Case Number: KC066692    Hearing Date: July 22, 2014    Dept: O

Pangilian, et al. v. J.P. Morgan Chase National Corporate Services, Inc., et al. (KC066692)

Defendants J.P. Morgan Chase National Corporate Services, Inc. and JPMorgan Chase Bank, N.A.’s DEMURRER TO FIRST AMENDED COMPLAINT

Respondent: No oppostion

TENTATIVE RULING

Defendants J.P. Morgan Chase National Corporate Services, Inc. and JPMorgan Chase Bank, N.A.’s demurrer to first amended complaint is SUSTAINED. The court will hear from plaintiffs regarding any circumstance warranting leave to amend.

JUDICIAL NOTICE is taken of Defense Exhibits 1-5. (Ev. Code 452(h).)

SECURITIZATION:
“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.” (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515.) Plaintiffs would not be the victims of such invalid transfers because their obligations under the note remained unchanged. “Instead, the true victim may be an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note. It is also possible to imagine one or many invalid transfers of the promissory note may cause a string of civil lawsuits between transferors and transferees.” But plaintiff “may not assume the theoretical claims of hypothetical transferors and transferees” to assert causes of action for declaratory relief or wrongful foreclosure. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497; see also Yvanova v. New Century Mortgage Corp. (2014) 226 Cal. App. 4th 495 and Keshtgar v. U.S. Blank, N.A. (2014) 226 Cal.App.4th 1201.)

Borrowers must allege and show prejudice as to claims of the lack of authority to transfer a promissory note. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272 – noting that it is difficult to conceive how borrowers could show prejudice from an unauthorized transfer, because borrowers must anticipate the legal possibility of note transfers to different creditors, defaults in payments on the note cause any prejudice via foreclosure, and original lenders would be the ones prejudiced by an unauthorized loss.)

Judicially noticeable documents establish that there was never an assignment of the loan to a securitized trust. Even if the loan was securitized, Plaintiffs did not suffer any prejudice resulting from any alleged defective transfer. Plaintiffs are not attacking the validity of the debt and admit that they defaulted on their loan. Instead, they attack the securitization process and lack of Defendants’ authority to foreclose. However, based on the authorities above, Plaintiffs lack standing to pursue these claims. Demurrer on this ground is SUSTAINED.

1st CAUSE OF ACTION: BREACH OF CONTRACT:
The elements for a breach of contract cause of action are: (1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) resulting damages. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.) In alleging a breach of contract cause of action, it is necessary to specify whether the contract is written, oral or implied by conduct. (CCP 430.10(g).)

Plaintiffs fail to allege any written agreement to modify the loan. Therefore, the claim fails because it is barred by the Statute of Frauds. Demurrer is SUSTAINED.

2nd CAUSE OF ACTION: VIOLATION OF CC 2923.5
This COA fails to allege facts supporting plaintiffs’ claim of violation. Further, the FAC fails to allege that the property is owner-occupied. Demurrer is SUSTAINED.

3rd CAUSE OF ACTION: VIOLATION OF CC 2923.6
This COA fails because CC 2923.6 does not impose a duty upon defendants to modify the loan. Further, the FAC fails to allege that the property is owner-occupied. Finally, the FAC fails to allege that plaintiffs submitted a “complete application.” Demurrer is SUSTAINED.

4th CAUSE OF ACTION: VIOLATION OF B&P 17200:
The Unfair Business Practices Act shall include “any unlawful, unfair, or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)

“To satisfy the narrower STANDING requirements imposed by Proposition 64, a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.… A plaintiff fails to satisfy the causation prong of the statute if he or she would have suffered “the same harm whether or not a defendant complied with the law.” … Jenkins’s third cause of action must also satisfy the second prong of the standing requirements under Business and Professions Code section 17204 (i.e., causation), which REQUIRED HER TO PLEAD A CAUSAL LINK BETWEEN HER ECONOMIC INJURY, THE IMPENDING NONJUDICIAL FORECLOSURE OF HER HOME, and the six unfair or unlawful acts allegedly committed by Defendants. (Bus. & Prof. Code, § 17204.) Importantly, Jenkins admits in both her SAC and opening brief that she defaulted on her loan. IT IS ALSO INDISPUTABLE JENKINS’S DEFAULT TRIGGERED THE LAWFUL ENFORCEMENT OF THE POWER OF SALE CLAUSE in the deed of trust, and it was the triggering of the power of sale clause that subjected Jenkins’s home to nonjudicial foreclosure…. As Jenkins’s home was subject to nonjudicial foreclosure because of Jenkins’s default on her loan, which occurred before Defendants’ alleged wrongful acts, Jenkins cannot assert the impending foreclosure of her home (i.e., her alleged economic injury) was caused by Defendants’ wrongful actions. Thus, even if we assume Jenkins’s third cause of action alleges facts indicating Defendants’ actions violated at least one of the UCL’s three unfair competition prongs (unlawful, unfair, or fraudulent), Jenkins’s SAC cannot show any of the alleged violations have a causal link to her economic injury.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497, 521.)

Plaintiffs lack standing to pursue a B&P 17200 claim because they admit they defaulted on their loan, which triggered foreclosure proceedings. Any wrongful conduct on the part of Defendant occurred after the default. Thus, Plaintiffs cannot show the unfair business practice has a causal link to Plaintiffs’ economic injury. Demurrer is SUSTAINED.

5th CAUSE OF ACTION: COMMONLAW UNFAIR COMPETITION
This COA fails to allege that defendant and plaintiffs are competitors. (American Cyanamid Co. v. American Home Assurance Co. (1994) 30 Cal.App.4th 969, 977 – “there is no duty to defend an underlying lawsuit for unfair competition absent the element of competition or rivalry between the parties.”) Demurrer is SUSTAINED.

6th CAUSE OF ACTION: DECLARATORY RELIEF fails because the other claims fail. Demurrer is SUSTAINED.

7th CAUSE OF ACTION: BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING fails to allege any special relationship beyond the lending relationship. (Bionghi v. Metro. Water Dist. (1999) 70 Cal.App.4th 1358, 1370 – “available only in limited circumstances, generally involving a special relationship between the contracting parties.”) Demurrer is SUSTAINED.

8th CAUSE OF ACTION: VIOLATION OF HOMEOWNERS’ BILL OF RIGHTS fail to support any of the allegations with facts. Demurrer is SUSTAINED.