Perales v. Select Portfolio Servicing

• Decision Date: 05 September 2019
• Docket Number: D075087
• Parties: ANGELICA PERALES, Plaintiff and Appellant, v. SELECT PORTFOLIO SERVICING, N.A., et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

ANGELICA PERALES, Plaintiff and Appellant, v. SELECT PORTFOLIO SERVICING, N.A., et al., Defendants and Respondents.

D075087

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

September 5, 2019

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. RIC1603194)

APPEAL from a judgment of the Superior Court of Riverside County, Sunshine Sykes, Judge. Affirmed.

Law Offices of Aaron Berger and Aaron Berger; Law Offices of Natalie Aghavni Panossian-Bassler and Natalie Aghavni Panossian-Bassler for Plaintiff and Appellant.

Kutak Rock and Steven M. Dailey, for Defendants and Respondents.

Plaintiff Angelica Perales appeals a judgment of dismissal based on an order sustaining without leave to amend the demurrer of defendants Select Portfolio Servicing (SPS) and The Bank of New York Mellon (BONY) (sometimes collectively defendants) to plaintiff's third amended complaint (TAC). In her TAC, plaintiff alleged causes of action for negligent and intentional misrepresentation, and violation of the Unfair Competition Law (Bus. & Prof. Code § 17200 et. seq., UCL) in connection with foreclosure proceedings on her residential property.

In sustaining the demurrer without leave to amend, the trial court found the TAC was a sham pleading because it omitted material allegations from plaintiff's second amended complaint (SAC) that she was a de facto borrower on the note signed only by her former husband, which was secured by a deed of trust (DOT) they both signed. In a previous ruling that plaintiff did not appeal, the court sustained without leave to amend all borrower-related causes of action in the SAC, after finding plaintiff as a matter of law was not in a borrower-lender relationship with defendants.

On appeal, plaintiff contends the allegations that she was a borrower were immaterial for purposes of the sham pleading doctrine, and that she should have been granted leave to amend the TAC to add an explanation for her omitted allegations.

We independently conclude the demurrer to the TAC was properly sustained without leave to amend because as defendants also argue, (1) plaintiff's complaint includes myriad allegations that lack sufficient factual particularity to support any valid cause of action (see Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 (Yvanova)); (2) plaintiff lacked standing to assert any cause of action based on defendants' servicing of her former husband's loan, including any possible modification thereto, because as noted, she did not sign the note, nor did she attempt to assume the loan or qualify on her own for a loan; (3) the TAC was a sham pleading, as found by the trial court; and (4) plaintiff's three causes of action separately fail as a matter of law, aswe explain. As such, we conclude the court properly exercised its discretion in refusing to grant plaintiff leave to amend her complaint a fourth time. Affirmed.

FACTUAL BACKGROUND

A. Allegations in the TAC and Facts Subject to Judicial Notice

In 2007, plaintiff and her then husband Francisco Perales (Francisco) acquired residential real property subject to a mortgage loan secured by the DOT. Although both plaintiff and Francisco were parties to the grant deed and cosigned the DOT, only Francisco signed the note securing the DOT. Defendant SPS was the mortgage servicer of, and defendant BONY was the beneficiary under, the loan.

The DOT in part provided: "Borrower covenants and agrees that Borrower's obligations and liability shall be joint and several. However, any Borrower who co-signs this Security Instrument but does not execute the Note (a 'co-signer' [i.e., plaintiff]): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer's interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower [i.e., Francisco] can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co-signer's consent." (Italics added.)

In November 2014, a notice of default was recorded against the property. The trustee's sale for the property was scheduled for April 2015, then postponed to June 2015, and later cancelled. On May 28, 2015, a grant deed was recorded by Francisco transferring his interest in the property to plaintiff as her sole and separate property.

