Case Number: EC067189 Hearing Date: January 12, 2018 Dept: NCB

11. EC067189

MARCOS A. FLORES et al v. THE CALIFORNIA CREDIT UNION, et al

Demurrer

The Plaintiffs allege that Defendants improperly commenced a foreclosure proceeding on the Plaintiff’s property and sold the property.

CAUSES OF ACTION IN COMPLAINT:

1) Violation of Homeowner Bill of Rights

2) Negligence

3) Set Aside Trustee’s Sale

4) Cancellation of Instrument

5) Quiet Title

6) Violation of Business and Professions Code section 17200

7) Intentional Misrepresentation

8) Unjust Enrichment

9) Wrongful Foreclosure

10) Violation of RESPA

This hearing concerns the demurrers of Defendants, California Credit Union and T.D. Service Co., to the Complaint. California Credit Union was the lender and T.D. Service Co. was the party that performed the non-judicial sale of the property.

The Plaintiffs did not file any opposition papers to the demurrers.

In its papers, the Defendant, California Credit Union, states that this is the fifth action filed by the Plaintiffs to allege that a wrongful foreclosure occurred with regards to their property. The Defendants provide copies of the pleadings in the prior four actions in exhibits A, C, D, and E to their request for judicial notice. These prior actions include BC499732, which was filed on May 23, 2013. The Plaintiffs dismissed this action without prejudice on July 30, 2013 (see docket in exhibit B). In addition, the Plaintiffs filed pleadings in BC652002, BC652025, and BC652026, which were filed on February 27, 2017 and February 28, 2017. These actions were consolidated and then dismissed by the Plaintiffs without prejudice on September 15, 2017 (see notice of consolidation and request for dismissal in exhibits F and G).

The Plaintiffs’ claims in the pending case also arise from the non-judicial foreclosure proceedings commenced against their property to recover amounts owed on a loan. The Plaintiffs claim that on May 20, 2014, they discovered that a notice of default, a notice of trustee’s sale, and a notice of trustee’s deed upon sale had been recorded. The Plaintiffs allege that these events occurred because the Defendants had conspired to sell their home without notice and that the Defendant, Besorat17, LLC was the fake winning bidder at the foreclosure sale. The Plaintiffs then waited over three years after they discovered these notices recorded on their property before they commenced this action on October 5, 2017.

On December 1, 2017, the Court heard the demurrer of Strategic Acquisitions Inc. and Besorat Fund 17, LLC, to the pleadings. The Court found that the tender rule applied to the

Plaintiffs’ claims in the Complaint because the Plaintiffs are seeking to set aside a non-judicial foreclosure sale. As a result, the Plaintiffs must plead that they satisfied the tender rule to bring the claims in their Complaint because they are implicitly integrated with the foreclosure sale. Since the Plaintiffs did not allege any facts showing that they had tendered the debt, the Court sustained the demurrers of Strategic Acquisitions Inc. and Besorat Fund 17, LLC, and granted leave to amend.

The Plaintiffs did not file an amended pleading. As a result, on January 3, 2018, the Court granted the ex parte application of Strategic Acquisitions Inc. and Besorat Fund 17, LLC, and dismissed them from this action.

This prior finding applies to the current hearing because, when pleading a cause of action implicitly integrated with a sale under a non-judicial foreclosure, there must be allegations showing that the plaintiff tendered the amount of the secured indebtedness. Abdallah v. United Sav. Bank (1996) 43 Cal. App. 4th 1101, 1109 (affirming an order sustaining a demurrer without leave to amend in a case claiming that the foreclosure and sale of a home was improper); see also Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal. App. 3d 112, 118 (applying tender rule to any cause of action implicitly integrated with the voidable sale). Here, the Plaintiffs’ property has been sold and they brought this action to attack the foreclosure sale with causes of action that directly attack the sale or that are implicitly integrated with the sale. As noted above, after the Court identified this defect in their pleadings and granted leave to amend, the Plaintiffs did not file an amended pleading to correct the defect.

This failure to satisfy the tender rule is grounds to find that the pleadings lack sufficient facts.

The following analysis considers each cause of action.

