Case Number: KC066257 Hearing Date: March 25, 2014 Dept: O

Gonzalez v. Bank of America, N.A., et al. (KC066257)
Defendants Bank of America, N.A. and U.S. Bank, N.A.’s DEMURRER TO FIRST AMENDED COMPLAINT

Respondent: Plaintiffs A. and F. Gonzalez

TENTATIVE RULING

Defendants Bank of America, N.A. and US. Bank, N.A.’s demurrer to first amended complaint is SUSTAINED with 10 days leave to amend.

1st CAUSE OF ACTION: VIOLATION OF HOMEOWNER BILL OF RIGHTS: (a) Upon request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact. (b) The single point of contact shall be responsible for doing all of the following: (1) Communicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options. (2) Coordinating receipt of all documents associated with available foreclosure prevention alternatives and notifying the borrower of any missing documents necessary to complete the application. (3) Having access to current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative. (4) Ensuring that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the mortgage servicer, if any. (5) Having access to individuals with the ability and authority to stop foreclosure proceedings when necessary. (c) The single point of contact shall remain assigned to the borrower’s account until the mortgage servicer determines that all loss mitigation options offered by, or through, the mortgage servicer have been exhausted or the borrower’s account becomes current. (d) The mortgage servicer shall ensure that a single point of contact refers and transfers a borrower to an appropriate supervisor upon request of the borrower, if the single point of contact has a supervisor. (e) For purposes of this section, “SINGLE POINT OF CONTACT” MEANS AN INDIVIDUAL OR TEAM OF PERSONNEL each of whom has the ability and authority to perform the responsibilities described in subdivisions (b) to (d), inclusive. The mortgage servicer shall ensure that each member of the team is knowledgeable about the borrower’s situation and current status in the alternatives to foreclosure process. (CC 2923.7(a) – (e).)

The Homeowner’s Bill of Rights became effective on 1/1/13. Although Plaintiffs allege conduct occurring before 1/1/13, Plaintiffs also allege at Par. 25 that they submitted their loan modification after 1/1/13. Pars. 26-27 allege that Plaintiffs were never provided a “single point of contact.” However, these allegations are contradicted by Plaintiffs’ own admission at Par. 38 that Defendants assigned a SPOC (i.e. single point of contact), but the SPOC failed to assist or contact Plaintiffs to assist with the application. In opposition to the demurrer, Plaintiffs concede that a single point of contact could be a “team,” but a “team with the same instructions and not merely reading instructions from a computer.” (Opposition, 7:22-23.) However, CC 2923.7 does not contain such a requirement.

Further, to the extent that Plaintiffs also allege dual tracking violations, CC 2923.6(c) only prohibits the recording of a notice of default or notice of sale while the “complete first lien loan modification application is pending,” but does not create any duty to halt all foreclosure activity based on any submission of loan modification applications by the borrower, as plaintiff suggest. Plaintiffs do not allege that they submitted a complete application or that any foreclosure notices were recorded while the loan modification was pending. Insofar as the claim is based on the originating lender’s conduct, the claim is defective against demurring defendants. Demurrer is SUSTAINED with 10 days leave to amend.

2nd CAUSE OF ACTION: NEGLIGENT MISREPRESENTATION:
The elements of a cause of action for negligent misrepresentation are: (1)The defendant must have made a representation as to a past or existing material fact; (2) the representation must have been untrue; (3) regardless of his actual belief the defendant must have made the representation without any reasonable ground for believing it to be true; (4) the representation must have been made with the intent to induce plaintiff to rely upon it; (5) the plaintiff must have been unaware of the falsity of the representation; he must have acted in reliance upon the truth of the representation and he must have been justified in relying upon the representation; (6) and, finally, as a result of his reliance upon the truth of the representation, the plaintiff must have sustained damage. (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal. App. 3d 388, 402.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.)

Negligent Misrepresentation fails for lack of specificity. Further, Plaintiffs fail to allege any damages. Par. 49 alleges that Plaintiffs fell behind on their payments, but the failure to make payments was not caused by any reliance on Defendants’ representations. Plaintiffs were obligated to make these payments with or without any alleged representation. Demurrer is SUSTAINED with 10 days leave to amend.

3rd CAUSE OF ACTION: BREACH OF CONTRACT:
The elements for a breach of contract cause of action are: (1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) resulting damages. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) In alleging a breach of contract cause of action, it is necessary to specify whether the contract is written, oral or implied by conduct. (CCP 430.10(g).) In order to plead a written contract (the first element listed above), a plaintiff must, in addition to alleging the making of the contract, do one of the following: (1) set forth the contract in haec verba; or (2) plead the contract’s legal effect by alleging the substance of its relevant terms. (4 Witkin, California Procedure 4th Edition, ¿¿479-481.) In order to plead an oral contract, a plaintiff must plead its legal effect, i.e., allege the substance of the contractual terms. (Id., at 483.)

CC 2923.6(c) only prohibits the recording of a notice of default or notice of sale while the “complete first lien loan modification application is pending,” but does not create any duty to halt all foreclosure activity based on any submission of loan modification applications by the borrower, as plaintiff suggest. Plaintiffs do not allege that they submitted a complete application or that any foreclosure notices were recorded while the loan modification was pending. Insofar as the claim is based on the originating lender’s conduct (prior to enactment of the Homeowner’s Bill of Rights), the claim is defective against demurring defendants. Demurrer is SUSTAINED with 10 days leave to amend.

4th CAUSE OF ACTION: BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING:
The elements are: 1) Existence of contractual relationship; 2) implied duty; 3) breach; and 4) causation of damages. (E.g., Smith v. San Francisco (1990) 225 Cal.App.3d 38, 49; 1 Witkin Sum. Cal. Law (10th ed. 2005) Contracts § 800.)

The 4th cause of action fails because it is based on the defective contract claim. Demurrer is SUSTAINED with 10 days leave to amend.

5th CAUSE OF ACTION: NEGLIGENCE:
The relationship between a lending institution and its borrower-client is not fiduciary in nature. A commercial lender is entitled to pursue its own economic interests in a loan transaction. This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another…. As a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. Thus, for example, a lender has no duty to disclose its knowledge that the borrower’s intended use of the loan proceeds represents an unsafe investment. The success of the borrower’s investment is not a benefit of the loan agreement which the lender is under a duty to protect. Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender. (Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089, 1093-1096.)

Plaintiffs failed to allege any facts giving rise to a duty. Further, Plaintiffs’ property has not been sold, so Plaintiffs have not alleged resulting damages. Damage to Plaintiffs’ credit score was caused by Plaintiffs’ own default, not by Defendants’ review of Plaintiffs’ loan modification application. Demurrer is SUSTAINED with 10 days leave to amend.

6th CAUSE OF ACTION: VIOLATION OF B&P 17200:
The Unfair Business Practices Act shall include “any unlawful, unfair, or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Even a single incident – a one-time act that is unfair, unlawful or fraudulent – is sufficient to state a claim under 17200. (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 fn. 3.)

Plaintiff’s Unfair Business Practices claim is based on the preceding defective claims. Further, Plaintiffs lack standing in that they have not “lost money or property.” The monthly payments that Plaintiffs made were for payments Plaintiff already owed under the loan. Demurrer is SUSTAINED with 10 days leave to amend.