Case Name: Tang v. JPMorgan Chase Bank, et al.
Case No.: 17-CV-307324

This is a wrongful foreclosure action initiated by plaintiff Vincent Tang (“Plaintiff”) against defendants JPMorgan Chase Bank (“JPMorgan”), Quality Loan Service Corporation (“QLS”), Deborah Brignac (“Brignac”), U.S. Bank, N.A. (“U.S. Bank”), Select Portfolio Servicing (“SPS”), Orchid Terrace Inc., Monte Vista Oaks, Inc., Monte Vista Oaks DB Plan, and KIP Dream Homes.

According to the operative second amended complaint (“SAC”), Plaintiff owns property located at 2739 Clover Meadow Court, San Jose, CA (“Subject Property”). (SAC, ¶ 2.) On June 27, 2005, Plaintiff obtained a loan from Washington Mutual Bank (“WaMu”) in the amount of $825,000.00 and secured the loan by a deed of trust (“DOT”) on the Subject Property. (Id. at ¶ 42.) The DOT and promissory note (“Note”) named WaMu as the beneficiary and California Reconveyance Company (“CRC”) as the trustee. (Id. at ¶ 43.) On October 2, 2008, JPMorgan purchased WaMu as a result of a receivership ordered by the Federal Deposit Insurance Corporation (“FDIC”). (Id. at ¶ 44.)

On March 1, 2010, CRC recorded a notice of default on the Subject Property (“NOD”). (SAC, ¶ 45.) That same day, an assignment of the DOT (“ADOT”) to Bank of America (“BANA”), as successor by merger to LaSalle Bank NA and as trustee to the WaMu Mortgage Pass-Through Certificate Series 2005-AR19 (“WaMu AR19”), was recorded. (Id. at ¶ 47.) The ADOT is void because its executor, Brignac, represented she signed it “under the authority of being a Vice President of [JPMorgan],” she but never held that position. (Id. at ¶ 50.) Instead, she was a foreclosure specialist and supervisor for CRC. (Ibid.) The ADOT is additionally void because it purported to transfer the DOT into WaMu AR19 on or about February 26, 2010, almost five years after the pool had closed. (Id. at ¶ 52.)

Thereafter, U.S. Bank, through SPS, substituted ALAW as trustee (“SOT1”). (SAC, ¶¶ 56-57.) There is no recorded document transferring interest to U.S. Bank. (Ibid.) The SOT1 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note at that time, and therefore had no interest to assign. (Ibid.) Two years later, QLS was substituted as trustee (“SOT2”). (Id. at ¶ 58.) The SOT2 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note at that time. (Id. at ¶ 59.) QLS then recorded three notices of trustee sale on March 24, 2016, June 14, 2016, and November 1, 2016 (“Three NOTS”). (Id. at ¶ 60.)

QLS subsequently sold the Subject Property to Orchid Terrace, Inc., Monte Vista Oaks Inc., Monte Visa Oaks DB Plan, and KIP Dream Homes at a foreclosure action. (SAC, ¶ 62.) Their status as bona fide purchasers is “void and voidable at the option of the Plaintiff” because they do not have certificates of qualification as required for foreign business entities and are not registered with the California Secretary of State. (Id. at ¶ 63.) After the sale, a trustee’s deed upon sale (“TDUS”) was recorded, which is also void because “defendants” did not have the lawful authority to foreclose. (Id. at ¶¶ 64-65.)

Plaintiff asserts causes of action for: (1) declaratory judgment; (2) “statutory violations;” (4) unlawful foreclosure; (5) slander of title; (6) cancellation of instruments; and (7) unfair business practices.

SPS and U.S. Bank (“Defendants”) presently demur to the SAC on the ground of failure to state sufficient facts to constitute a cause of action.

Defendants argue Plaintiff fails to state a claim relative to all causes of action on the basis of standing and asserts specific arguments applicable to individual causes of action. The Court will first address standing.

As a preliminary matter, the Court previously sustained JPMorgan’s demurrers to the complaint and the first amended complaint. Those pleadings asserted five causes of action for “statutory violations,” unlawful foreclosure, slander of title, cancellation of instruments, and unfair business practices. Although the prior orders did not permit Plaintiff to amend the pleading to include a new cause of action, he asserts a declaratory relief cause of action for the first time in the SAC.

