Judge William A. Crowfoot, Case Number: 21AHCV00108, Date: 2023-08-11 Tentative Ruling

Judge: William A. Crowfoot, Case: 21AHCV00108, Date: 2023-08-11 Tentative Ruling

On November 22, 2021, plaintiff Veronica Nga Pham (“Plaintiff”) filed this action against defendant Community Loan Servicing, LLC fka Bayview Loan Servicing (“Community Loan Servicing”) asserting causes of action for: (1) rescission of contract, (2) breach of contract, (3) fraud, (4) violation of Civil Code sections 2923.5 and 2924 et seq., and (5) violation of Business and Professions Code section 17200 et seq.

On September 21, 2022, Plaintiff filed the operative First Amended Complaint (“FAC”) adding Nationstar Mortgage, LLC dba RightPath Servicing (“Nationstar”) as a Doe defendant.

On May 25, 2023, Community Loan Servicing and Nationstar (collectively, “Defendants”) moved for summary judgment or, in the alternative, summary adjudication of each of Plaintiff’s causes of action.

In reviewing a motion for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) A motion for summary judgment must be denied where the moving party’s evidence does not prove all material facts, even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).

Plaintiff alleges that Community Loan Servicing carried out a non-judicial foreclosure and in doing so, breached a contract with Plaintiff and violated sections of the Civil Code and Business and Professions Code. (FAC, ¶ 1.) Plaintiff alleges that on November 2, 2006, she purchased property located at 9457 La Rosa Drive in Temple City, California (the “Property”), and obtained financing through HSBC Mortgage Corporation (“HSBC”) by executing a promissory note and deed of trust. (FAC, ¶¶ 2, 8.) Community Loan Servicing later assumed the rights and obligations under the promissory note and deed of trust. (FAC, ¶ 8.) Between November 2006 and October 2018, Plaintiff made mortgage payments electronically through her bank, but fell behind on her payments in December 2015 and paid the mortgage for the months of December 2015 and January 2016 in February of 2016. (FAC, ¶¶ 9-10.) In March 2016, she made payments for February and March 2016. (FAC, ¶ 11.) She alleges she made mortgage payments “in this manner” through October 2018 and her payments would clear. (FAC, ¶ 12.) In or around February 2018, Plaintiff discovered that her mortgage payment was rejected, yet she continued to make mortgage payments. (FAC, ¶¶ 13-14.) On December 18, 2018, Plaintiff alleges that a Notice of Default had been recorded which stated that she had failed to make payments on her mortgage beginning on or around April 1, 2017. (FAC, ¶ 15.) She does not identify which defendant caused this notice of default to be recorded, but further alleges that she had in fact made those mortgage payments between April 1, 2017, and October 2018, and therefore filed a lawsuit against Community Loan Servicing (the “2020 Lawsuit”). (FAC, ¶¶ 16-17.)

On or around March 5, 2021, Community Loan Servicing offered Plaintiff a “Trial Payment Plan” (“TPP”) in exchange for a settlement and release of all claims. (FAC, ¶ 17.) Plaintiff alleges that on March 8, 2021, her attorney inquired about the terms of the TPP and was informed that the outstanding balance as of January 2021 was approximately $411,000. (FAC, ¶ 18.) Plaintiff accepted the TPP and settled the 2020 Lawsuit.

In August 2021, Plaintiff received an offer to permanently modify the mortgage and was allegedly shocked that the outstanding balance was $513,601.55. (FAC, ¶ 20.) Plaintiff claims that the unpaid balance had been misrepresented in order to induce her to enter into the TPP and settlement agreement. (FAC, ¶ 20.)

Sometime after, servicing of the loan then transferred to Nationstar. (FAC, ¶ 21.) Plaintiff allegedly sent a qualified written request (“QWR”) on or around July 8, 2022, but did not receive a response from Nationstar. (FAC, ¶ 21.) Plaintiff alleges that as of the filing date for the FAC, Nationstar has not responded to Plaintiff or communicated with her at all. (FAC, ¶ 21.)

