Case Name: Durvalino Sarmento v. Bank of New York Mellon, et al.
Case No.: 18CV323337

I. Background

This case brought by Durvalino Sarmento (“Plaintiff”) against Bank of New York Mellon FKA the Bank of New York Mellon as trustee for the certificate holders of the CWALT, Inc., Alternative Loan Trust 2007-17CB Mortgage Pass-Through Certificates, Series 2007-17CB (“Bank of New York”), Bayview Loan Servicing, LLC (“Bayview”) and the Law Offices of Les Zieve (“Les Zieve”) arises from an alleged failure to provide written notice to Plaintiff that his applications for a loan modification and short sale were denied.

According to the allegations of the operative first amended complaint (“FAC”), Plaintiff purchased real property located at 3892 Kauai Drive, San Jose (the “Property”). In order to purchase the Property, Plaintiff obtained a loan memorialized by a Deed of Trust and Promissory Note. The Deed of Trust was securitized and assigned to Bank of New York in 2011 and servicing for the loan was transferred to Bayview in 2013.

On November 13, 2015, Les Zieve was substituted as trustee and a Notice of Default was recorded against the Property. Les Zieve later recorded a Notice of Trustee Sale and set a sale date for April 5, 2016.

On April 4, 2016, Plaintiff filed a case in the Santa Clara County Superior Court, namely Durvalino v. Bank of New York Mellon, Case No. 16CV293443 (“Prior Action”), against Bank of New York and Les Zieve in order to stop the sale. Plaintiff sought a temporary restraining order to prevent the sale, which was denied. Even so, the sale did not occur.

Plaintiff thereafter applied for a loan modification from Bayview. Bayview called Plaintiff’s broker and informed him the application was denied. As such, Plaintiff’s broker sought authorization for a short sale, but Bayview refused to enter into negotiations due to the ongoing litigation. Plaintiff never received written notice of Bayview’s denials and was therefore denied the opportunity to appeal either decision.

On January 5, 2017, Plaintiff was forced to file for bankruptcy; he voluntarily dismissed the bankruptcy proceeding after retaining counsel. On May 15, 2017, another Notice of Trustee Sale was recorded against the Property despite the fact Plaintiff still had not received a written determination of his loan modification and short-sale applications. Plaintiff was consequently forced to file for bankruptcy again.

Plaintiff asserts four causes of action for (1) violation of Civil Code section 2924.11; (2) violation of Civil Code section 2923.7; (3) negligence; and (4) violation of Business and Professions Code section 17200.

Bank of New York and Bayview (collectively “Defendants”) presently demur to the first, third, and fourth causes of action. They filed a request for judicial notice in support.

II. Request for Judicial Notice

“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.” (Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 364.) Matters subject to judicial notice are listed in Evidence Code sections 451 and 452. (Id. at p. 364.) A precondition to judicial notice is that the matter to be noticed is relevant to a material issue before the court. (People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2.)

Defendants request judicial notice of recorded real property records and court records.

The real property records concerning the Property are: Grant Deed recorded in March 1995; Deed of Trust recorded in May 2007; Assignment of a Deed of Trust recorded on May 2011; Substitution of Trustee recorded in November 2015; Notice of Default and Election to Sell Under Deed of Trust recorded in November 2015; Notice of Trustee Sale recorded in March 2016; Second Notice of Trustee Sale recorded in May 2017.

“Pursuant to [Evidence Code section 452, subdivisions (c) and (h)] courts have taken judicial notice of the existence and recordation of real property records, including deeds of trust, when the authenticity of the documents is not challenged.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264 disapproved of on other grounds by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.) Thus, the subject real property records are generally proper subjects for judicial notice. However, Defendants do not actually rely on them in support of any argument raised by their demurrer. As such, these records are not relevant to resolving the demurrer and consequently are not judicially noticeable.

The court records are: Register of Actions filed April 4, 2016 from the Prior Action; Order Denying Ex Parte Motion for Temporary Restraining Order filed April 18, 2016 from the Prior Action; Order Re: Defendant Bank of New York Mellon’s Demurrer to Complaint filed October 24, 2016 from the Prior Action; Request for Dismissal of Entire Action filed January 30, 2018 from the Prior Action; Register of Actions filed February 13, 2018 from the present action; Order on Demurrer filed August 17, 2018 from the present action; Order Re: Plaintiff Durvalino Sarmento’s Application for Preliminary Injunction filed August 23, 2018 from the present action.

Court records are judicially noticeable under Evidence Code section 452, subdivision (d), and the records are relevant to Defendants’ arguments. Judicial notice of these records is therefore proper.

Accordingly, the request for judicial notice is DENIED as to the real property records and GRANTED as to the court records.

