Case Number: BC659521 Hearing Date: February 20, 2018 Dept: J

Re: Harold P. Johnson, et al. v. Wells Fargo Bank, N.S. (BC659521)

DEMURRER TO FIRST AMENDED COMPLAINT; MOTION TO STRIKE PORTIONS OF FIRST AMENDED COMPLAINT

Moving Party: Defendant Wells Fargo Bank, N.A.

Respondent: Plaintiffs Harold P. Johnson and R. Diana Johnson (Demurrer only; no timely opposition to Motion to Strike filed (due 2/5/18))

POS: OK

Plaintiffs allege that they were applying for a refinance from Defendant Wells Fargo Bank, N.A. (“WF”) and requested that the trustee’s sale on their existing loan with WF be postponed but that the property was sold. The complaint was filed 4/28/17. On 8/3/17, this matter was transferred from Department 91 (personal injury hub) to this instant department. The First Amended Complaint, filed 11/22/17, asserts causes of action for:

1. Fraud

2. False Misrepresentation

3. Breach of Contract

4. Gross Negligence

A Trial Setting Conference is set for 2/20/18.

DEMURRER TO FIRST AMENDED COMPLAINT:

Defendant Wells Fargo Bank, N.A. (“WF”) demurs, per CCP § 430.10(d), to Plaintiffs Harold P. Johnson’s and R. Diana Johnson’s (“Plaintiffs”) First Amended Complaint (“FAC”), on the basis that plaintiffs failed to name an indispensable party. WF also demurs to the first through fourth causes of action therein per subsection (e), on the basis that they each fail to state facts sufficient to constitute causes of action.

REQUEST FOR JUDICIAL NOTICE:

WF’s request for judicial notice (“RJN”) is ruled on as follows: GRANT as to Exhibit “A” (i.e., deed of trust recorded 8/16/06); GRANT as to Exhibit “B” (i.e., “Notice of Default” recorded 5/6/10); GRANT as to Exhibit “C” (i.e., “Notice of Rescission of Notice of Default” recorded 9/22/11); GRANT as to Exhibit “D” (i.e., “Notice of Default” recorded 3/20/13); GRANT as to Exhibit “E” (i.e., “Notice of Trustee’s Sale” recorded 9/23/13); GRANT as to Exhibit “F” (i.e., “Notice of Trustee’s Sale” recorded 3/11/14); GRANT as to Exhibit “G” (i.e., “Notice of Rescission of Notice of Default” recorded 12/24/14); GRANT as to Exhibit “H” (i.e., “Notice of Default” recorded 8/5/16); GRANT as to Exhibit “I” (i.e., “Notice of Trustee’s Sale” recorded 3/30/17); GRANT as to Exhibit “J” (i.e., “Trustee’s Deed Upon Sale” recorded 5/11/17) and GRANT as to Exhibit “K” (i.e., docket for bankruptcy Case No. 1:14-bk-11658-AA).

“[A] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265, disapproved of on other grounds by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.)

The judicially noticeable documents reflect as follows: on 8/16/06, a deed of trust was recorded on the subject property, which identified World Savings Bank, FSB as the lender and beneficiary and Golden West Savings Association Service Co. as trustee. (RJN, Exhibit “A”). On 5/6/10, a “Notice of Default” was recorded. (Id., Exhibit “B”). On 9/22/11, a “Notice of Rescission of Notice of Default” was recorded. (Id., Exhibit “C”). On 3/20/13, another “Notice of Default” was recorded. (Id., Exhibit “D”). On 9/23/13, a “Notice of Trustee’s Sale” was recorded. (Id., Exhibit “E”). On 3/11/14, another “Notice of Trustee’s Sale” was recorded. (Id., Exhibit “F”). On 3/31/14, plaintiffs filed for Chapter 7 bankruptcy; they received a discharge on 7/21/14. (Id., Exhibit “J”). On 12/24/14, another “Notice of Rescission of Notice of Default” was recorded. (Id., Exhibit “G”). On 8/5/16, another “Notice of Default” was recorded. (Id., Exhibit “H”). On 3/30/17, another “Notice of Trustee’s Sale” was recorded. (Id., Exhibit “I”).

INDISPENSABLE PARTY:

“The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds:…(d) There is a defect or misjoinder of parties.” CCP § 430.10(d).

WF’s contention that plaintiffs’ FAC fails to name an indispensable party is well-taken. “A person who is subject to service of process…shall be joined as a party in the action if…he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.” CCP § 389(a).

