 |
 |
Follow Marin Events
|
•
• •
• |
|
Go to unfair business practices California's unfair competition law (UCL), (Business and Professions Code section 17200 et seq..) UCL's “’focus is on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices.’ ”
‘”Failure to disclose other relevant information, is actionable under” ’ the UCL
Go to declaratory relief
advanced: ("loan modification" & "homeowner bill #of rights" & foreclosure & 2923.6) advanced: ("loan modification" & "homeowner bill #of rights" & foreclosure & 2923.6 & modification) & "loss mitigation" GALLARDO v MTDS2015 WL 871656 Not Officially Published (Cal. Rules of Court, Rules 8.1105 and 8.1110, 8.1115) Only the Westlaw citation is currently available. California Rules of Court, rule 8.1115, restricts citation of unpublished opinions in California courts. Court of Appeal, Sixth District, California. Aaron D. GALLARDO, Individually and as Trustee for the AG Family Trust, Plaintiff and Appellant, v. MTDS, INC., et al., Defendants and Respondents. H038404 Filed February 27, 2015 (Santa Clara County Super. Ct. No. 1–12–CV217221) Attorneys and Law Firms
Opinion Márquez, J. *1 Plaintiff Aaron D. Gallardo obtained a $750,000 loan secured by a Deed of Trust on real property. After he defaulted on his loan and received a notice of trustee's sale, Gallardo individually and as trustee for the AG Family Trust (hereafter jointly Gallardo), sued his mortgage lender and other entities to prevent foreclosure of his home. The complaint contained four causes of action: (1) quiet title, (2) (2) an accounting, (3) (3) unfair business practices, and (4) (4) declaratory relief. Gallardo appeals from the trial court's order sustaining the defendants' demurrer without leave to amend. Although labeled an action to “quiet title,” we conclude that Gallardo's first cause of action also contains a claim to enjoin foreclosure of his home by non-authorized entities. Based in part on facts that the trial court properly judicially noticed from recorded documents, we conclude the trial court properly sustained the demurrer to all four causes of action in the complaint without leave to amend and will therefore affirm the judgment of dismissal.
FACTS AND PROCEDURAL HISTORYIn reviewing the propriety of a trial court's order sustaining a demurrer, we accept as true all factual allegations properly pleaded in the complaint. (Gu v. BMW of North America, LLC (2005) 132 Cal.App.4th 195, 200.) Accordingly, our summary of the facts is drawn from the material allegations of the operative pleading (Gallardo's original complaint), the documents attached thereto (which the complaint incorporated by reference), and facts the court properly judicially noticed. (Ibid.) Since a demurrer admits the truth of all facts properly pleaded, we will refer to the allegations of the complaint without sometimes using the prefatory phrase “Gallardo alleges,” to avoid undue repetition of that phrase. The Property and the LoanGallardo is the owner of a single-family dwelling on Farm Hill Way in Los Gatos (the Property), which is his principal residence. In 2006, Gallardo obtained a $750,000 option adjustable rate mortgage (Option ARM) loan from MortgageIt, Inc. (MortgageIt). The “defining feature” of an Option ARM is that for a limited number of years at the beginning of the loan, the borrower may avoid defaulting on the loan by making a minimum monthly payment that is lower than the interest accruing on the loan. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 234 (Boschma ).) Since the minimum payment is insufficient to cover the interest due, the difference between the amount of interest accrued and the amount of the payment made is added to the loan's principal, thereby increasing the amount owed. Thus, after an initial period of years (five years in this case), “a borrower who elects to make only the scheduled payment[s] ... owes more to the lender than he or she did on the date the loan was made.” (Ibid.) After this initial period during which negative amortization can occur, the borrower's payment schedule is reset to require minimum monthly payments that amortize the loan. (Ibid.) *2 Gallardo's $750,000 loan was to be repaid over 40 years. Initially, Gallardo's payments were $1,986.34 per month. The promissory note (Note) advised Gallardo of the possibility of negative amortization, but provided that the total amount of principal due would never exceed 115 percent of the amount originally borrowed (115 percent of $750,000 is $862,500). In 2011, Gallardo's payments were reset to $3,458.89 per month and by January 2012, the amount due for principal and “other charges” had increased to $859,958.28. The loan was secured by a Deed of Trust (Deed of Trust) on the Property. The Deed of Trust identified Gallardo as the “Borrower,” MortgageIt as the “Lender,” Chicago Title Company as the “Trustee,” and Mortgage ElecTROnic Registration Systems, Inc. (MERS) as “acting solely as nominee for Lender and Lender's sUCCessors and assigns” and as the “beneficiary” under the Deed of Trust. Default and Nonjudicial Foreclosure ProceedingsGallardo defaulted on his loan. On September 30, 2011,
Meridian Foreclosure Service (Meridian), “the duly appointed Trustee,
Substituted Trustee, or Agent of the Beneficiary,” recorded a
notice of default. On January 3, 2012, Meridian recorded a Notice of Sale, which stated that the total amount due for principal and “other charges” was $859,958.28 and that the sale was scheduled for January 30, 2012. Copies of the Note, Deed of Trust, and the Notice of Sale were attached to the complaint and incorporated therein. Legal Action Gallardo filed a verified complaint on January 23, 2012, one week before the date set for the trustee's sale. The named defendants were MortgageIt and MERS and four entities that purport to be sUCCessors or assignees of the lender, the trustee, or the beneficiary, including: (1) MTDS, Inc. (MTDS), doing business as Meridian; (2) Deutsche Bank National Trust Company (Deutsche Bank); (3) OneWest Bank (OneWest); and (4) Indymac Mortgage Services, a subsidiary of OneWest. We shall refer to the defendants collectively as “Defendants.” The same day that he filed his complaint, Gallardo filed an application for a
preliminary injunction and an
ex parte application for a temporary restraining
order (TRO) to restrain the trustee's
sale pending a hearing on his application for a preliminary
injunction. Additional Allegations in the Complaint*3 Gallardo made a number of other allegations in his
complaint. He alleged that at an unknown time, “Indymac Bank, FSB” (IndyMac)
organized a collateralized mortgage trust known as the “Indymac INDX Mortgage
Loan Trust Series 2006 AR14” (the Trust). Deutsche Bank and Indymac were
trustees of the Trust.
