Filed 10/8/26 Avila v. PHH Mortgage Corp. CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or or dered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
CARLOS AVILA,
F088687
Plaintiff and Appellant,
(Super. Ct. No. 22CV-03537)
v.
PHH MORTGAGE CORPORATION,
OPINION
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Merced County. Brian L.
McCabe, Judge.
Shapero Law Firm and Sarah Shapero for Plaintiff and Appellant.
Severson & Werson; Stinson, Jan T. Chilton, Elizabeth C. Farrell and Christopher
M. Lapidus, for Defendant and Respondent.
-ooOoo-
The California Homeowner Bill of Rights (HBOR) (Civ. Code, § 2923.4 et seq.)1
is “a complex set of enactments focused specifically on residential mortgages and passed
as a legislative response to the ongoing mortgage foreclosure crisis in 2012.” (Morris v.
JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 295; see Stats. 2012, ch. 87,
§ 1, subd. (a).) The statutory scheme is “designed to promote good faith negotiation of
some form of foreclosure alternative [citation], typically modification of the borrower’s
loan terms.” (Morris, at p. 295.) Homeowners may obtain injunctive relief for HBOR
violations that occur before or during the foreclosure process (§ 2924.12, subd. (a)), and
monetary damages are recoverable for violations resulting in a completed foreclosure
(id., subd. (b)).
This case arises from a homeowner’s attempt to enjoin foreclosure proceedings
based on alleged HBOR violations related to his efforts to obtain a loan modification.
Two causes of action were alleged under the HBOR, and a third cause of action was
based on the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.). The
appeal is taken from a judgment of dismissal entered after a demurrer was sustained
without leave to amend.
We conclude that the HBOR causes of action were adequately pleaded. As to
those claims, the demurrer should have been overruled. The UCL claim, however, did
not allege an economic injury as required to establish standing to sue under Business and
Professions Code section 17204. Since no curative proposals have been offered on
appeal, the denial of leave to amend the UCL claim does not constitute reversible error.
The judgment will be affirmed in part and reversed in part.
1 All undesignated statutory references are to the Civil Code.
2.
FACTUAL AND PROCEDURAL BACKGROUND
Pleaded Allegations and Judicially Noticeable Facts
The following summary is derived from the pleadings filed below, exhibits to
those pleadings, and publicly recorded documents that were judicially noticed by the trial
court. All quotes are taken from the operative third amended complaint.
In 2008, plaintiff/appellant Carlos Avila (plaintiff) borrowed approximately
$400,000 to purchase a house in Merced. The loan was secured by a deed of trust on the
property, which included a power of sale clause. Other publicly recorded documents
suggest plaintiff may have refinanced the loan in 2009.
Plaintiff began falling behind on his mortgage payments in early 2017. At the
time, his mortgage servicer was Ocwen Loan Servicing, LLC (Ocwen).2 In
November 2017, Ocwen informed plaintiff in writing that he was approved for a “Trial
Period Plan” or “TPP” (sometimes called a trial payment plan). “The monthly payment
for the TPP was $1,839.03 and for the duration of three months, January through March
[of 2018].” A copy of the offer letter was attached as an exhibit to earlier versions of the
complaint but is omitted from the third amended complaint.3
Plaintiff accepted Ocwen’s offer and allegedly satisfied all payment obligations
under the TPP. In approximately mid-2018, plaintiff inquired about the status of his loan
2 “ ‘Mortgage servicer’ means a person or entity who directly services a loan, or who is
responsible for interacting with the borrower, managing the loan account on a daily basis
including collecting and crediting periodic loan payments, managing any escrow account,
or enforcing the note and security instrument, either as the current owner of the
promissory note or as the current owner’s authorized agent.” (§ 2920.5, subd. (a).)
3 A TPP is a common element of various home loan modification programs. As the name
suggests, it is a short-term period during which the borrower demonstrates an ability to
meet the requirements of a loan modification by making reduced monthly mortgage
payments. (See West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 786–
788.) “Exhibit 1” showed that Ocwen did in fact approve plaintiff for a TPP in late 2017.
The document was relevant to a breach of contract claim that plaintiff later abandoned,
which is presumably why plaintiff omitted the exhibit from the operative pleading.
3.
modification. Ocwen claimed to have made “a mistake” and told plaintiff “that he would
have to start another TPP.” Plaintiff began the second TPP “at the end of 2018.”
“Plaintiff completed the second TPP and still did not receive his final loan
modification paperwork.” “On or around February 2019,” defendant/respondent PHH
Mortgage Corporation (PHH) replaced Ocwen as plaintiff’s mortgage servicer.
According to respondent, Ocwen merged with PHH.4
At some later point in 2019, plaintiff contacted PHH “and inquired about his final
loan modification paperwork.” “PHH responded that they did not know of any
[agreement] with Ocwen and that [p]laintiff would have to submit a new loan
modification application with PHH if he wanted to be considered for loss mitigation
options.” Plaintiff submitted a new application, which is essentially when the events
germane to the present lawsuit began.
“Plaintiff turned in two to three loan modification application[s] per year starting
in 2019 to PHH because he was given the run around [sic] regarding his applications.
