Opinion
E076188
01-28-2022
IRVING ABAS, Plaintiff and Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, et al., Defendants and Respondents.
Rodriguez Law Group and Patricia Rodriguez for Plaintiff and Appellant. Wright, Finlay & Zak, Jonathan D. Fink and Cathy K. Robinson for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County. No. CIVDS1930995 John M. Tomberlin and Lynn M. Poncin, Judges.
Rodriguez Law Group and Patricia Rodriguez for Plaintiff and Appellant.
Wright, Finlay & Zak, Jonathan D. Fink and Cathy K. Robinson for Defendants and Respondents.
OPINION
MCKINSTER ACTING P. J.
After defendants and respondents Deutsche Bank National Trust Company, as trustee for Long Beach Mortgage Trust 2005-WL3 (Deutsche Bank) and Select Portfolio Servicing, Inc. (SPSI) recorded a notice of default and election to sell under a deed of trust against real property owned by plaintiff and appellant Irving and his wife, plaintiff sued for dual tracking the foreclosure (Civ. Code, § 2923.6), negligence, and declaratory relief. The trial court sustained, with 30 days leave to amend, defendants' demurrer to plaintiff's second amended complaint (SAC). When plaintiff failed to timely amend the SAC, the court dismissed the action. Plaintiff appeals. We affirm.
Plaintiff's wife, Judy Abas, is not a party to this appeal. (See fn. 2, post.)
I. PROCEDURAL BACKGROUND AND FACTS
On or about July 19, 2005, plaintiff and his wife (the borrowers) obtained a loan in the amount of $693,000 from Long Beach Mortgage Company (the loan), the repayment of which was secured by a deed of trust recorded against certain real property located on Kenwood Place in Rancho Cucamonga (the property). Three years later, the loan was in default, and on April 16, 2008, Washington Mutual Bank, successor in interest to Long Beach Mortgage Company, filed a notice of default and election to sell under the deed of trust. On April 19, 2013, the Federal Deposit Insurance Corporation, as receiver of Washington Mutual Bank, assigned the deed of trust to Deutsche Bank.
On March 30, 3018, Deutsche Bank contacted plaintiff to assess his financial situation and explore options to avoid foreclosure. On November 6, 2018, Deutsche Bank recorded a notice of default and election to sell under the deed of trust against the property. After plaintiff failed to cure the loan's arrearages, a notice of trustee's sale was recorded on March 4, 2019. The trustee's sale was scheduled for October 21, 2019.
On October 10, 2019, plaintiff submitted a complete loan modification application to SPSI. Three days later, he initiated this action and alleged, inter alia, wrongful foreclosure and impermissible dual tracking. Following defendants' demurrers to the complaint and amended complaint, plaintiff filed the SAC asserting three causes of action-dual tracking the foreclosure (Civ. Code, § 2923.6), negligence, and declaratory relief. The SAC also alleged that defendants had postponed the trustee's sale date. Defendants again demurred, and on July 30, 2020, the trial court sustained the demurrer with 30 days leave to amend. Plaintiff had until August 31, 2020, to amend the SAC.
On September 9, 2020, defendants moved, ex parte, to dismiss the action and for entry of judgment, based on plaintiff's failure to file a third amended complaint. (Code Civ. Proc., § 581, subd. (f)(2); Cal. Rules of Court, rule 3.1320(h).) Plaintiff neither opposed the motion nor appeared at the hearing. The trial court granted the motion, dismissed the SAC, and entered judgment in defendants' favor. Plaintiff appeals.
II. DISCUSSION
A. Standard of Review.
"'Our standard of review of an order sustaining a demurrer is well settled. We independently review the ruling on demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. [Citation.] In doing so, we "give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law."'" (Bocanegra v. Jakubowski (2015) 241 Cal.App.4th 848, 853.)
Generally, we must consider if there is a reasonable probability that pleading defects can be cured by amendment. (V.C. v. Los Angeles Unified School Dist. (2006) 139 Cal.App.4th 499, 506; Code Civ. Proc., § 452.) But, where the plaintiff is given leave to amend and fails to do so, we strictly construe the complaint and presume it states as strong a case as possible. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.)
B. Analysis.
Plaintiff contends the trial court erred in dismissing his action because the SAC sufficiently states claims for improper dual tracking, negligence, and declaratory relief. More specifically, he points to the SAC's assertions that he had submitted a complete loan modification application on October 10, 2019, and defendants led him to believe that they were moving forward with the loan modification but, in reality, they proceeded with a trustee sale. Plaintiff argues the court wrongly sustained the demurrer.
Plaintiff fails to address his failure to include an indispensable party. At the July 30, 2020 hearing, plaintiff's counsel admitted that plaintiff's wife was an indispensable party and claimed that it "was an oversight . . . to not put in Mrs. Abas . . . [to] alleviate the issue of an indispensable party."
1. Violation of Civil Code section 2923.6.
California's Homeowner Bill of Rights (HBOR) (Assem. Bill No. 278 (2011-2012 Reg. Sess.); Sen. Bill No. 900 (2011-2012 Reg. Sess.)), effective January 1, 2013, was enacted "to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure." (Civ. Code § 2923.4; see Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272.) "To enforce [its] new requirements, the HBOR creates a private right of action allowing a borrower to seek injunctive relief to enjoin a material violation of the act prior to foreclosure and to assert a claim for damages for a violation of the act following foreclosure." (Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 951, italics added.)
