Opinion
C096523
08-14-2023
HERBERT E. MILLER, Plaintiff and Appellant, v. WILMINGTON SAVINGS FUND SOCIETY, FSB, as Trustee, etc., Defendant and Respondent.
NOT TO BE PUBLISHED
(Super. Ct. No. SCV0047375)
Mesiwala, J.
Appellant Herbert E. Miller appeals from a judgment of dismissal after the trial court sustained a demurrer to his first amended complaint without leave to amend. Miller contends the trial court erred by making impermissible factual determinations in ruling on the demurrer. Respondent Wilmington Savings Fund Society, FSB (Wilmington) argues the trial court did not make any factual determinations and merely took judicial notice of facts that could not reasonably be controverted. We conclude Miller properly stated claims for wrongful foreclosure and quiet title and the trial court erred by making factual determinations beyond the permissible scope of review on a demurrer. We will reverse and remand with instructions to overrule the demurrer as to these two causes of action.
FACTUAL AND PROCEDURAL BACKGROUND
"To determine whether a demurrer was properly sustained, we review the allegations of the operative complaint for facts sufficient to state a claim for relief. In doing so, we treat the demurrer as admitting all material facts properly pleaded." (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 866.) "[T]he allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties." (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 244245; Code Civ. Proc., § 452.) We may also consider matters properly subject to judicial notice, "though not disputed or disputable facts stated therein." (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 &fn. 1(Yvanova); Code Civ. Proc., § 430.30; Evid. Code, §§ 450-452, 459.)
A
Miller's Allegations
Miller organized the operative complaint into three "claim[s] for relief" described as "wrongful foreclosure," "quiet title," and "cancellation of instruments." Miller challenges the sustaining of the demurrer on only the first two claims.
Miller alleges that, in 2016, he received by grant deed an interest in a residential property in Auburn (the property). The grantor had previously taken a loan from Countrywide Bank and secured the loan with a deed of trust for the property (deed of trust). Miller attempted to pay off the note after acquiring the property, but the loan servicers refused to accept his offer and refused to identify the current beneficiary of the deed of trust.
The deed of trust designated Mortgage Electronic Registration Systems, Inc. (MERS) as the original beneficiary. In 2010 or 2011, MERS assigned the deed of trust to BAC Home Loans Servicing, LP (BAC Home Loans) and recorded the assignment, which we will refer to as the first assignment. In 2014, MERS assigned the deed of trust a second time, this time to Ocwen Loan Servicing, LLC (Ocwen) and recorded the second assignment. The same day, Ocwen assigned the deed of trust to Christiana Trust, a division of Wilmington, and recorded the third assignment. In 2016, Christiana Trust assigned the deed of trust to Wilmington and recorded the assignment, which we will refer to as the sixth assignment.
Miller contends the second, third, and sixth assignments are void because MERS had already assigned its interest to BAC Home Loans in the first assignment and had no interest to assign to Ocwen in the second assignment, meaning Ocwen had no interest to assign down the chain. Therefore, Wilmington was not the beneficiary of the deed of trust when it substituted the trustee and directed the trustee to record a notice of default and conduct a foreclosure sale. Nor was the substitute trustee the actual trustee under the deed of trust when it issued a trustee's deed to Wilmington after the foreclosure sale. So Miller contends Wilmington wrongfully foreclosed on the property and Miller remains the owner.
As a result of the wrongful foreclosure, Miller lost the property when he otherwise would have paid off the note and retained possession.
B
Wilmington's Demurrer and Request for Judicial Notice
Wilmington demurred to both Miller's claim for wrongful foreclosure and his claim to quiet title. Along with its demurrer, Wilmington filed the following: a request for judicial notice, attaching the deed of trust; two deeds granting the property to Miller; six recorded assignments of the deed of trust; a recorded substitution of the trustee for the deed of trust; a recorded notice of default and a recorded notice of foreclosure sale; a recorded notice of rescission of an earlier notice of default; a recorded trustee's deed to the property from the foreclosure sale; and several papers from other lawsuits.
Wilmington then argued that the trial court could look at a recorded assignment not mentioned in the complaint and determine that Miller's allegations were false and Miller could not state a cause of action for wrongful foreclosure. Wilmington conceded that the second, third, and sixth assignments mentioned in the complaint did not properly assign the deed of trust to Wilmington. Instead, Wilmington pointed to a fourth assignment later in 2014 from Bank of America, N.A. (successor by merger to BAC Home Loans) to Christiana Trust that Wilmington asserted properly connected the first assignment to the sixth assignment. Wilmington also argued that the trial court should ignore a fifth assignment from earlier in 2016 purporting to assign the deed of trust from BAC Home Loans to Christiana Trust, without explaining why the parties were making a very similar assignment almost two years later or why Bank of America was no longer listed as the successor to BAC Home Loans.