The complaint alleged that in 2009 Indymac, as a trustee of the Trust,
received a “putative interest” in Gallardo's Deed of
Trust “by means of a putative assignment endorsed by MERS.” (Facts
that are subject to judicial
notice from recorded documents contradict this
allegation.) The complaint contained causes of action for
quiet title, an
accounting, unfair
business practices, and declaratory
relief.
Gallardo alleged, among other things, that the Notice of Sale was improperly recorded because:
Gallardo also alleged that MERS had no power to transfer an interest in the Note or Deed of Trust or exercise any other powers of the beneficiary because it did not have a financial interest in the debt, and that the assignment of the Deed of Trust to Deutsche Bank and the substitution of Meridian as trustee were invalid.1 The second cause of action for an accounting alleged that the description of the index used to calculate the variable interest rate in the Note was uncertain and ambiguous and that the correct rate of interest therefore could not be ascertained. Gallardo argued that the deficiency declared in the notice of default was therefore “overstated” and in excess of the true amount. He asked the court to determine the “correct interest rate ... during the life of the loan,” to recalculate the amount of interest due and the credit for payments he had made, and to determine the correct deficiency balance due to cure the default. He also asked the court to declare that the Note was a contract of adhesion, a claim he has abandoned on appeal. The third cause of action for unfair business practices alleged that Meridian “is engaged in a ... deceptive, fraudulent and unfair business practice” of publishing and recording notices of trustee sales that fail to
Gallardo argued that this practice, by impeding communication between the borrower and the party foreclosing on the loan, “impairs the state polic[ies]” of encouraging sales to the highest bidder and of keeping consumers in their homes. Gallardo also alleged that all defendants engaged in the unfair business practice “of failing to secure and endorse over ... the original promissory note,” which violated the UCC and created a risk that the original noteholder would demand payment from the borrower after the Property was sold in foreclosure. He argued that these practices could result in a loss of title to the property, damage to his credit, and cause economic losses, including litigation expenses. *4 The fourth cause of action for declaratory relief alleged that the parties disputed:
demurrerIn April 2012, Deutsche Bank (as trustee of the Trust), OneWest (which stated that it was erroneously sued in the name of its division, Indymac Mortgage Services), and MERS demurred to the complaint. (MDTS, Meridian, and MortgageIt have not appeared in the action and are not parties to this appeal. Hereafter, “Defendants” shall refer only to defendants that filed the demurrer.) Defendants argued they had standing to commence foreclosure proceedings as the servicer and the assigned beneficiary of the loan and did so in accordance with the statutory scheme (§ 2924 et seq.). Defendants asserted that in 2006, a few months after the loan was made, Gallardo's loan was “pooled and securitized” and all beneficial interest under the Deed of Trust and the Note was assigned to Deutsche Bank as trustee of the Trust. Defendants demurred to the quiet title cause of action on the ground that Gallardo had not alleged that he had tendered or offered to tender the amount due, arguing that a borrower may remain in possession, but may not quiet title without paying the debt. Defendants also argued that (1) claims for wrongful foreclosure based on a lack of standing fail as a matter of law, (2) the foreclosure was initiated in accordance with law (3) California courts have rejected attempts to premise wrongful foreclosure claims on alleged UCC violations, (4) Gallardo's conclusory allegations did not support a violation of section 2923.5, and (5) Gallardo could not sue to quiet title because he was not the legal owner of the Property and had only an equitable interest. Defendants attacked the accounting cause of action on the grounds that a plaintiff is entitled to an accounting only if there is a fiduciary relationship between the parties and there is a balance due from a defendant to a plaintiff, whereas
Defendants' demurrer to the unfair business practices claim argued that Gallardo had not alleged injury, that any harm could have been avoided by paying the debt, that the claim was not pleaded with sufficient particularity, and that there was no predicate law violation. They also argued that the declaratory relief claim failed because declaratory relief lies only to adjudicate future rights and liabilities whereas Gallardo's claims are based on past wrongs (the alleged wrongful foreclosure in September 2011). In their memorandum of points and authorities in support of their demurrer, Defendants described nine documents, which they asserted the court could properly judicially notice on demurrer. But Defendants' request for judicial notice asked the court to judicially notice only one document: a master purchase agreement between the FDIC (as conservator for Indymac), OneWest, and one other entity dated March 18, 2009, a copy of which Defendants obtained from the FDIC website and attached to their request for judicial notice. Defendants neglected to list the other eight documents or attach copies of those documents to their request for judicial notice. *5 Gallardo filed written opposition to the demurrer. He did not object to Defendants' request for judicial notice. In their reply, Defendants urged the court to deny leave to amend because Gallardo had not demonstrated how his complaint could be amended. With their reply, Defendants filed an “Errata” to their request for judicial notice, which contained all nine documents referenced in their points and authorities. Unfortunately, the parties neglected to include a copy of the Errata in the record on appeal. On our own motion, we have augmented the record to include a copy of the Errata and the exhibits attached thereto. (California Rules of Court, rule 8.115(a)(1)(A); all further rules citations are to the rules of court.) The documents Defendants asked the court to judicially notice in the “Errata” included:
Before the hearing on the demurrer, Defendants filed written opposition to Gallardo's request for a preliminary injunction, which repeated the arguments made in their demurrer, essentially arguing that Gallardo was not entitled to a preliminary injunction because he was not likely to prevail on his claims. On May 22, 2012, the court sustained the demurrer without leave to amend. Although the court provided a detailed, written tentative ruling, which it adopted as its order on the demurrer, it did not expressly rule on Defendants' requests for judicial notice. On May 31, 2012, a different judge took Gallardo's request for a preliminary injunction off calendar because there was “no possible basis for granting any kind of relief” after the court sustained the demurrer without leave to amend. Gallardo filed his notice of appeal that same day. DISCUSSIONI. AppealabilityGallardo appeals from an order sustaining the demurrer to his complaint without leave to amend. But such an on order is not appealable. As this court has stated many times, the “general rule of appealability is this: ‘An order sustaining a demurrer without leave to amend is not appealable, and an appeal is proper only after entry of a [judgment of] dismissal on such an order.’ [Citation.] But ‘when the trial court has sustained a demurrer to all of the complaint's causes of action, appellate courts may deem the order [sustaining the demurrer] to incorporate a judgment of dismissal, since all that is left to make the order appealable is the formality of the entry of a dismissal order or judgment.’ ” (Melton v. Boustred (2010) 183 Cal.App.4th 521, 527, fn. 1 (Melton ).) A judgment of dismissal that leaves no issue remaining to be determined as to one of multiple parties is final as to that party and may be appealed.