In September 2015, plaintiff alleged she spoke with Gabriella Luna, a representative of defendant SPS. Luna represented "the foreclosure sale would be postponed until the loan modification review was complete." In November 2015, SPS sent a letter to the property addressed to Francisco stating that SPS had reviewed and denied a loan modification for the property.¹

Because the loan modification to which SPS responded in November 2015 was not included in the record, it is unclear whether plaintiff or Francisco or both submitted this particular application. A declaration of an SPS employee in opposition to the request for temporary restraining order and preliminary injunction sought by plaintiff attributed the loan modification to plaintiff, based on her own and other residents' financial information that was provided and reviewed by SPS.

On January 17, 2016, plaintiff submitted her own loan modification application.² On January 21, 2016, a notice of trustee's sale (NTS) was recorded against the property with a sale date of March 2, 2016. Plaintiff thereafter moved for an injunction to stop the sale, as noted ante. The court at a May 2016 hearing refused to issue an injunction, finding plaintiff had not shown a probability of prevailing on any of her claims. The property was sold at auction in June 2016 and granted to defendant BONY.

As noted, plaintiff's TAC alleged three causes of action. Plaintiff asserted standing as legal owner of the property.

In the general allegations of the TAC, plaintiff asserted her case concerned a "massive scheme" of wrongful and fraudulent business practices "carried out by the Defendants related to the foreclosure of California properties." She further asserted that as part of this scheme, defendants failed to "properly, adequately, and fairly communicate with defaulted borrowers regarding alternatives to foreclosure"; that defendants also "systematically fail[ed] to provide proper notice of foreclosure sales, and fail[ed] to review loan modification applications in violation of California pre-foreclosure statutes"; and that the conduct of defendants was "specifically designed to increase the likelihood of foreclosure among California's hardship[-]stricken borrowers and assure that borrowers, like the Plaintiff in the instant matter, [were] never afforded consideration for programs, which would provide an alternative to foreclosure."

Plaintiff further asserted that the mortgage secured by the property was "highly unfavorable and [an] unduly risky loan product, the proliferation of which would later come to be directly associated with the worst economic crash in United States history since the Great Depression"; that defendants "established and implemented a policy of deception and failed to disclose material facts about the underlying loan"; and that defendants "knew that this scale of lending based upon inflated property values, without income verification and in violation of numerous other underwriting guidelines, would lead to widespread declines in property values, thereby putting Plaintiff into the gravesituation whereby she would lose any equity in the subject property and have no means of refinancing or selling the subject property during the resulting market collapse."

Plaintiff's general allegations further asserted that she had "no experience beyond basic financial matters"; that she was "never explained the full terms of the underlying loan, including but not limited to the rate of interest, how the interest rate would be calculated, what the amortization schedule would be, the risks and disadvantages of the loan, the prepayment penalties or the maximum amount of the monthly loan payment"; and that she was the "victim of bait-and-switch practices whereby favorable loan terms were negotiated and were supplanted by less favorable terms at the time of closing."

Plaintiff asserted that the NTS recorded against the property was "void and improper" because she was then in the process of "negotiating terms for a loan modification with SPS"; that on January 17, 2016, she allegedly had "submitted a completed, legible and satisfactory loan modification application electronically to SPS through SPS'[s] online document portal"; that despite the fact the "loan mod was under review, SPS continued to advance foreclosure proceedings by filing the NTS on January 21, 2016"; that she suffered "damages and harm" caused by SPS's "fail[ure] to communicate with [her] regarding alternatives to foreclosure," based on "SPS's substandard contact, servicing, and operations protocols"; and that, although she allegedly was "willing and able to tender funds to satisfy the alleged deficiency, and was prepared to make that tender if necessary to stop a foreclosure sale," she did not do so because she "was informed by Defendants that the trustee's sale was not to take place, and therefore no tender was necessary."

In addition to the general allegations, in her first cause of action for negligent misrepresentation plaintiff asserted defendants owed a duty to "provide her with accurate information about the status of her mortgage loan accounts"; a "duty of care to deal reasonably with [her] as a borrower in default and try to...