Case Name: Ezequiel Hinojos v. Asset Ventures, LLC, et al.
Case No.: 1-13-CV-256853

Defendants Newport Beach Holdings, LLC (“Newport”) and Michaela Brychcova (“Brychcova”) separately demur to the first amended complaint (“FAC”) of plaintiff Ezequiel Hinojos (“Plaintiff”) on the ground of failure to allege sufficient facts. (See Code Civ. Proc. [“CCP”], § 430.10, subd. (e).) Defendants Asset Ventures, LLC (“AV”) and Anthony Martinez (“Martinez”) demur to Plaintiff’s FAC on the grounds of uncertainty and failure to allege sufficient facts and bring a motion to strike portions of the FAC. (See CCP, §§ 430.10, subd. (e) & 435-436.)
This is a wrongful foreclosure action. In the FAC, Plaintiff alleges that he obtained a home equity line of credit from Wells Fargo Bank (“Wells Fargo”) on or about May 10, 2006. (FAC, ¶ 21.) Newport, AV, Martinez, Brychcova, and defendant Eagle Creek, LLC (collectively, “Defendants”) allegedly engaged in a joint venture to secure indebtedness upon Plaintiff’s property in order to extract money from him. (Id., ¶ 15.) The deed of trust (“DOT”) on the property was allegedly assigned to Newport but the assignment was void since Newport was not registered with the Secretary of State to transact business in California. (Id., ¶¶ 24-29.) Thereafter, Plaintiff alleges that a notice of default (“NOD”) was recorded in April 2013, and a notice of trustee sale was recorded on November 8, 2013. (Id., ¶¶ 39-40.) In the FAC, Plaintiff asserts causes of action for (1) violation of Civil Code section 2924c (against Defendants); (2) violation of Civil Code section 2923.4 (against Defendants); (3) violation of Civil Code section 2923.55 (against Defendants); (4) injunctive relief pursuant to Civil Code section 2924.12 (against Defendants); (5) unlawful and attempted foreclosure (against Defendants); (6) cancellation of instrument (against Defendants); (7) violation of the unfair competition law (“UCL”) (against Defendants); (8) fraud (against Defendants); (9) abuse of process (against Eagle Crest); and (10) slander of title (against AV and Martinez).

AV and Martinez’s request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (c); see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [“Fontenot”].)
Plaintiff’s first request for judicial notice is GRANTED IN PART and DENIED IN PART. The request is GRANTED as to the recorded real property record and the Secretary of State’s certificate. (See Evid. Code, § 452, subd. (c); see also Fontenot, supra, at pp. 264-265.) The request is DENIED as to Newport’s website. (See Evid. Code, § 452, subd. (h); but see Searles Valley Minerals Operations, Inc. v. State Bd. of Equalization (2008) 160 Cal.App.4th 514, 519 [courts may not take judicial notice of the contents of websites].)
Plaintiff’s “additional request for judicial notice” is DENIED. (See Evid. Code, § 452, subds. (c); see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [only relevant matters are subject to judicial notice].)

I. Newport’s & Brychcova’s Demurrers

Newport demurs to the eight causes of action asserted against it and to the FAC as a whole on the ground of failure to allege sufficient facts. Plaintiff argues that Newport cannot bring a demurrer because it is not registered to transact business in California. To the contrary, Newport’s failure “to have a certificate of registration to transact intrastate business in this state does not . . . prevent [Newport] from defending an action or proceeding in this state.” (See Corp. Code, § 17708.07, subd. (b).)

Newport persuasively argues that since the FAC alleges that it assigned the DOT to another entity before the NOD was recorded, Plaintiff does not allege sufficient facts in support of the first, second, third, and fifth causes of action against it. (See FAC, ¶¶ 30 & 39-40.) Since Plaintiff’s fourth cause of action is, in essence, a request for injunctive relief in connection with the other claims, Plaintiff also fails to state sufficient facts in support of the fourth claim. (See Civ. Code, § 2924.12, [“[i]f 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”]; see also Shell Oil v. Richter (1942) 52 Cal.App.2d 164, 168 [“Shell Oil”] [“[i]njunctive relief is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted”].)

