Case Number: KC066337 Hearing Date: July 03, 2014 Dept: O

Lewis v. Bank of America, N.A., et al. (KC066337)

Defendants Bank of America, N.A., Deutsche Bank National Trust Company, and Recontrust Company, N.A.’s DEMURRER TO FIRST AMENDED COMPLAINT
Respondent: Plaintiff Lewis

TENTATIVE RULING
Defendants Bank of America, N.A., Deutsche Bank National Trust Company, and Recontrust Company, N.A.’s demurrer to first amended complaint is SUSTAINED. The court will hear from Plaintiff regarding any further grounds warranting leave to amend.

JUDICIAL NOTICE is taken of Defense Exhibits A-H and Plaintiff’s Exhibits A-B. (Ev. Code 451(f), 452(c), (d), (g), and (h).)

1st CAUSE OF ACTION: FRAUDULENT LOAN TRANSFER:

STANDING:
“Civ. Code, § 2924, subd. (a)(1), states that a trustee, mortgagee, or beneficiary, or any of their authorized agents may initiate the foreclosure process… nowhere does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and the court sees no ground for implying such an action.” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149.)

Jenkins v. JP Morgan Chase Bank, N.A. held, “Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. An assignment merely substitutes one creditor for another, without changing the borrower’s obligations under the note…. Because a deed of trust does not convey a power of sale directly to the beneficiary-creditor, it is immaterial whether an assignment of a promissory note was properly acknowledged and recorded when a deed of trust is used to secure a debt… The transferee of a promissory note secured by a deed of trust is not a mortgagee, or other encumbrancer to whom a power of sale is given within the meaning of Civ. Code, § 2932.5, and such a transferee need not have a duly acknowledged and recorded interest in the promissory note before exercising the power of sale. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515-519.)

Here, Plaintiff is not attacking the validity of the debt. Plaintiff admits that she defaulted on her loan. Instead, she attacks the securitization process. However, Plaintiff did not suffer any prejudice resulting from any alleged defective transfer. (See, e.g. Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85 – “Siligas fail to allege any facts showing that they suffered prejudice as a result of any lack of authority of the parties participating in the foreclosure process. The Siligas do not dispute that they are in default under the note. The assignment of the deed of trust and the note did not change the Siligas’ obligations under the note, and there is no reason to believe that Accredited as the original lender would have refrained from foreclosure in these circumstances. Absent any prejudice, the Siligas have no standing to complain about any alleged lack of authority or defective assignment.”) Borrowers must allege and show prejudice as to claims of the lack of authority to transfer a promissory note. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272 – noting that it is difficult to conceive how borrowers could show prejudice from an unauthorized transfer, because borrowers must anticipate the legal possibility of note transfers to different creditors, defaults in payments on the note cause any prejudice via foreclosure, and original lenders would be the ones prejudiced by an unauthorized loss.) EVEN IF ANY SUBSEQUENT TRANSFERS OF THE PROMISSORY NOTE WERE INVALID, THE BORROWERS ARE NOT THE VICTIMS OF SUCH INVALID TRANSFERS BECAUSE THEIR OBLIGATIONS UNDER THE NOTE REMAINED UNCHANGED. Under California law, a party must show injury in order to challenge the validity of the assignment. (Bumb v. Benett (1958) 51 Cal.2d 294, 300.)

Plaintiff lacks standing to challenge the securitization process, and fails to allege any prejudice. Demurrer is SUSTAINED.

3rd CAUSE OF ACTION: FRAUD IN LOAN SERVICING:
The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. (See CC 1709.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.) Fraud claims are governed by the 3-year statute of limitations per CCP 338(d).

Plaintiff’s fraud claim is uncertain. Pars. 80-84 allege that Plaintiff suffered damages because Defendant did not give Plaintiff a loan modification. However, Par. 79 admits that Plaintiff received a loan modification. Par. 31 further admits that Plaintiff defaulted on loan modification payments. If multiple misrepresentations were made, then such must be pled with particularity. Demurrer is SUSTAINED.

