Opinion
C082825
10-31-2018
BERENICE THOREAU DE LA SALLE, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL ASSOCIATION, as Successor, etc., et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. CV 140003)
Plaintiff Berenice Thoreau de la Salle is among the host of mortgagees who have defaulted on their loans since the Great Recession of 2008 (remaining in her home for nearly 10 years without making any payments for it). In this preforeclosure action, plaintiff appeals in pro se contending the trial court erred in sustaining without leave to amend the demurrer to her latest pleading. We affirm the judgment.
FACTUAL BACKGROUND
In March 1988, plaintiff and her husband (now deceased) purchased a residential property located at 1687 Forest Trail, Mammoth Lakes, California (the Property). In April 2005, plaintiff executed an adjustable rate promissory note (Note), secured by a deed of trust, on the Property. The Note indicates that plaintiff borrowed $668,000 from America's Wholesale Lender (AWL), a trade name used by Countrywide Financial Corporation, which was acquired by Bank of America, N.A. (Bank of America) on or about July 1, 2008. The deed of trust identified plaintiff as the borrower, AWL as the lender, ReconTrust Company, N.A. as the trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary that was "acting solely as a nominee for Lender and Lender's successors and assigns."
In November 2008, plaintiff defaulted on her loan. In August 2010, MERS, solely as the nominee for Countrywide Home Loans, Inc., doing business as (dba) AWL, assigned the beneficial interest under the Note and the deed of trust to U.S. Bank, N.A. (U.S. Bank), as trustee for the certificate holders of the Structured Adjustable Rate Mortgage Loan Trust, series No. 2005-19XS (SARM 05-19XS). The assignment was recorded in October 2010. In July 2011, MERS again assigned the beneficial interest under the Note and the deed of trust to U.S. Bank, as trustee for the certificate holders of SARM 05-19XS. The assignment was recorded in July 2011.
Effective July 1, 2013, Bank of America transferred the servicing of plaintiff's loan to Nationstar Mortgage, LLC (Nationstar). In a letter dated July 3, 2013, QBE Insurance Corporation advised plaintiff that the insurance Bank of America had obtained for the Property was cancelled, effective June 28, 2013, for the following reason: "LOAN PAID IN FULL." On July 15, 2013, Bank of America assigned the beneficial interest under the Note and deed of trust to Nationstar (hereafter Younan Assignment).
In August 2013, Nationstar informed plaintiff, in response to her written request, that SARM 05-19XS was the current owner of her loan.
In November 2013, the Younan Assignment was recorded. In that same month, legal counsel for Bank of America informed plaintiff that "the July 3, 2013 letter that you received was sent to inform you that the lender placed insurance policy that Bank of America secured on October 12, 2012 was being cancelled. This letter mistakenly stated that the insurance policy had been paid in full, and Bank of America will be sending you a correction letter under separate cover."
In December 2013, Nationstar sent plaintiff a letter stating that her loan payment was past due, and that it intended to initiate foreclosure proceedings on the Property. The letter specifically stated that the foreclosure would be conducted in the name of U.S. Bank, as trustee for the certificate holders of SARM 05-19XS (Noteholder). Nationstar, however, has yet to initiate any foreclosure proceedings. Plaintiff does not dispute that she has not made a loan payment since October 2008.
In January 2014, plaintiff filed this action against Bank of America, Nationstar, and U.S. Bank. Before defendants filed a response, plaintiff filed a first amended complaint. Thereafter, the trial court granted defendants' motion for judgment on the pleadings with leave to amend. After the second amended complaint was filed, the trial court granted plaintiff permission to file a third amended complaint. The third amended complaint alleges six causes of action: (1) fraud; (2) negligence; (3) slander of title; (4) violation of the Homeowner's Bill of Rights (HBOR); (5) violation of Business and Professions Code section 17200 et seq. (the "unfair competition law" (hereafter UCL)); and (6) declaratory relief.
In March 2016, defendants demurred to the third amended complaint. In a detailed written order, the trial court sustained the demurrer without leave to amend. Plaintiff now challenges the trial court's order on appeal.
