2013-00140046-CU-OR

Ty Crawford vs. Greenpoint Mortgage Funding Inc

Nature of Proceeding: Hearing on Demurrer to First Amended Complaint

Filed By: Porter, Jennifer M.

*** If oral argument is requested, the parties shall at the time of the request
notify both the clerk and opposing counsel of the specific causes of action that
will be addressed at the hearing. ***

Defendants JPMorgan Chase Bank, N.A., et al.’s demurrer to the First Amended
Complaint (“1AC”) is SUSTAINED with and without leave to amend, as follows.

Moving counsel is admonished because the notice of demurrer does not provide notice
of the Court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel
is directed to contact opposing counsel and advise him/her of Local Rule 1.06 and the
Court’s tentative ruling procedure and the manner to request a hearing. If moving
counsel is unable to contact opposing counsel prior to hearing, moving counsel
is ordered to appear at the hearing in person or by telephone.

Defendants’ request for judicial notice of various documents relating to plaintiff’s
$620,000 mortgage loan and the corresponding Deed of Trust (“DOT”), his default
thereunder and the subsequent foreclosure proceedings culminating in a February
2013 Notice of Trustee’s Sale (although this sale has not yet occurred) is
UNOPPOSED and is GRANTED.

In 2005, plaintiff obtained a $620,000 mortgage loan which was secured by a Deed of
Trust (“DOT”) against real property located in Orangevale. According to the 1AC,
plaintiff was offered a loan modification in 2008 and although not entirely clear, it
appears plaintiff accepted this modification. (1AC, ¶18.) In April 2012, plaintiff was
given yet another loan modification but within months he again fell behind in his
payments resulting in a Notice of Default (“NOD”) being recorded in November 2012.
Plaintiff now makes the following contentions:

(1) He was told “they [sic] did not qualify for any other loan even though he did
qualify for other loans but he was nevertheless “directed into the Subject Loan
because it was the most profitable for [defendants];”
(2) Plaintiff was given a stack of documents and was rushed through the
process of signing them;
(3) He “was pressured into taking the Subject Loan” which he should not have
entered since the monthly payments needed to reduce the principal balance
represented 57% of plaintiff’s monthly income;
(4) The interest rate for the original loan was “unconscionable;”
(5) “Defendants…failed to exercise due care in evaluating the Plaintiff’s financial
condition…;” and
(6) Defendants failed to exercise due care in finding a loan modification deal
that would result in payments that the plaintiff could afford over the life of the loan.
(1AC, ¶¶21-25.)

The present action was commenced in March 2013 and the 1AC filed in January 2014
purports to assert three (3) causes of action (“COA”). Defendants now demur to each
COA in the 1AC on multiple grounds summarized below and plaintiff opposes.

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1 COA for “Reformation Under Civil Code §1670.5.” Defendants demurs to this
COA on the grounds that (1) “reformation” is not a recognized COA under California
law, (2) this COA is not properly asserted against the demurring defendants since they
played no role whatsoever in the 2005 mortgage loan’s origination in 2005, (3) plaintiff
is not entitled to the requested relief merely because he did not read the loan
documents, (4) this COA is barred by the four year statute of limitations in Code of
Civil Procedure §339(1) and (5) plaintiff cannot now seek reformation of the 2005 loan
terms after having received not one but two modifications and derived a substantial
economic benefit at the expense of the other parties.

Although plaintiff filed an opposition, it nowhere addresses any of defendants’
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contentions regarding the 1 COA. The Court construes this failure as a concession
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that the 1 COA lacks merit and therefore, the demurrer to this COA is hereby
sustained without leave to amend.

2nd COA for “Negligence.” Defendants insist this COA fails because plaintiff has
failed to plead facts sufficient to establish the existence of any duty of care owed to
him since the 1AC does not indicate any conduct outside the conventional scope of an
ordinary lender of money but even if it did, plaintiffs has also failed to plead facts
showing the breach of any duty of care.

The opposition asserts that the factors cited in Biakanja v. Irving support the finding of
a duty of care owed to plaintiff since defendants agreed to a loan modification to help
the former save his home from foreclosure, “a process far outside the scope of merely
lending money.” (Oppos., p.3:9-14.)

