NorCal tentative ruling - CA Judge GETS IT!

* TENTATIVE DECISION *

Plaintiff VS. JP MORGAN CHASE BANK

HEARING ON DEMURRER TO 1st Amended COMPLAINT of Plaintiff

FILED BY QUALITY LOAN SERVICE CORP.

The Court rules as follows on the general demurrer brought by defendant Quality Loan Service Corporation.  (Cal. Code Civ. Proc., section 430.10, subd. (e).)  The demurrer is directed to plaintiff's First Amended Complaint, filed on July 29, 2011.

            Defendant's request for judicial notice is granted.  Defendant's demurrer is overruled, as to all three causes of action stated against defendant: the First, Second, and Third Causes of Action.  Defendant shall file an answer on or before March 16, 2012.  The basis for this ruling is as follows.

            1st C/A (Declaratory Relief).  The Court disagrees with defendant's argument that plaintiff is improperly seeking relief for past wrongs in this cause of action; plaintiff is seeking a determination of the present state of the note and deed of trust.  (See, e.g., Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947-948.)  Further, a defendant cannot attack a declaratory relief claim on the merits; so long as an actual controversy is alleged, the pleader need not establish the right to a favorable judgment.  (Id.  See also, Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 187, 221 ["a demurrer is a procedurally inappropriate method for disposing of a complaint for declaratory relief"].)

            2nd C/A (Slander of Title).  The Court agrees that defendant’s alleged conduct in recording documents is subject to the privilege of Civil Code section 47.  However, it is the qualified common interest privilege that applies here, and the qualified privilege leaves trustees open to liability if they act with malice.  (Kachlon v. Markowitz(2008) 168 Cal.App.4th 316, 333,

339-340.)  Malice is defined as actual malice, meaning “that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.”  (Id., at 336 [italics in original].)  Plaintiff has alleged sufficient facts in his Second Cause of Action to show that defendants acted with malice.

            3rd C/A (Quiet Title).  The Court overrules defendant's demurrer to the Third Cause of Action on the same grounds set forth in the Court's ruling on the demurrer brought by the JP Morgan defendants.   (Please see Line 8 below.)

HEARING ON DEMURRER TO 1st Amended COMPLAINT of Plaintiff FILED BY JP MORGAN CHASE BANK N.A

The Court rules as follows on the general demurrer brought by defendant JP Morgan Chase Bank, N.A., and by defendant Federal National Mortgage Association.  (Cal. Code Civ. Proc., section 430.10, subd. (e).)  The general demurrer is directed to plaintiff's First Amended Complaint, filed on July 29, 2011.

            Defendants' request for judicial notice is granted.  Defendants' demurrer is overruled as to both of the two causes of action that are the subject of the demurrer: the Third and the Fourth Causes of Action.  Defendants shall file an answer on or before March 16, 2012.  The basis for this ruling is as follows.

            3rd C/A (Quiet Title).  Plaintiff adequately alleges two grounds for bringing a quiet title action.

            First, plaintiff alleges that defendants never obtained a valid assignment of the subject note and deed of trust from the original lender.  Defendants have not persuasively argued why, if these allegations are proved to be true, plaintiff should not be able to dispute the defendants' claim to a security interest in plaintiff's real property.

            Second, plaintiff alleges anomalies in the chronology of the foreclosure process that would appear to render the notice of default "void," and not merely voidable:

6-15-10            JP Morgan and QLS recorded a notice of default.

                        (FAC, paragraph 26.)

8-30-10            JP Morgan recorded an assignment of deed of trust from

                        Fannie Mae to JP Morgan.  (FAC, paragraphs 28 and 29.)

9-23-10            QLS recorded a substitution of trustee.

                        (FAC, paragraph 31.)

These allegations have been confirmed by defendants' own request for judicial notice of the same

recorded documents referred to by plaintiff.   (See defendants' Request for Judicial Notice, Exhibits 3, 4, and 5.)  In addition, defendants' request for judicial notice demonstrates that the assignment of the subject deed of trust from Fannie Mae to JP Morgan was not executed until August 25, 2010, and that the substitution of trustee was not executed until September 16, 2010  (RJN, Exhibits 4 and 5 [notarized signatures dated August 25 and September 16, 2010].)

            Thus it is undisputed that the notice of default was recorded by JP Morgan and QLS more than two months before an assignment to JP Morgan was effected (August 25, 2010), and more than three months before QLS was appointed as the foreclosure trustee (September 16, 2010).  Defendants have failed to make a persuasive argument why a deed of trust recorded by persons with no interest in the subject property should not be deemed void.  (See, Cal. Civil Code, sections 2924(a)(1) and 2924b, subd. (b)(4); Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868, 876‑877.)

            The Court finds the Gomes decision to be easily distinguishable.  (See, Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149.)  That decision dealt with the question of whether a borrower could bring a cause of action to challenge the authority of Mortgage Electronic Registration Systems, Inc. ("MERS") to initiate foreclosure proceedings.  MERS had been named as the beneficiary in the recorded deed of trust, and as the Court of Appeal noted: "[t]he role of MERS is central to the issues in this appeal."  (Gomes, supra, 192 Cal.App.4th at 1151.)  The Gomes case is distinguishable from the case at bar because here defendants' own request for judicial notice confirms that the parties who initiated foreclosure proceedings (JP Morgan and QLS) did so at a time when neither had an interest of any kind in the subject real property.

