Opinion
E063421
07-06-2018
CHARLIE OREA et al., Plaintiffs and Appellants, v. JPMORGAN CHASE BANK, N.A. et al., Defendants and Respondents.
Charlie Orea, in pro. per., and Brenda Orea, in pro. per., for Plaintiffs and Appellants. Bryan Cave, Glenn J. Plattner, and Richard P. Steelman, Jr., for Defendants and Respondents JPMorgan Chase Bank, N.A., JPMorgan Chase & Co., and Wells Fargo Bank, N.A. Reed Smith and Kasey J. Curtis for Defendant and Respondent Bank of America, N.A. Houser & Allison, Eric D. Houser, Joshua R. Mino, and Emilie K. Edling for Defendants and Respondents Deutsche Bank National Trust Company, Ocwen Loan Servicing, LLC, and Mortgage Electronic Registration Systems, Inc.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVRS1307416) OPINION APPEAL from the Superior Court of San Bernardino County. Gilbert G. Ochoa, Judge. Affirmed. Charlie Orea, in pro. per., and Brenda Orea, in pro. per., for Plaintiffs and Appellants. Bryan Cave, Glenn J. Plattner, and Richard P. Steelman, Jr., for Defendants and Respondents JPMorgan Chase Bank, N.A., JPMorgan Chase & Co., and Wells Fargo Bank, N.A. Reed Smith and Kasey J. Curtis for Defendant and Respondent Bank of America, N.A. Houser & Allison, Eric D. Houser, Joshua R. Mino, and Emilie K. Edling for Defendants and Respondents Deutsche Bank National Trust Company, Ocwen Loan Servicing, LLC, and Mortgage Electronic Registration Systems, Inc.
I. INTRODUCTION
Plaintiffs and appellants, Charlie Orea and Brenda Orea (the Oreas or plaintiffs), sued their home mortgage lender and other defendants, alleging a single cause of action for quiet title. The trial court sustained respondents' general demurrers to plaintiffs' first amended complaint (FAC), without leave to amend, and entered judgments of dismissal in favor of each respondent.
There are six respondents: Wells Fargo Bank, N.A., as Trustee for the Certificateholders of Structured Asset Mortgage Investments II Inc., Greenpoint MTA Trust 2006-AR2, Mortgage Pass-Through Certificates, Series 2006-AR2 (WFB as Trustee), Bank of America, N.A., Deutsche Bank National Trust Company, not individually but solely as indenture trustee for the holders of GSR Trust 2005-HEL1, Mortgage-Backed Notes, Series 2005-HEL1 (Deutsche Bank as Trustee), JPMorgan Chase Bank, N.A. and JPMorgan Chase & Co. (collectively the Chase Entities), Mortgage Electronic Registration Systems, Inc. (MERS), and Ocwen Loan Servicing, LLC (Ocwen). Plaintiffs also named GreenPoint Mortgage Funding, Inc., and several other parties, as defendants in the FAC, but none of these defendants are parties to this appeal.
Plaintiffs claim respondents' demurrers were erroneously sustained. They also claim the court erroneously set aside defaults to the FAC entered against several of respondents, and that the trial court and clerk engaged in "judicial misconduct and fraud." We conclude the demurrers were properly sustained without leave to amend, the defaults were properly set aside, and the record utterly fails to support plaintiffs' claims of judicial misconduct and fraud. Accordingly, we affirm the judgments.
II. FACTUAL BACKGROUND
A. Plaintiffs' $799,200 Loan and $99,900 Home Equity Line of Credit (HELOC)
On October 24, 2005, plaintiffs obtained a home mortgage loan in the amount of $799,200 secured by a deed of trust (the First DOT) on plaintiffs' Rancho Cucamonga residence. On the same date, plaintiffs obtained a HELOC in the amount of $99,900, secured by a second deed of trust (the Second DOT) on plaintiffs' Rancho Cucamonga residence. The First and Second DOTs identified plaintiffs as the borrowers, GreenPoint Mortgage Funding, Inc. as the lender, Marin Conveyancing Corp. as the trustee, and MERS as the beneficiary and the nominee for the lender and the lender's successors and assigns.
The "'MERS System'" is "a method devised by the banking industry to facilitate the securitization of real property debt instruments." (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 267 (Fontenot), disapproved on another ground in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939, fn. 13 (Yvanova).) "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 . . . 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, at p. 267.)
In June 2007, MERS executed a substitution of trustee, naming Quality Loan Service Corporation (Quality Loan) as the trustee under the First DOT. Also in June 2007, Quality Loan executed and recorded a notice of default, showing plaintiffs were $11,549.96 in arears on the First DOT.