“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” (Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023, internal citations omitted.) A court may, in its discretion, strike new causes of action when they are not drawn in conformity with its prior order. (See Code Civ. Proc., § 436, subd. (b); Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528 [“[Section 436] is commonly invoked to challenge pleadings filed in violation of a deadline, court order, or requirement of prior leave of court”].) As Plaintiff did not seek permission to include the declaratory relief cause of action, the first cause of action of the SAC is hereby stricken. It is therefore unnecessary to discuss the merits of the demurrer relative to the first cause of action.

I. Standing

There appear to be two allegations forming the basis for Plaintiff’s standing to initiate this action. First, the ADOT is void based on Brignac’s lack of authority to execute it. Second, the ADOT is void because the DOT was not timely assigned into WaMu AR19.
Defendants argue Plaintiff does not have standing under either theory.

“Standing is a threshold issue, because without it no justiciable controversy exists. Standing goes to the existence of a cause of action. Pursuant to Code of Civil Procedure section 367, ‘[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.’” (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 813 (“Saterbak”), internal citations and quotation marks omitted.) A plaintiff who initiates a post-foreclosure action has standing to challenge the validity of an assignment if it is void. (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 943 (“Yvanova”).) The difference between void and voidable is crucial for the discussion of standing as “[a] void contract is without legal effect” and may not be ratified by the parties, while a voidable contract is still subject to ratification by the parties. (Id. at pp. 929-930.) Thus, while a plaintiff has standing to challenge a void assignment, he or she lacks standing to challenge one that is merely voidable. (Saterbak, supra, 245 Cal.App.4th at p. 815.) To plead an assignment is void, a plaintiff may not simply allege as much as a conclusion; rather, he or she must allege a factual basis supporting the conclusion. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1156.)

First, Plaintiff alleges Brignac’s recording of the ADOT was fraudulent because she executed it “under the authority of being a Vice President of Defendant,” however, she never held that position. (SAC, ¶ 50.) Plaintiff pleads Brignac was actually a foreclosure specialist and supervisor for the California Reconveyance Company. (Ibid.)

This allegation fails to confer standing on Plaintiff; allegations that a written instrument is void because the signatory was allegedly employed by another entity are insufficient to invalidate the instrument. (See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 46; see also Rahbarian v. JP Morgan Chase (E.D. Cal., Nov. 10, 2014, No. 2:14-CV-01488 JAM) 2014 WL 5823103, at *8 [“The mere fact that Derborah [sic] Brignac was not an employee of JPMorgan and Colleen Irby was not an employee of CRC does not give rise to a reasonable inference that they did not have the authority to sign documents on behalf of those companies.”].) Being an employee of one entity does not necessarily disqualify a signatory from being authorized on behalf of another entity to sign on its behalf. (Mendoza, supra, 6 Cal.App.5th at p. 819.) Moreover, contrary to Plaintiff’s arguments, the emphasis of his allegations is on Brignac’s employment, not her lack of authority to execute the ADOT. (See SAC, ¶ 50.) Plaintiff does not actually allege she was not authorized to execute the ADOT.

The allegations are additionally insufficient to confer standing because where a plaintiff alleges that a document is void due to the signatory’s lack of authority to execute the document, yet does not contest the validity of the underlying debt, the plaintiff lacks standing to contest the assignment. (Pratap v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 63 F.Supp.3d 1101, 1109.) Further, it is well-established that these allegations render an assignment only voidable, not void. (Javaheri v. JPMorgan Chase Bank, N.A. (C.D. Cal., Aug. 13, 2012, No. 2:10-CV-08185-ODW) 2012 WL 3426278, at *6.) Because the ADOT would only be voidable, Plaintiff lacks standing to challenge Defendants’ authority based on Brignac’s execution of the document.

Next, Plaintiff alleges the ADOT is void because the DOT was transferred into WaMu AR19 on or about February 26, 2010, almost five years after the pool had closed. (SAC, ¶ 52.) Defendants also contend Plaintiff lacks standing to challenge the transfer to the pool because a defect in the securitization only renders the assignment voidable and not void. This argument is well-taken. Plaintiff does not address this argument in opposition, tacitly conceding its merit. A defect in the securitization process only renders the assignment voidable, not void. (See Saterbak, supra, 245 Cal.App.4th at p. 815.) Because a plaintiff does not have standing to challenge an assignment that is merely voidable, Plaintiff lacks standing here to the extent the action is predicated on the transfer of the DOT into the pool.

