2018-00231187-CU-OR

Luzminda Corpuz-Roman vs. Caliber Home Loans, Inc.

Nature of Proceeding: Motion to Strike the 2nd Amended Complaint

Filed By: Kress, Lindsey E.

Defendant Caliber Home Loans, Inc.’s (“Defendant”) motion to strike portions of plaintiff Luzminda Corpuz-Roman’s (“Plaintiff”) Second Amended Complaint is UNOPPOSED and is GRANTED.

Defendant moves to strike Plaintiff’s requests for actual damages and rescission under her UCL claim and Plaintiff’s conclusory claim for punitive damages in her prayer for relief.

Under section 436, the court may “[s]trike out any irrelevant, false, or improper matter inserted in any pleading” as well as “all or part of any pleading not drawn or filed in conformity with the laws of this state.” (Code Civ. Proc, § 436, subds. (a) and (b).)

Plaintiff’s third cause of action for violation of the UCL requests damages for “excessive interest accumulation, negative amortization, loss of equity, destruct[ion] of credit standing, pain, suffering, and emotional distress, in an amount to be shown at trial.” (SAC ¶¶ 85-86.) But “damages” are not recoverable under the UCL as a matter of law. (See Cal. Bus. & Prof. Code § 17203; Buckland v. Threshold Enters. Ltd.

(2007) 155 CaI.App.4th 798 (“[R]emedies for individuals under the UCL are restricted to injunctive relief and restitution…); accord Korea Supply Co. v. Lockheed Martin Corp

. (2003) 29 Cal.4th 1134, 1144 (“A UCL action is equitable in nature; damages cannot be recovered.”).) Thus, non-restitutionary disgorgement is not available in connection with Plaintiff’s § 17200 cause of action. (Korea Supply Co., pp. 1150-1151.) § 17200 only authorizes restitution of funds or property wrongfully acquired by the defendant in which the plaintiff has an ownership or vested interest. (Alch v. Superior Court (2004) 122 Cal.App.4th 339, 404.)

Plaintiff’s UCL claim also requests injunctive relief against Caliber in the form of a rescission of the Notice of Trustee’s Sale. (SAC ¶ 79.) Rescission is not available under the UCL. (See People v. Beaumont Investment, Ltd. (2003 111 Cal.App.4th 102, 132-133 (rescission applies only to contract actions, not to actions brought under the UCL).)

Based on the foregoing, and Plaintiff’s failure to oppose, Plaintiff’s requests for actual damages and rescission under her UCL claim are stricken.

Plaintiff’s prayer also requests “punitive and/or exemplary damages in an amount sufficient to punish defendants’ wrongful conduct and deter future misconduct.” (SAC, Prayer ¶ 8.)

A court tests the adequacy of a punitive damages allegation by way of a motion to strike. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 164.) In order to plead an entitlement to punitive damages a plaintiff must allege the defendant is guilty of “oppression, fraud, or malice.” (Civil Code § 3294(a).) “Malice” under Civil Code § 3294(c)(1) means conduct intended to injure the plaintiff or despicable conduct by the defendant with a willful and conscious disregard of others. Malice “based on a conscious disregard of the plaintiff’s rights, requires proof that the defendant’s conduct is ‘despicable’ and ‘willful.’” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1211.) “‘[D]espicable’ connotes conduct that is ‘…so vile, base, contemptible, miserable,

wretched or loathsome that it would be looked down upon and despised by ordinary decent people.’” (Id. [citations omitted].) Despicable conduct includes “that which is in blatant violation of law or policy.” (American Airlines, Inc. v. Sheppard, Mullin, Richter,

& Hampton (2002) 96 Cal.App.4th 1017, 1050.) Indeed, “[e]ven ‘nonintentional torts’ may form the basis for punitive damages when the conduct constitutes conscious disregard of the rights or safety of other. [citation omitted] ‘Nonintentional conduct comes within the definition of malicious acts punishable by the assessment of punitive damages when a party intentionally performs an act from which he knows, or should know, it is highly probable harm will result.’ [citation omitted].” (Skf Farms v. Superior Court (1984) 153 Cal.App.3d 902, 907.)

The SAC does not include any allegations sufficient to support a claim for punitive damages. At most, the SAC only includes the conclusory request for punitive damages in the prayer for relief. This is insufficient and is, therefore, stricken.

This minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.

Item 15 2018-00231187-CU-OR

Luzminda Corpuz-Roman vs. Caliber Home Loans, Inc.

Nature of Proceeding: Hearing on Demurrer to the 2nd Amended Complaint

Filed By: Kress, Lindsey E.

Defendant Caliber Home Loans, Inc.’s (“Caliber” or “Defendant”) demurrer to plaintiff Luzminda Corpuz-Roman’s (“Plaintiff”) Second Amended Complaint (“SAC”) is ruled upon as follows.