DISCUSSION
1.0 Appellate Jurisdiction
Plaintiff appeals from the trial court's order sustaining a demurrer without leave to amend. Defendants served notice of the entry of this order as an entry of judgment, although they acknowledge on appeal that it is in fact an interlocutory order ("[t]o date, no final judgment has been entered") before addressing the merits of this appeal, stating that "this Court should accept jurisdiction" (presuming that we somehow are entitled to exercise jurisdiction with the consent of the parties) "as if the appeal was taken from a final judgment." (Italics added.)
Contrary to defendants' belief, "our usual practice [is] to dismiss the purported appeal without further ado if a final judgment ha[s] not been entered." (Giannuzzi v. State of California (1993) 17 Cal.App.4th 462, 464, fn. 2.) However, after briefing was complete, we granted plaintiff's request to augment the record on appeal to include a copy of the judgment of dismissal entered on April 2, 2018. We construe the notice of appeal as being taken from the final judgment of dismissal. (See Coast Plaza Doctors Hospital v. UHP Healthcare (2002) 105 Cal.App.4th 693, 699.) Accordingly, we will consider the merits of plaintiff's appeal.
2.0 Standard of Review
We review an order sustaining a demurrer without leave to amend de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469.) "[W]e accept the truth of material facts properly pleaded in the operative complaint, but not contentions, deductions, or conclusions of fact or law." (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 (Yvanova).) We may also consider documents attached to the complaint and matters subject to judicial notice. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.)
"If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. [Citation.] If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. [Citation.] The plaintiff has the burden of proving that an amendment would cure the defect." (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Such a showing can be made for the first time on appeal. (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.)
3.0 The Trial Court Properly Sustained the Demurrer
3.1 Fraud
"The elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance on the misrepresentation, (4) justifiable reliance on the misrepresentation, and (5) resulting damages." (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469, citing Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)
Plaintiff's fraud cause of action is predicated on two theories. First, plaintiff alleges that the Note and deed of trust were void ab initio because the lender identified on the Note and deed of trust—AWL—was a nonexistent entity that lacked the capacity, competency, and legal authority to enter into a contract at the time she obtained her loan. According to plaintiff, AWL is a fictitious business name that cannot hold property such as her Note. Second, plaintiff alleges that, because the Note had been paid in full with insurance proceeds and "destroyed," Nationstar wrongfully threatened her with nonjudicial foreclosure. According to plaintiff, Nationstar cannot foreclose on the Property because it did not receive a legally valid assignment of the deed of trust and Note via the Younan Assignment since the Note had been paid in full prior to the assignment. Plaintiff's theories fail as a matter of law.
The use of a fictitious business name for a legal entity in a promissory note or deed of trust does not vitiate their enforceability, and the "dba" in the present case—which the pleadings admit has been in use since 2003—has been on file in California since at least 2006. (9 Witkin, Summary of Cal. Law (11th ed. 2017) Partnership, § 11, p. 598; see Pinkerton's, Inc. v. Superior Court (1996) 49 Cal.App.4th 1342, 1348-1349.) The allegation that a third party has paid the balance due under the Note and the speculation that the Note must therefore have been cancelled or "destroyed" is belied by a document attached to the third amended complaint—counsel's letter of November 2013—and even if true, does not extinguish plaintiff's obligation under the Note because the payment was not made on her behalf but was instead made pursuant to the third party's obligation to another entity. (Cf. Casault v. Fannie Mae (C.D.Cal. 2012) 915 F.Supp.2d 1113, 1135.) Plaintiff failed to provide any legal authority supporting her theories on which her fraud cause of action is predicated. As a result, the third amended complaint fails to state a cause of action for fraud.
3.2 Negligence
The elements of a cause of action for negligence are (1) the existence of a duty to exercise due care, (2) breach of that duty, (3) causation, and (4) damages. (See Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 500.) Whether a duty of care exists is a question of law to be decided on a case-by-case basis. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62.) Absent the existence of a duty, there can be no breach and no negligence. (Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1683.)
