Filed 2/5/20 Quach v. Specialized Loan Servicing LLC CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SIXTH APPELLATE DISTRICT

SILVIE THU-HIAN QUACH et al.,

Plaintiffs and Appellants,

v.

SPECIALIZED LOAN SERVICING LLC et al.,

Defendants and Respondents.

H044641

(Santa Clara County

Super. Ct. No. 1-15-CV-275847)

Appellant Silvie Thu-Hian Quach defaulted on her home loan. She unsuccessfully sought a loan modification, and the property was sold in a trustee’s sale. Quach and her coappellant CHR Property, LLC (CHR), an entity controlled by Quach to which she had voluntarily transferred ownership of the property prior to its sale, sued her loan servicer, respondent Specialized Loan Servicing LLC (SLS), and her lender, respondent HSBC Bank USA, N.A. (HSBC), which acquired the property at the trustee’s sale. The suit included a variety of claims related to respondents’ alleged mishandling of her loan modification request and their wrongful conduct prior to the trustee’s sale. The trial court granted summary adjudication to respondents on all causes of action and entered judgment against appellants, a decision Quach and CHR now challenge on appeal. For the reasons explained below, we affirm the judgment.

I. FACTS AND PROCEDURAL BACKGROUND

Quach owned a home in San Jose, California (property). In 2007, Quach obtained a $847,000 loan from Countrywide Home Loans, the predecessor-in-interest to HSBC, memorialized by a note secured by a deed of trust encumbering the property. In early 2013, the deed of trust securing the loan was assigned to HSBC, “as trustee for the holders of the Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, Mortgage Pass-through Certificates Series 20007-OA4.” Respondent SLS was a mortgage servicer that serviced Quach’s loan on behalf of HSBC. Sometime between 2008 and 2013, Quach stopped making her monthly loan payments. In August 2014, Quach submitted a loan modification application to SLS.

Three months after submitting her loan modification application, Quach in November 2014 deeded title to the property to CHR, a limited liability company of which she was the sole member. Quach transferred the property to CHR for tax and personal reasons related to her divorce. After submitting her loan modification application in August 2014, Quach communicated with SLS about it over a period of several months. In the meantime, on January 12, 2015, on behalf of HSBC, the trustee recorded a notice of trustee’s sale of the property.

Following the notice of sale, in January 2015, Quach and CHR (collectively, plaintiffs) initiated this lawsuit against SLS. During the pendency of the litigation, the parties agreed to participate in mediation. Quach believed the parties would maintain the status quo during mediation, including CHR’s ownership of the property. Contrary to her expectations and without any mediation occurring, SLS instructed the trustee of the property to sell it. HSBC acquired the property at a trustee’s sale in November 2015.

In February 2016, following rounds of demurrer and motion practice, plaintiffs filed their operative complaint, the Third Amended Complaint (complaint) against SLS and HSBC (collectively, defendants). The complaint alleged seven causes of action: (1) violation of the California Homeowner Bill of Rights (the HBOR); (2) negligence (against SLS only), (3) fraud, (4) breach of contract, (5) breach of the implied covenant of good faith and fair dealing, (6) violation of California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.), and (7) quiet title (against HSBC only).

Defendants filed an answer, which generally denied the allegations and asserted various affirmative defenses. With respect to the first cause of action, defendants asserted that they had cured any HBOR violation under the HBOR’s safe harbor provision (Civ. Code, § 2924.12, subd. (c) ), because defendants in October 2015 had rescinded the allegedly violative notice before proceeding with the trustee’s sale in November 2015. Defendants asserted the affirmative defense of litigation privilege to the third, fourth, and fifth causes of action.

In June 2016, defendants moved for summary judgment or, in the alternative, summary adjudication of each cause of action. Defendants’ motion was accompanied by two declarations, exhibits, and a separate statement of undisputed facts. Plaintiffs filed an opposition that included two declarations, exhibits, and a separate statement of disputed and undisputed facts. We discuss the evidence submitted by the parties in further detail below.

In a written order filed in September 2016, the trial court granted defendants’ motion for summary adjudication of all seven causes of action. The trial court entered judgment on November 16, 2016, and Quach timely filed a notice of appeal.

Although the notice of appeal listed only Quach as the appealing party, it attached the judgment against both Quach and CHR. Appellants’ briefing raises arguments on behalf of Quach and CHR. Respondents in turn address in this court the merits of these contentions and assert no objection to the inclusion of claims related to CHR. “[I]t is and has been the law of this state that notices of appeal are to be liberally construed so as to protect the right of appeal if it is reasonably clear what appellant was trying to appeal from, and where the respondent could not possibly have been misled or prejudiced.” (Luz v. Lopes (1960) 55 Cal.2d 54, 59.) Because it is clear that the appeal involves arguments related to Quach and CHR and respondents have not asserted any prejudice with respect to CHR’s inclusion, we construe the notice of appeal to encompass both Quach and CHR. (See Cal. Rules of Court, rule 8.100(a)(2).)