With respect to the sixth cause of action, Plaintiff alleges that the assignment of the DOT to Newport and any subsequent assignment are void because they contain false information and Newport is not registered with the Secretary of State. (FAC, ¶¶ 26-29 & 66-67.) Acquiring security interests in real property does not constitute “transacting business” in California, and a foreign limited liability company may acquire deeds of trust without registering. (Corp. Code, § 17708.03, subd. (b)(7)-(8).) Moreover, “[t]he failure of a foreign limited liability company to have a certificate of registration to transact intrastate business in this state does not impair the validity of a contract or act of the foreign limited liability company.” (Corp. Code, § 17708.07. subd. (b).) Also, the amount of indebtedness stated in the assignments to and from Newport is the same as the amount stated in the DOT, and Plaintiff does not dispute the accuracy of the figure stated in the DOT. (FAC, Exs. 1 & 3-4; see also Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal.App.4th 1443, 1447 [“Holland”].) To the extent the amount of indebtedness reflected on other instruments is allegedly inaccurate, such fact does not support a claim against Newport because Newport allegedly does not have an interest in those transactions. Therefore, Plaintiff has not alleged sufficient facts in support of the sixth cause of action against Newport. As for the UCL claim, since Plaintiff bases this claim on his other causes of action against Newport, he also fails to allege sufficient facts in support of the UCL claim. (See Wolski v. Fremont Investment & Loan (2005) 127 Cal.App.4th 347, 357 [a UCL claim fails where it is based on a violation of law that also fails].) Turning to the fraud claim, the only allegedly fraudulent statements made by Newport are those in its recorded assignments. (FAC, ¶¶ 32 & 89, & Exs. 3-4.) The amount of indebtedness stated therein is the same as what is stated in the DOT, and Plaintiff does not dispute the accuracy of the amount stated in the DOT. (See Holland, supra, at p. 1447.) The recorded instruments are not fraudulent simply because Newport was not registered to transact business. (See Corp. Code, §§ 17708.03, subd. (b) & 17708.07. subd. (b).)

Accordingly, Newport’s demurrer to the first through eighth causes of action and to the FAC as a whole for failure to allege sufficient facts is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Brychcova demurs to the eight causes of action asserted against her on the ground of failure to allege sufficient facts. The claims against Brychcova are based on the allegations that she was Newport’s agent and signed the recorded assignments to and from Newport, and all Defendants were therefore co-conspirators. (FAC, ¶¶ 6, 31, & 34-35.) The statement that Defendants were co-conspirators is a legal conclusion and not presumed true on demurrer. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Since Plaintiff failed to allege sufficient facts to constitute a cause of action against Newport, it follows that he also failed to allege sufficient facts to constitute a cause of action against Brychcova.

Therefore, Brychcova’s demurrer to each cause of action asserted against her in the FAC for failure to allege sufficient facts is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

II. AV & Martinez’s Demurrer

AV and Martinez’s demurrer to each cause of action asserted against them on the ground of uncertainty is OVERRULED. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal App 4th 612, 616 [“demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures”].)

Plaintiff’s claims against Martinez are based on alter ego liability. (See Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811, citation omitted [alter ego requires allegations in support of (1) a unity of interest; and (2) inequitable results].) Plaintiff states in the FAC that adherence to the fiction of separateness between AV and Martinez would permit an abuse of the corporate privilege and sanction fraud and promote injustice. (FAC, ¶ 19.) This statement is a legal conclusion, and Plaintiff does not allege facts in support of it. (See Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 [to plead an inequitable result, plaintiffs must allege conduct amounting to bad faith, and difficulty enforcing a judgment does not suffice].) Thus, Plaintiff has not adequately alleged alter ego liability and sufficient facts to support a cause of action against Martinez.

