18-CIV-02202 ROGELIO C. CORTEZ, ET AL. VS. BAYVIEW LOAN SERVICING, LLC, ET AL.

ROGELIO C. CORTEZ BAYVIEW LOAN SERVICING, LLC
MARK W. LAPHAM AUSTIN R. HENDERSON

HEARING ON DEMURRER TENTATIVE RULING:

Defendants Bayview Loan Servicing, LLC’s, Mortgage Electronic Systems, Inc.’s (MERS), and the Bank of New York Mellon’s (BONY) Demurrer to Plaintiffs Rogelio and Elenita Cortez’s 51-18 Complaint is SUSTAINED, for the reasons set forth below.

Defendants argue Plaintiffs lack standing to assert all of the asserted claims because the Property at issue is not “owner-occupied.” See Civ. Code § 2924.15 (providing that Civ. Code § 2924.11, and other HBOR statutes, apply only to “owner-occupied residential real property … ‘owneroccupied’ means that the property is the principal residence of the borrower …” The Deed of Trust (DOT) here identifies the “Borrower” as both Rogelio and Elenita Cortez. Plaintiffs apparently have owned several properties that have been the subject of foreclosure proceedings, and litigation. They currently have at least two pending wrongful foreclosure cases in this Court, involving separate properties, in which they have stated, under penalty of perjury, the properties are “owner-occupied.” (Compare the verified Complaint in Rogelio Cortez et. al. v. New Penn Financial LLC, Case No. 17CIV04209, involving property at 169 Parkview Ave., Daly City, Ca. [“Plaintiffs are the owners of an owner-occupied, single family residence located at 169 Parkview Avenue, Daly City…”], with the verified Complaint in this case [“Plaintiffs are the owners of an owner-occupied, single family residence located at 29 San Felipe Avenue, South SF, Ca.”]). In their Opposition (not filed under oath), Plaintiffs state that Rogelio Cortez lives in the Daly City property, whereas Elenita Cortez lives in the South SF property. Given the Complaint’s allegation that the Property is owner-occupied, which the Court at this stage must assume is a truthful allegation, this issue cannot be resolved on Demurrer. If the parties engage in discovery at some point, however, Defendants may delve into this issue further, whether via sworn deposition testimony or otherwise. See Pen. Code § 118 (describing elements of a perjury charge).

As to the First, Second, and Third Causes of Action for wrongful foreclosure, declaratory relief, and quiet title, the Demurrer is SUSTAINED WITH LEAVE TO AMEND. As set forth in Defendants’ Request for Judicial Notice (RJN), Ex. A, the 2005 DOT appointed MERS as the DOT’s beneficiary and nominee “for the Lender and Lender’s successors and assigns.” Plaintiffs contend MERS’ subsequent (April 2012) assignment of the beneficial interest in the DOT to BONY (RJN, Ex. B) is “void” because in 2005, First Allied sold the loan to Countrywide, “the Seller and Sponsor in the securitization transaction identified as the CWALT Inc. Alternative Loan Trust 2005-56.” See Complaint, ¶¶49-50. Plaintiffs’ argument conflicts with the express language of the DOT, cited above. See Herrera v. Federal Nat. Mortg. Assn. (2012) 205 Cal.App.4th 1495, 1506. The alleged 2005 sale of the loan does not change the fact that MERS was the DOT’s designated beneficiary and nominee, and remained so for the alleged new owner of the Note. Thus, after 2005, MERS still had the authority to assign interest in the DOT to BONY, as trustee for the CWALT. See Siliga v. Mortgage Elec. Registration Sys, Inc. (2013) 219 Cal.App.4th 75, 83 (trustor/borrower who agreed under a DOT that MERS has the authority to exercise all of the rights and interests of the lender is precluded from maintaining a cause of action based on the allegation that MERS has no authority to exercise those rights). For failure to allege facts demonstrating that MERS’ assignment of beneficial interest in the DOT to BONY was “void”/invalid, the Complaint fails to state a claim for relief. Since the First, Second, and Third Causes of Action all rely on these allegations and legal theory, they fail to state a claim for relief.

As to the Fourth Cause of Action for violation of Civ. Code § 2923.6 et. seq., the Demurrer is SUSTAINED WITH LEAVE TO AMEND. § 2923.6 was repealed, effectively Jan. 1, 2018. Plaintiffs are granted leave to amend to allege, if they can, a proper claim under Civ. Code § 2924.11 (see discussion above regarding “owner-occupied” properties), which they contend is the successor statute.

As to the Fifth Cause of Action for negligence and the Sixth Cause of Action for negligent infliction of emotional distress, the Demurrer is SUSTAINED WITH LEAVE TO AMEND. Any negligence claim requires the existence of a duty of care owed by Defendants to Plaintiff(s). Eddy v. Sharp (1988) 199 Cal.App.3d 858, 864. Although a split in authority exists, the weight of authority holds that a financial institution, whether a lender or loan servicer, owes no duty of care to a borrower where the institution’s involvement in the loan transaction does not exceed the scope of its role as a lender or servicer of the loan. Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095-1097; Shupe v. Nationstar Mortg. LLC (E.D. Cal. 2017) 231 F.Supp.3d 597, 605. Subsequent case law has clarified that merely agreeing to accept/consider a loan modification application does not alter this rule. Ordinarily, “a lender does not owe a borrower or third party any duties beyond those expressed in the loan agreement, except those imposed due to special circumstance.” Resolution Trust Corp. v. BVS Dev. (9th Cir. 1994) 42 F.3d 1206, 1214 (citing Nymark). No special circumstances are alleged here. Bayview, BONY and Plaintiffs are not alleged to have any relationship other than Bayview’s alleged role as the loan servicer, and BONY’s role as the purported lender/beneficiary of the DOT. Plaintiffs allege no special circumstances that might change the nature of this relationship from that of an arm’s length lender/loan servicer relationship, where Defendants’ duties are prescribed by contract and statute. For failure to allege a duty of care, the Complaint fails to state a cause of action for negligence or negligent infliction of emotional distress.

As to the Seventh Cause of Action for unfair business practices under Bus. & Prof. Code § 17200, the Demurrer is SUSTAINED WITH LEAVE TO AMEND. This claim fails because the predicate causes of action, for the reasons stated above, fail to state a claim for relief. Further, to have standing to bring a claim under the Unfair Competition Law (UCL), a litigant must have suffered injury in fact and “lost money or property” as a result of the unfair competition. While Plaintiffs allege various forms of harm from Defendants’ alleged acts (see Complaint, ¶104), none of the alleged damage constitutes lost money or property for purposes of a § 17200 claim. Thus, Plaintiffs fail to allege facts providing standing to assert a UCL claim. Defendants’ RJN is GRANTED as to Exhs. A-D (recorded documents) (Evid. Code § 452(c)) and Exhs. E, F, G (court documents) (Evid. Code § 452(d)). The RJN is DENIED as to Ex. H (letter). As to recorded and court documents, judicial notice is taken as to their filing/recording dates, contents, and the effect of legally operative language where applicable, but not the truth of assertions/allegations therein.

As to at least some of the asserted claims, Plaintiffs’ ability to amend to state a claim for relief appears doubtful. The Court nonetheless grants leave to amend as to all asserted claims in light of the Court’s liberal stance in this regard, and the fact the Complaint has not previously been amended.

If the tentative ruling is uncontested, it shall become the order of the Court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required as the tentative ruling affords sufficient notice to the parties.