That some of the named defendants were not parties to the demurrer does not render any judgment of dismissal unappealable. *6 In many cases, the prevailing party on a demurrer neglects to obtain a judgment of dismissal. In this case, it appears Defendants did not have an opportunity to obtain a judgment of dismissal, since Gallardo filed his notice of appeal prematurely: nine days after the hearing on the demurrer and four weeks before the court signed the written order sustaining the demurrer without leave to amend. But since the trial court sustained the demurrer to all of Gallardo's causes of action without leave to amend as to Defendants, they are entitled to a judgment of dismissal. “ ‘We will accordingly deem the order on the demurrer to incorporate a judgment of dismissal and will review the order.’ ”
II. Defects in Gallardo's Opening Brief
California Rules of
Court, rule 8.204(a)(2)(c) provides that an
Gallardo also neglected to include a statement of
appealability in his brief.
If Gallardo had complied with this requirement, he would have discovered the appealability issue discussed in the previous section and presumably taken the steps necessary to perfect his appeal. When a party's brief fails to comply with the requirements of rule 8.204, the appellate court may decline to file it, return it for corrections, strike it with leave to file a new brief, or “disregard the noncompliance.” (Rule 8.204(a)(1)(E).) We shall exercise our discretion to disregard the noncompliance in this case, but admonish Gallardo and his counsel that future breaches of these requirements may result in sanctions or other consequences. III. Standard of Review and Burden of Proof on AppealWe review a judgment of dismissal after the trial court has sustained a demurrer without leave to amend under the de novo standard of review. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando ).) We assume the truth of (1) all facts properly pleaded, (2) facts that may be implied or reasonably inferred from the facts expressly alleged, and (3) evidentiary facts that are in exhibits attached to the complaint.
We may also consider matters that are properly judicially noticed. (Schifando, at p. 1081.) But we do not assume the truth of contentions, deductions or conclusions of fact or law. (Evans, at p. 6.) If facts appearing in exhibits to the complaint conflict with the allegations of the complaint, the facts stated in the exhibits conTROl, unless the exhibits are ambiguous. (SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83 (SC Manufactured ).) We give the complaint a reasonable interpretation and read it in context. (Schifando, at p. 1081.) *7 “[T]o prevail on appeal from an order sustaining a demurrer, the appellant must affirmatively demonstrate error. Specifically, the appellant must show that the facts pleaded are sufficient to establish every element of a cause of action and overcome all legal grounds on which the trial court sustained the demurrer.” (Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1052 (Intengan ).) We will affirm the judgment if there is any ground on which the demurrer could have been properly sustained. (Ibid., citing Debro v. Los Angeles Raiders (2001) 92 Cal.App.4th 940, 946.) When the trial court sustains a demurrer without leave to amend, we review its determination that no amendment could cure the defect for an abuse of discretion. (Schifando, supra, 31 Cal.4th at p. 1081.) The trial court abuses its discretion if “there is a reasonable possibility the plaintiff could cure the defect with an amendment.” (Ibid.) IV. General Principles Regarding Deeds of Trust and Nonjudicial Foreclosure“The financing or refinancing of real property in California is generally accomplished by the use of a Deed of Trust.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 507 (Jenkins ).) “There are three parties in the typical Deed of Trust: the trustor (debtor), the beneficiary (lender), and the trustee.” (Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813 (Biancalana ).) A Deed of Trust conveys
title to real property from the trustor (debtor) to a third party trustee to
secure the payment of a debt owed to the beneficiary (lender) under a promissory
note. Although the Deed of Trust technically conveys title to the real property from the trustor (debtor) to the trustee, “the extent of the trustee's interest in the property is limited to what is necessary to enforce the operative provisions of the Deed of Trust.” (Jenkins, supra, 216 Cal.App.4th at p. 508.) Generally, a Deed of Trust requires the trustee to perform one of two “mutually exclusive duties”:
Despite the security interest the Deed of Trust creates, the trustor “retains all incidents of ownership with regard to the real property, including the rights of possession and sale.” (Ibid.) When a borrower defaults on a debt secured by a Deed of Trust, the lender may elect to judicially or nonjudicially foreclose on the real property security. “ ‘ “Nonjudicial foreclosure is less expensive and more quickly concluded than judicial foreclosure, since there is no oversight by a court, ‘[n]either appraisal nor judicial determination of fair value is required,’ and the debtor has no postsale right of redemption.” ’ ” (Jenkins, supra, 216 Cal.App.4th at pp. 508, 509–510.) Sections 2924 through 2924k set forth a “ ‘comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a Deed of Trust.’
