Case Name: JASON CHAN LEE v. JPMORGAN CHASE BANK, ET AL.
Case No.: 17CV308319

This is a foreclosure dispute. Currently before the Court is the demurrer to the original complaint in this matter brought by Defendant MTC Financial, Inc. (“MTC”). The Complaint, filed April 7, 2017, states claims for: 1) Violation of Civil Code § 2923.55; 2) Violation of Civil Code § 2923.6; 3) Violation of Civil Code § 2923.7; 4) Violation of Civil Code §2924.12, and; 5) Violation of Bus. & Prof. Code § 17200 et seq.

Judicial Notice
A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 fn. 2.) In support of its demurrer MTC has submitted a request for judicial notice of 12 documents (exhibits A-L to the request). The only specific authorities identified in support of the request are Evidence Code §§ 452(d) and (h). (See Request at p. 3:10-13 and 4:1-2.)

Notice of exhibit B, a copy of the September 25, 2008 Purchase and Assumption Agreement whereby the assets, but not the liabilities, of Washington Mutual Bank were transferred to JPMorgan Chase Bank is GRANTED under § 452(h). (See Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 755-756 [court may take judicial notice of the legal effect of the Purchase and Assumption Agreement].) Notice of any of the other exhibits pursuant to § 452(h) is DENIED as inapplicable. (See Gould v. Md. Sound Indus. (1995) 31 Cal.App.4th 1137, 1145 [“Judicial notice under Evidence Code section 452, subdivision (h) is intended to cover facts which are not reasonably subject to dispute and are easily verified. These include, for example, facts which are widely accepted as established by experts and specialists in the natural, physical, and social sciences which can be verified by reference to treatises, encyclopedias, almanacs and the like or by persons learned in the subject matter.”].)

Notice of exhibits I-K, copies of records from Plaintiff’s prior state and then federal litigation involving the same real property, is GRANTED pursuant to Evidence Code § 452(d). Notice of any other exhibits pursuant to § 452(d) is DENIED as inapplicable. Notice of exhibits A and C-H, copies of various documents recorded in Santa Clara County is GRANTED by the Court on its own motion pursuant to the appropriate authority, Evidence Code § 452(c). Under Evidence Code § 452(c) the court may take judicial notice of “any official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.” This has been interpreted to include documents recorded by a government department. (See Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549 [“The court may take judicial notice of recorded deeds.”]; See also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-65 [stating that “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 . . . [and, f]rom this, the court may deduce and rely upon the legal effect of the recorded document”].) Exhibit F, a copy of a Substitution of Trustee recorded on May 7, 2015, establishes that MTC first became the Trustee in this matter in May 2015.

Demurrer to the Complaint
In ruling on a demurrer the Court treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.) Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed. Similarly, facts appearing in exhibits attached to the complaint (part of the “face of the pleading”) are given precedence over inconsistent allegations in the complaint. (See Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal App 4th 1443, 1447; Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1474 [rejecting allegation contradicted by judicially noticed facts]. See also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 (“[T]o the extent the factual allegations conflict with the content of the exhibits to the complaint, we rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”); See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice §3(3) [“It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.”])

The Complaint here has three attached exhibits (A-C). Exhibit A is a copy of the March 7, 2006 Deed of Trust for the subject property, the same document submitted by MTC as exhibit A to its request for judicial notice. It establishes that Plaintiff’s lender in 2006 was Washington Mutual Bank and that the Trustee was California Reconveyance Company. Exhibit B to the Complaint is a copy of Notice of Default (“NOD”) for the subject property recorded May 5, 2010 by the then Trustee, California Reconveyance Company. A copy of the same document is submitted by MTC as exhibit C to its request for judicial notice. Exhibit C to the Complaint is a copy of Notice of Trustee’s Sale issued by MTC and recorded February 28, 2017. A copy of the same document is submitted as exhibit L to MTC’s request for judicial notice.

The Complaint’s first four causes of action allege violations of the Homeowners’ Bill of Rights (“HBOR”). The HBOR became effective January 1, 2013, and it is not retroactive. (See Rockridge Trust v. Wells Fargo, N.A. (N.D.Cal. 2013) 985 F.Supp.2d 1110, 1152.) While Plaintiff pleads alleged violations of Civil Code sections 2923.55, 2923.6, and 2923.7 as three separate causes of action, the actual private right to assert a claim for a violation of any of those statutes is provided by Civil Code section 2924.12, subdivision (b). (See Civ. Code § 2924.12, subd. (b) “After a trustee’s deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages pursuant to Section 3281, resulting from a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not corrected and remedied prior to the recordation of the trustee’s deed upon sale.”].) Thus, the alleged violations of Civil Code sections 2923.55, 2923.6, and 2923.7 can be seen as components of a single cause of action, here pled as the fourth. The fourth cause of action as pled has no independent existence; it is entirely based on the three prior claims. The fifth cause of action is, likewise, entirely based on the previously alleged “acts and omissions” of the unspecified “defendants” incorporated by reference.