II. DISCUSSION

Quach and CHR contend we should reverse the trial court’s judgment on several grounds. They claim the trial court erred in granting summary adjudication of four causes of action: violation of the HBOR (first cause of action), negligence (second cause of action), breach of agreement to mediate in good faith (fourth cause of action), and breach of the implied covenant of good faith and fair dealing (fifth cause of action).

A. General Principles of Summary Judgment and Appellate Review
B.
The purpose of summary judgment is to “determine whether, despite their allegations, trial is in fact necessary to resolve [the parties’] dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) “A defendant moving for summary judgment has the burden of showing that a cause of action lacks merit because one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar, supra, 25 Cal.4th at p. 850.)” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945 (Jones).)

We review de novo the trial court’s decision granting summary judgment and its ruling on a motion for summary adjudication. (Samara v. Matar (2018) 5 Cal.5th 322, 338 [summary judgment]; Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273 [summary adjudication].) In conducting our independent review, we “apply the same three-step analysis as the trial court: first we ‘identify the issues framed by the pleadings;’ next we ‘determine whether the moving party’s showing has satisfied his burden of proof and justifies a judgment in movant’s favor;’ and finally we ‘determine whether the opposition demonstrates the existence of a triable issue of material fact.’ [Citations.] In doing so, we liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Pipitone v. Williams (2016) 244 Cal.App.4th 1437, 1449 (Pipitone).)

The first step of the summary judgment analysis is both defined and limited by the pleadings, which “ ‘set the boundaries of the issues to be resolved at summary judgment.’ ” (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250 (Conroy).) “A moving party seeking summary judgment or adjudication is not required to go beyond the allegations of the pleading, with respect to new theories that could have been pled, but for which no motion to amend or supplement the pleading was brought, prior to the hearing on the dispositive motion.” (Jacobs v. Coldwell Banker Residential Brokerage Co. (2017) 14 Cal.App.5th 438, 444.) Because the pleadings define the scope of summary judgment, “ ‘[a] party may not oppose a summary judgment motion based on a claim, theory, or defense that is not alleged in the pleadings,’ and ‘[e]vidence offered on an unpleaded claim, theory, or defense is irrelevant because it is outside the scope of the pleadings.’ ” (Ibid.)

In light of these principles, a party opposing a summary judgment motion may not expand the issues or theories of liability beyond those alleged in the complaint. “ ‘The burden of a defendant moving for summary judgment only requires that he or she negate plaintiff’s theories of liability as alleged in the complaint. A “moving party need not ‘. . . refute liability on some theoretical possibility not included in the pleadings.’ [Citations.]” . . . “ ‘[A] motion for summary judgment must be directed to the issues raised by the pleadings. The [papers] filed in response to a defendant’s motion for summary judgment may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings.’ ” ’ ” (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 332–333.)

In the second step of our review, we examine the moving party’s evidence to determine whether it has satisfied its burden of production. (Pipitone, supra, 244 Cal.App.4th at p. 1449.) “Typically, to meet this burden, a defendant moving for summary judgment can either negate an element of the cause of action or demonstrate a complete defense to plaintiff’s claim. [Citation.] Only if the defendant meets its initial burden does the burden shift to the plaintiff to show a triable issue exists.” (Jones v. Awad (2019) 39 Cal.App.5th 1200, 1207.) “A prima facie showing is one that is sufficient to support the position of the party in question.” (Aguilar, supra, 25 Cal.4th at p. 851.)

If the moving party has satisfied its prima facie showing, in the third step of the summary judgment analysis we consider whether the opponents of a summary judgment motion (here, Quach and CHR) have raised a triable issue of material fact. Such an issue “exists ‘if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.’ ” (Jones, supra, 230 Cal.App.4th at p. 945.) “ ‘The plaintiff . . . may not rely upon the mere allegations or denials’ of his ‘pleadings to show that a triable issue of material fact exists but, instead,’ must ‘set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.’ (Code Civ. Proc., § 437c, subd. (o)(2).)” (Aguilar, supra, 25 Cal.4th at p. 849.)

With these principles in mind, we consider appellants’ claims that the trial court erred in granting summary adjudication of five of the causes of action alleged in the complaint.

C. Violation of the Homeowner Bill of Rights (HBOR) (First Cause of Action)
D.
1. Relevant HBOR Provisions
2.
The HBOR was enacted in 2012, “while California was ‘still reeling from the economic impacts of a wave of residential property foreclosures that began in 2007[.]’ [T]he legislation sought to ‘modify[ ] the foreclosure process to ensure that borrowers who may qualify for a foreclosure alternative are considered for, and have a meaningful opportunity to obtain, available loss mitigation options.’ (Stats. 2012, ch. 87, § 1, subds. (a), (b)). Much of the HBOR contains procedures to help borrowers obtain alternatives to foreclosure, which also are designed ‘to ensure that the current crisis is not worsened by unnecessarily adding foreclosed properties to the market when an alternative to foreclosure may be available.’ ” (Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 157.) The HBOR went into effect in January 2013. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86, fn. 14 (Lueras).)

