Bautzer v. Select Portfolio Servicing, Inc. CA4/2 (2020) · DecisionDepot
Bautzer v. Select Portfolio Servicing, Inc. CA4/2
California Court of Appeal Dec 24, 2020 No. E072733Unpublished
Filed 12/24/20 Bautzer v. Select Portfolio Servicing, Inc. CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
MARK R. BAUTZER, as Trustee, etc.,
Plaintiff and Appellant, E072733
v. (Super.Ct.No. PSC1805507)
SELECT PORTFOLIO SERVICING, OPINION INC., et al.,
Defendant and Respondent.
APPEAL from the Superior Court of Riverside County. David M. Chapman,
Judge. Affirmed.
Law Offices of J. David Nick and J. David Nick for Plaintiff and Appellant.
Kutak Rock and Steven M. Dailey for Defendant and Respondent, Select Portfolio
Servicing, Inc.
Wargo & French, Jeffrey N. Williams; RJT & Associates and Raymond J.
Tittmann for Defendant and Respondent, Assurant, Inc.
1
Plaintiff Mark R. Bautzer, as successor borrower to the mortgage on his deceased
mother’s residence in Ojai, sued the mortgage servicing company (Select Portfolio
Servicing, Inc.) and the provider of fire insurance (Assurant, Inc.). He claimed Select
procured, or Assurant provided, a policy with limits insufficient to cover the loss from a
fire that destroyed the property. His complaint contained causes of action for breach of
complaint satisfied none of these requirements. Importantly, it contained no allegations
demonstrating that he provided Select with any consideration for promising to procure an
insurance policy “sufficient” for his purposes. Because Bautzer does not argue that he can
amend his complaint to cure these defects and allege a valid separate agreement, we
uphold the trial court’s determination that his breach of contract claims fail. (Galbiso v.
Orosi Public Utility Dist. (2010) 182 Cal.App.4th 652, 663 [plaintiff bears the burden of
demonstrating a reasonable possibility that defects can be cured by amendment].)
D. The Negligence and Unfair Business Practice Claims Fail
The fact that the insurance covenants in the deed of trust control and do not
require Select to purchase any particular type of fire insurance means that Bautzer’s other
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two causes of action also fail. As to his negligence claims, he cannot satisfy the first
element of the tort—that Select or Assurant owed him a duty of care. (Nymark v. Heart
Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095 [“The existence of a duty
of care owed by a defendant to a plaintiff is a prerequisite to establishing a claim for
negligence”].) Bautzer’s alleged injury involves conduct controlled by a loan agreement
(the deed of trust). He claims he lost the property to foreclosure because Select obtained,
or Assurant provided, insufficient fire insurance.
In California, “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 mere lender of money.” (Nymark v. Heart Federal
Savings & Loan Assn., supra, 231 Cal.App.3d at p. 1096; see also Wagner v. Benson
(1980) 101 Cal.App.3d 27, 35 [lender’s liability to a borrower for negligence arises only
when the lender “‘actively participates’ in the financed enterprise ‘beyond the domain of
the usual money lender’”].) “Loan servicers do not owe a duty to the borrowers of the
loans they service.” (Shepherd v. Am. Home Mortg. Servs., Inc. (E.D. Cal. 2009) 2009
WL 4505925, at [2]; accord, Lueras v. BAC Home Loans Servicing, LP (2013) 221
Cal.App.4th 49 [loan servicer did not owe the borrower a legal duty when discussing loan
modifications].) As the mortgage servicer, Select did not owe Bautzer a duty of care. Its
obligations to Bautzer sound in contract, not tort.
15
Bautzer’s reliance on Greenfield v. Insurance Inc. (1971) 19 Cal.App.3d 803 and
Westrick v. State Farm Insurance (1982) 137 Cal.App.3d 685 is misplaced. Those cases
hold that an insurance broker hired by a plaintiff to procure a certain type of insurance
policy owes the plaintiff a legal duty to exercise reasonable care to seek the coverage
requested (Greenfield, at p. 810) and to disclose the rights and obligations under the
policy (Westrick, at p. 692). The situation here is easily distinguishable. Select is the
servicer of the loan; Bautzer never alleged he hired it to act as an insurance broker for
him.
Nor did Assurant owe Bautzer a duty of care. Its relationship to Bautzer is even
more attenuated than Select’s, as Assurant was never in privity with him. Select obtained
the insurance policy from Assurant then, as authorized under the deed of trust, billed
Bautzer for the premiums. Assurant did not owe a legal duty to Select (let alone to
Bautzer) to make any particular insurance available or to advise of any inadequacies in
the policy limits. (Gibson v. Government Employees Ins. Co. (1984) 162 Cal.App.3d 441,
442-443, 448.)
Bautzer’s unfair business practice claim fails because it is derivative of the
contract and negligence claims. (Smith v. State Farm Mutual Automobile Ins. Co. (2001)
93 Cal.App.4th 700, 718.) His claim that Select and Assurant were engaging in unfair
business practices is predicated on the same conduct as his causes of action for breach of
contract and negligence—namely, that Select failed to obtain, and Assurant failed to
provide, insurance that fully covered the lender’s interest in the loan (and thus would not
16
result in an outstanding balance Bautzer would either have to pay or lose the property in
foreclosure).
Finally, we reject Bautzer’s argument that we should reverse the trial court’s
ruling because it didn’t explain its “sudden” change of course from its tentative decision
to overrule the demurrer. In fact, the trial court did state its reasons for sustaining the
demurrer, but even if it hadn’t, we review the court’s ruling, not its reasoning. (McClain
v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 802.) Thus, “we may affirm the trial
court’s ruling ‘on any basis presented by the record whether or not relied upon by the trial
court.’” (Ibid.)
Bautzer’s arguments on appeal can be boiled down to an insistence that, because
we are at the demur stage, we should look at his complaint only and ignore the terms of
the deed of trust. He argues that since he alleged Select promised to find him an
acceptable insurance policy, we should accept that as the truth. Legal principles and
common sense dictate that we should not. “‘The interests of all parties are advanced by
avoiding a trial and reversal for defect[s] in pleadings.’” (Pacific States Enterprises, Inc.
v. City of Coachella (1993) 13 Cal.App.4th 1414, 1420, fn. 3.)
Bautzer’s allegations and the judicially noticed deed of trust reveal as a matter of
law that none of his theories of liability is tenable. We therefore conclude the trial court
was correct to sustain Select’s demurrer and grant Assurant’s motion for judgment on the
pleadings without leave to amend.
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III
DISPOSITION
We affirm the judgment. Bautzer shall bear costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
SLOUGH J. We concur:
McKINSTER Acting P. J.
RAPHAEL J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that the plaintiff's claims for breach of contract, negligence, and unfair business practices failed as a matter of law because the deed of trust explicitly authorized the lender to obtain force-placed insurance without any obligation to provide specific coverage limits. The court further held that the plaintiff failed to allege a valid separate agreement or any duty of care owed by the mortgage servicer or insurer.
Issues
Whether the trial court erred in sustaining a demurrer and granting a motion for judgment on the pleadings based on the terms of a deed of trust.
Whether the plaintiff sufficiently alleged a separate, enforceable insurance agreement outside the scope of the deed of trust.
Whether the mortgage servicer or insurance provider owed a duty of care to the borrower regarding the adequacy of force-placed insurance coverage.
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“The controlling agreement in this litigation is the insurance covenant in the deed of trust securing the mortgage on the Ojai property, and that document clearly states it is the borrower’s responsibility to maintain fire insurance.”
“Lender is under no obligation to purchase any particular type or amount of coverage.”
“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 mere lender of money.”