RED ROOF, INC. v. PHH MORTGAGE CORPORATION, et al.

seven days prior to the IDC, and the responding parties may file the same form in the department setting forth a response three days prior to the IDC. Once Defendant confirms an IDC date, Defendant must use the Court's online reservation system to continue the motion to a post-IDC discovery hearing date. The parties are ordered to have with them whatever materials are needed to make the IDC session productive and successful. Prior to the IDC date, lead or other designated counsel for the parties, with full authority, are to meet and confer, in person or via telephone in a further attempt to resolve as many of the issues as possible before the IDC. (See Cal.

Rules of Court, rule 3.670(f)(2).) If the parties resolve their discovery disputes before the IDC date, Defendant is ordered to take both the IDC and the motion off calendar as soon as possible. Defendant is ordered to give notice of this Order. DATED: August 31, 2026 ________________________________ Hon. Teresa A. Beaudet Judge, Los Angeles Superior Court

Superior Court of California County of Los Angeles Department 508 RED ROOF, INC. Plaintiff, vs. PHH MORTGAGE CORPORATION, et al., Defendants. | Case No.: |

| Hearing Date: | August 31, 2026 | Hearing Time: 10:00 a.m. [TENTATIVE] ORDER RE: DEFENDANT Velocity Commercial Capital, LLC's DEMURRER TO VERIFIED COMPLAINT

DEFENDANT ONITY MORTGAGE CORPORATION'S DEMURRER TO PLAINTIFF'S COMPLAINT | Background On June 11, 2025, Plaintiff Red Roof, Inc. ("Red Roof") filed this action against Defendants PHH Mortgage Corporation, PHH Mortgage Services, and Velocity Mortgage Capital, alleging three causes of action for (1) wrongful foreclosure, (2) quiet title, and (3) accounting. Defendant Velocity Commercial Capital, LLC ("Velocity"), erroneously sued as Velocity Mortgage Capital, now demurs to Red Roof's complaint in its entirety.

Red Roof opposes. Velocity did not file a reply. Defendant Onity Mortgage Corporation ("Onity"), formerly known as PHH Mortgage Corporation, and erroneously sued as PHH Mortgage Services, now demurs to Red Roof's complaint in its entirety. Red Roof opposes. Onity did not file a reply. Request for Judicial Notice The Court grants Velocity's request for judicial notice of Exhibits 1, 2, 3, 4, and 5.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda¿ (2007) 147 Cal.App.4th 740, 747.) In testing the sufficiency of the complaint, the court assumes the truth of properly pleaded factual allegations, facts reasonably inferred from those expressly pleaded, and judicially noticed matters. ((Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) "A demurrer tests the pleadings alone and not the¿evidence or other extrinsic matters.¿Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed." (SKF Farms v.

Superior Court ¿(1984) 153 Cal.App.3d 902, 905.) Accordingly, "[w]hether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer." (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609-10.) Under Code of Civil Procedure section 430.10 subdivisions (e) and (f), a demurrer may be filed if the pleading is uncertain or does not state facts sufficient to constitute a cause of action. For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. ((Aubry v.

Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) Leave to amend must be allowed where there is a reasonable possibility of successful amendment, otherwise, it is abuse of discretion. ((Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

Discussion

Velocity and Onity both demur to Red Roof's complaint for failing to name an indispensable party and failing to allege facts sufficient to state a cause of action. A. Allegations of the Complaint This action involves Red Roof's purchase of "the subject property located at 1939 S. San Pedro St., Los Angeles, CA 90011," through the mortgage loan provided by PHH Mortgage Corporation. (Compl., P. 1.) Plaintiff alleges that "Defendants, PHH MORTGAGE CORPORATION and PHH MORTGAGE SERVICES, are both in mortgage lending business, providing, among others, mortgage loans to individuals and business entities in the County of Los Angeles, California.

Plaintiff is informed and thereon alleges that their principal place of business is in the city of West Palm Beach, Florida, and they, along with defendant, VELOCITY MORTGAGE CAPITAL, actively lends within the County of Los Angeles with extensive mortgage loan accounts in the County of Los Angeles, California." (Compl., P. 2.) Plaintiff alleges that "[i]n January 2025, Plaintiff initiated a good faith effort to open an escrow to sell the subject property to a buyer named Kangaroo Go Inc. and to avoid costly foreclosure.