For example, [he] would call PHH multiple times a month and rarely spoke to the same
person. Plaintiff’s alleged single point of contact (SPOC), Mary C[.], only spoke with
[him] approximately two times in the span of over three years. The individuals [p]laintiff
spoke to when he called [d]efendant PHH were unable to give [him] accurate updates on
his loan account.”
4 Although the pleadings assert causes of action against both Ocwen and PHH, the
demurrers were filed by a single party identifying itself as “PHH Mortgage Corporation,
successor by merger to Ocwen Loan Servicing, LLC.” The judgment of dismissal was
accordingly entered in favor of one party: “Defendant PHH Mortgage Corporation,
successor by merger to Ocwen Loan Servicing, LLC (‘PHH’).” We therefore treat PHH
as the sole respondent in this appeal. Although PHH claims to have recently “changed its
name to Onity Mortgage Corporation,” we have no evidence verifying that information.
(See In re Zeth S. (2003) 31 Cal.4th 396, 413, fn. 11 [“the unsworn statements of counsel
are not evidence”].) On remand, it would be advisable for plaintiff to determine and
clarify exactly which party or parties he is suing.
4.
“Plaintiff would receive conflicting and frustrating communications from PHH
stating that they received his application, then that his application was complete, then that
his application was missing documents.” “When [he] would supply the missing
document requested, he would then get confirmation [but later receive] another letter
stating that more documents were needed to complete his application.” “Plaintiff would
make appointments to speak with his assigned SPOC only to be called by an agent who
was not knowledgeable about his account. The agents [p]laintiff would speak to would
apologize for not being able to help him by saying they were just reading off the screen
and that they could not have access to underwriters, only relationship managers did.”
The pleadings do not specifically allege any events in 2020 and 2021. However,
the allegations of submitting “two to three loan modification application[s] per year
starting in 2019” and continuously getting “the [runaround]” imply that plaintiff’s efforts
to obtain a loan modification persisted from late 2019 through the end of 2021.
In January 2022, PHH caused a notice of default to be recorded with the Merced
County Recorder’s Office. In other words, PHH formally initiated nonjudicial
foreclosure proceedings. (See § 2924, subd. (a)(1).) Plaintiff alleges he “had a complete
loan modification application pending” with PHH when the notice was recorded.
In May 2022, PHH caused a notice of trustee’s sale to be recorded with the county
recorder’s office. The sale was scheduled for August of that year. Plaintiff alleges he
“had a complete loan modification application pending” at the time the notice of sale was
recorded. However, plaintiff also alleges that he proceeded to file a new loan
modification application with PHH on June 9, 2022.
A copy of plaintiff’s June 2022 application, and attachments thereto, was included
as an exhibit to earlier versions of the complaint. The exhibit was inexplicably omitted
from the third amended complaint. Although an amended complaint “supersedes all prior
complaints” (Lee v. Bank of America (1994) 27 Cal.App.4th 197, 215), we summarize
certain parts of the previously filed exhibit to better frame the issues on appeal.
5.
The June 2022 application was a preprinted form containing a section for the
applicant to identify the “type of hardship” creating the need for a loan modification.
(Capitalization omitted.) Several hardship options were listed, with corresponding
instructions for the “required hardship documentation.” (Capitalization omitted.)
Plaintiff checked a box designated for the hardship of a reduction in income. The
corresponding documentation requirement was stated as follows: “Paystubs dated within
90 days that show at least 30 days of year-to-date income OR [¶] Two most recent bank
statements showing income deposit amounts dated within the last 90 days.”
Although plaintiff checked a box next to the first income verification option
(“Paystubs .…”), the material he attached to the application was intended to satisfy the
second option (“Two most recent bank statements .…”). The operative pleading
describes those attachments as “bank statements from March and April 2022, with the
income deposit amounts conspicuously circled, accompanied with his IRS Schedule C
(Form 1040) profit and loss statement for his auto repair business.”
After submitting his June 2022 application, plaintiff received a letter from PHH.
The correspondence was dated June 23, 2022. “In the letter, [p]laintiff was told that he
needed to submit a recent paystub dated within the last 90 days that reflect[ed] year to
date income, or two most recent bank statements dated within the last 90 days showing
income deposits.” “Plaintiff was frustrated because he [believed] that he had already
provided the requested information.” Nevertheless, “on June 29, 2022, [p]laintiff
submitted his checking/savings account history in which he circled his payroll deposits
from March 2022, April 2022, May 2022, and June 2022.”
In a letter dated July 8, 2022, PHH confirmed receipt of plaintiff’s supplemental
documents. Plaintiff subsequently received a letter from PHH dated August 22, 2022, in
which PHH claimed it “did not receive the missing documents, and [plaintiff’s] review
was denied on August 1, 2022.” Plaintiff’s allegations imply, but do not directly allege,
that he was not previously informed about the denial of his application and only learned
6.
of it in the letter dated August 22, 2022. Plaintiff further alleges that he “was not given
an opportunity to appeal his denial.” (See § 2923.6, subd. (d) [“If the borrower’s
application for a first lien loan modification is denied, the borrower shall have at least
30 days from the date of the written denial to appeal the denial and to provide evidence
that the mortgage servicer’s determination was in error”].)
Additional Allegations
The pleaded contentions do not address any events after August 2022, but the
operative complaint does allege that the trustee’s sale was postponed to November of that
year. PHH presently alleges, in its appellate briefing, that “[n]o foreclosure sale has
[ever] been held.” Plaintiff does not address this contention.
