Case Number: BC534936    Hearing Date: September 08, 2014    Dept: 32

CASE NAME: Winthura Silvage Silva, et al. v. PennyMac Loan Services, LLC
CASE NO.: BC534936
HEARING DATE: 09/08/14
DEPARTMENT: 32
CALENDAR NO.: 11
SUBJECT: Demurrer to First Amended Complaint
MOVING PARTY: Defendant PennyMac Loan Services, LLC (“Defendant”)
RESP. PARTY: None

COURT’S TENTATIVE RULING

Demurrer to First Amended Complaint (“FAC”)

First Cause of Action (Breach of Contract) SUSTAINED WITHOUT LEAVE TO AMEND.

Second Cause of Action (Quantum Meruit) SUSTAINED WITHOUT LEAVE TO AMEND.

Third Cause of Action (Breach of Covenant of Good Faith and Fair Dealing) SUSTAINED WITHOUT LEAVE TO AMEND.

STATEMENT OF THE CASE

This case arises from events following a November 2006 real estate loan in the face amount of $565,000 secured by a deed of trust on property located at 20816 Chase Street, Winnetka, California. The loan subsequently fell into default. Plaintiff acquired the loan from the original lender. At the time of the non- judicial foreclosure sale the outstanding amount of the loan was $889,606.05. After the foreclosure sale, Plaintiff sold the property to a third party. The dispute that is the subject of the FAC involves efforts of Plaintiffs to arrange a “short sale”, i.e., a sale for less than the loan amount, prior to the foreclosure.

In the complaint, Plaintiffs allege that Defendant unreasonably and in bad faith refused to approve a short sale of Plaintiff Silva’s property. Plaintiffs apparently allege that Plaintiff Silva, the owner of the property, would buy the property pursuant to the short sale. Plaintiff Mohamed alleges that he performed work marketing the property for which Defendant must provide compensation.

On June 11, 2014, the court sustained Defendant’s demurrer to the original complaint with leave to amend. Plaintiffs filed a first amended complaint on July 8, 2014.

There has been no opposition filed by Plaintiffs. For the reasons set forth below, the court sustains the demurrers without leave to amend. However, at the hearing Plaintiffs may make a proffer of facts that could be alleged in an amended pleading to address the deficiencies in the FAC.

ANALYSIS

Defendant’s Request for Judicial Notice.

Exhibits A: GRANTED. The court may take judicial notice of the records of any court of record in the United States pursuant to Evid. Code § 452(d). Although the bankruptcy court proof of claim is not certified, no objection has been received.

Exhibits B – E: GRANTED. The court can take judicial notice of these recorded title records.

First Cause of Action – Breach of Contract

In the first cause of action for breach of contract, Plaintiff Mohamed alleges that he had an “agreement” with Defendant PennyMac, and that PennyMac breached this “agreement” by foreclosing on the property and failing to compensate Plaintiff “for his efforts” in marketing the subject property. (FAC ¶ 14.) Plaintiff alleges that he “was contacted by PennyMac,” and that thereafter he “followed every instruction” and worked “for PennyMac without any compensation” to market the property for sale. (FAC ¶¶ 10-13.)

Plaintiff Mohamed does not allege that the parties entered an oral or written agreement. He does not attach a written agreement or plead the terms of a written agreement.

Thus, it appears that this claim is premised on an implied contract theory. “A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor’s conduct.” (Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 182.) Although Plaintiff Mohamed alleges that he performed work marketing the property, he does not allege facts showing that Defendant impliedly agreed to compensate him for such work. Indeed, Plaintiff Mohamed was the listing agent for Plaintiff Silva, who allegedly owned the property. (FAC ¶¶ 6, 8, 22.) Thus, Plaintiff Mohamed has not alleged sufficient facts to establish a contractual relationship with Defendant, as opposed to a relationship with Plaintiff Silva .

Plaintiff Mohamed also alleges that he was to receive a commission from the short sale of the property from Defendant. (FAC ¶ 22.) Under the statute of frauds, agreements authorizing an agent to sell real property for compensation or commission must be in writing. (Civ. Code § 1624(a)(4); Beazell v. Schrader (1963) 59 Cal.2d 577, 582.) Plaintiff Mohamed does not allege the existence of any written document between himself and Defendant authorizing him to sell the property for compensation or a commission. Indeed, Plaintiff admits the agreement was “implied.” (FAC ¶ 22.) Accordingly, the breach of contract claim, as pleaded, is barred by the statute of frauds.

No opposition has been received from Plaintiffs to show that these defects could be cured by amendment. As Plaintiffs have already been given an opportunity to amend the complaint, further leave to amend is denied. However, Plaintiffs may make a proffer of facts at the hearing if they contend additional facts would cure these defects.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the first cause of action.

Second Cause of Action – Quantum Meruit

The elements of a claim for quantum meruit are: (1) Plaintiff’s performance of services, work or labor; (2) at defendant’s request; and (3) circumstances inferring defendant’s promise to pay a reasonable value. (Maglica v. Maglica (1998) 66 Cal. App. 4th 442, 449-50.)

Here, as discussed above for the first cause of action, Plaintiff Mohamed has not alleged sufficient facts to suggest that he performed work marketing the property based on a promise by Defendant to pay reasonable value for such work. Rather, it appears that Plaintiff Mohamed performed these services as an agent for Plaintiff Silva. (FAC ¶ 8.) Moreover, under California law, the statute of frauds bars a cause of action for quantum meruit where, as here, a written agreement is required. (Beazell, supra at 582.) As stated above, Plaintiff Mohamed has not alleged the existence of a writing establishing that he would receive compensation or commission for the short sale from Defendant.

No opposition has been received from Plaintiffs to show that these defects could be cured by amendment. As Plaintiffs have already been given an opportunity to amend the complaint, further leave to amend is denied. However, Plaintiffs may make a proffer of facts at the hearing if they contend additional facts would cure these defects.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the second cause of action.

Third Cause of Action – Breach of Covenant of Good Faith and Fair Dealing

Defendant contends that the third cause of action fails because Plaintiffs Silva and Mohamed have not alleged a contractual relationship with Defendant. Defendant also contends that Plaintiff Silva has not alleged his damages for this cause of action.

A cause of action for breach of covenant requires the existence of a contractual relationship. (See Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349-50.) For the reasons stated above as to the first cause of action, Plaintiff Mohamed has not alleged a contractual relationship to support the third cause of action. As to Plaintiff Silva, Plaintiffs have not alleged that Defendant accepted the short sale offer. (FAC ¶¶ 14, 19-20.) Therefore, Plaintiffs do not allege the formation of the alleged short sale contract at issue between Silva and Defendant.

The implied oral agreement between Silva and Defendant also appears to lack consideration. “A naked promise unsupported by a consideration is not enforceable, and a consideration is defined by the code (Civ. Code, sec. 1605), as follows: ‘Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise.’” (Western Lithograph Co. v. Vanomar Producers (1921) 185 Cal. 366, 369.) A short sale can only occur when the lender agrees to accept less than is owed by the borrower. (See Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1390-1391.) Because the short sale was apparently to be made to Silva, the borrower (see FAC ¶ 20), it is unclear how Silva supplied any consideration for the short sale.

No opposition has been received from Plaintiffs to show that these defects could be cured by amendment. As Plaintiffs have already been given an opportunity to amend the complaint, further leave to amend is denied. However, Plaintiffs may make a proffer of facts at the hearing if they contend additional facts would cure these defects.

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the third cause of action.