Plaintiff does not advance any arguments supporting the conclusion that he has standing to sue. Plaintiff asserts he has standing pursuant to paragraph 22 of the DOT. Paragraph 22 of the DOT states Plaintiff shall have the right to bring a court action to assert the non-existence of a default or any other defense to the sale. Plaintiff insists the DOT is essentially a contract and should be governed by contract law and not foreclosure statutes. Paragraph 22 does not purport to grant Plaintiff standing in any context to initiate an action; it states that prior to “acceleration,” the lender must provide Plaintiff with written notice of certain information, including that he has “the right to bring a court action to assert the non-existence of a default or any other defense . . . to acceleration and sale.” Insuring Plaintiff is informed of his ability to initiate an action does not automatically confer standing on him. (See Saterbak, supra, 245 Cal.App.4th at p. 816 [stating similar “provisions do not change [a plaintiff’s] standing obligations under California law”]; see also Yhudai v. Impac Funding Corporation (2016) 1 Cal.App.5th 1252, 1260.) As such, paragraph 22 of the DOT does not confer standing on Plaintiff.

In sum, Plaintiff lacks standing to assert each cause of action to the extent they are predicated on Brignac’s lack of authority, the assignment of the DOT into the pool, and the language of paragraph 22 of the DOT.

II. Arguments Applicable to Individual Causes of Action

A. Second Cause of Action – Statutory Violations

Plaintiff pleads Defendants violated Civil Code sections 2924.17, subdivision (b) (“Section 2924.17(b)”) and 2924f, subdivision (b)(1) (“Section 2924f(b)(1)”), which are provisions of the Homeowner Bill of Rights (“HBOR”), as well as Penal Code sections 115, subdivision (a) (“Section 115(a)”) and 115.5, subdivision (a) (“Section 115.5(a)”). The violations of these statutes are predicated on defects in the NOD, ADOT, SOT 1, SOT 2, Three NOTS, and TDUS.

First, Defendants maintain Plaintiff fails to allege a violation of Section 2924.17, which “place[s] a burden on the foreclosing party to file a declaration with the notice of default, and provide[s] requirements for the lender’s diligence prior to filing that declaration.” (Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 163.) Subdivision (b) of that statute requires that, prior to recording or filing any foreclosure-related documents, “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.” (Civ. Code, § 2924.17, subd. (b).) Specific to this provision, Plaintiff alleges Defendants foreclosed upon the Subject Property without reviewing competent and reliable information. (SAC, ¶ 88.) Defendants insist the allegation is inadequate because it is conclusory and without detail.
This argument has merit. Statutory claims must be pleaded with particularity. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 783.) This requires plaintiffs to “set forth facts in his [or her] complaint sufficiently detailed and specific to support an inference that each of the statutory elements of liability is satisfied” because “[g]eneral allegations are regarded as inadequate.” (Mittenhuber v. City of Redondo Beach (1983) 142 Cal.App.3d 1, 5.) Plaintiff fails to meet this standard. Plaintiff only pleads the legal conclusion that Defendants failed to review the proper material. There are no detailed allegations relating to Defendants’ review of material reflecting Plaintiff’s loan status and how that review was inadequate.

Next, Section 2924f(b)(1) provides that prior to the sale of property pursuant to the power of sale contained in any deed of trust or mortgage, “notice of the sale thereof shall be given by posting a written notice of the time of sale and of the street address and the specific place at the street address where the sale will be held, and describing the property to be sold, at least 20 days before the date of sale in one public place in the city where the property is to be sold, if the property is to be sold in a city, or, if not, then in one public place in the county seat of the county where the property is to be sold, and publishing a copy once a week for three consecutive calendar weeks.” Defendants aptly argue Plaintiff fails to allege any violation of this statute with particularity. Plaintiffs fail to specify the inaccuracies of any of the Three NOTS. (SAC, ¶ 90.)

