Case Name: John, et al. v. Bank of New York Mellon, et al.
Case No.: 2015-1-CV-286315

Defendants Nationstar Mortgage, LLC, Bank of New York Mellon f.k.a. The Bank of New York (“BONY”), successor trustee to JP Morgan Chase, N.A., as trustee for holders of Structured Asset Mortgage Pass Through Certificate Series 2006-ARI, and Mortgage Electronic Registration Systems (“MERS”) (collectively, “Defendants”) demur to the first amended complaint (“FAC”) filed by plaintiffs Baimba John and Fatmata John (collectively, “Plaintiffs”).

This is an action for wrongful foreclosure. In 2005, Plaintiffs obtained two loans in the amount of $980,000 and $280,000 from Countrywide Home Loans, Inc. secured by a deed of trust (“DOT”) recorded against real property located at 3354 Casalegno Court, Santa Clara (the “Property”). (Complaint, Exhibit A.) The DOT identified MERS as the beneficiary and Recontrust Company, N.A. (“Recontrust”) as the trustee. (Id.) In 2008, a Notice of Default and Election to Sell Under Deed of Trust and a Notice of Sale were recorded against the Property. (Defendants’ Request for Judicial Notice (“RJN”), Exhibits D-E.) However, no trustee’s sale actually occurred. (Id.)

On June 17, 2010, a Substitution of Trustee and Assignment of Deed of Trust was recorded, thereby substituting Recontrust as the trustee and assigning MERS the beneficial interest under the DOT. (Defendants’ RJN, Exhibit F.) That same day, a new Notice of Trustee’s Sale was recorded by Recontrust. (Id., Exhibit G.)

Two years later, in March 2012, a Corporation Assignment of Deed of Trust/Mortgage was recorded against Property, assigning the beneficial interest under the DOT to “The Bank of New York Mellon FKA the Bank of New York as Successor to JP Morgan Chase Bank, N.A. as Trustee for Holders of SAMI II 2006-AR1, MTG Pass-Through Certificates, Series 2006-AR1&Send FCLR Notice- Wells Fargo, Wait 10 DYS, then Proceed.” (Defendants’ RJN, Exhibit H.) A Notice of Trustee’s Sale was also recorded that month by Recontrust, setting a trustee’s sale date for April 2, 2012. (Id., Exhibit I.) One month later, in April 2012, a Corrective Corporation Assignment of Deed of Trust was recorded, to correct the incorrect assignee listed on the March 2012 assignment to “The Bank of New York Mellon FKA The Bank of New York as Successor Trustee to JP Morgan Chase Bank, N.A., as Trustee for Holders of SAMI II 2006-ARI, Mortgage Pass-Through Certificates, Series 2006- ARI.” (Id., Exhibit J.)

In July 2013, a Notice of Rescission of Declaration of Default and Demand for Sale and Notice of Default and Election to Sell was recorded, rescinding the 2008 Notice of Default and Election to Sell. (Defendants’ RJN, Exhibit K.)

One year later, on July 15, 2014, a Substitution of Trustee was recorded, substituting The Wolf Firm as the trustee. (Defendants’ RJN, Exhibit M.) That same day, a new Notice of Default and Election to Sell Under Deed of Trust was recorded by The Wolf Firm. (Defendants’ RJN, Exhibit L.) Thereafter, on October 17, 2014, a Notice of Trustee’s Sale was recorded. (Id., Exhibit N.)

Plaintiffs generally allege that “due to the chain of assignments, it is now unknown and doubtful who is the current lender/beneficiary/assignee with legal authority and standing regarding the mortgage on the [Property].” (FAC, ¶ 18.) Plaintiffs further allege that there were “material alterations of the original terms of the loan that created controversy(ies) as to the true total amount of the total mortgage.” (Id.) Plaintiffs also assert various allegations regarding robo-signing, irregularities in the securitization of the loan, and irregularities in the non-judicial foreclosure process.

On September 30, 2015, Plaintiffs filed the original complaint asserting the following causes of action: (1) wrongful foreclosure; (2) wrongful assignment of deed of trust; (3) lack of legal standing; (4) violation of California bill of rights; (5) fraud; (6) quiet title; (7) declaratory relief; (8) accounting; (9) violation of consumer protection act; (10) violations of Business & Professions Code section 17200, et seq.; (11) unjust enrichment; and (12) injunctive relief.