AV and Martinez argue that Plaintiff’s first through sixth causes of action are precluded as a matter of law because Civil Code section 2924.15 provides that Civil Code sections 2923.4, 2923.55, and 2924.12 only apply to first lien mortgages or deeds of trust, and AV and Martinez contend that the DOT is a junior deed of trust. This argument is unavailing because Plaintiff does not allege that the DOT is a junior deed of trust, and only allegations that are set forth in the subject pleading, reasonably inferred from the facts alleged, or subject to judicial notice are considered on demurrer. (See Hall v. Great Western Bank (1991) 231 Cal.App.3d 713, 719, fn. 7 [“[a] court will not consider facts which have not been alleged in the complaint unless they may be reasonably inferred from the matters which have been pled or are proper subjects of judicial notice”].)

Plaintiff’s first cause of action is predicated on the allegation that the NOD is invalid because it does not identify the correct current beneficiary of the DOT. (FAC, ¶ 43.) The NOD identifies AV as the current beneficiary. (FAC, Ex. 5.) To the extent Plaintiff alleges that AV is not the lawful beneficiary, such allegations are insufficient to state a claim to invalidate the NOD. (Rossberg v. Bank of America (2013) 219 Cal App 4th 1481, 1495-1498; see also Fontenot, supra, 198 Cal.App.4th at p. 270.) Accordingly, Plaintiff has failed to allege sufficient facts to support the first cause of action.

Plaintiff’s second cause of action is based on the allegation that AV did not provide him with a meaningful opportunity to obtain available loss mitigation options. (FAC, ¶¶ 46-49.) This is sufficient to state a claim for failure to provide the requisite summary of information. (See Civ. Code, § 2923.3, subd. (e) [“[f]ailure to provide these summaries to the mortgagor or trustor shall have the same effect as if the notice of default or notice of sale were incomplete or not provided”].) AV insists that its demurrer to the second cause of action must be sustained because Plaintiff cites Civil Code section 2923.4 in the FAC as the legal basis for this claim, but that provision merely states the purpose of the Act and does not “require any particular result.” This argument is not persuasive because courts “are not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38-39 [“Quelimane”], italics in original, citation omitted.) Plaintiff’s third cause of action is based on the allegation that AV recorded a false statement of due diligence with the NOD because AV did not make a good faith effort to contact Plaintiff. (FAC, ¶¶ 51-52.) A borrower may state a cause of action “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.” (Rossberg v. Bank of America, N.A. (2013) 219 Cal. App. 4th 1481, 1494, citation omitted [demurrer properly sustained, where allegations and exhibits indicated lender contacts].) Therefore, Plaintiff has adequately alleged facts to support his third cause of action. As for the fourth cause of action, that claim is merely a request for injunctive relief, and not a cause of action in and of itself. (See Shell Oil, supra, at p. 168.)

AV and Martinez argue that Plaintiff’s fifth and sixth causes of action must fail because he does not allege a tender offer. To the contrary, tender of indebtedness is not required where the property has not been sold, since “it would defeat the purpose of the statute to require the borrower to tender the full amount of the indebtedness prior to any enforcement of the right to—and that’s the point—the right to be contacted prior to the notice of default.” (Mabry v. Super. Ct. (2010) 185 Cal.App.4th 208, 225.) AV and Martinez also argue that all of the alleged assignments of the DOT were valid, but the sixth cause of action is based on the allegation that both the assignments and the DOT and notice of trustee’s sale are void due to false statements contained therein. (FAC, ¶¶ 52 & 66-67, & Exs. 5-6; see also Kong v. City of Hawaiian Gardens Redevelop. Agency (2003) 108 Cal.App.4th 1028, 1047 [“Kong”] [“a demurrer cannot rightfully be sustained to part of a cause of action”].) Therefore, Plaintiff alleges sufficient facts in support of the fifth and sixth causes of action.

