Tash v. Devoir Oblige Capital Grp.

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RAYMOND M. TASH et al., Plaintiffs and Appellants, v. DEVOIR OBLIGE CAPITAL GROUP, LLC, et al., Defendants and Respondents.

B327414

California Court of Appeals, Second District, Third Division

June 20, 2024

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. 20STCV48390 Robert B. Broadbelt, Judge. Affirmed.

Neufeld Marks and Paul S. Marks for Plaintiffs and Appellants.

Wright, Finlay &Zak, Jonathan D. Fink and Cathy K Robinson for Defendants and Respondents.

EGERTON, J.

Plaintiffs Raymond and Katrin Tash appeal a judgment of dismissal following an order sustaining the demurrer of defendants Devoir Oblige Capital Group, LLC aka D.O. Capital Group, LLC (Devoir Oblige); FCI Lender Services, Inc. (FCI); SG Capital Partners, LLC (SG Capital); and Select Portfolio Servicing, Inc. (SPS) (collectively, respondents). Respondents became the successor mortgagees and loan servicers after plaintiffs defaulted on their home mortgage. Although plaintiffs admit executing and submitting a loan application that contained false information, they allege a loan officer for their original lender was responsible for including the falsehoods in the application. Thus, plaintiffs contend respondents violated the Rosenthal Fair Debt Collection Practices Act (the Rosenthal Act or the Act, Civ. Code, § 1788 et seq.) by recording a notice of default that stated plaintiffs' loan application contained materially false information.^[1] The trial court sustained respondents' demurrer, concluding respondents could not be held liable for the loan officer's alleged misconduct because plaintiffs had specifically alleged the loan officer was an employee of the original lender in his dealings with plaintiffs. We affirm.

BACKGROUND

Consistent with the applicable standard of review, we draw our statement of facts from the allegations of plaintiffs' operative second amended complaint and other matters properly subject to judicial notice. (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885; Hanouchian v. Steele (2020) 51 Cal.App.5th 99, 103 (Hanouchian).)

" '[W]e treat as true all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.'" (Hanouchian, at p. 103.)

Between late 2018 and early 2019, plaintiffs applied for a loan from BM Real Estate Services, Inc. dba Priority Financial Network (BM Real Estate) to purchase a home in Los Angeles. They worked directly with a loan officer and employee of BM Real Estate named Tzvi Ratner-Stauber.

Before preparing the loan documents, Ratner-Stauber met with Raymond Tash to discuss plaintiffs' application.^[2] During the meeting, Tash disclosed that, in 2014, he lost a townhome in Oregon to foreclosure and, two weeks later, he filed for personal bankruptcy.

Sometime after the meeting, Ratner-Stauber presented Tash with a partially filled out loan application that he asked Tash to complete. Contrary to Tash's disclosures, Ratner-Stauber had prepared the application to state there had been no bankruptcies or foreclosures within the past seven years. The application also stated that no part of the down payment was borrowed, even though Ratner-Stauber had himself facilitated a separate loan to finance part of the down payment. After receiving the application, Tash again discussed the bankruptcy with Ratner-Stauber and supplied additional information about the bankruptcy. Tash signed a later version of the application that disclosed the bankruptcy, but the application still falsely stated the down payment was not financed and plaintiffs had not had a property foreclosed upon within the past seven years. BM Real Estate funded the loan sometime in 2019.

First American Title Insurance Company (First American Title) was the trustee under the deed of trust.

In late 2019, plaintiffs missed a few mortgage payments. The amount of the default exceeded $200,000. On two unspecified dates, plaintiffs tendered funds to SPS, the then-current loan servicer, to reinstate the loan. On both occasions, SPS returned the funds and advised plaintiffs that the loan had been accelerated due to a false statement in plaintiffs' loan application. Thus, only a full repayment of the loan (in excess of $2 million) would be accepted.^[3]

In June 2020, SG Capital acquired the loan from BM Real Estate. Sometime after that, Devoir Oblige acquired the loan from SG Capital. FCI acted as loan servicer for Devoir Oblige.

In August 2020, First American Title recorded a notice of default and notice of sale on the property. Before the sale could take place, Tash filed a petition for bankruptcy. In the bankruptcy, he managed to obtain an alternative home loan (albeit at a significantly higher interest rate) and paid off the original mortgage.