On February 9, 2016, the Court sustained Defendants’ demurrer to the third and twelfth causes of action without leave to amend and to all of the remaining causes of action with 10 days’ leave to amend.

On March 2, 2016, Plaintiffs filed the FAC asserting the following claims: (1) wrongful foreclosure; (2) wrongful assignment of deed of trust; (3) violation of California bill of rights; (4) fraud; (5) quiet title; (6) declaratory relief; (7) accounting; (8) violation of consumer protection act; (9) violations of Business & Professions Code section 17200, et seq.; and (10) unjust enrichment.

On April 19, 2016, Defendants filed the instant demurrer to each and every cause of action in the FAC on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) That same day, Defendants also filed the instant motion to strike portions of the operative pleading. Plaintiffs filed papers in opposition to the demurrer only on May 23, 2016. Defendants filed their reply on May 31, 2016.

I. Procedural Issue

A. Oversized Opposition

As with their papers filed in opposition to Defendants’ demurrer to the original complaint, Plaintiffs’ opposition to the instant demurrer is procedurally defective because it is 18 pages in length and thus exceeds the mandated page limit. (See Cal. Rules of Court, rule 3.113(d) [an opposing memorandum may not exceed 15 pages].) Additionally, Plaintiffs have not included a table of contents and a table of authorities. (See Cal. Rules of Court, rule 3.113(f) [stating that “[a] memorandum that exceeds 10 pages must include a table of contents and a table of authorities”].)

Because the opposition is an oversized memorandum, it is considered in the same manner as a late-filed paper. (Cal. Rules of Court, rule 3.113(g).) The Court has discretion to refuse to consider a late-filed paper. (Cal. Rules of Court, rule 3.1300(d).)

Here, the Court, in its discretion, will consider Plaintiffs’ opposition despite the aforementioned defects as Defendants do not appear to have been prejudiced as they timely filed a substantive reply addressing Plaintiffs’ arguments.

B. Untimely FAC

Defendants’ also contend that the FAC itself is untimely, noting that in the Court order filed February 9, 2016, Plaintiffs were provided 10 days’ leave to amend, yet did not file the FAC until March 2, 2016, 12 days later. Defendants request that the Court strike the FAC in its entirety due to Plaintiffs’ failure to comply with the Court’s order, emphasizing that Plaintiffs were expressly “admonished” in the February 9th order for failing to comply with the California Rules of Court and “advised that all future filings must comply with the California Rules of Court and Code of Civil Procedure.” (Order, 4:14-19.)

In their opposition, Plaintiffs do not dispute that the FAC is untimely, but insist that the late filing was necessitated by the publication of Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919. Defendants respond that Yvanova is legally irrelevant and has no import on the viability of Plaintiffs’ claims and assert that even if Yvanova was relevant, Plaintiffs still could have timely filed the FAC on February 19, 2016 because Yvanova was filed the day before.

Plaintiffs did not request leave of court to file the untimely FAC. The Court has the discretion to strike and/or dismiss the FAC in its entirety as it was not filed in conformity with the prior order. (See Code Civ. Proc., § 436, subd. (b); see also Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 614; Harlan v. Department of Transportation (2005) 132 Cal.App.4th 868, 873-875 [a court has discretion to accept an untimely amendment without first filing a noticed motion].) Here, the Court, in its discretion, declines to do so. The FAC was only filed two days late, this is Plaintiffs’ first attempt to amend their pleading, and Defendants do not appear to have suffered any prejudice as a result of the delay. Further, the Court prefers to abide by the “guiding principle of deciding cases on the merits rather than on procedural deficiencies.” (Oliveros v. County of Los Angeles (2004) 120 Cal.App.4th 1389, 1395.)

