Frank Pestarino vs. Wells Fargo Bank, N.A.

Demurrer to Amended Complaint

Cal. Super. - 4th Dist.September 10, 2018

A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Michael Rapkine (#222811) mrapkine@afrct.com ANGLIN, FLEWELLING, RASMUSSEN, CAMPBELL & TRYTTEN LLP 301 North Lake Avenue, Suite 1100 Pasadena, California 91101 Tel: (626) 535-1900 | Fax: (626) 577-7764 Attorneys for Defendant WELLS FARGO BANK, N.A. SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE — CENTRAL JUSTICE CENTER FRANK PESTARINO, an individual, and Case No.: 30-2018-01017402-CU-OR-CJC MARTY BENNETT, an individual, [The Hon. Richard Lee] Plaintiffs, DEFENDANT WELLS FARGO’S NOTICE v8. OF DEMURRER AND DEMURRER TO THE FIRST AMENDED COMPLAINT; WELLS FARGO BANK, N.A., a National MEMORANDUM OF POINTS AND Association; CLEAR RECON CORP,a California AUTHORITIES; DECLARATION OF Corporation; MAGNUM PROPERTY MICHAEL RAPKINE INVESTMENTS LLC, a California Limited Liability Company; STRATEGIC Date: February 21, 2019 ACQUISITIONS,INC., a California Corporation; Dont. Lop STEVEN MASTROPAOLO, aka BUD MASTROPAOLOQ,an individual; OCEAN Reservation ID: 72927904 COLLECTIVE REAL ESTATE, business entity unknown; THE ADDRESS, INC, a California Trial Date: None Set Corporation; and DOES 1 through 10, inclusive, Action Filed: September 10, 2018 Defendants. TO PLAINTIFFS AND THEIR COUNSEL OF RECORD:PLEASE TAKE NOTICE that on February 21, 2019 at 1:30 p.m.in department C-32 of theabove-entitled Court, located at 700 Civic Center Drive West, Santa Ana, California, defendant WELLSFARGO BANK, N.A. (hereinafter, “Wells Fargo™) will move the Court for an order sustaining its 94000/FR1240/02186259-2 1 DEFENDANT WELLS FARGO’S NOTICE OF DEMURRER AND DEMURRER TO FAC A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 demurrerto the first, eighth, ninth, and tenth causes of action in the First Amended Complaint. (the “FAC”. The demurreris based on this notice, the statement of demurrers, the Declaration of Michael Rapkine (“Rapkine Decl.”), the memorandum of points and authorities filed herewith, the accompanying Request for Judicial Notice, the FAC, all other records and pleadings on file herein, and on such arguments as may be presented at the hearing. Respectfully submitted, Dated: November 12, 2018 ANGLIN, FLEWELLING, RASMUSSEN, CAMPBELL & TRYTTEN LLP By: Whedal Roo Michael Rapkine ~~ mrapkine@afrct.com Attorneys for Defendant WELLS FARGO BANK, N.A. (“Wells Fargo”) b Wells Fargo is only named in the causes of action for wrongful foreclosure, quiettitle, unfair business practices, and declaratory relief. 94000/FR1240/02186259-2 2 DEFENDANT WELLS FARGO’S NOTICE OF DEMURRER AND DEMURRER TO FAC A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF MICHAEL RAPKINE I, Michael Rapkine, declare as follows: 1. [ am an attorney at law licensed to practice before this Court and am associated with the law firm of Anglin, Flewelling, Rasmussen, Campbell & Trytten, LLP, counsel of record for defendant Wells Fargo Bank, N.A. (“Wells Fargo™.) Assuch, I have personal knowledge of the matters stated below. I make this declaration pursuant to Code of Civil Procedure § 430.41(a)(3)(A). 2. As counsel ofrecord for Wells Fargo, I had a telephonic meet and confer with plaintiffs’ counsel (Krystina T. Tran, Esq.) on November 8, 2018. During this call, I enumerated the various defenses that Wells Fargo would be raising in its demurrer to the First Amended Complaint, yet the parties were unable to reach an agreement resolving any of these legal issues. Accordingly, the demurrer before this Court was necessary. I declare under penalty of perjury under the laws of the State of California that the foregoingis true and correct. If called on to testify to the foregoing, I would and could competently testify thereto. Executed this 12th day of November 2018, at Pasadena, California. hha DA Michael Rapkifte 94000/FR 1240/02186259-2 3 DECLARATION OF MICHAEL RAPKINE A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATEMENT OF DEMURRERS Defendant Wells Fargo demursto the causes of action in the FAC on the following grounds: 1. First Cause of Action: Wrongful Foreclosure Plaintiffsfail to state a cause of action for wrongful foreclosure because: (1) the underlying allegation that there wasa violation of Civil Code § 2923.5 is defective for numerous reasons;(ii) the contention that Wells Fargo and the foreclosure trustee committed “dualtracking”in late 2017,in violation of former Civil Code § 2923.6,is also riddled with myriad defects; (111) the allegation that Wells Fargo violated Civil Code § 2924.11 in August 2018 is likewise plagued with incurable shortcomings; (iv) plaintiffs have not sufficiently articulated any damages; and (v) a portion of the wrongful foreclosure claim is barred by the doctrine ofjudicial estoppel, due to plaintiffs’ failure to disclose any potential claims relating to the subject loan or property in their 2018 bankruptcy schedules. C.C.P. § 430.10(e). 2. Eighth Cause of Action: Quiet Title Plaintiffs failto state a quiettitle claim because: (i) this cause of action is entirely derivative in nature, predicated on fatally defective theories that Wells Fargo violated Civil Code §§ 2923.5, 2923.6, and 2924.11; and (ii) plaintiffs cannot maintain a quiettitle claim without an actual tender of the full debt at issue. C.C.P. § 430.10(e). 3. Ninth Cause of Action: Violation of Bus. & Prof. Code § 17200, ef seq. Plaintiffs fail to state a cause of action for unfair business practices because: (i) this cause of action is entirely derivative in nature, predicated on fatally defective theories that Wells Fargo violated Civil Code §§ 2923.5, 2923.6, and 2924.11; (ii) this UCL claim is not pled with sufficient particularity; (iii) plaintiffs lack standing to assert a UCL claim; and (iv) thereis no basis for plaintiffs to recover restitution or injunctive relief against Wells Fargo, which are the only remedies available under the UCL to a private litigant. C.C.P. § 430.10(e). /11 Il 111 117 94000/FR 1240/02 186259-2 4 STATEMENT OF DEMURRERS A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4. Tenth Cause of Action: Declaratory Relief Plaintiffsfailto state a cause of action for declaratory relief because: (1) this claim is entirely derivative in nature, predicated on plaintiffs’ other defective causes of action; and (ii) given that the subject property was sold to a third party purchaserat the trustee’s sale, there no longer exists an “actual and present” controversy between plaintiffs and Wells Fargo. C.C.P. § 430.10(e). Respectfully submitted, Dated: November 12, 2018 ANGLIN, FLEWELLING, RASMUSSEN, CAMPBELL & TRYTTEN LLP byMidal) Cohn Michael Rapkine Attorneys for Defendant WELLS FARGO BANK, N.A. 94000/FR1240/02186259-2 5 STATEMENT OF DEMURRERS A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page STATEMENT OF DEMURRERS ...c.ocoiiriiiiiiiiitte eeeasesveteranseens 4 MEMORANDUM OF POINTS AND AUTHORITIES ........cooooiiiiiiieeceeeeeeeeecece 12 1. INTRODUCTION....cciiiiit erinseerseeesees ste e sbeebs ssa ssae eae sbe ete ssesne enna 12 2. SUMMARY OF THE FAC AND JUDICIALLY NOTICEABLE DOCUMENTS ............... 12 3. TO THE EXTENT THE WRONGFUL FORECLOSURE CLAIM IS BASED ON A VIOLATION OF CIVIL CODE SECTION 2923.5, IT FAILS AS A MATTER OF LAWcetteeteeeestehteae nesses beste atesteeesr essere ans 14 A. The Subject Property Does Not Appear To Have Been Owner-Occupied.................. 