In the complaint’s first cause of action, Quach and CHR allege defendants violated sections 2924.18, subdivision (a), and 2923.6, subdivisions (c) and (d), of the HBOR by illegally recording the January 2015 notice of trustee’s sale while defendants were still negotiating with Quach over the terms of a possible loan modification and prior to providing Quach with a written determination regarding her eligibility for such a modification or allowing the applicable time for an appeal of such a determination to expire. Although the complaint does not use the term, this practice is sometimes referred to as “dual tracking.” The “HBOR prohibits ‘dual tracking,’ which occurs when a bank forecloses on a loan while negotiating with the borrower to avoid foreclosure. (§ 2923.6.)” (Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272.)

At the time of the allegedly unlawful recording in January 2015, section 2924.18, subdivision (a), provided that if a borrower submitted a “complete application for a first lien loan modification,” a notice of sale shall not be recorded “while the complete first lien modification application is pending, and until the borrower has been provided with a written determination by the mortgage servicer regarding that borrower’s eligibility for the requested loan modification.” (Former § 2924.18, subd. (a), added by Stats. 2012, ch. 86 (Assem. Bill No. 278), § 21.) Section 2923.6, subdivisions (c) and (d), similarly provided that a notice of sale could not be recorded while a complete application was pending and until the loan servicer made a written determination that the borrower was not eligible for a loan modification, and the applicable time for borrower to appeal that determination under the statute expired. (Former § 2923.6, subds. (c) & (d), added by Stats. 2012, ch. 86 (Assem. Bill No. 278), § 7; see also Schmidt v. Citibank, N.A. (2018) 28 Cal.App.5th 1109, 1124 (Schmidt) [noting that former section 2923.6 “prohibited the recording of a notice of default or notice of sale (or the conducting of a trustee’s sale) during the pendency of a first lien loan modification application, and set forth a number of requirements that had to be met before a notice of default or notice of sale could be recorded. (See former § 2923.6, subds. (c)–(f).)”].)

In the time period at issue in this appeal, the HBOR also provided a safe harbor that allowed defendants to remedy a purported defect prior to the trustee’s sale. (See Schmidt, supra, 28 Cal.App.5th at p. 1115 [affirming summary judgment and observing “[s]ection 2924.12, subdivision (c), provides a safe harbor by encouraging the curing of violations,” and holding plaintiffs could not maintain an unfair competition claim premised on alleged HBOR violations that had been cured].) Section 2924.12, subdivision (c), upon which defendants relied as an affirmative defense to the first cause of action, provided, “A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not be liable for any violation that it has corrected and remedied prior to the recordation of a trustee’s deed upon sale, or that has been corrected and remedied by third parties working on its behalf prior to the recordation of a trustee’s deed upon sale.” (Former § 2924.12, subd. (c), added by Stats. 2012, ch. 87 (Sen. Bill No. 900), § 16 & amended by Stats. 2014, ch. 401 (Assem. Bill No. 2763), § 5.)

In their motion for summary judgment, defendants presented evidence that they cured any defect arising out of the January 2015 notice by sending Quach a letter dated February 6, 2015, denying her application for a loan modification. In October 2015, the trustee rescinded the January 2015 notice and recorded a new notice of the trustee’s sale.

On appeal, Quach and CHR contend the trial court erred in granting summary adjudication of this cause of action because they raised a triable issue of material fact as to whether Quach received the February 6, 2015 denial letter and because the bank foreclosed on the loan while Quach’s subsequent loan modification applications remained pending, in violation of section 2924.18, subdivision (a). Respondents counter that the trial court properly granted summary adjudication because Quach’s evidence about her asserted failure to receive the denial letter was insufficient to create a triable issue of material fact, and the first cause of action contained no allegations related to additional loan modification applications.

To assess the merits of these arguments, we employ the familiar three-step summary judgment analysis, beginning with the issues framed by the pleadings. (Pipitone, supra, 244 Cal.App.4th at p. 1449.)

3. Allegations in the Complaint
4.
The complaint asserts Quach defaulted on the loan in 2013 and submitted a loan modification application in August 2014. The complaint does not describe any loan application made by Quach other than that of August 2014. While Quach was still communicating with SLS about her August 2014 loan modification application, a notice of trustee’s sale for the property was recorded in January 2015.

Quach and CHR allege defendants violated the HBOR, in particular Civil Code sections 2923.6, subdivision (c) and 2924.18, subdivision (a), by recording this notice of trustee’s sale while Quach’s loan modification application was pending without providing Quach with a written determination of her ineligibility for the modification and by failing to give her 30 days following the denial of the loan modification, in violation of section 2923.6, subdivision (d).