In addition, Defendants argue Plaintiff fails to allege any material violations of Section 2924.17. Defendants do not indicate where the materiality requirement is found. Presumably, Defendants rely on Civil Code section 2924.12, which provides that a plaintiff may only bring an action based on certain enumerated Civil Code provisions if the violation is material. However, Section 2924.12 does not specifically identify Section 2924f(b)(1) as a provision whose violation must be material. As such, Defendants’ argument lacks merit.
Turning to the alleged violations of the Penal Code, Defendants aptly assert Plaintiff does not state a claim for a violation of Sections 115(a) and 115.5(a) because he has no standing to enforce criminal statutes. “Generally, criminal statutes do not confer private rights of action, and thus any party asserting such a private right bears the burden of establishing its existence.” (Grajeda v. Bank of America, N.A. (S.D. Cal., June 10, 2013, No. 12-CV-1716- IEG NLS) 2013 WL 2481548, at *2 [dismissing claim under Section 115(a) in a wrongful foreclosure case because the plaintiff provided no authority supporting contention a private right of action exists].) Courts have otherwise held Section 115 does not provide citizens with a private right of action. (Patino v. Franklin Credit Management Corporation (N.D. Cal., Aug. 29, 2016, No. 16-CV-02695-LB) 2016 WL 4549001, at *3.) As such, Plaintiff fails to state a claim for violations of Sections 115(a) and 115.5(a).

As the second cause of action fails to allege facts supporting any statutory violation or that Plaintiff has standing to assert this claim, the demurrer to this cause of action is sustained.

B. Third Cause of Action – Unlawful Foreclosure

Plaintiff alleges Defendants wrongfully foreclosed on the Subject Property because the DOT and Note were improperly moved into WaMu AR19 and Brignac fraudulently executed the ADOT. (SAC, ¶¶ 99-101.) As a result, the subsequently executed documents are void. (Id. at ¶ 101.)

Defendants contend Plaintiff fails to plead he tendered the sum of indebtedness. This argument has merit. A general rule, a debtor cannot set aside a foreclosure without also alleging he or she paid the secured debt before the action is commenced. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112; Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86-87.) This is often referred to as the “tender rule.” (See Lona v. Citibank, N.A., supra, 202 Cal.App.4th at p. 115.) Here, Plaintiff does not allege he tendered the amount due on his loan or made an offer to do so. Instead, he insists the tender rule is inapplicable because he alleges the documents initiating the foreclosure are void. Tender is not required where “the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face.” (Id. at pp. 112-113.) As discussed above, even assuming he adequately alleges Brignac lacked authority and the securitization was defective, these defects only render the ADOT voidable, not void. Therefore, the exception to the tender rule is inapplicable and Plaintiff is required to plead he tendered the amount due.

Plaintiff’s argument in opposition does not support a different conclusion. Plaintiff asserts that, under Yvanova, a borrower is not required to plead compliance with the tender rule. Yvanova, however, does not stand for that proposition. On the issue of tender, the California Supreme Court noted that tender is excused when the underlying deed of trust is void, and then stated it “[e]xpress[es] no opinion as to whether [the] plaintiff . . . must allege tender to state a cause of action for wrongful foreclosure under the circumstances of this case.” (Yvanova, supra, 62 Cal.4th at p. 929, fn. 4.) Thus, Yvanova reiterated the above-stated law, and then explicitly declined to rule on that point. Consequently, Yvanova does not stand for the proposition that Plaintiff is excused from pleading he tendered the amount due.

Accordingly, the demurrer to the third cause of action is sustained on the bases Plaintiff failed to plead he tendered the amount due and lacks standing.

C. Fourth Cause of Action – Slander of Title

Plaintiff alleges the DOT and Note were “improperly moved” into WaMu AR19 and Brignac fraudulently executed the ADOT. (SAC, ¶¶ 109, 11.) As a result, all subsequently executed documents, including the NOD, SOT1, SOT2, Three NOTS, and TDUS, are void. (Id. at ¶ 111.)
It is clear based on Defendants’ arguments and the Court’s prior orders relative to the complaint and the first amended complaint that this cause of action has no merit. However, this cause of action is expressly only directed to QLS and JPMorgan; it is not asserted against either U.S. Bank or SPS. As such, Defendants may not properly challenge the adequacy of this cause of action by demurrer. This ruling is not a reflection of the sufficiency of Plaintiff’s allegations. To the extent Plaintiff wants to add these parties to this cause of action, it is not allowed without prior court order.

