URSULA QUINTO v. JPMORGAN CHASE BANK, ET AL.
Case No.: 1-14-CV-269843
DATE: Nov. 6, 2014
TIME: 9:00 a.m.
DEPT.: 3
As an initial matter the Court in ruling on a demurrer or motion to strike considers only the pleading under attack, any attached exhibits (part of the “face of the pleading”) and any facts or documents for which judicial notice is properly requested and may be granted. Any purported requests for judicial notice that do not comply with Rule of Court 3.1113(l) are denied. The Court cannot consider extrinsic evidence in ruling on a demurrer or motion to strike. Accordingly, the Court has not considered the exhibits attached to Plaintiff’s opposition brief.
“In reviewing the sufficiency of a complaint against a general demurer, 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. We also consider matters which may be judicially noticed.’” Blank v. Kirwan (1985) 39 Cal.3d 311, 318. Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed. Similarly, facts appearing in exhibits attached to the complaint (part of the “face of the pleading”) are given precedence over inconsistent allegations in the complaint. See Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal App 4th 1443, 1447. “While inconsistent theories of recovery are permitted, a pleader cannot blow hot and cold as to the facts positively stated.” Manti v. Gunari (1970) 5 Cal.App.3d 442, 449, internal citation omitted. See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice §3(3) (“It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.”)
The Court notes that in the loan modification correspondence attached to the Complaint as Exhibit E Plaintiff consistently identifies the subject property as an investment property that is rented to tenants. This identification controls over any inconsistent allegations in the Complaint.
Defendants’ request for judicial notice of 16 recorded documents (exhibits 1-16 to the request) is GRANTED pursuant to Evid. Code §452(h). See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1382, quoting Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal. App. 4th 1106, 1117; see also Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 (stating that “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language… [and, f]rom this, the court may deduce and rely upon the legal effect of the recorded document”); see also Stormedia Inc. v. Super. Ct. (Werczberger) (1999) 20 Cal.4th 449, 457, fn.9.
Defendants’ request for judicial notice of the Complaint filed by Plaintiff on April 29, 2014 in the Bankruptcy Court for the Northern District of California, Plaintiff’s dismissals of Defendant Select Portfolio Servicing and Defendant U.S. Bank from that proceeding, and the Bankruptcy Court’s Order of Aug. 13, 2014 dismissing the adversary bankruptcy proceeding (exhibits 17-19) is GRANTED pursuant to Evid. Code §452(d).
These recorded and/or court-filed documents establish the following judicially noticed facts that control over any contrary allegations in the Complaint: Plaintiff and Consuelo Malapit signed a Deed of Trust for the subject property secured by a promissory note for $545,600 that was recorded on Jan. 18, 2007 (Ex. 1 to Defendants’ RJN); Plaintiff and Malapit defaulted on the loan and a Notice of Default and Election to Sell Under Deed of Trust was recorded by Quality Loan Service Corp., as agent for the beneficiary Washington Mutual bank, on July 21, 2008 (Ex. 2 to the RJN). The Deed of Trust was assigned to La Salle Bank in a document recorded August 25, 2008 (Ex. 3 to the RJN). Quality Loan Service was substituted in as Trustee in a document recorded Sept. 3, 2008 (Ex. 4 to the RJN). A Notice of Trustee’s Sale for the subject property was recorded on Oct. 23, 2008 (Ex. 5 to the RJN), with the date of sale set for Nov. 12, 2008. A Rescission of Notice of Default and Election to Sell Under Deed of Trust was recorded on April 8, 2009 (Ex. 6 to the RJN).