PHH also points out that a notice of trustee’s sale automatically expires after
one year. (§ 2924g, subd. (c)(2).) However, a duly recorded notice of default does not
similarly expire by operation of law. The appellate record does not indicate or suggest
that the notice of default recorded in January 2022 was ever rescinded. It thus appears
that the foreclosure proceedings remain pending.
Procedural History
Plaintiff’s original complaint was filed in October 2022. The pleading alleged a
cause of action for breach of contract against Ocwen; a HBOR cause of action under
section 2923.6 against PHH; a HBOR cause of action under section 2923.7 against
Ocwen and PHH; and a UCL cause of action against Ocwen and PHH. The breach of
contract claim was based on plaintiff’s acceptance of Ocwen’s TPP offers and alleged
performance of all related obligations.
As it appears Ocwen and PHH are basically the same party, and for the reasons
stated in footnote 4, ante, we construe the defense filings below as having been made by
a single party and hereafter refer to PHH as “defendant.” Between 2023 and 2024,
defendant filed three demurrers. Each was sustained with leave to amend. After the
second demurrer, plaintiff apparently concluded that his breach of contract claim was, as
7.
defendant had argued, barred by the statute of limitations. Subsequent versions of the
complaint alleged only the two HBOR causes of action and the additional UCL cause of
action.
The operative third amended complaint was filed in May 2024. Defendant
responded with a fourth demurrer. This final demurrer was fully sustained, without leave
to amend, in August 2024.
The earlier demurrer rulings notably contained the following instructions with
regard to the section 2923.6 claim: “[Plaintiff must] allege specific facts establishing
… complete loan modification applications and [that] all documents requested were
submitted in a timely fashion and that there was [an] acknowledgement that the
application was complete.” The quoted language did not appear in the third demurrer
ruling or the final demurrer ruling.
In the final demurrer ruling, plaintiff’s section 2923.6 cause of action was held
defective for the following reasons:
“There is no dispute that a Notice of Default was recorded on
January 19, 2022. The complaint alleges that a loan modification
application was submitted on June 9, 2022, after the Notice of Default had
already been recorded. [Record citation.] Plaintiff argues that a June 23,
2022 letter requesting additional documents constitutes an admission that
the June 9, 2022 application was complete because [p]laintiff contends that
the additional documents requested had already been provided. Contrary to
[his] contention, the plain wording of the letter that additional documents
were required and that language cannot reasonably be construed to be an
admission that all necessary documents had been provided. A reasonabl[e]
interpretation of the letter is that either the documents sent had not been
received, or that some aspect of the documents was insufficient. Since
there is no allegation that [p]laintiff responded to the June 23, 2022 letter
8.
provided all documents requested in that letter [sic], the subsequent Sale
was not in violation of Civil Code [section] 2923.6.”5
The second HBOR cause of action, based on section 2923.7, was found to lack
allegations of a SPOC’s failure “to fulfill his or her responsibilities or that any failure was
a material violation that affected [p]laintiff’s loan obligations, disrupted the loan
modification process, or otherwise caused [him] harm.” The UCL claim, which
depended on the existence of at least one HBOR violation, was summarily deemed
nonviable. Although defendant had argued that the UCL claim failed for insufficient
allegations of standing, the trial court did not address that issue.
Plaintiff filed a timely notice of appeal in September 2024. Due to the parties’
requests for extensions and other various delays, the appellate briefing was not completed
until May 2026.
DISCUSSION
Standard of Review
“In reviewing an order sustaining a demurrer, we examine the operative complaint
de novo to determine whether it alleges facts sufficient to state a cause of action under
any legal theory.” (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.)
The complaint is liberally construed, with “all material facts properly pleaded” accepted
as true, but no weight is given to mere factual or legal conclusions. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.) “We will affirm if there is any ground on which the
demurrer can properly be sustained, whether or not the trial court relied on proper
grounds or the defendant asserted a proper ground in the trial court proceedings.”
(Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031.)
5 As earlier noted, there are no allegations or indications that a trustee’s sale ever
occurred. Plaintiff’s operative complaint seeks injunctive relief to prevent a trustee’s sale
from happening unless and until he is given a full opportunity to obtain a loan
modification in accordance with all HBOR statutes.
9.
If the demurrer was properly sustained, we must further determine whether the
pleading defects can be cured by an amendment. (T.H. v. Novartis Pharmaceuticals
Corp., supra, 4 Cal.5th at p. 162.) Demonstrating the possibility of a viable amendment
is the plaintiff’s burden. (Ibid.) “The plaintiff must identify some legal theory or state
facts that can be added by amendment to change the legal effect of his or her pleading.”
(Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1251; accord, Hernandez v. City of
Pomona (2009) 46 Cal.4th 501, 520, fn. 16.) A reviewing court is not required to
develop curative amendments sua sponte, and its analysis need not go beyond the
plaintiff’s specific proposals or lack thereof. (HFH, Ltd. v. Superior Court (1975) 15
Cal.3d 508, 513, fn. 3; Medina v. Safe-Guard Products, Internat., Inc. (2008) 164
Cal.App.4th 105, 112, fn. 8.)
