Judge: Virginia Keeny, Case: 22VECV00976, Date: 2022-10-27 Tentative Ruling

Case Number: 22VECV00976    Hearing Date: October 27, 2022    Dept: W

GARCIA v. SELECT PORTFOLIO SERVICING, INC.

DEMURRER to plaintiff’s complaint

Date of Hearing:        October 27, 2022                  Trial Date:       None set.  

Department:              W                                            Case No.:        22VECV00976

Moving Party:            Defendant Select Portfolio Servicing, Inc.

Responding Party:     Plaintiffs Medina Garcia and Jaime Garcia  

Meet and Confer:      Robinson Decl. ¶¶ 3-4

BACKGROUND

Plaintiffs Medina Garcia and Jaime Garcia (collectively, “Plaintiffs”) are the owners of the property located at 7618 Kelvin Avenue, Winnetka, California 91306 (“subject property”). On May 3, 2006, Plaintiffs obtained an adjustable-rate interest only mortgage loan, which was secured by a deed of trust; that same day, Plaintiffs obtained a home equity credit line, which was secured by a second deed of trust. On June 1, 2018, Plaintiffs filed Chapter 13 bankruptcy; their plan was confirmed on November 5, 2018. On January 28, 2022, a notice of default was recorded. On June 6, 2022, a notice of trustee’s sale was recorded, which set a sale date for July 19, 2022. On July 8, 2022, Plaintiffs submitted a complete loan modification application to Select Portfolio Servicing, Inc. (“SPS”). The trustee sale was set for July 19, 2022.

On July 13, 2022, Plaintiffs filed a complaint, asserting causes of action against SPS and Does 1-50 for 1) Violation of Civil Code § 2923.6; 2) Violation of Civil Code § 2923.55; and 3) Violation of Business and Professions Code § 17200 et seq.

Defendant SPS demurs to Plaintiffs’ complaint on the grounds that each cause of action fails to state facts sufficient to constitute a cause of action.

[Tentative] Ruling

Defendant SPS’ Demurrer to the Complaint is sustained with leave to amend as to the first and third causes of action and without leave as to the second cause of action.

ANALYSIS

Request for Judicial Notice

SPS requests that this court take judicial notice of Exhibits 1 (i.e., the “Order Granting Motion for Relief From the Automatic Stay Under 11 U.S.C. § 362 (Real Property)” filed July 16, 2019 in In re: Medina Ilagan Garcia, Case No. 1:18-bk-11408-VK) and 2 (i.e., the “Order Granting Motion for Relief from the Automatic Stay Under 11 U.S.C. § 362 (Real Property)” filed April 2, 2021 in the above-entitled case(.

The Request for Judicial Notice is GRANTED pursuant to Evid. Code §452(d),(h).

Merits

First Cause of Action –for Violation of Civil Code § 2923.6

Civil Code § 2923.6, subdivision (c) provides, in relevant part, that “[i]f a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer at least five business days before a scheduled foreclosure sale, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is

pending . . .”

Plaintiffs contend that SPS has violated Civil Code § 2923.6, subdivision (c) by attempting to sell the subject property while their loan modification application is pending. (Complaint, ¶ 26.)

Plaintiffs have alleged that a notice of default was recorded on January 28, 2022. (Id., ¶ 15). Plaintiffs have alleged that a notice of trustee’s sale was recorded on June 6, 2022, wherein a sale date for July 19, 2022 was set. (Id., ¶ 16.) Plaintiffs have further alleged that they submitted a complete loan modification application to SPS on July 8, 2022 and that, despite this submission, the trustee’s sale is still scheduled to occur on July 19, 2022. (Id., ¶¶ 17 and 18.)

Here, even assuming that Plaintiffs submitted a complete loan modification application to SPS on July 8, 2022, there has been no § 2923.6, subdivision (c) violation by SPS, inasmuch as (1) the notice of default and notice of trustee’s sale were both recorded before, not while, the complete first lien loan modification application was submitted to SPS and as (2) no trustee’s sale has been conducted.

Additionally, Plaintiffs contend that they are entitled to injunctive relief under § 2924.12. Plaintiffs, however, have failed to allege that a material violation of § 2923.6 has occurred. Civil Code § 2924.12, subdivision (a)(1), provides that “[i]f a trustee’s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.” “[B]y its terms, the HBOR creates liability only for material violations that have not been remedied before the foreclosure sale is recorded. A material violation is one that affected the borrower's loan obligations, disrupted the borrower's loan-modification process, or otherwise harmed the borrower.” (Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5^th 830, 837.)

The recordings of the notice of default and notice of trustee’s sale were not in violation of § 2923.6 and did not affect Plaintiffs’ loan obligations, disrupt the loan modification process or otherwise harm Plaintiffs. Plaintiffs have alleged that they were able to successfully submit a complete loan modification application to SPS, and that the application is pending. (Complaint, ¶¶ 17, 24 and 26.) Plaintiffs further concede that no trustee’s sale has occurred. (Id., ¶¶ 18 and 25).

SPS’ demurrer to the first cause of action, then, is sustained, with leave to amend.

Second Cause of Action –for Violation of Civil Code § 2923.55

Civil Code § 2923.55, subdivision (a), provides that “(a) A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default pursuant to Section 2924 until all of the following: (1) The mortgage servicer has satisfied the requirements of paragraph (1) of subdivision (b). (2) Either 30 days after initial contact is made as required by paragraph (2) of subdivision (b) or 30 days after satisfying the due diligence requirements as described in subdivision (f). (3) The mortgage servicer complies with subdivision (c) of Section 2923.6, if the borrower has provided a complete application . . .” (Emphasis added).

Subdivision (c) provides that “[a] notice of default recorded pursuant to Section 2924 shall include a declaration that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the individual did not meet the definition of ‘borrower’ pursuant to subdivision (c) of Section 2920.5.”

Plaintiffs contend that SPS has violated Civil Code § 2923.55 because the contact to assess Plaintiffs’ financial situation and explore foreclosure prevention alternative transpired in February 2017, nearly five years before the notice of default was recorded. (Complaint, ¶ 29.) Plaintiffs are not alleging that SPS never contacted them; instead, they ae arguing that the notice of default declaration should have a more recent date set forth therein. Section 2923.55, however, only requires that the initial contact be at least 30 days prior to the recording of the notice of default.

Further, Plaintiffs’ allegations that SPS has not been in contact with Plaintiffs within the scope of § 2923.55 is belied by judicially noticeable documents.

Lastly, Plaintiffs appear to concede the lack of merit of their second cause of action, inasmuch as they have failed to address same in their opposition. SPS’ demurrer to the second cause of action is sustained, without leave to amend.

Third Cause of Action –for Violation of Business and Professions Code §§ 17200, et seq.

Business and Professions Code § 17200 provides that “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . .”

Plaintiffs have failed to allege any unlawful, fraudulent, or unfair business act or practice by SPS. Plaintiffs’ claim is dependent upon their flawed HBOR claims.

Additionally, Plaintiffs have failed to allege standing. An individual has standing to maintain a 17200 claim if he or she “has suffered injury in fact and has lost money or property as a result of the unfair competition.” (Bus. & Prof. Code § 17204.) Plaintiffs have not alleged that they have lost any money or property as a direct result of any wrongdoing by SPS. Again, Plaintiffs concede that no trustee’s sale has occurred. (Complaint, ¶¶ 18 and 25).

SPS’ demurrer to the third cause of action is sustained, with leave to amend.