A formal letter of offer was sent to both the foreclosing entity, Assured Lender Services, Inc., and the mortgage company, Velocity Mortgage Capital. On January 6, 2025, Liz, a representative of Velocity Mortgage Capital, acknowledged the Plaintiff's interest in purchasing and requested documentation to demonstrate the Plaintiff's financial capability and intent to close on the property." (Compl., P. 4, emphasis omitted.) Plaintiff alleges that then, "[o]n February 13, 2025, at the request of Liz from Velocity Mortgage Capital, plaintiff submitted a Letter of Intent including: Proof of loan funding approval, For Sale by Owner Sales Agreement and an estimated HUD statement reflecting a closing date." (Compl., P. 5, emphasis omitted.)

Plaintiff alleges "[o]n February 19, 2025, Cherie of Assured Lender Services instructed the Plaintiff to open escrow and provided the necessary payoff statement. On February 21, 2025, the Plaintiff received the escrow documentation showing a scheduled closing date of May 20, 2025, and promptly shared this with both Liz and Cherie." (Compl., P. 6, emphasis omitted.) Finally, "[w]hile the escrow is pending with the closing date of May 20, 2025 already in place, defendants proceeded with the foreclosure on May 6, 2025, causing plaintiff to prematurely lose its title and unable to realize the economic benefit of having gone through the escrow.

Until the foreclosure took place on May 6, 2025, plaintiff acted in good faith throughout the process, complying with all document requests and timelines. Despite the foregoing, defendants caused the foreclosure sale to take place while escrow was open, with an agreed-upon closing date in place and already communicated." (Compl., P. 7.) B. Velocity's Demurrer a. Relevant Background

Velocity asserts that "[t]his lawsuit is one of four near-identical and frivolous actions initiated by Plaintiff's principal and counsel of record in an attempt to take or retain possession of real property owned by Defendant. In this version, Plaintiff Red Roof asserts three causes of action for (1) Wrongful Foreclosure, (2) Quiet Title, and (3) Accounting. Plaintiff asks the Court the [sic] unwind a foreclosure sale which occurred in May 2025, despite acknowledging its default on the subject loan and failing to allege any wrongful conduct by defendants." (Dem., 4:3-8.)

Velocity explains that it "made a loan to Red Roof which was secured by a Deed of Trust, Security Agreement, Assignment of Leases, Rents, and Profits, and Fixture Filing (' Deed of Trust ') recorded against the Property on October 14, 2021 (RJN, Ex. 1.) The Deed of Trust was signed by Connie H. Kim as president of Red Roof, Inc. (Id.) Velocity subsequently assigned its interest in the Deed of Trust to 'U.S. Bank National Association, as Trustee for Velocity Commercial Capital Loan Trust 2021-4' (' US Bank ') by assignment recorded on December 2, 2022. (RJN, Ex. 2.)

Upon recording the Assignment of Deed of Trust, Velocity granted, assigned, and transferred 'the described [Deed of Trust], with all interest, all liens, and any rights to or to become due thereon.' (Id.) US Bank became the beneficiary under the subject Deed of Trust." (Dem., 4:20-5:3.) Velocity next contends that "Plaintiff defaulted on the loan, and alleges that it 'initiated a good faith effort to open an escrow to sell the subject property to a buyer named Kangaroo Go Inc. to avoid costly foreclosure.' (Complaint, P. 4.)

The public information of Kangaroo Go Inc., as filed with the California Secretary of State, confirms that the entity originated in May 2024, and that Connie H. Kim is the CEO of the entity. (RJN, Ex. 4, 5.) Accordingly, the alleged 'good faith effort' to sell the Property was a performative act of self-dealing, wherein Connie H. Kim was effectively 'selling' the Property to herself. A trustee's sale of the Property took place on May 6, 2025, and title to the Property transferred to US Bank by virtue of a Trustee's Deed Upon Sale recorded on May 8, 2025. (RJN, Ex. 3.)

US Bank remains the owner of the Property." (Dem., 5:4-12.) b. Indispensable Party Velocity first demurs under Code of Civil Procedure Section 430.10, subdivision (d), because "[t]here is a defect or misjoinder of parties." Velocity cites Code of Civil Procedure section 389, subdivision (a), which governs the joinder of parties, providing that "[a] person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.

If he has not been so joined, the court shall order that he be made a party."

Velocity asserts that "Plaintiff asks the Court to unwind a foreclosure sale and to quiet title to the Property to Plaintiff. Without question, this would affect the rights of the Property owner US Bank, which is not a party to this action. Judgment cannot be entered as requested by Plaintiff without tremendous prejudice and deprivation of due process to the Property owner." (Dem., 6:28-7:3.) Red Roof's opposition contends that "[t]he assertion that somehow the lack of U.S. BANK as the indispensable party automatically renders this Complaint unable to further amend to include the alleged indispensable party is not entirely correct.