MTC demurs to all five causes of action alleged in the Complaint on the sole ground that they each fail to state sufficient facts. (See Demurrer at p. 1:21-2:8.)

In its memorandum of points and authorities MTC makes an argument not raised in its demurrer; that all causes of action in the Complaint fail as alleged against it because its actions were privileged under Civil Code §§ 2924 and 47. “[Civil Code] 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 under the qualified common-interest privilege of [Civil Code] section 47, subdivision (c)(1).” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 333.) However, the privilege is typically asserted as a defense to a claim based on a publication, such as libel, slander, or, in the foreclosure context, slander of title. (Ibid.) Slander of title is not alleged here and MTC has not cited any California authority holding that the privilege is a basis for sustaining a demurrer to HBOR claims or that a plaintiff bringing HBOR claims is required to allege that defendants acted with malice.

MTC’s demurrer to the first cause of action alleging a violation of Civil Code § 2923.55 is SUSTAINED. The claim as pled is expressly based on the recording of the May 5, 2010 NOD attached as exhibit B to the Complaint. (See Complt. at ¶¶ 22-28.) As explained above, since it is not retroactive, no claim for violation of an HBOR provision can be based on events prior to January 1, 2013. Furthermore the May 5, 2010 NOD itself, exhibit B to the Complaint and exhibit C to MTC’s request for judicial notice, establishes that the Trustee at the time of recording was California Reconveyance Company, not MTC. MTC can have no HBOR liability based on an action taken by a different trustee in 2010. As the claim as alleged against MTC fails as a matter of law and cannot be cured by amendment without contradicting the entire factual basis of the claim, leave to amend is DENIED.

MTC’s demurrer to the second cause of action alleging a violation of Civil Code § 2923.6 is SUSTAINED. The express basis for the claim is the allegation that “Defendants did not make a written determination that Plaintiff [was] not eligible for a first lien loan modification . . . [I[f Chase did review Plaintiff[‘s] loan file . . . Chase would have discovered that Plaintiff qualified for a first lien loan modification.” (Complt. at ¶ 31.) The only violation alleged in the second cause of action is of an obligation that falls only on the mortgage servicer, which Plaintiff does not dispute is JPMorgan Chase, not MTC. Civil Code § 2923.6 states in pertinent part in subsection (b) that “[i]t it the intent of the Legislature that the mortgage servicer offer the borrower a loan modification or workout plan,” and in subsection (c)(1) states that if an application for a first loan modification is made the mortgage servicer must make “a written determination that the borrower is not eligible for a first lien loan modification . . .”

The opposition fails to address this point and simply repeats language from the complaint while also referring to the 2010 NOD, which cannot support an HBOR claim against anyone. For the sole reason that this is a demurrer to the original complaint in this matter, 10 days’ leave to amend is granted.

MTC’s demurrer to the third cause of action alleging a violation of Civil Code §2923.7 is SUSTAINED with 10 days’ leave to amend. As with the second cause of action the only statutory violation alleged is of an obligation owed by the mortgage servicer, not the trustee. Civil Code §2923.7(a) states that “[u]pon request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.” The third cause of action in turn alleges in pertinent part that “Plaintiff contracted Chase and requested a foreclosure prevention alternative and assistance . . . Despite Plaintiff[‘s] request for assistance with this alternative to foreclosure prevention, Plaintiff [was] not provided a ‘case manager’ in compliance with California Code § 2923.7 at any point after January 1, 2013 and to this date.” (Complt. at ¶36.)

The opposition again fails to offer any meaningful response or explain how an alleged failure of a mortgage servicer to provide a point of contact supports a claim for violation of § 2923.7 against a trustee. As this is a demurrer to the original complaint in this matter, 10 days’ leave to amend is nonetheless granted.

MTC’s demurrer to the fourth cause of action alleging a violation of Civil Code § §2924.12 is SUSTAINED with 10 days’ leave to amend. As explained above, § 2924.12 does not give rise to a separate independent claim, it instead provides the enforcement mechanism for alleged violations of Civil Code §§ 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. Prior to a trustee’s deed upon sale being recorded, a borrower may request an injunction to enjoin a “material violation” of §§ 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. (§ 2924.12(a)(1).) After a trustee’s deed upon sale has been recorded a borrower may seek to recover “actual economic damages” caused by a “material violation” of §§ 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. (§ 2924.12(b).) As each of the three preceding claims currently fail to state sufficient facts against MTC, the fourth cause of action does as well.

MTC’s demurrer to the fifth cause of action alleging Unfair Business Practices is SUSTAINED with 10 days’ leave to amend. The claim as alleged (Complt. at ¶¶ 45-50) simply incorporates the preceding allegations by reference and asserts that they demonstrate that “Defendants” without specification, “engaged in acts of unfair competition with the deliberate intent to injure Plaintiff.” (Complt. at ¶48.) As none of the prior causes of action currently state sufficient facts to support a claim against MTC there are no predicate claims that would support an allegation that MTC’s business practices violate Bus. and Prof. Code §17200 et seq.