Case Name: Purvis v. Wells Fargo Bank et al.
Case No: 19CV343490

I. Background

This is a wrongful foreclosure action brought by plaintiff Alton Purvis (“Plaintiff”) against Wells Fargo Bank (“Defendant”) and Rushmore Loan Management Services, LLC (“Rushmore”).

According to the allegations of the second amended complaint (“SAC”), Plaintiff owns property in San Jose at 3421 Antonacci Court (the “Property”). (SAC, ¶ 8.) The Property was encumbered by a mortgage through World Savings Bank, beneficial interest of which was transferred to Defendant. (Id. at ¶ 10.) In March 2017, Defendant recorded a notice of default on the Property, but thereafter received and accepted mortgage payments from Plaintiff. (Ibid.) Plaintiff contends that the notice of default was invalid because of the loan payments and also because it did not contact him to discuss loss mitigation options. (Ibid.)

Prior to the notice of default, Plaintiff sought loan modification. (SAC, ¶ 11.) However, he was not behind on his payments, and Defendant advised him that to qualify, he must be in default. (Ibid.) Plaintiff stopped making payments, and thereafter submitted a loan modification package which was ultimately denied. (Ibid.) He reapplied, but Defendant denied receiving the documents, or stated the documents were unsigned and Plaintiff needed to reapply. (Ibid.)

As a result, Plaintiff had to file for bankruptcy, and Defendant initiated foreclosure on the Property. (SAC, ¶ 11.) Once again Plaintiff sought loan modification but did not receive a response for nearly a year. (Ibid.) During this period, Defendant continued to accept loan payments from Plaintiff waiving its right to proceed with the foreclosure. (Ibid.) However, in January 2019, Defendant returned Plaintiff’s December payment and attempted to proceed with the foreclosure. (Ibid.) Plaintiff again sought loan modification but his application was denied after only two days. (Ibid.) He received conflicting information regarding his ability to appeal this decision, and the time to appeal expired. (Ibid.)

Servicing of Plaintiff’s loan was transferred from Defendant to Rushmore. (SAC, ¶ 13.) Rushmore advised Plaintiff to submit a loan modification application and also advised that as of March 2019 the foreclosure sale was postponed. (Id. at ¶ 14.) Plaintiff submitted a loan modification application, and the foreclosure sale has yet to occur. (Id at ¶¶ 14, 16.) In the meantime, Plaintiff has maintained $50,000 in a suspense account which has not been applied to the alleged default. (Id. at ¶ 15.)

Based on the foregoing, Plaintiff alleges causes of action for: (1) violation of Civil Code sections 2923.5 and/or 2923.55; (2) violation of Civil Code section 2923.6; (3) violation of Civil Code section 2923.7; (4) violation of Civil Code section 2924.17; (5) violation of Civil Code section 2924; (6) violation of Civil Code section 2924.11; (7) estoppel; (8) negligence; (9) intentional misrepresentation; (10) negligent misrepresentation; (11) promise without intention to perform; (12) declaratory relief; (13) quiet title; (14) slander of title; (15) cancellation of instruments; and (16) violation of Business and Professions Code section 17200 (the “UCL”).

Before the Court is Defendant’s demurrer.

II. Request for Judicial Notice

In support of its demurrer, Defendant requests judicial notice of three recorded instruments and three corporate documents. The request is made pursuant to Evidence Code section 452, subdivisions (c), (d), and (h).

Judicial notice may be taken of any matter authorized or required by law. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113, citing Evidence Code §§ 451 & 452.) A matter is subject to judicial notice only if it is reasonably beyond dispute. (Ibid.) Furthermore, any matter judicially noticed must be relevant to a material issue. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2.)

While the documents for which judicial notice is sought may be appropriate subjects for such notice, they do not appear relevant as they are not referenced in Defendant’s substantive arguments. Likewise, the information sought to be noticed can be found in the SAC which acknowledges that Wells Fargo is a successor in interest to the original lender. Furthermore, the dates and substance of the recorded instruments are referenced in the SAC.

Therefore, the request for judicial notice is DENIED.

III. Demurrer

Defendant demurs to the sixth cause of action for violation of Civil Code section 2924.11, and the fourteenth cause of action for slander of title on the ground of failure to state sufficient facts pursuant to Code of Civil Procedure section 430.10, subdivision (e).

A. Legal Standard

A demurrer tests the legal sufficiency of a pleading, but not the truth of a plaintiff’s allegations or the accuracy with which he or she describes the defendant’s conduct. (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958; citing Committee on Children’s Television Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213.) The demurrer is treated as admitting all material facts, properly pleaded, but not contentions, deductions or conclusions of law. (Ibid.)