Plaintiff's negligence cause of action is based on the theory that defendants owed her a duty of care not to slander the title to the Property, which was breached when the "knowingly false" Younan Assignment was recorded. Plaintiff alleges that defendants slandered her title because (1) the Younan Assignment falsely represents that Bank of America was the holder of the deed of trust with the power to, among other things, assign the beneficial interest thereunder, together with the Note, to Nationstar, and (2) the Younan Assignment contains false representations due to the deed of trust being void ab initio. According to plaintiff, Bank of America owed her a duty to disclose that the deed of trust was void ab initio on the ground AWL lacked the competency, capacity, and authority to enter into a contract. Plaintiff further asserts that Nationstar had a duty to ensure it had reliable evidence to substantiate its right to foreclose on the Property.
Plaintiff alleges no facts that would establish any duty to her on defendants' part such that she may pursue a cause of action for negligence. (See Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 740-741 [" 'as a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money' "]; Somera v. Indymac Federal Bank, FSB (E.D.Cal. Mar. 3, 2010, No. 2:09-cv-01947-FCD-DAD) [2010 U.S. Dist. Lexis 19256, at p. *16] ["a loan servicer does not have a duty to a borrower when its involvement does not exceed the scope of its role as a mere loan servicing company"].) Plaintiff fails to cite any case where a court found the lender and/or loan servicer owed a duty of care to the borrower on the facts she alleged. Accordingly, the third amended complaint fails to state a cause of action for negligence.
3.3 Slander of Title
The elements of a cause of action for slander of title are well established. "Slander or disparagement of title occurs when a person, without a privilege to do so, publishes a false statement that disparages title to property and causes the owner thereof ' "some special pecuniary loss or damage." ' [Citation.] The elements of the tort are (1) a publication, (2) without privilege or justification, (3) falsity, and (4) direct pecuniary loss. [Citations.] If the publication is reasonably understood to cast doubt upon the existence or extent of another's interest in land, it is disparaging to the latter's title." (Sumner Hill Homeowners' Assn., Inc. v. Rio Mesa Holdings, LLC (2012) 205 Cal.App.4th 999, 1030.)
The "mailing, publication, and delivery of notices" (Civ. Code, § 2924, subd. (d)(1)) required as part of the nonjudicial foreclosure process is protected by the qualified privilege set forth in section 47, subdivision (c)(1). To overcome this privilege, a plaintiff must allege facts showing the recording was done with malice, "meaning ' "that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights." ' " (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 336.)
Undesignated statutory references are to the Civil Code.
Plaintiff's slander of title cause of action is premised on the initial recording of the allegedly void ab initio deed of trust and the subsequent recording of the assignments of the Note and deed of trust. Plaintiff's cause of action fails because, as discussed ante, the initial recording of the deed of trust and subsequent assignments of the deed of trust and Note were not void on the theory that the deed of trust and Note were void ab initio. In addition, to the extent this cause of action is based on the theory that the Note could not be assigned because it had been paid in full with insurance proceeds, it fails for the reasons discussed ante. Finally, to the extent this cause of action is predicated on the recording of documents protected by the qualified privilege set forth in section 47, subdivision (c)(1), it fails because plaintiff did not allege facts sufficient to establish malice. Therefore, the third amended complaint fails to state a cause of action for slander of title.
3.4 HBOR
The Legislature enacted the HBOR, effective January 1, 2013, "to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure." (§ 2923.4, subd. (a); see Valbuena v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1272.) "To enforce the new requirements, the HBOR creates a private right of action allowing a borrower to seek injunctive relief to enjoin a material violation of the act prior to foreclosure and to assert a claim for damages for a violation of the act following foreclosure." (Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 951.)
The HBOR limits this private right of action for damages, however, to violations of specific code sections. As relevant here, the HBOR provides: "After a trustee's deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages . . . resulting from a material violation of Section . . . 2924.17 by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not corrected and remedied prior to the recordation of the trustee's deed upon sale." (§ 2924.12, subd. (b); see Rockridge Trust v. Wells Fargo, N.A. (N.D.Cal. 2013) 985 F.Supp.2d 1110, 1149 [to state a claim for damages under the HBOR a borrower "must plead (1) a material violation of one of the enumerated code sections; (2) by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent; (3) that causes actual economic damages"].)