The substitution of trustee in favor of Quality Loan was recorded in June 2009.
In October 2013, Quality Loan recorded a second notice of default, showing plaintiffs were $261,750.26 in arrears on the First DOT. Quality Loan recorded three notices of trustee's sale under the First DOT—in June 2009, November 2010, and January 2014. The January 2014 notice of trustee's sale showed the unpaid balance and charges secured by the First DOT totaled $1,143,545.66.
In February 2010, MERS assigned the beneficial interest under the First DOT to WFB as Trustee. In June 2012, MERS assigned the beneficial interest under the Second DOT to Deutsche Bank as Trustee. The record indicates that, when the beneficial interest under the Second DOT was assigned to Deutsche Bank as Trustee, Bank of America, N.A. was servicing the HELOC secured by the Second DOT, and Ocwen later became the servicer for the HELOC. The record also indicates that the Chase Entities, or one of them, serviced the First DOT. B. Procedural History
In October 2013, plaintiffs filed their original complaint in this action, alleging causes of action for quiet title, declaratory relief, and injunctive relief, and seeking to enjoin all foreclosure efforts and to quiet title to the property against the First and Second DOTs. The court sustained general demurrers to the original complaint, with leave to amend.
On June 30, 2014, plaintiffs filed the FAC, alleging a single cause of action for quiet title. Each respondent generally demurred to the FAC, the court sustained the demurrers without leave to amend, and entered judgments dismissing the FAC, with prejudice, in favor of each respondent.
In ruling on the demurrers, the trial court properly took judicial notice of the following recorded instruments: The First and Second DOTs, the assignment of the First DOT to WFB as Trustee, the assignment of the Second DOT to Deutsche Bank as Trustee, and the substitution of Quality Loan in place of Marin Conveyancing Corp. as trustee under the First DOT. (Evid. Code, §§ 452, subds. (c), (h), 453; Yvanova, supra, 62 Cal.4th at p. 924, fn. 1.) Thus, this court is required to take judicial notice of the instruments, their existence and factual contents, but not disputed or disputable facts stated therein. (Evid. Code, § 459, subd. (a); Yvanova, supra, at p. 924, fn. 1.)
III. DISCUSSION
A. Respondents' Demurrers Were Properly Sustained Without Leave to Amend
1. Standard of Review
On appeal from a judgment of dismissal following an order sustaining a general demurrer to a complaint without leave to amend, we independently determine whether the complaint states a cause of action as a matter of law. (Yhudai v. IMPAC Funding Corp. (2016) 1 Cal.App.5th 1252, 1255.) In determining whether the complaint states a cause of action, we treat the demurrer as admitting all properly pleaded material facts, but not contentions, deductions or conclusions of fact or law, and we also consider judicially noticeable matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
The trial court's decision to grant or deny leave to amend involves the trial court's discretion, which we review on appeal for an abuse of discretion. (Ellena v. Department of Ins. (2014) 230 Cal.App.4th 198, 204-205; Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) Our task is to determine whether there is a reasonable possibility the plaintiff can cure any factual deficiencies in the complaint by amendment. If so, the trial court has abused its discretion in sustaining the demurrer without leave to amend, and we reverse; if not, there has been no abuse of discretion and we affirm. (Blank v. Kirwan, supra, at p. 318.) The plaintiff has the burden of proving such reasonable possibility. (Ibid.)
2. The FAC Does Not Sufficiently Allege a Cause of Action for Quiet Title
The FAC is verified and alleges a single cause of action for quiet title. That is, the FAC seeks to quiet title to the Rancho Cucamonga property in favor of plaintiffs and over each defendant's alleged adverse claims to plaintiffs' title. (Code Civ. Proc., § 760.010 et seq.) A complaint for quiet title must be verified and allege, among other things, "[t]he title of the plaintiff as to which determination under this chapter is sought and the basis of the title" and "[t]he adverse claims to the title of the plaintiff against which a determination is sought." (Code Civ. Proc., § 761.020, subds. (b), (c), italics added.)
In February 2012, plaintiffs assigned their interest in the property to "the Kali Trust," but plaintiffs filed the FAC for quiet title in their individual names. Plaintiffs claim they are the sole beneficiaries of the Kali Trust. Thus, for ease of reference, we treat plaintiffs as the title holders of the property.