II. Request for Judicial Notice

Defendants’ request for judicial notice of various documents recorded against the Property is GRANTED. (See Evid. Code, § 452, subd. (h); see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [“[A] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face”]; Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1367, fn. 8; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)

III. Failure to Allege Facts Sufficient to Constitute a Cause of Action

A. First and Second Causes of Action

As in their original complaint, Plaintiffs’ wrongful foreclosure and wrongful assignment claims continue to challenge Defendants’ authority to foreclose (FAC, ¶¶ 39-42), contend that the assignment was improper (FAC, ¶¶ 54-68), assert that Defendants violated Civil Code section 2923.5 (FAC, ¶¶ 36-38), allege that the DOT was robo-signed (FAC, ¶ 44), claim that Danitra Kegler’s signing of the July 2014 Substitution of Trustee was improper because the document falsely indicates she is an employee of BONY, and that the loan balance on the Notice of Default and Notice of Trustee’s Sale contradict each other (FAC, ¶¶ 43-44).

First, to the extent that these claims are predicated on allegations of improper securitization and/or assignment of the loan, Plaintiffs lack standing to assert such claims. Plaintiffs do not dispute that the Property has yet to be sold and no statute allows a borrower to assert a claim, before the foreclosure sale, to determine whether the foreclosing entities have the authority to foreclose, and courts have refused to create such a cause of action. (Gomes v. Countrywide Home Loan, Inc. (2011) 192 Cal.App.4th 1149, 1155 [“California’s nonjudicial foreclosure law does not provide for the filing of a lawsuit to determine whether MERS has been authorized by the holder of the Note to initiate foreclosure”]; Robinson v. Countrywide Home Loans, Inc. (2011) 199 Cal.App.4th 42, 46.) The recently decided case of Yvanova v. New Century Mortgage Corp., cited by Plaintiffs in the FAC and their opposition, does not compel a contrary conclusion. In that case, the California Supreme Court held that a borrower has standing to sue for wrongful foreclosure where an alleged defect in the assignment renders the assignment void. (Yvanova, 62 Cal.4th at 942-943.) However, the court’s ruling was “expressly limited to the post-foreclosure context” and thus, because Plaintiffs are attempting to bring a preforeclosure suit challenging Defendants’ ability to foreclose, Yvanova does not alter their standing obligations. (Saterbak v. JP Morgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814-815.) Further, Yvanova “recognizes borrower standing only where the defect in the assignment renders the assignment void, rather than voidable.” (Yvanova, supra, 62 Cal.4th at 942-943.) California authority has held that improper securitization renders an assignment voidable, at worst. (Saterbak, 245 Cal.App.4th at 815.) No California court has held that a borrower has standing to challenge an assignment that is merely voidable.

Next, as explained in the preceding order on Defendants’ demurrer to the original complaint, Plaintiffs’ reliance on Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079 with regard to standing is misplaced as that decision is inconsistent with the weight of California authority and thus the Court declines to follow it. (See, e.g., Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 514-515; see also Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1507.) Moreover, even if the Court were inclined to consider Glaski, the New York case relied upon by the court in its interpretation of New York law- Wells Fargo, N.A. v. Erobobo (N.Y. App. Div. 2015) 127 A.D.3d 1176, 1178- has since been overruled, which further discredits Glaski. (Ramajin v. Deutsch Bank Nat’l Trust Co. (2d. Cir. 2014) 757 F.3d 79, 90.)

Additionally, as they failed to do previously, Plaintiffs have not alleged facts showing that they sustained injury due to the allegedly improper assignments because their obligations under the note remained unchanged, and as unrelated third parties to the securitization, they lack standing to enforce any agreements between transferors and transferees related to such transactions. (See Herrera, supra, 205 Cal.App.4th at 1507 [“because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note”]; see also Jenkins, 216 Cal.App.4th at 514-515.)

Plaintiffs’ remaining allegations do not rescue their claims either. First, their contention that Defendants failed to comply with Civil Code section 2923.5 is still conclusory and lacking any supporting facts which demonstrate such a violation. Second, Plaintiffs’ allegations of robo-signing do not state a claim because, as explained previously, a borrower in default lacks standing to seek relief based on a claim that an assignment is void due to an allegation of robo-signing because he or she cannot allege harm, given that the foreclosure proceeding was commenced by the default and not any defect in the assignment. (Javaheri v. JP Morgan Chase Bank, N.A. (C.D. Cal., 2012) 2012 WL 3436278, at *6; see also Fontenot, supra, 198 Cal.App.4th at 272.) Here, matters subject to judicial notice show that Plaintiffs defaulted on the Note. (Defendants’ RJN, Exhibits D and L.) Consequently, Plaintiffs cannot allege injury as a result of the alleged robo-signing.

