Case Name: Mayher v. Rabobank N.A., et al.
Case No.: 18CV332605

This is an action for wrongful foreclosure. According to the allegations of the second amended complaint (“SAC”), on June 25, 2002, plaintiff Timothy J. Mayher (“Plaintiff”) entered into a loan agreement with Community Bank of Central Calfironia for $250,000, secured by a deed of trust on property at 17446 Belletto Dr. in Morgan Hill, recorded with Santa Clara County Recorder’s Office as document number 16361096. (See SAC, ¶ 18; see also Def.’s request for judicial notice, exh. 4,.) Despite the deed of trust plainly listing the Belletto Dr. property, and not listing a different property, Plaintiff mistakenly thought that the loan was secured by a different property in San Juan Bautista. (See SAC, ¶ 18.) From 2002 to 2009, Plaintiff made all payments on the San Juan Bautista property, but nevertheless, in 2009, the San Juan Bautista property was foreclosed upon. (See SAC, ¶¶ 19-20.) Plaintiff never separately paid on the loan because he thought it was included in the payment he made for the San Juan Bautista property. (See SAC, ¶ 19.) On June 19, 2017, a notice of default was recorded on the property, stating that Plaintiff was behind on the loan in the amount of $98,928.94. (See SAC, ¶ 22.) On March 29, 2018, a notice of trustee’s sale was recorded on the subject property, with a sale date of April 27, 2018, indicating that the amount of unpaid balance and other charges was estimated at $367,769.84. (See Def.’s request for judicial notice, exh. 15.) Plaintiff contacted defendant Rabobank N.A. (“Rabobank”), who eventually allowed him to apply for a loan modification. (See SAC, ¶ 23.) On May 21, 2018, Rabobank sent a letter to Plaintiff, acknowledging receipt of his application for modification, submitted for consideration of possible foreclosure/collection alternatives. (See SAC, ¶ 24; see also initial complaint, exh. A.) The Rabobank letter indicated that: an account manager would be assigned as a single point of contact; the account manager would review Plaintiff’s financial situation within 30 days; the account manager would determine whether it is possible to modify the loan to a more affordable payment and/or determine the best course of action to address Plaintiff’s delinquency; the account manager will contact Plaintiff in writing to provide a decision; and, Rabobank will not refer the loan to foreclosure during the evaluation period or during the time for acceptance of any offer. (See initial complaint, exh. A.) In a letter dated June 28, 2018, Rabobank informed Plaintiff that he did not qualify for a loan modification due to his income. (See SAC, ¶ 25.) Plaintiff felt that he had sufficient income to qualify for a loan modification, so he contacted Rabobank, who requested additional information. (See SAC, ¶ 25.) On July 10, 2018, Plaintiff provided two years of taxes. (See SAC, ¶ 26, see also initial complaint, exh. B.) Rabobank did not respond to the July 10, 2018 email and instead moved forward with a foreclosure sale on July 17, 2018. (See SAC, ¶ 27.) Plaintiff attended the trustee sale with the letter from Rabobank, and the trustee, WT Capital Lender Services halted the sale for 45 minutes so the trustee could speak to Rabobank about whether to go forward with the sale. (See SAC, ¶ 28.) The trustee then showed the letter to the two bidders at the sale. (See SAC, ¶ 29.) One bidder decided to not bid on the property and the other, defendant Breckenridge Property Fund 2016, LLC (“Breckenridge”), bid on the property and paid $720,000 for a property worth approximately $1,500,000. (See SAC, ¶ 29.) On October 8, 2018, Plaintiff filed the SAC in the United States District Court, Northern District of California, asserting causes of action against defendants Rabobank and Breckenridge for:

1) Promissory estoppel (against Rabobank);
2) Negligence (against Rabobank);
3) Wrongful foreclosure (against Rabobank);
4) Unfair business practices (against Rabobank);
5) Cancellation of deed (against Breckenridge); and,
6) Quiet title (against Breckenridge).

