Case Number: BC528559    Hearing Date: October 21, 2014    Dept: 40

BABATUNDE A. EBOREIME v. BANK OF AMERICA, N.A.; et.al.
DEMURRER TO FIRST AMENDED COMPLAINT

Case No: BC528559
Date: October 21, 2014
Tentative Ruling: The demurrer of Bank of America NA, Seda Babadjanians, Trans N. Nguyen and Stephanie Powell to the first amended complaint is GRANTED WITHOUT LEAVE TO AMEND.
This is the second demurrer to Plaintiff’s pleadings. The demurrer challenges the complaint in its entirety on the grounds that Plaintiff has failed to state a cause of action, the allegations are uncertain and Plaintiff has failed to allege tander. Defendants’ request for judicial notice is granted. Plaintiff’s request for judicial notice is denied.
Res Judicata/Judicial Estoppel: Defendants argue Plaintiff’s confirmed Chapter 13 plan indicates Plaintiff accepted the terms of the Note and Deed of Trust; agreed to cure all arrearages owed to Bank of America over a 46 month period; and agreed to continue to make all monthly mortgage payments. (RJN Exh. 5, 6.) Further, Defendants argue that at no time did Plaintiff disclose his claims against Defendants.

When an individual enters Chapter 13 bankruptcy, a confirmed plan serves to bind the debtor and each creditor. (11 U.S.C.A. §1327(a).) Further, there is case law supporting the position that a confirmed plan is res judicata on all issues that could have or should have been litigated at the confirmation hearing. (See In re Valenti (B.A.P. 9th Cir. 2004) 310 B.R. 138, 150.) Here, Defendants argue that with regard to the debtor’s right to litigate such issues following confirmation of the plan, the plan must contain a specific reservation of rights. Defendants rely on In re Kelley (B.A.P. 9th Cir. 1996) 199 B.R. 698, 704, a Chapter 11 case.

“ ‘The normal rules of Res judicata and collateral estoppel apply to the decisions of bankruptcy courts.’ ” (Martin v. Martin (1970) 2 Cal.3d 752, 758.) “The burden of establishing preclusion by prior adjudication (res judicata) rests squarely on the party asserting it.” (Ferraro v. Camarlinghi (2008) 161 Cal. App. 4th 509, 529.) To demonstrate the application of res judicata, one must establish (1) the decision in the prior proceeding is: (a) final; and (b) on the merits; (2) the successor action is based on the same cause of action as the former one; and (3) the parties to the former proceeding are: (a) the parties in the successor action; or (b) are in privity with them. (Zevnik v. Sup. Ct. (2008) 159 Cal.App.4th 76, 82-83.) While the claims asserted here may be barred, the demurrer does not fully address the necessary elements for establishing the application of this doctrine to this case. It is not clear that the issue of the interest rate on Plaintiff’s loan was conclusively resolved in the bankruptcy proceeding. (FAC ¶¶8-15, 20.) Further, there is no discussion of how the bankruptcy proceedings relate to the claims as asserted against non-corporate Defendants. Therefore, the demurrer is not sustained on this basis.

Regarding judicial estoppel, one must establish that (1) a party took two positions; (2) in judicial or quasi-judicial proceedings; (3) tribunal adopted the position; (4) positions completely are inconsistent; and (5) the first position was not due to ignorance, fraud or mistake. (State Water Resources Control Bd. Cases (2006) 136 Cal.App.4th 674, 826-827.) Defendants cite to Hamilton v. State Farm Fire & Cas. Co. (9th Cir. 2001) 270 F.3d 778, 783, in which the Court held that a plaintiff was estopped from pursuing post-discharge claims against an insurer because: (1) the debtor clearly asserted inconsistent positions as he failed to list his claims against State Farm as assets on his bankruptcy schedules and later sued State Farm on the same claims, (2) the bankruptcy court accepted the debtor’s prior assertions in that the court granted the debtor a discharge, and (3) Hamilton obtained an unfair advantage by obtaining all the benefits of his Chapter 7 bankruptcy without complying with his affirmative duty to disclose all assets. (Id. at pp. 784-785.) Defendants argue that at no time during the bankruptcy did Plaintiff disclose these claims, barring him from litigating them now. This is well taken and likely bars Plaintiff’s claims against Bank of America. (See HRP Group v. Aurora Loan Services, LLC. (E.D. Cal. 010) 436 B.R. 569, 578.) However, the fifth element depends on facts outside the four corners of the complaint and outside of the judicially noticeable matter. Therefore, the demurrer is not sustained on this basis.