5. Defendants’ Evidence
6.
In their answer, defendants set forth an affirmative defense asserting they cured any HBOR violation by rescinding the January 2015 notice of trustee’s sale in October 2015 (§ 2424.12, subd. (c)). As the moving parties, defendants bore the initial burden of production of this affirmative defense to the HBOR claim. (Jones, supra, 230 Cal.App.4th at p. 945.)

In support, defendants submitted the declaration of SLS employee Michael Ward (Ward Declaration) that contained a number of facts drawn from records maintained by SLS. Quach had not made any payment on the loan in nearly eight years. On February 6, 2015, SLS sent a letter to Quach declining her application for a loan modification. SLS sent the letter to Quach’s post office box in San Jose, which was the mailing address to which SLS had sent other correspondence to Quach.

In the February 2015 letter, SLS detailed multiple options it had considered for Quach to prevent foreclosure and its reasons for rejecting them. For example, the letter noted that Quach’s loan was not eligible for the Home Affordable Modification Program because the current unpaid balance on her loan was higher than that program limit, and she failed to qualify for a standard repayment plan based on her monthly gross income. The letter further advised Quach of her right to request a review of the modification denial. Quach did not appeal the February 2015 denial of her request for a loan modification. On October 2, 2015, the trustee rescinded the January 2015 notice and recorded a new notice of trustee’s sale. The property was sold to HSBC in the trustee’s sale on November 24, 2015.

Based on the evidence submitted by defendants, we conclude they met their burden of production of the affirmative defense that they had cured any alleged violation of the HBOR caused by the notice of sale issued in January 2015. (§ 2924.12, subd. (c).) The burden therefore shifted to plaintiffs to produce admissible evidence of a material fact that would support a finding that defendants failed to cure the HBOR violation. (See Aguilar, supra, 25 Cal.4th at p. 850.)

7. Plaintiffs’ Evidence
8.
Plaintiffs did not dispute either the rescission of the January 2015 notice of trustee sale or the recording of the new notice of the trustee’s sale in October 2015. Plaintiffs also did not contest that Quach failed to appeal SLS’s decision to deny her loan modification application memorialized in the February 2015 letter sent by SLS to Quach. Instead, plaintiffs contended that Quach never received the February 2015 denial letter in the first place and asserted an additional HBOR violation not alleged in the complaint—namely that Quach submitted additional loan modification applications, which were not denied prior to foreclosure, in violation of section 2924.18, subdivision (a).

In support, plaintiffs submitted a declaration from Quach stating she had applied for “another loan modification” on January 10, 2015. Quach also stated she did not “recall” receiving the February 6, 2015 denial letter attached to the Ward Declaration; “nor do I have any idea to which of the multiple modification applications it purportedly relates to.” Elsewhere in her declaration, Quach stated she “never received a letter conclusively stating that my pending loan modification application had been denied” and asserted she “never received an official denial of the loan modification application I submitted in 2014.” Quach admitted that she had received another letter sent to her by SLS on December 31, 2014, at the post office box address to which SLS states it sent the February 2015 letter. Further, Quach sent a letter to SLS on September 17, 2014, in which she listed her mailing address as the post office box to which SLS sent the February 2015 letter.

In addition to Quach’s declaration, plaintiffs submitted excerpts from the deposition testimony of Loretta Poch, an SLS employee designated as its “person most knowledgeable,” in which Poch expressed some uncertainty about the number of loan modification applications Quach had submitted to SLS. When plaintiffs’ counsel posed a question that asked Poch to assume there were multiple applications, Poch responded she did not know which application the February 6, 2015 denial letter referenced.

9. Analysis
10.
Having carefully reviewed the record, we conclude that plaintiffs’ showing was insufficient to create a triable issue of material fact whether defendants committed the HBOR violation alleged in the first cause of action. As an initial matter, whether Quach actually received the February 2015 letter is not material to the violation alleged in the complaint.

In the time period relevant to the allegations in the complaint, section 2924.18, subdivision (a) provided that, once a borrower submitted a complete loan modification application, the mortgage servicer must “provide[]” to the borrower “a written determination by the mortgage servicer regarding that borrower’s eligibility for the requested loan modification.” Notably, the provision does not state that the loan servicer’s written determination must be provided to the borrower in a particular manner. The evidence showed that SLS sent a written letter to Quach at her address of record and, therefore, complied with the HBOR, by “provid[ing] [her] with a written determination by the mortgage servicer regarding [her] eligibility for the requested loan modification.” (§ 2924.18, subd. (a).) For these reasons, Quach’s statement that she did not receive the letter was insufficient to create a triable issue of material fact.

Turning to plaintiffs’ contention that there were triable issues of material fact going to whether Quach had submitted more than one loan modification application, we conclude that this evidence, too, was insufficient to preclude summary adjudication. It is undisputed that the complaint did not assert that Quach submitted multiple loan applications. Instead, the complaint referenced only her loan modification application submitted in August 2014.

