Filed 5/14/15 Ibanez v. PNC Bank CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

PEDRO N. IBANEZ,

Plaintiff and Appellant,

v.

PNC BANK, N.A. et al.,

Defendants and Respondents.

E058834

(Super.Ct.No. RIC1219022)

O P I N I O N

APPEAL from the Superior Court of Riverside County. Paulette D. Barkley, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

Pedro N. Ibanez, in pro. per., for Plaintiff and Appellant.

Wolfe & Wyman, Stuart B. Wolfe, Samantha N. Lamm, and Carrie A. Stringham for Defendants and Respondents.

I. INTRODUCTION

Plaintiff and appellant, Pedro N. Ibanez (plaintiff), sued defendant and respondent, PNC Bank, N.A. (PNC), for claims arising from a loan PNC’s predecessor made to his son, and PNC’s failure to agree to modify the loan after it went into default. After demurrers were sustained to the original and an amended complaint on the ground that plaintiff lacked standing to pursue these claims, the court denied plaintiff leave to amend. After judgment of dismissal was entered, plaintiff appealed. We affirm.

II. FACTUAL AND PROCEDURAL SUMMARY

In his original complaint, plaintiff alleged the following background facts: plaintiff’s son, Socrates Ibanez, applied for a loan from PNC’s predecessor, National City Mortgage (NCM); the spaces on the application form for the borrower’s income were left blank; NCM accepted the application and loaned Socrates $650,000; the loan was secured by a deed of trust on property in Murrieta; plaintiff was a co-owner of the property; Socrates gave specific powers of attorney to plaintiff to, among other powers, sell or transfer the property, refinance or negotiate loans pertinent to the property, and manage construction on the property.

Attached to the complaint are 13 exhibits, including copies of: (1) a portion of Socrates’s application for a $650,000 loan, showing nothing in the spaces for the borrower’s income; (2) a deed of trust dated July 28, 2005, naming Socrates as trustor and NCM as the beneficiary; (3) a quitclaim deed dated July 31, 2005, by which Socrates granted one-half of his interest in certain property to plaintiff; and (4) the power of attorney documents referred to in the body of the complaint.

For his first, untitled cause of action, plaintiff alleges that PNC violated Civil Code section 2923.6 by not offering a loan modification workout plan to him or to Socrates. More specifically, he alleges that he and his spouse can afford a monthly loan payment of $1,500. Such a payment would be beneficial to PNC; however, PNC offered to modify the loan to provide for monthly loan payments of $5,622.95.

In his second cause of action, labeled “conspiracy to commit fraud” (capitalization omitted), plaintiff alleged that Socrates’s loan application was fraudulent because the spaces in the application form for Socrates’s income were blank. Socrates’s actual income, he alleges, was “intentionally hidden” by a mortgage broker because it was less than the monthly loan payment. The failure to include the monthly income is allegedly a breach of the mortgage broker’s fiduciary duty to the borrower under section 2923.1. Plaintiff further alleges that NCM knew or should have known that the application was fraudulent, and that NCM conspired to commit the fraud by accepting the application from the mortgage broker. Finally, plaintiff alleged that PNC, as NCM’s successor, is liable for NCM’s fraudulent actions.

PNC demurred to the complaint and each cause of action on the ground that plaintiff lacked standing to pursue the causes of action and the complaint failed to state facts sufficient to constitute a cause of action.

Following a hearing, the court sustained the demurrer with leave to amend.

Plaintiff subsequently filed what he described as a “1st Amendment to Original Complaint.” In this pleading, plaintiff expressly incorporated the “information and Exhibits in the Original Complaint.” In the new pleading, plaintiff described his first cause of action as “Tort in Violation of Public Policy,” and reasserted his claim that PNC failed to offer an affordable loan modification workout plan to him and Socrates.