On October 22, 2018, the parties stipulated to the case being remanded to state court. On November 27, 2018, the stipulation was filed with the Court. Defendants each separately demur to the SAC.

Breckenridge’s demurrer

Breckenridge demurs to the two causes of action against it on the grounds that the SAC does not allege tender of the full amount of the loan; and, despite the SAC’s conclusory allegations, Breckenridge is a bona fide purchaser for value of the subject property.

Breckenridge is correct that “a plaintiff seeking to set aside an irregular sale must allege tender of the full amount of the loan to maintain any cause of action that either is based on the wrongful foreclosure allegations or seeks redress from that foreclosure.” (Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516, 525; see also Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109 (affirming dismissal of causes of action because “appellants are required to allege tender of the amount of United’s secured indebtedness in order to maintain any cause of action for irregularity in the sale procedure”); see also Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 512 (stating that “a debtor cannot set aside the foreclosure based on irregularities in the sale without also alleging tender of the amount of the secured debt”); see also Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 580 (stating “plaintiffs’ action must fail because their tender of payment was not an unconditional offer to pay all of the sums necessary to cure the default”).) Here, the SAC neither alleges tender, nor that Plaintiff is excused from the tender requirement, much less facts demonstrating such excuse from the tender requirement. Moreover, Plaintiff utterly fails to address the issue of tender in opposition. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (stating that “Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636; see also Hendy v. Losse (1991) 54 Cal.3d 723, 742 (stating that “the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”).) As it appears that Plaintiff cannot amend the SAC to state facts sufficient to state a viable cause of action against Breckenridge, Breckenridge’s demurrer to the SAC is SUSTAINED without leave to amend on this basis.

Rabobank’s demurrer

First cause of action for promissory estoppel

The first cause of action of the SAC for promissory estoppel alleges that: Rabobank sent a letter stating that a decision would be made within 30 days regarding his loan modification but the decision was not made within 30 days; Plaintiff was denied a loan modification based upon income; Rabobank gave Plaintiff an opportunity to provide further documentation demonstrating potential qualification; Plaintiff sent further documentation; Rabobank did not review the documentation and make a decision based on the new documentation but instead moved forward with a foreclosure sale; Plaintiff relied on Rabobank to conduct a proper review of his loan modification based upon the additional documentation; if Plaintiff knew that Rabobank might move forward with a foreclosure sale, Plaintiff would have taken further action to protect the property from the sale such as refinancing the loan; and, Plaintiff has been injured by his reliance on sending the additional documentation as he has lost title, equity, and potentially possession of his home. (See SAC, ¶¶ 32-38.) Rabobank demurs to the first cause of action on the ground that it fails to state facts sufficient to constitute a cause of action for promissory estoppel.

The first allegation—that Rabobank promised to make a decision within 30 days, but that it did not make it within 30 days—is not a proper basis for the cause of action because the delayed decision did not injure Plaintiff as alleged, since the delay itself did not cause Plaintiff to lose title, equity and potentially possession of the subject property. (See Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 944 (stating that “the party asserting the estoppel must be injured by his reliance… [on] a promise clear and unambiguous in its terms”).) Thus, the lone viable promise for the promissory estoppel cause of action is that Rabobank “gave Mr. Mayher an opportunity to provide additional documentation to demonstrate that he was qualified.” (SAC, ¶ 32.) However, this is not a promise that is clear and unambiguous in its terms such that “a court can determine the scope of the duty, and the limits of performance… to provide a rational basis for the assessment of damages.” (Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 226.) In fact, the allegation does not even allege a promise, much less a promise to stop a foreclosure sale. In opposition, Plaintiff asserts that “Defendant promised Plaintiff that they would have everything resolved if only he submitted updated financial documentation and not to worry about the upcoming sale date.” (Opposition, p.3:15-17.) However, these facts are not alleged by the SAC. Additionally, as Rabobank argues, the SAC does not allege facts demonstrating substantial change in position. (See Jones, supra, 230 Cal.App.4th at p.948 (stating that “[e]ven if the postponement were an inducement to forebear payment, plaintiffs have failed to show a substantial change in position based on the postponement”).) Rabobank’s demurrer to the first cause of action is SUSTAINED with 10 days leave to amend.