Legal Overview
Real property financing typically involves a security instrument that enables the
lender to reach assets of the borrower if the loan is not repaid. (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1235.) “In California, the security instrument is most
commonly a deed of trust (with the debtor and creditor known as trustor and beneficiary
and a neutral third party known as trustee).” (Ibid.) Most deeds of trust include a power
of sale clause giving the lender a contractual right to pursue nonjudicial foreclosure if the
borrower defaults on the loan. (Robin v. Crowell (2020) 55 Cal.App.5th 727, 742–743.)
The nonjudicial foreclosure process begins with the recording of a notice of
default and election to sell the property. (§ 2924, subd. (a)(1); Arabia v. BAC Home
Loans Servicing, L.P. (2012) 208 Cal.App.4th 462, 470.) After a three-month waiting
period, and at least 20 days before the scheduled sale, the trustee may publish and record
a notice of sale. (§§ 2924, subd. (a)(2), 2924f, subd. (b).) If the sale is not postponed and
the borrower does not exercise his or her rights of reinstatement or redemption, the
property is sold at a public auction to the highest bidder. (§ 2924g, subd. (a).)
10.
The HBOR, under section 2923.6, forbids mortgage servicers from engaging in a
practice commonly described as “dual tracking.” Dual tracking occurs when a lender
forecloses on a home while simultaneously negotiating (or pretending to negotiate) with
the borrower to avoid foreclosure. In other words, the lender continues to pursue
foreclosure while ostensibly “evaluating a borrower’s loan modification application.”
(Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5th 830, 848
(Billesbach).) “The result is that the borrower does not know where he or she stands, and
by the time foreclosure becomes the lender’s clear choice, it is too late for the borrower
to find options to avoid it.’” (Ibid.)
Section 2923.6 provides that if a borrower “submits a complete application for a
first lien loan modification offered by, or through, the borrower’s mortgage servicer,” the
mortgage servicer “shall not record a notice of default or notice of sale, or conduct a
trustee’s sale, while the complete first lien loan modification application is pending.”
(Id., subd. (c).) The phrase “complete application” means the borrower “has supplied the
mortgage servicer with all documents required by the mortgage servicer within the
reasonable timeframes specified by the mortgage servicer.” (Id., subd. (h).) “ ‘First lien’
means the most senior mortgage or deed of trust on the property that is the subject of the
notice of default or notice of sale.” (§ 2920.5, subd. (d).)
The denial of a loan modification application must be communicated to the
borrower in writing. (§ 2923.6, subds. (c)(1), (f).) The borrower must then be afforded
“at least 30 days from the date of the written denial to appeal the denial and to provide
evidence that the mortgage servicer’s determination was in error.” (Id., subd. (d).)
Notice of the right to appeal, and “instructions regarding how to appeal,” must be
included in the written denial. (Id., subd. (f)(1).)
For any “material” HBOR violations occurring prior to a completed foreclosure,
i.e., before the property is auctioned and the trustee’s deed of sale is recorded, a borrower
may sue to enjoin the foreclosure proceedings “until the court determines that the
11.
mortgage servicer … has corrected and remedied the violation or violations giving rise to
the action for injunctive relief.” (§ 2924.12, subd. (a)(1), (2).) “A material violation is
one that affected the borrower’s loan obligations, disrupted the borrower’s
loan-modification process, or otherwise harmed the borrower.” (Billesbach, supra, 63
Cal.App.5th at p. 837.) Monetary relief is not available unless the borrower actually
loses their home, but the borrower may recover his or her “reasonable attorney’s fees and
costs.” (§ 2924.12, subd. (h).)
Plaintiff’s first cause of action, which defendant calls the “Dual Tracking Claim,”
is based on section 2923.6. Plaintiff’s second cause of action, aka the “SPOC Claim,” is
based on section 2923.7. “When a borrower requests a foreclosure prevention
alternative, the mortgage servicer shall promptly establish a single point of contact
[(SPOC)].” (§ 2923.7, subd. (a).)
The SPOC must inform the borrower about the process of applying for a loan
modification and “the deadline for any required submissions.” (§ 2923.7, subd. (b)(1).)
The SPOC is also responsible for “[c]oordinating the receipt” of the borrower’s
application documents and “notifying the borrower of any missing documents necessary
to complete the application.” (Id., subd. (b)(2)). Additionally, the SPOC “shall remain
assigned to the borrower’s account until the mortgage servicer determines that all loss
mitigation options offered by, or through, the mortgage servicer have been
exhausted ….” (Id., subd. (c).)
The Dual Tracking Claim
In analyzing plaintiff’s first cause of action, the trial court exclusively focused on
the alleged events in June 2022. The court noted that the notice of default and notice of
trustee’s sale had already been recorded by June 2022, thus implying there were no
pertinent allegations concerning the notices. However, paragraphs 25 and 26 of the
operative pleading allege plaintiff “had a complete loan application pending” when the
notices of default and sale were recorded. Those contentions state a prima facie violation
12.
of section 2923.6. If a borrower’s “complete first lien loan modification application is
pending,” the mortgage servicer shall not record or cause to be recorded “a notice of
default or notice of sale” until the application is denied “and any appeal period pursuant
to subdivision (d) has expired.” (§ 2923.6, subd. (c)(1).)