Turning to Plaintiff’s seventh cause of action for a violation of the UCL, he alleges that AV engaged in an unlawful, fraudulent, or deceptive practice by making recorded documents containing false information. (FAC, ¶ 75.) This is adequate to support the claim that AV engaged in an unlawful, unfair, or deceptive business practice. (See Walker v. Countrywide Home Loans (2002) 98 Cal.App.4th 1158, 1170 [“[t]o show that a business practice is deceptive, a plaintiff suing under the [UCL] need only show that members of the public are likely to be deceived”]; see also Quelimane, supra, at pp. 46-47 [the UCL does not impose a heightened pleading requirement]; see also Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647-648 [“[t]he ‘fraud’ prong of [the UCL] is unlike common law fraud or deception” because “[a] violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage,” rather, “it is only necessary to show that members of the public are likely to be deceived”].) In addition, contrary to AV and Martinez’s assertion, a UCL claim may be based on a single alleged act. (See United Farm Workers of America, AFL-CIO v. Dutra Farms (2000) 83 Cal.App.4th 1146, 1163, citation omitted.) AV and Martinez argue that Plaintiff lacks standing to assert a UCL claim. Plaintiff alleges to have lost money as a result of Defendants’ actions, and further alleges that the foreclosure of his home is imminent. (FAC, ¶ 82.) This allegation is sufficient to establish standing. (See Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 254 [a borrower has standing to bring a UCL claim if he/she alleges any economic injury, including the loss of money or property]; see also Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 521-522 [a plaintiff has standing if he/she had business dealings with a defendant and lost money or property as a result]; Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 323 [there are “innumerable ways” standing may be shown, for example, a plaintiff has standing where a defendant’s unfair business practice caused the plaintiff to: “have a present or future property interest diminished;” or “be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary”].) Thus, Plaintiff alleges sufficient facts to support his UCL claim.

Turning to the fraud claim, Plaintiff fails to specifically allege facts to support the element of justifiable reliance. (See Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 638.) Therefore, he has not stated a claim for fraud. In addition, the slander of title cause of action is based on allegedly false statements in the NOD and notice of trustee’s sale. However, statements in the NOD are privileged and do not support a slander of title claim. (See Civ. Code, § 2924, subd. (d); see also Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 333 [holding “that section 2924 deems the statutorily required mailing, publication, and delivery of notices in nonjudicial foreclosure, and the performance of statutory nonjudicial foreclosure procedures, to be privileged communications”].) Furthermore, AV allegedly did not make any statements in the notice of trustee’s sale or publish the document. (See FAC, Ex. 6; see also Howard v. Schaniel (1980) 113 Cal.App.3d 256, 264 [elements of a slander of title claim].) Thus, Plaintiff has not alleged sufficient facts to support the slander of title claim.

Accordingly, AV and Martinez’s demurrer for failure to allege sufficient facts is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND as to each cause of action asserted against Martinez and the first, fourth, eighth, and tenth causes of action asserted against AV, but OVERRULED as to the second, third, fifth, sixth, and seventh causes of action asserted against AV.

III. AV & Martinez’s Motion to Strike

Paragraphs that contain mere legal conclusions are improper to include in a complaint. (Smithson v. Sparber (1932)123 Cal.App. 225, 232.) Some paragraphs in the FAC contain legal conclusions without supporting factual allegations. (See FAC, ¶¶ 62, 71, & 118.) AV and Martinez contend that Plaintiff cannot recover punitive damages because their relationship is purely contractual; however, the FAC does not contain any allegations suggesting that Plaintiff entered into any contract with AV and Martinez. That being said, the FAC does not contain allegations sufficient to support a punitive damages claim against AV and Martinez. (See Turman v. Turning Point of Central California (2010) 191 Cal.App.4th 53, 63-64.) Thus, the motion to strike is GRANTED IN PART and DENIED IN PART. The motion is GRANTED WITH 10 DAYS’ LEAVE TO AMEND as to paragraphs 62, 71, and 118, and as to paragraph 17 in the prayer for relief, but DENIED as to the remaining paragraphs.