B. Sixth Cause of Action

Defendant argues that the SAC fails to state a cause of action for violation of Civil Code Section 2924.11. Section 2924.11 is part of the “Homeowners Bill of Rights” and prohibits recording of a notice of default when a loan modification has been approved or alternatively prevents recording of a notice of trustees’ sale if a loan modification is approved after notice of default. (Civ. Code, § 2924.11, subd. (a-b).) In the pre-foreclosure context, the available remedy for a violation of this section is an injunction preventing a trustee’s sale until the violation is corrected. (Civ. Code, § 2924.12.)

As Defendant argues, the SAC does not allege that Plaintiff’s loan modification applications were ever approved, thus the statute does not apply. In fact, the SAC alleges that at multiple junctures, Plaintiff applied for loan modification, but was repeatedly denied or in some instances ignored. (SAC, ¶¶ 11, 14, 53, 54.) At best it alleges that the application was under “review.” (Id. at ¶ 54.) As no loan modification was allegedly ever approved, offered or accepted, Plaintiff cannot state a cause of action for a violation of Civil Code section 2924.11.

Consequently, the demurrer to the sixth cause of action on the ground of failure to state sufficient facts is SUSTAINED, without leave to amend as Plaintiff cannot allege that he was approved for a loan modification.

C. Fourteenth Cause of Action

Defendant demurs to the fourteenth cause of action for slander of title on the basis that the cause of action is barred by the litigation privilege found in Civil Code section 47 and Plaintiff fails to allege tender.

To state a cause of action for slander of title, one must allege: (1) a publication; (2) which is without privilege or justification; (3) which is false; and (4) which causes direct and immediate pecuniary loss. (Schep v. Capital One (2017) 12 Cal.App.5th 1331, 1336.) The recording of a notice of trustee’s sale and notice of default are privileged communications pursuant to Civil Code section 47. (Ibid; Civ. Code, § 2924.) However, the privilege is qualified where malice is alleged. (Id. at 1337.) Malice is pleaded where the defendant is allegedly “motivated by hatred or ill will towards the plaintiff” or “lacked reasonable grounds for its belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff’s rights.” (Ibid.)

The fourteenth cause of action alleges slander of title based on the notice of default and notice of trustee’s sale. These recorded instruments are protected, privileged communications unless Plaintiff has sufficiently alleged malice. Ill will towards Plaintiff is pleaded in a conclusory way, and supported only by the statement that Defendant “acted with ill will towards plaintiff” and the recording of the instruments was “motivated by Defendant’s ill will towards Plaintiff.” (SAC, ¶ 115.) Such conclusions of law do not hold up against a demurrer.

Likewise, while the words “reckless disregard” are pleaded, the alleged “disregard” is directed at Defendant’s receipt and acceptance of Plaintiff’s monthly payments, and its subsequent disregard for his loan modification application. (SAC, ¶ 115.) Thus, that Defendant “lacked reasonable grounds for its belief in the truth of the publication” is not sufficiently pleaded, if at all.

As malice is not sufficiently alleged, the recording of the instruments are privileged communications and a cause of action for slander of title does not withstand the demurrer.

Defendant also argues that the SAC fails to allege Plaintiff’s tender of all outstanding indebtedness. A debtor cannot set aside a foreclosure based on irregularity in the sale procedure without alleging tender of the amount of the secured debt. (Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 512.) The rationale is that without allegations of tender, any irregularities in the sale were not the cause of damages to the borrower. (Ibid, citations omitted.)

At best, the SAC equivocates on Plaintiff’s tender of loan payments. It alleges that in or about early 2009 “Plaintiff stopped making payments which has snowballed into the current situation.” (SAC, ¶ 11) It goes on to allege that Plaintiff filed for bankruptcy and thereafter made “regular payments… for several years.” (Ibid.) It alleges that from “March 11, 2018 until December 2018, Defendant…accepted monthly mortgage payments from Plaintiff…” (Ibid.) It further states that Plaintiff holds “$50,000 in a suspense account” which has not been applied to the “Subject Loan due to Defendants’ own errors.” (Id. at ¶ 12.) Likewise, though not procedurally appropriate, the SAC itself pleads for a recognition that “several courts have recognized a general equitable exception to applying the tender rule where it would be inequitable to do so.” (Id. at ¶ 16.) It then goes on to state circumstances in which requiring tender would be inequitable, but does not specifically allege them. (Ibid.) Finally, it alleges “if necessary [Plaintiff] is willing to tender an amount deemed necessary by this Court…” effectively pleading a lack of tender. (Ibid.)

The SAC therefore does not allege tender sufficient to overcome the demurrer.

Therefore, the demurrer to the fourteenth cause of action on the ground of failure to state sufficient facts is SUSTAINED, without leave to amend. Plaintiff was previously granted leave to amend the causes of action for slander of title. Plaintiff has failed to cure the defect in the SAC, so there is no basis to grant leave to amend.