“These provisions cover every aspect of exercise of the power of sale contained in a Deed of Trust.” (I.E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285) “ ‘Because of the exhaustive nature of this scheme, California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute.’ [Citations.]” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 (Gomes ).) *8 A nonjudicial foreclosure is “presumed to have been conducted regularly, and the burden of proof rests with the party attempting to rebut this presumption.”
Therefore, a debtor who seeks to prevent a nonjudicial foreclosure based on the foreclosing entity's purported lack of authority must “affirmatively” plead facts demonstrating a lack of authority.
A debtor may not bring a preemptive lawsuit seeking to force the foreclosing entity to prove its authority before conducting a nonjudicial foreclosure. (Jenkins, at pp. 511–513.) Allowing a judicial action to prevent a nonjudicial foreclosure without specific factual allegations showing a lack of authority “would unnecessarily ‘interject the courts into [the] comprehensive nonjudicial scheme’ created by the Legislature, and ‘would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.’ ” (Id. at p. 512; see also Gomes, at pp. 1154–1156.) V. First Cause of Action to quiet title (or enjoin the Foreclosure Sale by Non–Authorized Entities)Gallardo argues the trial court erred when it sustained the
demurrer to his first cause of action to
quiet title
based on his failure to allege that he had tendered the amount due under the
loan. Gallardo acknowledges that to quiet title
against the noteholder, he must allege tender of the balance due under the loan.
A. Tender RequirementWe begin with the premise that generally, a borrower may not quiet title against a secured lender without first paying the outstanding debt on which the mortgage or Deed of Trust is based.
The cloud on title remains until the debt is paid. (Burns v. Hiatt (1906) 149 Cal. 617, 620–622.) To obtain equitable relief to set aside a foreclosure sale, the defaulted borrower must tender the full amount of the debt for which the property was security. (Dimock v. Emerald Properties, LLC (2000) 81 Cal.App.4th 868, 877–878 (Dimock ).) Case law has recognized four exceptions to the tender requirement in actions to set aside a foreclosure sale, including
(Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112–113 (Lona ).) In Dimock, the court held that no tender was required to set aside a foreclosure sale where the trustee that conducted the sale no longer had the power to sell because the noteholder had recorded a substitution of trustee prior to the date of the sale. Consequently, the foreclosure by the first trustee was void and the borrower did not have to tender the full amount of the debt to set it aside. (Dimock, supra, 81 Cal.App.4th at pp. 871–878.) *9 But “[w]hile the tender requirement may apply to causes of action to set aside a foreclosure sale, a number of California and federal courts have held or suggested that it does not apply to actions seeking to enjoin a foreclosure sale—at least where the lenders had allegedly not complied with a condition precedent to foreclosure.
In Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, the court concluded that Pfeifer and the other tender cases were inapplicable because the borrower had not sued to set aside or prevent a foreclosure sale. Instead, “he sought to quiet title to the property, which he [could] not do without paying the outstanding indebtedness.” (Id. at p. 87.) In summary,
Although Gallardo labeled his first cause of action as one to “quiet title,”
Defendants treated the first cause of action as both a claim to
quiet title
and a claim for “wrongful foreclosure,”
employing the latter label in papers filed in the trial court. “Erroneous or confusing labels attached by the inept pleader are to be ignored if the complaint pleads facts [that] would entitle the plaintiff to relief.” (Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908.) Following a judgment of dismissal after a demurrer, we examine the complaint's factual allegations to determine whether they state a cause of action on any available legal theory. (Ibid.) Since Gallardo's opening brief clearly states that he does not seek to quiet title to the true noteholder, for the purpose of our review, we shall treat the first cause of action as a claim to enjoin a foreclosure sale by non-authorized entities. As we have noted, a number of courts have held or suggested that the tender requirement “does not apply to actions seeking to enjoin a foreclosure sale—at least where the lenders had allegedly not complied with a condition precedent to foreclosure.” (Intengan, supra, 214 Cal.App.4th at pp. 1053–1054, original italics.) Gallardo's complaint alleges the notice of default was improperly recorded in part because Defendants failed to comply with section 2923.5.2 We agree that the tender requirement did not apply in this case and the court erred when it sustained the demurrer to the first cause of action on that basis. We turn next to Gallardo's other arguments regarding his claim to enjoin the foreclosure sale. B. Incomplete or Inaccurate Record of Title*10 Gallardo contends the court erred in sustaining the demurrer because the complaint alleges “an incomplete and/or inaccurate title record of assignment.” Quoting paragraph 11 of the complaint, he argues the notice of default was not properly recorded because the Note “was not lawfully endorsed, assigned and transferred by [MortgageIt] to each sUCCeeding lender claiming an interest [in the Note] in accordance with the requirement[s] of the [UCC].” He concludes that these allegations are “allegation[s] of fact,” which if proven true mean that there are “pretenders” to the noteholder's rights under the Deed of Trust. We begin with the observation that these allegations are conclusions of law that we do not accept as true on demurrer. (Jenkins, supra, 216 Cal.App.4th at p. 506.) And as we explain in the next section, documents that the court properly judicially noticed, in combination with factual allegations of the complaint, contradict the conclusory allegations that the title record is incomplete and that Defendants did not have the right of sale or the authority to foreclose.