In his second cause of action, now titled, “Tort in Violation of Public Policy, Aggravated with the Conspiracy to Commit Fraud, in violation of California Civil Code [section] 2923.1,” plaintiff alleged additional facts. In particular, he alleged that an employee of NCM received a loan application from Socrates knowing that the application did not include Socrates’s monthly income, which was less than the amount of the proposed monthly loan payment; the employee deliberately left this information out of the application; and by leaving this information off the application, Socrates was placed in imminent harm because of his inability to make payments on the loan. Plaintiff further alleged that PNC and NCM had agreed to settle claims asserted by the United States and the Securities and Exchange Commission arising under the False Claims Act (31 U.S.C.A. § 3729 et seq.) and federal securities laws.

PNC again demurred based on lack of standing and failure to state facts sufficient to constitute a cause of action. Following a hearing, the court sustained the demurrer on the ground that plaintiff lacked standing to pursue the claims, and denied leave to amend.

The day after the court’s ruling, plaintiff filed an “ex parte motion for early discovery and order for admissions . . . .” (Capitalization omitted.) In this motion, plaintiff sought an order compelling defendants “to state their intentions as to the Property in question.” (Underlining omitted.) In particular, he sought the answer to two questions: (1) “What are your legal foreclosure intentions as to the subject property . . . ?”; and (2) “You have seen the documents and exhibits filed by the plaintiff, what are your objections, if any, to these documents and exhibits?” (Capitalization omitted.) Following a hearing, the court denied the motion.

After judgment of dismissal was entered, plaintiff appealed.

III. STANDARD OF REVIEW

A demurrer is used to test the sufficiency of the factual allegations of the complaint to state a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) The facts pled are assumed to be true and the only issue is whether they are legally sufficient to state a cause of action. “In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff. [Citation.]” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

IV. DISCUSSION

“Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” (Code Civ. Proc., § 367.) “‘A real party in interest ordinarily is defined as the person possessing the right sued upon by reason of the substantive law. [Citation.]’ [Citation.] A real party in interest must have an actual, substantial interest in the subject matter of the action.” (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 208.)

“A party who is not the real party in interest lacks standing to sue. [Citation.] . . . A complaint filed by someone other than the real party in interest is subject to general demurrer on the ground that it fails to state a cause of action. [Citation.]” (Redevelopment Agency of San Diego v. San Diego Gas & Electric Co. (2003) 111 Cal.App.4th 912, 920-921.)

A. Plaintiff Lacks Standing to Sue for Failure to Comply with Section 2923.6

Plaintiff’s first cause of action is based on his allegation that PNC failed to offer an affordable loan modification workout plan to him and Socrates under section 2923.6.

At the time plaintiff filed his original complaint, section 2923.6 provided, in relevant part:

“(a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to any particular party in the loan pool or investor under a po[o]ling and servicing agreement, and that a servicer acts in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if it agrees to or implements a loan modification or workout plan for which both of the following apply:

“(1) The loan is in payment default, or payment default is reasonably foreseeable.

“(2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.

“(b) It is the intent of the Legislature that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.” (2009 Stats., 1st Reg. Sess. 2009-2010, ch. 43, § 2, p. 248.)

Courts interpreting this statute have held that it did not create a duty to offer or agree to a loan modification. (See, e.g., Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 222, fn. omitted [the statute “merely expresses the hope that lenders will offer loan modifications on certain terms”]; Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1617 [“There is no ‘duty’ under [the former statute] to agree to a loan modification”]; Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1056 [“section 2923.6 does not grant a right to a loan modification”].)

In 2012, the Legislature amended section 2923.6 to create certain rights and obligations with respect to loans in the process of foreclosure. (See 2012 Stats., 1st Reg. Sess. 2011-2012, ch 86, § 7, pp. 2303-2304.) “One of the targets of the legislation is a practice that has come to be known as ‘dual tracking.’ ‘Dual tracking refers to a common bank tactic. When a borrower in default seeks a loan modification, the institution often continues to pursue foreclosure at the same time.’ [Citations.] The result is that the borrower does not know where he or she stands, and by the time foreclosure becomes the lender’s clear choice, it is too late for the borrower to find options to avoid it.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 904.) The statute became effective on January 1, 2013, before plaintiff filed his first amended complaint.