Before the property was sold, Plaintiff and Malapit signed (in the presence of a notary) a Loan Modification Agreement with Defendant JPMorgan Chase Bank on Jan. 23, 2009. The Agreement was recorded on May 18, 2009 (Ex. 7 to the RJN). The Agreement states in paragraph 4 that the “modified principal balance” on the loan as of Jan. 1, 2009 is $578,690.59 and that “The Borrower does not have any defense, offsets or counterclaims to the Modified Principal Balance.” Paragraph 12 of the Agreement (“Warranties”) states in pertinent part that “Borrower does hereby state and warrant that the above described Note is valid and enforceable in all respects and is not subject to any claims, defenses or right of offset or credit except as herein specifically provided.” Paragraph 14 (“Acknowledgement by Borrower”) states: “As part of the consideration for this Agreement, Borrower agrees to release and waive all claims Borrower might assert against the Trust and or its agents, and arising from any act or omission to act on the part of the Trust or its agents, officers, directors, attorneys, employees and any predecessor-in-interest to the Note and Security Instrument, and which Borrower contends caused Borrower damage or injury, or which Borrower contends renders the Note or the Security void, voidable, or unenforceable. This release extends to any claims arising from any judicial foreclosure proceedings or power of sales proceedings if any, conducted prior to the date of this Agreement.” Thus, separate and apart from any statutes of limitation that might be applicable, Plaintiff waived any claims arising out of the loan origination as consideration for the loan modification she was granted.
California Reconveyance Company (“CRC”) was substituted in as Trustee in a document recorded June 18, 2009 (Ex. 8 to the RJN). On that same date a second Notice of Default and Election to Sell Under Deed of Trust was recorded (Ex. 9 to the RJN). Another Notice of Trustee’s Sale was recorded on Sept. 23, 2009 (Ex. 10 to the RJN). On July 13, 2012, a July 9, 2012 Order of the federal District Court granting Defendants JPMorgan Chase and CRC’s Motion to Expunge a Notice of Pendency of Action (lis pendens) pursuant to Cal. CCP §405.32, was recorded (Ex. 11 to the RJN). As that Order explains, Plaintiff had filed an action in this Superior Court on May 3, 2011 against JPMorgan Chase and CRC. Defendants removed the action to federal court, where it was dismissed with prejudice in an order dated Nov. 30, 2011. After Plaintiff refused to voluntarily dismiss the notice of pendency, Defendants moved for an order dismissing it, which the District Court granted.
Further Notices of Trustee’ Sale were recorded on Aug. 5, 2013 (Ex. 12 to the RJN) and Nov. 4, 2013 (Ex. 13 to the RJN). In a document recorded Jan. 17, 2014 ALAW was substituted in as Trustee (Ex. 14 to the RJN). Another Notice of Trustee’s Sale was recorded on Jan. 28, 2014, with a sale date set for Feb. 18, 2014 (Ex. 15 to the RJN). A Trustee’s Deed Upon Sale was recorded on Feb. 21, 2014, reflecting the sale of the subject property to Defendant U.S. Bank, N.A. at public auction (Ex. 16 to the RJN). Plaintiff then filed an adversary action in federal Bankruptcy Court, asserting wrongful foreclosure on April 29, 2014 (Ex. 17 to the RJN). Plaintiff dismissed the defendants in that action (Ex. 18 to the RJN) and the adversary action was dismissed by the Bankruptcy Court in an Aug. 13, 2014 Order due to Plaintiff’s failure to respond to a July 3, 2014 Order to Show Cause re: dismissal (Ex. 19 to the RJN). Plaintiff then filed this action on Aug. 22, 2014.
Turning now to the Demurrer, Defendants’ demurrer to the Complaint 1st cause of action, violation of Civ. Code §2923.6, on the ground that it fails to state sufficient facts is SUSTAINED.
As several federal courts have noted, Civ. Code §2923.6 does not create a private right of action. See Collins v. Power Default Services, Inc. (N.D. Cal. 2010) 2010 U.S. Dist. LEXIS 3361; Santos v. Countrywide Home Loans, Inc. (E.D. Cal 2009) 2009 U.S. Dist. LEXIS 103453, *7 (“’[N]othing in Cal. Civ. Code §2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers.’”); Enders v. Countrywide Home Loans, Inc. (N.D. Cal. 2009) 2009 U.S. Dist. LEXIS 113386, *14 (“[S]ection 2923.6 does not provide a private right of action.”) As the 1st cause of action fails as a matter of law, leave to amend is DENIED.
Defendants’ demurrer to the Complaint’s 2nd cause of action, Breach of the Implied Covenant of Good Faith and Fair Dealing, on the ground that it fails to state sufficient facts is SUSTAINED.
