2013-00135762-CU-OR

Rajinder Pooni vs. Nuview Financial Service LLC

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint (EMC Mortgage)

Filed By: Vatanparast, Roxana

*** If oral argument is requested, the parties must at the time oral argument is
requested notify the clerk and opposing party of the specific causes of action
that will be addressed at the hearing. The parties are also reminded that
pursuant to local court rules, only limited oral argument is permitted on law and
motion matters. ***

Defendant EMC Mortgage, LLC’s (“EMC”) demurrer to the Second Amended
Complaint (“2AC”) is SUSTAINED in part and OVERRULED in part, with leave to
amend, as follows.

Moving counsel is admonished because the notice of hearing/motion/demurrer does
not provide notice of the Court’s tentative ruling system, as required by Local Rule
1.06, and does not provide the correct address for Dept. 54. Moving counsel is
directed to contact opposing counsel and advise him/her of Local Rule 1.06 and the
Court’s tentative ruling procedure and the manner to request a hearing. If moving
counsel is unable to contact opposing counsel prior to hearing, moving counsel
is ordered to appear at the hearing in person or by telephone.

Plaintiffs’ counsel is also admonished for failing to comply with CRC Rule 3.1110(b)(3)-
(4).
Defendant’s request for judicial notice is unopposed and is granted.

This is a wrongful foreclosure case. According to the 2AC, plaintiffs first discovered in
2012 that their home was foreclosed upon in April 2008 (even though they were then
current on their mortgage) and that despite the rescission of the trustee’s sale being
recorded later in April 2008, plaintiffs suffered damage to their credit. Additionally, the
2AC alleges that plaintiffs attempted to obtain a loan modification beginning in 2009
and were told they could not be considered for a modification while current on their
loan payments. Thereafter, plaintiffs stopped making payments and commenced a
trial payment plan (“TPP”), making roughly 17 payments under the TPP without
receiving a permanent modification. Plaintiffs claim they re-applied for a permanent
loan modification and were told they needed to stop making payments but while their
application was pending, their mortgage was assigned by defendant EMC to U.S.
Bank. The latter then recorded a notice of trustee’s sale, at which U.S. Bank acquired
title to plaintiffs’ home in September 2012.

The 2AC purports to allege eight (8) causes of action (“COA”) for Breach of Contract;
Breach of Covenant of Good Faith and Fair Dealing; Promissory Estoppel; Violation of
Civil Code §2924 et seq.; Fraud (Intentional Misrepresentation); Negligent
Misrepresentation; Unfair Competition and Quiet Title. Defendant EMC now demurs to
all COA except for the last, which is not alleged against EMC. Plaintiffs oppose.

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Breach of Contract. Defendant EMC demurs to the 1 COA claiming the allegations
that EMC breached the deed of trust and promissory note by foreclosing on the
plaintiffs’ home in 2008 are deficient since plaintiffs did not sufficiently plead either
breach of any material term or resulting damages and since the claim is time-barred.
In opposition, plaintiffs contend in part this COA is timely under the delayed discovery
rule discussed in Sanchez v. South Hoover Hospital (1976) 18 Cal.3d 93 to the extent
plaintiffs allege the 2008 foreclosure sale was not discovered until 2012.

However, the Court is not persuaded that the delayed discovery rule applies at all to
contract claims since the sole authority cited by the opposition (i.e., Sanchez) was a
medical malpractice action (i.e., a tort claim) where the Supreme Court explained that
the rule applies when a plaintiff, despite exercising reasonable diligence, is unable to
discover his/her injury and its negligent cause. (Sanchez, at 96-97.) Moreover, the
Supreme Court justified this extension of the statute of limitation was largely based on
the fiduciary and confidential relationship between a physician and patient. (Id., at 97-
98.) Since this same justification does not exist in the present case, Sanchez does not
advance plaintiffs’ position. Regardless, it is well established that a plaintiff seeking to
invoke the delayed discovery rule “must specifically plead facts to show (1) the time
and manner of discovery and (2) the inability to have made earlier discovery despite
reasonable diligence.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.)
Here, the 2AC is devoid of any facts which establish that plaintiffs, despite reasonable
diligence, were unable to discover the alleged breach of contract earlier than 2012.
Because plaintiffs have failed to show that the delayed discovery applies to non-tort
claims and because plaintiffs have also failed to plead facts sufficient to properly
invoke the delayed discovery rule, the demurrer to this COA is sustained on the statute
of limitations ground and the Court need not consider the other grounds asserted by
EMC.

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Defendant EMC also demurs to the 1 COA to the extent it alleges EMC failed to give plaintiffs a permanent loan modification on the grounds that it is barred by the statute
of frauds. This demurrer is overruled since Paragraph 41 of the 2AC expressly alleges
the TPP was memorialized in writing. While it is true that the 2AC does not allege that
the TPP was offered pursuant to the federal HAMP program, this issue was not raised
in the moving papers and is not otherwise dispositive of this breach of contract claim in
this challenge to the sufficiency of the 2AC.

Breach of Covenant of Good Faith and Fair Dealing. Defendant demurs to the 2nd
COA on the grounds that it is barred by the four year statute of limitations and that
plaintiffs have failed to plead facts showing EMC frustrated the former’s contractual
rights. In opposition, plaintiffs again cite the delayed discovery rule as discussed in
Sanchez and further argue that EMC hindered plaintiffs’ performance of the deed of
trust and promissory note by inducing them to stop making payments.

