Case Number: BC710021 Hearing Date: January 03, 2019 Dept: 34

SUBJECT: Demurrer to Second through Sixth Causes of Action

Moving Party: Defendant Aztec Foreclosure Corp.

Resp. Party: None

The demurrer to the second, third, and sixth causes of action is SUSTAINED, with leave to amend. The demurrer to the fourth and fifth causes of action is SUSTAINED, without leave to amend.

PRELIMINARY COMMENTS:

This demurrer is unopposed, yet plaintiffs have not indicated that they are planning on filing an amended complaint. The Court finds such silence to be troubling. If plaintiffs believed that the demurrer should be overruled, they should have filed an opposition. If plaintiffs agreed that the complaint needed to be amended, they should have agreed when meeting-and-conferring with defendants to amend the complaint or file a first amended complaint. Had they done so, the court and its staff would not have had to spend the time analyzing a demurrer to a complaint that even plaintiffs agree must be amended.

It is even more troubling because Defendant Aztec Foreclosure Corp. filed a Notice of Non-Monetary interest on July 16, 2018. Plaintiffs opposed Aztec’s notice on August 1, 2018.

The Court also notes that Plaintiffs have failed to file their Case Management Statement for the Case Management Conference that was originally scheduled to be heard on December 21, 2018 (and has been continued to today). The Court finds this series of non-actions by plaintiffs’ counsel to be unprofessional. The Court will set an OSC re sanctions for plaintiffs’ counsel’s failure to file a CMS.

BACKGROUND:

Plaintiffs Davit Ghumashyan and Landwell Management, Inc., commenced this action on June 13, 2018, asserting causes of action for: (1) Violation of California’s Homeowners Bill of Rights; (2) Wrongful Foreclosure; (3) Quiet Title; (4) Negligence Per Se; (5) Declaratory Relief; and (6) Unlawful, Fraudulent, and Unfair Business Practices.

ANALYSIS:

Defendant Aztec Foreclosure Corp. (“Defendant”) demurs to the second through sixth causes of action. (The first cause of action is not asserted against Aztec Foreclosure Corp.)

A. Second Cause of Action: Quiet Title

California Code of Civil Procedure § 761.020 requires a complaint for quiet title to be verified and to include the following elements: (1) a legal description of the property; (2) the basis of title as to which determination is sought; (3) the adverse claims to the title as to which determination is sought; (4) the date as of which the determination is sought; and (5) a prayer for the determination of title. (Code Civ. Proc. § 761.020; 5 Witkin, Cal. Pro. (4th ed. 1997) Pleading § 622.) There has been a long-standing equitable rule that “a mortgagor of real property cannot, without paying his debt, quiet his [or her] title against the mortgagee.” (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707; McElroy v. Chase Manhattan Mortg. Corp. (2005) 134 Cal.App.4th 388, 394; Mix v. Sodd (1981) 126 Cal.App.3d 386, 390; Santos v. Countrywide Home Loans (E.D.Cal. 2009) 2009 WL 3756337, *4 [the element of quiet title of being the rightful owners of the property requires that plaintiffs have satisfied their obligations under the deed of trust by paying the debt owed]. But see Newson v. Countrywide Home Loans, Inc. (N.D.Cal. 2010) 2010 WL 2034769, 12 [a quiet-title cause of action need not allege that plaintiffs actually tendered the amount of the loan proceeds, but sufficiently allege a willingness to tender the amount].)

Defendant demurs on the ground Plaintiff has failed to allege tender. Plaintiff explicitly alleges that “[t]he alleged foreclosure sale of the Subject Property is void and thus tender is not required to state a cause of action for quiet title as alleged below.” (Compl. ¶ 18.) Plaintiff’s statement of the law is correct. (Fonteno v. Wells Fargo Bank, N.A. (2014) 228 Cal.App.4th 1358, 1368 [“Courts have recognized various exceptions to the tender rule, including an exception based on the allegation that a foreclosure sale is void”]; Sciarratta v. U.S. Bank National Association (2016) 247 Cal.App.4th 552, 568 [“Because Sciarratta properly alleged the foreclosure was void and not merely voidable, tender was not required to state a cause of action for quiet title or for cancellation of instruments.”].) Accordingly, whether Plaintiff must plead tender or not turns on the sufficiency of the wrongful foreclosure allegations, discussed below.

Second, Defendant demurs on the ground Plaintiff has not sufficiently alleged that Defendants have an adverse interest in the property. As an initial matter, Defendant’s argument is somewhat unclear, as it appears Defendant is advancing the argument on behalf of its codefendants, Nationstar and U.S. Bank, even though these defendants are not demurring. (See Demurrer, p. 8:8-11.) The Court declines to consider those arguments.

Assuming the argument is advanced by Defendant as to itself only, however, the Court concludes the argument is meritorious. Plaintiff alleges that it “seeks to quiet title in the name of Davit Ghumashyan . . . and Landwell . . . as against the adverse claims of Nationstar, U.S. Bank, and BANA, who may be currently the title holder(s) and Defendant Aztec, the purported trustee.” (Compl. ¶ 45.) Plaintiff does not allege that Aztec has any adverse claim to the property, and simply serving as trustee alone is insufficient to impose any adverse claim. (Vournas v. Fidelity National Title Insurance Co. (1999) 73 Cal.App.4th 668, 677.)