III. Merits of Demurrer

Defendants demur to the third and fourth causes of action on the ground of uncertainty. (See Code Civ. Proc., § 430.10, subd. (f).) They also demur to the first, third, and fourth causes of action on the ground of failure to state sufficient facts. (See Code Civ. Proc., § 430.10, subd. (e).)

A. Uncertainty

Defendants’ demurrer to the third cause of action for negligence and fourth cause of action for violation of Business and Professions Code section 17200 on the ground of uncertainty reflects an apparent misunderstanding of the nature of a demurrer on this basis. Indeed, they do not even include any law reciting the standards for a demurrer for uncertainty in their supporting memorandum.

Demurrers for uncertainty are disfavored and will be sustained only where the pleading is so unintelligible the defendant cannot reasonably respond, i.e., the party cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against it. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Ibid.; see also Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 fn. 2.) “A special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading, but is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequira (1950) 100 Cal.App.2d 143, 145-146.) Therefore, a demurer for uncertainty “should not be sustained if the allegations are sufficiently clear to apprise the defendant of the issues that must be met, even if the allegations of the complaint may not be clear and as detailed as might be desired.” (Merlino v. West Coast Macaroni Mfg. Co. (1956) 90 Cal.App.2d 106, 108.)

Defendants do not argue Plaintiff’s claims are uncertain under applicable standards; rather, they contend Plaintiff’s claims are uncertain due to purported deficiencies pertaining to whether a cause of action has been stated (see, e.g., Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 57; Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1359-1366.) They simply do not contend the pleading is so unintelligible that it cannot reasonably respond. As such, there is no basis for concluding the claims against Defendants are fatally uncertain.

Accordingly, the demurrer to the third and fourth causes of action on the ground of uncertainty is OVERRULED.

B. Failure to State Sufficient Facts

1. First Cause of Action

The first cause of action for violation of Civil Code section 2924.11 alleges Defendants violated Civil Code sections 2924.11, subdivision (a), 2924.11 subdivision (b), and 2923.7 by failing to provide Plaintiff written determination on his loan modification and short-sale applications, thereby depriving him of his right to appeal and seek foreclosure alternatives.

Defendants argue Plaintiff’s claim fails because the Court stated in its order to the prior demurrer (“Prior Order”) that Plaintiff could not maintain an action for violation of section 2924.11 since the alleged facts occurred before the statute became effective. In opposition, Plaintiff argues the Prior Order actually states his claim still survived under Civil Code section 2923.6 despite the inapplicability of section 2924.11. He contends that since he did not amend any portion of his first cause of action, the Court should overrule Defendants’ demurrer.

For context, Defendants previously demurred to Plaintiff’s first cause of action, labeled “Violation of Civil Code § 2923.6(c)/2924.11(b),” on the basis that Civil Code section 2924.11 did not apply because it did not become effective until after the underlying facts occurred. While the Court agreed with Defendants that section 2924.11 could not be the basis for Plaintiff’s claim, it overruled Defendants’ demurrer since Plaintiff otherwise alleged a violation of section 2923.6, subdivision (c) and a demurrer will not lie to only part of a cause of action. (Order, p. 9:4-10.)

Although Plaintiff asserts he did not subsequently amend the first cause of action, the Court observes he did in fact do so. A comparison of the complaint and FAC shows Plaintiff removed the reference to section 2923.6 from the label of the cause of action; now, the cause of action is labeled “Violation of Civil Code § 2924.11.” He additionally removed the single reference to section 2923.6 found in the body of the pleading. Previously, in paragraph 2 of the first cause of action, Plaintiff alleged Defendants’ conduct violated “Civil Code § 2923.6(c)/ 2924.11(b)”; presently the same paragraph states Defendants violated an entirely different statute, particularly Civil Code section 2923.7.

With that said, Defendants once again only target a portion of the cause of action, particularly the alleged violation of section 2924.11. Although the cause of action is now labeled solely as a claim for violation of that statute, the label is not controlling for purposes of evaluating whether a cause of action has been stated. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38–39.) Plaintiff otherwise alleges a violation of section 2923.7, which Defendants do not acknowledge. Since Defendants do not challenge the first cause of action to the extent it alleges a violation of section 2923.7, the demurrer is not sustainable. (See PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action.].)
For this reason, Defendants’ demurrer to the first cause of action for failure to state sufficient facts is OVERRULED.

2. Third Cause of Action

The third cause of action for negligence alleges Defendants were negligent in their handling of Plaintiff’s loan modification and short sale applications, thereby causing him harm.

