Case Number: BC664312 Hearing Date: June 01, 2018 Dept: 53

DAVID R. ZEPEDA vs. U.S. BANK, N.A. , et al., BC664312, JUNE 1, 2018

Order RE: DEFENDANT U.S. BANK NATIONAL ASSOCATION’S DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT

Defendant U.S. Bank National Association’s Demurrer to Plaintiff’s Second Amended Complaint is SUSTAINED IN PART AND OVERRULED IN PART.

The Court SUSTAINS U.S. Bank’s demurrer to the first, second, third, sixth, eighth, ninth, and fourteenth causes of action, without leave to amend.

The Court OVERRULES U.S. Bank’s demurrer to the fourth cause of action

BACKGROUND

On June 7, 2017, Plaintiff David R. Zepeda (“Zepeda”) filed this action against Defendants U.S. Bank National Association (“U.S. Bank”) and Wolf Law Firm (jointly, “Defendants”). On February 15, 2018, Zepeda filed the operative Second Amended Complaint alleging the following causes of action: (1) wrongful foreclosure, (2) violation of CCP §2923.55, (3) violation of CCP § 2923.6, (4) unfair business practices, (5) negligent misrepresentation, (6) fraudulent concealment, (7) breach of contract, (8) breach of the covenant of good faith and fair dealing, (9) fraud/deceit, (10) negligence, (11) intentional misrepresentation, (12) declaratory relief, and (14) predatory lending and unfair credit practices (“SAC”).

Zepeda alleges that on or about September 28, 2007, he obtained a mortgage loan in the original principal balance of $225,000.00 (the “Loan”) from the originating lender Metrocities Mortgage, LLC. (SAC, ¶ 12, Ex. A.) The Loan was secured by a Deed of Trust recorded on September 28, 2007 against the real property located at 528 W. 106th Street, Los Angeles, CA 90044 (the “Property”). (SAC, Ex. A.) On or about July 30, 2015, a Notice of Default and Election to Sell Under Deed of Trust (“NOD”) was recorded against the Property. (SAC, ¶ 16, Ex. B.)

Because of financial hardship, Zepeda alleges that he reached out to U.S. Bank to request a loan modification. (SAC, ¶¶ 13-14.) He alleges that he was then encouraged to apply for U.S. Bank’s “Principal Reduction Offer.” (SAC, ¶ 18.) Zepeda alleges that on or about July 30, 2016, he received a “Loss Mitigation Pre-Qualification” packet offering him an opportunity to participate in a special loss mitigation program. (SAC, ¶ 20, Ex. C.) Zepeda alleges that he agreed to join the program, which required making three trial payments on September 1, 2016, October 1, 2016, and November 1, 2016 (the “Trial Payments”). (SAC, ¶ 22.) On or about August 13, 2016, Zepeda alleges that he went to a U.S. Bank branch in Los Angeles to arrange automatic payment of the Trial Payments, where he was assured by a U.S. Bank representation that the automatic payments had been successfully set up. (SAC, ¶¶ 23-24.) Shortly thereafter, Zepeda alleges that he was hospitalized between approximately August 24, 2016 until late November 2016. (SAC, ¶ 25.) Zepeda alleges that after his release from the hospital, he discovered that U.S. Bank had failed to automatically deduct the Trial Payments. (SAC, ¶ 26.)

On November 23, 2016, Zepeda received a Notice of Trustee’s Sale. (SAC, ¶ 27, Ex. D.) Zepeda alleges that he attempted to negotiate with U.S. Bank regarding the Notice of Trustee’s Sale, but he was not given the opportunity to tender funds though he was willing, and U.S. Bank proceeded with foreclosure. (SAC, ¶¶ 28-30.) The Notice of Trustee’s Sale was recorded against the Property on or about November 23, 2016. (RFJN, Ex. A.) The Property was thereafter sold at a trustee’s sale on December 22, 2016, and the Trustee’s Deed Upon Sale was recorded January 4, 2017. (SAC, ¶ 30, Ex. E.)

U.S. Bank now demurs to the first, second, third, fourth, sixth, eighth, ninth, eleventh, and fourteenth causes of action under Code of Civil Procedure section 430.10(e) on the grounds that the causes of action fail to state facts sufficient to constitute a cause of action.

REQUEST FOR JUDICIAL NOTICE

The Court GRANTS U.S. Bank’s request for judicial notice.

