Case Number: KC066722 Hearing Date: June 11, 2014 Dept: J

Dennis Westbrook, et al. v. RoundPoint Mortgage Servicing Corporation, etc., et al. (KC066722)

DEMURRER TO COMPLAINT

Moving Party: Defendant RoundPoint Mortgage Servicing Corporation (Joinder by Defendant Nationstar Mortgage LLC)

Respondents: No timely opposition filed

POS: Moving OK; Joinder OK

In this action alleging violations of the Homeowners Bill of Rights, the Complaint, filed 3/13/14, asserts causes of action for:

1. Lack of Standing
2. Violation of Civil Code §2923.5
3. Violation of Civil Code §2924.17
4. Violation of Civil Code §2924.9
5. Breach of Contract
6. Breach of the Implied Covenant of Good Faith
7. Violation of Business & Professions Code §17200
8. Declaratory Relief
9. Quiet Title

The Case Management Conference is set for 7/8/14.

Defendant RoundPoint Mortgage Servicing Corporation demurs to all causes of action in Plaintiffs Dennis and Michelle Westbrook’s Complaint. Defendant claims that all nine causes of action fail to state facts sufficient to constitute a cause of action pursuant to CCP §430.10(e).

Plaintiffs allege that they own real property located at 22718 Jura road, Diamond Bar, CA 91765, and that the property is encumbered by a promissory note (“Note”) and deed of trust (“DOT”) in the amount of $393,000.00; that the loan was originated with Home Loan Servicing Mortgage Corporation, but was assigned to various entitles; that a Notice of Default (“NOD”) was recorded on 6/25/10; that they were not contacted by anyone to discuss options to foreclosure, and any declaration to the contrary in the NOD is false; that in 2011 they qualified under the HAMP guidelines for a loan modification application, and submitted one to RoundPoint, which refused to allow additional time for Mr. Westbrook to explain its terms to the then newly disabled Mrs. Westbrook; that on 3/10/14, they sent a qualified written request under RESPA to RoundPoint, which would not respond in good faith.

Bankruptcy:

Failure to list an asset or interest on the bankruptcy schedules causes the debtor to be judicially estopped from pursuing a claim to recover that interest after discharge. Hamilton v. State Farm Fire & Casualty Co., 270 F.3d 778, 783, 785 (9th Cir. 2001). Here, Plaintiffs filed a Chapter 7 Bankruptcy Petition in the Central District of California, Los Angeles Division, assigned case number 2:13-bk-37536-BB. Judicial notice of the Petition lodged as Ex. “H” is taken pursuant to Evid. Code §452(d). Plaintiffs’ Schedule B, which identified all personal property held by the Plaintiffs, stated that they had no contingent, unliquidated claims or counterclaims, and listed no claims against any of the defendants in this action. There have been no facts alleged that the bankruptcy trustee has joined in this lawsuit. “The Chapter 7 trustee alone has the exclusive right to pursue the cause of action in question on behalf of the bankruptcy estate.” In re Carlos Magana-Lopez, 2012 Bankr. LEXIS 1689, 11; 11 U.S.C. §362(c)(1). Therefore, Plaintiffs lack standing to assert any of the claims alleged in the Complaint. Plaintiffs have failed to oppose the demurrer. The demurrer is therefore sustained on this ground.

FIRST CAUSE OF ACTION FOR LACK OF STANDING:

Plaintiffs allege that a prior Trustee (Defendant Quality Loan Service Corp.) caused a defective NOD to be recorded despite not being the holder of the beneficial interest under the DOT, so RoundPoint lacked standing to initiate foreclosure and is in violation of Civil Code §2924(a)(6) (the Homeowners Bill of Rights, or “HBOR”). HBOR precludes loan servicers from foreclosing until after pre-modification and pre-foreclosure notices are given, and there is a review of loan modification applications. It also requires a single point of contact for borrowers. Its remedies enables homeowners (1) to request injunctions against foreclosures pending compliance, (2) to obtain damages where violations were not corrected prior to the recordation of the trustee’s deed upon sale, and (3) to obtain penalties when servicers have filed multiple, inaccurate mortgage documents, or committed reckless or willful violations. See Civ. C. §2920.5 – 2924.20.

However, HBOR became effective on 1/01/13, and applies to conduct occurring thereafter. Civil Code Section 3 states that “[n]o part of [this Code] is retroactive, unless expressly so declared.” In this case, Plaintiffs allegations regarding pre-2013 events fail because HBOR was not effective until 2013. Further, there is no provision for a private right of action under HBOR for any violation of Section 2924(a)(6) (describing who may foreclose).