Section 2924.17, subdivision (a) mandates that certain documents related to the foreclosure process, including "a notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded by or on behalf of a mortgage servicer in connection with a foreclosure . . . shall be accurate and complete and supported by competent and reliable evidence." Section 2924.17, subdivision (b) states that "[b]efore recording or filing any of the documents described in subdivision (a), 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."
Plaintiff seeks damages and injunctive relief for a violation of section 2924.17, subdivision (b) based on (1) Nationstar's refusal to provide her documentation supporting its right to foreclose on the Property, and (2) Nationstar's refusal to ensure it had reliable evidence to substantiate its purported right to foreclose on the Property. According to plaintiff, Bank of America aided and abetted Nationstar's violation of section 2924.17, subdivision (b) by recording the Younan Assignment, which was void ab initio. In doing so, plaintiff alleges that Bank of America knew there was no reliable evidence of any right to foreclose on the Property by any entity.
Here, because a trustee's deed upon sale has not been recorded, plaintiff may seek injunctive relief only to enjoin a material violation of section 2924.17. (§ 2924.12, subd. (a)(1).) In this regard, plaintiff seeks to enjoin defendants from selling, encumbering, transferring, or alienating the Property. The third amended complaint does not allege facts showing that such relief is proper.
As an initial matter, the clear and unambiguous language of section 2924.17 does not require Nationstar to provide documentation to plaintiff supporting its right to foreclose on the Property. Further, to the extent plaintiff alleges that Nationstar violated section 2924.17 because it had no reliable evidence of its right to foreclose since it knew the deed of trust was void ab initio, the third amended complaint does not state a viable cause of action. Plaintiff does not allege that Nationstar commenced nonjudicial foreclosure proceedings by filing or recording a notice of default. (§ 2924, subd. (a).) But even if such proceedings had been commenced, the HBOR does "not create a right to litigate, preforeclosure, whether the foreclosing party's conclusion that it had the right to foreclose was correct." (Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 163 (Lucioni).) This is because a different statutory section—section 2924, subdivision (a)(6)—forbids an entity from " 'initiat[ing] the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust,' " and that section is not one of the sections for which injunctive relief is authorized. (Lucioni, supra, at pp. 158-159.) The Lucioni court reasoned that "[i]f the [California] Legislature wished to authorize" preforeclosure challenges to the foreclosing party's right to foreclose, "it could have authorized injunctive relief for a violation of section 2924[, subdivision] (a)(6)." (Lucioni, at p. 163.) However, because the California Legislature did not authorize injunctive relief for violations of section 2924, subdivision (a)(6), the Lucioni court concluded that borrowers could not use other statutory sections, including section 2924.17, to assert preforeclosure challenges to the foreclosing party's right to foreclose. (Lucioni, supra, at p. 163.)
In support of her HBOR claim, plaintiff alleges that former section 2923.55, subdivision (b) gives borrowers the right to request that a mortgage servicer document its right to foreclose. Various sections of the HBOR were subject to a sunset provision, effective January 1, 2018 (Lucioni, supra, 3 Cal.App.5th at p. 157), including section 2923.55 (former § 2923.55, subd. (i)). Former section 2923.55 prohibited the recording of a notice of default pursuant to section 2924 unless the mortgage servicer had sent the borrower a statement advising the borrower that he or she may request copies of certain documents concerning the mortgage loan: The borrower's promissory note or other evidence of indebtedness; the borrower's deed of trust or mortgage; any assignment of the borrower's mortgage or deed of trust required to demonstrate the right of the mortgage servicer to foreclose; and the borrower's payment history since the borrower was less than 60 days past due. (§ 2923.55, subds. (a), (b)(1)(B)(i)-(iv), repealed by Stats. 2013, ch. 76 § 15, eff. Jan. 1, 2018.)