DISCUSSION

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

A. Wrongful Foreclosure (1st Cause of Action)

To maintain a wrongful foreclosure claim, a plaintiff must allege that “(1) the defendants caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) the plaintiff suffered prejudice or harm; and (3) the plaintiff tendered the amount of the secured indebtedness or was excused from tendering.” (Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062.) “Recognized exceptions to the tender rule include when: (1) the underlying debt is void, (2) the foreclosure sale or trustee’s deed is void on its face, (3) a counterclaim offsets the amount due, (4) specific circumstances make it inequitable to enforce the debt against the party challenging the sale, or (5) the foreclosure sale has not yet occurred.” (Id.)

The Court previously sustained U.S. Bank’s demurrer to the wrongful foreclosure cause of action because Zepeda failed to allege that he tendered the amount of the secured indebtedness or was excused from tendering. In the SAC, Zepeda still fails to plead facts to satisfy the tender rule. Zepeda’s new allegation that he intended to continue to make payments automatically due to his hospitalization and thereby “attempted to tender his secured indebtedness electronically” does not fall within a recognized exception to the tender rule. (SAC, ¶ 35.) Zepeda argues in a conclusory manner that the fact that he was ready, willing, and able to tender all of the delinquencies and costs due for redemption of the Property is sufficient to excuse tender but cites to no legal authority in support of this proposition. In any event, the Court is unaware of any authority that provides that being ready, willing, and able to tender satisfies the tender requirement or is an exception to the requirement. For this reason, the demurrer to the first cause of action is sustained. Because the previous demurrer was sustained with leave to amend on this exact ground, and because Zepeda has still failed to plead facts sufficient to satisfy the tender requirement, the Court sustains the wrongful foreclosure cause of action without leave to amend.

B. Violation of Civil Code section 2923.55 and Civil Code section 2923.6 (2nd and 3rd Causes of Action)

U.S. Bank notes that Civil Code section 2923.55 and Civil Code section 2923.6 have been repealed effective January 1, 2018. (See Civ. Code §§ 2923.55(i), 2923.6(k).) It is well-settled that “an action wholly dependent on statute abates if the statute is repealed without a savings clause before the judgment is final.” (Younger v. Superior Court (1978) 21 Cal.3d 102, 109.) Neither Civil Code section 2923.55 nor Civil Code section 2923.6 contain a savings clause. Therefore, the causes of action fall with the repeal of the statute. Zepeda advances no argument that suggests otherwise. Therefore, the Court sustains the demurrer to the second and third causes of action without leave to amend.

C. Fraud/Deceit and Fraudulent Concealment (6th and 9th Causes of Action)

To plead a cause of action for fraud, Zepeda must plead facts showing the following elements: (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) The elements of a fraudulent concealment cause of action are (1) concealment of a material fact, (2) the defendant’s duty to disclose the fact, (3) the defendant’s intentional concealment with the intent to defraud, (4), plaintiff’s unawareness of the fact and justifiable reliance, and (5) damages. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850.) A duty to disclose arises when: (1) there is a fiduciary relationship between the parties; (2) the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff; and (4) the defendant makes partial representations but also suppresses some material facts. (See Los Angeles Memorial Coliseum Commission v. Insomniac, Inc. (2015) 233 Cal.App.4th 803, 831.)

In Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, the court addressed the requirement that “fraud must be pled specifically; general and conclusory allegations do not suffice.” The Lazar court explained that “[t]his particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ [Citation omitted.] A plaintiff’s burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ [Citation omitted.]” (Ibid.)

The Court previously sustained U.S. Bank’s demurrer to the fraud causes of action because Zepeda failed to plead the supporting facts with sufficient particularity. In the SAC, Zepeda has now alleged that the agents of U.S. Bank who made certain misrepresentations/omissions were named “John” and “Maria.” (SAC, ¶ 64.) Zepeda alleges generally that “a U.S. Bank, N.A. representative…advised [him] that he had successfully setup autopay for the three critical payments.” (SAC, ¶ 24.) Whether this agent was John or Maria is unclear. Although John is alleged to have made the affirmative misrepresentations, Maria is alleged to have fraudulently concealed material facts relating to the automatic payments. It is unclear, then, what role Maria played in the transaction.