Defendant’s demurrer to the second cause of action is therefore SUSTAINED, with leave to amend.

B. Third Cause of Action: Wrongful Foreclosure

“The basic elements of a tort cause of action for wrongful foreclosure track the elements of an equitable cause of action to set aside a foreclosure sale. They are: ‘(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1184.)

Defendant again demurs on the ground Plaintiffs have not alleged tender, but again, as noted above, whether Plaintiffs were required to allege tender turns on whether the foreclosure is alleged to be void.

Plaintiffs allege the foreclosure was wrongful because Defendant did not have proper authority to serve as trustee for the deed of trust. Plaintiffs’ allegations are uncertain, however. It is unclear from the face of the complaint why, exactly, Plaintiffs believe Defendant was not a proper trustee. (See Compl. ¶ 55.) Defendant, by contrast, requests judicial notice of the recorded Substitution of Trustee that named Defendant as trustee. (See RJN, Exh. 7.) Absent further explanation from Plaintiffs, the Court concludes Plaintiffs have not sufficiently alleged the foreclosure was wrongful due to Defendant’s involvement.

Plaintiffs also allege the foreclosure was wrongful because Defendants did not comply with the Homeowner’s Bill of Rights (“HBOR”), because Defendants did not respond to Plaintiffs’ proposal for a short sale. (Compl. ¶¶ 57-58.) Whatever the merits of these allegations as to the other defendants, however, this allegation is insufficient to state a cause of action against Defendant, as the trustee. Pursuant to Civ. Code § 2924(b), “In performing acts required by this article, the trustee shall incur no liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default under the secured obligation, deed of trust, or mortgage.” Similarly, section 2924(d) states, “(d) All of the following shall constitute privileged communications pursuant to Section 47: (1) The mailing, publication, and delivery of notices as required by this section. (2) Performance of the procedures set forth in this article. (3) Performance of the functions and procedures set forth in this article if those functions and procedures are necessary to carry out the duties described in Sections 729.040, 729.050, and 729.080 of the Code of Civil Procedure.”

In order to overcome this privilege, Plaintiffs would need to allege Defendant acted with malice. Plaintiffs have not done so. Plaintiffs’ short sale discussions were conducted with Nationstar. (Compl. ¶¶ 29-31.) Indeed, Plaintiffs do not include Defendant in the first cause of action, for violation of HBOR. Given Defendant’s lack of involvement in the short sale proposal—or, indeed, lack of allegation as to Defendant even having knowledge of the dispute—Plaintiffs have not sufficiently pled a cause of action against Defendant for wrongful foreclosure.

Defendant’s demurrer to the third cause of action is therefore SUSTAINED, with leave to amend.

C. Fourth Cause of Action: Negligence Per Se

Plaintiffs allege Defendants are liable for negligence per se due to Defendants’ violation of various HBOR provisions. Courts have repeatedly held that such claims are improper. Plaintiffs’ sole recourse is for causes of action directly alleging statutory violations, such as Plaintiffs’ first cause of action. Violations of such statutes do not otherwise support negligence claims. (See, e.g., Residential Capital, LLC v. Cal-Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 827 [“‘The comprehensive statutory framework established to govern nonjudicial foreclosure sales is intended to be exhaustive. [Citation.] It includes a myriad of rules relating to notice and right to cure. It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings.’ [Citation.] . . . No negligence cause of action need be recognized here. Otherwise, we would be engaging in judicial legislation by grafting a tort remedy onto a comprehensive statutory scheme in the absence of a compelling justification for doing so. (§§ 2924-2924k.)”].)

Defendant’s demurrer to the fourth cause of action is therefore SUSTAINED, without leave to amend.

D. Fifth Cause of Action: Declaratory Relief

Defendant demurs to Plaintiffs’ declaratory relief cause of action on the ground it is entirely duplicative of Plaintiffs’ other claims. The Court agrees. (See, e.g., California Ins. Guarantee Ass’n v. Superior Court (1991) 231 Cal.App.3d 1617, 1624 [“Generally, an action in declaratory relief will not lie to determine an issue which can be determined in the underlying tort action. ‘The declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action. The object of the statute is to afford a new form of relief where needed and not to furnish a litigant with a second cause of action for the determination of identical issues.’”].)

Defendant’s demurrer to the fifth cause of action is therefore SUSTAINED, without leave to amend.

E. Sixth Cause of Action: Violation of the UCL

Defendant demurs on the ground Plaintiffs’ claims, at least as against this Defendant, are privileged pursuant to Civ. Code § 2924(d). The Court agrees that Plaintiffs’ examples of unlawful, unfair, or fraudulent claims all appear to arise from privileged conduct, and the Court further agrees Plaintiffs have not sufficiently alleged malice, with respect to this Defendant, to overcome the privilege.

Defendant’s demurrer to the sixth cause of action is therefore SUSTAINED, with leave to amend.