Case Number: KC066502 Hearing Date: June 23, 2014 Dept: O

Perez, et al. v. Bank of America, N.A., et al. (KC066502)

Defendants Bank of America, N.A., Federal National Mortgage Association, ReconTrust Company, N.A’s DEMURRER TO COMPLAINT

Respondent: NO OPPOSITION

TENTATIVE RULING

Defendants Bank of America, N.A., Federal National Mortgage Association, ReconTrust Company, N.A’s demurrer to complaint is SUSTAINED. The court will hear from Plaintiff regarding any possibility of leave to amend.

JUDICIAL NOTICE is taken of Defendants’ exhibits. (Ev. Code 452, 453, and 454.)

TENDER:
Tender applies to any cause of action that is based on allegations of wrongful foreclosure or that seeks redress from foreclosure. (Abdallah v. United Sav. Bank (1996) 43 Cal.App.4th 1101, 1109; Arnolds Mgmt. Corp., 158 Cal.App.3d 579; Karlsen v. Gibralter Sav. & Loan Assn. (1974) 15 Cal.App.3d 112, 117.) Tender is required to set aside a completed sale. (See persuasive authority, Barrionuevo v. Chase Bank, N.A. (N.D. Cal. 2012) 885 F.Supp.2d 964, 969.)

Plaintiffs have not alleged that they tendered the debt. Accordingly, demurrer on this ground is SUSTAINED.

1st CAUSE OF ACTION: CANCELLATION OF INSTRUMENT:
The Complaint refers to the Homeowners Bill of Rights, however, the statute was not in effect in 2011, when the incidents complained of occurred. Further, there is no legal authority that the statute has any retroactive effect. (Evangelatos v. Super. Ct. (1988) 44 Cal.3d 1188, 1209 – It is a widely recognized legal principle, specifically embodied in Cal. Civ. Code § 3, that in the absence of a clear legislative intent to the contrary statutory enactments apply prospectively.)

Plaintiffs allege that the Deed of Trust was invalidly assigned because Bank of America did not reference the true owner, Fannie Mae. (Complaint, Pars. 19 and 23.) However, lender-related defendants do not have the initial burden to prove authority to validly assign the note, or to conduct a foreclosure sale, but instead nonjudicial foreclosure sale is presumed to have been conducted regularly, and the burden of proof rests with challenging parties. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270.) As for allegation sufficiency, complainants fail to allege an invalid assignment of a debt or promissory note, based solely upon recorded documents, but instead must address whether the debt was validly assigned in any manner, without recordation. Complainants fail to allege a claim for wrongful foreclosure, based upon a violation of laws of secured transactions, requiring the assignment of an interest in the security for a debt, along with an assignment of the debt itself, where they fail to allege an invalid assignment of the deed of trust and the notes. (Id. at 271.) Civil Code section 2932.5 (requiring assignees of a mortgagee to record assignments before exercising a power to sell real property) applies to mortgages, but not deeds of trust, and thus, “where a deed of trust is involved, the trustee may initiate foreclosure irrespective of whether an assignment of the beneficial interest is recorded.” (Haynes v. Emc Mortgage Corp. (2012) 205 Cal.App.4th 329, 336.) Civil Code Section 2932.5 is inapplicable to trust deeds, but instead applies to mortgages, and requires a recording of an assignment of a mortgage, so that a prospective purchaser knows that the mortgagee has the authority to exercise the power of sale. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 518.) The “statutory requirement [Civil Code §2932.5] that an assignment of the beneficial interest in a debt secured by real property must be recorded in order for the assignee to exercise the power of sale applies only to a mortgage and not to a deed of trust.” (Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 122 – demurrer properly sustained without leave to amend, notwithstanding there being no recording of the lender’s assignment of the deed of trust, and assignee and MERS were entitled to invoke the deed’s power of sale provision). The extent of the authority of a lender’s nominee is defined by its agency agreement with the lender, and whether the lender’s nominee had the authority to assign the lender’s interest in the note must be determined by reference to that agreement. Accordingly, an allegation that the lender’s nominee was merely a nominee is insufficient to demonstrate that the lender’s nominee lacked authority to make a valid assignment of the note on behalf of the original lender. Absent a specific factual basis, this claim amounts to a preemptive claim seeking to require the foreclosing party to demonstrate in court its authority to initiate a foreclosure. Such a claim is invalid and subject to demurrer. Similarly, a claim that there is no evidence that the lender’s nominee had written authorization to assign the deed of trust and the note is merely a challenge to the foreclosing party to prove in court its authority to initiate a foreclosure. (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85.) Demurrer is SUSTAINED.

2nd CAUSE OF ACTION: VIOLATION OF B&P 17200:
The Unfair Business Practices Act shall include “any unlawful, unfair, or fraudulent business act or practice.” (B&P Code 17200.) A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Even a single incident – a one-time act that is unfair, unlawful or fraudulent – is sufficient to state a claim under 17200. (Klein v. Earth Elements, Inc. (1997) 59 Cal.App.4th 965, 969 fn. 3.)