D. Fifth Cause of Action – Cancellation of Instruments

Plaintiff seeks a judicial determination that the DOT was illegally and improperly moved into WaMu AR19 and the transfer was void. (SAC, ¶ 120.) Plaintiff additionally seeks to have the ADOT declared null and void because it was fraudulently executed. (Id. at ¶ 121.) Last, Plaintiff seeks to have the subsequently executed documents, including the NOD, SOT1, SOT2, Three NOTS, and TDUS, declared null and void as they are fruit of the poisonous tree. (Id. at ¶¶ 122-123.)

Defendants contend Plaintiff fails to state a claim for cancellation of instruments because he does not allege the element that there is a reasonable apprehension of serious injury due to the written instrument. (See Civ. Code, § 3412; see Saterbak, supra, 245 Cal.App.4th at p. 819 [elements of cancellation of instruments claim].) According to Defendants, Plaintiff cannot plead he suffered a serious injury because he alleges he defaulted on his mortgage and does not allege he cured that debt. This argument is well-taken. When a purportedly defective assignment does not alter the plaintiff’s payment obligations, he or she has not suffered serious injury. (Saterbak, supra, 245 Cal.App.4th at p. 819.) Even when the subject assignment is invalid, “it could not ‘cause serious injury’ under the statute because [the] obligations on the Note remained unchanged.” (Ibid., quoting Civ. Code, § 3412, original italics.) As Plaintiff does not dispute he defaulted on the loan or that he satisfied his debt, he fails to allege there is a reasonable apprehension of serious injury.

Therefore, the demurrer to the fifth cause of action for cancellation of instruments is sustained on the bases Plaintiff fails to allege a serious injury and lacks standing.

E. Sixth Cause of Action – Unfair Business Practices

Plaintiff alleges Defendants violated Business and Professions Code section 17200, et seq. (“UCL”) by proceeding with an unlawful nonjudicial foreclosure and causing the invalid property documents to be recorded. (SAC, ¶¶ 131-139.)

“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’ Its purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320, citations omitted.) “Because . . . section 17200 is written in the disjunctive, it establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent. In other words, a practice is prohibited as unfair or deceptive even if not unlawful and vice versa.” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 644, citations and quotations marks omitted.) While not clearly articulated, it appears from the pleading that Plaintiff’s claim is based on the unlawful and unfair prongs. To the extent Plaintiff’s claim is based on the unfairness prong, his theories of unfairness are predicated on the same allegedly improper activities as his previous claims, such as the assignment of the DOT into WaMu AR19 and Brignac’s purported forgery.

Defendants contend the predicate claims lack merit, and thus this claim also lacks merit. This argument is well-taken. As Plaintiff fails to allege any unlawful activity, it therefore follows that he cannot state a claim for violation of the UCL based on the same allegations. (See Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610; see also Avila v. Wells Fargo Bank, National Association (N.D. Cal., Dec. 23, 2016, No. C 16-05904 WHA) 2016 WL 7425925, *6 [sustaining demurrer as to a UCL claim because the plaintiff’s other theories of “defendant’s impropriety fail”].)

Accordingly, the demurrer to the sixth cause of action is sustainable as Plaintiff fails to state a claim under the unfair and unlawful prongs and lacks standing.

III. Conclusion

For the foregoing reasons, the demurrer to the first cause of action is MOOT as the Court has stricken that cause of action, and otherwise does not state a cause of action. The demurrer to the fourth cause of action is OVERRULED. The demurrer to the second, third, fifth, and sixth causes of action on the ground of failure to state sufficient facts to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND. Although Plaintiff seeks leave to amend, he does not provide any facts suggesting how he would be able to amend the many deficiencies in this pleading. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [a “[p]laintiff must show in what manner he [or she] can amend his [or her] complaint and how that amendment will change the legal effect of the pleading”].) As noted above, the newly claimed theory of forgery does not cure the standing problems. (See Saterbak, supra, 245 Cal.App.4th at p. 814 [lack of standing when plaintiff expressly alleged assignment was forged].)

Plaintiff is instructed not to file any other pleadings without permission from the Court related to the motions pending before the Court.

Defendants shall submit a proposed judgment either approved as to form or with proof of compliance with Rules of Court, Rule 3.1312.
The Court shall prepare the Order.