Rather than pointing to any allegations in the complaint, plaintiffs rely on statements made during the discovery phase of the litigation, in particular questions posed to or statements made by counsel at a deposition, which plaintiffs contend put “SLS on notice Quach contended she had submitted multiple loan modification applications.” Plaintiffs argue “issues in a summary judgment proceeding are not always limited to the pleadings,” and a trial court may look beyond the pleadings so long as the moving party was not prejudiced.

We do not agree. Courts have uniformly held that the pleadings frame the pertinent issues on summary judgment and dictate the materiality of a fact. (Conroy, supra, 45 Cal.4th at p. 1250; Jacobs, supra, 14 Cal.App.5th at p. 444.; Kanovsky v. At Your Door Self Storage (2019) 42 Cal.App.5th 594, 601.) “We may not consider a new theory raised by a plaintiff in opposition to summary judgment, or on appeal from the granting of summary judgment, where that theory is not supported by the pleadings.” (Schmidt, supra, 28 Cal.App.5th at p. 1125.) “A summary judgment or summary adjudication motion that is otherwise sufficient ‘cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings; counterdeclarations are no substitute for amended pleadings.’ [Citation.] Thus, a plaintiff wishing ‘to rely upon unpleaded theories to defeat summary judgment’ must move to amend the complaint before the hearing.” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648 (Oakland Raiders).) It is undisputed plaintiffs made no such amendment.

Plaintiffs rely on Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, but that case does not assist them. Rather, Emerald Bay affirmed the long-standing principle that “[t]he pleadings establish the scope of an action and, absent an amendment to the pleadings, parties cannot introduce evidence about issues outside the pleadings.” (Id. at p. 1091.) The case does not support plaintiffs’ argument that a summary judgment proceeding may include issues beyond the pleadings as long as the moving party is not “misled.”

For these reasons, and based on our independent review of the record, we affirm the trial court’s grant of summary adjudication to defendants of plaintiffs’ first cause of action.

E. Negligence (Second Cause of Action)
F.
In the complaint’s second cause of action, Quach and CHR assert negligence claims against SLS. “ ‘To state a cause of action for negligence, a plaintiff must allege (1) the defendant owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach proximately caused the plaintiff’s damages or injuries.’ ” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1180 (Daniels).)

Plaintiffs allege SLS mishandled plaintiffs’ loan application by, among other acts, repeatedly requesting documents from plaintiffs that they had already submitted, providing plaintiffs with contradictory information, and failing to make a determination on plaintiffs’ completed loan modification application.

The trial court granted summary adjudication to defendants on both negligence claims but on separate grounds. The trial court concluded as a matter of law that SLS did not owe CHR a duty of care in its handling of Quach’s application for a loan modification. The trial court granted summary adjudication to defendants of Quach’s negligence claim because she failed to raise a triable issue of material fact that she had suffered any damages from their handling of her loan modification application.

As to the issues of duty and damages, the relevant evidence is undisputed. In November 2014, several months after Quach submitted her loan modification application in August 2014, Quach transferred the property by grant deed to CHR for personal reasons and recorded the deed to the property under CHR’s name. Quach remained the borrower on the note and deed of trust securing the loan. There is no evidence in the record that defendants had any contact with CHR in the context of Quach’s loan modification application, although defendants were aware at some point (it is not clear when) of the recorded grant deed and, on November 4, 2015, had the notice of trustee’s sale sent to both Quach and CHR pursuant to section 2924b.

In reviewing the trial court’s grant of summary adjudication to defendants, we begin with the first element of duty, which the trial court determined was dispositive of CHR’s negligence claim.

1. Duty
2.
Appellants argue SLS owed a duty of care to CHR in handling Quach’s request for a loan modification notwithstanding the lack of privity between CHR and SLS. In support of a finding of duty, appellants assert that SLS knew that CHR owned the property, and SLS “could foresee a wrongful foreclosure would harm CHR because its interest in the property would be wiped out.”

“[T]he threshold question in an action for negligence is whether the defendant owed the plaintiff a duty to use care.” (Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705, 715 (Summit Financial).) “ ‘Duty is a question of law for the court, to be reviewed de novo on appeal.’ ” (Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1142 (Kesner).) “Civil Code section 1714, subdivision (a) provides in relevant part: ‘Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself or herself.’ ” (Id. at pp. 1142–1143.) Despite this broad language, the “ ‘[r]ecognition of a duty to manage business affairs so as to prevent purely economic loss to third parties in their financial transactions is the exception, not the rule, in negligence law.’ ” (Summit Financial, at p. 715.)

In applying Civil Code section 1714 to determine the existence of a duty, the most important factor for courts to consider is whether the injury in question was foreseeable. (Kesner, supra, 1 Cal.5th at p. 1145.) Nevertheless, foreseeability standing alone is insufficient to impose liability for negligent conduct, and courts must consider other public policy considerations in imposing negligence liability in the absence of privity. (See Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 399, 406.) “The considerations most relevant in the ‘business context’ are set forth in Biakanja v. Irving (1958) 49 Cal.2d 647, 650.” (QDOS, Inc. v. Signature Financial, LLC (2017) 17 Cal.App.5th 990, 999 (QDOS).) This court applied the six-factor Biakanja test to conclude a lender owed a borrower a duty of care in processing the borrower’s loan modification requests. (Daniels, supra, 246 Cal.App.4th at p. 1183.)

