NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Monterey County Super. Ct. No. 16CV003679)
Plaintiffs, Petra Martinez and Stanley Atkinson, sued The Bank of New York Mellon and several related entities for wrongful foreclosure. The trial court sustained a demurrer to the complaint without leave to amend and entered judgment for defendants. Since the complaint does not allege facts sufficient to state a cause of action, we will affirm the judgment.
Plaintiffs are married and live in a house in Salinas. They obtained a loan in 2006 to refinance an existing mortgage on that property. Three years later, they received a notice of default and election to foreclose because of nonpayment on the loan. Plaintiffs sued The Bank of New York Mellon and a number of other parties alleged to be involved with the loan, the securitization of the loan, and the foreclosure.
"In simplified terms, 'securitization' is the process where (1) many loans are bundled together and transferred to a passive entity, such as a trust, and (2) the trust holds the loans and issues investment securities that are repaid from the mortgage payments made on the loans." (Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1082, fn. 1.) --------
Defendants demurred to the complaint, prompting plaintiffs to file the operative first amended complaint alleging a single cause of action for wrongful foreclosure based on "complete lack and want of standing." Plaintiffs' theory was essentially that defendants did not have authority to foreclose. To support that theory, the complaint alleged: the loan transaction was void because the bank never lent any "lawful 'money of account' "; the transaction was void because it was fraudulent; the transaction was void because in the securitization process the note was separated from the deed; plaintiffs exercised their right to rescind the loan under the federal Truth in Lending Act (15 U.S.C., § 1601, et. seq.); and the foreclosure violated a court order from a previous action.
Defendants demurred to the first amended complaint on the grounds that it failed to state a cause of action and that the allegations were uncertain and ambiguous. The trial court sustained the demurrer without leave to amend and entered judgment for defendants.
Our review of a trial court's decision sustaining a demurrer is de novo. (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031.) We independently review the complaint, assume its factual allegations to be true, and determine whether it states a cause of action under any legal theory. (Ibid.) As we do not defer to the trial court's reasoning, we will affirm the judgment if any of the grounds asserted for demurrer has merit, regardless of the ground relied on by the trial court. (Melton v. Boustred (2010) 183 Cal.App.4th 521, 528.)
To state a cause of action for wrongful foreclosure, the complaint must contain facts showing: (1) The trustee or mortgagee caused an illegal, fraudulent, or oppressive sale of property under a power of sale in a mortgage or deed of trust; (2) plaintiffs were harmed by the foreclosure; and (3) plaintiffs either tendered the amount owed or were excused from tendering. (Sciarratta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552, 562-563.) A mere technical violation in the foreclosure process will not give rise to a legal claim (Ibid.); however, a cause of action is stated if the foreclosing party is not entitled to foreclose in the first place. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 942-943 (Yvanova).)
As a threshold matter, we note the complaint does not allege a foreclosure sale has occurred (though counsel informed us at oral argument that the sale eventually did take place, long after judgment was entered and after briefing was completed on appeal). In Yvanova, the California Supreme Court expressly declined to decide whether, or under what circumstances, a borrower may bring an action for injunctive or declaratory relief to prevent a sale that has not yet taken place. (Yvanova, supra, 62 Cal.4th at p. 924 ["We hold only 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. 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."]) We note that other courts have concluded the holding of Yvanova is "expressly limited to the post-foreclosure context." (See Saterback v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 815.) But even assuming plaintiffs could maintain a viable action without alleging a completed sale, the facts in their complaint do not establish a lack of authority to foreclose.
Plaintiffs allege that the underlying loan transaction was void for want of consideration because they never received "any lawful [ ] 'money of account' of the United States of America." But consideration is not limited to currency. A valid contract is created when parties exchange promises that represent legal obligations. (Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 94.) In the context of a mortgage, the bank promises to fund the loan in exchange for the borrower's promise to make the monthly mortgage payments. (See Gillies v. JPMorgan Chase Bank, N.A. (2017) 7 Cal.App.5th 907, 909 ["A person who borrows money from a bank to purchase or refinance a home has a reasonable expectation that the bank will fund the loan. The bank has a reasonable expectation that monthly mortgage payments will be made."].) Plaintiffs do not allege that the bank failed to fund the loan; indeed, it appears from the complaint that the bank both promised to and did fund the loan, as plaintiffs were no longer subject to their previous mortgage. The fact that plaintiffs did not personally receive money in the course of the transaction does not make it void.