Regarding Miller's claim to quiet title, Wilmington contended Miller's interest in the property was "wiped out" by the foreclosure sale. Wilmington alternatively argued Miller had failed to tender repayment of the note secured by the property.
The trial court granted Wilmington's request for judicial notice and found that the first, fourth, and sixth assignments "demonstrate a clear chain of title." The court also found that the second, third, and fifth assignments "would be ineffectual for any purpose based on prior valid assignments." Based on these findings, the court concluded that Wilmington properly initiated the foreclosure and then sustained the demurrer to all Miller's claims. The court did not separately address the quiet title claim or the parties' arguments regarding that claim.
Miller timely appealed from the resulting judgment.
DISCUSSION
I
Reviewing Orders Sustaining Demurrers
"In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory." (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.) "In doing so, we treat the demurrer as admitting all material facts properly pleaded." (C.A. v. William S. Hart Union High School Dist., supra, 53 Cal.4th at p. 866.) "Indeed, 'we accept as true even improbable alleged facts, and we do not concern ourselves with the plaintiff's ability to prove [the] factual allegations.'" (Marina Pacific Hotel &Suites, LLC v. Fireman's Fund Ins. Co. (2022) 81 Cal.App.5th 96, 104-105.)"' "Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context." '" (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) "[T]he allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties." (Youngman v. Nevada Irrigation Dist., supra, 70 Cal.2d at pp. 244-245; Code Civ. Proc. § 452.)
II
Judicial Notice of Recorded Documents
The existence and facial contents of recorded documents are subject to judicial notice under Evidence Code sections 452, subdivisions (c) and (h), and 453, but we do not take notice of "disputed or disputable facts stated therein." (Yvanova, supra, 62 Cal.4th at p. 924, fn. 1.) For example, where a recorded substitution of trustee for a deed of trust recites that a party" 'is the present beneficiary under'" the deed of trust, "this fact is hearsay and disputed; the trial court could not take judicial notice of it." (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.) "Nor does taking judicial notice of the [recorded] assignment of [a] deed of trust establish that the [assignee] is the beneficiary." (Ibid.; accord, Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1102; see also Yvanova, at p. 924, fn. 1 [citing Glaski].) Likewise, statements in a recorded document that one entity is the successor to another are also not subject to judicial notice. (Herrera, at p. 1375.)
III
Wrongful Foreclosure
Construing the complaint and the recorded documents judicially noticed by the trial court in accordance with these standards, we conclude Miller has stated facts sufficient to state a cause of action for wrongful foreclosure. "Wrongful foreclosure is a common law tort claim. 'The elements of a wrongful foreclosure cause of action are:" '(1) [T]he trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.'" '" (Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516, 525.) Wilmington argues Miller failed to allege facts establishing each of these three elements. We will address each element in turn.
A. Wrongful Sale
Wilmington contends "[a]ppellant failed to allege any facts to establish that the Trustee's Sale was wrongful." We disagree.
"A foreclosure initiated by one with no authority to do so is wrongful for purposes of such an action . . . [because] only the original beneficiary, its assignee or an agent of one of these has the authority to instruct the trustee to initiate and complete a nonjudicial foreclosure sale." (Yvanova, supra, 62 Cal.4th at p. 929.) "If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever [citation], the foreclosing entity has acted without legal authority by pursuing a trustee's sale, and such an unauthorized sale constitutes a wrongful foreclosure." (Id. at p. 935.)
Here, Miller has alleged the assignment of the deed of trust to Wilmington was void because the assigning party did not have an interest to assign. So Wilmington was not the beneficiary of the deed of trust when it substituted the trustee and directed the trustee to record a notice of default and conduct a foreclosure sale. Nor was the substitute trustee the actual trustee under the deed of trust when it issued a trustee's deed to Wilmington after the foreclosure sale. These allegations are sufficient to establish the first element of Miller's wrongful foreclosure cause of action.
The trial court taking judicial notice of the fourth assignment does not alter this conclusion because judicial notice does not establish: (1) Bank of America was the successor by merger to BAC Home Loans at the time of the assignment, (2) Bank of America was the beneficiary of the deed of trust at the time of the assignment, or (3) Christiana Trust became the beneficiary. These facts are hearsay and remain disputable, so they cannot negate Miller's allegations. (See Yvanova, supra, 62 Cal.4th at p. 924, fn. 1; Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th at p. 1375; Glaski v. Bank of America, supra, 218 Cal.App.4th at p. 1102.) Nor can judicial notice of the sixth assignment establish that Christiana Trust was the beneficiary or that Wilmington became the beneficiary. The documents subject to judicial notice can serve as evidence in later proceedings, but they do not establish indisputably the legal status of the listed entities.