The elements of negligence are duty, breach, causation, and damages. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62.) Here, Defendants challenge the elements of breach and causation/damages.

a. Breach

Defendants argue Plaintiff’s claim fails because the alleged breach “is inter alia no longer applicable.” (Memo., p. 4:28.) They contend Plaintiff eludes to other foreclosure opportunities, but fails to identify what those are and admits he sought such opportunities with Bayview. Defendants maintain Bayview’s loan modification review was, in effect, Plaintiff’s appeal such that their conduct did not deny him appeal rights. In support, Defendants rely on the Court’s previous ruling on Plaintiff’s application for a preliminary injunction stating, “the recent loan modification review by Defendant Bayview, and its corresponding August 15, 2018 denial letter to Plaintiff, have the effect of causing Plaintiff’s prior claims of violations of Civil Code sections 2923.6 and 2923.7 under its First and Second Causes of Action (respectively), to be non-material” and “[t]herefore, Plaintiff is unlikely to prevail on its First and Second Causes of Action at trial.” Defendants conclude their alleged breach is no longer applicable.

Defendants’ argument is flawed as they improperly rely on the Court’s previous ruling on Plaintiff’s application for a preliminary injunction. Defendants are essentially treating the statements made by the Court as conclusive findings in this case. But they are not. (See 7 Witkin, Cal. Procedure (3d ed. 1985) Judgment, § 211, p. 649 [“Intermediate determinations, such as rulings on motions and interlocutory orders, are not conclusive”].) The Court’s findings were made in the discrete context of evaluating an application for preliminary injunction, which is subject to different standards of evaluation, and again, have no binding effect in the case. Thus, Defendants’ position is unsubstantiated.

Therefore, there is no basis to conclude Plaintiff failed to adequately allege the element of breach.

b. Causation and Damages

Defendants argue Plaintiff fails to adequately plead causation and damages resulting from their conduct because any damages he suffered are the result of him defaulting on his loan, not their actions related to the loan modification and short sale applications. The Court disagrees.

“A plaintiff must allege a causal connection between the negligence . . . and the injury he suffered. Ordinarily that is accomplished by implication from the juxtaposition of the allegations of wrongful conduct and harm.” (Christensen v. Superior Court (1991) 54 Cal.3d 868, 900–01, internal citations and quotation marks omitted.)

Following the sustaining of Defendants’ previous demurrer to the third cause of action on the basis the causation/damages allegations were insufficient, Plaintiff amended the pleading and now adequately details how Defendants’ conduct caused him harm. He alleges that, had he been notified his applications were denied in a timely manner, he could have “sought other foreclosure prevention alternatives,” “appealed the decision or asked for a written determination,” “sought outside assistance,” or “privately listed his property for sale.” (FAC, ¶ 67.) Plaintiff further alleges, “As a result of Defendants’ negligence, Plaintiff suffered damages beyond those that Plaintiff would have suffered had Defendant taken the proper care in their statutory duties.” (FAC, ¶ 69.) Plaintiff specifically pleads that Defendants’ failure to notify him of the denial of his applications caused him harm, including, “but not limited to, being forced into bankruptcy due to the imminent loss of his Property, destruction of Plaintiff’s credit, attorneys’ fees, severe emotional distress, loss of appetite, frustration, fear, anger, helplessness, nervousness, anxiety, sleeplessness, sadness, and depression, according to proof at trial and within the Court’s jurisdiction.” (Ibid.) Accordingly, Plaintiff has sufficiently pled a causal connection between Defendants’ conduct and the resulting damage.

Therefore, there is no basis to conclude Plaintiff failed to adequately allege the elements of causation and damages.

c. Conclusion

In light of the above, the demurrer to the third cause of action on the ground of failure to state sufficient facts is OVERRULED.

3. Fourth Cause of Action

The fourth cause of action for violation of Business and Professions Code section 17200 alleges Defendants engaged in unlawful, unfair and fraudulent acts by violating various Civil Code statutes, breaching the loan modification, and refusing to deal in good faith.

Business and Professions Code section 17200, otherwise known as the Unfair Competition Law (“UCL”), prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [California’s false advertising law].” (Bus. & Prof. Code, § 17200 et seq.)

Defendants contend the UCL claim fails because Plaintiff (1) lacks standing; (2) failed to allege they committed any unlawful, unfair or fraudulent business acts; and (3) failed to allege damages.

a. Standing

Defendants argue Plaintiff lacks standing to maintain a UCL claim because he cannot demonstrate injury in fact and causation.

To have standing under the UCL, a party must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322, italics original.)

The Court previously sustained Defendants’ demurrer to Plaintiff’s UCL claim in the original complaint on the ground Plaintiff did not allege sufficient facts to establish standing because he failed to allege how Defendants’ acts caused him additional harm beyond that caused by his default. Plaintiff amended the fourth cause of action to address this. Despite the amended pleading, Defendants again argue Plaintiff has not alleged standing to support his UCL cause of action for the same reasons stated in their previous demurrer.

i. Injury in Fact

Defendants argue Plaintiff’s allegations of injury and causation are insufficient because Plaintiff has failed to allege concrete, particularized damages establishing a loss or deprivation of money or property constituting an injury in fact and have demanded improper relief.