Tender: Defendants also challenge the complaint on grounds Plaintiff seeks to invalidate the foreclosure of his property, yet fails to allege tender. (FAC ¶¶13, 15, 20.) This issue was raised in the previous demurrer. Plaintiff alleges he began experiencing difficulties paying his mortgage and the judicially noticeable documents support the fact that he defaulted. (¶10, RJN Exh. 2, 5-9.) However, Plaintiff has failed to allege tender or any valid exception to that rule. With regard to the tender requirement, there has been a long-standing equitable rule that “a mortgagor of real property cannot, without paying his debt, quiet his [or her] title against the mortgagee.” Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707; see Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-13; accord Shuster v. Bac Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 512 (addressing exceptions to the tender rule).

Homeowner’s Bill of Rights: As did the original complaint, Plaintiff’s FAC makes a brief reference to the HBOR. (FAC ¶¶14, 20.) Plaintiff alleges he “disputes the validity of any declaration filed under Civil Code §2923.54 and claims of exemption from the Real Estate Commissioner of a final or temporary order of exemption that the time frame for giving Notice of Sale in subdivision (a) of Section 2923.5 does not apply pursuant to Section 2923.52 or 2923.55.” (¶14.) Here, Defendants raise two arguments regarding the Homeowner’s Bill of Rights – (1) Plaintiff admits that Defendants complied with Section 2923.55 and (2) the HBOR does not apply to Plaintiff’s loan.
As noted with regard to the previous demurrer, Section 2923.52 has been repealed. As to Sections 2923.5(a) and 2925.55, the judicially noticeable documents indicate that the Notice of Default was recorded in October 2011 (RJN Exh. 2), before this section of the HBOR went in to effect. (See Rockridge Trust v. Wells Fargo, N.A. (N.D.Cal.2013) 985 F.Supp.2d 1110.) Most of the case law addressing the retroactivity of this statute is unpublished. Further, it is well taken that Plaintiff admits he submitted the necessary paperwork for a loan modification and was denied. (FAC ¶12.)
First Cause of Action – Fraudulent Concealment
Plaintiff’s fraudulent concealment claim is premised on the August 27, 2007 refinancing of his home. Plaintiff alleges he was told – by Defendants Babadjanians and Nguyen, who are alleged to be agents of Bank of America – that the loan would be fixed at a 4% interest rate. (FAC ¶8.) He also alleges Babadjanians was his personal banker, assigned by Bank of America, and that she had “meticulously cultivated Plaintiff’s trust.” (Id.) Presumably, Plaintiff alleges this to establish that he trusted Babadjanians to be truthful. In any event, Plaintiff later discovered the interest rate on his loan was actually 7% and alleges Bank of America knew that rate would eventually lead Plaintiff to default. (FAC ¶10.) Defendants challenge this cause of action on grounds four grounds: (1) this cause of action is barred by the statute of limitations; (2) the oral representations are barred by the statute of frauds; (3) fraudulent concealment fails because Plaintiff cannot allege or prove reliance on the representations; and (4) there is no special relationship to warrant tort recovery for fraudulent concealment. The Court notes that the allegations have changed very little from the originally filed complaint.

To plead a cause of action for fraudulent concealment, one must allege (1) the defendant concealed or suppressed a material fact; (2) defendant was under a duty to disclose the fact to the plaintiff; (3) defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; (4) plaintiff was unaware of the fact and would not have acted in the same way knowing of the concealed or suppressed fact; (5) causation; and (6) the plaintiff sustained damage. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 868.)