1. Second Cause of Action for Breach of Contract and Fourth Cause of Action for Violations of Civil Code sections 2923.4 and 2924

For Plaintiff’s second cause of action for breach of contract, Plaintiff alleges that an unspecified defendant “breached” the deed of trust and promissory note when it “instituted foreclosure proceedings against Plaintiff.” (FAC, ¶ 31.) For Plaintiff’s fourth cause of action, she alleges that Community Loan Services improperly recorded a notice of default. (FAC, ¶ 46.)

Defendants argue that they cannot be held liable for breach of contract or violating Civil Code sections 2923.4 and 2924 because they were not servicing the loan at the time of the alleged breach and did not record the Notice of Default on December 13, 2018. (Defendants’ Undisputed Material Fact (“UMF”) Nos. 2-5.) Furthermore, Defendants argue that there has been no foreclosure, nor is there a pending foreclosure sale. (UMF No. 6.) These facts are undisputed by Plaintiff and Plaintiff does not oppose Defendants’ motion for summary adjudication on these two causes of action. Accordingly, Defendants’ motion for summary adjudication of the second and fourth causes of action is GRANTED.

Plaintiff alleges that “Defendant” violated the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. 2601, et seq., which requires mortgage loan servicers to acknowledge and respond to inquiries from borrowers. (FAC, ¶ 52.) Plaintiff alleges that she sent a QWR seeking information and documents on July 8, 2022, and specifically asking about several errors she identified on the account, but “Defendant” did not send a confirmation of receipt within 5 days of receipt nor provide any response. (FAC, ¶ 54.) As a result, Plaintiff alleges she suffered loss of money and incurred interest and fees. (FAC, ¶ 57.) Based on the FAC and the moving and opposing papers, the Court presumes that the “Defendant” being referred to here is Nationstar and that Nationstar is moving for summary adjudication.

Nationstar argues that this cause of action fails because it timely responded to the QWR. (Memo., p. 21.) 12 U.S.C. section 2605(e)(1) requires a servicer of a federally related mortgage loan who receives a QWR from the borrower (or an agent of the borrower) for information to provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period. Within not later than 30 days after receipt, the servicer, after conducting an investigation, must provide the borrower with a written explanation or clarification that includes information requested or an explanation for why the information is unavailable or cannot be obtained by the servicer. The servicer must also provide the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.

Nationstar argues that there is no violation of 12 U.S.C section 2905 because Nationstar received Plaintiff’s QWR on or about October 28, 2022, and responded by letter dated November 10, 2022. (UMF Nos. 43-44.) However, this is insufficient to show that Plaintiff cannot establish this cause of action.

First, Nationstar does not address Plaintiff’s allegation that they failed to respond with a notice of receipt within 5 days. (See FAC, ¶ 56.) To circumvent this, Nationstar argues that “there is no causation or damages associated with any purported delay by [Nationstar].” (Memo., pp. 20-24.) It is unclear what Nationstar means by claiming “there is no causation.” Nationstar does not contest that a QWR was sent or received. Instead, Nationstar relies on Plaintiff’s deposition transcript in which she admits that she did not prepare the QWR, did not review the QWR, does not remember communicating with Nationstar, or attempting to do so. (UMF Nos. 45-48.) By doing so, Nationstar appears to emphasize the fact that Plaintiff did not personally “cause” the QWR to be sent. But this is irrelevant because 12 U.S.C. section 2605 specifically allows for “an agent of the borrower” to submit a QWR for information. (12 U.SC. § 2605, subd. (e)(1)(A).)