Plaintiffs also allege that the DOT is void because “it was not transferred into the investment trust within the time period required by law” pursuant to the holding in Glaski v. Bank of America (2013) 218 Cal.App.4th 1079. However, Glaski is a minority view, and the majority view is that borrowers lack standing to challenge the securitization of their loans. See, e.g., Maxwell v. Deutsche Bank Nat’l Trust Co. (N.D. Cal. Nov. 18, 2013) 2013 U.S. Dist. LEXIS 164707, 6 (“the majority of courts, including many judges in this district and circuit, as well as other California courts, have disagreed with [the Glaski] decision and its conclusion.”) Further, Plaintiffs’ general allegations regarding securitization fail to allege facts to rebut the unbroken chain of title in the present case. Glaski, supra at 1095. The demurrer is sustained.

SECOND CAUSE OF ACTION FOR VIOLATION OF CIVIL CODE §2923.5:

Plaintiffs allege that RoundPoint did not initiate contact with Plaintiffs prior to issuing the NOD. To state this claim, Plaintiffs must allege that the foreclosing entity failed to discuss, prior to the recording of a NOD, the borrower’s financial situation and or options to prevent foreclosure. CC §2923.5, subd. (1)(1) & (2). “[A]ny ‘assessment’ must necessarily be simple—something on the order of, ‘why can’t you make your payments?’” Mabry v. Sup.Ct. (2010) 185 Cal.App.4th 208, 232. Here, Plaintiffs allege that they were offered a proposed “modification” from RoundPoint (¶22), so it appears that pre-foreclosure discussions did in fact occur, and there is no violation of Section 2923.5. The demurrer is sustained.

The THIRD CAUSE OF ACTION FOR VIOLATION OF CIVIL CODE §2924.17 and the FOURTH CAUSE OF ACTION FOR VIOLATION OF CIVIL CODE §2924.9:

These Code Sections are part of HBOR, which does not apply retroactively, as discussed above. The demurrers are sustained.

FIFTH CAUSE OF ACTION FOR BREACH OF CONTRACT:

Plaintiffs allege that RoundPoint breached the DOT by not including a statement that Plaintiff have “the right to bring a court action to assert the non-existence of a default or any other defense” in the NOD (¶81). The elements of a cause of action for breach of contract are: “(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178. Here, Plaintiffs have failed to allege facts to support damages. Plaintiffs have not suffered actual damages, nor been prevented from bringing an action to challenge the foreclosure. The demurrer is sustained.

SIXTH CAUSE OF ACTION FOR BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING:

The covenant is implied into every contract, and it “requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement.” Benavides v. State Farm General Ins. Co. (2006) 136 Cal.App.4th 1241, 1249. In this case, Plaintiffs received the benefit of the loan funds to purchase the property. The demurrer is sustained.

SEVENTH CAUSE OF ACTION FOR VIOLATION OF BUSINESS AND PROFESSIONS CODE §17200 ET SEQ.:

Section 17200 permits certain public officials, and any person who has suffered injury in fact due to unfair competition or business practices, to bring a claim. Here, Plaintiffs do not allege unlawful, unfair, or fraudulent business practices. The defective claims of securitization and loan modification are insufficient. In addition, Plaintiffs lack standing because they have not suffered injury in fact (loss of money or property). (B&P 17204). The demurrer is sustained.

EIGHTH CAUSE OF ACTION FOR DECLARATORY RELIEF:

The elements of an action for declaratory relief are an actual bona fide dispute between parties as to a legal obligation arising under the circumstances specified in CCP § 1060 and, in addition, the controversy must be justiciable – i.e., presents a question as to which there is more than one answer. (Western Motors Servicing Corp. v. Land Development & Inv. Co. (1957) 152 Cal.App.2d 509. Here, there is no actual controversy because Plaintiffs agreed to the conveyance of the power of sale in the DOT. Judicial notice is taken of the DOT lodged as Ex. “A”. Further, Plaintiffs admitted in their bankruptcy schedules that RoundPoint was their creditor. (Plaintiffs’ Schedule D, Ex. H). The demurrer is sustained.

NINTH CAUSE OF ACTION FOR QUIET TITLE:

Plaintiffs seek an order declaring their interest superior to that of all parties claiming an interest in the Property. For purposes of a quiet title claim, the cloud on title persists until the debt is paid. Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477. Here, Plaintiffs have not paid-off the loan on the Property. The demurrer is sustained.

The court will hear from counsel for Plaintiffs as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.