Plaintiff does not allege that a notice of default was recorded or that she requested Nationstar provide a copy of any of the documents specified in former section 2923.55, subdivision (b)(1)(B). Instead, in October 2013, plaintiff requested that Nationstar provide her with written proof that SARM 05-19XS was "the current owner of the Note evidencing the loan in question." Accordingly, the third amended complaint fails to allege a violation of former section 2923.55, subdivision (b)(1)(B).
3.5 Business and Professions Code Section 17200 et seq.
To state a claim for a violation of the UCL under Business and Professions Code section 17200 et seq., a plaintiff must allege the defendant committed a business act or practice that is "fraudulent, unlawful, or unfair." (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1136.)
Plaintiff failed to allege a specific unfair business act or practice, apart from allegations as to which the demurrer was properly sustained. As a consequence, the trial court properly sustained the demurrer as to this cause of action. (See Price v. Starbucks Corp. (2011) 192 Cal.App.4th 1136, 1147 ["Because the underlying causes of action fail, the derivative UCL . . . claim[] also fail[s].]; Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.)
3.6 Declaratory Relief
Since plaintiff's request for declaratory relief is derivative of her other nonviable causes of action, the trial court properly sustained the demurrer as to this cause of action. (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 54; Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794.)
3.7 Leave to Amend
The trial court granted plaintiff leave to amend her complaint twice. She has not shown there is a reasonable probability she could cure the defects if given further opportunity to do so. Accordingly, the trial court did not abuse its discretion in sustaining the demurrer to the third amended complaint without leave to amend. There is nothing in the record or in plaintiff's appellate briefs showing she could add facts to her third amended complaint that would support a viable cause of action.
Citing Yvanova and several federal district court cases, plaintiff contends she has the right to challenge the Younan Assignment as void. In making this argument, she suggests her pleading can be amended to state a viable cause of action. In essence, plaintiff argues she may bring a preemptive action to determine whether Nationstar may initiate nonjudicial foreclosure proceedings. We disagree.
Yvanova involved a borrower that had defaulted on a promissory note secured by a deed of trust on real property. After the holder of the promissory note completed a nonjudicial foreclosure, the borrower sued for wrongful foreclosure, alleging that the holder of the note did not validly obtain rights under the note by assignment because the assignment was void. (Yvanova, supra, 62 Cal.4th at p. 925.) Our Supreme Court determined that the borrower had standing to sue. The court held that "a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment." (Id. at p. 924.) But the court said its holding was a narrow one. (Ibid.) "We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party's right to proceed." (Ibid.)
Unlike Yvanova, this case involves a borrower in default attempting to preempt a threatened nonjudicial foreclosure, which is precisely the question left open by Yvanova. But the question was answered by the Court of Appeal, Fourth Appellate District, Division One, in Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808 (Saterbak). In that case, the borrower sought to cancel the assignment of the deed of trust to her home after a notice of default and notice of trustee's sale had been recorded but before a sale occurred. The court stated: "California courts do not allow such preemptive suits because they 'would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.' " (Id. at p. 814.) The court explained that requiring defendants to prove, prior to foreclosure, that they are authorized to initiate a foreclosure is inconsistent with the policy behind nonjudicial foreclosure to provide a quick, inexpensive and efficient remedy. (Id. at pp. 814-815; see Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 511-513, disapproved on another ground in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; see also Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154, fn. 5.)
As Saterbak observed, Yvanova did not alter standing for preforeclosure cases because its holding that a borrower has standing to sue for wrongful foreclosure based on an allegedly void assignment was "expressly limited to the post-foreclosure context." (Saterbak, supra, 245 Cal.App.4th at p. 815.) We agree with Saterbak. Here, because plaintiff's action is preforeclosure, she does not have standing to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party's rights under an assigned note. We need not determine whether, under Yvanova, plaintiff has alleged facts showing the Younan Assignment was void, as opposed to voidable. Although Yvanova requires a void transfer to confer standing, Saterbak prohibits a preforeclosure challenge to the assignment of the note regardless of whether the alleged assignment was void or voidable. (Ibid.) Accordingly, we do not reach the question in this case. (See Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 810-820 [holding that alleged assignment in that case was voidable].)
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
BUTZ, J. We concur: BLEASE, Acting P. J. MAURO, J.