2018-00226338-CU-OR

Criselda Centeno vs. U.S. Bank National Association

Nature of Proceeding: Hearing on Demurrer to Plaintiffs’ Complaint

Filed By: Straus, Douglas C.

Defendant U.S. Bank National Association, as Trustee for the Holders of the First Franklin Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-FF10’s (“US Bank”) demurrer to the Complaint of Plaintiffs Criselda Centano and Anthony Bui (together, “Plaintiffs”) is ruled on as follows.

Requests for Judicial Notice

The Court grants US Bank’s request for judicial notice of the Assignment of the DOT (Ex. 1) and Substitution of Trustee (Ex. 2).

The Court denies US Bank’s request for judicial notice of the “admission” in Centeno’s deposition testimony (Ex. 3). A court’s power to take judicial notice of admissions would appear to be limited to a “judicial admission” in a pleading, which is a conclusive concession, different from an evidentiary admission, which is merely evidence and may be rebutted by contradictory evidence. (Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 850; see also 1 Witkin Cal. Evid., Hearsay § 97.) Further, even if a Court may take judicial notice of evidentiary admissions, it is only where the admission “cannot reasonably be controverted.” (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 485.) Here, Ceneno’s purported admission in deposition testimony is an evidentiary admission that may be rebutted by contradictory evidence.

The Court denies US Bank’s request for judicial notice of the “admission” in Plaintiffs’ request for admission (“RFA”) responses because US Bank failed to attach Exhibit 4 to the RJN. Thus, the Court cannot consider it. However, the Court notes that RFA responses would almost certainly be subject to the same analysis as Exhibit 3 and thus judicial notice of Exhibit 4 would also be improper.

Demurrer

This is a nonjudicial foreclosure, Homeowners’ Bill of Rights (“HBOR”) action. In August 2005, Plaintiffs obtained a $558,400 loan from the original lender, First Franklin a Division of Ant. City Bank of IN, A National Association (“First Franklin”) secured by a Promissory Note and Deed of Trust on 250 Lyman Circle, Sacramento CA 95835. (Compl. ¶17, Ex. A.) Plaintiffs allege that they subsequently suffered hardship and loss of income, and in February 2012 they submitted a complete application for a Request for Mortgage Assistance (“RMA”) to Select Portfolio Servicing Inc. (“SPS”). (Compl. ¶18.) In June 2014, Plaintiffs allege they were given a written Trial Payment Plan (“TPP”). (Id. ¶26.) Plaintiffs further allege that they “fully performed” the TPP by making their three monthly payments under the TPP. (Id. ¶¶26, 29.) Thereafter, in October 2014, Plaintiffs faxed Defendants their income and requested to have a loan modification review. (Id. ¶¶29, 30.) In January 2015, per Defendants’ instructions, Plaintiffs submitted the application with the RMA form new revision. (Id. ¶31.)

On November 16, 2015, a Notice of Default (“NOD”) was recorded. (Id. Ex. D.) On March 7, 2016, Plaintiffs received a demand letter for $60,221.69 to cure the default. ( Id. ¶35.) On March 18, 2016, a Notice of Trustee’s Sale (“NTS”) was recorded. (Id. ¶39.) Plaintiffs allege that they submitted a completed loan modification to SPS in or around June 2016 but that “Defendants failed to issue a written determination to Plaintiffs as to their First Lien Loan modification application.” (Id. ¶37.) Notices of

Trustee’s Sale were recorded on June 23, 2016, August 29, 2016, and January 12, 2018. (Id. ¶40.)

The Complaint alleges HBOR causes of action for violations of Civ. Code §§ 2923.5, 2924.11, 2923.7, and 2937, as well as causes of action for breach of contract, negligence, intentional/negligent infliction of emotional distress, and unfair business practices.

US Bank has filed a demurrer to all causes of action in the Complaint, arguing that they all fail to allege facts sufficient to state a cause of action. Plaintiffs oppose the demurrer.

Civ. Code § 2923.55 (First Cause of Action)

Plaintiffs allege that US Bank recorded the November 2015 NOD in violation of section 2923.5.

Section 2923.5 requires that, prior to recording an NOD, a beneficiary or authorized agent must contact the borrower via telephone or in person to assess the borrower’s financial situation and explore options for disclosure. Here, Plaintiffs allege that Defendants failed to contact them and further failed to meet the “due diligence” requirements when contact fails, such as send a letter by first class mail that included a toll-free HUD number, make three attempts to contact Plaintiffs, and determine that Plaintiffs’ primary and secondary numbers were disconnected. (Compl. ¶48.) They allege the declaration of compliance on the NOD is false because Defendants failed to convert the written TPP into a permanent loan modification, despite Plaintiffs’ performance of the terms. (Id.)

