Opinion
A141970
01-22-2016
WARLITA AGMATA-RIVAC et al., Plaintiffs and Appellants, v. WELLS FARGO BANK, N.A., as Trustee, etc., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG13707190)
In this case challenging defendant's authority to foreclose under a deed of trust, the borrowers, plaintiffs Warlita Agmata-Rivac and Severino Rivac, appeal from a judgment for defendants Wells Fargo Bank N.A. (Wells Fargo) as trustee of the JP Morgan Mortgage Trust 2008-R2 Mortgage Pass-Through Certificates/Series 2008-R2 (Series 2008-R2 Trust) et al., sustaining their demurrer to the complaint without leave to amend and dismissing the case. We affirm.
I. BACKGROUND
In September 2007, Washington Mutual Bank (WaMu) loaned plaintiffs $886,690 secured by a deed of trust on property in Alameda, which named California Reconveyance Company (CRC) as trustee. On or before August 22, 2008, WaMu securitized and sold its beneficial interest in the deed of trust to the Series 2008-R2 Trust. In September 2008, WaMu was declared insolvent, and the Federal Deposit Insurance Corporation was appointed receiver. That same month, the FDIC transferred WaMu's secured debt, and all of WaMu's " 'mortgage servicing rights and obligations,' " to JP Morgan Chase Bank, N.A. (JP Morgan). JP Morgan is the custodian, and Chase Home Finance, LLC (Chase) is the servicer, to the Series 2008-R2 Trust.
The complaint states that in July 2011, CRC "purportedly as agent for the alleged Beneficiary Wells Fargo, as Trustee and/or JP Morgan as Custodian or Servicer" recorded a notice of default and election to sell under the deed of trust. The notice of default stated that the past due amount owed was $23,406.05. The notice of default was executed by Jauhar Shuaib, as assistant secretary of CRC. The complaint alleges that Shuaib was "not in fact an Assistant Secretary of CRC, but instead an employee of Wells Fargo or JP Morgan, a robo-signer, who was not authorized on behalf of the true beneficiary of Plaintiffs' Deed of Trust to initiate a foreclosure . . . ." CRC recorded notices of trustee's sales of the property in October 2011 and May 2012, listing estimated unpaid balances of $949,188.18 and $1,007,475.88. The notices of sale were executed by persons purporting to be assistant secretaries of CRC, but alleged to be "robo-signers without authority of the true beneficial interest holder of Plaintiffs' Deed of Trust." The complaint does not allege that a trustee's sale has been held.
Plaintiffs sued Wells Fargo, JP Morgan, Chase, and CRC in December 2013. The complaint asserts causes of action for breaches of express and implied agreements, slander of title, violation of Civil Code section 2923.5, wrongful foreclosure, violation of the federal Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 1961 et seq.) (RICO), and violation of Business and Professions Code section 17200.
The court sustained defendants' demurrer to the complaint without leave to amend and dismissed the action with prejudice. Plaintiffs timely appealed from the order. Although a judgment was entered after the filing of the notice of appeal, the order on the demurrer dismissing the case was itself an appealable judgment. (Hudis v. Crawford (2005) 125 Cal.App.4th 1586, 1590, fn. 4.) There is no question or argument that the appeal is not properly before us.