15 B. Plaintiffs’ Theory Concerning A Defective Notice of Default Falls Prey To The “Doctrine of Substantial Compliance”.........cccocevviiriieiieriniiieeceeeee, 15 C. Plaintiffs Cannot Allege A “Material” Statutory Violation ...........cecceeeeerieiereieennnnnn, 16 D. Plaintiffs Are Judicially Estopped From Asserting A Violation of Section 2023S eeesetenter erent neta eaten nearer tenant ens 16 4. PLAINTIFFS CANNOT ASSERT “DUAL TRACKING” THEORY UNDER FORMER CIVIL CODE SECTION 2923.6 ....uiiiiiiieeiesirieeee seersseein 18 A. Allegations of “Dual Tracking” in 2017 Are Not Pled With Any Specificity ............. 18 B. Civil Code Section 2923.6 Had A Sunset Date of December 31,2017 .......cooevvvvvnnnn. 19 C. A Default On A Prior Loan Modification Vitiates A Dual Tracking Claim................ 19 D. Plaintiffs Cannot Allege A “Material” Statutory Violation .........ccccocveinininciienn. 21 E. Allegations Under Section 2923.6 Are Also Barred By The Doctrine Of Judicial EStOPPEL...cccviriiiiiiieiect is es 21 5. PLAINTIFFS CANNOT ASSERT A CLAIM UNDER CIVIL CODE SECTION 2924.11ceroeternanetat eRe enter te ete en ee nnne ete te te enaenras 21 A. Plaintiffs Were Not Afforded HBOR Protection in 2018 .........cccooveiviiiiiiieiee, 21 B. Plaintiffs Cannot Plead A “Material” Violation Of Any HBOR Statute ..................... 22 6. PLAINTIFFS’ “PREDATORY LENDING” THEORY IS FATALLY FLAWED ................ 23 7. THE QUIET TITLE CLAIM IS LIKEWISE INCAPABLE OF AMENDMENT ................. 24 94000/FR1240/02186259-2 6 TABLE OF CONTENTS A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P I N ~ ~ O N W n 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8. THE UCL CLAIM IS CONCLUSORY AND MERITLESScocoon24 9. PLAINTIFFS’ REQUEST FOR DECLARATORY RELIEF FARES NO BETTER............. 26 94000/FR 1240/02186259-2 7 TABLE OF CONTENTS A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P W w ~ N O N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) FEDERAL CASES Anaya v. Advisors Lending Group, 2009 U.S. Dist. LEXIS 68373 (E.D. Cal. 2009) ....ooovirieiiiieceiciceceeeececeeeveeeee 24 Bell v. Wells Fargo Bank, N.A., 2014 U.S. Dist. LEXIS 153170 (C.D. Cal. 2014) ..cueoieuieiieieeeeeeeeeeeeeeee eeeeeeeeeeer, 15 Cornejo v. Ocwen Loan Servicing, LLC, 151 F. Supp. 3d 1102 (E.D. Cal. 2015)ucieectseeveeseen 16 Deschaine v. IndyMac Mortg. Servs., 617 F. Appx 690 (9th Cir. 2015) coiiiiiiiiiecreer19, 20 Groth-Hill Land Co., LLC v. GMLLC, 2013 U.S. Dist. LEXIS 103039 (N.D. Cal. 2013) ..icuiiriiiieieieeiecteetece ee23 Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778 (9th Cir. 2001) ..ccuiiiieiiiiiiieie estoreererateseres 17,18 Hay v. First Interstate Bank ofKalispell, N.A., 978 F.2d 555 (Oth Cir. 1992)ecmsreeersteeres 17 Haynish v. Bank ofAmerica, N.A., 2018 U.S. Dist. LEXIS 91274 (N.D. Cal. 2018)....cccviiieieeieneiieiceieeeeceeseer 15,19, 21 Hoffman v. Bank ofAmerica, N.A., 2010 U.S. Dist. LEXIS 70455 (N.D. Cal. 2010) ....cccuviiioiirieeiieceeieeteeceee ceceevens 25 Massett v. Bank ofAm., N.A., 2013 U.S. Dist. LEXIS 129651 (C.D. Cal. 2013) ..cuiiiiiiciiciceccecrccrecrececeeeveeene 18, 19 McNeil v. Wells Fargo Bank, N.A., 2014 U.S. Dist. LEXIS 89610 (N.D. Cal. 2014) ...cccviiiieiiiiiiiecieeeeeeeetreectseeeaves 15 Montes v. Wells Fargo Bank, N.A., 2017 U.S. Dist. LEXIS 174475 (E.D. Cal. 2017) oroticeects20 Morton v. Wells Fargo Bank, N.A., 2016 U.S. Dist. LEXIS 169419 (N.D. Cal. 2016) .....cccveoiiieiiiiereiecereeee23 Natividad v. Resmae Mortg. Corp., 2015 U.S. Dist. LEXIS 124641 (N.D. Cal. 2015)citieseres17 Ogamba v. Wells Fargo Bank, N.A., 2018 U.S. Dist. LEXIS 11734 (N.D. Cal. 2018)cectcetera20) 94000/FR1240/02186259-2 8 TABLE OF AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rabidou v. Wachovia Corp., 2014 U.S. Dist. LEXIS 175103 (N.D. Cal. 2014) ..c.ooiieieieieieeeeeeeeee ee17 Reyes v. Wells Fargo Bank, N.A., 2017 U.S. Dist. LEXIS 198129 (C.D. Cal. 2017) eecvvieieieiieeiieeeeeeeeeeeeeeeeeeeeens 20 Saridakis v. J.P. Morgan Chase Bank, 2015 U.S. Dist. LEXIS 16751 (C.D. Cal. 2015) c..iieiiiiieeieesieseeeeeeeeeeeevee 18 Smith v. Wells Fargo Bank, N.A., 2016 U.S. Dist. LEXIS 8368 (N.D. Cal. 2016) ....ccciiiiiiiiiecieirieeiecteectseevee 20 Woodring v. Ocwen Loan Servicing, LLC, 2014 U.S. Dist. LEXIS 100873 (C.D. Cal. 2014) ....ccieoiiiiiiriiirenreeeerrseee 18 STATE CASES Agnew v. State Bd. ofEqualization, 21 Cal. 4th 310 (1999)coerceeeeeee eee eee esate setae aera e sates ante eer e sear aeearean 22) Aguilar v. Bocci, 39 Cal. APP. 3A ATS (1974)ieeeesteseeesteerer esterase eres 24 Conrad v. Bank ofAmerica Nat. Bank & Sav. Assoc., 45 Cal. APP. 4th 133 (1996) ....eciiieeiieececeeeeeerstebeeen 17 Covenant Care, Inc. v. Superior Court, 32 Cal. 4th 771 (2004) ..ee eetesreeesree sree esas sera eseesabsbe bee ehe ee serene eenaeeser anes 18 Daro v. Superior Court, 151 Cal. App. 4th 1079 (2007). ..cceeeieeeeeseerseresseasonseens 25 Emery v. Visa Int’l Serv. Assoc., 95 Cal. APP. 4th 952 (2002).ceritaresteseers 25 Gavina v. Smith, 25 Cal. 2d 501 (1944)iiieteteeteerte eet esate sees beesbeers s best t estes eabe antes nee enrans 24 Governing Bd. v. Mann, I8 Cal. 3A BIO (1977)eectsereseste e ee ae ees tb tees taba este e ests estaearbaeeastae saves ennseesens 19 Graham v. Bank ofAmerica, N.A., 226 Cal. APP. 4th 594 (2014) eeecitiessteers erases eer e asses er eens ee sbe eer t este e sabe e she ens 25 Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. APP. 4th 497 (2013)meteoritestesters etree eae sb ere ese ease e een e teense a eaeenes 25 Karlsen v. American Sav. & Loan Ass'n, 15 Cal. APP. 3d 112 (1071)icieeestresses bese basse sear esse a sebaesanenis 24 94000/FR 1240/02186259-2 9 TABLE OF AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P © ~ ~ O N \ O 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kasky v. Nike, Inc., 27 Cal. 41h 939 (2002)o.ooeeteres teeneee 26 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003)weereeeee etre eset eee eer eter e eterna, 24 Lopez v. Southern Cal. Rapid Trans. Dist., 40 Cal. 3d 780 (1985)...stressestesteseeeeestoreee ee en 18 Mabry v. Superior Court, 185 Cal. App. 4th 208 (2010)....ccuiiireriiirieiereeiere estieevee eset eer eens 25 Oaks Management Corp. v. Superior Court, 145 Cal. App. 4th 453 (2006).....c.comvueriieieirreeesteeeeeeeeeeestoreeeeee 23 Otay Land Co. v. Royal Indemn. Co., 169 Cal. App. 4th 556 (2008).....c.eiiitiriieiieceteseeersteeeeeeeeee 26 People v. Johnson, 28 Cal. 4th 240 (2002) coveneeeeeeeeeeeeeeenenna 22 Perlas v. GMAC Mortgage, LLC, 87 Cal. App. 4th 429 (2010)....cuiiiiiiieeireienetceteraessereenone 23 Shimpones v. Stickney, 219 Cal. 637 (1934)...teetersebeters eres eters rete tenets tenes 24 Sipe v. McKenna, 88 Cal. App. 2d TOOT (1948) .....iiiiiiiieicteeterseterseesti 24 Thomas v. Gordon, 85 Cal. APP. 4th 113 (2000)..c..iiiuiiieceerieee cereeeeeteeee eee eee ote eee e eter teeta eee arses ere ents eee aans 17 Western Security Bank v. Superior Court, 15 Cal. 4th 232 (1997)weeteseteeeteaseseternoeeen enone 19 STATE STATUTES Cal. Bus. & Prof. Code § 17204...ccceeeeeeeereersteeres 25Cal. Civ. Code § 2923.42) ....c.eciiririieiiiiiieiteratesterete 25Cal. Civ. Code § 2923.5oiiteeeeres eerste tees teteraeaterspassimCal. Civ. Code § 2923.0 c..eviiiiiiiiieieeieee eeeeeeeeeeeeesetae erent etepassimCal. Civ. Code § 2923.6(C)....erveremiieetiniiieteietenieirietsteers a teeters ete se eset reteset en sete sees tease serene eens 18Cal. Civ. Code § 2923.6(C)(3) .eveveruerieiiirirreiiririricietetreesees esetessetereteesneeeeeeeetereeseeeeeaes 19, 20 94000/FR1240/02186259-2 10 TABLE OF AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cal. Civ. Code § 2923.6(8) ...vueurrereeireieriereieeeeeees sees eeeeee ee20,21 Cal. Civ. Code § 2923.55...eeeeeeeee eee eee eee eee ee15 Cal. Civ. Code § 2924.11o.ooeeeeee15,19,21,22 Cal.Civ. Code § 2924. 