1. First Cause of Action for Violation of HBOR (against both Defendants)

The Homeowner Bill of Rights (“HBOR”) is codified at Civil Code sections 2920.5, 2923.4 to 2923.7, 2924, 2924.9 to 2924.12, 2924.15, 2924.17 to 2924.20. HBOR was enacted “to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower’s mortgage servicer, such as loan modifications or other alternatives to foreclosure.” Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal. App. 4th 1267, 1272. HBOR provides for injunctive relief for statutory violations that occur prior to foreclosure in section 2924.12(a) and monetary damages when the borrower seeks relief for violations after the foreclosure sale has occurred in section 2924.12(b). In addition, section 2924.12 permits the Court to award attorney’s fees to a prevailing borrower. Since this is a statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619.

As an initial issue, the Plaintiffs did not identify any statute that was violated. There are no allegations that plead with reasonable particularity the manner by which the moving Defendants violated any provision of HBOR. Instead, the Plaintiffs lists a number of legal conclusions, e.g., the Defendants engaged in robo-signing of documents and the Defendants did not establish a single point of contact. There are no allegations that demonstrate that a provision

of HBOR applied to the moving Defendants and that they violated the provision. As a result, the Plaintiff has failed to state with reasonable particularity the facts supporting the statutory elements of the claimed violation of HBOR.

This is grounds for a demurrer to the first cause of action.

2. Second Cause of Action for Negligence (against California Credit Union)

A cause of action for negligence includes the elements of duty, breach of duty, causation, and damages. Burgess v. Superior Court (1992) 2 Cal. 4th 1064, 1072. Under California law, a lender owes no general duty of care to the borrower. Nymark v. Heart Federal Savings & Loan Association (1991) 231 Cal.App.3d 1089, 1096 (“as a general rule, a financial institution owes no legal 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.”).

The Plaintiffs’ claim is that the Defendants were negligent when they serviced the Plaintiffs’ loan. Since this relates to the conventional role of lenders, the Defendants do not have a legal duty of care to the Plaintiffs with regards to their involvement in the loan transaction. Accordingly, this cause of action lacks sufficient facts.

3. Third Cause of Action to Set Aside Trustee’s Sale, Fourth Cause of Action for Cancellation of Instruments, Fifth Cause of Action to Quiet Title, Ninth Cause of Action for Wrongful Foreclosure (against both Defendants)

These causes of action all seek remedies that directly attack the foreclosure sale, e.g., the third cause of action seeks to set aside the sale, the fourth cause of action seeks to cancel the deed issued after the sale, and the fifth cause of action seeks to reverse the sale and quiet title in the Plaintiffs with regards to buyer at the sale. This sale of their property was a sale of the security that the Plaintiffs had used to secure the debt that they owed. As discussed above, the Plaintiffs cannot attack this foreclosure sale unless they plead facts showing that can tender the amount owed to demonstrate that it would not be an idle act to set aside the sale of their property that occurred more than three years ago. Since the Plaintiffs did not plead that they satisfied the tender rule, these causes of action lack sufficient facts. This is grounds for a demurrer to the third, fourth, fifth, and ninth causes of action.

4. Sixth Cause of Action for Violation of Business and Professions section 17200 (against both Defendants)

The Plaintiffs’ sixth cause of action is brought for the violation of Business and Professions Section 17200, which defines unfair competition to be any unlawful, unfair, or fraudulent business practice. The purpose of the UCL is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986. Section 17200 defines unfair competition to mean and include “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law

(§ 17500 et seq.)].” Id. Since section 17200 is written in the disjunctive, a business act or practice need only meet one of the three criteria, i.e., unlawful, unfair, or fraudulent, to be considered unfair competition under the UCL. Id.

In order to plead a claim under Business and Professions Code section 17200, there must be allegations demonstrating that the Defendants engaged in an unlawful, unfair, or fraudulent business act or practice. Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal. App. 4th 659, 676-677. Further, to plead this statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619.

A review of the pleadings reveals that it lacks the required particularity. Instead, the Plaintiffs repeat the legal conclusion that the Defendants’ business practices were unlawful, unfair, or fraudulent and makes general statements in paragraphs 67 to 81 that the Defendants made false statements, recorded documents, and held a secret sale of their property.

A violation of the unlawful prong includes anything that can properly be called a business practice and that at the same time is forbidden by law. Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal. App. 4th 659, 676-677. A review of the pleadings reveals no allegations that identify a law, regulation, or statute and the particular business practices of the moving Defendants that was directed at the Plaintiff and that violated the identified law, regulation, or statute.