II. DISCUSSION
A. Scope of Review
We review an order sustaining a demurrer de novo to determine whether the complaint states facts sufficient to constitute a cause of action. (Bower v. AT & T Mobility, LLC (2011) 196 Cal.App.4th 1545, 1552; Stanton Road Associates v. Pacific Employers Ins. Co. (1995) 36 Cal.App.4th 333, 341 (Stanton Road).) We construe the complaint "liberally . . . with a view to substantial justice between the parties" (Code Civ. Proc., § 452) and treat it " ' "as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.' " (Stanton Road, supra, 36 Cal.App.4th at p. 340; Jager v. County of Alameda (1992) 8 Cal.App.4th 294, 296-297.) When the court sustains a demurrer without leave to amend, " 'we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.' [Citations.]" (Stanton Road, supra, at p. 341.) B. Res Judicata Ruling
The court determined that plaintiffs' case was barred by the doctrine of res judicata because a prior action brought by plaintiff Warlita Agmata-Rivac against defendants JP Morgan and CRC involving the same foreclosure proceedings at issue in this case was dismissed with prejudice. Defendants do not defend the judgment on this ground because the prior action was apparently dismissed for lack of prosecution, and such a dismissal is not a judgment on the merits as required for application of the doctrine of res judicata. (Franklin Capital Corp. v. Wilson (2007) 148 Cal.App.4th 187, 215.) C. Wrongful Foreclosure
Plaintiffs state that under Civil Code section 2924, subdivision (a)(1), a notice of default initiating a nonjudicial foreclosure under a power of sale must be filed by the "trustee, mortgagee, or beneficiary" under the deed of trust "or any of their authorized agents." The cause of action for wrongful foreclosure alleges that neither Wells Fargo nor JP Morgan is a beneficiary under the deed of trust because of WaMu's "unperfected securitization" of the loan.
According to plaintiffs' complaint, in order for defendants to have an enforceable interest in the deed of trust, WaMu was required to record an assignment of its interests to defendants within 90 days of the sale of the loan to the series 2008-R2 trust. Citing Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski), the complaint alleges the securitization was ineffective because the apparent lack of assignment violated the terms of the governing Series 2008-R2 Trust pooling and servicing agreement (PSA). The complaint further alleges: "The transfer to the securitized trust was unperfected because of the failure to assign [the] Deed of Trust in a timely manner in violation of the PSA. [¶] . . . The power of sale cannot be invoked in compliance with . . . Civil Code section 2924 as stated herein due to the unperfected securitization in 2008; therefore the DOT is false and unenforceable."
Glaski held that a borrower has standing to challenge a foreclosure on the grounds that assignment of interests in the loan to the foreclosing party was invalid. (Glaski, supra, 218 Cal.App.4th at p. 1097) The holding in Glaski is an outlier, and we decline to follow it. In Davies v. Deutsche Bank Nat. Trust Co. (9th Cir. No. 12-60003, Mar. 24, 2014) 2014 U.S.App.LEXIS 5416, pp. **3-4, the court held that the borrower had no standing to argue that the lender lacked authority to foreclose due to violations of a PSA. The borrower "cannot challenge violations of the pooling and servicing agreement. We recognize that California courts have divided over this issue. But the weight of authority holds that debtors in Davies' shoes—who are not parties to the pooling and servicing agreements—cannot challenge them. [Citations.] We believe the California Supreme Court, if confronted with this issue, would so hold." (Id. at p. ** 4.)
We agree with the court in Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515 (Jenkins), that "[a]s an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under [a] promissory note, [a borrower] lacks standing to enforce any agreements, including the investment trust's pooling and servicing agreement, relating to such transactions. [Citation.] [¶] Furthermore, even if any subsequent transfers of the promissory note were invalid, [plaintiff] is not the victim of such invalid transfers because [her] obligations under the note remain unchanged." As the court in Snell v. Deutsche Bank Nat. Trust Co. (E.D.Cal. No. 2:13-cv-02178-MCE-DAD, Jan. 29, 2014) 2014 U.S.Dist.LEXIS 11122, p. *13, has observed, "[n]umerous courts have subsequently expressed their disagreement with Glaski and have continued to follow the Jenkins approach."