            The tender rule is not a defense, for two reasons.  First, plaintiff is contesting the validity of the underlying debt; to require plaintiff to tender the full amount of the underlying debt to the JP Morgan defendants would be to require that plaintiff affirm the validity of the JP Morgan defendants' right to collect that underlying debt.  (See, Lona v. Citibank, N.A. (2011)  202 Cal.App.4th 89, 112-113.)  Second, plaintiff alleges that the subject notice of default is void, and not merely voidable, and plaintiff thereby invokes a second recognized exception to the tender rule.  (See, Lona, supra, 202 Cal.App.4th at 112; Dimock, supra, 81 Cal.App.4th at 878.

            The Court's ruling on the demurrer to the Third Cause of Action is not based on section 2932.5 of the California Civil Code.  The Court agrees with defendants' position that section 2932.5, which requires that assignments be recorded before foreclosure proceedings are commenced, applies only to mortgages, and not to deeds of trust.

            4th C/A (Civil Code section 2943).  While the Fourth Cause of Action is not a model of clarity, the gist of plaintiff's legal theory is clear; and the question of whether defendants' alleged misconduct was "willful" is a fact-intensive question that is not appropriately resolved by demurrer.

* TENTATIVE RULING: *

Plaintiff VS. QUALITY LOAN SERVICE CORPORATION, ET AL.

PRO/PER v QUALITY LOAN SERVICE CORPORATION

DEMURRER TO 1st Amended COMPLAINT of Plaintiff BY EMC MORTGAGE CORPORATION

•  The Demurrer to the First Cause of Action for Breach of Contract is SUSTAINED WITH LEAVE TO AMEND.  (Code Civ. Proc. § 430.10(e)).  Plaintiffs allege that a loan modification agreement was breached and that a forbearance agreement was breached.  While the allegations show that there could be no breach of an agreement to modify the loan, the allegations fail to preclude a breach of contract based on a forbearance agreement where a lender agreed to forego foreclosure under circumstances that were met.  Subsequent allegations made in support of the fraud claim but not made part of the allegations in support of the instant claim show that Plaintiffs may be basing their claim on a breach of an agreement other than one to modify the loan.  The allegations are insufficiently specific to determine what claim Plaintiffs intend to pursue here. 

• The Demurrer to the Second Cause of Action for Breach of the Implied Covenant of Good Faith And Fair Dealing is SUSTAINED WITH LEAVE TO AMEND.  Plaintiffs fail to allege facts showing a valid contract for which any Defendant breached the implied covenant of good faith and fair dealing. 

• The Demurrer to the Third Cause of Action for Fraud and Deceit is SUSTAINED WITH LEAVE TO AMEND.  Plaintiffs fail to sufficiently specify who allegedly made the misrepresentations.  Plaintiffs only generally allege “Defendants” made such misrepresentations without, at the least, alleging which Defendant they were purportedly speaking on behalf of or employed by at the time they made the misrepresentations.  However, contrary to EMC’s contention that Plaintiffs allege that they could not have cured a default, Plaintiff’s allege that they would have taken appropriate steps to protect their interests had Defendants been honest about their intent to proceed with a Trustee’s Sale.  Thus, the Court rejects EMC’s contention that the claim fails for a lack of justifiable reliance. 

• The Demurrer to the Fourth Cause of Action for Wrongful Foreclosure is OVERRULED.  Contrary to EMC’s contention, Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155-56, is inapposite because Plaintiffs specifically allege that based on the fraudulent conduct of robo-signers the entity that initiated the foreclosure lacked the authority to proceed with the foreclosure.  

•  The Demurrer to the Fifth Cause of Action for Promissory Estoppel is SUSTAINED WITH LEAVE TO AMEND.  (Code Civ. Proc. § 430.10(e)).  The allegations are insufficiently specific.  Plaintiffs fail to allege the source of the promise to refrain from recording a notice of trustee’s sale if Plaintiffs refrained from seeking legal help to avoid a trustee’s sale. 

• The Demurrer to the Sixth Cause of Action for Violation of the Unfair Practices Act is OVERRULED. 

• The Demurrer to the Seventh, Eighth and Ninth Causes of Action are OVERRULED.  The demurrer to these causes of action is based on the same rationale set forth in support of the demurrer to the Fourth Cause of Action and rejected for the same reasons.  

• The Demurrer to the Tenth Cause of Action for Quiet Title is OVERRULED.  Plaintiffs need not allege tender where they allege fraud with respect to the basis for Defendants’ asserted title in the subject property. 

• The Demurrer to the Eleventh Cause of Action for Declaratory Relief is OVERRULED.  The allegations sufficiently show the existence of an actual, present controversy.

AND THE NEXT DAY -

Plaintiff vs. JPMORGAN CHASE BANK, N.A.

Plaintiff / JONATHAN FRIED

JPMORGAN CHASE BANK, N.A. / S. CHRISTOPHER YOO

MOTION FOR SANCTIONS AGAINST PLAINTIFF AND ATTORNEY FILED BY JPMORGAN CHASE BANK, N.A.

•  Defendant's motion for sanctions pursuant to CCP § 128.7 is DENIED.  Defendant's First Amended Complaint has survived both a demurrer and a motion for summary judgment.  On these facts, it would be inequitable to sanction plaintiff and plaintiff's counsel who are the prevailing parties with respect to those two motions.  

MOTION FOR SUMMARY JUDGMENT AS TO 1st Amended COMPLAINT of Plaintiff FILED BY JP MORGAN CHASE BANK, N.A.

• Defendant's Motion for Summary Judgment as to Plaintiff's First Amended Complaint is DENIED.  Defendant has failed to meet its initial burden of proof that there is no trialble issue of material fact as to each and every cause of action of the First Amended Complaint.  No order had ever issued as to the 2nd, 3rd, 4th, and 5th causes of action.  Accordingly, the 2nd, 3rd, 4th, and 5th causes of action of the first amended complaint had never been dismissed.