4th CAUSE OF ACTION: NEGLIGENCE IN MODIFICATION PROCESS:
The relationship between a lending institution and its borrower-client is not fiduciary in nature. A commercial lender is entitled to pursue its own economic interests in a loan transaction. This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another…. As a general rule, a financial institution owes no 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. Thus, for example, a lender has no duty to disclose its knowledge that the borrower’s intended use of the loan proceeds represents an unsafe investment. The success of the borrower’s investment is not a benefit of the loan agreement which the lender is under a duty to protect. Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender. (Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089, 1093-1096.) “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. … The Biakanja factors do not support imposition of a common law duty to offer or approve a loan modification.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67.)

Plaintiff failed to allege any unique circumstance that would impose a duty on Defendants. “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.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67.) Demurrer is SUSTAINED.

5th CAUSE OF ACTION: ENJOIN PENDING TRUSTEE SALE BASED ON WRONGFUL FORECLOSURE PROCEEDINGS:
Plaintiff contends Defendants violated CC 2923.5 by failing to contact her regarding a loan modification. However, the FAC admits that Plaintiff received a loan modification, establishing that the lender was in contact with Plaintiff and therefore complied with its duties under CC 2923.5. Citing a nonbinding lower court case, Plaintiff contends that it is not sufficient that the borrower contact the lender, but that the lender must contact the borrower. However, nothing in the statute requires the lender, rather than the borrower, to initiate contact. Demurrer is SUSTAINED.

6th CAUSE OF ACTION: QUIET TITLE:
The complaint shall be verified and shall include all of the following: (a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any; (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession; (c) The adverse claims to the title of the plaintiff against which a determination is sought; (d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought; (e) A prayer for the determination of the title of the plaintiff against the adverse claims. (CCP 761.020.)

A borrower cannot quiet title without discharging his debt. (Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477.) Plaintiff claims her cause of action for violation of CC 2923.5 excludes her from tender pursuant to Mabry v. Sup.Ct. (2010) 185 Cal.App.4th 208, 213. However, as explained above, Plaintiff’s CC 2923.5 claim is defective. Demurrer is SUSTAINED.

2nd CAUSE OF ACTION: B&P Code 17200: B&P 17200:
The Unfair Business Practices Act shall include “any unlawful, unfair, or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)

“To satisfy the narrower STANDING requirements imposed by Proposition 64, a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.… A plaintiff fails to satisfy the causation prong of the statute if he or she would have suffered “the same harm whether or not a defendant complied with the law.” … Jenkins’s third cause of action must also satisfy the second prong of the standing requirements under Business and Professions Code section 17204 (i.e., causation), which REQUIRED HER TO PLEAD A CAUSAL LINK BETWEEN HER ECONOMIC INJURY, THE IMPENDING NONJUDICIAL FORECLOSURE OF HER HOME, and the six unfair or unlawful acts allegedly committed by Defendants. (Bus. & Prof. Code, § 17204.) Importantly, Jenkins admits in both her SAC and opening brief that she defaulted on her loan. IT IS ALSO INDISPUTABLE JENKINS’S DEFAULT TRIGGERED THE LAWFUL ENFORCEMENT OF THE POWER OF SALE CLAUSE in the deed of trust, and it was the triggering of the power of sale clause that subjected Jenkins’s home to nonjudicial foreclosure…. As Jenkins’s home was subject to nonjudicial foreclosure because of Jenkins’s default on her loan, which occurred before Defendants’ alleged wrongful acts, Jenkins cannot assert the impending foreclosure of her home (i.e., her alleged economic injury) was caused by Defendants’ wrongful actions. Thus, even if we assume Jenkins’s third cause of action alleges facts indicating Defendants’ actions violated at least one of the UCL’s three unfair competition prongs (unlawful, unfair, or fraudulent), Jenkins’s SAC cannot show any of the alleged violations have a causal link to her economic injury.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497, 521.)

Plaintiff lacks standing to pursue a B&P 17200 claim because she admits she defaulted on her loan, which triggered foreclosure proceedings. Any wrongful conduct on the part of Defendants occurred after the default. Thus, Plaintiff cannot show the unfair business practice has a causal link to Plaintiffs’ economic injury. Demurrer is SUSTAINED.

7th CAUSE OF ACTION: DECLARATORY RELIEF fails because the other claims fail. Demurrer is SUSTAINED.

The court will hear from Plaintiff regarding any further grounds warranting leave to amend.