In their reply brief, plaintiffs argue for the first time that the foreclosure was wrongful because CRC was not authorized to record the notice of default. However, CRC is named as trustee in the deed of trust, and plaintiffs identify no document removing CRC from that role. Plaintiffs state they "do not dispute the fact that the original DOT contemplated . . . CRC as the trustee. But events took place after the execution of the DOT, specifically the moving of the DOT into the 2008-R2 Trust. As a result . . . CRC's interest as trustee passed to Wells Fargo." We reject this argument because it is unsupported by any legal authority, and it is improperly advanced for the first time in plaintiffs' reply brief (Granite Construction Co. v. American Motorists Ins. Co. (1994) 29 Cal.App.4th 658, 667, fn. 8). For the same reasons, we reject plaintiff's argument that the notice of default was improper because it was allegedly "robo-signed."
Accordingly, the demurrer was correctly sustained as to the wrongful foreclosure claim. D. Breaches of Contract
Plaintiff's causes of action for breaches of express and implied contracts assert various claims based on alleged violations of the PSA governing the Series 2008-R2 Trust. As we have said, plaintiffs have no standing to raise these contentions. (Jenkins, supra, 216 Cal.App.4th at p. 515.)
Plaintiffs allege WaMu's "attempted assignment of beneficial interest was a void—and not merely voidable—transfer because it violated... [t]he Internal Revenue Code . . . requirements regarding the timeframes for proper asset transfers to tax-exempt real estate mortgage investment conduit . . . trusts" such as the Series 2008-R2 Trust. This statutory allegation, based on Glaski, does not state a cause of action either. (Jenkins, supra, 216 Cal.App.4th at p. 527 [the plaintiff "cannot assert statutory violations, which provide independent grounds for possible claims, under the rubric of a breach of contract claim, especially when she makes no effort to link the actions that allegedly violated the statutes to the express terms or underlying purposes of a specific contract between the parties"].)
The complaint alleges that defendants breached paragraphs 22 and 24 of the deed of trust because they "invoked the power of sale without notice to Plaintiffs."
Paragraph 22 of the deed of trust provides: "If lender invokes the power of sale, Lender shall execute or cause Trustee to execute a written notice of the occurrence of an event of default and of Lender's election to cause the property to be sold. Trustee shall cause this notice to be recorded in each county in which any part of the Property is located. . . . Trustee shall give public notice of sale to the persons and in the manner prescribed by [a]pplicable [l]aw." Plaintiffs contend that "[t]his never happened in the instant matter" because "[n]o lender has a legal claim to Plaintiffs' Deed of Trust and could not have legally executed the July 21, 2011 Notice of Default . . . due to the break in the chain of title at the time of the attempted securitization on or before August 22, 2008 . . . and if not at that time then at the time of the attempted purchase by JP Morgan shortly thereafter on September 25, 2008."
Thus, plaintiffs argument for violation of paragraph 22 is not that CRC, as trustee, failed to record notices of default and sale that complied with the statutory procedures for non-judicial foreclosures. Rather, their argument is yet another variation of plaintiffs' untenable invalid securitization theory. According to plaintiffs, CRC did not give the statutory notices becase it had no power to do so. In once again rejecting that theory, we note that even if transfers of the secured note and beneficial interest under the deed of trust were invalid, plaintiffs were "not the victim[s] . . . because [their] obligations under the note remained unchanged. Instead, the true victim may be an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note." (Jenkins, supra, 216 Cal.App.4th at p. 515.)
Paragraph 24 of the deed of trust provides that "[l]ender, at its option, may from time to time appoint a successor trustee to any Trustee appointed hereunder . . . ." No successor trustee was appointed, and plaintiffs do not attempt to explain the alleged violation of paragraph 24.
Plaintiffs also contend that defendants violated paragraph 20 of the deed of trust, an allegation not advanced in their complaint. Paragraph 20 states in part: "The note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to the borrower. A sale might result in a change in the entity (known as the 'Loan Servicer') that collects Periodic Payments due under the Note and this Security Instrument . . . . Borrower will be given written notice of the change which will state the name and address of the new Loan Servicer, the address to which payments should be made and any other information RESPA [the Real Estate Settlement Procedures Act (12 U.S.C. § 2610, et seq.)] requires in connection with a notice of transfer of servicing." The notice of default directed plaintiffs to contact JP Morgan to arrange for payment to stop the foreclosure, and provided JP Morgan's address and phone number. Plaintiffs do not explain how they were damaged by any alleged failure to provide notice as specified in paragraph 20. Thus, even if they were granted leave to amend to allege a violation of that paragraph, the amendment would not state a cause of action for breach of contract.