The FAC alleges that the First and Second DOTs constitute the "adverse claims" to the Rancho Cucamonga property over which plaintiffs' seek to quiet their "superior title." The FAC does not allege that any of the defendants (including respondents) claim an adverse title interest in the property other than pursuant to the First or the Second DOT. Thus, plaintiffs' cause of action for quiet title against each defendant, including each respondent, turns on whether plaintiffs' title is superior to any title interest that may be asserted under the First and Second DOTs.
In order to establish that plaintiffs have superior title over the First and Second DOTs, the FAC must allege plaintiffs "'are the rightful owners of the property, i.e., that they have satisfied their obligations under the Deed[s] of Trust.'" (Khan v. Citimortgage Inc. (E.D. Cal. 2013) 975 F.Supp.2d 1127, 1148.) The FAC nowhere alleges that plaintiffs have paid the amounts secured by the First and Second DOTs. Indeed, the FAC effectively concedes that plaintiffs have not paid the amounts secured. This is fatal to plaintiffs' quiet title cause of action against each defendant and respondent, including WFB as Trustee and Deutsche Bank as Trustee, the holders of the beneficial interests under the First and Second DOTs. (Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 820 (Mendoza) [the plaintiff in a quiet title action cannot demonstrate paramount title against holder of beneficial interest under deed of trust unless the plaintiff has paid the debt secured by the deed of trust].)
(a) Plaintiffs' Late Securitization and Robo-signing Theories Lack Merit
Plaintiffs claim that the First and Second DOTs are "void" and unenforceable, and must therefore be deemed satisfied or paid in full. To this end, the FAC alleges that MERS's 2010 and 2012 assignments of the beneficial interests under the First and Second DOTs to WFB as Trustee and to Deutsche Bank as Trustee, are void for three reasons: (1) under applicable New York law, the assignments are void because they were made after the closing dates of the investment trusts; (2) the lateness of the assignments violates federal tax law; and (3) the assignments were "fraudulently" executed by unauthorized persons or "robo-signers," and involved unauthorized notaries. As we explain, these claims are not new and are factually insufficient to show that the assignments are void. Thus, these claims are insufficient to support plaintiffs' claim of superior title over the First and Second DOTs, as a matter of law.
To begin with, under our Supreme Court's self-described "narrow" holding in Yvanova, a mortgage loan borrower can state a cause of action for wrongful foreclosure by alleging sufficient facts to show that a "void" assignment of the beneficial interest under the foreclosing deed of trust occurred before the foreclosure sale. (Yvanova, supra, 62 Cal.4th at p. 924; Mendoza, supra, 6 Cal.App.5th at pp. 809-811.) As the Yvanova court explained: "[O]nly the entity holding the beneficial interest under the [foreclosing] deed of trust—the original lender, its assignee, or an agent of one of these—may instruct the trustee to commence and complete a nonjudicial foreclosure. [Citations.] 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 [citations], the foreclosing entity has acted without legal authority by pursuing a trustee's sale, and such an unauthorized sale constitutes wrongful foreclosure." (Yvanova, supra, at p. 935.)
But as the Mendoza court explained, the assignment of the beneficial interest under a deed of trust to "a real estate mortgage investment conduit (REMIC) trust" after the trust's closing date—as the FAC alleges occurred when the First and Second DOTs were assigned to WFB as Trustee and to Deutsche Bank as Trustee—does not render the assignment void under applicable New York law, even though the late assignment violates the trust's pooling and service agreement and renders the trust ineligible for certain federal tax exemptions. (Mendoza, supra, 6 Cal.App.5th at pp. 811-819 [disagreeing with Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1094-1095]; Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814-815.) Likewise, the "fraudulent" execution of a deed of trust assignment by unauthorized persons, as the FAC alleges occurred with the assignments of the First and Second DOTs, does not render the assignment void. (Mendoza, supra, at p. 819.)
Rather, each of these circumstances render the assignment voidable at the option of the parties to the assignment, but not void. (Mendoza, supra, 6 Cal.App.5th at p. 819.) The borrower is not a party to the assignment, is not aggrieved by the defective assignment, and therefore lacks standing to challenge the voidable, defective assignment. (Saterbak v. JPMorgan Chase Bank, N.A., supra, 245 Cal.App.4th at p. 815 ["Yvanova recognizes borrower standing only where the defect in the assignment renders the assignment void, rather than voidable."].)