Defendant’s request for judicial notice is granted. (See Poseidon Devel., Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117-18; see also Stratford Irrig. Dist. v. Empire Water Co. (1941) 44 Cal.App.2d 61, 68 [recorded land documents, not contracts, are the subject of judicial notice on demurrer].) The Court, however, does not accept the truth of any facts within the judicially noticed documents except to the extent such facts are beyond reasonable dispute. (See Poseidon Devel., supra, 152 Cal.App.4th at 1117-18; see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265 (“[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 the recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity.”)

In this foreclosure action Plaintiff alleges causes of action for negligence, violation of Civil Code § 2924.11, violation of Business & Professions Code § 17200, and breach of contract. In short, Plaintiff alleges the defendants failed to properly review her loan modification application and are improperly proceeding with a foreclosure sale.

Caliber demurred to each cause of action in the First Amended Complaint. On September 17, 2018, the Court overruled the demurrer as to the negligence cause of action and sustained, with leave to amend, the demurrer as to the second, third, and fourth causes of action.

Caliber now demurs to the second, third, and fourth causes of action in the SAC on the grounds that each fails to state facts sufficient to constitute a cause of action. Caliber contends Plaintiff has failed to sufficiently amend to correct the deficiencies identified by the Court in its September 17, 2018, Order. Caliber also contends the demurrer should be sustained in its entirety because Plaintiff has failed to join an indispensable party.

The Court notes that in its demurrer the SAC, Caliber has raised many of the same arguments that were raised and already decided by the Court in the demurrer to the FAC. However, Caliber has not identified any changed allegations that would make these arguments once again relevant. Accordingly, the Court will not address those arguments that were already determined, but are again repeated in this instant motion.

Indispensable Party

Defendant contends the SAC is deficient because Plaintiff has failed to join a necessary party – Raymond V. Roman – her husband, who is a co-borrower and signatory on the Deed of Trust. (RJN, Exh. 1.) Defendant contends Mr. Roman is necessary to this action since he is a co-borrower under the Deed of Trust and has a direct interest in the claims asserted hereunder. Further, without him joined, Caliber contends it faces a substantial risk of double liability in the event Mr. Roman brings a second action based on the same loan, property, and Deed of Trust.

CCP § 389(a) provides: “A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.”

Plaintiff argues in opposition that Mr. Roman is not an indispensable party because he would be barred by res judicata from re-litigating the claims in this case on the basis that he is in privity to the parties to this action. Plaintiff’s argument regarding res judicata is nothing more than speculation and not a factor relevant to the indispensable party analysis. Even if Mr. Roman were barred by res judicata from re-litigating his claims that does not mean that he is not an indispensable party. Indeed, even using Plaintiff’s analysis, it appears to concede Mr. Roman would be adversely affected in a practical sense, and that such prejudice would be serious.

The demurrer is SUSTAINED with leave to amend. Plaintiff is directed to file a Third Amended Complaint no later than December 21, 2018, in which her husband, Raymond V. Roman, is named as a plaintiff. Mr. Roman is a co-borrower and signatory on the Deed of Trust. Hence, he has an interest in the subject matter of the case and his absence could impede his ability to protect that interest.

Second Cause of Action (Violation of Civil Code § 2924.11)

Defendant’s demurrer is SUSTAINED, without leave to amend.

As of January 1, 2018, the HBOR II went into effect. The corresponding statute protecting the same Primary Right is found under Cal. Civ. Code § 2924.11(a) [2018], providing: If a borrower submits a complete application for a foreclosure prevention alternative offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, trustee, mortgagee, beneficiary, or authorized agent shall not record a notice of sale or conduct a trustee’s sale while the complete foreclosure prevention alternative application is pending. A mortgage servicer…shall not record a notice of default or notice of sale or conduct a trustee sale until any of the following occurs:

(1) the mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.

(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.

(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under the first lien loan modification.

Accordingly, Civil Code § 2924.11 prevents a mortgage servicer from recording a Notice of Trustee’s Sale (“NOTS”) or conducting a sale while a complete foreclosure prevention alternative application is pending and until the borrower has been provided with a written determination by the mortgage servicer. (Civ. Code § 2924.11(a).)

Defendant argues the only relief available under 2924.11 is injunctive relief, which cannot lie against Caliber because it is no longer the servicer of the loan. (SAC ¶ 30, 65.) Even if Caliber did violation section 2924.11 by ordering a NOTS to be recorded, Caliber is no longer servicing the loan, cannot review Plaintiff for a loan modification, and cannot foreclose on or postpone foreclosure on the property. For this reason, the demurrer is SUSTAINED, without leave to amend as Plaintiff was previously given leave to amend on this same basis, but has failed to correct the deficiency or identify any way in which such deficiency may be cured.

Third Cause of Action (Violation of Business & Professions Code § 17200)

Defendant’s demurrer is OVERRULED.