Plaintiffs contend that Wells Fargo "breached its implied covenant of good faith and fair dealing by allowing CRC to improperly act as trustee." Again, this argument is improperly raised for the first time in the appellant's reply brief, but plaintiffs have no tenable theory of liability in any event. The theory builds on their opening brief's contention that "CRC was not in fact the Trustee under Plaintiff's Deed of Trust on [the] date [the notice of default] was recorded because there was no Substitution of Trustee document recorded." But no substitution of trustee was required because CRC is the named trustee in the deed of trust. E. RICO Cause of Action
Plaintiffs go so far as to claim that defendants' actions violated the RICO statute. The cause of action is set forth in approximately seven pages of rambling allegations. Plaintiffs charge that "[d]efendants concealed the fact that the Loans were securitized as well as the terms of the Securitization Agreements, including, inter alia: (1) Financial Incentives paid; (2) existence of Credit Enhancement Agreements, and (3) existence of Acquisition Provisions. By concealing the securitization, Defendants concealed the fact that Borrower's loan changed in character inasmuch as no single party would hold the Note but rather the Notes would be included in a pool with other Notes, split into tranches, and multiple investors would effectively buy shares of the income stream from the loans. Changing the character of the loan in this way had a materially negative effect on Plaintiff that was known by Defendants but not disclosed."
Plaintiffs further assert: "The conspirators intended to maintain an absolute stranglehold on the American economy for many decades, if not centuries, into the future. This could only be accomplished if the scheme was able to evolve over time in a changing regulatory and consumer environment. The point is that the conspirators adjusted the American lending system and the legal system governing it in a way designed to most effectively gratify their greed motivated crimes over the longest period of time. Through this revolution in the use of words and ephemeral concepts such as the 'corporation,' the conspirators, including the present Defendants, have by and—large been successful in changing the paradigm so that the rights of individuals are in contradiction with the ownership proclamation as stated in the terms of the Pooling and Servicing Agreement, and as previously addressed."
Plaintiffs' opening brief identifies seven actions on the part of defendants allegedly constituting RICO violations, including "[f]ailing to evidence chain of title possession and indebtedness," and "[n]o notice that JP Morgan purchased Plaintiff's DOT through the WaMU receivership or purchase and assumption agreement."
It is apparent from the complaint that this is not the first case in which plaintiffs' counsel has advanced such a RICO theory, since the defendants are incorrectly listed as "Deutsche Bank, The Bank of New York, SPS, Bank of America and Recontrust." Plaintiffs' counsel has evidently raised such RICO allegations multiple times in the federal courts with no success. In Rubio v. U.S. Bank N.A. (N.D.Cal. No. C 13-05752 LB, Mar. 31, 2014) 2014 WL 1318631 (Rubio), where counsel for appellants also represented the plaintiff, the court wrote: "Plaintiff alleges that Defendants violated [RICO] by concealing that the loans were securitized, hiding the terms of the securitization agreements, sending fraudulent assignments in foreclosure cases, making misrepresentations, concealing the parties' lack of standing, and other similar broad allegations against the Defendants and the mortgage industry in general. . . . These claims have been brought by Plaintiffs' counsel in nearly identical form in other cases in this district, and the courts there have dismissed them with prejudice. (See, e.g. Bergman v. Bank of Am. [(N.D.Cal. No. C 13-00741 JCS, Oct. 23, 2013) 2013 WL 5863057 (Bergman)], *29-30 (collecting cases and dismissing nearly-identical claims with prejudice)." (Rubio, supra, 2014 WL 1318631 at *17.) The Rubio court followed Bergman, and dismissed the RICO claims with prejudice. (Id. at **17-18.)