Plaintiffs sued respondents, as well as BM Real Estate, Ratner-Stauber, and First American Title. As relevant to this appeal, the operative second amended complaint asserts a cause of action for violation of the Rosenthal Act against respondents and the other defendants.^[4] In support of the claim, the complaint alleges the defendants' foreclosure notices "falsely stated that there were material misrepresentations in [plaintiffs'] loan application, and/or that any alleged incorrect statements were materially false, and/or that the original lender reasonably relied on any such statements in funding the mortgage loan."

Respondents challenged the pleading by demurrer on the ground that it failed to allege sufficient facts to state a claim for violation of the Rosenthal Act. Among other things, they argued the complaint admitted Tash executed and submitted a loan application with several material misrepresentations; none of respondents' alleged conduct constituted a violation of the Rosenthal Act; and, at most, Ratner-Stauber allegedly engaged in inappropriate debt collection activity, but he was not respondents' agent.

The trial court sustained respondents' demurrer without leave to amend and entered a judgment of dismissal.^[5] Plaintiffs filed a timely notice of appeal.

DISCUSSION

The Rosenthal Act aims "to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts."^[6] (§ 1788.1, subd. (b).) Among other things, the Act "generally requires 'debt collector[s] collecting or attempting to collect a consumer debt' to comply with the provisions of its federal counterpart, the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692 et seq.)." (Hagey v. Solar Service Experts, LLC (2023) 94 Cal.App.5th 1303, 1308 quoting § 1788.17; accord Best v. Ocwen Loan Servicing, LLC (2021) 64 Cal.App.5th 568, 576 [the Act "incorporates the FDCPA, so that a violation of the FDCPA is per se a violation of the Rosenthal Act"].)^[7] Any debt collector who violates the Act is liable for "any actual damages sustained by the debtor as a result of the violation." (§ 1788.30, subd. (a).)

Plaintiffs contend respondents' alleged conduct violated provisions of the FDCPA prohibiting a debt collector from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt."^[8] (15 U.S.C. § 1692e; see § 1788.17 [incorporating 15 U.S.C. § 1692e into Rosenthal Act].) They point specifically to the allegation that the notice of default "falsely stated that there were material misrepresentations in [plaintiffs'] loan application, and/or that any alleged incorrect statements were materially false, and/or that the original lender reasonably relied on any such statements in funding the mortgage loan." Materiality, in plaintiffs' telling, is the crucial issue. They acknowledge the complaint admits the loan application contained false information about a past foreclosure and the use of borrowed funds to finance their down payment. But plaintiffs argue these falsehoods could not have been material to respondents because Tash disclosed the true information to Ratner-Stauber, who, plaintiffs contend, "was and is alleged to be an agent of defendants."^[9] The trial court rejected plaintiffs' attempt to impute Ratner-Stauber's alleged knowledge and misconduct to respondents, reasoning plaintiffs had "not sufficiently alleged that he, as an employee or agent for defendant BM Real Estate [citation], was acting on behalf of [respondents]." (Italics added.) Plaintiffs contend the court erred. Because an agency allegation is" 'a statement of ultimate fact,'" plaintiffs argue it was sufficient to allege that" 'all defendants acted as agents of every other defendant in the scope of said agency.'" (See Skopp v. Weaver (1976) 16 Cal.3d 432, 439 (Skopp).) Had plaintiffs alleged only this ultimate fact, we would be compelled to agree. However, as the trial court recognized, the operative pleading alleges specific facts that negate plaintiffs' claim that Ratner-Stauber was respondents' agent.

"It is well established that in the context of a demurrer specific allegations control over more general ones." (Chen v. PayPal, Inc. (2021) 61 Cal.App.5th 559, 571, citing Medical Marijuana, Inc. v. ProjectCBD.com (2016) 6 Cal.App.5th 602, 619 (ProjectCBD.com); Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1235-1236.) As the Perez court explained, "[w]here a pleading includes a general allegation, such as an allegation of an ultimate fact, as well as specific allegations that add details or explanatory facts, it is possible that a conflict or inconsistency will exist between the general allegation and the specific allegations. To handle these contradictions, California courts have adopted the principle that specific allegations in a complaint control over an inconsistent general...