Case Name: David Alessio v. Wells Fargo Bank, N.A., et al.
Case No.: 2014-1-CV-270050

This is an action by Plaintiff David Alessio (“Plaintiff”) alleging violations of the Homeowners Bill of Rights (“HBOR”) and Unfair Business Practices. Currently before the Court is the demurrer by Defendant Wells Fargo Bank, N.A. (“Defendant”) to Plaintiff’s First Amended Complaint (“FAC”).

The Court in ruling on a demurrer treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.)

Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed. “While inconsistent theories of recovery are permitted, a pleader cannot blow hot and cold as to the facts positively stated.” (Manti v. Gunari (1970) 5 Cal.App.3d 442, 449, internal citation omitted.) See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice §3(3) (“It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.”)

Defendant’s request for judicial notice of three documents: 1) the Deed of Trust securing the mortgage loan for the subject property, recorded May 25, 2007 (Ex. A); 2) A Notice of Default on that loan, recorded May 5, 2014 (Ex. B), and; 3) A Notice of Trustee’s Sale for the subject property, recorded August 8, 2014 (Ex. C), is GRANTED. (See Evid. Code §452(c); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [stating that courts may take judicial notice of the dates, parties, and legally operative language of a series of recorded documents.])

“The Homeowner Bill of Rights (Civ.Code, §§ 2920.5, 2923.4–2923.7, 2924, 2924.9–2924.12, 2924.15, 2924.17–2924.20) (HBOR), effective January 1, 2013, was enacted ‘to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower’s mortgage servicer, such as loan modifications or other alternatives to foreclosure.’ (§ 2923.4, subd. (a).)” (Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272.)

The FAC does not allege that any trustee’s deed upon sale has been recorded. Accordingly, the only relief potentially available to Plaintiff at present under the HBOR is an injunction, and he may not at this time seek economic damages under his statutory claims. “If a trustee’s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2914.10, 2924.11, or 2924.17” (Civ. Code §2924.12(a)(1).)

Defendant’s demurrer to the FAC’s first cause of action, violation of Civil Code §2923.7., on the ground that it fails to state sufficient facts is OVERRULED.

California Civil Code §2923.7(a) requires that “[u]pon request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.” Civil Code §2923.7(e) states that “‘single point of contact’ means an individual or team of personnel each of whom has the ability and authority to perform the responsibilities described in subdivisions (b) to (d), inclusive.”

Plaintiff’s FAC adequately alleges that on or around April 26, 2014 he went to a Wells Fargo office in Cupertino, California seeking advice regarding foreclosure alternatives. He was eventually directed to speak on the phone with a Wells Fargo representative named Michael Redic, who told him that he could complete the loan modification application in writing or over the phone directly with him. Plaintiff alleges that he opted to complete the application over the phone with Mr. Redic and that Mr. Redic also agreed to be his single point of contact when Plaintiff asked for one to be appointed. Plaintiff alleges that Mr. Redic told him on April 26, 2014 that his loan modification application was complete, that no additional documents were needed at that time, and that Redic would contact Plaintiff if any additional information or documentation was needed. (See FAC at 8 and 15.) Each of these factual allegations is accepted as true on demurrer and any potential difficulty in proving them is irrelevant at the pleading stage. The FAC goes on to allege that despite the representations made to Plaintiff by Defendant’s representative Mr. Redic regarding the completeness of his application and that he would be contacted if anything further were required, Defendant recorded a Notice of Default on May 5, 2014. When Plaintiff called Defendant on or about August 4, 2014 to inquire about the status of the application he had been told was complete, he was told that Mr. Redic was no longer with Defendant’s Home Retention Department and that Defendant had no record that Plaintiff had submitted the application. (See FAC at 14-16.)

Defendant’s sole specific argument in support of its claim that Plaintiff’s first cause of action fails to state sufficient facts is that Plaintiff has not, in Defendant’s view, alleged a material violation of the statute. This is not a basis for sustaining the demurrer. (See Penermon v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 47 F.Supp.3d 982, 996, fn. 7 [“Whether an alleged violation was ‘material’ is a question of fact and is inappropriate for disposition at [the pleading stage].”]; Garcia v. PNC Mortgage (N.D. Cal., Feb. 9, 2015, C 14-3543 PJH) 2015 WL 534395, at *4 [materiality of HBOR violations is a factual issue inappropriate for resolution on a motion to dismiss].) The decisions in Knapp v. Doherty (2004) 123 Cal.App.4th 76, 92-94 and Biancalana v. T.D. Serv. Co. (2013) 56 Cal.4th 807, 816, cited by Defendant, are both distinguishable as they are reviews of granted summary judgments, and neither stands for the proposition that the issue of a whether a violation was “material” can be resolved on demurrer. “[C]ases are not authority for propositions not considered.” (People v. Ault (2004) 33 Cal.4th 1250, 1268 fn. 10.) For pleading purposes the FAC’s allegations that, but for Defendant’s failure to comply with §2923.7 and to communicate with Plaintiff, the Notices of Default and of Trustee’s Sale would not have been recorded and Plaintiff would not be threatened with “imminent loss” of the property he continues to live in adequately allege a material breach of §2923.7 for which Plaintiff may seek injunctive relief under §2924.12(a)(1).