Defendant argues the sufficiency of paragraphs 25 and 26 should be treated as a
forfeited issue because plaintiff did not focus on it below. We are not unsympathetic to
defendant’s position. PHH repeatedly argued, in successive demurrers, that the
allegations were too “conclusory.” Plaintiff never attempted to refute the argument. His
opposition papers merely included the following statement: “Plaintiff also alleges that
both the Notice of Default and Notice of Trustee’s sale were recorded while other
applications were pending.” Defendant submits that a “single unsupported sentence
[does] not suffice to preserve an argument [for appeal].”
Unfortunately for defendant, the forfeiture argument does not withstand scrutiny.
If a trial court is informed of an issue and called upon to decide it, the issue is ordinarily
preserved for appellate review. (See Hu v. XPO Logistics, LLC (2026) 117 Cal.App.5th
1197, 1211.) Plaintiff’s opposition briefs referenced the pleaded allegations now in
dispute and argued those allegations supported his first cause of action.
Moreover, because our review is de novo, we “may consider new theories on
appeal from the sustaining of a demurrer.” (Simpson v. The Kroger Corp. (2013) 219
Cal.App.4th 1352, 1367 [resolving appellant’s claim on the merits “even though it was
not ‘the focus’ of her complaint or her demurrer opposition”].) The sufficiency of
plaintiff’s factual allegations to support a dual tracking claim is purely a question of law.
Although poorly developed below, the issue is now “sufficiently framed and developed
for us to decide.” (Berman v. HSBC Bank USA, N.A. (2017) 11 Cal.App.5th 465, 471
[resolving whether appellant pleaded “facts sufficient to state a cause of action” despite
arguable forfeiture].)
13.
Defendant alternatively reasserts its contention that plaintiff’s allegations are too
conclusory. It is argued that plaintiff was obligated to provide details such as when the
allegedly pending application was submitted, when it was “deemed complete” by PHH,
“or what happened to [the application] thereafter.” We must again disagree with
defendant’s position.
“To survive a demurrer, the complaint need only allege facts sufficient to state a
cause of action; each evidentiary fact that might eventually form part of the plaintiff’s
proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53
Cal.4th 861, 872.) Evidentiary facts, which are not required, are distinguished from
“ultimate facts,” i.e., those essential to stating the elements of an actionable claim. (Doe
v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “While it is true that pleading
conclusions of law does not fulfill this requirement, it has long been recognized that
‘[the] distinction between conclusions of law and ultimate facts is not at all clear and
involves at most a matter of degree.’ ” (Perkins v. Superior Court (1981) 117
Cal.App.3d 1, 6; accord, Foster v. Sexton (2021) 61 Cal.App.5th 998, 1027.) “What is
important is that the complaint as a whole contain sufficient facts to apprise the defendant
of the basis upon which the plaintiff is seeking relief.” (Perkins, at p. 6.)
“Likewise, ‘ “[t]he particularity required in pleading facts depends on the extent to
which the defendant in fairness needs detailed information that can be conveniently
provided by the plaintiff; less particularity is required where the defendant may be
assumed to have knowledge of the facts equal to that possessed by the plaintiff.
[Citation.]” [Citation.] There is no need to require specificity in the pleadings because
“modern discovery procedures necessarily affect the amount of detail that should be
required in a pleading.” ’ ” (Thomas v. Spitzer (2023) 90 Cal.App.5th 436, 451.) A
reviewing court thus assumes the truth of specific factual allegations and “facts that
reasonably can be inferred from those expressly pleaded.” (Fremont Indemnity Co. v.
Fremont General Corp. (2007) 148 Cal.App.4th 97, 111, italics added; accord, Schifando
14.
v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; Rickley v. Goodfriend (2013) 212
Cal.App.4th 1136, 1141.)
Plaintiff’s complaint would be too conclusory if it merely alleged, for example,
that PHH “violated section 2923.6.” But the operative pleading both alleges the violation
and explains how it was committed: by causing a notice of default and notice of trustee’s
sale to be recorded while plaintiff “had a complete loan modification application
pending.” The alleged conduct is a violation of section 2923.6, subdivision (c).
Alleging the application was “complete” is not unduly vague because the HBOR
defines completeness in section 2923.6, subdivision (h). A loan modification application
is complete “when a borrower has supplied the mortgage servicer with all documents
required by the mortgage servicer within the reasonable timeframes specified by the
mortgage servicer.” (Ibid.) Furthermore, paragraphs 25 and 26 are not the only pertinent
allegations. Paragraph 22 alleges plaintiff had previously received “conflicting and
frustrating communications from PHH stating that they received his application, then that
his application was complete, then that his application was missing documents.”
Paragraph 23 alleges plaintiff “would supply the missing document requested, … then get
confirmation [but later receive] another letter stating that more documents were needed to
complete his application.”
As defendant acknowledges, we must liberally construe the operative pleading and
give it “a reasonable interpretation, reading it as a whole and its parts in their context.”
(Best v. Ocwen Loan Servicing, LLC (2021) 64 Cal.App.5th 568, 574.) Applying this
standard, plaintiff is entitled to the reasonable inference that the words “had a complete
loan application pending” in paragraphs 25 and 26 of the complaint mean he had
provided all documents required by PHH when the notices of default and sale were
recorded. Whether he can ultimately prove the allegations is not relevant at this stage of
the case. “[T]he question of plaintiff’s ability to prove these allegations, or the possible
15.
difficulty in making such proof does not concern the reviewing court .…” (John’s Grill,
Inc. v. The Hartford Financial Services Group, Inc. (2024) 16 Cal.5th 1003, 1013.)