“Biakanja set forth a list of factors that inform whether a duty of care exists between a plaintiff and defendant in the absence of privity: ‘the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.’ ” (Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 578.)

More recently, the California Supreme Court reaffirmed its precedent that liability in negligence for purely economic losses “is ‘the exception, not the rule’ under our precedents. [Citation.] And that holds true even though Civil Code section 1714 does not, by its terms, ‘distinguish among injuries to one’s person, one’s property or one’s financial interests.’ ” (Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 400.) The court reviewed a number of prior tort decisions in which it had found a duty of care for cases involving economic loss, summarizing them generally as cases in which “purely economic losses flow . . . from a financial transaction meant to benefit the plaintiff (and which is later botched by the defendant).” (Id. at p. 403.)

Applying the six-factor Biakanja test to the evidence, the trial court here concluded that CHR was a “third-party assignee of a borrower,” and the evidence “establishes that the transaction was intended to affect Quach, not a third party.” The trial court noted that when SLS agreed to review Quach’s request for a loan modification in August 2014, CHR did not even have an interest in the property and therefore SLS could not “foresee[] that the alleged mishandling of the loan modification would harm CHR.” It further concluded that “no overriding policy considerations support the imposition of a duty with respect” to a third party as opposed to a borrower.

Although we have considered the question independently, we agree with the trial court’s analysis. Regarding the first Biakanja factor, “the extent to which the transaction—the loan modification—was intended to affect appellants,” we conclude this factor weighs against finding a duty of care. (See Daniels, supra, 246 Cal.App.4th at p. 1182.) Unlike in Daniels, Quach—not CHR—was the borrower of the loan. Quach continued to hold the loan even after she deeded the property to CHR. The evidence clearly shows the loan modification was not intended to help CHR. The primary purpose of the transaction was to affect (and potentially benefit) Quach by assessing her eligibility and qualifications for options to avoid foreclosure through modifying her existing loan. Any impact on CHR, the owner of the property, “ ‘was collateral to the primary purpose’ ” of the loan modification transaction. (Summit Financial, supra, 27 Cal.4th at p. 715.)

Regarding the critical component of foreseeability addressed in three of the other Biakanja factors—“namely, the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, and the closeness of the connection between the defendant’s conduct and the injury suffered by the plaintiff,” there is no evidence that SLS did or could foresee that Quach would transfer her property interest to a limited liability company for personal reasons. (See QDOS, supra, 17 Cal.App.5th at p. 1001.) Plaintiffs similarly did not present admissible evidence that, following the transfer in November 2014, Quach informed SLS about the transfer in the course of her continuing communications with SLS regarding her loan modification request. (Ibid.) We are not persuaded that defendants’ mere knowledge that CHR had a property interest and that defendants had the statutorily required notice sent to CHR, without more, are sufficient to create a triable issue of material fact as to foreseeability.

The fourth factor is the “closeness of the connection” between SLS’s conduct CHR’s injury, which was loss of the property. (QDOS, supra, 17 Cal.App.5th at p. 1001.) This factor, too, weighs against finding a duty of care to CHR. Although CHR’s loss of the property resulted from the foreclosure sale initiated by defendants, the sale stemmed from Quach’s failure to make her payments on the loan. There is no evidence that defendants created or induced the default, that Quach qualified for a loan modification and defendants thwarted a modification she would otherwise have been eligible for, or, as in the case of Daniels, that defendants were “stringing [her] along with promises that a loan modification would be forthcoming.” (Daniels, supra, 246 Cal.App.4th at p. 1183.)

Finally, turning to the moral blame factor and policy of preventing future harm, we also conclude they do not weigh in favor of imposing a duty of care by SLS to CHR. Plaintiffs do not appear to raise any discernable policy arguments supporting imposing a duty on a loan servicer to a non-borrower business entity that was created by the borrower for personal reasons. CHR cites no statute demonstrating a public policy of preventing future harm to third parties in the loan modification context. (Compare Daniels, supra, 246 Cal.App.4th at p. 1183.)

CHR relies primarily on Munger v. Moore (1970) 11 Cal.App.3d 1, but that decision did not involve a cause of action for negligence and did not address the threshold element of duty. Rather, in Munger, the Court of Appeal “announced the rule that wrongful foreclosure is a tort” and that “the measure of damages is the familiar measure of tort damages: all proximately caused damages.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 409.) This rule has no obvious relevance to CHR’s negligence cause of action, and Munger does not assist its argument here. Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270 similarly does not support appellants’ contention that SLS owed a duty to CHR and that CHR can pursue a claim for damages as the decision does not address or analyze the issue of a legal duty. (See id. at p. 280.)