To prevent dual tracking, the amended statute provides that if a borrower submits a complete application for a first lien loan modification, the mortgage servicer (among others) is precluded from recording a notice of default or notice of sale, or conducting a trustee’s sale while the application is pending. (§ 2923.6, subd. (c).) The foreclosure process is effectively stayed until: (1) the mortgage servicer determines that “the borrower is not eligible for a first lien loan modification and any appeal period . . . has expired”; (2) “The borrower does not accept an offered first lien loan modification within 14 days of the offer”; or (3) “The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification.” (Ibid.)

The amended statute also obligates mortgage servicers to send written notice to “the borrower” explaining the reasons for the denial of a loan modification application and provide “[t]he borrower” with the right to appeal the denial. (§ 2923.6, subds. (d), (f).)

Prior to the recording of a trustee’s deed, a borrower may bring an action to enjoin a material violation of section 2923.6. (§ 2924.12, subd. (a)(1).) If a trustee’s deed has been recorded, a borrower may recover damages resulting from a material violation of the statute. (§ 2924.12, subd. (b).)

Significantly, the rights created by section 2923.6, including the right to sue for damages, are rights of the “borrower.” For purposes of section 2923.6, a “borrower” includes “any natural person who is a mortgagor or trustor.” (§ 2920.5, subd. (c)(1).) The defined term does not include parents of a borrower or one who is merely a co-owner of the property that is the subject of the mortgage or deed of trust.

Socrates is the person who borrowed the money and is the only trustor on the deed of trust. For purposes of section 2923.6, therefore, the borrower in this case is Socrates, not plaintiff. Thus, based on the allegations in plaintiff’s pleadings, Socrates is the only person possessing any rights created by section 2923.6, and is the real party in interest in any action based upon a violation of those rights. Because plaintiff is not a real party in interest, he does not have standing to pursue such a claim.

The fact that Socrates gave a power of attorney to plaintiff with the authority to refinance and negotiate loans concerning the property does not alter our conclusion. The recipient of a limited power of attorney is an “attorney-in-fact” with the authority granted in the instrument. (Prob. Code, § 4262.) An attorney-in-fact is “a person granted authority to act for the principal . . . .” (Prob. Code, § 4014, italics added; see In re Marriage of Caballero (1994) 27 Cal.App.4th 1139, 1151 [a “power of attorney is a device available to a person to empower another to act on his or her behalf”].) The instrument does not assign to plaintiff any rights or claims owned by Socrates or otherwise give plaintiff standing to assert such claims in his own name. “The holder of a power of attorney is merely an agent of the party who appointed him or her, not a trustee. Thus, the holder is not the real party in interest as to rights belonging to the principal . . . , and cannot sue to enforce those rights. Nor can the holder sue derivatively for damages suffered by the owner.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶ 2:13, p. 2-9 (rev. # 1, 2014).)

Plaintiff cites to Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66 for the proposition that an employee who has been terminated in violation of public policy can sue his employer for damages in tort, notwithstanding the lack of an employment contract. He relies on City of Moorpark v. Superior Court (1998) 18 Cal.4th 1143, for its holding that an employee who is discriminated against based upon a workplace injury is not limited to the remedies provided by the workers’ compensation law; the employee may also seek damages under the Fair Employment and Housing Act (Gov. Code, § 12900 et seq.) and common law tort principles (City of Moorpark v. Superior Court, supra, at pp. 1158, 1161). These cases are inapposite. The issue is not, as plaintiff seems to believe, whether he can assert tort claims when he is not a party to the contract between Socrates and PNC, but whether he owns the tort claims he asserts. Green and City of Moorpark do not address this issue because the plaintiffs in those cases were clearly the individuals who held the pertinent rights not to be discriminated against or wrongfully terminated. No one in those cases was asserting a claim for damages based on the discrimination or wrongful termination of their son.