Finally, Plaintiffs’ allegations regarding the propriety of Danitra Kegler signing the July 2014 Substitution of Trustee and the purported inconsistencies in the outstanding loan balance reflected in the July 2014 Notice of Default and Election to Sell Under Deed of Trust and the October 2014 Notice of Trustee’s Sale are belied by the judicially noticeable documents. The July 2014 Substitution of Trustee indicates that Danitra Kegler signed the document as “Assistant Secretary” to Nationstar, as attorney in fact for BONY. (Defendants’ RJN, Exhibit M.) Therefore, Plaintiffs’ contention that she improperly represented herself as an employee of BONY lacks merit. Further, the July 2014 Notice of Default and Election to Sell Under Deed of Trust and the October 2014 Notice of Trustee’s Sale do not set forth inconsistent figures for the outstanding balance of the loan. Rather, the July 2014 Notice of Default and Election to Sell Under Deed of Trust sets forth only the amount that is past due, plus costs and expenses while the October 2014 Notice of Trustee’s Sale sets forth the total unpaid balance, along with other charges. (Defendants’ RJN, Exhibits L and N.)

Based on the foregoing, Defendants’ demurrer to the first and second causes of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

B. Third Cause of Action

Plaintiffs’ third cause of action for violation of the Homeowner’s Bill of Rights (the “HBOR”) suffers from the same deficiency articulated in the Court’s order on the demurrer to this claim in the original complaint- Plaintiffs fail to identify the specific statute that the Defendants allegedly violated. (See Mittenhuber v. City of Redondo Beach (1983) 142 Cal.App.3d 1, 5 [providing that statutory claims must be pled with specificity].) In addition, Plaintiffs do not allege that the Property is their primary residence or owner occupied. (See Civ. Code, § 2924.15, subd. (a) [stating that the HBOR applies only to mortgages that are secured by “owner-occupied residential real property”].) While Plaintiffs’ opposition directs the Court’s attention to Civil Code sections 2923.55, subdivision (b) [requiring mortgage servicer to send particular information in writing to borrower], and 2924, subdivision (a)(6) [prohibiting any entity but the holder of the beneficial interest under a mortgage or deed of trust, the original or substituted trustee, or the holder’s designated agent from recording or causing to be recorded a notice of default] of the HBOR, the FAC fails to sufficiently plead facts to support a claim under either statute.

Consequently, Defendants’ demurrer to the third cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

C. Fourth Cause of Action

Plaintiffs’ fourth cause of action for fraud is still not pleaded with the requisite specificity. In order to state a fraud claim a plaintiff must plead: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of the statement’s falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Further, “fraud must be pleaded specifically; general and conclusory allegations do not suffice. … The particularity requirement necessitates pleading facts which show ‘how, when, where, to whom, and by what means the representations were tendered.’ [Citation.]”].) While additional facts have been pleaded regarding when certain documents were recorded, the FAC still fails to sufficiently plead each misrepresentation, knowledge of the statement’s falsity, intent to defraud, justifiable reliance, and resulting damages.

Additionally, to extent, this claim is based on the allegations that Defendants lacked the authority to foreclose on the Property, it fails for the reasons discussed above.

Therefore, Defendants’ demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

D. Fifth Cause of Action

Plaintiffs’ fifth cause of action for quiet title is fatally deficient based on their failure to plead tender of their outstanding debt. California law is clear that a mortgagor (i.e., borrower) cannot quiet title against a mortgagee (i.e., lender) without satisfying the debt secured by the property. (Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477-478; see also Carson Redevelopment Agency v. Adam (1982) 136 Cal.App.3d 608, 612.) This rule is founded upon equitable principles, and is similar to the tender rule specific to actions to set aside a completed foreclosure sale. The cases cited by Plaintiffs in the FAC, Dimock v. Emerald Properties LLC (2000) 81 Cal.App.4th 868 and Lona v. Citibank (2011) 202 Cal.App.4th 89, are unavailing to them because the exceptions set forth in those cases are not applicable to the case at bar, with no allegations that the deed of trust was illegal at the time of formation or that their claims would offset any amounts claimed under the agreements.