11(Q)......cueueereeirneieirenie 15 Cal. Civ. Code § 2924.12...eeeeeeeee eee eee eee eee eee ee22 Cal. Civ. Code § 2924. 12().....ccvurrereeieieieeeeeeeeeeeeeeeee eeeeee ee22 Cal. Civ. Code § 2924.12(D) ....ouvuiirireiniieieeeeeeeeeeeee eee eee eee ee22 Cal. Civ. Code § 2924. 15(2).......curiierienieeiiieeeeeeeee eee eee eee eee ee15 Cal. CIV. Code § 3281...eeeseesees ee22,23 Cal. CIV. Code § 3282...eeeeeeeee eee eee eee eee ee23 RULES Fed. Ro APD. PL 32.1(8)oooeeeeeeeee ee19 OTHER AUTHORITIES Black’s Law Dictionary (2013) ..c....cvvueuiueemiimeeeeeoeseeeeeeeee ees esses eee ee22] Oxford English Dictionary (2013) ..ccuevuiuiieieeectseeeeee eee eee ee22) 94000/FR1240/02186259-2 11 TABLE OF AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES 1. INTRODUCTION This action arises from a home loan obtained from Wells Fargo’s predecessor-in-interest in 2006, a subsequent loan modification that plaintiffs secured in 2010, and plaintiffs’ default on the modified loan in January 2012. Following nearly seven years of missed mortgage payments and numerous bankruptcy filings by plaintiffs, Wells Fargo completed a foreclosure on the subject property in September 2018. At the trustee’s sale, the property was acquired by a third party purchaser. This action now follows, with plaintiffs challenging the propriety of the foreclosure mechanics. Among other things, plaintiffs contend that Wells Fargo violated the Homeowners’ Bill of Rights (the “HBOR?”) by relaying a modification denial decision in August 2018, without a written letter that set forth the denial reason(s). Plaintiffs also complain that they were not afforded an opportunity to appeal Wells Fargo’s denial decision. In addition, plaintiffs contend that the loan modification they received in 2010 was “predatory” in nature. For the myriad reasons briefed below, plaintiffs cannot state a viable claim against Wells Fargo. 2. SUMMARY OF THE FAC AND JUDICIALLY NOTICEABLE DOCUMENTS In April 2006, plaintiff Frank Pestarino obtained a $749,000 home loan from Wells Fargo’s predecessor-in-interest, World Savings Bank, FSB.2 (FAC § 21.) The loan was memorialized in an adjustable rate promissory note and secured by a deed oftrust recorded against 422 19" Street, Huntington Beach, California. (FAC 921-22; Exh. A to FAC [Note] & Exh. B [Deed of Trust].) Approximately “[a] year after execution of the above documents, Mr. Pestarino executed and caused to be recorded a Grant Deed transferring the Subject Property to himself and [Marty] Bennett.” (FAC 9 23; Exh. C to FAC [Grant Deed].) In April 2010, plaintiffs (Mr. Pestarino and Ms. Bennett) obtained a loan modification from Wells Fargo. (FAC 4 24; Exh. D to FAC [Modification Agreement].) As reflected in the modification In January 2008,this original lender (World Savings Bank, FSB) changed its name to Wachovia Mortgage, FSB. It underwent a second name change to Wells Fargo Bank Southwest, N.A. before merging into Wells Fargo Bank, N.A. in November 2009. Attached to the accompanying RIN as Exhibits A through E are true and correct copies of records issued by the Office of Thrift Supervision, the Office of the Comptroller of the Currency, and the FDIC, which acknowledge this transition. 94000/FR 1240/02186259-2 12 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P agreement, plaintiffs’ debt was reduced from $792,427.18 to $760,730.09. (Exh. D at p.1.) Despite this principal reduction, plaintiffs complain aboutthe interest-only nature of the mortgage payments from 2010 through mid-2016. (FAC qf 24-25.) In January 2012, plaintiffs ceased making mortgage payments.’ During this period, plaintiffs encountered financial turmoil, as reflected by over $42,000 in tax liens recorded against the property. (RIN, Exhs. F & G.) Mr. Pestarino was also named in an adversary complaint by his attorneys (the Olson Law Firm), with this firm obtaining a $106,846 judgmentthat cannot be discharged in bankruptcy. (RIN, Exh. H [Adv. Comp.], Exh. I [Default Judgment] & Exh. J [Writ of Execution].) After years of missed payments, Wells Fargo had its foreclosure trustee record a notice of default with the Orange County Recorder on April 22,2016. (FAC § 26; Exh. E to FAC.) At the time, the loan arrearage stood at $245,059.40. (Exh. E at p.1.) Plaintiffs contend that Wells Fargo did not attempt to contact them prior to recording this notice of default to discuss foreclosure alternatives, in violation of Civil Code § 2923.5. (FAC 427 & 68-72.) Beginning in December 2012, plaintiffs filed a series of bankruptcies as a presumable means to stave off the commencement ofthe foreclosure. Attached to the RIN as Exhibit K is a compilation of bankruptcy dockets, evidencing seven (7) bankruptcies collectively filed by plaintiffs. At some unspecified time, “Plaintiffs submitted a completed loan modification application to WELLS FARGO.” (FAC 928.) On September 18, 2017, a notice oftrustee’s sale was recorded with respect to the property. (Exh. F to FAC.) Plaintiffs maintain that recordation ofthis notice constituted “dual tracking”, in violation of the Homeowners’ Bill of Rights. (the “HBOR”) (FAC 9929 & 75-77.) The above modification request appears to have been denied; however, plaintiffs “never gave up trying for a loan modification.” (FAC § 30.) The complaint goes on to allege that “[t]he most recent loan modification application was submitted on or about July 14,2018.” (FAC § 31.) According to plaintiffs, they received a telephone call from a bank manager named “Aaron” on August 2, 2018, who stated that Wells Fargo would not furnish the plaintiffs with another loan modification. (FAC § 32.) Aaron added that plaintiffs’ only loss mitigation option was a short sale of the property. /d. 3 This default is corroborated within the recorded notice of default. (Exh. E to FAC at p.2: “payment has not been made of: Installment of Principal and Interest plus impounds and/or advances which became due on 1/15/2012, plus late charges, and all subsequentinstallments of principal, interest . .”) 