Case Number: EC060846 Hearing Date: July 03, 2014 Dept: A

Sinai-Nathan v US Bank

DEMURRER

Calendar: 4
Case No: EC060846
Date: 7/3/14

MP: Defendants, Wells Fargo Bank, N.A. and US Bank National Association
RP: Plaintiffs, Nili Sinai-Nathan

ALLEGATIONS IN SECOND AMENDED COMPLAINT:
The Plaintiff obtained a mortgage loan from Defendant, Wells Fargo Bank. The loan was secured by a deed of trust recorded on the Plaintiff’s real property. After the Plaintiff suffered a loss of income due to the recession, the Plaintiff attempted to obtain a modification of the loan. The Defendant promised that no foreclosure sale would occur while the parties were negotiating the loan modification. However, the Defendant commenced foreclosure proceedings and sold the Plaintiff’s property in a non-judicial foreclosure sale on February 15, 2013.

CAUSES OF ACTION IN SECOND AMENDED COMPLAINT:
1) Violation of Civil Code section 2924.10
2) Violation of Civil Code section 2923.6
3) Promissory Estoppel
4) Negligence

RELIEF REQUESTED:
Demurrer to each cause of action.

DISCUSSION:
This hearing concerns the demurrer filed by Defendants, Wells Fargo Bank and US Bank.

1. Demurrer to First and Second Causes of Action for Violations of Civil Code sections 2924.10 and 2923.6
The Defendants argue that these causes of action lack sufficient facts because the Plaintiff is not a party to the loan. The Plaintiff’s first and second causes of action are based on provisions of the Homeowner Bill of Rights. The Homeowners Bill of Rights is a collection of statutes that became effective on January 1, 2013 and that add new procedures to California’s non-judicial foreclosure proceedings.
Civil code section 2924.12 creates a statutory cause of action to enforce these requirements. If a trustee’s deed upon sale has not been recorded, then a borrower may bring an action for injunctive relief to enjoin a material violation of Civil code sections 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. If a trustee’s deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages pursuant to Section 3281, resulting from a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not corrected and remedied prior to the recordation of the trustee’s deed upon sale. In addition, section 2924.12 permits the Court to award attorney’s fees to a prevailing borrower.
The first cause of action seeks relief for the violation of section 2923.10. Section 2923.10 requires a mortgage servicer to send written acknowledgement that it has received a complete first lien modification application from a borrower. Section 2923.6 bars a mortgage servicer from recording a notice of default or conducting a trustee’s sale while a complete application for a first lien loan modification is pending from the borrower. Both code sections provide relief for borrowers seeking a loan modification.
Civil Code section 2920.5(c) defines “borrower” to mean any natural person who is a mortgagor or trustor and who is potentially eligible for any federal, state, or proprietary foreclosure prevention alternative program offered by, or through, his or her mortgage servicer.
Plaintiff attached a copy of the deed of trust to exhibit 2 to her Second Amended Complaint. A review of the deed of trust reveals that it identifies the Plaintiff, Nili Sinai-Nathan, and her husband, Louis Nathan, as borrowers. Further, the Plaintiff signed the deed of trust and agreed to be bound by its terms. Since the Plaintiff is a borrower and trustor under the deed of trust, the Second Amended Complaint contains sufficient facts to demonstrate that the Plaintiff meets the definition of “borrower” under Civil Code section 2920.5(c).
Accordingly, since the Plaintiff meets the definition of “borrower”, this is not grounds to sustain a demurrer to the first and second causes of action.

a. First Cause of Action for Violation of Civil Code Section 2924.10
Section 2923.10 requires a mortgage servicer to send written acknowledgement that it has received a complete first lien modification application from a borrower. Section 2923.10(a) states that the written acknowledgement must include the following information:

1) A description of the loan modification process, including an estimate of when a decision on the loan modification will be made after a complete application has been submitted by the borrower and the length of time the borrower will have to consider an offer of a loan modification or other foreclosure prevention alternative.
2) Any deadlines, including deadlines to submit missing documentation, that would affect the processing of a first lien loan modification application.
3) Any expiration dates for submitted documents.
4) Any deficiency in the borrower’s first lien loan modification application.

Since this is a statutory cause of action, it must be pleaded with particularity. Covenant Care, Inc. v. Superior Court (2004) 32 Cal. 4th 771, 790.

The Defendant argues that the Second Amended Complaint does not state a cause of action for the violation of section 2923.10 because it contains the required written acknowledgement in exhibit 4. The Plaintiff alleges in paragraphs 29 and 30 that she submitted her application on January 16, 2013 and January 18, 2013. The Plaintiff alleges that she received the written acknowledgement from the Defendant and that a copy is attached as exhibit 4.
A review of exhibit 4 reveals that it is dated January 19, 2013, which is one day after the Plaintiff sent her application. The written acknowledgement includes a description of the loan modification process.
The Plaintiff alleges in paragraph 30 that the written acknowledgement violated Civil Code section 2923.10 because it did not identify any missing documents and it did not identify a deadline to submit the missing documents. The Plaintiff alleges in paragraph 35 that she was “left in limbo” because she did not know what the Defendants would do. However, a review of the written acknowledgement reveals that it states that the mortgage servicer would be reviewing the Plaintiff’s application and determining whether the Plaintiff is eligible for mortgage assistance. There is no language indicating that the application is on hold, incomplete, or that any documents are missing.
The Plaintiff’s claim is that the Defendants should have identified missing documents and set a deadline for their submission in the written acknowledge. However, there are no allegations that identify any missing documents or that demonstrate that the Defendant knew that these documents were missing when it sent the written acknowledgment. If the Defendant was not aware that documents are missing, it could not identify missing documents and it would be an idle act to set a deadline for their submission.