“The controlling test for determining whether a person is an indispensable party is, ‘Where the plaintiff seeks some type of affirmative relief which, if granted, would injure or affect the interest of a third person not joined, that third person is an indispensable party. (Bank of California v. Superior Court (1940) 16 Cal.2d 516, 522.)’ (Sierra Club, Inc. v. California Coastal Com. (1979) 95 Cal.App.3d 495, 501.)” Save Our Bay, Inc. v. San Diego Unified Port Dist. (1996) 42 Cal.App.4th 686, 692.

Plaintiffs seeks to have the sale of the subject property “be voided, vacated, and set aside and fully conveyance [sic] to [them].” (FAC, ¶ FIR-7.) In this case, on 5/11/17, a “Trustee’s Deed Upon Sale” was recorded, reflecting that the subject property was sold at a trustee’s sale on 4/20/17 to Charles Warren Coughlin. (RJN, Exhibit “J”). Plaintiffs cannot seek to obtain the relief requested absent his joinder as a defendant in this action.

TENDER:

Plaintiffs’ FAC also fails on the basis of tender. “[A]s a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. (Abdallah [v. United Savings Bank (1996)] 43 Cal.App.4th [1101,] at p. 1109; Onofrio [v. Rice (1997) 55 Cal.App.4th 413,] at p. 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action].) ‘The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].’ (FPCI RE-HAB 01 v. E&G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022.)” Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.

There are exceptions to the requirement to tender the debt, which are: 1) the borrower attacks the validity of the debt (e.g., based on fraud); 2) the borrower has a counter-claim or set-off against the beneficiary sufficient to cover the amount due; 3) it would be inequitable as to a party not liable for the debt; and 4) the trustee’s deed is void on its face, apart from equitable principals (e.g., trustee lacked power to convey property). Id. at 112-113. Plaintiffs have not pled any of these exceptions.

Plaintiffs’ FAC also fails for the following additional reasons:

FIRST AND SECOND CAUSES OF ACTION (i.e., FRAUD AND FALSE MISREPRESENTATION, RESPECTIVELY):

“’”The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”’ Lazar v. Superior Court (1996) 12 Cal.4th 631, 638. ‘”Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 234. “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ (Hills Trans. Co. v. Southwest (1968) 266 Cal.App.2d 702, 707).” Id. Additionally, “[t]he requirement of specificity in a fraud action against a corporation requires the plaintiff to 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, authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157 (citations omitted).

“To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing. (Hills Trans. Co. v. Southwest Forest Industries, Inc. (1966) 266 Cal.App.2d 702, 708; Regus v. Schartkoff (1957) 156 C.A.2d 382, 389.)” Tarmann, supra, 2 Cal.App.4th at 159.

“[M]aking a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise.” Id. “’[S]omething more than nonperformance is required to prove the defendant’s intent not to perform his promise.’ (People v. Ashley (1954) 42 Cal.2d 246, 263; see also Jacobson v. Mead (1936) 12 Cal.App.2d 75, 82; Justheim Petroleum Company v. Hammond (10th Cir. 1955) 227 F.2d 629, 637; Rest.2d Torts, § 530, com. d.; Prosser, Torts (5th ed. 1984) § 109, p. 764.).” Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30.

Plaintiffs’ first and second causes of action are not pled with the requisite specificity. Plaintiffs do not allege that they were told the sale would be stopped; in fact, they concede that “defendant refused to continue or halt the sale.” (FAC, ¶ FR-3). Their complaint is devoid of any specific facts indicating that any unidentified individuals at WF “knew” any representation was false at the time the representation was made. They do not plead any facts reflecting justifiable reliance.

WF’s demurrer to the first and second causes of action is sustained.

THIRD CAUSE OF ACTION (i.e., BREACH OF CONTRACT):

“’A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.’ (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388).” Rutherford Holdings, LLC, supra, 223 Cal.App.4th at 228.

Plaintiffs allege that on/about 4/20/17, they entered into an oral agreement with defendant, wherein they “both agreed that the funding for the refinancing of the plaintiffs real property was at hand” and that WF “breached the agreement by not halting the trustees deed upon sale and allowing the sale to go threw [sic] despite the plaintiff[s] requesting that it be rescheduled.” (FAC, ¶ BC-1).

“An agreement for the sale of real property or an interest in real property comes within the statute of frauds. (Civ.Code, § 1624, subd. (a)(3)). A mortgage or deed of trust also comes within the statute of frauds.” Secrest v. Security Nat. Mortg. Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552. A forbearance agreement modifying a note and/or deed of trust is also subject to the statute of frauds. (Id. at 553.) Plaintiffs’ allegations reflect that there is no enforceable agreement to forbear or provide a refinancing loan.

WF’s demurrer to the third cause of action is sustained.

