2013-00142131-CU-OR

Travis Doster vs. Bank of America NA

Nature of Proceeding:    Hearing on Demurrer to Second Amended Complaint

Filed By:   Kang, Grace B.

Defendants Bank of America, N.A., Reconstruct Company, N.A. and Wells Fargo
Bank, N.A.s’ demurrer to Plaintiff Travis Doster’s second amended complaint (“SAC”)
is ruled upon as follows.

Defendants’ Request for Judicial Notice is granted. (See Poseidon Devel., Inc. v.
Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117-18; see also
Startford Irrig. Dist. v. Empire Water Co. (1941) 44 Cal.App.2d 61, 68 [recorded land
documents, not contracts, are the subject of judicial notice
on demurrer].) The court, however, does not accept the truth of any facts within the
judicially noticed documents except to the extent such facts are beyond reasonable
dispute. (See Poseidon Devel., 152 Cal.App.4th at 1117-18.) see also Fontenot v.
Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265
(“[A] court may take judicial notice of the fact of a document’s recordation, the date the
document was recorded and executed, the parties to the transaction reflected in the
recorded document, and the document’s legally operative language, assuming there is
no genuine dispute regarding the document’s
authenticity.”)

In this foreclosure action, Plaintiff alleges causes of action for violation of the
Homeowners Bill of Rights (one count of robosigning and one count of failure to
validate mortgage), cancellation of instruments, fraud, breach or oral contract, and for
money had and received.

Tender

The demurrer to all causes of action in the complaint on the basis that Plaintiff was
required to “make a valid tender of the indebtedness is overruled.  The Court
previously overruled the demurrer to the entire complaint on this basis in its ruling on
the demurrer to the FAC.  There is no basis to revisit the ruling.

First Cause of Action (Violation of HOBR)

Count One-Robosigning The Court previously sustained Defendants’ demurrer to this count on the basis that
Plaintiff’s allegations were conclusory.  Plaintiff alleges that in violation of Civil Code §
2924.17, Defendants knowingly recorded false documents (NOD, NOTS, etc.) which
contained information that was not verified and not true in that the Deed of Trust was
forged, BANA had already transferred its beneficial interest to BAC SEC and neither
Reconstruct nor Wells Fargo were rightfully entitled to enforce the Deed of Trust.

Civil Code § 2924.17(b) requires mortgage servicers to review competent and reliable
evidence to substantiate the borrower’s default and the right to foreclose prior to
recording or filing any documents in connection with a foreclosure.

Defendants argue, among other things, that the robosigning count is barred because it
is based upon documents which were recorded prior to the date the HOBR was
enacted.  This argument is rejected for the same reasons that it was rejected in the
ruling on the first demurrer.  Indeed, the robosigning count, is based on documents
recorded/filed both before and after the HOBR’s enactment.  (SAC ¶ 14.)  Thus,
Defendants’ failed to show as a matter of law that the “robosigning” count fails as a
matter of law because it predates HOBR’s enactment.

While Defendants argue that the allegations remain conclsuory, the Court disagrees.
Plaintiff has alleged, for example, that the Notice of Default recorded on February 13,
2013, was false because it stated that he was in default despite the fact that he was
not in default given he had fully paid under his forbearance agreement, because the
NOD contained a statement that he was contacted in accordance with Civil Code §
2923.5.  (SAC ¶ 14(v).)  Plaintiff alleges that had the NOD not been robosigned and
someone verified the information, the true facts would have come to light.  These
allegations are sufficient to state a violation of § 2921.17(b) as they set forth a specific
factual basis as to how Defendants failed to review information to substantiate
Plaintiff’s default prior to recording the NOD, regardless of the sufficiency of any other
allegations. The Court need not consider Defendants’ argument regarding Plaintiff’s
ability to challenge any assignment as the Court found that the robosigning count is
sufficiently pled with respect to the NOD.  The demurrer to the robosigning count is
overruled.

Count Two-Failure to Validate

Defendants demur to this count on the basis that the judicially noticeable documents
demonstrate that the foreclosure was properly conducted.

Plaintiff alleges that in February 2013, he sent a letter demanding that Defendants
BANA and Reconstruct verify their right to foreclose and that he received a response
that was intentionally misleading as to the owner of the note.  (SAC ¶ 27.)  He alleges
that BANA stated it was the servicer but could not identify the party on whose behalf it
was servicing the note, sometimes referring to BAC SEC and sometimes referring to
WELLS.  Plaintiff’s second count is essentially based on the same factual predicate as
the first count and thus is sufficient for the same reasons stated above.

Finally, Defendants argue that Plaintiff failed to allege prejudice in connection with the
foreclosure process.  This argument is rejected as Plaintiff clearly alleged, for example,
that had the recorded documents been verified/validated, the true information would
have come to light, specifically that he was not in default as stated in the NOD.  (SAC
¶ 14(v).)
The Court is puzzled by Defendants arguments that there was no stated violation of
the HOBR because Plaintiff was previously denied a loan modification and failed to
provide a material change to them regarding his circumstances as required by Civil
Code § 2923.6.  Plaintiff’s HOBR cause of action is not premised upon any alleged
violation with respect to Civil Code § 2923.6.