Consequently, Defendants’ demurrer to the fifth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

E. Sixth Cause of Action

In this cause of action, Plaintiffs seek a declaration that Defendants do not have the authority to foreclose on the Property. For the reasons previously articulated, Plaintiffs may not bring such a claim. (See Jenkins, supra, 216 Cal.App.4th at 512-513 [stating that a borrower may not bring a declaratory relief action to determine whether a defendant has authority to initiate a non-judicial foreclosure of his or her home].) Accordingly, Defendants’ demurrer to the sixth cause of action on the ground of failure to state fact sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

F. Seventh Cause of Action

Plaintiffs’ eighth cause of action for an accounting fails because it is derivative of their other causes of action and those causes of action do not survive demurrer. (See Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 833 [“A right to accounting is derivative; it must be based on other claims”].) Consequently, Defendants’ demurrer to the seventh cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

G. Eighth Cause of Action

Plaintiffs’ eighth cause of action for violation of the Consumer Financial Protection Act is deficiently pleaded for the same reason as in their original complaint- namely, Plaintiffs fail to identify the specific statute that Defendants’ conduct allegedly violated or otherwise plead facts demonstrating such a violation. (See Mittenhuber, supra, 142 Cal.App.3d at 5 [providing that statutory claims must be pled with specificity].) Plaintiffs’ opposition that does not identify the statute or point to any facts in their FAC that support their claims; instead, they spend multiple paragraphs reciting their understanding of the purpose of the Consumer Financial Protection Act and the authority conferred to the Consumer Financial Protection Board. (Plaintiffs’ Opposition, 16:4-17:3.) Consequently, Defendants’ demurrer to the eighth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

H. Ninth Cause of Action

Plaintiffs’ ninth cause of action for violation of Business & Professions Code section 17200, et seq. fails for the same reason as the seventh in that is it derivative of Plaintiffs’ other causes of action and those causes of action do not survive demurrer. (Price v. Starbucks Corp. (2011) 192 Cal.App.4th 1136, 1147; accord Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178 [stating that a claim for violation of the UCL “stand[s] or fall[s] depending on the fate of the antecedent substantive causes of action”].) Additionally, this cause of action fails because Plaintiffs fail to plead facts establishing that they have standing to bring suit under the UCL by failing to demonstrate the requisite causation. Plaintiffs’ default predated Defendants’ alleged conduct; consequently, it was Plaintiffs’ default, not Defendants’ conduct, that caused Plaintiffs to be on the verge of losing the Property. (Jenkins, 216 Cal.App.4th at 524 [holding that a borrower could not “show any of the alleged violations have a causal link to her economic injury,” because borrower defaulted on her loan “before [lender’s] alleged wrongful acts”].)

In accordance with the foregoing analysis, Defendants’ demurrer to the ninth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

I. Tenth Cause of Action

Defendants’ demurrer to the tenth cause of action for unjust enrichment on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND. This claim is not a separate cause of action and in any event, Plaintiffs fail to plead facts demonstrating that they are entitled to restitution. (See McBride v. Boughton (2004) 123 Cal.App.4th 379, 387-388 [“Unjust enrichment is not a cause of action, however, or even a remedy, but rather ‘ ‘ ‘a general principle, underlying various legal doctrines and remedies’ ’….[Citation.] It is synonymous with restitution. [Citation.]’ [Citation.] Unjust enrichment has also been characterized as describing ‘ ‘the result of a failure to make restitution ….’ ’ [Citations.] … There are several potential bases for a cause of action seeking restitution. For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. [Citations.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory (an election referred to at common law as ‘waiving the tort and suing in assumpsit’)”].)

IV. Motion to Strike

Defendants move to strike various portions of the FAC, including Plaintiffs’ request for attorney’s fees, punitive damages, and to set aside the “illegal trustee sale.” This motion is unopposed. Given the ruling on the demurrer, which has eliminated all of the claims asserted in the FAC, the motion to strike is DENIED as moot.