For these reasons, we conclude that SLS owed no duty of care to CHR, and the trial court therefore properly granted summary adjudication of CHR’s negligence action.

3. Damages
4.
We assume, as do the parties, that SLS owed Quach, the borrower, a duty of due care in its consideration of her loan modification application. (See Daniels, supra, 246 Cal.App.4th 1150, 1183.) The trial court granted summary adjudication to SLS of Quach’s negligence claim on the ground that Quach failed to show any triable issue as to her damages. When assessing whether the trial court thereby erred, we begin with the allegations in the complaint.

The complaint asserts that SLS breached its duty of care to Quach and “directly and proximately caused harm” to her by “not allowing Plaintiffs to timely receive a loan modification, preventing Plaintiffs from being considered for other alternatives to foreclosure, forcing Plaintiffs to file the instant action to prevent the wrongful foreclosure of the Property, by forcing Plaintiff to incur thousands of dollars in attorney fees and by preventing Plaintiffs from selling the property and cashing out their equity.”

The trial court granted summary adjudication to defendants on Quach’s negligence claim because the damages alleged in the complaint were suffered only by CHR, the property owner, and not by Quach. In the absence of any allegations in the complaint related to damages suffered by Quach, the trial court found there was no triable issue of fact related to her damages. Regarding her argument that she retained a possessory interest in the property, the trial court found that Quach had transferred all her rights to the property to CHR via grant deed, and she raised no triable issue of fact that she retained any rights to the property. The trial court further rejected Quach’s argument that the mishandling of the loan modification application damaged her credit score because the complaint did not allege this injury.

On appeal, Quach does not renew these arguments. Instead, she cites other injuries she allegedly suffered as a consequence of defendants’ alleged negligence, including emotional distress, arguing it was foreseeable she and her parents, who lived in the home, would “face eviction with no place to live.” However, as defendants correctly point out, Quach did not allege these injuries in the complaint. As with her claim in the trial court that her credit score was adversely affected, Quach could not avoid summary adjudication based on asserted injuries not described in the pleadings. (See Oakland Raiders, supra, 131 Cal.App.4th at p. 648.)

Quach also asserts that she incurred damages in the form of attorney’s fees, and this alleged injury is sufficient to create a triable issue of material fact. Unlike her claims related to emotional distress and her credit score, the complaint does seek recovery of damages based on her payment of attorney’s fees. However, there is no legal basis for Quach to recover attorney’s fees for her negligence claim. “Under the American rule, each party to a lawsuit ordinarily pays its own attorney fees.” (See Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751.) In her opening brief in this court, Quach cites no relevant exception to this basic principle. Therefore, whether Quach incurred attorney’s fees is not material to her cause of action for negligence.

For these reasons, the trial court properly granted summary adjudication to defendants of Quach’s negligence claim.

With respect to the negligence cause of action, appellants generally contend that the trial court’s findings of duty as to Quach but no damages on the one hand and no duty as to CHR on the other is flawed because it “rests on a contradiction.” However, this seemingly contradictory result flows not from any error by the trial court but from Quach’s voluntary decision to transfer her property interest to CHR. By this action, Quach introduced a new entity to which defendants did not owe any duty of care, and which ultimately suffered the injuries alleged in the negligence cause of action.

For these reasons, we conclude the trial court properly granted summary adjudication to defendants of both CHR’s and Quach’s negligence claims.

G. Fraud and Contract Claims (Third, Fourth, and Fifth Causes of Action)
H.
Appellants argue the trial court erred when it concluded the absolute litigation privilege protects the defendants’ actions that form the basis of the breach of contract and breach of the implied covenant of good faith and fair dealing claims alleged in the fourth and fifth causes of action (contract claims). Respondents counter that appellants have forfeited their claim of error by failing to raise it in the trial court and assert that the new argument lacks substantive merit. To address forfeiture, we summarize the claims and theories of liability alleged in the complaint relating to the failure to mediate, the briefing in the trial court, and the claims on appeal.

1. Allegations in the Complaint
2.
The complaint alleges that, on September 8, 2015, plaintiffs and SLS appeared before the trial court for a case management conference during which the parties “agreed to participation in mediation in good faith and the Court subsequently entered an order reflecting the same.” The complaint attaches a copy of a September 8, 2015 minute order, which indicates the trial court referred the parties to alternative dispute resolution (specifically mediation) “per agreement of the parties.” (Boldface and italics omitted.) Based on this agreement, Quach “reasonably believed” that SLS would “maintain the status quo.” Despite this agreement to mediate, SLS proceeded with the trustee’s sale in November 2015 without having engaged in mediation.

The complaint alleges three causes of action based on SLS’s failure to engage in mediation: fraud, breach of contract, and breach of the implied covenant of good faith and fair dealing. The fraud claim centers on the false representation by SLS that it would participate in mediation in good faith. The breach of contract claim alleges SLS breached the agreement to mediate in good faith and implied promise to refrain from foreclosure pending completion of mediation by foreclosing on the property.