“It is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract. . . . [T]he implied covenant of good faith is read into contracts ‘in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ This in fact is consistent with the general distinction between breach of the covenant of good faith as recognized in the context of a contract action and that recognized as a tort.” Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal 4th 342, 373, emphasis added, internal citations omitted. See also Guz v. Bechtel National, Inc. (2000) 24 Cal 4th 317, 349, 350 (“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made. . . . It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.”) Emphasis in original.
The claim as presently pled has no connection to any express terms of any alleged contract and thus fails to state a claim. Plaintiff has not alleged a breach of any contract. Plaintiff also cannot base any breach of the implied covenant claim on her original loan as judicially noticed material establishes that she released any claims arising from the original loan in signing the loan modification agreement. The only breach alleged is that “the commencement of foreclosures proceedings [u]pon the property lawfully belonging to Plaintiffs without the production of documents demonstrating the lawful rights for the foreclosure constitutes a breach of covenant.” Complaint at 100. This “produce the note” theory is incorrect as a matter of law. It is now well established in California law that nothing in the applicable statutes precludes foreclosures by a party lacking possession of the original promissory note. See Debrunner v. Deutsche Bank Nat. Trust Co. (2012) 204 Cal App 4th 433, 440; Rossberg v. Bank of America (2013) 219 Cal App 4th 1481, 1492-1493. Leave to amend the 2nd cause of action is DENIED as the only identified premise for the claim is incorrect as a matter of law.
Defendants’ demurrer to the Complaint’s 3rd cause of action, Injunctive Relief, on the ground that it fails to states sufficient facts is SUSTAINED.
“The elements of a cause of action for injunctive relief are (1) a tort or other wrongful act constituting a cause of action; and (2) irreparable injury, i.e., a factual showing that the wrongful act constitutes an actual or threatened injury to property or personal rights which cannot be compensated by an ordinary damage award.” Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410. “[T]he plaintiff in a cause of action for injunctive relief must plead: (a) The tort or other wrongful act constituting the cause of action. (b) The grounds for equitable relief of this kind, i.e., a showing of inadequacy of the remedy at law.” Witkin, Cal. Procedure (5th Ed., 2008) 5 Pleading §823. The only “wrongful act” alleged in the 3rd cause of action is that unspecified “Defendants” sought payments and pursued foreclosure without possession of the original promissory note. This fails to state a cause of action for injunctive relief. Again, the assertion that Defendants must establish possession of the original promissory note to proceed with a foreclosure is incorrect as a matter of law and fails to describe a wrongful act. See Debrunner, supra; Rossberg, supra. Leave to amend is DENIED as the claim is based on a premise that is incorrect as a matter of law.
Defendants’ demurrer to the Complaint’s 4th cause of action for violation of Civ. Code §1572 (“Actual Fraud”), 5th cause of action for Fraud and 7th cause of action for Intentional Misrepresentation on the ground that they each fail to state sufficient facts is SUSTAINED with 10 days’ leave to amend.
All of these claims are for variations of fraud. Fraud requires a) misrepresentation (false representation, concealment or nondisclosure); b) Knowledge of falsity; c) intent to defraud/induce reliance; d) justifiable reliance; and e) resulting damage. Philipson & Simon v. Gulsvig (2007) 154 Cal App 4th 347, 363. The law is well established that in order to state a cause of action for fraud, each of the elements must be pled with specificity. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216-217. In pleading fraud against a corporate defendant, the requirement that fraud be pled with specificity “requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157; see also Lazar v. Superior Court (1996) 12 Cal.4th 631, 645. All three causes of action as currently pled fail to state sufficiently specific fraud claims against any of the “Defendants” generally referred to.
To the extent any of these claims attempt to allege that a failure to “produce the note” is actionable fraud they are incorrect as a matter of law. Plaintiff also lacks standing to bring any claim based on an allegedly unlawful assignment or securitization of the note. See Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal App 4th 497, 515 (“‘Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note.’ As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [Plaintiff] lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions. Furthermore, even if any subsequent transfers of the promissory note were invalid, [Plaintiff] is not the victim of such invalid transfers because her obligations under the note remained unchanged.”) Internal citations omitted, brackets added. See also Mendoza v. JPMorgan Chase Bank, N.A. (2014) 228 Cal App 4th 1020, 1029 (“Courts have rejected homeowners’ claims that securitization inherently changes the roles of the original parties.”)