Second Cause of Action (Cancellation of Instruments)

Defendants demur to this cause of action on the basis that it is time barred because
Plaintiff seeks to cancel certain loan documents which were executed in 2006 yet he
failed to allege facts showing when/how he discovered that the loan/foreclosure
documents were forged  or why he could not have discovered that information earlier
despite the exercise of reasonable diligence.  The Court previously sustained the
demurrer to this cause of action in the FAC on this basis.

The Court finds that Plaintiff has cured the defects in that he has alleged that
discovered that the documents were forged/falsified in February 2013 when he sought
relief under the HOBR.  He alleges that he had no reason to know of any impropriety
with any of the underlying documents until he became aware that BANA was
attempting to foreclose on he sent his mortgage validation letter and received the
documentation he alleges is false.  Prior to that time, he alleges that he had only been
provided a copy set of the closing documents from title.  (SAC ¶ 41.)  These
allegations were absent from the FAC.  The Court finds, that for pleading purposes
only, Plaintiff has alleged facts showing “(1) the time and manner of discovery and (2)
the inability to have made earlier discovery despite reasonable diligence.”  (Fox v.
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Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4   797, 808.)  The instant complaint was
filed in March 2013 and thus for pleading purposes, the second cause of action is not
barred by the statute of limitations.  In addition, Plaintiff seeks to cancel documents
that were not executed until 2013, e.g., the NOD recorded in February 2013.  Thus
even if Defendants were correct on the statute of limitations argument with respect to
loan documents executed in 2006, such argument would not show that the entire
cause of action was untimely.

Defendants also argue that cancellation is only appropriate when there is a reasonable
apprehension that if left outstanding the instrument may cause serious injury to a
person against whom it is void or voidable.  (Civ. Code § 3412.)  Plaintiff has alleged
such facts, for example, as he has alleged that a falsified notice of default has been
recorded falsely indicating that he is in default.  Thus he has alleged both an “apparent
validity” and “actual invalidity” of the NOD.  (Civ. Code § 3413.)  Further, while
Defendants may be correct that a sale is not currently scheduled, the outstanding
NOD, pursuant to which Defendants could proceed with a sale may cause serious
injury to Plaintiff if left outstanding.

The demurrer to the second cause of action is overruled.

Third Cause of Action (Fraud)

Defendants demur on the basis that the cause of action is time barred.  The demurrer
on this basis is overruled.  The Court already found in its ruling on the demurrer to the
FAC that the fraud cause of action was not barred by the statute of limitations as pled
and there is no reason to revisit that ruling.
Defendants’ demur on the basis that the fraud cause of action is not pled with the
requisite specificity is overruled.  The Court previously sustained the demurrer on this
basis finding that Plaintiff failed to allege the “names of the persons who made the
misrepresentations,” their authority to speak for the corporation, specifically “what they
said or wrote,” or precisely “when it was said or written.”  (Perlas v. GMAC Mortgage,
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LLC (2010) 187 Cal.App.4   429, 434.)  Plaintiff has now alleged specific names of the
individuals alleged to have made the misrepresentations, their authority to speak,
specific dates, and specific statements.  (SAC ¶¶ 65- 77.)  The demurrer on the basis
that the fraud claim is not specifically pled is overruled.

Defendants’ demur on the basis that Plaintiff failed to allege intent to induce reliance,
actual reliance or damages is overruled.  Plaintiff alleged that BANA falsely
represented that it would execute a forbearance agreement, would negotiate a
modification, and ultimately would receive a modification.  (SAC ¶¶ 65-77.)  Plaintiff
alleged that BANA made these promise with no intent to perform in order to collect
payments from him.  (Id. ¶ 78.)  He alleged that he justifiably relied upon the promises
to send BAN over $33,000 believing that a written forbearance agreement or
modification agreement was forthcoming, despite the fact that BANA was not the true
servicer of the loan.  (Id. ¶¶ 79-80.)  He alleges that had he known BANA would not
honor its promises, he would have elected to grant BANA a deed in lieu or allowed
them to foreclose on the security.  (Id. ¶ 80.)  He alleges that he was damaged
because BANA wrongfully received $33,000 from him because it had no intention of
modifying the mortgage.  (Id. ¶ 82.)  These allegations are sufficient to show intent to
induce reliance, actual reliance and damages.

Finally, Defendants cite to case law finding that forbearance agreements that alter
foreclosure rights fall within the statute of frauds and must be in writing, apparently to
argue that a fraud cause of action cannot be based on a promise to execute a
forbearance agreement.  (Secrest v. Security National Mortgage Loan Trust 2002-2
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(2008) 167 Cal.App.4   544.)  However, that case stands for the proposition that an
unsigned written forbearance agreement was unenforceable because it was not in
writing as required by the statute of frauds.  (Id. at 553.)  It did not hold that a fraud
cause of action for damages could not be based upon a promise to execute a
forbearance agreement.  Indeed, the instant cause of action does not seek to enforce
an agreement, it merely seeks damages for making a false promise.