C. Failure to Comply with the UCCGallardo argues the Note “was not validly assigned to the person falsely identified as an assignee of the trust deed.” In particular, quoting paragraph 11 of the complaint, he asserts the Note “was not lawfully endorsed, assigned and transferred by the original lender to each sUCCeeding lender claiming an interest therein in accordance with the requirements of the [UCC] prior to any recording adverse to [Gallardo's] title....” (Emphasis omitted.) This court rejected a similar assertion in Debrunner, supra, 204 Cal.App.4th 433.
D. Alleged Failure to Comply with Section 2923.5Gallardo argues that section “2923.5requires that an assignment of a trust deed be recorded before the power of sale can be exercised by a putative assignee of the note and trust deed, and further that the title record must contain a continuous ‘chain’ of assignments of the interests in a trust deed without any gaps in the ownership record before a notice of default or following Notice of Sale can be recorded on behalf of a putative beneficiary of a trust deed.” We understand Gallardo's contention to be that the notice of default and the Notice of Sale were invalid because Defendants did not comply with section 2923.5 Section 2923.5 provides: “Where a
power to sell real property is given to a mortgagee, or other encumbrancer, in
an instrument intended to secure the payment of money, the power is part of the
security and vests in any person who by assignment becomes entitled to payment
of the money secured by the instrument. The power of sale may be exercised by
the assignee if the assignment is duly acknowledged and recorded.” *14 The
Fourth District Court of Appeal recently reviewed the applicability of section
2923.5 to deeds of trust in Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481 (Rossberg ). The Rossberg court held, as it had in Jenkins, that “section 2923.5[is] inapplicable to trust deeds” and that “nothing in section 2923.5rendered the notice of default invalid.”
We will follow Calvo, Haynes, Jenkins, and Rossberg and conclude that section 2923.5 does not apply to Gallardo's Deed of Trust. Even if section 2923.5 applied, based on
facts the court properly judicially noticed and allegations of the complaint,
there was a continuous chain of title between the original beneficiary (MortgageIt)
and the assignee beneficiary that ordered the foreclosure (Deutsche Bank). In
addition, the assignment of the Deed of Trust to Deutsche Bank—which was
executed and acknowledged on September 2, 2011—was recorded on September 30,
2011, the same day that the
notice of default was recorded. The Notice of Sale was
recorded on January 3, 2012. Gallardo filed this action one week before the date
set for the trustee's sale, and it appears
the sale has never taken place. Gallardo nonetheless argues that before Defendants can foreclose based on the notice of default recorded in September 2011, “they must first record the correct series of assignments showing the putative 2011 assignor” (the FDIC as receiver for IndyMac Federal Bank) “has the right to assign any rights under the Deed of Trust pursuant to [section] 2923.5.” But, as we have already explained, section 2923.5 does not apply to deeds of trust. Moreover, facts that were properly judicially noticed from the assignment of Deed of Trust recorded in 2009 demonstrate that MortgageIt (the original beneficiary) assigned its interest under the Deed of Trust to IndyMac Federal Bank in November 2008 and the complaint alleges that IndyMac Bank was received by the FDIC in 2008. As we have stated previously, these facts demonstrate that IndyMac Federal Bank was a substitute beneficiary under the Deed of Trust and that the FDIC, as receiver for IndyMac Federal Bank, subsequently assigned IndyMac's interest in the Deed of Trust and the Note to Deutsche Bank. E. Possession of the Note is not Required to ForecloseGallardo “disputes whether defendants can prove the intervening unrecorded assignments or other transfers (inferable from the receivership(s) and [Trust] ) were accompanied by endorsement and delivery of the promissory note.” He argues that “[o]nly the party who holds the original note properly endorsed over” has the right to assign the Note and “until there is a title record of assignments tracking the actual ‘path’ of the note between defendants ... Deutsche Bank cannot show the legal right to foreclose.” *15 Section
2924, subdivision (a)(1), authorizes a
“trustee, mortgagee, or beneficiary, or any of their authorized agents” to
record the notice of default. The statute
does not limit the power of sale to the beneficiary, or “the party who holds the
original note properly endorsed over.”
F. MERS's Capacity to Transfer the NoteGallardo also argues that MERS was only a “nominal beneficiary” and since it was not the lender, it lacked capacity to transfer the Note. The “ ‘MERS System’ ” was “devised by the mortgage banking industry to facilitate the securitization of real property debt instruments.... MERS is a private corporation that administers a national registry of real estate debt interest transactions. Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments, but the members retain the promissory notes and mortgage servicing rights. The notes may thereafter be transferred among members without requiring recordation in the public records. [Citation.] [¶] Ordinarily, the owner of a promissory note secured by a Deed of Trust is designated as the beneficiary of the Deed of Trust. [Citation.] Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as ‘nominee’ for the lender, and granted the authority to exercise legal rights of the lender.” (Fontenot, supra, 198 Cal.App.4th at pp. 267–268.) Like Gallardo, the plaintiff in Fontenot alleged that “MERS lacked the
authority to assign the note because it was merely a nominee of the lender and
had no interest in the note.” (Fontenot, supra, 198
Cal.App.4th at p. 270.) The court rejected that assertion: “Contrary
to [the] plaintiff's claim, the lack of a possessory interest in the note did
not necessarily prevent MERS from having the authority to assign the note. While
it is true MERS had no power in its own right to assign the note, since
it had no interest in the note to assign, MERS did not purport to act for its
own interests in assigning the note. *16 For these reasons, we reject the contention that MERS lacked capacity to assign the Note. G. Alleged Failure to Transfer the Note with the Deed of TrustGallardo asserts that “[m]ere assignment of the trust deed is a nullity in California unless the note is also transferred at the same time.” He contends the first assignment of the Deed of Trust did not mention the Note. This assertion, even if it recites the correct legal rule, is not supported by the record since both recorded assignments indicate that the assignor assigned “all beneficial interest” under the Deed of Trust “together with the Promissory Note secured by said Deed of Trust.”3 Gallardo argues “there is also the problem of the effect of Indymac's receivership, which intervened between the ... 2009 assignment and the 2011 assignment[,] and the uncertainty of MortgageIt's status during that period.” This argument is unsupported by the record since the complaint alleges that Indymac was received by the FDIC in 2008, which was before either assignment. H. leave to amendAs stated previously, when the trial court sustains a
demurrer without leave
to amend, we review its determination that no amendment could cure
the defect for an abuse of discretion. (Schifando, supra, 31 Cal.4th at p. 1081.) The trial court abuses its discretion if “there
is a reasonable possibility the plaintiff could cure the defect with an
amendment.” (Ibid.)
