A good footnote on Foreclosure cases


Note 1 – Cause of Action Under CCC § 2923.5, Post Trustee’s Sale – There is no private right of action under Section 2923.5 once the trustee’s sale has occurred. The “only remedy available under the Section is a postponement of the sale before it happens.” Mabry v. Superior Court, 185 Cal. App. 4th 208, 235 (2010).

Note 2 – Cause of Action Under CCC § 2923.6 – There is no private right of action under Section 2923.6, and it does not operate substantively. Mabry v. Superior Court, 185 Cal. App. 4th 208, 222-223 (2010). “Section 2923.6 merely expresses the hope that lenders will offer loan modifications on certain terms.” Id. at 222.

Note 3 – Cause of Action for Violation of CCC §§ 2923.52 and / or 2923.53 – There is no private right of action. Vuki v. Superior Court, 189 Cal. App. 4th 791, 795 (2010).

Note 4 – Cause of Action for Fraud, Requirement of Specificity – “To establish a claim for fraudulent misrepresentation, the plaintiff must prove:

(1) the defendant represented to the plaintiff that an important fact was true;

(2) that representation was false;

(3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth;

(4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation;

(6) the plaintiff was harmed; and,

(7) the plaintiff’s reliance on the defendant’s representation was a substantial factor in causing that harm to the plaintiff. Each element in a cause of action for fraud must be factually and specifically alleged. In a fraud claim against a corporation, a plaintiff must allege the names of the persons who made the misrepresentations, their authority to speak for the corporation, to whom they spoke, what they said or wrote, and when it was said or written.” Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 429, 434 (2010) (citations and quotations omitted).

Note 5 –Fraud – Statute of Limitations- The statute of limitations for fraud is three years. CCP § 338(d). To the extent Plaintiff wishes to rely on the delayed discovery rule, Plaintiff must plead the specific facts showing

(1) the time and manner of discovery and

(2) the inability to have made earlier discovery despite reasonable diligence.” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 808 (2005).

Note 6 – Cause of Action for Negligent Misrepresentation – “The elements of negligent misrepresentation are

(1) the misrepresentation of a past or existing material fact,

(2) without reasonable ground for believing it to be true,

(3) with intent to induce another’s reliance on the fact misrepresented,

(4) justifiable reliance on the misrepresentation, and

(5) resulting damage. While there is some conflict in the case law discussing the precise degree of particularity required in the pleading of a claim for negligent misrepresentation, there is a consensus that the causal elements, particularly the allegations of reliance, must be specifically pleaded.” National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc., 171 Cal. App. 4th 35, 50 (2009) (citations and quotations omitted).

Note 7 – Cause of Action for Breach of Fiduciary Duty by Lender – “Absent special circumstances a loan transaction is at arm’s length and there is no fiduciary relationship between the borrower and lender. A commercial lender pursues its own economic interests in lending money. A lender owes no duty of care to the borrowers in approving their loan. A lender is under no duty to determine the borrower’s ability to repay the loan. The lender’s efforts to determine the creditworthiness and ability to repay by a borrower are for the lender’s protection, not the borrower’s.” Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 429, 436 (2010) (citations and quotations omitted).

Note 8 – Cause of Action for Constructive Fraud – “A relationship need not be a fiduciary one in order to give rise to constructive fraud. Constructive fraud also applies to nonfiduciary “confidential relationships.” Such a confidential relationship may exist whenever a person with justification places trust and confidence in the integrity and fidelity of another. A confidential relation exists between two persons when one has gained the confidence of the other and purports to act or advise with the other’s interest in mind. A confidential relation may exist although there is no fiduciary relation ….” Tyler v. Children’s Home Society, 29 Cal. App. 4th 511, 549 (1994) (citations and quotations omitted).

Note 9 – Cause of Action for an Accounting – Generally, there is no fiduciary duty between a lender and borrower. Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 429, 436 (2010). Further, Plaintiff (borrower) has not alleged any facts showing that a balance would be due from the Defendant lender to Plaintiff. St. James Church of Christ Holiness v. Superior Court, 135 Cal. App. 2d 352, 359 (1955). Any other duty to provide an accounting only arises when a written request for one is made prior to the NTS being recorded. CCC § 2943(c).