The second cause of action for negligence

Rabobank asserts that the second cause of action for negligence fails to state facts sufficient to constitute a cause of action for negligence because Rabobank did not owe Plaintiff a duty to Plaintiff. The second cause of action alleges that Rabobank had a duty pursuant to Civil Code section 1708, and a common law duty to act reasonably with respect to Plaintiff’s loan modification pursuant to Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150. (See SAC, ¶¶ 40-41.) Section 1708 generically states that “[e]very person is bound, without contract, to abstain from injuring the person or property of another, or infringing upon any of his or her rights.” However, as Rabobank argues “this states only a general principle of law… [nor] authorizes a cause of action for damages.” (Ley v. State of California (2004) 114 Cal.App.4th 1297, 1306, citing Katzberg v. Regents of University of California (2002) 29 Cal.4th 300, 327–328.) As to the duty pursuant to Daniels, supra, there, the plaintiff alleged that he was current on his loan payments, but the lender instructed him to stop making payments. (See Daniels, supra, 246 Cal.App.4th at p.1183.) In determining the existence of a duty, the Sixth District evaluated the Biakanja factors, and evaluating the closeness of the connection between the lender’s conduct and the alleged injuries, such factor weighed heavily in favor of the plaintiff. Here, there is no such alleged closeness of any connection between Rabobank’s conduct and the alleged injuries. In fact, it appears that Plaintiff mistakenly thought he was making payments on the loan on the subject property, but was making payments on a loan on a different property that resulted in the notice of default and trustee sale. Moreover, as stated in the discussion regarding the first cause of action, it is unclear as to whether Rabobank could be considered blameworthy at all; the SAC merely alleges that Plaintiff was given an opportunity to submit additional documentation—not that such submission would stop the foreclosure sale as Plaintiff contends in opposition. The letter attached to the initial complaint indicates that Plaintiff would be evaluated for a loan modification; Plaintiff alleges that he was evaluated for such a loan modification and was denied a modification. However, dissatisfied with the result, he contacted Rabobank who gave him the aforementioned opportunity to submit further documentation. However, there is no allegation that Rabobank promised to review the further documentation or that such review would lead to the halting of the impending trustee sale. In evaluating the Biakanja factors in determining the existence of a duty as alleged in the second cause of action, Plaintiff has not alleged facts supporting the existence of such a duty. (See Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67-68.) Rabobank’s demurrer to the second cause of action is SUSTAINED with 10 days leave to amend.

Third cause of action for wrongful foreclosure

Rabobank asserts that the third cause of action for wrongful foreclosure fails to state facts sufficient to constitute a cause of action because the SAC does not allege tender of the full amount of the loan. As previously discussed with Breckenridge’s demurrer, the SAC neither alleges tender, nor that Plaintiff is excused from the tender requirement, much less facts demonstrating such excuse from the tender requirement. Moreover, Plaintiff utterly fails to address the issue of tender in opposition. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (stating that “Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636; see also Hendy v. Losse (1991) 54 Cal.3d 723, 742 (stating that “the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”).) Instead, Plaintiff argues that Rabobank failed to comply with Civil Code sections 2923.5 and 2924(c). The SAC does not allege any violation of the code sections. As it clear that Plaintiff cannot amend the SAC to state facts supporting tender, Rabobank’s demurrer to the third cause of action is SUSTAINED without leave to amend.

Fourth cause of action for unfair business practices

The fourth cause of action is wholly dependent on the prior causes of action. As the prior causes of action fail to state facts sufficient to constitute a viable cause of action, Rabobank’s demurrer to the fourth cause of action is likewise SUSTAINED with 10 days leave to amend.