A violation of the fraudulent prong of section 17200 can be shown with allegations that the fraudulent practice was likely to deceive members of the public. Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167. A review of the sixth cause of action reveals no allegations that identify a particular business practice of the moving Defendants that was a fraudulent practice likely to deceive the public.

A violation of the unfair prong of section 17200 involves an examination of the impact of the business practice on its alleged victim balanced against the reasons, justifications and motives of the alleged wrongdoer. Searle v. Wyndham Int’l (2002) 102 Cal.App.4th 1327, 1334. An unfair business practice occurs when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. Id. In general the unfairness prong has been used to enjoin deceptive or sharp practices. Id. However, the unfairness prong does not give the Courts a general license to review the fairness of contracts. Id. A review of the pleadings reveals no allegations that identify a particular business practice of the moving Defendants that offends established public policy or that is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.

This is grounds for a demurrer to the sixth cause of action.

5. Seventh Cause of Action for Fraud (against both Defendants)

The seventh cause of action for fraud includes the following elements:

1) a representation, usually of fact, which is false;

2) knowledge of its falsity;

3) intent to defraud;

4) justifiable reliance upon the misrepresentation; and

5) damage resulting from that justifiable reliance

Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73.

This cause of action is a tort of deceit and the facts constituting each element must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Since the claims must be pleaded with particularity, the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73. The seventh cause of action for fraud is not pleaded with the necessary particularity. See e.g., Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216 (facts constituting each element of fraud must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings).

The Plaintiffs do not plead facts particular to each Defendant that identifies any representations that were made. There are no facts identifying how, when, where, to whom, or by what means any Defendant made the unidentified representations. Further, there are no allegations that identify how the Plaintiffs suffered damages by relying on the unknown representations of the moving Defendants. This is grounds for a demurrer to the fraud claim.

6. Eighth Cause of Action for Unjust Enrichment (against both Defendants)

The eighth cause of action for unjust enrichment is not a cause of action. See e.g., Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794 (under California law, unjust enrichment is not a cause of action). This is grounds for a demurrer without leave to amend.

7. Tenth Cause of Action for Violation of RESPA (against both Defendants)

The Plaintiffs seek relief under 12 USC section 2605, which is part of the Real Estate Settlement Procedures Act (“RESPA”). This was an act passed by the United States Congress in 1974 and it is codified at Title 12, Chapter 27 of the United States Code, 12 USC sections 2601 to 2617. Since this is a statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619.

Here, the Plaintiffs’ cause of action pleads legal conclusions that the Defendants violated RESPA because the Defendants gained improper amounts of interest and income and the payments between the Defendants were misleading and designed to create a windfall. There are no allegations that identify any statute that this violated or that plead, with reasonable particularity, the manner by which the moving Defendants violated a statute of RESPA.

Further, the Plaintiffs then, in a section labeled “ARGUMENT” allege that the Defendants violated the National Housing Act at 12 USC 1701x by failing to provide access to debt management and relief and that the Defendants violated the Uniform Commercial Code by enforcing the deed of trust. There are no allegations that identify, with reasonable particularity,

the manner by which the Defendants engaged in conduct that violated the National Housing Act or the Uniform Commercial Code. This does not plead any cause of action against the moving Defendants.

Further, this section, which is on pages 35 to 43, appears to be cut and pasted from another document and inadvertently inserted between the tenth cause of action and the prayer for relief. It includes arguments in support of a rescission of the contract and it was signed and dated under penalty of perjury on page 43. The prayer for relief then begins on page 44 and the Plaintiffs’ signatures for the Complaint are on page 45. The arguments and citations in pages 35 to 43 do not identify a claim against the moving Defendants in this case.

Accordingly, there are grounds for a demurrer to the tenth cause of action.

Therefore, the Court sustains the Defendants’ demurrers to the causes of action in the Complaint. The Plaintiffs did not file any opposition papers and did not request leave to amend. As noted above, when the Court previously granted the Plaintiffs’ leave to amend, they did not file an amended pleading. Since the Plaintiffs have not offered any grounds to find that they can amend their pleadings, the Court does not grant leave to amend.