“To satisfy the narrower STANDING requirements imposed by Proposition 64, a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.… A plaintiff fails to satisfy the causation prong of the statute if he or she would have suffered “the same harm whether or not a defendant complied with the law.” … Jenkins’s third cause of action must also satisfy the second prong of the standing requirements under Business and Professions Code section 17204 (i.e., causation), which REQUIRED HER TO PLEAD A CAUSAL LINK BETWEEN HER ECONOMIC INJURY, THE IMPENDING NONJUDICIAL FORECLOSURE OF HER HOME, and the six unfair or unlawful acts allegedly committed by Defendants. (Bus. & Prof. Code, § 17204.) Importantly, Jenkins admits… that she defaulted on her loan. IT IS ALSO INDISPUTABLE JENKINS’S DEFAULT TRIGGERED THE LAWFUL ENFORCEMENT OF THE POWER OF SALE CLAUSE in the deed of trust, and it was the triggering of the power of sale clause that subjected Jenkins’s home to nonjudicial foreclosure…. As Jenkins’s home was subject to nonjudicial foreclosure because of Jenkins’s default on her loan, which occurred before Defendants’ alleged wrongful acts, Jenkins cannot assert the impending foreclosure of her home (i.e., her alleged economic injury) was caused by Defendants’ wrongful actions. Thus, even if we assume Jenkins’s third cause of action alleges facts indicating Defendants’ actions violated at least one of the UCL’s three unfair competition prongs (unlawful, unfair, or fraudulent), Jenkins’s SAC cannot show any of the alleged violations have a causal link to her economic injury.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497, 521.)

Plaintiffs lack standing to pursue a B&P 17200 claim because they admit they defaulted on their loan, which triggered foreclosure proceedings. Any wrongful conduct on the part of Defendants occurred after the default. Thus, Plaintiffs cannot show the unfair business practice has a causal link to Plaintiffs’ economic injury. Demurrer is SUSTAINED.

3rd CAUSE OF ACTION: WRONGFUL FORECLOSURE
Fails because plaintiffs have not tendered the debt. Further, the publicly recorded documents belie plaintiffs’ claims. The Deed of Trust contains an express provision granting power of sale. Further, HBOR is not retroactive, and CC 2923.6 does not provide a private right of action. Demurrer is SUSTAINED.

4TH CAUSE OF ACTION: QUIET TITLE:
The complaint shall be verified and shall include all of the following: (a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any; (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession; (c) The adverse claims to the title of the plaintiff against which a determination is sought; (d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought; (e) A prayer for the determination of the title of the plaintiff against the adverse claims. (CCP 761.020.) In this state it is established that a cause of action to quiet title may be pleaded in general terms. If the complaint alleges that the plaintiff is the owner in fee simple of the described property, that each defendant claims some interest in the property, that each claim is wrongful and that no defendant has any interest in the property, then allegations such as these are ordinarily sufficient to state a cause of action to quiet title. (Hyatt v. Colkins, 174 Cal.580.) They are insufficient only if the rest of the complaint reveals a defect in the plaintiff’s title. (See Martin v. Hall, 219 Cal. 334; Carlson v. Lindauer, 119 Cal.App.2d 292.)

The complaint is defective because it is unverified. Further, Plaintiffs are not attacking the validity of the debt. Plaintiffs admit that they defaulted on their loan. Instead, they attack the assignment. However, Plaintiffs did not suffer any prejudice resulting from the alleged defective assignment. (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85 – “Siligas fail to allege any facts showing that they suffered prejudice as a result of any lack of authority of the parties participating in the foreclosure process. The Siligas do not dispute that they are in default under the note. The assignment of the deed of trust and the note did not change the Siligas’ obligations under the note, and there is no reason to believe that Accredited as the original lender would have refrained from foreclosure in these circumstances. Absent any prejudice, the Siligas have no standing to complain about any alleged lack of authority or defective assignment.”) Borrowers must allege and show prejudice as to claims of the lack of authority to transfer a promissory note. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272 – noting that it is difficult to conceive how borrowers could show prejudice from an unauthorized transfer, because borrowers must anticipate the legal possibility of note transfers to different creditors, defaults in payments on the note cause any prejudice via foreclosure, and original lenders would be the ones prejudiced by an unauthorized loss.)

Additionally, a borrower cannot quiet title without discharging his debt. (Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477; Abdallah v. United Sav. Bank (1996) 43 Cal.App.4th 1101, 1109; Arnolds Mgmt. Corp., 158 Cal.App.3d 579; Karlsen v. Gibralter Sav. & Loan Assn. (1974) 15 Cal.App.3d 112, 117.) It is settled in California that a mortgagor cannot quiet her title without paying the debt secured. (Shimpones v. Stickney (1934) 219 Cal. 637, 649.) Demurrer is SUSTAINED.

The court will hear from Plaintiff regarding any possibility of leave to amend.