30-14-701932

Demurrer to Verified Complaint

The Court orders Plaintiff’s counsel to ensure that opposition papers in the future are served by overnight delivery, electronic service, or another authorized method of service that will reach the office of Defendants’ counsel the next business day. CCP §1005(b), CRC. 3.1300(a).

The demurrers to the 1st through 7th causes of action are sustained as follows.

Demurrers to 1st C/A – Civ. Code §2923.6:

Sustain with Leave to Amend.

In this claim, Plaintiffs are claiming an absolute statutory right to a loan modification under section 2923.6. (Compl. para. 44). “Civil Code section 2923.6 does not grant a right to a loan modification. To the contrary, it ‘merely expresses the hope that lenders will offer loan modifications on certain terms’ and ‘conspicuously does not require lenders to take any action.’…In other words, ‘[t]here is no ‘duty’ under Civil Code section 2923.6 to agree to a loan modification.” Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1056 (internal citations omitted); Hamilton v. Greenwich Investors (2011) 195 Cal.App.4th 1602, 1617.

There are hints in the complaint of other potential alleged violations of the statute (e.g., para. 38, 82). However, it does not appear as if the 1st cause of action as currently alleged is based on such events. The Court will grant Plaintiffs leave to amend.

Demurrers to 2n, 3rd and 5th C/A for Breach of Contract (HAMP), 5th Amendment Due Process Violation (HAMP), and Breach of Implied Covenant of GFFD (HAMP contract):

Sustain without leave to amend.

Plaintiffs allege that Bank of America entered into a contract with Fannie Mae (HAMP contract) under which the US government compensates participating servicers for loan successful loan modifications. Plaintiffs allege that Defendants did not properly determine their eligibility for a HAMP loan modification and thereby denied Plaintiffs access to the benefits of this government program. Plaintiffs assert claims for breach of the HAMP contract as third party beneficiaries, for breach of the implied covenant of GFFD in the HAMP contract, and for deprivation of 5th amendment rights based on denied access to the HAMP program.

The majority of district courts in the Ninth Circuit that have considered these issues have concluded there is no express or implied private right of action for borrowers to sue lenders or loan servicers for violation of HAMP and that individual borrowers do not have standing to sue under a HAMP Servicer Participation Agreement between lenders and Fannie Mae. See, e.g., Brockway v. JP Morgan Chase Bank, 2012 WL 2726758, *3 (SD Cal. July 9, 2012); Castillo v. Bank of America, N.A. 2012 WL 4793240 * 6 (S.D. Cal. 2012); Velasco v. Aurora Loan Services LLC, 2012 WL 569582, *2-3 (C.D. Cal. 2012) Kilaita v. Wells Fargo Home Mortg., 2011 WL 6153148, *9 (N.D. Cal. 2011); Warner v. Wells Fargo Bank, N.A., 2011 WL 2470923, *3 (C.D.Cal. 2011).

The opinion cited by Plaintiffs, Marquez v. Wells Fargo Home Mortgage Bank, 2010 WL 3212131 (2010 S.D. Cal. 2010), is the minority view and a number of courts have rejected Marquez. See Ansanelli v. JP Morgan Chase Bank, 2011 WL 1134451, at *6-7 (N.D.Cal. 2011); Orcilla v. Bank of America, N.A., 2010 WL 5211507, at *3 (N.D.Cal. 2010); Brockway v. JP Morgan Chase Bank, 2012 WL 2726758, *3 (SD Cal. July 9, 2012); Morales v. Chase Home Finance LLC (N.D. Cal. 2011) 2011 WL 1670045, at *9.

This Court adopts the position of the majority of the federal courts and sustains demurrers to these claims without leave to amend.

The 4th c/a is for violation of 5th amendment rights. The Court will adopt the view of federal courts which have rejected the theory that financial institutions act as “state actors” in connection with the HAMP program, thus, a claim for a due process violation is not viable. See Brashears v. Bank of America Home Loans (C.D. Cal., 2013) 2013 WL 5741832 *7-8 (collecting decisions); Neal v. E-Trade Bank (E.D. Cal. 2011) 2011 WL 3813158, at *3-4.