3. Defendants’ Evidence
4.
Defendants moved for summary adjudication on the basis of its affirmative defense that the contract claims were barred by the litigation privilege set forth in section 47, subdivision (b). (§ 437c, subd. (o)(2).)

“Section 47 establishes a privilege that bars liability in tort for the making of certain statements. Pursuant to section 47(b), the privilege bars a civil action for damages for communications made ‘[i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to [statutes governing writs of mandate],’ with certain statutory exceptions that do not apply to the present case. The privilege established by this subdivision often is referred to as an ‘absolute’ privilege, and it bars all tort causes of action except a claim for malicious prosecution.” (Hagberg v. California Federal Bank (2004) 32 Cal.4th 350, 360.) The litigation privilege “applies to any communication ‘ “(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that [has] some connection or logical relation to the action.” ’ [Citation.] The privilege immunizes defendants in any tort action, with the exception of malicious prosecution.” (Olsen v. Harbison (2010) 191 Cal.App.4th 325, 336–337.)

In a supporting declaration, defendants admitted that the “parties were ordered to mediate their dispute under the Court’s Alternative Dispute Resolution” and that no mediation had taken place. Defendants also submitted a copy of the September 8, 2015 minute order. Defendants did not dispute that the foreclosure sale occurred and submitted evidence that the sale proceeded “as scheduled” in November 2015.

5. Plaintiffs’ Evidence
6.
In opposition, plaintiffs did not present any evidence disputing the facts submitted by defendants underlying their assertion of the litigation privilege or contend that the defendants’ actions were unprotected by the privilege. Instead, plaintiffs argued the trial court should decline to apply the privilege for equitable reasons. Plaintiffs’ opposition briefing focused on characterizing defendants’ conduct as “despicable” and requesting the trial court to either “determine if it will allow blatant misrepresentations made in open court to be protected under the litigation privilege” or, if the privilege applies, to “carve out an exception” based on equitable principles.

7. Trial Court’s Ruling
8.
In its order granting summary adjudication of the mediation-related claims, the trial court addressed together plaintiffs’ causes of action for fraud, breach of contract, and breach of the implied covenant of good faith and fair dealing. The trial court concluded that defendants established all necessary elements of the litigation privilege. The trial court found that defendants’ unrebutted evidence showed that the alleged agreement was “a communication made in a judicial proceeding to achieve the objects of the litigation, which has some connection or logical relation to the action” and that plaintiffs made “no attempt” to establish a triable issue of material fact as to the defense. Given the “absolute” nature of the privilege, the trial court rejected plaintiffs’ argument that it should carve out an exception based on equitable considerations.

9. Analysis
10.
On appeal, appellants argue in their opening brief that the contract claims in the fourth and fifth causes of action are not based on privileged statements but rather stem from defendants’ “decision to go forward with the foreclosure sale.” Appellants tacitly concede the merits of the trial court’s summary adjudication of the fraud cause of action (the third cause of action), stating the trial court “may have been right” to conclude that claim was barred by the absolute litigation privilege because the claim “is based on a representation at a court hearing.” Therefore, we conclude appellants have abandoned any claim of error with respect to their third cause of action for fraud.

Appellants nonetheless contend the trial court erred in granting summary adjudication of the contract claims in the fourth and fifth causes of action because respondents’ liability was also based on the “decision to go forward with the foreclosure sale” to which no privilege attaches. Respondents assert plaintiffs have forfeited this argument by failing to raise it in the trial court. In their reply brief, appellants do not respond to respondents’ forfeiture argument.

“An appellate court ‘generally will not consider an argument “raised in an appeal from a grant of summary judgment . . . if it was not raised below.” ’ ” (Donohue v. AMN Services, LLC (2018) 29 Cal.App.5th 1068, 1093, review granted and order directing depublication den. Mar. 27, 2019; Jackpot Harvesting Co., Inc. v. Superior Court (2018) 26 Cal.App.5th 125, 155.) We conclude that, by not raising it below, appellants forfeited their contention that the litigation privilege does not apply to the contract claims because they are not premised on the privileged statements. Furthermore, in addition to having forfeited the argument by failing to make it in the trial court, appellants have also abandoned the claim on appeal by declining in their reply brief to address the issue of forfeiture raised by respondents. (See The Police Retirement System of St. Louis v. Page (2018) 22 Cal.App.5th 336, 346, fn. 3.)

Other than this forfeited argument, appellants do not advance any claim of error with respect to their contract claims. Therefore, we affirm the trial court’s grant of summary adjudication to defendants of the fourth and fifth causes of action.

III. DISPOSITION

We direct the trial court to issue a corrected judgment that accurately reflects that the judgment pertains to the third amended complaint. In all other respects, the judgment is affirmed. In the interests of justice, each party is to bear its own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

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Danner, J.

WE CONCUR:

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Elia, Acting, P.J.

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Grover, J.

H044641

Quach v. Specialized Loan Servicing LLC et al.