Contrary to what the trial court suggested in the earlier demurrer rulings, plaintiff
was not obligated to allege that PHH confirmed his application was complete. The
absence of such confirmation would not necessarily disprove plaintiff’s allegations of
completeness; it might instead indicate PHH breached its duty to “provide written
acknowledgment of the receipt of the documentation within five business days of
receipt.” (§ 2924.10, subd. (a).) Alternatively, as plaintiff argues in his opening brief,
PHH may have erroneously treated the application as incomplete when he had in fact
submitted all required documents.
“The statute defines completeness by when the borrower has supplied the required
documents to the mortgage servicer, not when the mortgage servicer completes its review
and acknowledges that no further documents are required. The statutory language does
not permit a mortgage servicer to create a moving target so borrowers have no way of
knowing whether a loan modification application is complete until the mortgage servicer
tells them so.” (Mace v. Ocwen Loan Servicing, LLC (N.D.Cal. 2017) 252 F.Supp.3d
941, 946.) “If the ‘borrower has supplied the mortgage servicer with all documents
required by the mortgage servicer within the reasonable timeframes specified by the
mortgage servicer,’ then the application is complete.” (Id. at p. 947, quoting § 2923.6,
subd. (h).)
Standing alone, the sufficiency of plaintiff’s allegations regarding the complete
and pending application at the time of the notices of default and sale warrant reversal as
to the first cause of action. Plaintiff also pleaded further violations of section 2923.6 in
August 2022. Specifically, the lost opportunity to appeal PHH’s denial of his most recent
loan modification application.
As discussed, the notices of default and sale were recorded in January 2022 and
May 2022, respectively. Although plaintiff alleges he had a complete loan modification
16.
application pending on those dates, the operative pleading explains that he submitted a
new application to PHH on June 9, 2022. According to the pleading, “[i]n a letter dated
June 23, 2022, PHH requested alleged missing documents from [the] application such as
two bank statements within 90 days showing income deposit amounts, and
documentation of other earned income received.”
Plaintiff maintains that his June 2022 application was complete at the time of
submission, and that PHH made a mistake by treating it as incomplete. That particular
issue of completeness is a mixed question of law and fact that is not resolvable at the
pleading stage. The trial court focused on this dispute and found a pleading deficiency
because “there is no allegation that [p]laintiff responded to the June 23, 2022 letter [and]
provided all documents requested in that letter .…”
The trial court’s reading of the third amended complaint was simply incorrect.
Paragraphs 32 and 49 allege that on June 29, 2022, plaintiff responded to PHH’s letter by
submitting additional income verification documents. It is further alleged, in
paragraphs 33 and 50, that PHH later provided written confirmation that it had received
the supplemental documents.
The trial court did not address any contentions regarding PHH’s eventual denial of
the June 2022 application. Plaintiff alleged that “in a letter dated August 22, 2022, [he]
was informed that [PHH] did not receive the missing documents, and his review was
denied on August 1, 2022.” Plaintiff further alleged that “he was not given an
opportunity to appeal his denial.” Paragraph 53 asserts that PHH violated section 2923.6
“by not allowing [p]laintiff an opportunity to appeal its decision to deny his application.
Had [p]laintiff been afforded this opportunity, he likely would have been able show that
he had [submitted] all documentation requested by [PHH].”
Defendant argues “[i]t is not enough for [plaintiff] to show that the trial court gave
an incorrect reason for dismissing this claim.” That statement is accurate. “It is the
correctness of the trial court’s action in sustaining a demurrer, not its reasons, which is
17.
reviewable.” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 72.) However, the
arguments for affirmance on other grounds are not persuasive.
Defendant first complains that plaintiff did not specifically allege its failure to
send “a denial letter with notice that he had 30 days to appeal the denial.” It is true that
plaintiff’s contentions are awkwardly worded. The key allegation reads, “[I]n a letter
dated August 22, 2022, [p]laintiff was informed that [PHH] did not receive the missing
documents, and his review was denied on August 1, 2022.” The next two paragraphs
allege plaintiff was not given an opportunity to appeal the denial of his application. The
reader must infer what could have easily been stated in plain language: PHH claimed to
have denied the application on August 1, 2022, but plaintiff never received a written
denial; he only learned of the denial in a letter dated August 22, 2022, and he was not
advised of his appeal rights nor given the opportunity to appeal as mandated by
section 2923.6, subdivisions (d) and (f)(1).
A complaint need not be “a model of clarity” so long as it “contains substantive
factual allegations sufficient to apprise [the defendant] of the claims against [it].” (A.J.
Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.) In his reply
brief, plaintiff confirms he is alleging unawareness of the purported denial of his
application on August 1, 2022; “only learn[ing] of it in the August 22nd letter”; and that
he was “not provided a right to appeal or notified of how to appeal his denial.” Plaintiff
offers to amend the operative complaint “to unequivocally plead” those allegations.
Because the essential allegations are reasonably inferable, the filing of a fourth amended
complaint is unnecessary.
Lastly, defendant contends any deprivation of plaintiff’s appeal rights is
immaterial given the expiration of the notice of trustee’s sale by operation of law in 2023.