Accordingly, the Plaintiff does not plead a claim for the violation of the statute because there are no specific facts in the cause of action that indicate the following:

1) the Plaintiff submitted an application that was missing documents;
2) the Defendants knew that the application was missing documents and failed to identify these missing documents in its written acknowledgement.

Therefore, the Court will sustain the demurrer to the first cause of action.

California law imposes the burden on the Plaintiff to demonstrate the manner in which the Plaintiff can amend the pleadings to correct the defects in her Complaint. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiff does not meet this burden by identifying the manner in which she can add the specific facts needed to plead the first cause of action. Instead, the Plaintiff makes a generic request for leave to amend in a single sentence on page 12 of her opposition. There is no showing that she can correct these defects by amendment.
Accordingly, the Court will not grant leave to amend.

b. Second Cause of Action for Violation of Civil Code Section 2923.6
Section 2923.6 bars a mortgage servicer from recording a notice of default or conducting a trustee’s sale while a complete application for a first lien loan modification is pending from the borrower.
The Defendant argues that the Plaintiff cannot plead this cause of action because it determines when a loan application is complete. This argument implies that the Defendant did not violate section 2923.6 by selling the Plaintiff’s property because the Plaintiff’s loan application was not “complete.”
However, the Plaintiff alleges in paragraph 39 that she submitted a complete loan application on January 16, 2013 and January 18, 2013. The Plaintiff’s allegations are assumed true and the Plaintiff’s ability to prove the allegations is of no concern for the purposes of ruling on the demurrer. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214. Since the Plaintiff alleges that her loan application was complete, her cause of action pleads sufficient facts.

Therefore, the Court will overrule the demurrer to the second cause of action.

2. Demurrer to Third Cause of Action for Promissory Estoppel
The Defendants argue that the Plaintiff has not pleaded a clear promise or detrimental reliance in her cause of action. The elements of promissory estoppel are the following:

1) a promise clear and unambiguous in its terms;
2) reliance by the party to whom the promise is made;
3) the reliance must be both reasonable and foreseeable; and
4) the party asserting the estoppel must be injured by his reliance.
Aceves v. U.S. Bank N.A. (2011) 192 Cal. App. 4th 218, 225.

The promise must be clear and unambiguous in its terms and cannot be established from preliminary discussions and negotiations. Garcia v. World Savings, FSB (2010) 183 Cal. App. 4th 1031, 1044. Further, a hopeful expectation cannot satisfy the element of reliance. Aceves, 192 Cal.App.4th at 227. The promises must be definite enough for the Court to determine the scope of the duty imposed by them. West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal. App. 4th 780, 804.

The Plaintiff alleges in paragraph 46 that the Defendant made representations that her application for a loan modification was under review and that no further steps would be taken to foreclose on the property while the application was in “active review”. These allegations indicate that the Defendant promised not to foreclose on the Plaintiff’s property while her application was under review. The Court can determine the scope of the duty imposed by the promises, i.e., while the Defendant was reviewing the Plaintiff’s application, the Defendant had a duty not to foreclose on the Plaintiff’s property. This is sufficient to plead the element of a promise clear and unambiguous in its terms.

The Plaintiff alleges in paragraph 47 that she relied on this promise by not seeking alternatives to foreclosure, such as selling her property. This is sufficient to plead detrimental reliance. See e.g., West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal. App. 4th 780, 805 (finding that in a promissory estoppel claim based on a promise not to foreclose, detrimental reliance can be based on the claim that the plaintiff would have pursued other options, including possibly selling her home).

Therefore, the Court will overrule the demurrer to the third cause of action.

3. Demurrer to Fourth Cause of Action for Negligence
The Defendants argue that the Plaintiff has not pleaded sufficient facts to demonstrate that they had a duty of care under a negligence theory. The Defendants were lenders and under California law, a lender owes no general duty of care to the borrower. Nymark v. Heart Federal Savings & Loan Association (1991) 231 Cal.App.3d 1089, 1096 (“as a general rule, a financial institution owes no legal 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.”).
The Plaintiff alleges in paragraph 51 that the Defendant exceeded its conventional role as a lender when it entered into the loan modification process. The Plaintiff also alleges in paragraph 53 that the Defendant failed to acknowledge that her application was incomplete and failed to postpone the sale until it had made a determination on the application for a loan modification.
A loan modification is, at its core, an attempt by a money lender to salvage a troubled loan and nothing more than a renegotiation of loan terms. Armstrong v. Chevy Chase Bank, FSB (N.D. Cal. Oct. 3, 2012) 2012 U.S. Dist. LEXIS 144125, 11-12. This renegotiation is the same activity that occurred when the loan was first originated; the only difference being that the loan is already in existence. Id. Outside of actually lending money, it is undebatable that negotiating the terms of the lending relationship is one of the key functions of a money lender. Id. For this reason, a loan modification is characterized as a traditional money lending activity. Id.
This indicates that the Defendants’ conduct when reviewing the loan modification is part of the lending relationship. There are no grounds to find that the Defendants exceeded the scope of the conventional role as lenders.

Therefore, the Court will sustain the demurrer to the fourth cause of action.

California law imposes the burden on the Plaintiff to demonstrate the manner in which the Plaintiff can amend the pleadings to correct the defects in her Complaint. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiff does not meet this burden by identifying the manner in which she can plead a negligence claim against her lenders. Instead, the Plaintiff makes a generic request for leave to amend in a single sentence on page 12 of her opposition. There is no showing that she can correct these defects by amendment.
Accordingly, the Court will not grant leave to amend.

RULING:
SUSTAIN demurrer to first and fourth causes of action without leave to amend.
OVERRULE demurrers to second and third causes of action.