94000/FR 1240/02186259-2 13 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P O 0 0 3 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs complain that they are entitled to a written letter that sets forth the reasons for the denial. (FAC 1 34 & 82.) Another gripe of plaintiffs is that they were not afforded an opportunity “to appeal the denial ofthe application that was submitted on July 14, 2018.” (FAC q 35; see also, 9 82.) Around the time ofplaintiffs’ most recent modification request, Mr. Pestarino filed his latest bankruptcy. (Case No. 8:18-bk-12537-TA,filed on 7/12/18) (RIN, Exh. L [Bankr. Petition].) In this petition, Mr. Pestarino listed his residence as 21752 Pacific Coast Highway, Unit 15A, Huntington Beach, CA 92646. (RIN, Exh. L at p. 2.) On July 30, 2018, Wells Fargo brought a motion for relief from the automatic stay with respect to the subject property. (RIN, Exh. M.) On August 23, 2018, the Honorable Theodor C. Albert granted Wells Fargo’s motion for relief in Mr, Pestarino’s pending bankruptcy. (RIN, Exh. N.) Plaintiff Marty Bennett has also filed a recent bankruptcy in an effort to stave off a trustee’s sale. (Case No. 8:18-bk-12335-ES filed on 6/28/18) (RIN, Exh. O [Bankr. Petition] & Exh. P [Bankr. Schedules].) On July 10, 2018, Wells Fargo brought a motion for relief from the automatic stay with respect to the property. (RIN, Exh. Q.) On August 13, 2018, the Honorable Erithe A. Smith granted Wells Fargo’s motion for relief in Ms. Bennett’s bankruptcy. (RIN, Exh. R.) Having lost the benefit of the automatic stay, plaintiffs instituted a prior action against Wells Fargo on August 30, 2018. (Case No. 30-2018-01015961-CU-OR-CJC.) On September 5, 2018, plaintiffs sought a TRO to enjoin a trustee’s sale, yet the Honorable Deborah Servino denied a TRO. (RIN, Exh. S.) Shortly after this event, plaintiffs dismissed their prior action without prejudice. A trustee’s sale was held on September 6, 2018. (FAC 4936-37.) As reflected in the recorded trustee’s deed upon sale, defendant Magnum Property Investments (“Magnum™) purchased the property for $1,000,500.00. (RIN, Exh. T.) At the time ofthe sale, plaintiffs’ debt to Wells Fargo stood at $1,155,698.59. (RIN, Exh. T at p.1.) Plaintiffs now bring the instant action. As briefed below, not a single claim has merit. 3. TO THE EXTENT THE WRONGFUL FORECLOSURE CLAIM IS BASED ON A VIOLATION OF CIVIL CODE SECTION 2923.5, IT FAILS AS A MATTER OF LAW Plaintiffs assert a wrongful foreclosure claim that is entirely predicated on several alleged HBOR violations. To begin with,it is alleged that Wells Fargo violated Civil Code § 2923.5 by 94000/FR1240/02186259-2 14 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 recording a notice of default without attempting contact with plaintiffs to discuss the delinquency and foreclosure alternatives. (FAC 9927 & 68-72.) This claim suffers from the below shortcomings. A. The Subject Property Does Not Appear To Have Been Owner-Occupied As a preliminary matter, the HBOR claims fail because the subject property (422 19" Street, Huntington Beach, CA) does not appearto have been owner-occupied. Pursuant to Civil Code §2924.15(a), “[u]nless otherwise provided, Sections 2923.5, 2923.7, and 2924.11 shall apply only to first lien mortgages or deedsoftrust that are secured by owner-occupied residential real property containing no more than four dwelling units.” Section 2924.11(a) adds: “For these purposes, ‘owner- occupied’ meansthat the property is the principal residence ofthe borrower and is security for a loan made for personal, family or household purposes.” First, Frank Pestarino did not reside in the property at loan origination; after all, the “owner occupancy” box in Section 32 of the underlying deed oftrust is not checked. (Exh. B to FAC at p.14.) Furthermore, Mr. Pestarino’s recent bankruptcy petition confirms that he does not reside in the property. (RIN, Exh. L.) In this petition dated July 12, 2018, Mr. Pestarino stated under penalty of perjury that he resided at 21752 Pacific Coast Highway, Unit 15A, Huntington Beach, CA. (RJN, Exh. L at p. 2.) Moreover, the operative complaint confirms that the subject property was a rental property. (e.g., FAC 9 7: “Plaintiffs have lost rental income due to Defendants’ purposeful interference with Plaintiffs’ contracts.”) In light ofthe above, the claims under Civil Code §§ 2923.5 and 2924.11 fail, due to the owner- occupancy requirement in Section 2924.15(a). B. Plaintiffs’ Theory Concerning A Defective Notice of Default Falls Prey To The “Doctrine of] Substantial Compliance” Case law also confirms that modification discussions at any time are sufficient to defeat a claim under Civil Code §§ 2923.5 or 2923.55.% In Bell v. Wells Fargo Bank, N.A.,2014 U.S. Dist. LEXIS 153170, *7-10 (C.D. Cal. 2014), the district court dismissed a Section 2923.55 claim because the * Effective January 1, 2018, Civil Code § 2923.55 was replaced by Section 2923.5, which similarly governs the steps a lender must take before recording a notice of default. Haynish v. Bank ofAmerica, N.A4.,2018 U.S. Dist. LEXIS 91274, *7 (N.D. Cal. 2018) (“[t]he pre-2018 laws were repealed and a new, second set of provision took their place.”) 94000/FR1240/02186259-2 15 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P O 0 0 3 A N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 complaint conceded that modification talks occurred affer the notice of default was recorded. See also, McNeil v. Wells Fargo Bank, N.A., 2014 U.S. Dist. LEXIS 89610, *10-11 (N.D. Cal. 2014) (a concession that modification talks took place vitiated the Section 2923.5 claim, even though plaintiff insisted that Wells Fargo had not followed all the pre-NOD procedures outlined in the statute). In this case, plaintiffs submitted applications to Wells that resulted in modification denials in 2017 and 2018. (e.g., FAC 9928-32.) Plaintiffs stress that they “never gave up trying for a loan modification.” (§ 30.) It should be added that plaintiffs already received a modification in 2010 (Exh. D to FAC); thus, they were aware that Wells offered loss mitigation programs to delinquent borrowers. Put simply, there cannot be a reasoned contention that Wells Fargo has not “substantially complied” with Civil Code § 2923.5. After all, the purpose of this HBOR provision is to inform delinquent borrowers that there are foreclosure prevention alternatives. C. Plaintiffs Cannot Allege A “Material” Statutory Violation Ona related note, plaintiffs cannot plead a “material” violation of Section 2923.5. This issue is discussed in detail in Section 5(B) of this demurrer. See also, Cornejo v. Ocwen Loan Servicing, LLC, 151 F. Supp. 3d 1102, 1113 (E.D.Cal. 2015) (“Courts have interpreted the term ‘material’ to refer to whetherthe alleged violation affected a plaintiff's loan obligations or the modification process.”) D. Plaintiffs Are Judicially Estopped From Asserting A Violation of Section 2923.5 As touched on earlier in this motion, plaintiff Marty Bennett filed her latest bankruptcy on June 28,2018. (RIN, Exhs. O & P [Petition & Schedules] .) Plaintiff Frank Pestarino filed his latest bankruptcy on July 12, 2018. (RIN, Exh. L [Petition & Schedules].) In neither bankruptcy was there a disclosure of a potential claim relating to the subject loan or property. Schedule D to both bankruptcy schedules, entitled “Creditors Who Have Claims Secured By Property,”lists the home loan at issue. (RIN, Exh. L at p.25; see also, RIN, Exh. P at p.15.) The schedules include a “disputed” box for each debt listed. Although plaintiffs had bankruptcy counsel, neither plaintiff checked the “disputed” box on Schedule D; in other words,they did not disclose any potential claims against Wells Fargo with respect to the subject loan or property. Nor did plaintiffs list any claims against Wells Fargo in paragraph 33 of Schedule A/B, which asksthe debtor to list: “Claims against third parties, whether or not you have filed a lawsuit or made a 94000/FR 1240/02186259-2 16 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 demand for payment.” (RIN, Exh. L at p.21; RIN, Exh. P at p-10.) Although given the opportunity to raise a claim by checking “Yes”, both plaintiffs checked “No.” Id. Furthermore, paragraph 34 of Schedule A/B gave plaintiffs a third opportunity to list a claim against Wells Fargo. This paragraph asks debtors to list: “Other contingent and unliquidated claims of every nature, including counterclaims of the debtor and rights to set off claims.” (RIN, Exh. L at p21; RIN, Exh. P at p.10.) Once again, plaintiffs checked “No”to this question. Id. Plaintiffs now seek to pursue this suit after benefiting from bankruptcy protection. Because any claim thatattacks the propriety of the 2016 notice of default arose long ago, such claims are part of the bankruptcy estate and cannot be raised in this action. In Conrad v. Bank ofAmerica Nat. Bank & Sav. Assoc., 45 Cal. App. 4th 133, 148 (1996) (overruled on other grounds by Lovejoy v. AT&T Corp., 92 Cal. App. 4th 85, 93-94 (2001)), the Court of Appeal explained that equitable and judicial estoppel bars a lender liability action where the plaintiff’s claims were not disclosed in the bankruptcy. Likewise, in Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 556 (9th Cir. 1992), the Ninth Circuit affirmed a summary judgment in the lender’s favor when the plaintiffs failed to amend their schedules to include a claim against their lender after they discovered facts giving rise to their claim during the bankruptcy. Anotherinstructive case is Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 785 (9th Cir. 2001), for the Ninth Circuit explained: In this case, we must invoke judicial estoppel to protect the integrity of the bankruptcy process. The debtor, once he institutes the bankruptcy process, disrupts the flow of commerce and obtains a stay and the benefits derived by listing all his assets. The Bankruptcy Code and Rules impose upon the bankruptcy debtors an express, affirmative duty to disclose all assets, including contingent and unliquidated claims. It should added that judicial estoppel applies regardless of whether a debtor’s plan is confirmed or whether a bankruptcy discharge is received. The protection ofthe automatic stay based on a sworn petition is a sufficient benefitto trigger estoppel and prevent the subsequent assertion of undisclosed claims. See e.g., Rabidou v. Wachovia Corp., 2014 U.S. Dist. LEXIS 175103, *9, n. 44 (N.D. Cal. 2014) (collecting numerous cases applying judicial estoppelto bar suits where the plaintiff gained the benefit of the automatic stay); Thomas v. Gordon, 85 Cal. App. 4th 113, 120 (2000) (finding the 94000/FR1240/02186259-2 17 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 0 N N A N O o 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 existence of the automatic stay to be a sufficient benefit to trigger judicial estoppel to bar unscheduled claims); Natividad v. Resmae Mortg. Corp., 2015 U.S. Dist. LEXIS 124641, *5-6 (N.D. Cal. 2015). In this case, the Section 2923.5 claim rests entirely on Wells Fargo’s alleged failure to attempt contacts with plaintiffs prior to April 2016. (FAC 427 & 68-72.) An ability to assert such allegations existed well before plaintiffs filed their latest bankruptcies, yet plaintiffs failed to disclose any potential claimsrelating to the loan/property in their bankruptcy schedules. In the words of the Hamilton court, judicial estoppel, which “protect[s] the integrity of the bankruptcy process”, bars plaintiffs from asserting a Section 2923.5 claim in the present action. 4. PLAINTIFFS CANNOT ASSERT “DUAL TRACKING” THEORY UNDER FORMER CIVIL CODE SECTION 2923.6 Pursuant to California’s “anti-dual tracking” provision that was in effect in 2017 (Civil Code § 2923.6(c)), a mortgage servicer could not record a foreclosure notice or proceed with a trustee’s sale while a “complete” loan modification application was under review. Plaintiffs fail to state a viable violation ofthis former HBOR provision for the following key reasons. A. Allegations of “Dual Tracking” in 2017 Are Not Pled With Any Specificity Plaintiffs allege a violation under former Civil Code § 2923.6(c) by simply stating that a “complete” application was submitted to Wells Fargo at some point, and that recordation of a notice of sale in September 2017 constituted dual tracking. (FAC 4 28-29 & 75.) Such allegations are insufficient because plaintiffs fail to providefacts regarding the records they submitted, or the date(s) on which they transmitted the documents. “[E}very fact material to the existence of [a defendant’s] statutory liability must be pleaded with particularity.” Lopez v. Southern Cal. Rapid Trans. Dist., 40 Cal. 3d 780, 795 (1985); see also, Covenant Care, Inc. v. Superior Court, 32 Cal. 4th 771, 790 (2004). An instructive case is Woodring v. Ocwen Loan Servicing, LLC, 2014 U.S. Dist. LEXIS 100873, *20 (C.D. Cal. 2014), for the court explained: “Plaintiff’s bald allegation that she submitted ‘complete’ loan modification applications — without any factual allegations — is a conclusory statement, and the Court does not rely on such assertions in evaluating the sufficiency of Plaintiff’s complaint.”; see also, Saridakis v. J.P. Morgan Chase Bank, 2015 U.S. Dist. LEXIS 16751, *5 (C.D. Cal. 2015) (same). By contrast, an example ofa sufficient dual tracking allegation can be seen in Massett v. Bank of 94000/FR1240/02186259-2 18 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P O O 0 0 N N O N W n B s 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Am., N.A., 2013 U.S. Dist. LEXIS 129651 (C.D. Cal. 2013). In Massett, the borrowers attached an email from a bank representative to the pleadings, which stated: “‘I am sending this email as confirmation of my receipt of all of the financial documents required in order to have a speedy review for modification. We do not need any further documentation at this point in time. . .”> Massett, 2013 U.S. Dist. LEXIS at *6. As further evidence that the modification review was “pending”, the borrowers attached a second email from their lender,stating: “‘The accountis currently still in review.” Id. at *6. B. Civil Code Section 2923.6 Had A Sunset Date of December 31, 2017 As another threshold matter, a claim under former Civil Code § 2923.6 necessarily fails because this statutory provision was only in effect between January 1, 2013 and December 31, 2017. As explained in Haynish v. Bank ofAmerica, N.A., 2018 U.S. Dist. LEXIS 91274, *7 (N.D. Cal. 2018), “[t]he pre-2018 laws were repealed and a new, second set of provision took their place.” Under California law, “when a pending action rests solely on a statutory basis, and when no rights have “vested underthe statute, a repeal of (the) statute without a saving clause will terminate all pending actions based thereon.” Governing Bd. v. Mann, 18 Cal. 3d 819, 829 (1977) (citation omitted). There is also a strong presumption against the retroactive application of new laws. Western Security Bank v. Superior Court, 15 Cal.4™ 232, 243 (1997) (“A basic canon of statutory interpretation is that statutes do not operate retrospectively unless the Legislature plainly intended them to do s0.”) Effective January 1, 2018, Civil Code § 2923.6 was replaced by Section 2924.11, which contains a similar (but less stringent) prohibition against dual tracking. Haynish, supra, 2018 U.S. Dist. LEXIS at *7. Any claim the plaintiffs in this action may have had under the pre-2018 Section 2923.6 “did not vest because they have not yet been granted final relief.” Id. at *12. C. A Default On A Prior Loan Modification Vitiates A Dual Tracking Claim In Deschaine v. IndyMac Mortg. Servs., 617 F. App’x 690 (9th Cir. 201 5),° the borrower asserted a handful of claims against her lender, including a statutory claim under Civil Code § 2923.6. In affirming the dismissal by the district court, the Ninth Circuit emphasized that there are two exceptions in which a borrower is not afforded continued HBOR protection. First, “section 3 Deschaine is not published. Pursuant to Federal Rule of Appellate Procedure 32.1(a), citations to unpublished orders by the Ninth Circuit are permitted, although such decisions are non-precedential. 