(b) Plaintiffs' "Note-splitting" Theory Lacks Merit
The FAC alleges only one additional factual basis to support its alleged cause of action for quiet title. The FAC alleges that MERS's assignments of the First and Second DOTs to WFB as Trustee and Deutsche Bank as Trustee are void, and plaintiffs are therefore excused from paying or tendering the amounts secured by deeds of trust, because the promissory notes secured by the deeds of trust were not assigned to WFB as Trustee and to Deutsche Bank as Trustee, along with the beneficial interests in the deeds of trust. This "note-splitting" theory also fails as a basis for plaintiffs' quiet title cause of action, as a matter of law.
The assignments are attached to the FAC, and we have taken judicial notice of the existence and contents of the assignments, but not of any "disputed or disputable facts" stated in the assignments. (Yvanova, supra, 62 Cal.4th at p. 924, fn. 1.) Each assignment states that MERS assigned the beneficial interests under each deed of trust, "together with" the "[p]romissory [n]ote" or "note[s]" secured by each deed of trust. The FAC alleges no facts to support its allegation that the notes were not assigned together with the deeds of trust. Thus, it is not reasonably subject to dispute that the notes were assigned together with the beneficial interests under the deeds of trust, as the assignments state. "A court may take judicial notice of something that cannot reasonably be controverted, even if it negates an express allegation of the pleading. [Citation.]" (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.) Thus, we may rely on the language of the assignments and disregard the FAC's unsupported contrary allegation. (Fontenot, supra, 198 Cal.App.4th at p. 271, fn. 10; Blank v. Kirwan, supra, 39 Cal.3d at p. 318 [unsupported conclusions of fact disregarded in determining whether complaint states cause of action].)
Furthermore, in Fontenot, the court rejected substantially the same note-splitting theory as a basis for challenging the authority of a beneficial interest holder to conduct a foreclosure sale. (Fontenot, supra, 198 Cal.App.4th at pp. 271-272.) Fontenot explained: "[I]t was not enough for plaintiff to allege that MERS's purported assignment of the note in the assignment of deed of trust was ineffective. Instead, plaintiff was required to allege that HSBC [the beneficial interest holder under the foreclosing deed of trust] did not receive a valid assignment of the debt in any manner. Plaintiff rests her argument on the documents in the public record, but assignments of debt, as opposed to assignments of the security interest incident to the debt, are commonly not recorded. The lender could readily have assigned the promissory note to HSBC in an unrecorded document that was not disclosed to plaintiff. To state a claim, plaintiff was required to allege not only that the purported MERS assignment was invalid, but also that HSBC did not receive an assignment of the debt in any other manner. There is no such allegation." (Ibid.)
In Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1506 (Herrera), disapproved on another ground in Yvanova, supra, 62 Cal.4th at page 93, footnote 13, this court adopted the Fontenot court's analysis in rejecting a substantially similar note-splitting theory. We do the same. The notes could have been assigned to WFB as Trustee and Deutsche Bank as Trustee by unrecorded instruments. The FAC does not allege this did not occur, and nothing in the record indicates that plaintiffs have any reasonable basis for alleging the notes were not assigned, at some point, to WFB as Trustee and Deutsche Bank as Trustee. (Code Civ. Proc., § 128.7, subd. (b)(3).)
(c) MERS Was Authorized to Accept and Assign the Beneficial Interests
Lastly, plaintiffs claim, for the first time on appeal, that the First and Second DOTs and MERS's assignments of the deeds of trust are void, because the California Secretary of State suspended MERS in 2002 and the Franchise Tax Board suspended MERS in 2010. This claim lacks merit for two reasons: "First, courts have routinely recognized that MERS's conduct in California is within the permissible scope for an unregistered foreign corporation, and thus is not governed by [Revenue and Taxation Code] § 23304.1. See, e.g., Casteneda v. Saxon Morg. Servs. [E.D. Cal. 2009] 687 F.Supp.2d 1191, 1105, n.3 (rejecting assertion that MERS is not qualified to do business in California). Second, even if MERS's conduct fell within the scope of [Revenue and Taxation Code] § 23304.1, MERS registered with California's Secretary of State on July 21, 2010, and therefore is 'entitled to have its prior transactions given full effect.'" (Wallace v. Mortg. Elec. Registration Sys. (C.D. Cal. Jan 11, 2012, CV 11-8039 ODW (MRWx)) 2012 U.S.Dist. Lexis 3977 [at *9-10].) MERS's assumption of the beneficial interests under the First and Second DOTs in 2005, and its assignments of the First and Second DOTs in 2010 and 2012, are not void.
3. The FAC Cannot Be Amended to State Any Cause of Action
In sum, the allegations of the FAC are insufficient to show that MERS's 2010 and 2012 assignments of the beneficial interests under the First and Second DOTs to WFB as Trustee and to Deutsche Bank as Trustee are void, and plaintiffs are therefore excused from paying the amounts secured by the deeds of trust. The FAC thus fails to state a cause of action for quiet title against any of respondents.