Furthermore, CCP §338(d) specifies a three year statute of limitations for actions grounded in fraud or mistake. To the extent these causes of action are attempting to state claims based on either the original 2007 loan or Plaintiff’s second default in June 2009 such claims are time-barred as Plaintiff’s Complaint was not filed until August 22, 2014 and Plaintiff has made no allegations of delayed discovery.
Defendants’ demurrer to the Complaint’s 6th cause of action for Declaratory Relief on the ground that it fails to state sufficient facts is SUSTAINED with 10 days’ leave to amend. As presently pled this claim simply states that a dispute has arisen between Plaintiff and unidentified Defendants “as to the duties and obligations of the respective parties with regard to the loan or the foreclosure. These disputes concern, but [are] not limited to, the ownership rights and the validity of the commencement of the foreclosure process.” Complaint at 144-145. This does not state sufficient facts. The elements of declaratory relief are: (1) a proper subject of declaratory relief within the scope of CCP §1060 and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party. A request for declaratory relief will not create a cause of action that otherwise does not exist. Rather, an actual, present controversy must be pleaded specifically and the facts of the respective claims concerning the underlying subject must be given. City of Cotati v. Cashman (2002) 29 Cal.4th 69, 80. See also Jenkins, supra, at 513-514, citing City of Cotati.
Defendants’ demurrer to the Complaint’s 8th cause of action (“To Set Aside a Defective and Wrongful Foreclosure”) on the ground that it fails to state sufficient facts is SUSTAINED.
All of the theories articulated in this claim (Complaint at 150-165) are invalid. As stated above, the “produce the note” theory does not state any valid basis for challenging a foreclosure, and Plaintiff does not have standing to challenge any transfer or assignment of the note or any purported violation of a pooling and servicing agreement. See Jenkins, supra. Plaintiff also cannot bring any claim under the “California Homeowner Bill of Rights,” Civ. Code §§2920.5-2924.20, alleging that the foreclosure sale was wrongful for two reasons. First, judicially noticed material establishes the Plaintiff was not only considered for but already granted a loan modification for the subject property (RJN, Ex. 7), and was not required to be offered another one. Civ. Code §2923.6(g) states in pertinent part that “[i]n order to minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first tier lien loan modification prior to January 1, 2013 . . .” Second, Civ. Code §2924.15(a) clearly states that “[u]nless otherwise provided, paragraph (5) of Section 2924, and Sections 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11 [cited in the Complaint], and 2924.18 shall apply only to first lien mortgages or deeds of trust that are secured by owner-occupied residential real property containing no more than four dwelling units. For these purposes, ‘owner-occupied’ means that the property is the principal residence of the borrower and is security for a loan made for personal, family or household purposes.” Both the material attached to the Complaint by Plaintiff herself as Ex. E and the material offered for judicial notice by Defendants (Ex. 17 to the RJN) establishes that Plaintiff has consistently identified the subject property as investment property rented to tenants and not as her principal residence.
As none of the alleged bases for the 8th cause of action presents a valid legal theory, leave to amend is DENIED.
Defendant’s demurrer to the Complaint’s 9th cause of action, Violation of Business and Professions Code §17200, on the ground that it fails to state sufficient facts is SUSTAINED with 10 days’ leave to amend. None of the preceding causes of action presently state sufficient facts to support a claim on which an unfair competition claim could be based and the claim itself (Complaint at 166-173) fails to otherwise sufficiently identify any acts of unfair competition.
Plaintiff is cautioned that where the demurrer has been sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been so sustained, not add entirely new causes of action. Patrick v. Alacer Corp. (2008) 167 Cal App 4th 995, 1015. To raise claims entirely unrelated to those originally alleged requires either a new lawsuit or a noticed motion for leave to amend. Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion to strike. See also Harris v. Wachovia Mortg., FSB (2010) 185 Cal App 4th 1018, 1023 (“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.”)
Furthermore, Plaintiff’s Complaint is verified and “[t]he general rule . . . is that material factual allegations in a verified pleading that are omitted in a subsequent amended pleading without adequate explanation will be considered by the court in ruling on a demurrer to the later pleading.” Shoemaker v. Myers (1990) 52 Cal 3d 1, 12-13.
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