The demurrer to the third cause of action is overruled.

Fourth Cause of Action (Breach of Oral Contract)

The Court previously sustained the demurrer to this cause of action on the basis that
Plaintiff alleged an oral promise to modify his loan which fell within the statute of frauds
and he had not adequately alleged a promissory estoppel claim to avoid the statute of
frauds.  Defendants again demur on the basis that Plaintiff failed to adequately allege
a claim for promissory estoppel.

Generally, an oral agreement to modify a mortgage loan comes within the statute of
frauds and if not in writing, it is unenforceable.  (Secrest, supra, at 552-553.)  Case law
recognizes that a plaintiff may allege promissory estoppel to avoid the statute of
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frauds.  (Aceves v. U.S.Bank, N.A.  (2011) 192 Cal.App.4   218, 230-231.)  “The
elements of a promissory estoppel claim are:  “(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, supra,  192 Cal.App.4th at 225-226 (citation
omitted).)  In Aceves , the plaintiff had alleged that “U.S. Bank agreed to ‘work with
[her] on a mortgage reinstatement and loan modification’ if she no longer pursued
relief in the bankruptcy court,” and the court held that this was a sufficiently “clear and
unambiguous promise” for the promissory estoppel claim to withstand the pleading
phase.  (Id.)  The court held that such alleged promise “indicates that U.S. Bank would
not foreclose on [the plaintiff’s] home without first engaging in negotiations with her to
reinstate and modify the loan on mutually agreeable terms.”  (Id.)  Concluding that the
alleged “promise was sufficiently concrete to be enforceable,” the court held that the
plaintiff’s pleading adequately alleged a claim for promissory estoppel.  (Id. at 222.)
The court clarified that the alleged promise was not a promise to modify a loan, it was
a “promise to negotiate” with the plaintiff.  (Id. at 226 (emphasis in Aceves).)

The Court previously found that Plaintiff had only alleged a promise to offer a
forbearance/modification and the unambiguous and concrete terms of those promises
were not alleged.  In the SAC, Plaintiff now alleges both that BANA promised to
negotiate with him regarding a modification and that BANA promised to offer him a
forbearance/modification.  The promise to negotiate is within the scope of Aceves,
which Plaintiff had not previously alleged in the FAC.  Plaintiff has sufficiently allege
that BANA promised to negotiate with him regarding a modification.  (SAC ¶¶ 68, 69,
90, 91.)  Thus, regardless of Plaintiff’s other allegations regarding a promise to offer a
forbearance/modification, as opposed to a promise to negotiate, Plaintiff’s cause of
action now falls within Aceves which found that an allegation of a promise to negotiate
a modification was sufficiently definite to support a promissory estoppel claim.  The
Court rejects Defendants’ argument that his allegations of a promise to negotiate are
somehow impermissibly contradictory to a promise to offer a forbearance/modification
agreement.  Indeed, as pointed out by Plaintiff, it simply reflects the varying positions
BANA took with him.  The allegations in the FAC did not preclude Plaintiff from also
alleging that BANA promised to negotiate with him.  Further, he has now sufficiently
alleged the terms of the promised forbearance/modification agreement as he has also
alleged that BANA promised to offer a forbearance agreement/modification whereby
the past due balance would be re-amortized into the principal, which would take
Plaintiff out of default, and a modification at a “step rate of 3% for the first year, 4% for
the next year, and 5% for the third year.”  (Id.  ¶ 91.)

Further, Plaintiff has alleged detrimental reliance and damage as a result of the
alleged promise to negotiate, promise to forbear.  Indeed, Plaintiff alleged that he
made numerous payments rather than simply cutting his losses and allowing BANA to
foreclose on the home.  (Id. ¶¶ 96-98.)  Indeed, California authority has cited
approvingly authority indicating that detrimental reliance may exist where a borrower
foregoes other opportunities, including “defaulting.”  ( West v. JPMorgan Chase Bank,
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N.A. (2013) 214 Cal.App.4   780, 805 [citing  Wigod v. Wells Fargo Bank, N.A. (7   Cir.
2012) 673 F.3d 547, 566 for the proposition that detrimental reliance was sufficiently
alleged when a plaintiff alleged that she gave up other “opportunities to save her home
and by devoting resources to making the lower monthly payments under the TPP
rather than attempting to sell her home or defaulting”].)  Plaintiff’s allegations are
sufficient for pleading purposes.

The demurrer to the fourth cause of action is overruled.
The demurrer is overruled.

Defendants shall file and serve their answers no later than July 11, 2014.

The minute order is effective immediately.  No formal order pursuant to CRC Rule
3.1312 or other notice is required.