Note 10 – Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing – “[W]ith the exception of bad faith insurance cases, a breach of the covenant of good faith and fair dealing permits a recovery solely in contract. Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th 1004, 1054 (2009). In order to state a cause of action for Breach of the Implied Covenant of Good Faith and Fair Dealing, a valid contract between the parties must be alleged. The implied covenant cannot be extended to create obligations not contemplated by the contract. Racine & Laramie v. Department of Parks and Recreation, 11 Cal. App. 4th 1026, 1031-32 (1992).

Note 11 – Cause of Action for Breach of Contract – “A cause of action for damages for breach of contract is comprised of the following elements:

(1) the contract,

(2) plaintiff’s performance or excuse for nonperformance,

(3) defendant’s breach, and

(4) the resulting damages to plaintiff. It is elementary that one party to a contract cannot compel another to perform while he himself is in default. While the performance of an allegation can be satisfied by allegations in general terms, excuses must be pleaded specifically.” Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1367 (2010) (citations and quotations omitted).

Note 12 – Cause of Action for Injunctive Relief – Injunctive relief is a remedy and not a cause of action. Guessous v. Chrome Hearts, LLC, 179 Cal. App. 4th 1177, 1187 (2009).

Note 13 – Cause of Action for Negligence – “Under the common law, banks ordinarily have limited duties to borrowers. Absent special circumstances, a loan does not establish a fiduciary relationship between a commercial bank and its debtor. Moreover, for purposes of a negligence claim, as a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. As explained in Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334, 277 Cal.Rptr. 753, “[a] commercial lender is not to be regarded as the guarantor of a borrower’s success and is not liable for the hardships which may befall a borrower. It is simply not tortious for a commercial lender to lend money, take collateral, or to foreclose on collateral when a debt is not paid. And in this state a commercial lender is privileged to pursue its own economic interests and may properly assert its contractual rights.” Das v. Bank of America, N.A., 186 Cal. App. 4th 727, 740-741 (2010) (citations and quotations omitted).

Note 14 – Cause of Action to Quiet Title – To assert a cause of action to quiet title, the complaint must be verified and meet the other pleading requirements set forth in CCP § 761.020.

Note 15 – Causes of Action for Slander of Title – The recordation of the Notice of Default and Notice of Trustee’s Sale are privileged under CCC § 47, pursuant to CCC § 2924(d)(1), and the recordation of them cannot support a cause of action for slander of title against the trustee. Moreover, “[i]n performing acts required by [the article governing non-judicial foreclosures], the trustee shall incur no liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default under the secured obligation, deed of trust, or mortgage. In performing the acts required by [the article governing nonjudicial foreclosures], a trustee shall not be subject to [the Rosenthal Fair Debt Collection Practices Act].” CCC § 2924(b).

Note 16 – Cause of Action for Violation of Civil Code § 1632 – Section 1632, by its terms, does not apply to loans secured by real property. CCC § 1632(b).

Note 17 – Possession of the original promissory note – “Under Civil Code section 2924, no party needs to physically possess the promissory note.” Sicairos v. NDEX West, LLC, 2009 WL 385855 (S.D. Cal. 2009) (citing CCC § 2924(a)(1); see also Lomboy v. SCME Mortgage Bankers, 2009 WL 1457738 * 12-13 (N.D. Cal. 2009) (“Under California law, a trustee need not possess a note in order to initiate foreclosure under a deed of trust.”).

Note 18 – Statute of Frauds, Modification of Loan Documents – An agreement to modify a note secured by a deed of trust must be in writing signed by the party to be charged, or it is barred by the statute of frauds. Secrest v. Security Nat. Mortg. Loan Trust 2002-2, 167 Cal. App. 4th 544, 552-553 (2008).

Note 19 – Statute of Frauds, Forebearance Agreement – An agreement to forebear from foreclosing on real property under a deed of trust must be in writing and signed by the party to be charged or it is barred by the statute of frauds. Secrest v. Security Nat. Mortg. Loan Trust 2002-2, 167 Cal. App. 4th 544, 552-553 (2008).