Even assuming that this allegation is sufficient to allege the “who” of a misrepresentation allegation, the Court finds that Zepeda has not sufficiently alleged the remaining elements of the fraud claims. Zepeda alleges that John and Maria concealed the fact that U.S. Bank had failed to automatically deduct the three trial payments as arranged before he was hospitalized. (SAC, ¶ 64.) However, it is unclear why John and Maria had a duty to actively disclose that fact or how that fact was a material fact they were in a position to disclose. Further, Zepeda has not sufficiently alleged any facts showing U.S. Bank’s intent to defraud by way of the concealment. As far as the misrepresentation itself, Zepeda merely alleges that John made the representation that Zepeda’s loan modification was being processed and that Zepeda did not need to make additional mortgage payments because he would be approved. (SAC, ¶ 82.) This allegation vaguely tracks with the allegation earlier in the SAC that “the agent for U.S. Bank assured Plaintiff that he would be fine and his home would not be foreclosed upon.” (SAC, ¶ 24.) However, as the Court has noted already, fraud requires pleading with particularity, and it is entirely unclear what the actual misrepresentation here was. Based on what is alleged in paragraph 24 of the SAC, it appears that the misrepresentation is that the autopay had been successfully set up. However, that is not pled in support of the actual fraud cause of action. (See SAC, ¶¶ 80-87.) In fact, the allegations under the fraud cause of action imply some other representation was made about the processing of Zepeda’s loan modification and assurances after multiple calls to U.S. Bank that his home was safe. (SAC, ¶¶ 81-82.) As noted by U.S. Bank, it is also unclear how Zepeda can establish justifiable reliance as the Trial Payments offer provides that failure to submit timely Trial Payments would result in the termination of the offer. (See SAC, Ex. C.) Therefore, the Court sustains the demurrer to the sixth and ninth causes of action without leave to amend.

D. Breach of the Implied Covenant of Good Faith and Fair Dealing (8th Cause of Action)

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 508.) “[T]he scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract.” (Id. at 509.) “The covenant of good faith and fair dealing . . . exists . . . to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 349.) However, allegations of a breach of the covenant of good faith and fair dealing that do not go beyond a statement of a mere contract breach may be disregarded as superfluous. (See Bionghi v. Metropolitan Water District (1999) 70 Cal.App.4th 1358, 1370.)

The Court previously sustained U.S. Bank’s demurrer to this cause of action as it was duplicative of Zepeda’s breach of contract cause of action. Now, in the SAC, Zepeda alleges that U.S. Bank breached the implied covenant by failing to automatically deduct the Trial Payments. (SAC, ¶ 75.) This statement does not go beyond a statement of a mere contract breach, as the breach of contract claim is also predicated on U.S. Bank’s failure to deduct the automatic payments. Therefore, the demurrer to the eighth cause of action is sustained without leave to amend.

E. Predatory Lending (14th Cause of Action)

The Court previously sustained U.S. Bank’s demurrer to this cause of action because there was no authority that predatory lending and unfair credit practices is a cognizable claim under California law. In the SAC, Zepeda cites California Financial Code section 4970 and 4978 and alleges that U.S. Bank hindered Zepeda’s ability to repay the loan. (SAC, ¶ 106.) However, there is no citation to any section of the Financial Code that prohibits the conduct alleged in the SAC. Zepeda also fails to address this defect in his opposition. Rather, Zepeda submits in his opposition that U.S. Bank failed to consider his ability to repay the loan. This allegation is not made in the SAC, and in any event, as noted by U.S. Bank, it was not the originating lender, so it is unclear how U.S. Bank could have considered Zepeda’s ability to repay the loan. (See SAC, ¶ 12.) Therefore, the demurrer to the fourteenth cause of action is sustained without leave to amend.

F. Business & Professions Code § 17200 (4th Cause of Action)

Business and Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200; see Clark v. Superior Court (2010) 50 Cal.4th 605, 610.)

Zepeda contends that his allegation that a U.S. Bank representative assured him that automatic payments were set up when in fact they were not satisfies the fraud prong of section 17200. In order to state a cause of action under the fraud prong, a plaintiff only needs to show that the public is likely to be deceived. (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) The Court finds that the allegation is sufficient to state a claim. Accordingly, the demurrer to this cause of action is overruled.

CONCLUSION

Based on the foregoing, the Court SUSTAINS U.S. Bank’s demurrer to the first, second, third, sixth, eighth, ninth, and fourteenth causes of action, without leave to amend. The Court OVERRULES U.S. Bank’s demurrer to the fourth cause of action. U.S. Bank is ordered to file and serve its Answer to the Second Amended Complaint within 20 days of this Order.

U.S. Bank is ordered to give notice of this ruling.

DATED: June 1, 2018

_____________________________

Hon. Howard L. Halm

Judge of the Superior Court