The trial court purported to "take judicial notice of the legal effect of [the documents'] language where that effect is clear," citing Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, but that case is distinct. In Poseidon, the plaintiff alleged it had assigned its interest in a deed of trust but claimed the assignment was only security and did not transfer its beneficial interest. (Id. at p. 1118.) The court took judicial notice of the legal effect of the document's language, which stated unequivocally that the plaintiff had assigned all its beneficial interest. (Ibid.)
Here, by contrast, the legal effect of the six judicially noticed assignments is not clear. Both parties claim that a number of the assignments are void but differ as to which. As to the fourth assignment, upon which Wilmington's arguments depend, Wilmington claims that Bank of America was the successor to BAC Home Loans's rights via merger, but Wilmington fails to establish this hearsay statement as fact. Wilmington offers no reason why the various entities recorded disconnected assignments or why the largely duplicative fifth assignment, recorded two years later, omits Bank of America as BAC Home Loans' successor by merger. Further complicating matters, Wilmington concedes that such assignments are often not recorded and, had the note been transferred, the deed of trust would have followed the note even without an assignment. (See Yvanova, supra, 62 Cal.4th at p. 942 [noting evidence that "the general practice in home loan securitization is to initially execute assignments of loans and mortgages or deeds of trust to the trustee in blank and not to record them; the mortgage or deed of trust is subsequently endorsed by the trustee and recorded if and when state law requires"]; Civ. Code, § 2936.) This suggests determining the true effect of the various assignments "would require the introduction of extrinsic evidence, which further indicates that the effect of the [assignment] is inappropriately determined upon demurrer." (Warren v. Atchison, T. &S. F. Ry. Co. (1971) 19 Cal.App.3d 24, 35.)
Under these circumstances, the trial court could not take judicial notice of the legal effect of the deed of trust and three select assignments to determine that Wilmington indisputably became the beneficiary of the deed of trust in 2016. Nor could the trial court properly infer Wilmington remained the beneficiary in 2018 when it substituted the trustee and when the substitute trustee initiated and held the foreclosure sale of the property. (See Mink v. Maccabee (2004) 121 Cal.App.4th 835, 839 ["a demurrer does not permit the trial court to make any factual findings at all, including 'implicit' ones"].) These are "matters of fact which are more appropriately determined from evidence, or at least detailed declarations in motions for . . . summary judgments, rather than allegations in a pleading." (Warren v. Atchison, T. &S. F. Ry. Co., supra, 19 Cal.App.3d at p. 33.)
B. Prejudice
Wilmington contends Miller has failed to allege prejudice because the original borrower had defaulted on the loan. We disagree.
At least one court has held that "[a] homeowner experiences prejudice or harm when an entity with no interest in the debt forecloses," essentially making the prejudice element redundant for this type of wrongful foreclosure. (Sciarratta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552, 565; see also Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280-281.) Other courts have required a plaintiff to "allege that the wrongful foreclosure interfered with his or her ability to pay on the debt or that the foreclosure otherwise would not have occurred." (Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 50.) We need not decide which rule applies because Miller's allegations meet all these requirements.
Miller alleged that he attempted to pay off the note secured by the property, but the loan servicers prevented him from doing so. Further, had Wilmington not been wrongfully holding itself out as the beneficiary of the deed of trust, Miller would have been able to identify the true beneficiary, pay off the note, and retain possession of the property. Miller has thus alleged the prejudice element of his wrongful foreclosure cause of action.
C. Tender
Wilmington contends Miller did not allege that he made the requisite tender and no exceptions to the tender requirement apply. We disagree.
"Where tendering is required and not excused, a plaintiff seeking to set aside an irregular sale must allege tender of the full amount of the loan to maintain any cause of action that either is based on the wrongful foreclosure allegations or seeks redress from that foreclosure." (Turner v. Seterus, Inc., supra, 27 Cal.App.5th at p. 525.) Courts have applied many equitable exceptions to this requirement, including two relevant here:" 'a tender may not be required if it would be "inequitable" to impose such a condition on the party challenging the sale'" and" 'tender is not required where the trustor's attack is based not on principles of equity but on the basis that the trustee's deed is void on its face.'" (Id. at p. 526.)
Miller alleges he is ready and willing to pay off the note secured by the property. Thus, Wilmington's contention that the complaint lacks any allegations of tender is inaccurate. Miller's allegations also invoke two of the exceptions to tender. It would be inequitable to require tender here when Miller attempted to pay off the outstanding balance of the note as soon as he obtained his interest in the property, but the loan servicers prevented him from doing so. (See Civ. Code, § 1511.) And Miller challenges the trustee's deed as void on its face, excusing him from the tender requirement.