The HBOR limits this private right of action for damages, however, to violations of specific code sections: "After a trustee's deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages . . . resulting from a material violation of Section . . . 2923.6, . . . by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not corrected and remedied prior to the recordation of the trustee's deed upon sale." (Civ. Code, § 2924.12, subd. (b), italics added; see Rockridge Trust v. Wells Fargo, N.A. (N.D.Cal. 2013) 985 F.Supp.2d 1110, 1149 [To state a claim for damages under the HBOR, a borrower "must plead (1) a material violation of one of the enumerated code sections; (2) by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent; (3) that causes actual economic damages."].)
"If a borrower submits a complete application for a first lien loan modification . . . a mortgage servicer . . . shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending." (Civ. Code § 2923.6, subd. (c), italics added.) Civil Code section 2923.6, subdivision (h), broadly prohibits dual tracking-pursuing both a loan modification and a foreclosure concurrently. "[A]n application shall be deemed 'complete' when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer."
Defendants argue there are no facts to suggest that they have done anything prohibited by Civil Code section 2923.6 because the SAC admits that defendants postponed the foreclosure sale. Pursuant to the safe harbor provision in Civil Code section 2924.12, subdivision (c), a plaintiff cannot maintain a claim for dual tracking if the defendant corrects the violation of Civil Code section 2923.6 prior to foreclosure. Given his admission that the sale, in this case, was postponed, plaintiff cannot establish what he contends is a material violation of Civil Code section 2923.6. The dismissal of this cause of action was proper.
Civil Code section 2924.12, subdivision (c), provides: "A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not be liable for any violation that it has corrected and remedied prior to the recordation of the trustee's deed upon sale, or that has been corrected and remedied by third parties working on its behalf prior to the recordation of the trustee's deed upon sale."
2. Negligence.
"The elements of a cause of action for negligence are (1) a legal duty to use reasonable care, (2) breach of that duty, and (3) proximate cause between the breach and (4) the plaintiffs injury." (Mendoza v. City of Los Angeles (1998) 66 Cal.App.4th 1333, 1339.) "The existence of a duty of care owed by a defendant to a plaintiff is a prerequisite to establishing a claim for negligence." (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095.)
Plaintiff's claim for negligence is based on his contentions that the purported assignment of the loan to Deutsche Bank was a legal nullity and defendants engaged in impermissible dual tracking in violation of Civil Code section 2923.6. His claim fails for the absence of a legal duty of care. In general, banks owe no duty of care to borrowers in an arm's length transaction such as a loan or loan modification. (Nymark v. Heart Fed. Savings & Loan Assn., supra, 231 Cal.App.3d at p. 1096 [opinion decided in 1991 before HBOR in 2013, which noted a movement to make lenders deal reasonably with borrowers who were in default to attempt to effectuate a doable loan modification]; see Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 206 ["No fiduciary duty exists between a borrower and lender in an arm's length transaction."].) A "loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution's conventional role as a lender of money. A lender's obligations to offer, consider, or approve loan modifications and to explore foreclosure alternatives are created solely by the loan documents, statutes, regulations, and relevant directives and announcements from the United States Department of the Treasury, Fannie Mae, and other governmental or quasi-governmental agencies. . . . If the modification was necessary due to the borrower's inability to repay the loan, the borrower's harm, suffered from denial of a loan modification, would not be closely connected to the lender's conduct. If the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lender's conduct." (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67; see Sheen v. Wells Fargo Bank, N.A. (2019) 38 Cal.App.5th 346, 352-353 [agreeing with and applying Lueras], review granted Nov. 13, 2019, S258019.)
Nothing in plaintiff's complaint or briefing suggests that he can allege that defendants' involvement in processing his complete loan modification application went beyond the conventional role as a loan servicer and created a general duty of care. Moreover, plaintiff's inability to state a claim for impermissible dual tracking precludes any claim of negligence in processing his application. The trial court did not err by dismissing the negligence claim.
3. Declaratory relief.
In his third cause of action, plaintiff sought declaratory relief based on defendants alleged impermissible dual tracking and negligence. He argues a judicial declaration is necessary and appropriate since his loan modification was submitted prior to the foreclosure sale and thus it "shall not take place." However, the SAC admits that defendants postponed the foreclosure sale. To the extent plaintiff seeks declaratory relief based his claims for wrongful foreclosure and unfair business practices (Civ. Code, § 2924, subd. (a)(6); Bus. & Prof. Code, §§ 17200-17500), such claims were previously dismissed in defendants' favor. Moreover, the law in California is clear: A party may not enjoin a nonjudicial foreclosure based on a claim that the assignment of the deed of trust is voidable. "'[A] preemptive claim seeking to require the foreclosing party to demonstrate in court its authority to initiate a foreclosure,' [is] invalid and subject to demurrer." (Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 40.) Permitting a lawsuit to determine whether a creditor is authorized to proceed with a nonjudicial foreclosure "would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures." (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155; see Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 160 ["[T]he Legislature intended to preclude borrowers from seeking to enjoin a foreclosure for reasons other than those expressly authorized."]; Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814-815; Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513, disapproved on another ground in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939 & fn. 13; cf. Yvanova at pp. 935, 942-943 [borrower may sue for wrongful foreclosure based on void assignment; court specified it was not ruling on whether borrower could preempt nonjudicial foreclosure].) The trial court did not err in sustaining the defendants' demurrer on the declaratory relief cause of action.
III. DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal.
We concur: CODRINGTON J., SLOUGH J.