B. Plaintiff Lacks Standing to Sue for Fraud

In his second cause of action, plaintiff asserts that PNC is liable in tort for violating public policy and conspiring to commit fraud. He alleges, in essence, that Socrates filled out his loan application form without stating any income in the space provided. Socrates’s mortgage broker, an employee of NCM and a fiduciary to Socrates, received the loan application from Socrates and deliberately left the spaces for income blank. As a result, the loan was approved, causing Socrates to receive $650,000 and be placed “in imminent harm since [he] will not be able to maintain monthly payments on this loan.” (Capitalization omitted.)

The elements of a cause of action for fraud “‘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.’ [Citations.]” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Here, the alleged misrepresentation is the omission of any amount of income on Socrates’s loan application. In fact, plaintiff alleges, Socrates did have some income, albeit not enough to allow him to repay the loan. It is not entirely clear how the elements of intent to defraud, justifiable reliance, and resulting damage are or could be alleged. However, reading the pleadings in a light favorable to plaintiff, it appears he is asserting that if the truth about Socrates’s income was stated on the loan application, it would have been apparent to all that Socrates could not make the monthly payments, the loan would never have been made, and Socrates would not be faced with having to repay the loan or the potential foreclosure sale of the property securing the loan.

At first glance, it would seem that if anyone has been harmed by the alleged fraud, it is PNC—its predecessor loaned $650,000 to Socrates based on the allegedly fraudulent loan application and has been harmed by the loss of the funds loaned to Socrates and not repaid. More importantly, the alleged facts do not constitute fraud against plaintiff. Even if plaintiff could establish that the blank spaces on the loan application constitute a fraudulent misrepresentation, he does not allege (and does not indicate that he could allege) that he knew of the misrepresentation or relied on the loan application in any way.

If, as plaintiff’s allegations suggest, Socrates’s mortgage broker breached his fiduciary duty to Socrates by allowing Socrates to submit the fraudulent loan application that led to the funding of the loan, the alleged fiduciary duty was owed to Socrates, not plaintiff. There is, quite simply, no alleged relationship between plaintiff and the mortgage broker or other basis for any duty owed to plaintiff. Therefore, plaintiff is not the real party in interest as to any claim for fraud or breach of fiduciary duty.

Plaintiff’s reliance on Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979 is misplaced. In that case, the court held that the plaintiff could recover damages in tort on a claim for fraud in the performance of a contract. (Id. at p. 991.) As in Green and City of Moorpark, the Robinson Helicopter court had no occasion to address, and did not address, the plaintiff’s standing to sue. The case has no bearing on the issues in this appeal.

C. Other Arguments

Plaintiff argues that the trial court failed to rule on an objection he made at oral argument. At the demurrer hearing, PNC’s counsel argued that the Green and City of Moorpark cases, which plaintiff relied on, involved employment contracts. Plaintiff, appearing in propria person, interjected: “Object, Your Honor. There was no employment contract.” The court responded: “Sir, he let you state your argument. Let him state his.”

Plaintiff’s argument that the court erred in failing to rule on his objection is without merit. First, his “objection” did not raise a procedural or evidentiary point that needed to be ruled upon; it was merely an argument as to the opposing counsel’s characterization of the cases. Second, the court’s failure to address plaintiff’s “objection” is immaterial because we review the court’s ruling de novo. (See Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 921.)

Next, plaintiff asserts he will be “harmed by the IMMINENT foreclosure of the property in question . . . .” The harm plaintiff would suffer by a foreclosure sale is the loss of his interest in the property. Such harm, however, is simply the consequence that a holder of any interest in property would suffer when a senior deed of trust on the property is foreclosed. (See Vallely Investments v. BancAmerica Commercial Corp. (2001) 88 Cal.App.4th 816, 824; Hohn v. Riverside County Flood Control etc. Dist. (1964) 228 Cal.App.2d 605, 612-613.) It does not, without more, state a cause of action.

Finally, plaintiff contends the court erred by denying his post-demurrer, ex parte motion for early discovery. Because the court had sustained PNC’s demurrers without leave to amend, the court properly ruled that plaintiff’s motion was moot.

V. DISPOSITION

The judgment is affirmed. PNC shall recover its costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

KING

J.

We concur:

RAMIREZ

P. J.

McKINSTER

J.