For example, the U.S. BANK can be designated as Doe 1." (Opp., 2:10-12.) Velocity's judicially noticed documents demonstrate that, although Velocity initially provided Red Roof with a loan, Velocity signed over all interests to US Bank on November 30, 2022. (RJN, Ex. 2.) US Bank foreclosed on the subject property and is therefore the owner of the property. (RJN, Ex. 3.) Accordingly, US Bank is the real party in interest, because it foreclosed on and owns Red Roof's former property. US Bank would likely be harmed if it is not joined as a party to the action because Red Roof's complaint directly involves US Bank's interests.

Accordingly, the demurrer is sustained under Code of Civil Procedure Section 430.10, subdivision (d), due to the defect of parties. c. Velocity is an Improper Party Next, Velocity asserts that all causes of action alleged against it fail because its interest in the Deed of Trust was assigned to US Bank. "An assignee stands in the shoes of the assignor, acquiring all of its rights and liabilities." (Professional Collection Consultants v. Hanada (1997) 53 Cal.App.4th 1016, 1018-1019.) Velocity asserts that "[b]y virtue of the Assignment of Deed of Trust (RJN Ex. 2), it is the assignee US Bank, not Velocity, who now owns all rights and liabilities regarding the subject Deed of Trust.

Here, each and every cause of action alleged against Defendant Velocity arises solely from the loan and Deed of Trust which have been assigned to US Bank. Velocity has no remaining interest, claim to title, or liability, such that the demurrer should be granted. Plaintiff cannot amend its pleading to cure this deficiency." (Dem., 7:11-16.) Red Roof's opposition asserts that "[c]ontrary to the assertion in the demurrer that somehow defendant VELOCITY was completely an uninterested party in this escrow transaction, the facts will show that defendant, VELOCITY, was the entity with whom plaintiff dealt with in arranging a third party, KANGAROO GO INC., to purchase the subject property." (Opp., 2:2-5.)

The Assignment of the Deed of Trust (RJN, Ex.2) shows that Velocity assigned all rights to US Bank on November 30, 2022. Although Red Roof contends that Velocity was not an uninterested party, Velocity's judicially noticed documents establish that after November 30, 2022, it has no longer had an interest, claim, or right to the property. Red Roof's assertion that Velocity is a proper party because Velocity assisted in arranging the sale of the property, do not support causes of action for wrongful foreclosure and quiet title.

Red Roof's cause of action for accounting "seeks the accounting of all of the payments and other transactions incurred in the defendants' mortgage account" (Compl., P. 15). As pointed out by Velocity, to allege an accounting claim, a party must establish that "(1) a relationship that requires accounting exists between the plaintiff and the defendant, and (2) that some balance is owed to the plaintiff, which can only be ascertained with an accounting. (Teselle v McLoughlin (2009) 173 Cal. App. 4 th 156, 179. [)]" Velocity points out that the "Assignment of Deed of Trust from [Velocity] to US Bank negates both of the above elements.

There exists no remaining relationship between [Red Roof] and [Velocity], and even if some balance remains owing to [Red Roof] under the Deed of Trust, [Velocity] is now a stranger to any such balance." (Dem. 10:2-9.) Based upon the discussion above, the Court sustains Velocity's demurrer without leave to amend. Although Red Roof seeks to amend the complaint to add US Bank as Doe 1, the complaint as to Velocity remains improper for the reasons discussed above. Accordingly, the demurrer is sustained without leave to amend because the defects as to Velocity do not appear to be curable.

C. Onity's Demurrer Onity is Red Roof's loan servicer, and it asserts that it "had no part in the foreclosure proceedings, does not hold title to the subject property and does not hold the beneficial interest in any lien on the subject property. Additionally, Plaintiff fails to allege any specific wrongful conduct by Onity." (Dem., 1:10-12.) Onity asserts that, looking at Velocity's request for judicial notice, it is clear that "Onity is not named on the Deed of Trust" and "Onity is not named on the Assignment.

As discussed, Onity was the Loan's servicer." (Dem., 1:25, 1:28-2:1.) Like Velocity, Onity first demurs to the complaint because "Plaintiff's Complaint fails to join a necessary party with actual interests in the property, rendering the action inappropriate for the requested relief. The current Property owner, U.S. Bank, is the only party with authority to take any enforcement actions regarding the Property. Plaintiff cannot obtain meaningful relief against Onity, who has no interest in the Property title and no authority to bind the actual property owner.

