Case Name: Anthony DePhillips, et al. v. John Gardner, et al.

Case No.: 19-CV-352481

Currently before the Court are the demurrer and motion to strike by defendant John Gardner (“Defendant”).

Factual and Procedural Background

This is an action for wrongful foreclosure. According to the allegations of the verified complaint, plaintiffs Anthony DePhillips (“Anthony”) and Renina Rebecca Gime DePhillips (“Renina”), individually and as trustees of the DePhillips Family Revocable Living Trust dated November 20, 2018 (collectively, “Plaintiffs”), are the owners of real property located at 745 Harrison Street, Santa Clara, California (“Property”). (Complaint, ¶ 1.)

In 1981, Anthony and his sister, Donna Gardner (“Donna”) discussed the possibility of Donna purchasing the Property from Anthony with a buyback agreement in the amount of $175,000. (Complaint, ¶ 7.) At that time, Anthony intended to reside in the Philippines for the foreseeable future with his wife and Renina “so selling to [Donna] would save him from trying to manage the Property from abroad.” (Id. at ¶ 8.) Pursuant to their discussion, Anthony sent Donna a signed Deed of Trust on June 25, 1981, and Donna was to deposit the funds contemplated in the Deed of Trust into his bank account to complete the transaction. (Id. at ¶ 9.)

Nearly two years passed and although Donna never paid Anthony the $175,000, Donna recorded the Deed of Trust on March 7, 1983. (Complaint, ¶ 10 & Ex. A.) Donna and Renina are listed as beneficiaries on the Deed of Trust as joint tenants. (Id. at ¶ 11.)

In November 2018, Donna passed away. (Complaint, ¶ 13.) Her son and Defendant took over her affairs. (Ibid.) Defendant purports to be the successor trustee and beneficiary of the Deed of Trust on the title for the Property. (Id. at ¶ 3.) Despite the fact that Donna’s interest in the Deed of Trust passed to Renina, Defendant caused defendant The Foreclosure Company, Inc. (“Foreclosure Company”) to record a Notice of Default and Election to Sell Under Deed of Trust on May 10, 2019. (Id. at ¶ 14 & Ex. B.) Plaintiffs reached out to the defendants on several occasions, notifying them that the $175,000 was never paid, and of other deficiencies, but the defendants largely ignored Plaintiffs’ requests to cancel the foreclosure proceedings. (Id. at ¶ 15.)

Based on the foregoing allegations, Plaintiffs filed their complaint against Defendant and Foreclosure Company, alleging causes of action for: (1) declaratory relief (against all defendants); (2) negligence (against Foreclosure Company); (3) cancellation of the Notice of Default (against all defendants); (4) injunctive relief (against all defendants); (5) quiet title (against all defendants); and (6) wrongful foreclosure (against all defendants).

On November 14, 2019, Defendant filed the instant demurrer and motion to strike. Plaintiffs filed an opposition to the demurrer on March 4, 2020. On March 10, 2020, Defendant filed a reply in support of his demurrer. The next day, March 11, 2020, Plaintiffs filed an opposition to the motion to strike.

Discussion

I. Demurrer

Defendant demurs to the first, third, fourth, and sixth causes of action of the complaint on the ground of failure to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

A. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “ ‘[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice’ [citation].” (Hilltop Properties, Inc. v. State (1965) 233 Cal.App.2d 349, 353; Code Civ. Proc., § 430.30, subd. (a).) “ ‘It is not the ordinary function of a demurrer to test the truth of the … allegations [in the challenged pleading] or the accuracy with which [the plaintiff] describes the defendant’s conduct. … .’ [Citation.] Thus, … ‘the facts alleged in the pleading are deemed to be true, however improbable they may be. [Citation.]’ [Citations.]” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958.)

B. First Cause of Action

Defendant argues the first cause of action for declaratory relief fails to state a claim because “[d]eclaratory relief is not a cause of action, but a form of relief.” (Mem. Ps. & As., p. 4:13-14.) In support of his argument, Defendant cites the case of Batt v. City and County of San Francisco (2007) 155 Cal.App.4th 65 (Batt) (disapproved on other grounds McWilliams v. City of Long Beach (2013) 56 Cal.4th 613, 619).

As is relevant here, the court in Batt stated, “A constructive trust is ‘not an independent cause of action but merely a type of remedy’ [citation], and an equitable remedy at that. [Citation.] The same is true of … declaratory relief (5 Witkin, supra, § 806, p. 262) ….” (Batt, supra, 155 Cal.App.4th at p. 82.)