Second, Nationstar cites to Plaintiff’s deposition testimony that she believes that Nationstar “has been named as a defendant because they are now the new servicer and assume the liability that [Community Loan Servicing] has or had as a prior servicer.” (UMF No. 49.) However, this does not show that Plaintiff cannot establish damages. Therefore, Nationstar has not established a prima facie case showing that Plaintiff does not have – and cannot reasonably obtain – any evidence regarding her actual damages against Nationstar for this particular cause of action. Even though Nationstar argues in its reply brief that there is “no evidence before the court” to infer that Plaintiff was actually damaged, Nationstar cannot simply point out the absence of evidence. (Reply, p. 8; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 825, 854 [insufficient for defendant to merely point out the absence of evidence].)

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

Plaintiff alleges that an unspecified defendant engaged in fraud by “knowingly and recklessly ma[king] false and misleading statements to [her] regarding the amount of debt to be included in a permanent modification, for the sole purpose of inducing [her] to settle her claims against Defendant.” (FAC, ¶ 36.) Specifically, Plaintiff alleges that defense counsel informed her lawyer that her outstanding balance was approximately $411,000 as of January 2021, which induced her to accept the TPP and enter into the settlement agreement. (FAC, ¶¶ 37-38.) However, Plaintiff claims that the outstanding balance was actually $513,601 once she received the modification offer in August 2021. (FAC, ¶ 38.) Based on the Complaint, moving and opposing papers, and the evidence, the Court assumes that the parties mean Community Loan Servicing when referring to “Defendant” in this cause of action.

First, Community Loan Servicing argues that Plaintiff’s fraud claim fails because it never made any representations about the modification offer – let alone any false ones -- and only the TPP was discussed in communications with Plaintiff’s counsel, Sarah Shapero, in March 2021. (Memo., pp. 11-12.) It argues that because only the TPP was discussed in March 2021, no misrepresentations could have been made about the modification loan, which did not yet exist and was not offered until August 2021. This is a narrow reading of Plaintiff’s Complaint. Plaintiff contends that the misrepresentation was not specifically about the TPP but about the outstanding balance on her loan. (FAC, ¶¶ 37-38.)

Second, Community Loan Servicing also argues that the representation that the “outstanding balance as of 1/2021 was ~$411K” was not false. Community Loan Servicing’s attorney, W. Jason Scott, declares that while he was working with Plaintiff’s counsel, Ms. Shapero, to resolve Plaintiff’s 2020 Lawsuit, he offered the TPP approval documents on March 5, 2021, and Ms. Shapero emailed him and asked, “Could you please provide the terms that were used to calculate this payment amount? Thank you.” (Scott Decl.., ¶ 5.) He declares he was not “immediately sure” what Ms. Shapero needed and later that day, he responded by providing a copy of Plaintiff’s January 2021 loan statement and writing: “What additional information are you asking for? The document reflects a 40 year at 6.25% with $0 deferred. Outstanding balance as of 1/2021 was $411k (attached).” (Defs.’ Exs. 14-15.) Community Loan Servicing argues that its attorney’s email was not an affirmative statement to substantiate a claim for misrepresentation and, in fact, was an accurate reflection of the monthly statement.

Third, Community Loan Servicing argues that Plaintiff’s reliance on Mr. Scott’s email for her unpaid loan principal balance was not justifiable because the attached monthly loan statement referenced an outstanding principal balance of $411,716.81, an escrow balance of -$31,542.37, and a summary of amounts past due before bankruptcy filing with a balance of $90,076.70, for a total debt exceeding $500,000. Additionally, Community Loan Servicing refers to Plaintiff’s Chapter 13 Petition for Bankruptcy in which Plaintiff identified Community Loan Servicing and the loan with a balance of $509,298. (Defs.’ Ex. 13.) Plaintiff also testified that over the course of two years, she never looked at the mortgage statements that were mailed to her.

Whether a party’s reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts. (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 132, as modified on denial of reh'g (July 15, 2014).) Furthermore, a plaintiff may not justifiably rely on an allegedly false statement that is “hedged with significant qualifications.” (Pacesetter Homes, Inc. v. Brodkin (1970) 5 Cal.App.3d 206, 213.)