Defendant contends Plaintiff has not alleged the existence of any unlawful, unfair, or fraudulent business practice or act. Proscribing ‘any unlawful’ business practice, ‘section 17200 ‘borrows violations of other laws and treats then as unlawful practices’ that the unfair competition law makes independently actionable.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [citations omitted].) Essentially any law, federal, state or common law is a sufficient predicate for a violation of the unlawful prong under § 17200. (People v. E.W.A.P., Inc. (1980) 106 Cal.App.3d 315, 319.)

In opposition, Plaintiff reasons her §17200 cause of action is supported by her claim for dual tracking in violation of Civil Code § 2924.11, and has thus alleged an unfair business practice. However, as discussed above, that cause of action is deficiently pled against Defendant and has been sustained without leave to amend. Further, Plaintiff has also not alleged with particularity, facts sufficient to establish that the

public would likely be deceived by Defendant’s conduct. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211.)

Plaintiff then contends the negligence claim may support her derivative unlawful UCL claim. Plaintiff cites to McGarvey v. JP Morgan Chase Bank, NA (2013) 2013 U.S. Dist. LEIS 147542. In McGarvey, the court noted that courts in California appear divided on whether common law claims such as negligence can serve as the predicate violation of law under the UCL unlawful prong. (Compare Abels v. Bank of Am., No. C 11-0208 PJH, 2011 U.S. Dist. LEXIS 39157 (N.D. Cal. Apr. 11, 2011) (an act is unlawful if it “violates an underlying state or federal statute or common law” including negligence) and Osei v. Countrywide Home Loans, 692 F. Supp. 2d 1240, 1254 (E.D. Cal. 2010) (same) with Stearns v. Select Comfort Retail Corp., 763 F. Supp. 2d 1128, 1150 (N.D. Cal. 2010) (negligence claims “may not constitute predicate acts for a UCL claim”) and Joe Hand Promotions, Inc. v. Alvarado, No. 1:10-CV-00907 LJO, 2011 U.S. Dist. LEXIS 43139, 2011 WL 1544501, at *7 (E.D. Cal. Apr. 21, 2011), report and recommendation adopted, 2011 U.S. Dist. LEXIS 49227, 2011 WL 1773296 (E.D. Cal. May 9, 2011) (same).) The McGarvey court found it need not resolve the dispute, and found that because the plaintiff stated a viable negligence claim and defendant did not argue in its motion that negligence cannot serve as a predicate violate of law for a UCL claim, plaintiff’s UCL claim based on unlawfulness may proceed. (McGarvey v. JP Morgan Chase Bank, NA (2013) 2013 U.S. Dist. LEIS 147542, *23.)

Decisions of federal courts, other than the United States Supreme Court, are not binding on state courts, regardless of whether they are interpreting federal or state law. (People v. Crittendon (1994) 9 Cal.4th 83,120, fn. 3; Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 251, fn. 6.) Further, the Court does not find McGarvey persuasive. However, as noted above, essentially any law, federal, state or common law is a sufficient predicate for a violation of the unlawful prong under § 17200. (People v. E.W.A.P., Inc. (1980) 106 Cal.App.3d 315, 319.) Accordingly, the Court finds the negligence claim can serve as a sufficient predicate for the unlawful UCL claim.

Based on the foregoing, the Court need not reach Defendant’s argument that Plaintiff has failed to allege standing.

Fourth Cause of Action (Breach of Contract)

Defendant’s demurrer is OVERRULED.

To establish a claim for breach of contract, Plaintiff must establish: (1) the existence of the contract, (2) Plaintiffs’ performance or excuse for nonperformance, (3) defendants’ breach, and (4) the resulting damage to Plaintiff.”(Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Defendant contends Plaintiff has failed to sufficiently amend to state facts that the she gave consideration in exchange for the alleged oral agreement to consider her loan modification.

Plaintiff alleges as consideration, she promised to diligently submit the necessary documents needed and forego other reasonably available alternative options to possibly avoid foreclosure. Plaintiff also alleges she fully performed by submitting the requisite documents promptly after they were requested. (SAC ¶¶ 92, 93.)

The Court finds the foregoing allegations sufficient. (See, e.g., Moore v. Freedom Mortg. Corp. (2017) 2017 U.S. Dist. LEXIS 94091 (“The time and energy Plaintiff expended when submitting additional financial documentation that was required under the TPP, but not the Loan’s terms, constitutes sufficient consideration.”).)

Conclusion

The demurrer as to failure to join an indispensable party is SUSTAINED with leave to amend. The demurrer is SUSTAINED with leave to amend. Plaintiff is directed to file a Third Amended Complaint no later than December 21, 2018, in which her husband, Raymond V. Roman, is named as a plaintiff.

The demurrer is SUSTAINED without leave to amend as to the second cause of action and OVERRULED as to the third and fourth causes of action.

The minute order is effective immediately. No formal order pursuant to CRC rule 3.1312 or other notice is required.