Note 20 – Tender – A borrower attacking a voidable sale must do equity by tendering the amount owing under the loan. The tender rule applies to all causes of action implicitly integrated with the sale. Arnolds Management Corp. v. Eischen, 158 Cal. App. 3d 575, 579 (1984).

Note 21 – Cause of Action for Violation of Bus. & Prof. Code § 17200 – “The UCL does not proscribe specific activities, but broadly prohibits any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising. The UCL governs anti-competitive business practices as well as injuries to consumers, and has as a major purpose the preservation of fair business competition. By proscribing “any unlawful business practice,” section 17200 “borrows” violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable. Because section 17200 is written in the disjunctive, it establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent. In other words, a practice is prohibited as “unfair” or “deceptive” even if not “unlawful” and vice versa.” Puentes v. Wells Fargo Home Mortg., Inc., 160 Cal. App. 4th 638, 643-644 (2008) (citations and quotations omitted).

“Unfair” Prong [A]ny finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition. We thus adopt the following test: When a plaintiff who claims to have suffered injury from a direct competitor’s “unfair” act or practice invokes section 17200, the word “unfair” in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition. Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 186-187 (1999).

“Fraudulent” Prong

The term “fraudulent” as used in section 17200 does not refer to the common law tort of fraud but only requires a showing members of the public are likely to be deceived. Unless the challenged conduct targets a particular disadvantaged or vulnerable group, it is judged by the effect it would have on a reasonable consumer. Puentes, 160 Cal. App. 4th at 645 (citations and quotations omitted).

“Unlawful” Prong

By proscribing “any unlawful” business practice, Business and Professions Code section 17200 “borrows” violations of other laws and treats them as unlawful practices that the UCL makes independently actionable. An unlawful business practice under Business and Professions Code section 17200 is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law. Virtually any law -federal, state or local – can serve as a predicate for an action under Business and Professions Code section 17200. Hale v. Sharp Healthcare, 183 Cal. App. 4th 1373, 1382-1383 (2010) (citations and quotations omitted).

“A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.” Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612, 619 (1993) (citations and quotations omitted).

Note 22 – Cause of Action for Intentional Infliction of Emotional Distress – Collection of amounts due under a loan or restructuring a loan in a way that remains difficult for the borrower to repay is not “outrageous” conduct. Price v. Wells Fargo Bank, 213 Cal. App. 3d 465, 486 (1989).

Note 23 – Cause of Action for Negligent Infliction of Emotional Distress – Emotional distress damages are not recoverable where the emotional distress arises solely from property damage or economic injury to the plaintiff. Butler-Rupp v. Lourdeaux, 134 Cal. App. 4th 1220, 1229 (2005).

Note 24 – Cause of Action for Conspiracy – There is no stand-alone claim for conspiracy. Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-511 (1994).

Note 25 – Cause of Action for Declaratory Relief – A claim for declaratory relief is not “proper” since the dispute has crystallized into COA under other theories asserted in other causes of actions in the complaint. Cardellini v. Casey, 181 Cal. App. 3d 389, 397-398 (1986).

Note 26 – Cause of Action for Violation of the Fair Debt Collection Practices Acts – Foreclosure activities are not considered “debt collection” activities. Gamboa v. Trustee Corps, 2009 WL 656285, at *4 (N.D. Cal. March 12, 2009).

Note 27 – Duties of the Foreclosure Trustee – The foreclosure trustee’s rights, powers and duties regarding the notice of default and sale are strictly defined and limited by the deed of trust and governing statutes. The duties cannot be expanded by the Courts and no other common law duties exist. Diediker v. Peelle Financial Corp., 60 Cal. App. 4th 288, 295 (1997).