Because Miller has adequately alleged facts that, if proven, would establish each element of his wrongful foreclosure cause of action, the trial court should have overruled Wilmington's demurrer to this cause of action.
IV
Quiet Title
The trial court did not specifically address Miller's quiet title cause of action, instead sustaining the demurrer based on its factual findings about the propriety of the foreclosure sale. We have already determined those factual findings were an improper basis for sustaining a demurrer, but we must affirm the judgment "if proper on any grounds stated in the demurrer, whether or not the court acted on that ground." (Carman v. Alvord (1982) 31 Cal.3d 318, 324.) We therefore consider Wilmington's contention that Miller failed to state a quiet title cause of action.
To state a quiet title cause of action, a plaintiff must file a verified complaint that alleges: (a) a description of the property; (b) plaintiff's title as to which a determination is sought; (c) the adverse claims to the title; (d) the date as to which the determination is sought; and (e) a prayer for the determination of title. (Code Civ. Proc., § 761.020.) Miller's allegations cover each of these requirements.
Wilmington makes three arguments for the insufficiency of Miller's allegations. Each lacks merit.
A. Miller's Title
Wilmington's first argument asks us to rely on the trial court's factual findings to determine that Miller's claim to title is inferior to Wilmington's claim. As explained above, the trial court could not properly make the necessary factual findings for such a determination in ruling on Wilmington's demurrer. Therefore, Miller has sufficiently alleged that he obtained his title in fee simple by grant deed-a deed that Wilmington included in its request for judicial notice.
B. Tender
Wilmington's second argument is that Miller failed to allege that he tendered repayment of the note on the property, and Wilmington contends this is an additional element of a quiet title cause of action. The statute lays out the requirements for a quiet title claim and does not mention that element. (Code Civ. Proc., § 761.020.) Some courts, however, have required such an allegation. (See, e.g., Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86-87.) Other courts have considered lack of tender to be an affirmative defense available to a mortgagee (see, e.g., Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477-478); have proceeded all the way to judgment and ordered payment of the debt, in addition to quieting title (see, e.g., Vanderkous v. Conley (2010) 188 Cal.App.4th 111, 120; Stein v. Simpson (1951) 37 Cal.2d 79, 87); or have not required such an allegation when the adverse interest is an allegedly void trustee's deed (see, e.g., Sciarratta v. U.S. Bank National Assn., supra, 247 Cal.App.4th at p. 568). We need not reconcile these cases because Miller has alleged that he has tendered repayment of the note, the beneficiary's agents refused his tender, and he remains ready and willing to pay off the note. These allegations are sufficient under even the strictest requirements in the case law.
C. Claim Preclusion
Wilmington's last argument is a request that we take judicial notice of a notice of appeal and an opinion from the unlawful detainer action between the parties and then a contention that the opinion bars Miller's quiet title claim. We take judicial notice of these documents, but we find Wilmington's argument forfeited and meritless.
Wilmington did not state this ground in its demurrer and did not raise this issue in the trial court. We cannot affirm the trial court's ruling on a ground not stated in the demurrer. (See Carman v. Alvord, supra, 31 Cal.3d at p. 324; Code Civ. Proc., § 430.60 ["A demurrer shall distinctly specify the grounds upon which any of the objections to the complaint . . . are taken. Unless it does so, it may be disregarded"]; see also Cornell v. Berkeley Tennis Club (2017) 18 Cal.App.5th 908, 944 [" 'A party may not for the first time on appeal change its theory of relief' "].)
In any event, the unlawful detainer judgment does not bar Miller's quiet title action. "[A] judgment in unlawful detainer usually has very limited res judicata effect and will not prevent one who is dispossessed from bringing a subsequent action to resolve questions of title." (Vella v. Hudgins (1977) 20 Cal.3d 251, 255.) An exception exists where the issues were fully and fairly litigated in the unlawful detainer action. (Id. at pp. 255-256.) But the opinion from the unlawful detainer action here shows that did not occur. Miller unsuccessfully sought a continuance the day before trial and did not appear at trial, so the appellate division determined only whether the trial court abused its discretion by denying the continuance. Nothing in that opinion precludes quieting title in this action.
DISPOSITION
The judgment is reversed. The case is remanded to the trial court with instructions to: (1) vacate its order sustaining Wilmington's demurrer to the first amended complaint in its entirety without leave to amend, and (2) enter a new order sustaining the demurrer to the cause of action for cancellation of instruments as beyond the scope of amendment authorized and overruling the demurrer to the causes of action for wrongful foreclosure and to quiet title. Plaintiff shall recover his costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
We concur: Duarte, Acting P. J., Boulware Eurie, J.