Case Number: BC533386 Hearing Date: May 22, 2014 Dept: 58

Judge Rolf M. Treu
Department 58
Hearing Date: Thursday, May 22, 2014
Calendar No.: 7
Case Name: Meigs v. Capital One Financial Corporation, et al.
Case No.: BC533386
Motion: Demurrer
Moving Party: Defendant Capital One, N.A. (erroneously sued as Capital One Financial Corporation) and Greenpoint Mortgage Funding, Inc.
Responding Party: Plaintiff John Meigs
Notice: Improperly served opposition

Tentative Ruling: Demurrer is sustained as to the 3rd COA with 15 days leave to amend, and is otherwise overruled.

Background –
On 1/16/14, Plaintiff John Meigs filed this action against Defendants Capital One Financial Corporation; Greenpoint Mortgage Funding, Inc.; Quality Loan Service Corporation; and Strategic Acquisitions, Inc. arising out of the non-judicial foreclosure of real property located at 10005 Santa Gertrudes Ave., Whittier, CA 90603.

Capital One and Greenpoint (“Moving Parties’) demurs to the Complaint. The Court provided a tentative ruling on the demurrer; and on 4/18/14, the Court continued the hearing on the demurrer to permit Defendant to file a supplemental reply.

Factual Allegations of the Complaint –
On 7/24/07, Plaintiff executed a promissory note secured by a deed of trust on the Property, making monthly installment payments. ¶ 12. On 6/25/13, a notice of default was recorded. ¶ 15. Plaintiff did not receive the notice of default and was not contacted. ¶ 16. In September 2013, Plaintiff discovered that foreclosure proceedings may have been commenced, contacted the customer service department of Capital One, and mailed a check to cure the default and bring Plaintiff’s account current to December 2013. ¶ 17, Ex. B. Capital One’s customer service department expressly assured Plaintiff that his account would be reinstated and foreclosure proceedings cancelled if the total default amount was tendered. ¶ 18. On 10/16/13, a notice of trustee sale was recorded; however, Plaintiff did not receive a copy thereof and was not contacted. ¶¶ 19-20. The Property was sold at a trustee’s sale on 12/12/13. ¶ 21.

Plaintiff asserts causes of action for (1) wrongful foreclosure, set aside trustee sale, and injunctive relief; (2) breach of contract, (3) promissory estoppel, and (4) breach of the implied covenant of good faith and fair dealing. The 2nd through 4th COAs are asserted against Capital One and Greenpoint only.

Demurrer –

1. Request for Judicial Notice
Moving Parties request judicial notice of the recorded deed of trust, notice of trustee’s sale, and notice of default (Exs. A-B, D): judicial notice of these recorded documents are granted. Moving Parties also request judicial notice of a letter dated 1/24/13 (Ex. C): judicial notice is denied as to the 1/24/13 because it is offered to dispute the allegations of the Complaint which is improper on a demurrer.

2. Improperly Served Opposition
Moving Parties correctly note that Plaintiff’s opposition was improperly served on 4/7/13 by mail which does not comply with CCP § 1005(c). See Borlund Decl. ¶ 6. However, Moving Parties timely filed a substantive reply. Therefore, the Court finds no prejudice in considering the improperly served opposition. Nevertheless, the Court admonishes Plaintiff’s counsel, and in the future, the Court may decline to consider noncompliant papers.

3. Supplemental Reply
Moving Parties’ supplemental reply addresses two issues: whether Plaintiff’s breach of contract claim (and dependent breach of the implied covenant of good faith and fair dealing) based on the right to cure survives and whether Plaintiff has alleged an exception to the tender rule. They are addressed in the right to cure and tender portions of this ruling.

4. 2nd COA, Breach of Contract
Plaintiff alleges that Defendants breached the deed of trust concerning notice of acceleration (Complaint ¶ 25) and Plaintiff’s right to cure (id. ¶ 26). See also Complaint ¶¶ 38-39; RJN Ex. A §§ 17-18. Preliminarily, Moving Parties argue that Plaintiff cannot establish performance or excuse (see Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367-68) because Plaintiff admits to being in default. However, this does not establish that Plaintiff cannot bring claims based on the notice of acceleration and right to cure provisions of the deed of trust, which only become triggered when a default occurs.

a. Notice of Acceleration
Moving Parties correctly note that Plaintiff’s claim based on the notice of acceleration fails to distinguish between the notice of acceleration and the notice of default. See RJN Ex. A § 17. Although the Court does not consider Moving Parties’ evidence that notice of acceleration was provided (RJN Ex. C), Plaintiff’s claim is only based on the alleged insufficiency of the notice of default (Complaint ¶ 25). This fails to allege facts to support breach of the notice of acceleration provision of the deed of trust.

b. Right to Cure
Moving Parties argue that Plaintiff cannot allege breach of the right to cure. However, Moving Parties argue that Plaintiff did not contact the proper party as stated in the notice of default, failed to obtain a written itemization of the amounts necessary to cure, and failed to allege where he sent the alleged correspondence and check. In the Court’s previous tentative ruling, the Court concluded that Moving Parties’ arguments improperly attempted to challenge the allegations of the Complaint.