To satisfy his burden on appeal, Gallardo “ ‘must show in what manner he can
amend his complaint and how that amendment will change the legal effect of his
pleading.’ [Citation.]
*17 Gallardo's written opposition to the demurrer challenged the legal grounds for the demurrer, but did not suggest any way in which his complaint could be amended in the event the court sustained the demurrer. At the hearing on the demurrer, Gallardo requested leave to amend, arguing generally that “[t]his [was his] first version of the complaint.” On appeal, citing Aubry, supra, 2 Cal.4th 962, Gallardo argues that he “did not have an
affirmative duty to state proposed amendments” and that “the issue of whether
the complaint could be amended to state a cause of action on which relief can be
granted is one of law for this court, reviewing the complaint de novo.” Since we have rejected each of Gallardo's legal arguments related to his first cause of action and he has not proposed any way in which his complaint can be amended to address those points, we conclude that the trial court did not abuse its discretion when it sustained the demurrer as to the first cause of action without leave to amend. VI. Second Cause of Action for an accounting
VII. Third Cause of Action for unfair business practicesGallardo's third cause of action alleged that Defendants engaged in “deceptive, fraudulent and unfair business practices” in violation of California's unfair competition law (UCL), Business and Professions Code section 17200 et seq. A. The UCL“The UCL prohibits, and provides civil
remedies for, unfair competition, which it defines as ‘any unlawful, unfair or
fraudulent business act or practice.’ (§ 17200.) Its purpose ‘is to protect both consumers and
competitors by promoting fair competition in commercial markets for goods and
services.’ (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949,....) Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three types of unfair competition: acts or practices that are (1) unlawful, or (2) unfair, or (3) fraudulent. (Cel–Tech, supra, 20 Cal.4th at p. 180.) “ ‘ “In other words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.” ’ ” (Ibid.) B. unfair business practices Alleged in the ComplaintParagraph 27 of Gallardo's complaint alleged that Meridian “individually and as agent for its putative appointor(s) engaged in a ... fraudulent and unfair business practice” of publishing and recording notices of trustee sales that failed to
Although Meridian has not appeared in this action and was not a party
to the demurrer, the complaint alleges that
Meridian was the agent for others. *20 Paragraph 28 of Gallardo's complaint alleged that “all defendants” engaged in the unfair business practices of
Since the complaint alleges conduct that arguably violates all three prongs of the UCL, we will briefly discuss each type of violation. C. Analysis under the Unlawful Prong of the UCL“By proscribing ‘any unlawful’ business practice, ‘section 17200 “borrows” violations of other laws and treats them
as unlawful practices’ that the unfair competition law makes independently
actionable.” (Cel–Tech, supra, 20 Cal.4th at p. 180.) (Debrunner, 204 Cal.App.4th at pp. 440–441.) If the complaint fails to state a violation of an underlying statute, a derivative claim of liability under the UCL based on the same statute also fails.
Since Gallardo's claims based on the UCC fail, he cannot state a claim for unfair business practices based on alleged violations of the UCC. Paragraph 27 of the complaint does not identify a specific statutory
violation. *21 As for Gallardo's allegation that Meridian failed to identify the party ordering the sale in the Notice of Sale, the complaint does not allege that such conduct was unlawful. Nor does Gallardo discuss this allegation in his appellate briefs. Moreover, section 2924f does not require that the Notice of Sale identify the party ordering the foreclosure. Instead, when the property has a street address or other common designation, it requires the notice to identify and provide contact information for the trustee or other person conducting the sale, which was done in this case. (§ 2924f, subd. (b)(5), former subd. (b)(1).) We therefore conclude that Gallardo cannot state a UCL claim under the unlawful prong based on this allegation. D. Analysis under the Unfair and Fraudulent Prongs of the UCL (California's unfair competition law (UCL), Business and Professions Code section 17200 et seq.)The proper definition of the term “unfair” in a consumer action under the UCL is uncertain.