Aside from plaintiffs’ failure to demonstrate that the delayed discovery applies to non-
tort claims and their failure to plead facts sufficient to properly invoke the delayed
discovery rule, the demurrer to the 2nd COA is sustained because the 2AC fails to
plead facts which show that EMC unfairly or improperly deprived plaintiffs of the
benefits of the underlying deed of trust and promissory note. As plaintiffs admit, they
were ready, willing and able to make their mortgage payments but in an attempt to
secure a loan modification, they voluntarily chose to stop making payments.
Regardless, even if plaintiffs had pled a valid breach of the implied covenant, the only
damages recoverable under this theory are contract damages. There is in California
no tort recovery under this COA except in the context of an insurer’s bad faith denial of
coverage.

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Promissory Estoppel. Defendant maintains that the 3 COA is flawed since it fails to
plead facts to establish all elements (including a clear, unambiguous “promise” and
some injury resulting from their reliance thereon) and since it is barred by the two year
statute of limitations.

The Court notes that promissory estoppel does not give rise to a claim for damages
but is simply an equitable basis on which an otherwise unenforceable promise may in
certain circumstances be enforced. (See, e.g., Avidity Partners, LLC v. State of
California (2013) 221 Cal.App.4th 1180.) As an equitable claim, there is no “statute of
limitations” defense to promissory estoppel and thus, EMC’s demurrer on that ground
must be overruled. Likewise, because the Court finds that plaintiffs have adequately
alleged a clear, unambiguous promise by defendants including EMC not to foreclose
on plaintiffs’ home while they were applying for a loan modification and at least some
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injury resulting from their reliance on the promise, the 3 COA is sufficiently pled to
withstand demurrer here. However, it remains unclear how defendant’s promise not to
foreclose can now be enforced since defendant U.S. Bank, as EMC’s successor,
foreclosed on the subject property and now apparently holds title to it.

Violation of Civil Code §2924 et seq. Defendant EMC’s demurrer to the 4th COA is
not entirely clear but appears to include arguments that plaintiffs have failed to the
foreclosure was invalid or any irregularity in the proceedings which was “prejudicial” to
them, and that a trustee’s deed which recites compliance with all requirements is
presumed valid and final and becoming conclusive where a bona fide purchaser
acquires the property for value. (The moving papers did not cite plaintiffs’ failure to
tender the amount of their debt as a basis for this demurrer and thus, the Court will not
consider the contention on this point made for the first time in EMC’s reply papers.)
Although the Court agrees that defendant U.S. Bank is not a bona fide purchaser for
value, the demurrer to this COA is sustained because it fails to plead facts establishing
that any of the alleged procedural irregularities resulted in prejudice to plaintiffs, who
assert throughout the 2AC they were at all times ready, willing and able to make their
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mortgage payments and/or to reinstate their loan. The 4 COA suggests plaintiffs
were “told” by defendants to miss loan payments but the facts actually pled in the 2AC
show plaintiffs themselves voluntarily chose to stop making payments in an attempt to
secure a modification. Thus, EMC’s recording a Notice of Default in August 2011
cannot itself be a proper basis for this COA. Additionally, the recording of the notice of
sale and eventual trustee’s sale in September 2012 is not properly attributable to EMC
since the 2AC admits in Paragraph 2 that defendant U.S. Bank alone did both of these
things. Coupled with plaintiff’s failure to plead this statutory COA with sufficient factual
particularity as required by California law (see, e.g., Covenant Care, Inc. v. Superior
Court (Inclan) (2004) 32 Cal.4th 771, 790 (citing Lopez v. Southern Cal. Rapid Trans.
Dist. (1985) 40 Cal.3d 780, 795)) especially as it relates to defendant EMC, the
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demurrer to the 4 COA is sustained.

Intentional and Negligent Misrepresentation. Defendant demurs because these
essentially identical COA are not alleged with the requisite factual specificity, because
there was no misrepresentation of fact but merely non-actionable opinions regarding
future events, and because both COA fail to plead facts showing EMC’s “knowledge of
falsity.”

The Court disagrees on each point and finds that these two COA are sufficiently pled.
Thus, the Court overrules the demurrer to both COA.

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Unfair Competition. Defendant EMC contends the 7 COA fails because plaintiffs
lack standing since they suffered no loss of property or money and because plaintiffs
failed to plead any “predicate unlawful act.”

This demurrer is overruled. Plaintiffs’ allegation in Paragraph 95 that they not only had
their credit destroyed but also lost their property is sufficient to establish an injury
which gives them standing to assert this COA. Additionally, since the Court has
overruled defendant EMC’s demurrer to the two misrepresentation COA, this Court
holds that the 2AC adequately identifies an unfair, unlawful or fraudulent business
practice which can support a claim under Business & Professions Code §17200.

Leave to amend is granted and plaintiff may file and serve a third amended complaint
no later than 6/27/2014. Although not required by court rule or statute, plaintiff is
directed to present a copy of this order when the amended complaint is
presented for filing.

Defendant EMC to respond within 10 days if the amended complaint is personally
served, 15 days if served by mail.

If defendant EMC intends to demur to the amended complaint or move to strike, it shall
determine if any other defendant who has appeared in this action also intends to
demur or move to strike. If so, all such defendants shall coordinate a single hearing
date for the demurrers and motions to strike. Additionally, a copy of the amended
complaint shall be included with the moving papers.
This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)