In the supplemental reply, Moving Parties reiterate that Plaintiff failed to allege compliance with the deed of trust (RJN Ex. A § 18) because Plaintiff did not contact Quality Loan Service Corporation as identified in the notice of default (see Complaint Ex. A p. 3). However, this fails to acknowledge Plaintiff’s allegation that he did not receive the notice of default. Complaint ¶ 16. Due to the alleged failure to receive the notice of default, Plaintiff’s allegation that he contacted the lender Capital One (see id. ¶ 4 (alleging that Capital One purchased Greenpoint)) to inquire as to the amount necessary to cure the default and sent a check to Capital One based on the figures provided (id. ¶ 17, Ex. B [9/2/13 Letter]) is sufficient at the pleading stage to allege performance or excuse.

Therefore, despite the insufficient factual allegations as to the notice of acceleration provision, the demurrer to the 2nd COA is overruled because a demurrer cannot be directed to part of a cause of action. See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.

5. 1st COA, Wrongful Foreclosure
a. Tender
Moving Parties argue that Plaintiff fails to allege tender of the full amount of indebtedness. See Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109. Plaintiff only alleges that he is willing and able to tender delinquencies and costs to redeem the Property (Complaint ¶ 33) and asserts exceptions to the tender rule (id. ¶ 34; see also Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-13).

In the Court’s previous tentative ruling, the Court noted that Plaintiff failed to allege facts that support offsets equal to or greater than the amount due on the loan (Complaint ¶ 34(A)) or that the trustee’s deed is void on its face (id. ¶ 34(C)). Additionally, the Court noted that Plaintiff’s argument that the trustee’s deed redacted information concerning the unpaid debt and the amount of the trustee’s sale (Opp’n p. 10:23-11:19) was not based on any allegations of the Complaint. However, the Court concluded that Plaintiff’s allegations supported the equitable exception to tender at the pleading stage. See Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424.

In its supplemental reply, Moving Parties argues that Plaintiff has failed to allege facts to establish an equitable exception, attempting to distinguish Onofrio on its facts. However, as with the contract claims, Moving Parties fail to acknowledge Plaintiff’s allegations that he did not receive the notice of default, that he contacted the lender to inquire as to the amount necessary to cure the default, and that he sent a check based on the figures provided. At the pleading stage, these allegations support Plaintiff’s good faith efforts to cure the default based on the information known to him (see Complaint ¶ 30): to require tender of the full amount may be inequitable. Therefore, the Court finds that Plaintiff’s offer of tender (id. ¶ 33) is sufficient.

b. Theories
Plaintiff’s wrongful foreclosure claim is based on the alleged breach of contract (Complaint ¶¶ 25-26), the failure to comply with Civil Code § 2923.5 concerning due diligence in contacting Plaintiff (Complaint ¶ 28), and the failure to comply with the Civil Code § 2924 et seq. concerning the mailing of the notices of default and trustee’s sale (Complaint ¶ 30).

As to Civil Code § 2923.5, Moving Parties correctly argue that the remedy for such a violation is only postponement of a trustee’s sale (Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 213) which is not available in this case.

As to the proper mailing of the notices, Moving Parties correctly note that Plaintiff fails to allege any facts that the notices were not properly mailed. Notably, Plaintiff appears to base this claim only on his non-receipt of the notices (Complaint ¶ 20) which is insufficient (see Knapp v. Doherty (2004) 123 Cal.App.4th 76, 89). Additionally, Plaintiff’s alleged correspondence with Capital One asserts issues with Plaintiff’s receipt of mail which is not attributed to Moving Parties (see Complaint Ex. B [9/2/13 Letter]), of which assertion the Court takes judicial notice (see Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal.App.4th 1443, 1447).

Nevertheless, because Plaintiff’s breach of contract claim survives, Plaintiff’s wrongful foreclosure claim likewise survives as the alleged failure to accept and process Plaintiff’s alleged tender is sufficient at the pleading stage to allege prejudice (see Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272). Therefore, the demurrer is overruled as to the 1st COA.

6. 3rd COA, Promissory Estoppel
The 3rd COA is based on Plaintiff’s communications with the customer service department of Capital One. Complaint ¶ 43 (citing to Complaint ¶¶ 17-18). Moving Parties argue that Plaintiff fails to allege a clear and unambiguous promise or detrimental reliance. See Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 226-27.

The Court agrees. Plaintiff fails to allege facts as to the express assurance that his account would be reinstated and foreclosure proceedings would be cancelled (Complaint ¶ 18): notably, Plaintiff’s correspondence indicates that the account representative with whom he spoke “seemed less than sure on the amount to cure the default.” (Complaint Ex. B [9/2/13 Letter]). Plaintiff fails to allege detrimental reliance where it appears that Plaintiff did not receive any response to his correspondence (Complaint Ex. B [9/10/13 and 9/20/13 Letters]) and there is no allegations as to the disposition of Plaintiff’s offered check. Complaint Ex. B [9/20/13 Letter] (asserting only that Plaintiff’s correspondence was received). Therefore, the demurrer is sustained as to the 3rd COA.

7. 4th COA, Breach of the Implied Covenant of Good Faith and Fair Dealing
Because Plaintiff’s breach of contract claim survives, Plaintiffs’ breach of the implied covenant of good faith and fair dealing likewise survives. See Complaint ¶ 49. Therefore, the demurrer is overruled as to the 4th COA.

8. Ruling
The demurrer is sustained as to the 3rd COA and is otherwise overruled. Because this is the first challenge to the pleadings, the Court will grant leave to amend.