94000/FR1240/02186259-2 19 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2923.6(c)(3) specifically authorizes a lender to pursue foreclosure against a defaulted borrowerif [t]he borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under,the first lien loan modification.”” Deschaine, 617 F. App’x at 693. Second, “Civil Code § 2923.6(g) states that ‘[i]n order to minimize the risk of borrowers submitting multiple applications . . . 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 lien loan modification prior to January 1, 2013.” Deschaine, 617 F. App’x at 693. Based on these exceptions enacted to curb abuse of the HBOR,the Ninth Circuit concluded that Mr. Deschaine was not afforded protection under Section 2923.6 in thefirst place, due to his receipt of a prior loan modification and subsequent default. 7d. at 693. Recent authority has embraced Deschaine. In Ogamba v. Wells Fargo Bank, N.A., 2018 U.S. Dist. LEXIS 11734, *7 (N.D. Cal. 2018), the district court granted Wells Fargo’s motion to dismiss, explaining that a default on a previous modification precluded plaintiff from maintaining a Section 2923.6 claim. (“The two cited HBOR protections, the right to a single point of contact as defined by law and protection against dual tracking, apply only to a borrowers first loan modification application. Plaintiff, proceeding on herthird loan modification application, enjoyed neither statutory privilege.”) Other courts have recently followed Deschaine, dismissing HBOR claims due to the borrower's receipt of a prior modification and a default on the modified loan. See e.g., Smith v. Wells Fargo Bank, N.4.,2016 U.S. Dist. LEXIS 8368, *7-8 (N.D. Cal. 2016) (“under section 2923.6(c)(3), a borrower who already obtained and defaulted on a first lien loan modification is not entitled to the protections against recording of notices and conducting a trustee's sale during the pendency of a later loan modification application.”); Montes v. Wells Fargo Bank, N.A., 2017 U.S. Dist. LEXIS 174475, *14 (E.D. Cal. 2017) (the district court cited Deschaine and held: “An unpublished, persuasive Ninth Circuit opinion explains § 2923.6 does not apply where, as here, a plaintiff has already defaulted on prior loan modifications.”)® In the instant action,the facts are incontrovertible that plaintiffs received a prior modification, 6 See also, Reyes v. Wells Fargo Bank, N.A.,2017 U.S. Dist. LEXIS 198129, *14, n.10 (C.D. Cal. 2017) (“In addition, the HBOR claims would fail even if HBOR applied because of Plaintiffs default on a prior modification.”) 94000/FR1240/02186259-2 20 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 only to default on this modified loan. Thus, plaintiffs were not afforded HBOR protection in 2017. D. Plaintiffs Cannot Allege A “Material” Statutory Violation As with each allegation of an HBOR violation, plaintiffs cannot plead a “material” violation of Civil Code § 2923.6. The issue of materiality is discussed in detail in Section 5(B) of this demurrer. E. Allegations Under Section 2923.6 Are Also Barred By The Doctrine Of Judicial Estoppel The Section 2923.6 claim also fails because plaintiffs did not assert any claims relating to the loan or property in their 2018 bankruptcy. (see Section 3(D) of demurrer for analysis.) 5. PLAINTIFFS CANNOT ASSERT A CLAIM UNDER CIVIL CODE SECTION 2924.11 The wrongful foreclosure claim also rests on the gripe that plaintiffs’ recent modification request was telephonically denied on August 2, 2018. (FAC 932 & 82.) Plaintiffs contend that Section 2924.11 requires issuance of a letter listing the denial reason(s). Id. Plaintiffs add that they were not afforded an opportunity to appeal the denial decision. (FAC qf 35 & 82.) Putting aside the owner-occupancy issue, a Section 2924.11 claim fails for the below reasons. A. Plaintiffs Were Not Afforded HBOR Protection in 2018 To begin with, plaintiffs were not afforded protection under Section 2924.11 due to their previous modification reviews. (FAC 9 30: Plaintiffs “never gave up trying for a loan modification.”) Prior to 2018, a borrower who had previously been denied a modification had a right to an additional review if they submitted evidence of a “material change in financial circumstances.” See Former Civil Code § 2923.6(g) (2013). Yet as explained in Haynish v. Bank ofAmerica, N.A4., 2018 U.S. Dist. LEXIS 91274, *14 (N.D. Cal. 2018), “[t]he repeal of that provision does not suggest a loosening of pleading requirements for plaintiffs; it instead suggests that under the current law, a servicer is not obligated to review a modification application from a borrower who was previously denied, even if the borrower experienced a material change in circumstances since the last denial.” Thus, Wells Fargo was not obligated to perform a formal modification review in 201 8. 7 Indeed, Haynish presents the only viable interpretation concerning the present version of the HBOR. Under the “anti-dual tracking” provision prior to 2018 (Civil Code § 2923.6), a borrower that received a modification denial was entitled to another review if they could substantiate a material change in finances. With the omission of the “material change” provision in the new anti-dual tracking provision (Section 2924.11), a borroweris either entitled to a single meaningful review or an endless number of reviews. If the latter interpretation were adopted, lenders would never be able to foreclose, rendering the lender’s security interest absolutely meaningless. 94000/FR1240/02186259-2 21 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P W w ~ ~ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 It should be added that even if plaintiffs could assert a claim under Section 2924.11 (and they cannot), there is no right to appeal a modification denial underthis statute. Accordingly, the allegations concerning appeal rights (FAC {9 35 & 82) should be disregarded by the Court. B. Plaintiffs Cannot Plead A “Material” Violation Of Any HBOR Statute In addition, plaintiffs fail to state an HBOR claim because there are no facts alleged that would remotely suggest a “material” violation of any statute. Indeed, Civil Code § 2924.12 is abundantly clear that a borrower must demonstrate a “material” violation to obtain any relief under the HBOR. Section 2924.12(a) deals with claims brought before a trustee’s sale: “[i]f a trustee’s deed upon sale has not been recorded, a borrower maybring an action for injunctive relief to enjoin a material violation of Section 2923.5, 2923.7, 2924.11, or 2924.17.” The same “materiality” requirement applies under Civil Code § 2924.12(b) to claims brought post-sale (emphasis added): 