Note 28 – Unopposed Demurrer – The Demurrer is sustained [w/ or w/o] leave to amend [and the RJN granted]. Service was timely and good and no opposition was filed. Failure to oppose the Demurrer may be construed as having abandoned the claims. See, Herzberg v. County of Plumas, 133 Cal. App. 4th 1, 20 (2005) (“Plaintiffs did not oppose the County’s demurrer to this portion of their seventh cause of action and have submitted no argument on the issue in their briefs on appeal. Accordingly, we deem plaintiffs to have abandoned the issue.”).

Note 29 – Responding on the Merits Waives Any Service Defect – “It is well settled that the appearance of a party at the hearing of a motion and his or her opposition to the motion on its merits is a waiver of any defects or irregularities in the notice of the motion.” Tate v. Superior Court, 45 Cal. App. 3d 925, 930 (1975) (citations omitted).

Note 30 – Unargued Points – “Contentions are waived when a party fails to support them with reasoned argument and citations to authority.” Moulton Niguel Water Dist. v. Colombo, 111 Cal. App. 4th 1210, 1215 (2003).

Note 31 – Promissory Estoppel – “The doctrine of promissory estoppel makes a promise binding under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange. Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement. The vital principle is that he who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted. In such a case, although no consideration or benefit accrues to the person making the promise, he is the author or promoter of the very condition of affairs which stands in his way; and when this plainly appears, it is most equitable that the court should say that they shall so stand.” Garcia v. World Sav., FSB, 183 Cal. App. 4th 1031, 1039-1041 (2010) (citations quotations and footnotes omitted).

Note 32 – Res Judicata Effect of Prior UD Action – Issues of title are very rarely tried in an unlawful detainer action and moving party has failed to meet the burden of demonstrating that the title issue was fully and fairly adjudicated in the underlying unlawful detainer. Vella v. Hudgins, 20 Cal. 3d 251, 257 (1977). The burden of proving the elements of res judicata is on the party asserting it. Id. The Malkoskie case is distinguishable because, there, the unlimited jurisdiction judge was convinced that the title issue was somehow fully resolved by the stipulated judgment entered in the unlawful detainer court. Malkoskie v. Option One Mortg. Corp., 188 Cal. App. 4th 968, 972 (2010).

Note 33 – Applicability of US Bank v. Ibanez – The Ibanez case, 458 Mass. 637 (January 7, 2011), does not appear to assist Plaintiff in this action. First, the Court notes that this case was decided by the Massachusetts Supreme Court, such that it is persuasive authority, and not binding authority. Second, the procedural posture in this case is different than that found in a case challenging a non-judicial foreclosure in California. In Ibanez, the lender brought suit in the trial court to quiet title to the property after the foreclosure sale, with the intent of having its title recognized (essentially validating the trustee’s sale). As the plaintiff, the lender was required to show it had the power and authority to foreclose, which is established, in part, by showing that it was the holder of the promissory note. In this action, where the homeowner is in the role of the plaintiff challenging the non-judicial foreclosure, the lender need not establish that it holds the note.

Note 34 – Statutes of Limitations for TILA and RESPA Claims – For TILA claims, the statute of limitations for actions for damages runs one year after the loan origination. 15 U.S.C. § 1640(e). For actions seeking rescission, the statute of limitations is three years from loan origination. 15 U.S.C. § 1635(f). For RESPA, actions brought for lack of notice of change of loan servicer have a statute of limitation of three years from the date of the occurrence, and actions brought for payment of kickbacks for real estate settlement services, or the conditioning of the sale on selection of certain title services have a statute of limitations of one year from the date of the occurrence. 12 U.S.C. § 2614.

TILA Rescission: Three Years from When? Three Days from When?

Livinglies's Weblog

James Macklin, a senior forensic analyst has worked together with attorneys and produced the following article on the “statute of limitations” as it applies to notices of rescission. I think I agree with their premise but would add that in all probability, if the lender is not known — the three day right of rescission starts to run when the real lender is disclosed. Otherwise there either is no contract for loan or the three day right can be exercised. If the three day right is exercised, then there is no defense to it of any kind even if the bank files the challenge action within 20 days of the notice. The challenge action would be subject to dismissal for failure to state a cause of action.


The general rule you will normally see in regard to TILA 3 year right of rescission is the following:
“Section 1635 of…

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