The Court rejects plaintiff’s argument. Aside from citing no legal authority for the
proposition that a loan modification constitutes conduct which exceeds the convention
role as a money lender, this Court is persuaded that engaging in the modification
process easily falls within the well established and ordinary role of lending money.
(See, e.g., Leuras v. BAC Home Loans Servicing (2013) 221 Cal.App.4th 49, 67 [“We
conclude a loan modification is the renegotiation of loan terms, which falls squarely
within the scope of a lending institution’s conventional role as a lender of money”]; see
also, Ramos v. Ocwen Mortgage Servicing, Inc. (E.D. Cal. 2014) 2014 U.S. Dist. Lexis
1166; Williams v. Wells Fargo Bank, N.A. (C.D. Cal. 2014) 2014 U.S. Dist. Lexis
17215.) Consequently, the demurrer to this COA is also sustained without leave to
amend.

3rd COA for “Declaratory Relief.” Defendants first demur to this COA on the grounds
it is not an independent COA but merely a remedy and to the extent the requested
declaratory relief is premised on the two preceding deficient COA, the declaratory relief
claim is insufficiently pled. Defendants also maintain that plaintiff lacks legal standing
to challenge the assignment of the original note and that even if the assignment was
invalid, plaintiff has failed to establish any resulting prejudice.

The opposition insists that declaratory relief is recognized by California law as an
independent COA and that under Glaski v. Bank of America (2013) 218 Cal.App.4th
1079, plaintiff has standing to raise defects in assignments of interests including but
not limiting to asserting, as here, the note’s assignment was void ab initio. The
opposition further concedes that this COA is not challenging the pooling and servicing
agreement as occurred in Jenkins v. JPMorgan Chase (2013) 216 Cal.App.4th 497, a
decision cited in the moving papers. Plaintiff also argues that he has been prejudiced
by the irregularity in the assignment of the note because he has been sending his
mortgage payments to the wrong party and remains fully indebted to the original
lender. (Oppos., p.7:12-14.) Finally, if the Court sustains the demurrer, the opposition
requests leave to amend to add new COA for conversion and misrepresentation. (Id.,
at p.5:22-26.)

Although first declaratory relief does appear to be an independent COA recognized
under California law, the Court sustains the demurrer to this COA. The gist of this
COA is that “The TRUST claims it holds the Note and Deed of Trust to the Subject
Property and therefore has the right to engage defendants in the servicing of the
Subject Loan” but “Plaintiffs [sic] contend…the TRUST was required to possess the
Deed of Trust to the Subject Loan within 90 days of the Closing Date of the Trust (or
July 27, 2006)…” and that “The original Deed of Trust on the Subject Property was
prepared in 2006,” meaning “There has never been a valid assignment of the Deed of
Trust to TRUST on or before July 27, 2006.” (1AC, ¶¶50-54.) However, the term
“TRUST” is nowhere defined in the 1AC and there are no attachments to the 1AC
which might otherwise assist in understanding what the term “TRUST” is intended to
represent. Likewise, while the 1AC expressly alleges the subject “Deed of Trust…was
prepared in 2006,” the Deed of Trust which the Court has taken judicial notice of and
which refers to plaintiff’s loan relative to the Orangevale property was actually
recorded in 2005, not 2006. Accordingly, this COA is fatally uncertain and does not
clearly state even the most basic facts on which this COA is purportedly premised.
Additionally, the 3rd COA does not plead facts but rather only unsupported conclusions
in connection with the allegation in Paragraph 53 that the Assignment of the Deed of
Trust in November 2012 was void ab initio. Finally, while the opposition asserts
plaintiff has suffered the requisite prejudice inasmuch as he contends ‘he has been
paying the wrong party but still remains fully indebted to the original lender,’ there is no
corresponding allegation currently in the 1AC. For all these reasons, the Court
concludes that this COA fails to state a valid claim for declaratory relief and the
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demurrer to the 3 COA is therefore sustained but with leave to amend.

Where leave to amend is granted, plaintiff may file and serve an amended complaint
no later than 5/12/2014. Although not required by court rule or statute, plaintiff is
directed to present a copy of this order when the amended complaint is
presented for filing.

Defendants to respond within 10 days if the amended complaint is personally served,
15 days if served by mail.

If any defendant intends to demur to the amended complaint or move to strike, it shall
determine if any other defendant who has appeared in this action also intends to
demur or move to strike. If so, all such defendants shall coordinate a single hearing
date for the demurrers and motions to strike. A copy of the amended complaint shall
be included with any demurrer or motion to strike.

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)