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 pursuant to Section 3281, resulting from a material violation of Section 2923.5, 2923.7, 2924.11, or 2924.17 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. If the court finds that the material violation was intentional or reckless, or resulted from willful misconduct by a mortgage servicer, mortgagee,trustee, beneficiary, or authorized agent, the court may award the borrowerthe greater of treble actual damagesorstatutory damagesoffifty thousand dollars ($50,000). The word “material”is not defined in the HBOR, yet the ordinary meaning of the word, understood from its definition, case law, and other language in the statute, indicates that a “ma terial” violation is onethatis substantial enough to have caused actual harm. Otherwise,the legislature would not have included the word “material”in the statute. If the legislature had chosen,it could have enabl ed borrowersto receive relief for any statutory violation, regardless of how trivial. However, “[o]ne of the guiding principles ofstatutory construction,[is] that significance be accorded every word of an act.” People v. Johnson, 28 Cal. 4th 240, 246-247 (2002); see also, Agnew v. State Bd. ofEqualization, 21 Cal. 4th 310, 330 (1999) (“the court should avoid a construction that makes some words surplusa ge.”).’ $ According to Black’s Law Dictionary (2013), the word “material” means “having influence or effect.” Similarly, the Oxford English Dictionary (2013) defines “material” as “important; essential; relevant.” In the context of Civil Code §§ 2923.5, 2923.6, and 2924.11, the word “material” therefore means that the statutory violation caused harm, whichis also why Civil Code § 2924.12(b) specifically 94000/FR1240/02186259-2 22 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Here,it is alleged that plaintiffs were entitled to a modification denial letter and a right to appeal the bank’s decision from August 2018. (FAC 99 32-35 & 82-83.) However, plaintiffs do notarticulate how the purported HBOR violations resulted in actual damages. Tellingly, there are no allegations that plaintiffs qualified for another modification. Morton v. Wells Fargo Bank, N.A., 2016 U.S. Dist. LEXIS 169419, *12 (N.D. Cal. 2016) (an HBORviolation is material if the lender’s blunder affected the outcome of the modification review process).’ For the foregoing reasons, this demurrer should be sustained without leave to amend. 6. PLAINTIFFS’ “PREDATORY LENDING” THEORY IS FATALLY FLAWED In a stray passage of the complaint, plaintiffs complain that the “interest only” mortgage payments outlined in the 2010 modification agreement “set the Plaintiffs up to fail . . .” (FAC 125) Such allegations fail for three critical reasons. To begin with, a lender has no obligation to place a borrower in an “affordable” loan, or one with desirable interest payments. In Perlas v. GMAC Mortgage, LLC, 87 Cal. App. 4th 429 (2010) (certifiedfor partial publication), the Court of Appeal rejected allegations that a bank should have known that a loan was not affordable, for this position “ignores the nature of the lender-borrower relationship” — specifically, that “there is no fiduciary relationship between the borrower and lender” and that “[a] commercial lender pursuesits own economic interests in lending money.” Perlas, 87 Cal. App. 4th at 436; see also, Oaks Management Corp. v. Superior Court, 145 Cal.App.4th 453, 466 (20006). Furthermore, any claim that attacks the 2010 modification agreement is fatally time-barred. Evenif the Court were to apply the four-year “catch-all” statute of limitations period provided under C.C.P. § 343, a cause of action based on predatory lending would have run four (4) years after plaintiffs executed the modification agreement ~ i.e., by the spring of 2014.'° states that a borrower can only bring a suit post-sale if there are “actual economic damages.” This conforms with the language of Civil Code § 3281, which is cited in Section 2924.12 asthe basis for recovery. Section 3281 provides: “Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages.” See also, Civil Code § 3282. Section 8 ofthis demurrer further discusses the plaintiffs’ lack of damages. 1 Moreover,there is no basis for plaintiffs to assert a tolling theory. Tolling may only delay accrual “until the plaintiff discovers, or has reason to discover, the cause of action.” Groth-Hill Land Co., LLC 94000/FR 1240/02186259-2 23 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Finally, a predatory lending theory fails because plaintiffs did not assert potential claims relating to the loan or property in their 2018 bankruptcy schedules. (for analysis, see Section 3(D), supra.) 7. THE QUIET TITLE CLAIM IS LIKEWISE INCAPABLE OF AMENDMENT Plaintiffs also seek an order quieting title to the property in their favor,free of any liens or encumbrances. (FAC 4 136.) This equitable claim necessarily fails because it rests entirely on the prior causes of action. Furthermore, plaintiffs clearly cannot tender the full debt at issue. Indeed, “[i]t is settled in California that a mortgagor cannot quiethistitle against the mortgagee without paying the debt secured.” Shimpones v. Stickney, 219 Cal. 637, 649 (1934); see also, Aguilar v. Bocci, 39 Cal. App. 3d 475, 477, (1974) (trustoris unable to quiet title “without discharging his debt”); Sipe v. McKenna, 88 Cal. App. 2d 1001, 1006 (1948) (same); Gavina v. Smith, 25 Cal. 2d 501, 505-506 (1944) (same). The reasoning is that: “[a]llowing plaintiffs to recoup the property without full tender would give them an inequitable windfall, allowing them to evade their lawful debt.” Karlsen v. American Sav. & Loan Ass’n, 15 Cal. App. 3d 112, 121 (1971). Here,plaintiffs’ loan arrearage alone stood at $245,059.40 in April 2016, and it continued to grow leading upto the trustee’s sale. (Exh. E to FAC.) Atthe time of the sale, the total secured debt was $1,155,698.59, as reflected in the trustee’s deed. (RIN, Exh. T at p.1.) Given this considerable debt and plaintiffs’ serial bankruptcy filings, an inability to tender even a portion ofthe debt at issue is manifest. Anaya v. Advisors Lending Group, 2009 U.S. Dist. LEXIS 68373, *27 (E.D. Cal. 2009) (a failure to make monthly payments reflects an inability to tender the total amount owed). 8. THE UCL CLAIM IS CONCLUSORY AND MERITLESS The UCL claim incorporates the prior causes of action by reference and states: “Defendants committed acts of unfair competition as defined by the UCL, by engaging in acts as described supra...” (FAC 9140.) Because the prior causes of action are defective, the UCL claim falls by the wayside. Furthermore, a UCL claim must be pled with particularity. Korea Supply Co. v. Lockheed v. GMLLC, 2013 U.S. Dist. LEXIS 103039, *27 (N.D. Cal. 2013) (citing Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 807 (2005).) Here, plaintiffs were on actual notice ofthe interest rates on their payments when they signed the modification agreement in 2010. (FAC § 24; Exh. D to FAC.) Not to mention that plaintiffs were reminded ofthe loan terms when they received monthly mortgage statements. Put simply, plaintiffs’ deadline to assert a predatory lending theory ran in spring 2014. 