But Defendant cites no legal authority, and the Court is aware of none, providing that a cause of action for declaratory relief is subject to demurrer on the basis that declaratory relief may be more appropriately characterized as a remedy as opposed to an independent cause of action. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 (Badie) [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 619, fn. 2 (Schaeffer) [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

Furthermore, Defendant does not establish that the first cause of action fails to plead a legally cognizable cause of action entitling Plaintiffs to declaratory relief. Case law provides that a plaintiff can properly allege a claim for declaratory relief if the plaintiff sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. (Centex Homes v. St. Paul Fire & Marine Ins. Co. (2015) 237 Cal.App.4th 23, 28–29 [“A cause of action for declaratory relief may adjudicate future rights and liability between parties who have a relationship, either contractual or otherwise. [Citations.] The pleader need not establish it is also entitled to a favorable judgment. [Citation.] To assert a cause of action for declaratory relief, Code of Civil Procedure section 1060 requires that there be an ‘actual controversy relating to the legal rights and duties of the respective parties,’ not an abstract or academic dispute. [Citation.] ‘However, the courts will nevertheless evaluate in the context of a demurrer whether the factual allegations of the complaint for declaratory relief reveal that an actual controversy exists between the parties. [Citation.] “Sustaining a demurrer when the complaint reveals such a controversy constitutes error. [Citations.]” ’ ”]; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606; Lee v. Silveira (2016) 6 Cal.App.5th 527, 546.) Defendant does not argue, or otherwise demonstrate, that Plaintiff fails to allege such facts.

Accordingly, Defendant’s demurrer to the first cause of action is OVERRULED.

C. Third Cause of Action

Defendant contends the third cause of action for cancellation of the Notice of Default is not a legally cognizable cause of action because he is not aware of any legal basis for asserting a claim for cancellation of loan documents.

A claim for cancellation of instruments, such as a Notice of Default, is expressly authorized by Civil Code section 3412. “ ‘Under Civil Code section 3412, “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position. [Citation.]’ [Citation.]” (See Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193–1194 (Thompson).) Notably, Defendant does not argue, or otherwise demonstrate, that Plaintiffs fail to allege facts entitling them to cancellation of the Notice of Default.

Accordingly, Defendant’s demurrer to the third cause of action is OVERRULED.

D. Fourth Cause of Action

Defendant argues the fourth cause of action for injunctive relief fails to state a claim because injunctive relief is a remedy, not a cause of action. In support of his argument, Defendant cites the case of Allen v. City of Sacramento (2015) 234 Cal.App.4th 41 (Allen).

As is relevant here, the court in Allen stated, “Injunctive relief is a remedy, not a cause of action. [Citations.] A cause of action must exist before a court may grant a request for injunctive relief. ([Citation]; City of South Pasadena v. Department of Transportation (1994) 29 Cal.App.4th 1280, 1293 … [“ ‘A permanent injunction is merely a remedy for a proven cause of action. It may not be issued if the underlying cause of action is not established.’ ”]; [citation].) [¶] Although the order sustaining the demurrer was proper because an injunction is not a cause of action, plaintiffs may still obtain injunctive relief if they prevail on a cause of action. [Citations.]” (Allen, supra, 234 Cal.App.4th at pp. 65–66.)

In opposition, Plaintiffs concede that their request for injunctive relief is more properly alleged in connection with their underlying causes of action as opposed to as a standalone cause of action.

Accordingly, Defendant’s demurrer to the fourth cause of action is SUSTAINED without leave to amend.

E. Sixth Cause of Action

Defendant asserts the sixth cause of action for wrongful foreclosure fails to state a claim because a notice of sale has not yet been recorded and the Property has not been sold.

The basic elements of a tort cause of action for wrongful foreclosure “are: ‘(1) the 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.’ [Citation.]” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 408.)

Here, Plaintiffs do not allege facts showing that the Property has been sold at a foreclosure sale. Additionally, in their opposition, Plaintiffs acknowledge that the Property has not been sold at a foreclosure sale. Thus, Plaintiffs cannot plead a claim for wrongful foreclosure. (See Sciarratta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552, 561 [“A wrongful foreclosure is a common law tort claim. It is an equitable action to set aside a foreclosure sale, or an action for damages resulting from the sale, on the basis that the foreclosure was improper.”]; see also Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 743 [explaining that under appropriate circumstances a plaintiff may bring a preforeclosure action for quiet title or a postforeclosure action for wrongful foreclosure].)

Accordingly, the demurrer to the sixth cause of action is SUSTAINED without leave to amend.