FOURTH CAUSE OF ACTION (i.e., GROSS NEGLIGENCE):

“Actionable negligence is traditionally regarded as involving the following: (a) a legal duty to use due care; (b) a breach of such legal duty; (c) the breach as the proximate or legal cause of the resulting injury.” Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202. “Gross negligence is pleaded by alleging the traditional elements of negligence…[h]owever, to set forth a claim for ‘gross negligence’ the plaintiff must allege extreme conduct on the part of the defendant.” Rosencrans v. Dover Images, Ltd. (2011) 192 Cal.App.4th 1072, 1082.

“‘The threshold element of a cause of action for negligence is the existence of a duty to use due care…’” Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137 (citation omitted). “[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. (Wagner v. Benson (1980) 101 Cal.App.3d 27, 34-35; Fox & Carskadon Financial Corp. v. San Francisco Fed. Sav. & Loan Assn. (1975) 52 Cal.App.3d 484, 488, 489; Bradler v. Craig (1969) 274 Cal.App.2d 466, 473, 476).” Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096. “The principle that a financial institution owes no duty to a borrower has been extended to loan servicers as well. (Azzini v. Countrywide Home Loans, No. 09cv787 DMS (CAB), 2009 WL 5218042, *2 (S.D.Cal. Dec. 29, 2009); Wong v. Am. Servicing Co., Inc., No. 2:09-CV-01506 FCD/DAD, 2009 WL 5113516, *6 (E.D.Cal. Dec. 18, 2009).” Griffin v. Green Tree Servicing, LLC 2015 WL 10059081, *11.

There is a split among Ninth Circuit and California state courts with respect to whether or not lenders and loan servicers owe borrowers a duty of care in processing residential loan modification applications, as evidenced by Lueras v. BAC Home Loans Servicing (2013) 221 Cal.App.4th 49 and Alvarez v. BAC Home Loans Servicing, LP (2014) 228 Cal.App.4th 941.

Lueras reasons that “a loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution’s conventional role as a lender of money. A lender’s obligations to offer, consider, or approve loan modifications and to explore foreclosure alternatives are created solely by the loan documents, statutes, regulations, and relevant directives and announcements from the United States Department of the Treasury, Fannie Mae, and other governmental or quasi-governmental agencies. The Biakanja [v. Irving (1958) 49 Cal.2d 647] factors do not support imposition of a common law duty to offer or approve a loan modification. If the modification was necessary due to the borrower’s inability to repay the loan, the borrower’s harm, suffered from denial of a loan modification, would not be closely connected to the lender’s conduct. If the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lender’s conduct.” Lueras, supra, 221 Cal.App.4th at 67.

Alvarez, on the other hand, applies the Biakanja factors to hold that while a lender may not owe a duty to offer or approve a loan modification, a lender does owe a duty to a borrower to exercise reasonable care in the review of a borrower’s loan modification application once the lender agrees to review for a modification.

The reasoning applied in Lueras is more persuasive, inasmuch as the Biakanja test is inapplicable in this instant context. Biakanja provides that “[t]he determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.” Biakanja, supra, 49 C.2d 647, 650. In Biakanja, the notary public defendant prepared the will of the plaintiff’s brother, which left the entire estate to the plaintiff. The will was denied probate for lack of sufficient attestation; as such, plaintiff only received her intestate share of the estate. There, the “principal question [was] whether defendant was under a duty to exercise due care to protect plaintiff from injury and was liable for damage caused plaintiff by his negligence even though they were not in privity of contract.” Id. at 648. The California Supreme Court thus restricted its decision to circumstances in which a stranger to a contract seeks to recover for harm arising from the performance of a particular contract to which the plaintiff is not a party. The goal of the test was to limit liability to contexts in which the “end and aim” of the transaction in issue was intended to benefit the interests of specifically identifiable third parties; in Biakanja, the “’end and aim’ of the transaction was to provide for the passing of Maroevich’s estate to plaintiff…Defendant must have been aware from the terms of the will itself that, if faulty solemnization caused the will to be invalid, plaintiff would suffer the very loss which occurred. As Maroevich died without revoking his will, plaintiff, but for defendant’s negligence, would have received all of the Maroevich estate, and the fact that she received only one-eighth of the estate was directly caused by defendant’s conduct.” Id. at 650-651 (citation omitted).

This instant case does not involve any third party beneficiary allegations. Furthermore, “there is no principled way to distinguish the process of applying for an original loan from the process of applying for a loan modification; both involve activities clearly within the conventional role of mere lenders of money.” Griffin, supra, 2015 WL 10059081, *14.

WF’s demurrer to the fifth cause of action is sustained.

MOTION TO STRIKE PORTIONS OF FIRST AMENDED COMPLAINT:

Based upon the foregoing rulings the motion to strike is moot.