Other courts require ‘that the public policy which is a predicate to a consumer unfair competition action under the “unfair” prong of the UCL ... be tethered to specific constitutional, statutory, or regulatory provisions.’ (Bardin [, supra,] 136 Cal.App.4th 1255, 1260–1261.) Still others assess whether the practice ‘is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers ... [weighing] the utility of the defendant's conduct against the gravity of the harm to the alleged victim.’ (Id. at p. 1260.) And some courts, in reviewing a pleading, apply all three tests. (Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 256–257.)” (Boschma, supra, 198 Cal.App.4th at p. 252.) A fraudulent practice under the UCL “require[s] only a showing that members of the public are likely to be deceived” and “can be shown even without allegations of actual deception, reasonable reliance and damage.” (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 838.) “ A claim based upon the fraudulent business practice prong of the
UCL is ‘distinct from common law fraud. “ This distinction reflects the UCL's focus on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices.’ ” (Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1255.) A fraudulent business practice “ ‘ “may be accurate on some level, but will nonetheless tend to mislead or deceive.... A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable under” ’ the UCL.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471 (McKell ).) *22 Although the complaint
contains the conclusory allegation that Meridian engaged in “fraudulent and
unfair business practice[s]” in preparing its notices of sale and that all
defendants engaged in “unfair business practices,” it does not allege with any
specificity how the conduct complained of is either unfair or fraudulent under
the UCL. On appeal, the trial court's judgment is presumed to be correct and the appellant has the burden of overcoming the presumption of correctness. (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956.) That burden includes presenting reasoned argument and legal authority on each point raised. “ ‘ “When an appellant fails to raise a point, or asserts
it but fails to support it with reasoned argument and citations to authority, we
treat the point as waived.” ’ [Citation.] The absence of cogent legal argument or citation to authority allows this
court to treat the contention as waived.’ ” (Ibid., citing In re Marriage of Falcone &
Fyke (2008)
164 Cal.App.4th 814, 830.) E. leave to amendAt the hearing on the demurrer, Gallardo argued that the unfair business practices claim could be amended to “allege[ ] statutory violations with sufficient particularity,” and that the prayer could be more specific, but he did not state which statutes Defendants had violated or how he would amend the prayer. On appeal, he has added arguments regarding section 2924f, which we have already rejected. Gallardo's brief on appeal also suggests that the complaint “can be amended to state a ‘burden on the market’ cause of action for [the] injunctive or restitution remedies of the UCL for, among other alleged wrongs, mis-describing real property collateral in defendants' Notice of Sale forms.” We have already rejected Gallardo's contention that Meridian failed to meet the statutory requirements regarding the description of the property in the Notice of Sale. Gallardo's cursory proposal for amending his complaint does not meet the detailed requirements set forth in Rakestraw, supra, 81 Cal.App.4th at pages 43–44. Gallardo has therefore failed to meet his burden to demonstrate how his complaint can be amended. For these reasons, we hold that the court did not err when it sustained the demurrer to Gallardo's UCL claim without leave to amend. VIII. Fourth Cause of Action for declaratory reliefdeclaratory relief is available to resolve “an actual controversy” about a party's rights and obligations under a deed or contract “before there has been any breach of the obligation in respect to which said declaration is sought.”
In other words, so long as there is an actual controversy, declaratory relief may be warranted even if there has been no breach, prejudice, or harm. *23 Paragraph 32 of Gallardo's
declaratory relief claim alleges:
Gallardo also alleges in paragraph 33:
Code of Civil Procedure
section 1060 specifically provides for a declaration of rights under
a written contract like the Note and Deed of Trust.
In paragraph 32, subpart a, Gallardo alleges that there is a present
controversy “whether the contents of the Notice of Default incorrectly state the
deficiency balance.” The declaratory relief claim also contains a
broad allegation that there is a present controversy whether the “Assignment,
Substitution of Trustee, notice of default, and
Notice of Sale are invalid and void and do not
comply with law.” Gallardo argues that the holding in Gomes does “not preclude resolving, for example, the validity of the assignments or the trust deed or settle what the correct deficiency is....” But aside from his previous arguments, which we have already rejected, Gallardo does not provide any argument that persuades us that the conclusory allegations in his complaint—that the “Assignment, Substitution of Trustee, notice of default, and Notice of Sale are invalid and void and do not comply with law”—are sufficient to state a cause of action for declaratory relief or that these allegations survive demurrer in light of our other conclusions. Nor does Gallardo propose any manner in which his declaratory relief action can be amended to state a cause of action. *24 The final basis alleged for Gallardo's declaratory relief claim is that “any trustee's sale or trustees [sic ] deed that defendants may secure in [the] future will be void and of no effect on account of the things alleged by this complaint.” But since we conclude that the court did not err in sustaining the demurrers to Gallardo's causes of action, this contention cannot serve as the basis for a declaratory relief claim standing alone. IX. Application of Homeowner Bill of RightsIn July 2012, after this appeal was filed, the Governor approved legislation commonly known as the “ ‘California Homeowner Bill of Rights’ ” (HBOR). (Lueras, supra, 221 Cal.App.4th at p. 86, fn. 14, citing Sen. Bill No. 900 (2011–2012 Reg. Sess.) & Assem. Bill No. 278 (2011–2012 Reg. Sess.).) The Legislature enacted the
HBOR in response to the mortgage
and foreclosure crisis “to mitigate the negative effects on the state and local
economies and the housing market that are the result of
continued foreclosures by modifying the foreclosure process to ensure that
borrowers who may qualify for a foreclosure alternative are considered for, and
have a meaningful opportunity to obtain, available loss mitigation options,”
such as loan modifications. (See Stats. 2012, ch. 86, § 1.)