Demurrers to 4th C/A – B&P §17200 violation

Sustain with leave to amend.

The claim is described in conclusory allegations that are not sufficient for pleading. (Compl. para. 61-65). “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. Further, this claim is plead by incorporating prior causes of action and allegations only. Since the 1st through 4th causes of action, fail to state claims as noted above, it appears the UCL claim also falls.

Demurrer to 6th C/A – Wrongful Foreclosure

Sustain with leave to amend.

It appears that Plaintiffs cannot state claims based on sections 2924.17, 2924.9 and other provisions of the HOBR. The provisions were enacted in 2012 (see Stats.2012, c. 86 (A.B.278), § 6, 12, 20), and became effective January 1, 2013. This was years after the NOD was recorded here (August 2011). The HOBR does not have retroactive effect. Emick v. JPMorgan Chase Bank, 2013 WL 3804039 at *4 (E.D. Cal. 2013); Rockridge Trust v. Wells Fargo, N.A. (N.D. Cal., 2013) 2013 WL 5428722; Sabherwal v. Bank of New York Mellon, 2013 WL 4833940 at *10 (S.D. Cal. 2013).

A cause of action for wrongful foreclosure is not stated based on the conclusory allegation that the assignment of the DOT was invalid due to “robo-signing”. As stated in Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515, 512-13: “As to Plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note. As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, Jenkins lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions. Furthermore, even if any subsequent transfers of the promissory note were invalid, Jenkins is not the victim of such invalid transfers because her obligations under the note remained unchanged.” See also Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1152-1155.

However, Plaintiff may be in a position to allege a section 2923.5 violation. (See 2009 Cal. Legis. Serv. Ch. 43 (S.B. 306) (West)). As it was in effect in 2011, a notice of default “shall include a declaration that the… agent has contacted the borrower, or has tried with due diligence to contact the borrower …” Id., subd.(b). Due diligence means first attempting to contact a borrower by sending a first-class letter that includes the toll-free telephone number made available by HUD …. After the letter has been sent, the agent shall attempt to contact the borrower by telephone at least three times at different hours and on different days. Id., subd.(g).

“A borrower may state a cause of action under section 2923.5 by alleging the lender did not actually contact the borrower or otherwise make the required efforts to contact the borrower despite a contrary declaration in the recorded notice of default.” Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1494.

Contrary to Defendant’s arguments (Dem. at 11:17), Plaintiffs allege: “No one contacted the Plaintiffs, mailed them any letters… or attempted to contact them on the three separate occasions required …” (Compl. para. 73). However, this is a very conclusory allegation. To state a cause of action, Plaintiffs should allege facts supporting their conclusory allegation. Cf. Skov v. U.S. Bank National Assoc. (2012) 207 Cal. App. 4th 690, 696.

Demurrers to 7th C/A – Violations of HOBR

Sustain with leave to amend.

Plaintiffs have combined many alleged violations of the HOBR into one cause of action, rendering the pleading confusing.

To the extent that violations are asserted for alleged defects in the notice of default, they would appear invalid because the NOD was recorded in 2011, years before the HOBR provisions were enacted.

In relation to the loan modification which Plaintiffs allege they sought in 2013, claims under section 2923.6 may exist. According to Plaintiffs, Defendants were “taking the necessary steps to conduct a trustee’s sale” while a loan modification was pending, in violation of subdivision (c). Presently, the allegation is too conclusory to support a claim, as Plaintiffs have not described any of the conduct. (Compl. para. 84).

Similarly, while section 2923.7(a) states that a borrower must be given a single point of contact for foreclosure prevention alternatives, the obligations appears to be triggered “upon request from a borrower” (2923.7(a)). Paragraph 85 does not allege a request was made.

The amended complaint shall be filed within 10 days.