In other words, because no sale is pending, there is no section 2923.6 violation to
remedy. Defendant misconstrues the scope of relief available under section 2924.12.
18.
If a trustee’s sale has not yet occurred, “a borrower may bring an action for
injunctive relief to enjoin a material violation of [section 2923.6 and other specified
HBOR provisions].” (§ 2924.12, subd. (a)(1).) “Any injunction shall remain in place
and any trustee’s sale shall be enjoined until the court determines that the mortgage
servicer … has corrected and remedied the violation or violations giving rise to the action
for injunctive relief.” (Id., subd. (a)(2), italics added.) If plaintiff were to prevail on the
claim regarding his appeal rights under section 2923.6, subdivisions (d) and (f)(1), the
trial court could enjoin the violation by requiring PHH to give plaintiff an opportunity to
appeal its denial of his June 2022 application. Such relief would be separate and distinct
from an injunction against a trustee’s sale.
The SPOC Claim
Plaintiff’s section 2923.7 claim was originally pleaded to broadly include alleged
SPOC violations dating back to his TPPs with Ocwen in 2018. Although plaintiff later
removed his breach of contract claim from the pleadings, he never updated or edited the
SPOC allegations. The trial court was understandably confused about certain allegations
that remained in the third amended complaint. Part of its final demurrer ruling addressed
the time-barred and irrelevant nature of those allegations.
The ruling as to plaintiff’s SPOC cause of action concluded, in pertinent part, with
the following statement: “To the extent [p]laintiff alleges a violation of [section] 2923.7
occurring in 2022, [he] fails to allege facts establishing that any failure concerning the
appointment of a [SPOC] constituted a material violation …, or otherwise caused [him]
harm.” Now, on appeal, plaintiff clarifies his SPOC claim only pertains “to the manner
in which PHH’s representatives handled the June 2022 [loan modification] application.”
Paragraph 60 of the operative pleading alleges plaintiff’s SPOC “failed to
coordinate the receipt of all documents associated with available foreclosure prevention
alternatives and notify the borrower of any missing documents necessary to complete the
application.” This merely parrots the language of section 2923.7, subdivision (b)(2).
19.
However, paragraphs 61 through 64 reallege specific facts regarding PHH sending
written confirmation in July 2022 about receiving plaintiff’s supplemental income
verification documents, and later sending a letter dated August 22, 2022, stating it “did
not receive the missing documents, and his review was denied on August 1, 2022.”
Paragraph 65 alludes to section 2923.7, subdivision (b)(4), by alleging the SPOC’s
failure to “ensure that [plaintiff was] considered for all foreclosure prevention
alternatives offered by, or through, the mortgage servicer,” i.e., PHH. Paragraph 66
realleges plaintiff’s submission of all documents requested by PHH, and PHH’s
contradictory representation “that [it] was still missing documents that he had sent in on
multiple occasions.” In other words, paragraph 66 impliedly alleges a violation of
section 2923.7, subdivision (b)(2), based on the SPOC’s failure to coordinate the receipt
of all documents related to his June 2022 application and/or to notify him of any missing
documents necessary to complete the application.
“In the construction of a pleading, for the purpose of determining its effect, its
allegations must be liberally construed, with a view to substantial justice between the
parties.” (Code Civ. Proc., § 452.) Therefore, necessary averments “ ‘may appear by
inference as well as by direct allegation.’ ” (Rickley v. Goodfriend, supra, 212
Cal.App.4th at p. 1141.) Plaintiff’s allegations are minimally sufficient to support a
SPOC claim relating to the June 2022 application. The alleged violations are material
insofar as they “disrupted the loan modification process” (Billesbach, supra, 63
Cal.App.5th at p. 837) and prevented him from being “considered for all foreclosure
prevention alternatives” (§ 2923.7, subd. (b)(4)). The scope of injunctive relief would be
limited (see § 2924.12, subd. (a)), but the claim survives the pleading stage.
The UCL Claim
The trial court’s rejection of the UCL claim was based on its conclusion that
neither of the HBOR causes of action were sufficiently pleaded. Although the rationale
was erroneous, we must “affirm a judgment of dismissal if it is correct on any ground
20.
stated in the demurrer, independent of the trial court’s stated reasons.” (Bichai v. Dignity
Health (2021) 61 Cal.App.5th 869, 877.) As defendant correctly argued in all four of its
demurrers, plaintiff did not plead factual allegations of standing to sue under the UCL.
Plaintiff has never discussed the possibility of a curative amendment. Therefore, as we
explain, the third cause of action was properly dismissed without leave to amend.
Applicable Law
“The UCL defines ‘unfair competition’ as ‘any unlawful, unfair or fraudulent
business act or practice and unfair, deceptive, untrue or misleading advertising.’
[Citation.] By proscribing ‘any unlawful’ business act or practice [citation], the UCL
‘ “borrows” ’ rules set out in other laws and makes violations of those rules
independently actionable.” (Zhang v. Superior Court (2013) 57 Cal.4th 364, 370.) For
that reason, UCL claims are typically derivative of other separately pleaded causes of
action.
Plaintiff acknowledges his UCL claim is “tethered” to the HBOR causes of action.
“When a statutory claim fails, a derivative UCL claim also fails.” (Aleksick v. 7-Eleven,
Inc. (2012) 205 Cal.App.4th 1176, 1185.) This is why the trial court based its dismissal
of the third cause of action on its analysis of the HBOR causes of action and did not reach
the issue of standing.