Here, Ms. Shapero only asked for “the terms used to calculate [the] payment amount” for the TPP. In response, Mr. Scott expressly asked Ms. Shapero what specific information she was looking for. That Ms. Shapero and Plaintiff assumed that Mr. Scott would provide the outstanding balance including interest, fees, and costs instead of the “outstanding principal balance” is not reasonable, especially when the monthly mortgage statement was attached to Mr. Scott’s email. (Scott Decl., ¶ 5, Ex. 15.) Furthermore, Plaintiff’s evidence shows that Ms. Shapero’s response to Mr. Scott’s email did not ask any other questions about the loan and only suggested a lower interest rate. (Plaintiff’s AOE, Ex. B, pp. 4-5.) After Mr. Scott informed Ms. Shapero that the terms were not negotiable, Ms. Shapero accepted the TPP and settlement on behalf of Plaintiff. (Plaintiff’s AOE, Ex. B, pp. 4-5.)

Accordingly, summary adjudication of Plaintiff’s fraud cause of action against Community Loan Servicing is GRANTED.

The UCL prohibits unfair competition, which is defined as any unlawful, unfair or fraudulent business act or practice. (Bus. & Prof. Code § 17200.) Plaintiff alleges that “Defendant’s violations of California Civil Code §§ 2923.6 and 2923.7 constitute unfair business practices.” These statutes regulate the conditions under which a loan servicer may record a notice of default; specifically, section 2923.6 precludes recording a notice of default when a borrow is under loss mitigation review to prevent dual tracking and section 2923.7 requires that a loan servicer assign a single point of contact when a borrower requests a foreclosure prevention alternative. However, it is undisputed that neither Community Loan Servicing or Nationstar recorded the notice of default.

Instead, Plaintiff argues in her opposition brief that the actual underlying predicate for her UCL claim is Nationstar’s alleged violation of 12 U.S.C. 2605 and Community Loan Servicing’s fraud. Defendants argue that Plaintiff is attempting to improperly expand the scope of her pleadings. The Court agrees.

“The pleadings play a key role in a summary judgment motion. ‘The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues’ and to frame ‘the outer measure of materiality in a summary judgment proceeding.’” (Hutton v. Fidelity National Title Co. (2013) 213 Cal.App.4th 486, 493; Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250 [“The materiality of a disputed fact is measured by the pleadings [citations], which ‘set the boundaries of the issues to be resolved at summary judgment.’ [Citations.]”].) “Accordingly, the burden of a defendant moving for summary judgment only requires that he or she negate plaintiff’s theories of liability as alleged in the complaint; that is, a moving party need not refute liability on some theoretical possibility not included in the pleadings. [Citations.]” (Hutton, supra, 213 Cal.App.4th at p. 493.) "[T]he [papers] filed in response to a defendant's motion for summary judgment may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings." (Ibid. [quotations and citations omitted].) "If the motion for summary judgment presents evidence sufficient to disprove the plaintiff's claims, . . . the plaintiff forfeits an opportunity to amend to state new claims by failing to request it." (Ibid. [quotations and citations omitted].) “[I]f a plaintiff wishes to introduce issues not encompassed in the original pleadings, the plaintiff must seek leave to amend the complaint at or prior to the hearing on the motion for summary judgment.” (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1257.)

Accordingly, Defendants’ motion for summary adjudication as to the Sixth Cause of Action is GRANTED.

Defendants move for summary adjudication of Plaintiff’s first “cause of action” for rescission because rescission is a remedy, not a cause of action. In opposition, Plaintiff argues that rescission is an equitable remedy as part of her fraud claim. However, as set forth above, the Court grants the motion for summary adjudication as to Plaintiff’s cause of action for fraud. Therefore, there is no predicate claim for which Plaintiff may claim rescission as a remedy.

Defendants’ motion for summary adjudication is GRANTED as to Plaintiff’s First, Second, Third, Fourth, and Sixth Causes of Action.

Nationstar’s motion for summary adjudication is DENIED as to Plaintiff’s Fifth Cause of Action.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.