FIDELITY NATIONAL TITLE INSURANCE COMPANY, A FLORIDA CORPORATION vs NIKI-ALEXANDER SHETTY

Defendant’s Amended Cross-Complaint was filed on April 28, 2026 alleging six causes of action: (1) breach of contract (2) breach of implied covenant of good faith and fair dealing (3) breach of fiduciary duty (4) negligence (5) negligent misrepresentation and (6) equitable indemnity and contribution. Cross-Defendant FNTIC filed a demurrer on May 29, 2026, an opposition was filed on June 15, 2026 and the reply was filed on June 29, 2026.

Grounds:

FNTIC demurs to the Second Cause of Action pursuant to Code of Civil Procedure section 430.10(e) on the ground that it fails to state facts sufficient to constitute a cause of action.

The allegations underlying this claim are fully encompassed by Defendant's affirmative defenses to the Complaint, which assert that FNTIC failed to apply all alleged credits, offsets, recoupment, equitable reductions, and other defenses arising from the refinance transaction. (See Amended Cross-Complaint, ¶¶ 51–59.) As such, the Second Cause of Action merely repackages affirmative defenses as an independent claim and fails to state a cognizable cause of action.

Moreover, the allegations are directly contradicted by the express terms of the assigned Note, attached as Exhibit 15 to the Complaint. Section 3 of the Note unequivocally provides that Defendant's obligation to make payments is not subject to any setoff, deduction, or counterclaim. The Note imposes no express or implied obligation on FNTIC to apply any alleged credits, offsets, recoupment, equitable reductions, or other defenses before enforcing its rights under the Note. Accordingly, the allegations fail as a matter of law.

Analysis: A. Grounds for Demurrer The grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civ. Proc., § 430.30, subd. (a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Concerning the legal sufficiency of a pleading, the sole issue on demurrer is whether the facts pleaded, if true, state a valid cause of action – i.e., if the complaint pleads facts that would entitle the plaintiff to relief. (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 339.) It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) B. Request for Judicial Notice

The Court GRANTS the unopposed request for judicial notice of the documents filed in this action: the Complaint, Cross-Complaint, Minute Order dated April 14, 2026, and Amended Cross- Complaint. (See Evid. Code §452, subd. (d).)

C. Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing In California, implied in every contract is a covenant of good faith and fair dealing which requires that neither party do anything which will deprive the other of the benefits of the agreement. (Ocean

2025CUFR038545: FIDELITY NATIONAL TITLE INSURANCE COMPANY, A FLORIDA CORPORATION vs NIKI-ALEXANDER SHETTY

Services Corp. v. Ventura Port Dist. (1993) 15 Cal.App.4th 1762, 1780.) Breach of the covenant requires a showing of a valid contract. (See CACI 325.) In the Amended Cross-Complaint, Defendant now alleges that his claims are based on the assigned promissory note (from FNTIC’s insured, Velocity Commercial Capital, LLC) and related loan instruments, and that FNTIC’s ability to enforce the agreements are limited to the rights possessed by Velocity. (Amended Cross-Complaint, ¶¶52-53.) “FNTIC took the assigned instruments subject to the burdens, limitations, defenses, credits, setoffs, recoupment rights, and equitable restrictions arising from the same transaction.” (Amended Cross-Complaint, ¶53.)

Defendant’s benefits and protections implied in the agreement include: The right to have any claimed indebtedness calculated and enforced only according to the terms of the assigned instruments, after application of all credits, offsets, recoupment, equitable reductions, and defenses arising from the same refinance transaction, including the failed first priority closing and FNTIC’s post-loss payment to Velocity. (Amended Cross-Complaint, ¶55.) As previously noted by the Court, the equitable affirmative defense of credit/offset/recoupment is already raised in Defendant’s Answer to the Complaint at ¶¶8, 18, and 27 - i.e., at ¶8 “SETOFF, CREDIT, AND RECOUPMENT”: “Any recovery must be reduced by all payments, credits, offsets, insurance proceeds, collateral recoveries, refunds, or other value received by Plaintiff or its assignor relating to the loan and title claim.” As Defendant states in Opposition, the claim is directed at FNTIC’s enforcement efforts.

Accordingly, this cause of action is duplicative and unnecessary, as it is already fully encompassed by Defendant’s defenses to the Complaint. Also, as expressly conceded by Defendant in his Opposition at page 5:20: “The implied covenant [claim] cannot contradict express contract terms.” It is notable that no actual terms of the underlying contract(s) are alleged. And just as importantly, the contract attached to the Complaint, upon which the claim relies, specifically states in § 3: Principal and interest shall be payable at Lender's main office or at such other place as Lender may designate in writing in immediately available funds in lawful money of the United States of America without set-off, deduction or counterclaim. (Complaint, Ex. 15, § 3 emphasis added.)

Defendant also fails to plead around the express terms of the Note. Specifically, he does not identify the contractual provisions upon which this cause of action relies or explain how those provisions conferred the alleged benefits that were purportedly frustrated. Nor does Defendant identify the specific credits, offsets, recoupment, equitable reductions, or other defenses that FNTIC allegedly failed to apply before enforcing the Note. These omissions render the allegations vague, conclusory, and insufficient to state a claim.

More fundamentally, Defendant fails to articulate any meaningful distinction between the affirmative defenses asserted in his Answer and the allegations supporting this cause of action in the Amended Cross-Complaint. The claim merely repackages those affirmative defenses as an affirmative cause of action without alleging any independent contractual duty that FNTIC breached. The implied covenant of good faith and fair dealing cannot create obligations that are

2025CUFR038545: FIDELITY NATIONAL TITLE INSURANCE COMPANY, A FLORIDA CORPORATION vs NIKI-ALEXANDER SHETTY

inconsistent with, or extend beyond, the parties' express agreement. As the California Supreme Court explained in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349–350, the implied covenant "cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement." For the reasons set forth above, the Court SUSTAINS the demurrer pursuant to CCP §430.10, subd. (e). The Court also denies further leave to amend as Defendant was previously provided with the opportunity to attempt to amend this precise claim in his cross-complaint. (See City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747 [leave to amend should be allowed liberally as a matter of fairness where the plaintiff has not yet had an opportunity to amend in response to a demurrer].)

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