US Bank argues that the NOD declaration is sufficient to establish that US Bank met its obligation. The NOD contains a declaration from authorized agent Toon Hobbs attesting: “On 5/12/2015 contact was made with borrower to assess the borrowers’ financial situation and explore options for the borrower to avoid foreclosure as required by California Civil Code §2923.55(b)(2).” (Compl. Ex. D.)

US Bank further argues that the Complaint itself describes a long history of contacts between Plaintiff and SPS, which included extended discussion of foreclosure alternatives before the NOD was recorded.

Here, the declaration on the NOD states that SPS complied with its obligations under section 3934.5. In light of any specific allegations to the contrary, declaration is sufficient to show compliance by making actual contact with Plaintiffs and to refute Plaintiffs’ conclusory claims. (Trepany v. Deutsche Bank Nat’l Trust Co., 2015 U.S. Dist. LEXIS 96333, *20; Kamp v. Aurora Loan Servs., No. 09-0844, 2009 U.S. Dist. LEXIS 95245 (C.D. Cal. Oct. 1, 2009); Juarez v. Wells Fargo Bank, N.A., No. 09-3104, 2009 U.S. Dist. LEXIS 110892 (C.D. Cal Nov. 11, 2009).)

Moreover, although Plaintiffs allege that the NOD is “false” and that Defendants failed to comply with section 2923.55, Plaintiffs only allege that Defendants failed to take the statutorily required steps when the agent is unable to contact the borrower. Plaintiffs do not clearly allege that Defendants failed to contact them over the phone or in person to discuss foreclosure avoidance options. Rather, they point to Defendants’ failure to make the TPP permanent as evidence of noncompliance. This is insufficient,

particularly in light of the allegations in the Complaint showing that Plaintiffs did explore foreclosure avoidance options prior to recording the NOD, including entering into a TPP. (See, e.g., Compl. ¶¶18-20, 32, 36.) Though it is unclear whether these discussions were ever telephonic or in person, Plaintiffs are granted leave to amend to clarify their allegations.

The demurrer to the first cause of action is sustained with leave to amend.

Civ. Code § 2923.11 (Dual Tracking – Second Cause of Action)

Plaintiffs allege that they submitted a complete loan modification application to SPS around June 2016, and that Defendants failed to issues a written determination on the application prior to recording the NOD and NTS. Thus, Plaintiffs allege that US Bank violated the dual tracking prohibition set forth in section 2923.11 (Compl. ¶53-57.)

Plaintiffs further allege that Defendants violated section 2924.11, which states that a borrower in compliance with a TPP may not have an NOD or NTS recorded. Here, Plaintiffs allege that they complied with the June 2014 TPP, yet the NOD and NTS were subsequently recorded in violation of the statute. (Compl. ¶¶26, 29, 30.)

US Bank argues that the Court should take judicial notice of plaintiff Centeno’s admission in a deposition from a prior case that she did not submit a loan modification application in June 2016, contrary to the allegations in the Complaint. (RJN Ex. 3.) The Court declines to take judicial notice of Exhibit 3, for the reasons discussed above.

Even if the Court did take judicial notice of this purported admission, it does not completely dispose of Plaintiffs’ second cause of action for two reasons. First, there are two named plaintiffs, and only Centeno testified that she did not submit the June 2016 loan modification application. Second, Plaintiffs have stated a cause of action under section 2924.11, as Defendants allegedly recorded a NOD and NTS after Plaintiffs allege they wholly complied with the terms of a written TPP. The demurrer to the second cause of action is accordingly overruled.

Civ. Code § 2923.7 (Single Point of Contact – Third Cause of Action)

Plaintiffs allege that Defendants failed to provide a single point of contact, which they requested upon their submission of a loan modification application to SPS in June 2016. (Compl. ¶61.) A single point of contact is required by section 2923.7 when requested by a borrower.

US Bank argues that this cause of action fails because a team of persons can serve as a single point of contact, and thus Plaintiffs allegations are insufficient.

However, Plaintiffs allege that they requested a single point of contact in June 2016 and that, thereafter, they did not “speak with the same person, or team of persons, as to the loan modification application’s status.” (Compl. ¶¶61-62.) This is sufficient to state a cause of action under section 2923.7, and thus the demurrer is overruled.

Civ. Code § 2937 (Notice of Transfer of Servicing – Fourth Cause of Action)

Plaintiffs allege that they did not receive “proper notification at any time” that their loan servicing was transferred from First Franklin to SPS, in violation of section 2937.