94000/FR 1240/02186259-2 24 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Martin Corp., 29 Cal. 4th 1134, 1143 (2003). Here, the defendants are lumped together, which is improper. (FAC 99 140 & 142-46.) As explained in Emery v. Visa Int'l Serv. Assoc., 95 Cal.App.4th 952, 960 (2002), “an unfair practices claim under section 17200 cannot be predicated on vicarious liability. . . a defendant’s liability must be based on his personal participation in the unlawful practices and unbridled control over the practices that are found to violate section 17200 or 17500.” Even more important, a private litigant must have lost money or property as a result of the unfair competition in order to have UCL standing. Bus. & Prof. Code § 17204; Daro v. Superior Court, 151 Cal. App. 4th 1079, 1098 (2007). Here,there is an absence of actual loss — after all, plaintiffs borrowed money and failed to repay the loan, in spite receiving a favorable loan modification in 2010. Numerous courts have affirmed this position. In Graham v. Bank ofAmerica, N.A., 226 Cal. App. 4th 594, 614 (2014), the Court of Appeal explained that UCL standing was not present because the “prospect of losing the home to foreclosure [was] the result of default, not the alleged conduct of defendants.” See also, Jenkins v. JP Morgan Chase Bank, N.A.,216 Cal. App. 4th 497, 523 (2013) (the Court of Appeal explained that plaintiff's “home was subject to nonjudicial foreclosure because of [her] default on her loan, which occurred before Defendants’ alleged wrongful acts. . .”). The sameis true in this case, for plaintiffs cannot establish a link between their lender’s conduct and loss of the property. The facts are incontrovertible that plaintiffs defaulted on the loan in 2012, despite receipt of a modification. Public records also reveal a numberof delinquencies with respect to other creditors. Put simply, plaintiffs lost the property due to an inability to make mortgage payments, rather than due to flawsin the foreclosure mechanicsthat are alleged to have emerged in 2016. In addition, courts are unanimous that there is no right to a modification! — thus, it is difficult to understand how Wells Fargo’s failure to provide a second modification has resulted in actual damages. "As explained in the seminal case ofMabry v. Superior Court, 185 Cal. App. 4th 208, 223 (2010), the Civil Code “does not does not operate substantively. Section 2923.6 merely expresses the hope that lenders will offer loan modifications on certain terms.”(italics in original); see also, Hoffman v. Bank ofAmerica, N.A.,2010 U.S. Dist. LEXIS 70455, *15 (N.D. Cal. 2010) (“lenders are not required to make loan modifications for borrowers that qualify under [the Home Affordable Modification Program], nor doesthe servicer’s agreement confer an enforceable right on the borrower”). Even the Homeowners’ Bill of Rights contains an express provision at Civil Code Section 2923.4(a), stating that there is no right to a loan modification — the purpose of the HBORis simply to afford borrowersa “meaningful opportunity”to be considered for loss mitigation options. 94000/FR1240/02186259-2 25 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Finally, the only remedies available to a private litigant under the UCL are restitution and injunctive relief. Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002). Given that the subject property was sold to defendant Magnum at the trustee’s sale, plaintiffs cannot articulate how an injunction can be issued with respect to Wells Fargo at this point. Asfor a restitution theory, plaintiffs borrowed money and their debt continued to balloon due to seven years of missed mortgage payments. At the time of the trustee’s sale, the secured debt owed to Wells Fargo stood at $1,155,698.59. (RIN, Exh. T at p.1.) Because the property was “underwater”, Wells Fargo only recouped $1,000,500 at the sale. Id. In other words, Wells Fargo lost money from the loan transaction, so it is difficult to understand how it derived an “ill gotten” gain from plaintiffs. 9. PLAINTIFFS’ REQUEST FOR DECLARATORY RELIEF FARES NO BETTER In the final cause of action, plaintiffs seek a determination that the trustee’s sale be set aside. (FAC 7 148; see also, Prayer § A-D.) Plaintiffs bring this declaratory relief claim by incorporating their previous allegations by reference and arguing that Wells Fargo violated “numerousstate and federal laws” during the foreclosure process. (FAC 149.) This claim falls by the wayside because it is entirely derivative in nature, predicated on flawed allegations that Wells Fargo violated the HBOR. Moreover, plaintiffs do not adequately allege an actual and present controversyin relation to Wells Fargo. Otay Land Co. v. Royal Indemn. Co., 169 Cal.App.4™ 556, 562 (2008). After all, the non- judicial foreclosure was completed on September 6, 2018, with third party purchasers acquiring the subject property as highest bidder at public action. Given this reality, the only “actual and present controversy” that still exists relates to whetherthe eviction process is being properly conducted, and this dispute is between plaintiffs and the current owners of the property. Forall of the above reasons, Wells Fargo’s demurrer should be sustained in its entirety. Respectfully submitted, Dated: November 12, 2018 ANGLIN, FLEWELLING, RASMUSSEN, CAMPBELL & TRYTTEN LLP By: IMA NS Michael Rapkine © Attorneys for Defendant WELLS FARGO BANK, N.A. 94000/FR1240/02186259-2 26 MEMORANDUM OF POINTS AND AUTHORITIES A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) I am employed in the County of Los Angeles, State of California. I am over the age of 18 years and not a party to the within action. My business address is 301 N. Lake Ave, Suite 1100 Pasadena, CA 91101-4158 On the date below, I served the foregoing document(s) described as: DEFENDANT WELLS FARGO’S NOTICE OF DEMURRER AND DEMURRER TO THE FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES; DECLARATION OF MICHAEL RAPKINE on the interested parties in this action by placing a true and correct copy enclosed in a sealed envelope as follows: Attorneysfor Plaintiffs Attorneysfor Defendant Frank Pestarino and Marty Bennett Magnum Property Investments, LLC Krystina T. Tran, Esq. Harris L. Cohen, Esq. LAW OFFICES OF TRAN & ISERHIEN, PC HARRIS L. COHEN, A PROF. CORP. 17011 Beach Boulevard, Suite 830 5305 Andasol Avenue Huntington Beach, CA 92647 Encino, CA 91316 Tel: (949) 797-9090 | Fax: (877) 502-1004 Tel: (818) 905-5599 | Fax: (818) 905-5660 Attorneysfor Defendant Magnum Property Investments, LLC Elkahah J. Burns, Esq. LAW OFFICES OF ELKANAH J. BURNS 847 N. Hollywood Way, Suite 201 Burbank, CA 91505 Tel: (818) 840-8889 | Fax: (818) 905-2708 BY MAIL: I am readily familiar with the firm’s practice of collection and processing correspondence by mailing. Under that same practice it would be deposited with U.S. Postal Service on that same day with postage fully prepaid at Pasadena, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. 94000/FR 1240/02186259-2 27 PROOF OF SERVICE A N G L I N F L E W E L L I N G R A S M U S S E N C A M P B E L L & T R Y T T E N L L P 10 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I declare under penalty of perjury under the laws ofthe State of California that the foregoing is true and correct. Executed on November 12, 2018, in Pasadena, California. 5 remand] 2 ~ / / / A Kimberly Wooten AN Als( AC (Type or Print Name) “ (Signatureof Declarant) 94000/FR1240/02186259-2 28 PROOF OF SERVICE