A heightened standing requirement was added to the UCL by voter initiative in
2004. Previously, “any person acting for the interests of itself, its members or the general
public” had standing to bring a UCL action. (Bus. & Prof. Code, former § 17204, as
amended by Stats. 1993, ch. 926, § 2, p. 5198.) The 2004 amendment restricted private
standing to “a person who has suffered injury in fact and has lost money or property as a
result of the unfair competition.” (Bus. & Prof. Code, § 17204, as amended by Prop. 64,
as approved by voters, Gen. Elec. (Nov. 2, 2004) § 3.)
“The UCL’s focus on ‘los[s]’ of ‘money or property’ [citation] restricts the broad
range of harms that could otherwise give rise to standing.” (California Medical Assn. v.
21.
Aetna Health of California Inc. (2023) 14 Cal.5th 1075, 1088.) “[O]nly injuries to
money or property—that is, only economic injuries—can support standing.” (Ibid.)
There is also a causation requirement, meaning the economic injury must be causally
connected to the unlawful, unfair, or fraudulent business practice. (Id. at p. 1096.)
Analysis
The trial court did not address standing in any of its rulings. Defendant, however,
emphasized the issue in each of the demurrers. Plaintiff declined to make any substantive
changes to the UCL allegations in his three amendments to the pleading. Each version,
including the operative third amended complaint, contains the following sentence: “As a
result of [d]efendants’ wrongful conduct, [p]laintiff has suffered various injuries
according to proof at trial, including but not limited to the imminent loss of property.”
This generic allegation does not identify or explain a causal connection between the
alleged HBOR violations and an economic injury. A liberal construction of the overall
pleading does not fix the problem.
It is questionable whether the possibility of a future foreclosure satisfies the
requirement of an injury in fact. One case holds that an “impending foreclosure” can
qualify. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 522,
disapproved on another ground in Yvanova v. New Century Mortgage Corp. (2016) 62
Cal.4th 919, 939 & fn. 13.) But in that same case, as here, the homeowner did not plead
the necessary “causal link to her economic injury.” (Jenkins, at p. 523.) “As Jenkins’s
home was subject to nonjudicial foreclosure because of Jenkins’s default on her loan,
which occurred before [the d]efendants’ alleged wrongful acts, Jenkins cannot assert the
impending foreclosure of her home (i.e., her alleged economic injury) was caused by [the
d]efendants’ wrongful actions.” (Ibid.)
In his opposition briefs to the trial court, plaintiff referenced unspecified “costs,
fees, and interest,” and “costs of suit.” It is unclear how such expenses might have been
incurred as a result of the alleged HBOR violations in 2022. Expenditures “in the course
22.
of UCL litigation, or to prepare for such litigation, do not serve, for purposes of UCL
standing, to establish an injury in fact resulting from the allegedly unfair competition.”
(California Medical Assn. v. Aetna Health of California Inc., supra, 14 Cal.5th at
p. 1099.) Plaintiff does not identify a causal connection between the alleged mishandling
of his loan modification applications and a particular economic loss or even category of
loss.
Plaintiff defaulted on his loan several years before the alleged HBOR violations
were committed. Defendant highlighted this circumstance and cited the Jenkins case in
each of the demurrers, but plaintiff declined to address the argument. He has still not
addressed it in a meaningful way.
The opening brief on appeal contains two paragraphs regarding UCL standing.
Plaintiff cites to unpublished federal district court cases for the proposition that an
“increase in debt is an economic injury that confers standing on a borrower, even if not
paid.” Both cases involved borrowers being charged for unauthorized or improper
expenses. (Vega v. Ocwen Financial Corp. (C.D.Cal., Mar. 24, 2015) No. 2:14-cv-
04408-ODW(PLAx), 2015 U.S. Dist. LEXIS 37079, *2–*3 [2015 WL 1383241, *1];
Lane v. Wells Fargo Bank, N.A. (N.D.Cal., June 21, 2013) No. C 12-04026 WHA, 2013
U.S.Dist. LEXIS 87669, pp. *31–*32 [2013 WL 3187410, *11].) In Vega, for example,
the mortgage servicer caused the defaulted borrower to incur “unnecessary and
inappropriate” charges for monthly home inspections. (Vega v. Ocwen Financial Corp.,
supra, 2015 U.S. Dist. LEXIS 37079, *3 [2015 WL 1383241, *1].) Here, the pleadings
do not suggest any remotely analogous circumstances.
Neither plaintiff’s opening brief nor his reply brief propose any amendments to the
UCL claim. Consequently, he has not met his burden to show the pleading defect is
curable. (Hernandez v. City of Pomona, supra, 46 Cal.4th at p. 520, fn. 16; Tindell v.
Murphy, supra, 22 Cal.App.5th at p. 1251.)
23.
DISPOSITION
The judgment is affirmed in part and reversed in part. The trial court shall vacate
its order sustaining the entire demurrer to the third amended complaint and enter a new
order (1) overruling the demurrer as to the first and second causes of action and
(2) sustaining the demurrer as to the third cause of action, without leave to amend. The
parties shall bear their own costs on appeal.
GUERRA, J.
WE CONCUR:
MEEHAN, Acting P. J.
HARRELL, J.
24.