Defendant’s demurrer to the FAC’s second cause of action, violation of Civ. Code §2923.6, on the ground that it fails to state sufficient facts is OVERRULED.

Civ. Code §2923.6(c) states that “If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs: (1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired. (2) The borrower does not accept an offered first lien loan modification within 14 days of the offer. (3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification.”

Defendant’s argument that the claim fails as a matter of law because Plaintiff does not allege that he submitted written application documents is unpersuasive. At the pleading stage Defendant cannot refute the FAC’s allegations that: 1) a Wells Fargo representative told Plaintiff on April 26, 2014 that he could apply for loan modification over the phone at his option; 2) that this same representative then spent “approximately forty minutes” on the phone with Plaintiff asking information about his finances, and; 3) told Plaintiff that his loan modification application was complete and that he would be contacted if any further information was required. (FAC at 8.) These allegations, accepted as true on demurrer, support a claim for violation of §2923.6 based on Defendant’s recordation of both a notice of default and of a Trustee’s Sale without any prior written determination on Plaintiff’s April 26, 2014 loan modification application.

Defendant’s repeated argument that the second cause of action also fails for lack of a material violation is, again, not a basis for sustaining the demurrer.

Defendant’s demurrer to the FAC’s third cause of action, violation of Civ. Code §2923.55, on the ground that it fails to state sufficient facts is OVERRULED.

Civ. Code §2923.55 requires the loan servicer to attempt to contact the borrower to discuss foreclosure prevention alternatives before recording a notice of default. (See §2923.55(a) & (b).) It also requires the notice of default to include a declaration of compliance (§2923.55(c)) and provides that before the notice of default can be recorded the mortgage servicer must comply “with subdivision (c) of Section 2923.6, if the borrower has provided a complete application as defined by in subdivision (h) of Section 2923.6.” (§2923.55(a)(3).) Civ. Code §2923.6(h) provides that “[f]or purposes of this section, an application shall be deemed ‘complete’ when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.” As Plaintiff has expressly alleged that Defendant’s authorized representative Mr. Redic instructed him on April 25, 2014 that his loan modification application was complete and that no further documents were required, he has adequately alleged a violation of §2923.55(a)(3).

As for Defendant’s argument that the declaration of compliance accompanying the judicially noticed Notice of Default establishes that the third cause of action fails as a matter of law, various court decisions interpreting the similar requirement in Civ. Code §2923.5 have rejected such an argument. (See Skov v. U.S. Bank National Assn. (2012) 207 Cal.App.4th 690, 696 [“whether U.S. Bank complied with section 2923.5 is the type of fact that is reasonably subject to dispute, and thus, not a proper subject of judicial notice” despite the recording of a declaration of compliance; demurrer was improperly sustained]; Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1057 [“Civil Code section 2923.5 requires not only that a declaration of compliance be attached to the notice of default, but that the bank actually perform the underlying acts … that would constitute compliance. While judicial notice could be properly taken of the existence of Jones’s declaration, it could not be taken of the facts of compliance asserted in the declaration, at least where, as here, Intengan has alleged and argued that the declaration is false and the facts asserted in the declaration are reasonably subject to dispute”]; Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1494-1495 [recognizing that “[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,” although holding demurrer properly sustained where specific allegations of the complaint demonstrated the required contacts had been made].)

While the FAC does not allege that the specific declaration accompanying the Notice of Default is false, it clearly alleges at 26-28 that Defendant did not in fact conduct the mandatory “due diligence” efforts required by the code section. Moreover the FAC at 9 alleges that between the April 26, 2014 representation by Defendant’s agent Mr. Redic that the loan modification application was complete and the May 5, 2014 recordation of the Notice of Default, no one affiliated with Defendant attempted to contact him in person or by telephone.

Finally Defendant’s demurrer to the FAC’s fourth cause of action, violation of Bus. & Prof. Code §17200 et seq. (Unfair Business Practices), on the ground that it fails to state sufficient facts is also OVERRULED.

Such a claim may be based on the statutory violations the Court has already found adequately alleged. Furthermore, unlike in Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 521-523 (disapproved in part by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919) cited in Defendant’s demurrer, it cannot be determined from the face of the pleading that Plaintiff cannot show a causal link between his claimed injury and Defendant’s alleged business practices. Unlike in Jenkins, Plaintiff here alleges that Defendant’s wrongdoing began prior to the recording of the Notice of Default.