The Statute of Limitations period for a cause of action for fraud is three years. (Broberg v. The Guardian Life Ins. Co. of Amer. (2009) 171 Cal. App. 4th 912, 920 (citing CCP §338(d)).) “Code of Civil Procedure section 338, subdivision (d), effectively codifies the delayed discovery rule in connection with actions for fraud, providing that a cause of action for fraud ‘is not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.’” (Brandon G. v. Gray (2003) 111 Cal. App. 4th 29, 35.)

Plaintiff’s allegations relate to the 2007 loan origination. Insofar as there might be some delayed discovery, the FAC alleges only that when he began experiencing difficulty paying his loans, he retained a forensic examiner to review his loan documents. (FAC ¶10.) He alleges it was at that time that he discovered his interest rate was in fact 7%. (Id.) He alleges this interest rate was “surreptitiously” put into his loan documentation but he does not allege that he could not have discovered the true interest rate before 2010.

As to the second argument, “[u]nder the statute of frauds, contracts ‘for the sale of real property, or of an interest therein’ … ‘are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent.’” (Lee v. Lee (2009) 175 Cal.App.4th 1553, 1556 (quoting Civ.C. §1624(a)).) Plaintiff’s opposition fails to address this issue. It is well taken that where a party has alleged a valid written loan agreement, he may not rely on oral representations made outside of the agreement. Whether the issue is statute of frauds, or the parole evidence rule, Plaintiff has not alleged any facts that would permit the consideration of such extrinsic information.

Defendants’ third argument is that Plaintiff cannot prove or allege reliance. This is well taken as Plaintiff has alleged that the actual loan documents stated the 7% interest rate despite the representation that the rate would be 4%. (¶10; see Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)

Lastly, Defendant argues there is no duty requiring disclosure. (See Pavicich v. Santucci (2000) 85 Cal. App. 4th 382, 398 (“a ‘duty to disclose a material fact normally arises only where there exits [sic] a confidential relation between the parties or other special circumstances require disclosure. . . .’”).) Plaintiff attempts to overcome this issue by alleging that at the time of loan origination, Bank of America “cultivated his trust,” by assigning Defendant Babadjanian to him. (FAC ¶8.) It is alleged that thereafter, Babanjanian, along with Nguyen made representations that the loan would carry a 4% interest rate. (Id.)

Case law supports the position that lenders generally do not have any fiduciary obligation to explain terms already set forth clearly in loan documents provided to borrowers. (See Kim v. Sumitomo Bank (1993) 17 Cal. App. 4th 974, 981 (signed loan documents clearly stated terms and there was no fiduciary duty of a bank to explain those terms).)

The demurrer is sustained without leave to amend given that the loan documents possessed by Plaintiff from the time of the loan state the interest rate is 7 percent regardless of any oral representation, there is no delayed discovery asserted for purpose of extending the statute of limitations and no exception has been alleged to the rule that financial institutions owe no duty to their loan customers.

Second Cause of Action – Violation of Bus. & Prof. Code §17200, et. seq.
Defendants challenge this cause of action on three grounds – (1) Plaintiff does not have standing; (2) Plaintiff has not pled a fraudulent business practices; and (3) Plaintiff has not pled an unfair business practices.

It is well taken that while Plaintiff alleges a list of actions he believe to be unlawful or unfair, he has not alleged how he has been damaged. (Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1253 (“In addition to pleading facts sufficient to show that the defendant’s acts constituted an unlawful, unfair, or fraudulent business practice, a plaintiff alleging a UCL cause of action must also plead facts sufficient to establish he or she has standing to bring an action under the UCL as amended by Proposition 64”); Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 254 (regarding the requirement to allege standing, including injury, and lost money or property, alleging an economic injury suffices) Plaintiff alleges he “is entitled to equitable relief including restitution, and disgorgement of all profits accruing to defendants because of their unlawful and deceptive business practices.” (¶28.) He also alleges that his made improvements on the property totaling some $150,000. (¶23.) However, Plaintiff has not alleged that he suffered any injury as he admits and the judicially noticeable documents demonstrate that he defaulted on this loan. Further, it is well taken that Plaintiff has failed to plead any facts establishing unfair or fraudulent conduct. P;aintiff has only pled unsupported conclusions. (FAC ¶¶20-26.)

Therefore the demurrer is sustained without leave to amend.