(Comopl. ¶¶67-68.)

US Bank argues that this cause of action fails because the Complaint and Exhibits show that Plaintiffs clearly knew that SPS was their loan servicer, as the allegations show they have been in contact with SPS since early 2014. (Compl. ¶77, Ex. B.)

Plaintiffs’ opposition argues that Defendants transferred the loan without any “prior notice” to Plaintiffs. (Opp. at p. 9.)

Section 2937(b) states that anyone transferring servicing of debt to a different servicer “shall give written notice to the borrower or subsequent obligor before the borrower or subsequent obligor becomes obligated to make payments to a new servicing agent.”

Here, Plaintiffs’ allegations regarding when and how they received notification of their loan servicing transfer to SPS are vague and conclusory and therefore insufficient, particularly in light of their allegations and Exhibit B, which shows that Plaintiffs were in contact with SPS as their servicer and thus received notice of transfer at some point. (See Compl. ¶77, Ex. B.) Accordingly, the demurrer to the fourth cause of action is sustained with leave to amend.

Breach of Contract (Fifth Cause of Action)

Plaintiffs allege that they fully performed their obligations under the June 2014 TPP, and that Defendants breached those terms by “rescinding” the TPP, resulting in damages to Plaintiffs. (Compl. ¶¶71-75.)

US Banks argues that the cause of action fails because Plaintiffs admitted that they received a permanent loan modification as a result of the 2014 TPP, and then defaulted on it. As a result, US Bank contends there was no breach, in direct contradiction to Plaintiffs’ allegations.

US Bank purports to cite to RJN Ex. 4 to show Plaintiffs’ admission that they were offered a 2014 loan modification. However, Ex. 4 was erroneously omitted from US Banks’ papers. Accordingly, the Court cannot consider whether the document is properly subject to judicial notice, nor can it consider its merits in connection with this demurrer. There is no other asserted basis for the demurrer and it is therefore overruled.

Intentional & Negligent Infliction of Emotional Distress (Sixth & Eighth Causes of Action)

Plaintiffs allege that they were given a written by Defendants TPP in June 2014, which they then wrongly rescinded. Plaintiffs further allege that they could have qualified for an RMA with principal reduction, and that as a result of Defendants actions, Plaintiffs suffered emotional distress. (Compl. ¶¶77-84, 105-107.)

US Bank argues that these causes of action are fail because (1) they are barred by the two year statute of limitations (Code Civ. Proc. §335.1) and (2) because Plaintiffs’ allegations that they were denied a permanent loan modification are false, citing RJN Ex. 4.

Plaintiffs fail to respond to the statute of limitations argument. Moreover, it is unclear

from the vague and conclusory allegations when the allegedly wrongful act – i.e., the “rescission” of the TPP – occurred. Taken together, the Court finds it proper to sustain the demurrer to the emotional distress causes of action with leave to amend.

Negligence (Seventh Cause of Action)

Plaintiffs allege that Defendants have a duty to comply with the HBOR and that they negligently breached that duty by refusing to offer a final loan modification, by “negligently constantly request[ing] Plaintiffs to submit new income information,” and by proceeding with the foreclosure process despite their alleged statutory violations. (Compl. ¶¶86-102.)

US Bank argues that Plaintiffs’ cause of action fails because it is vague and because it simply alleges that Defendants were negligent by requesting Plaintiffs’ to submit new income information while seeking a loan modification. US Bank further argues the cause of action fails due to the admission in RJN Ex. 4.

Again, RJN Ex. 4 is not included with the papers and thus cannot be considered by the Court. Plaintiffs do allege violations of statutory duties as the basis of their negligence cause of action, such as dual tracking and failure to provide a single point of contact.

They do not simply allege that Defendants made repeated requests for Plaintiffs’ income information, as US Bank contends.

The Court therefore finds US Bank’s arguments unpersuasive, and the demurrer is overruled.

Cal. Bus. & Prof. Code §17200 et seq. (Ninth Cause of Action)

Plaintiffs allege that Defendants engaged in unfair business practices as described in the Complaint. US Bank argues that this cause of action fails because there are no valid predicate acts alleged. However, as the Court has overruled the demurrer to several causes of action, the Court rejects US Bank’s argument and the demurrer is overruled here as well.

Plaintiffs may file and serve an amended complaint no later than June 8, 2018. (Although not required by statute or court rule, Plaintiffs are directed to present the clerk a copy of this ruling at the time of filing the amended complaint.) US Bank may file and serve a response within 10 days, 15 if the amended complaint is served by mail.