(Governor Brown's signing message; see Stats. 2012, ch. 86, §§ 1–25; Stats. 2012, ch. 87, §§ 1–25.) The [HBOR] became effective on January 1, 2013. [Citations.]” (Lueras, supra, 221 Cal.App.4th at p. 86, fn. 14.) The HBOR applies only to foreclosures of first
liens on owner-occupied residential property with no more than four dwelling
units. (§ 2924.15,
subd. (a).) DIFFERENT SECTION NOW
On the other hand, the HBOR provides borrowers with a private right of action for certain material violations of the act, including violations of sections 2923.6 (dual-tracking), 2923.7 (single point of contact), 2924.10 (acknowledgment of receipt), and 2924.17 (verification of documents). (Penermon, at p. *21, citing § 2924.12, subds. (a)(1),(b).) In February 2013, Gallardo requested and this Court granted him permission to
file a supplemental brief regarding the application of the then newly enacted
HBOR to this dispute. *25 In their supplemental respondents' brief, Defendants object that Gallardo's supplemental brief inTROduces new legal and factual arguments that were not alleged in the complaint and were not before the trial court. They also argue that Gallardo's supplemental brief merely reiterates the contents of the HBOR, without citing any violation of the HBOR; fails to explain how the complaint could be amended to cure the defects therein; and undermines Gallardo's basic premise that Defendants did not have the authority to foreclose. What the parties neglected to brief is the question of the retroactivve
application of the HBOR to a nonjudicial foreclosure proceeding
that started before the HBOR was enacted. See generally 5 Witkin, Summary of Cal. Law (8th ed. 1974) Constitutional Law, § 288, pp. 3578–3579.)[¶] Indeed, Civil Code section 3, one of the general statutory provisions governing the interpretation of all the provisions of the Civil Code—including the provision at issue in this case—represents a specific legislative codification of this general legal principle, declaring that ‘[no ] part of [this Code ] is retroactivve, unless expressly so declared.’ ... Like similar provisions found in many other codes (see, e.g., Code Civ. Proc., § 3; Lab.Code, § 4), section 3 reflects the common understanding that legislative provisions are presumed to operate prospectively, and that they should be so interpreted ‘unless express language or clear and unavoidable implication negatives the presumption.’ [Citation.]” (Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207–1208; original italics.) The notice of default was recorded on September
30, 2011, and the Notice of Sale was recorded on
January 3, 2012, long before the HBOR took effect
on January 1, 2013. (Lueras, supra, 221 Cal.App.4th at p. 86, fn. 14.) The parties' only attempt to address the question of retroactivvity is Gallardo's discussion of 20th Century Ins. Co. v. Superior Court (2001) 90 Cal.App.4th 1247 (20th Century.) But Gallardo's reliance on 20th Century is misplaced. That case involved Code of Civil Procedure section 340.9, which provides in part: “Notwithstanding any other provision of law or contract, any insurance claim for damages arising out of the Northridge earthquake of 1994 which is barred as of the effective date of this section solely because the applicable statute of limitations has or had expired is hereby revived and a cause of action thereon may be commenced provided that the action is commenced within one year of the effective date of this section.” (Code Civ. Proc., § 340.9, subd. (a).) This statute expressly provided for the reTROactive revival of specified claims arising out of the Northridge earthquake. In contrast, the HBOR is silent on the question of its retroactivve application. As noted previously, we must therefore apply the presumption that the HBOR applies prospectively only. We therefore conclude that the HBOR does not apply in this case since the nonjudicial foreclosure proceedings here were initiated before the HBOR was enacted. *26 Gallardo also argues that the question of compliance with various provisions of the HBOR “will arise on remand.” To the extent that Gallardo's supplemental brief can be understood to request an advisory opinion, we decline to provide one.
DISPOSITION The judgment is affirmed. WE CONCUR: Rushing, P.J. Premo, J. All Citations Not Reported in Cal.Rptr., 2015 WL 871656
FootnotesThe complaint also alleged the Notice of Sale was improper because the statutory notice procedures (§ 2923 et seq.) were not followed, including failures to (a) serve the AG Family Trust with all foreclosure notices; (b) identify the beneficiary for whom Meridian was acting; and (c) provide a legal description of the Property. Gallardo appears to have abandoned these claims on appeal. “In 2008, the Legislature enacted Civil Code section 2923.5 in response to the foreclosure crisis. (Stats. 2008, ch. 69, §§ 1, 2.) It prohibits filing a notice of default until 30 days after the lender contacts the borrower ‘to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure.’ ( ... § 2923.5, subds. (a)(1), (2); see Mabry, supra, 185 Cal.App.4th at p. 225.)” (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 525–526 (Stebley ).) “However, ... section 2923.5 does not provide for damages, or for setting aside a foreclosure sale,.... [T]he sole available remedy is ‘more time’ before a foreclosure sale occurs.... Further, the statute does not—and legally could not—require the lender to modify the loan.” (Stebley, at p. 526, original italics.) The quoted language is from the first assignment of the Deed of Trust. The second assignment uses the phrase “TOGETHER with the note or notes therein described and secured thereby.” Section 2924f was amended in 2012 and former subdivision (b)(1) was rewritten as subdivisions (b)(1) to (b)(7) without substantive change. (Stats. 2012, ch. 556.) The provisions in former subdivision (b)(1) regarding the required contents of a Notice of Sale are now found in subdivision (b)(5). AND NOW WE HAVE 2924.6 7 9 10 11 12 17 Section 2924.17, subdivision (a) provides, in relevant part, that specified documents recorded by a mortgage servicer in connection with a nonjudicial foreclosure “shall be accurate and complete and supported by competent and reliable evidence.” Section 2924.17, subdivision (b) provides that before recording such documents, “a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower's default and the right to foreclose, including the borrower's loan status and loan information.” Section 2924, subdivision (a)(6) provides: “No entity shall record or cause a
notice of default to be recorded or otherwise
initiate the foreclosure process unless it is the holder of the beneficial
interest under the mortgage or Deed of Trust, the
original trustee or the substituted trustee under the Deed
of Trust, or the designated agent of the holder of the beneficial
interest. Gallardo's first supplemental brief also refers to his application for a loan modification under the Home Affordable Modification Program (HAMP).
Moreover, a party's briefs should not make arguments that rely on facts outside the record and statements based on such improper matter will generally be disregarded by the appellate court. (Kendall v. Allied Investigations, Inc. (1988) 197 Cal.App.3d 619, 625.) And any statement in a brief concerning matters in the record, whether factual or procedural, and no matter where the reference occurs in a brief, must be supported by a citation to the record. (Rule 8.204(a)(1)(C); Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 745.) For all of these reasons, we shall disregard Gallardo's arguments based on alleged loan modification efforts under the HAMP.
|
|