II. Motion to Strike

Defendant moves to strike Plaintiffs’ request for punitive damages from the complaint.

A. Legal Standard

Under Code of Civil Procedure section 436, a court may strike out any irrelevant, false, or improper matter inserted into any pleading or strike out all or part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.) The grounds for a motion to strike must appear on the face of the challenged pleading or from matters of which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).) In ruling on a motion to strike, the court reads the pleading as a whole, all parts in their context, and assuming the truth of all well-pleaded allegations. (See Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63, citing Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

B. Merits of the Motion

As an initial procedural matter, the Court notes that Plaintiffs’ opposition to the motion to strike is untimely. Under the Code of Civil Procedure, “[a]ll papers opposing a [demurrer] shall be filed with the court and a copy served on each party at least nine court days … before the hearing.” (Code Civ. Proc., § 1005, subd. (b).) With a hearing date of March 17, 2020, Plaintiffs were therefore required to file and serve their opposition by March 4, 2020. However, it was not filed until March 11, 2020, seven days late and one day after Defendant’s reply papers were due.

The Court, in its discretion, may refuse to consider Plaintiffs’ opposition brief due to its tardiness. (See Cal. Rules of Ct., rule 3.1300 (d) [“If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.”].) Here, not only was Defendant deprived of the statutorily-mandated number of days to which he was entitled to review the opposition, but he suffered resulting prejudice as he was unable to file a substantive reply addressing the arguments raise in the late-filed opposition. Because of these due process concerns, it would not be appropriate for the Court to consider Plaintiffs’ opposition. In light of the foregoing, Court will disregard Plaintiffs’ opposition and consider the merits of the motion to strike. (See Bozzi v. Nordstrom, Inc. (2010) 186 Cal.App.4th 755, 765 [a trial court has broad discretion under rule 3.1300(d) of the California Rules of Court to refuse to consider papers served and filed beyond the deadline without a prior court order finding good cause of late submission].)

In his motion, Defendant contends the Court should strike Plaintiffs’ request for punitive damages sought in connection with the third cause of action for cancellation of the Notice of Default because: (1) the third cause of action is not a legally cognizable claim; (2) the third cause of action sounds in contract and thus punitive damages cannot be recovered; and (3) Plaintiffs do not plead facts showing that his alleged conduct constitutes malice, oppression, or fraud.

Defendant’s first argument lacks merit because, as previously explained, a claim for cancellation of instruments, such as the Notice of Default, is expressly authorized by Civil Code section 3412. (See Thompson, supra, 11 Cal.App.5th at pp. 1193-1194.)

Defendant’s second argument is unsubstantiated because Defendant does not identify any legal authority, and the Court is aware of none, providing that punitive damages cannot be requested in connection with a claim for cancellation of instruments, as a matter of law, simply because the cause of action involves a contract. (See Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

Finally, Defendant’s third argument is not well-taken. The right to recover punitive damages requires proof of “oppression, fraud, or malice” on the part of the defendant by “clear and convincing evidence.” (Civ. Code, § 3294, subd. (a).) For pleading purposes, in order to support a prayer for punitive or exemplary damages, the complaint must allege “ultimate facts of the defendant’s oppression, fraud or malice.” (Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-317.) Simply pleading the statutory terms “oppression, fraud or malice” is insufficient to adequately allege punitive damages, but only to the extent that the complaint pleads facts to support those allegations. (Blegen v. Super. Ct. (1986) 176 Cal.App.3d 503, 510-511.) Therefore, specific factual allegations demonstrating oppression, fraud, or malice are required. (Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872.)

Here, malice, fraud and oppression all serve as the foundation for Plaintiffs’ request for punitive damages. (Complaint, ¶¶ 26 & 27.) As is relevant here, “malice” is defined as conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1), italics added.) In the third cause of action, Plaintiffs allege an intentional wrong—that Defendant recorded the Notice of Default willfully and with the specific intent to harm them. (Complaint, ¶ 26.) Therefore, they plead sufficient facts to support their request for punitive damages. (See G.D. Searle & Co. v. Super. Ct. (1975) 49 Cal.App.3d 22, 29 [“When the plaintiff alleges an intentional wrong, a prayer for exemplary damage may be supported by pleading that the wrong was committed willfully or with a design to injure”]; see also Woodruf v. Howes (1981) 88 Cal. 184, 190 [intent is a fact and, thus, the averment that a defendant acted with an intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient for pleading purposes]; Wennerholm v. Stanford University School of Medicine (1942) 20 Cal.2d 713, 716 [same].)

Accordingly, the motion to strike Plaintiffs’ request for punitive damages is DENIED.