Plaintiffs also allege the transaction was fraudulent. But the complaint contains no facts regarding any alleged misrepresentations made regarding the loan and we are not required to accept the legal conclusion that it was the product of fraud. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 ["We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law."].) The only specific allegation plaintiffs make to support the fraud theory is that the foreclosing entity does not have possession of the original promissory note. Under California law, however, "nothing in the applicable statutes  precludes foreclosure when the foreclosing party does not possess the original promissory note." (Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433, 440~ (FDE/CLR/EMP)~.) So not having the original promissory note does not render the transaction void based on fraud or any other legal theory.
Plaintiffs further allege the mortgage is void because the deed of trust was separated from the promissory note during the securitization process. California law is clear though, that the deed of trust follows the associated promissory note even without a separate assignment. (Civ. Code, § 2936; Yvanova, supra, 62 Cal.4th at p. 927.) "Although the conveyance of the note may have been separated in time from the execution, recording, and physical transfer of the instrument reflecting the assignment of the deed of trust, that gap does not alter the legal fact that the deed of trust and the right to foreclose was, as a matter of law, transferred along with the note." (Yhudai v. IMPAC Funding Corp. (2016) 1 Cal.App.5th 1252, 1259, fn. 6.) So even if, as alleged, the deed of trust was separated from the note when the loan was assigned to another party, that fact is of no legal consequence and does not support a wrongful foreclosure cause of action.
Plaintiffs allege the foreclosure is wrongful because they exercised their right under the federal Truth in Lending Act to rescind the loan. The Truth in Lending Act "grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act's disclosure requirements. But this conditional right to rescind does not last forever. Even if a lender never makes the required disclosures, the 'right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first.' " (Jesinoski v. Countrywide Home Loans, Inc. (2015) ___ U.S. ___ , 135 S.Ct. 790, 792, citing 15 U.S.C., § 1635(f).) Here, plaintiffs allege they obtained the loan in January 2006, which marks the consummation of the transaction. They then allege they exercised the right of rescission on August 10, 2015. The complaint therefore discloses on its face that the purported rescission did not occur until well beyond the three-year deadline imposed by the statute.
The final basis for wrongful foreclosure alleged in the complaint is that the foreclosure violates a court order from a previous action between the parties. Plaintiffs also suggest in the complaint that the doctrine of res judicata bars defendants from foreclosing. The complaint describes the order in question only as a dismissal with prejudice of an earlier lawsuit entered in July 2011.
Dismissal of an action with prejudice can potentially give rise to issue preclusion, a rule similar to res judicata which prevents litigation of issues that could have been raised in a previous lawsuit. (Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 820). Issue preclusion only applies, however, when: (1) there is a final adjudication; (2) of an identical issue; (3) actually litigated and necessarily decided in the first suit; and (4) the party against whom the doctrine is asserted was a party to the first suit. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825.) As plaintiffs have not pleaded facts showing those elements, issue preclusion does not provide a basis for their wrongful foreclosure cause of action.
Even taken as true, the allegations in the first amended complaint do not state a cause of action for wrongful foreclosure. For that reason, the trial court properly sustained the demurrer. Further, because plaintiffs have not shown how they could amend the complaint to allege a viable cause of action, it was not an abuse of discretion to sustain the demurrer without leave to amend. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 890 [It is the plaintiff's burden to show what facts could be pleaded to state a cause of action; "to meet this burden, a plaintiff must submit a proposed amended complaint or, on appeal, enumerate the facts and demonstrate how those facts establish a cause of action."].)
The judgment is affirmed. Respondents are awarded costs on appeal.
Greenwood, P. J. /s/_________