The absence of a necessary party with real interests in the subject matter renders any judgment ineffective and inappropriate, as it would not bind the parties who actually control the Property and could take the actions Plaintiff seeks to prevent." (Dem., 2:18-24.) As discussed above, the Court finds that US Bank is an indispensable party to this case and sustains the demurrer on this basis. Next, Onity demurs to Red Roof's complaint because "California courts and the California Supreme Court have consistently recognized that a loan servicer's function is administrative in nature." (Dem., 2:27-28.)

To support this, Onity cites Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 918 fn. 2, where the Supreme Court stated that "[t]he entity holding the servicing rights to a mortgage loan is known as a servicer. A servicer is 'responsible for account maintenance activities such as sending monthly statements to mortgagors, collecting payments from mortgagors, keeping track of account balances, handling escrow accounts, calculating interest-rate adjustments on adjustable-rate mortgages, reporting to national credit bureaus, and remitting funds collected from mortgagors to the [owners of the beneficial interest in the loans].' [Citation.] 'Servicers also are responsible for handling defaulted loans, including prosecuting foreclosures and attempting to mitigate investors' losses.'" Onity further asserts that "[t]his distinction between servicing rights and beneficial ownership is legally significant because servicers operate as functional intermediaries, not as holders of any independent legal interest in the underlying property or deed of trust.

A servicer's position is thus fundamentally distinct from that of the beneficiary under a deed of trust. Under California's deed of trust structure, the beneficiary (i.e., the lender or its assignee) holds the beneficial interest in the security instrument, while the trustee holds nominal legal title. The servicer, by contrast, holds neither. This distinction is outcome-determinative when evaluating whether a servicer can be a proper party to litigation arising from foreclosure of a commercial lease." (Dem., 3:13-20.)

In opposition, Red Roof contends that "[c]ontrary to the assertion in the demurrer that somehow defendant ONITY MORTGAGE CORPORATION was completely an uninterested party in this escrow transaction, the facts will show that defendant, ONITY MORTGAGE CORPORATION, was the entity which administered the foreclosure process. Defendant, ONITY MORTGAGE CORPORATION, was the agent of VELOCITY or US BANK, while acting as the administrator of the foreclosure process." (Opp., 2:10-16.) Although Red Roof does not provide any law to support it suit against Onity, the Court notes that the singular case cited by Onity for the proposition that it cannot be sued does not affirmatively support this contention.

Although Onity's name does not appear on the deed of trust or as an assignee, Red Roof's opposition asserts that Onity acted as an agent and administrator of the foreclosure process. However, Red Roof's allegations in the complaint do not adequately allege this agent relationship or Onity's liability; this inadequacy, combined with the lack of Onity's name in the foreclosure documents, support the sustaining of the demurrer. Regarding leave to amend, Onity does not affirmatively demonstrate that, as a loan servicer, it cannot be sued as an agent.

Red Roof's opposition requests leave to amend so that it can add US Bank and plead facts demonstrating Onity's involvement in the transaction. Accordingly, the Court grants leave to amend. C onclusion Based on the foregoing, Velocity's demurrer as to the complaint is SUSTAINED, without leave to amend. The Court orders Velocity to file and serve a proposed judgment of dismissal within 10 days of the date of this Order. Onity's demurrer as to the complaint is SUSTAINED, with leave to amend. Red Roof is ordered to file and serve an amended complaint, if any, within 20 days of the date of this Order.

If no amended complaint is filed within 20 days, the Court orders Onity to file and serve a proposed judgment of dismissal within 30 days of the date of this Order. Onity is ordered to give notice of this Order. DATED: August 31, 2026 ________________________________ Hon. Teresa A. Beaudet Judge, Los Angeles Superior Court Case Number: 26STCV10329 Hearing Date: August 31, 2026 Dept: 508 Superior Court of California County of Los Angeles Department 508 DUSTIN TSU, et al., Plaintiffs, vs. DARRYL LYNN GREEN, as an individual and as Trustee of the DARRYL LYNN GREEN TTEE TRUST Dated November 17, 2025, et al., Defendants. | Case No.: | 26STCV10329 | Hearing Date: | August 31, 2026 | Hearing Time: | 10:00 a.m. | [TENTATIVE] ORDER RE: PLAINTIFFS DUSTIN TSU AND CARISSA TSU'S MOTION FOR ORDER AUTHORIZING ALTERNATIVE SERVICE OF SUMMONS BY ELECTRONIC MAIL PURSUANT TO C.C.P.

Sec. 413.30 | Background Plaintiffs Dustin Tsu and Carissa Tsu (jointly, "Plaintiffs") filed this action on March 30, 2026