We observe that the FAC's allegations are also insufficient to state a cause of action for wrongful foreclosure—in the event WFB as Trustee, or its agent, forecloses on the Rancho Cucamonga property pursuant to the First DOT. On November 3, 2017, this court denied plaintiffs' petition for a writ of supersedeas, in which plaintiffs sought to enjoin WFB as Trustee and the Chase Entities from proceeding with a foreclosure sale of the property on November 6, 2017, pursuant to the First DOT. The record does not indicate whether the foreclosure sale has occurred.
Plaintiffs have also not demonstrated a reasonable possibility that the FAC can be amended to state a cause of action for quiet title, or any other cause of action, against any of respondents. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) No potentially effective amendment, consistent with plaintiffs' theory that the assignments of the deeds of trust are void, is apparent on appeal. In the trial court, plaintiffs did not state any new facts indicating they could successfully amend the FAC to state any cause of action. (See Herrera, supra, 205 Cal.App.4th 1495 at p. 1501.) B. The Defaults Were Properly Set Aside
Plaintiffs claim, for the first time on appeal, that the FAC is sufficient to support a claim that their obligations under the First and Second DOTs are excused based on the Truth in Lending Act (the TILA). The FAC does not mention the TILA, either as a basis for rescinding plaintiffs' obligations under the deeds of trust or otherwise, and plaintiffs did not claim in the trial court they could allege any new facts which could support such a claim. Thus, plaintiffs' TILA claim is not properly before us. (Herrera, supra, 205 Cal.App.4th at p. 1506 ["[T]his court will not rewrite the complaint based on new facts raised for the first time on appeal."].) It is therefore unnecessary to address the claims of WFB as Trustee and the Chase Entities that plaintiffs' TILA claim is res judicata because it has been adjudicated against plaintiffs in federal court, and that the TILA claim otherwise fails as a matter of law.
After the FAC was filed, but before the demurrers to the FAC were sustained, the clerk entered the defaults of several of respondents, namely, the Chase Entities, Deutsche Bank as Trustee, and Ocwen.
Plaintiffs claim these respondents' defaults were improperly set aside, and as a result these respondents' demurrers to the FAC were erroneously sustained. We disagree. "'"A motion seeking [relief from default] lies within the sound discretion of the trial court, and the trial court's decision will not be overturned absent an abuse of discretion. [Citations.]"'" (Behm v. Clear View Technologies (2015) 241 Cal.App.4th 1, 8.) Plaintiffs do not explain how the trial court abused its discretion or otherwise erred in setting aside any of the defaults.
Additionally, the record shows that the defaults against the Chase Entities were mistakenly entered by the clerk before the Chase Entities' time to respond to the FAC had expired, and the default against Ocwen was mistakenly entered by the clerk after Ocwen had timely filed its demurrer to the FAC. Thus, these defaults were void and were properly set aside. (Bae v. T.D. Service Co. of Arizona (2016) 245 Cal.App.4th 89, 97-99; Bristol Convalescent Hospital v. Stone (1968) 258 Cal.App.2d 848, 862.)
The record also shows that the default against Deutsche Bank as Trustee was properly set aside on the ground it was taken by "mistake, inadvertence, surprise, or excusable neglect." (Code Civ. Proc., § 473, subd. (b).) The FAC was served at this respondent's New York address, rather than at its principal place of business in Santa Ana, California. Plaintiffs did not oppose the motion to set aside this default, and have therefore forfeited their claim that this default was erroneously set aside. (In re Alexandria P. (2014) 228 Cal.App.4th 1322, 1346 ["A claim of error is forfeited on appeal if it is not raised in the trial court."].) C. The Record Does Not Support Plaintiffs' Claims of Judicial Misconduct or Fraud
Plaintiffs extensively argue the trial court and clerk of court engaged in "judicial misconduct" and "fraud" throughout these proceedings, including in setting aside the defaults to the FAC and in ruling on the demurrers. These claims are utterly unsupported by any evidence in the record, and are therefore rejected. (Vaughn v. Jonas (1948) 31 Cal.2d 586, 601 ["The burden is on the appellant in every case affirmatively to show error and to show further that the error is prejudicial . . . ."].)
IV. DISPOSITION
The judgments are affirmed. Respondents shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278.)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
FIELDS
J. We concur: MILLER
Acting P. J. CODRINGTON
J.