“If a party has alleged or proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact.” (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th 310, 325.)

In Plaintiff’s amendments, he alleges how his harms go beyond what he would inherently suffer from default and the associated risk of foreclosure. He alleges Defendants’ conduct resulted in the following economic harms: (1) loss of money and property, (2) loss of credit, and (3) costs of bring suit. (FAC, ¶¶ 78, 79.) Defendants do not articulate how Plaintiff’s allegations of economic harm are insufficient. Their contention that Plaintiff has failed to allege injury in fact is therefore unsubstantiated.

As for the contention about improper remedies, Defendants argue actual and punitive damages, as Plaintiffs alleges, are not recoverable under the UCL. While that may be true (see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144), the issue of whether the remedies sought by Plaintiff are proper simply is not a legitimate basis for challenging standing to sue.

Therefore, Defendants have not substantiated their position that Plaintiff fails to establish standing for lack of injury of fact.

ii. Causation

Defendants argue Plaintiff fails to establish causation because his alleged injuries were the result of his own default rather than their actions.

For claims brought under the UCL, “a plaintiff’s economic injury come ‘as a result of’ the unfair competition . . .” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 326.) “[C]ausal connection is broken when a complaining party would suffer the same harm whether or not a defendant complied with the law.” (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099.) In the foreclosure context, a plaintiff must allege they would not have suffered the same harm absent the alleged UCL violation. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 522-3.)

As Defendants previously argued in their demurrer to the UCL claim in the complaint, they contend Plaintiff’s default predates anything they were alleged to have done and Plaintiff has failed to show how he has paid out any money or property to them as a result of their alleged unfair business practices. They argue Plaintiff fails to establish the alleged unfair business practices resulted in additional harm to him. Defendants conclude there is no causal connection.

Defendants’ arguments are unpersuasive. In the Prior Order, the Court sustained Defendants’ demurrer to this cause of action on the basis that Plaintiff did not clearly allege how his injuries went beyond what he would have suffered from default and possible foreclosure. (Order, p. 20:7-8.) Plaintiff amended his claim, adding allegations that “Defendant’s violations go beyond what Plaintiff would inherently suffer from the risk of foreclosure, as Defendant’s unfair and unlawful business practices resulted in additional harm” to Plaintiff who suffered greater “loss of credit, costs of bringing suit, or extreme stress, anxiety and fear of appearing pro per while seeking competent legal counsel” as a result of Defendants’ actions. (FAC, ¶ 79.) Plaintiff’s amendments allege what injuries resulted from Defendants’ actions and how their actions caused him greater harm. But Defendants do not address these amendments in their argument or demonstrate how they are deficient to establish causation.

Therefore, Defendants’ have not demonstrated Plaintiff failed to establish standing based on lack of causation.

b. Unlawful, Unfair, and Fraudulent Acts

Defendants argue Plaintiff failed to allege they committed any unlawful, unfair or fraudulent business acts and failed to establish damages.

Relative to unlawful prong of the UCL, Defendants assert Plaintiff’s claim fails because it is based on other causes of action, particularly violation of Civil Code section 2924.11 and negligence, which both fail. Defendants conclude Plaintiff cannot borrow these unlawful acts to achieve liability under this prong.

In their demurrer to the complaint, Defendants asserted a similar argument, contending the fourth cause of action failed because it was based on other causes of action that failed. In the Prior Order, the Court stated the argument was “not well-taken” because it did not sustain Defendants’ demurrer to all other causes of action. (Order, p. 20:15.) Here, the Court again has not sustained Defendants’ demurrer to each cause of action in the FAC. Most notably, Defendants are not even demurring to the second cause of action. As such, their argument as to the unlawful prong of the UCL necessarily fails.

Since Defendants have not identified any basis for concluding the UCL claim fails to the extent it is predicated on a violation of the unlawful prong, the claim must survive demurrer even if the unfair and fraudulent prongs have not been adequately alleged. (See PH II, Inc. v. Super. Ct. (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action].) Accordingly, the Court will not address Defendants’ arguments as to the remaining prongs.

c. Damages

Defendants state Plaintiff fails to establish damages under his UCL claim. In support, Defendants briefly reiterate their argument as it has been asserted for their contentions regarding injury in fact to establish standing under the UCL. Since the Court has already addressed this argument in detail, it will not do so again here.

d. Conclusion

For these reasons, the demurrer to the fourth cause of action on the ground of failure to state sufficient facts is OVERRULED.