Bergman "adopt[ed] the reasoning of previous cases and [found] that Plaintiff's claim here is 'far from plausible.' [Citation.] Plantiffs 'put forward no facts supporting [their] "sweeping contention that Defendants defrauded everyone" by bringing suit on behalf of entities without standing to sue.' [Citation.] They fail to allege facts of an ongoing organization to support the contention that Defendants function as an 'enterprise.' [Citation.] They fail to plausibly allege racketeering activities that are distinct from the alleged enterprise. [Citation.] They fail to allege that the loan constitutes an unlawful debt, i.e., an unlawful gambling debt. [Citations.] They fail to identify authority to support their contention that Defendants had a duty to make disclosures regarding securitization. [Citation.] Moreover, securitization is neither a crime nor racketeering activity. [Citation.]" (Bergman, supra, 2013 WL 5863057 at *30.)
Other federal cases also hold that foreclosure proceedings do not support RICO claims. "Plaintiff's RICO claim appears to be nothing more than conclusory allegations punctuated by threadbare recitals of the elements of a RICO cause of action. Plaintiff's attempt to cast a straightforward foreclosure proceeding as a pattern of racketeering activity is simply improper." (Zacharias v. JP Morgan Chase Bank, N.A. (N.D.Cal. No. 12-06525 SC, Feb. 13, 2013) 2013 WL 588757 at *3.) "[B]ecause the alleged damages arise from plaintiffs' conduct (failure to stay current on their loan payments), rather than from any action by defendants, plaintiffs cannot state a viable RICO claim." (Rivac v. Ndex W. LLC (N.D.Cal. No. C 13-1417 PJH, July 10, 2013) 2013 WL 3476659 at *8.) "The activity underlying plaintiff's claims was a simple loan transaction and foreclosure under a deed of trust. This is not the kind of unlawful activity contemplated by the Civil RICO Act." (Johnson v. Wachovia Bank FSB (E.D.Cal. No. 10-2839 GEB, Sept. 17, 2012) 2012 WL 4092426 at *3, fn. 2.)
We agree with the analysis in these federal cases and conclude that the demurrer to the RICO cause of action was correctly sustained. F. Other Causes of Action
At the outset of their opening brief, plaintiffs state that the court erred when it concluded they had failed to allege facts sufficient to state causes of action for violation of Civil Code section 2923.5 and slander of title. However, plaintiffs cite Civil Code section 2923.5 only in their arguments on the issue of res judicata, and their discussion of a federal case that denied a motion to dismiss a claim for violation of the statute. They advance no argument specific to the statutory cause of action, and have thus abandoned any claim of error with respect to its dismissal. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1177.) Similarly, plaintiffs make only passing references to slander of title in connection with the res judicata issue, and their arguments on the causes of action for breach of contract and violation of the RICO statute. Thus, any claim of error in connection with dismissal of the slander of title cause of action fails along with their arguments involving those other causes of action. As for the alleged violation of Business and Professions Code section 17200, the complaint acknowledges that "Section 17200 is a derivative cause of action and Plaintiffs' ability to pursue this cause of action depends on the success or failure of their substantive causes of action." Since plaintiffs' other causes of action are not viable, neither is their unfair competition claim. G. Leave to Amend
Plaintiffs contend that they should be granted leave to amend their complaint but fail to explain how they can amend it to state a cause of action. They have thus failed to establish that denial of leave to amend was an abuse of discretion. (Stanton Road, supra, 36 Cal.App.4th at p. 341.)
III. DISPOSITION
The judgment is affirmed.
/s/_________
Siggins, J. We concur: /s/_________
McGuiness, P.J. /s/_________
Pollak, J.