Filed 5/14/20 Shetty v. Nationstar Mortgage LLC CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

NIKI-ALEXANDER SHETTY,

Plaintiff and Appellant,

v.

NATIONSTAR MORTGAGE LLC et al.,

Defendants and Respondents.

H045125

(Santa Cruz County

Super. Ct. No. 16CV02271)

Plaintiff Niki-Alexander Shetty alleged in an amended complaint causes of action for: rescission under state law; enforcement of rescission under federal law; cancellation of instruments; quiet title; fraud on the court, conspiracy to obstruct justice, and obstruction of justice; and declarative relief. Defendants, Nationstar Mortgage LLC (Nationstar) and The Bank of New York Mellon (BNY Mellon), demurred to all causes of action. The trial court sustained the demurrer without leave to amend and dismissed the action as to those defendants. On appeal, plaintiff argues that the trial court erred in sustaining the demurrer without leave to amend. We find no error and affirm.

I. Background

In July 1991, Highland Ventures conveyed by grant deed real property in Watsonville, California to Heriberto S. Martinez and Maria M. Martinez (as husband and wife), and to Diego Martinez (as a single man). In October 2001, Diego conveyed his interest by grant deed to Heriberto and Maria.

In March 2005, Heriberto obtained a $552,000 mortgage on the Watsonville property, which was evidenced by a promissory note and secured by a deed of trust. The “ ‘Lender’ ” was identified as America’s Wholesale Lender. The “ ‘Trustee’ ” was CTC Foreclosure Services Corporation. Mortgage Electronic Registration Systems, Inc. (MERS) was identified as “a nominee for the Lender and the Lender’s successors and assign[ees],” as well as the “beneficiary” under the deed of trust. The deed of trust provided: “Subject to the provisions of Section 18 [providing that the lender may require payment in full if property is sold without the lender’s permission], any Successor in Interest of Borrower who assumes Borrower’s obligations under this Security Instrument in writing, and is approved by Lender, shall obtain all of Borrower’s rights and benefits under this Security Instrument. Borrower shall not be released from Borrower’s obligations and liability under this Security Instrument unless Lender agrees to such release in writing.”

In January 2008, Heriberto fell behind on his loan payments. In May 2008, Recontrust Company (Recontrust), as agent for MERS, recorded a “Notice of Default and Election to Sell under Deed of Trust,” which stated that Heriberto had fallen behind $14,485.64 on his loan payments. In June 2008, Recontrust rescinded the notice of default.

In December 2011, MERS assigned the deed of trust to BNY Mellon. In August 2013, Bank of America, N.A. (Bank of America) recorded another assignment of the deed of trust. The document stated that Bank of America, as the “holder of a Deed of Trust,” assigned all beneficial interest under the deed of trust to Nationstar.

In September 2015, Heriberto and Maria conveyed by grant deed their entire interest in the Watsonville property to plaintiff. The grant deed provided: “This grant deed also assigns any and all claims and causes of action known and unknown arising out of and related to the property described herein and respective mortgages to [plaintiff].” In December 2015, plaintiff recorded a “Request for Notice under § 2924b Civil Code,” requesting that he receive a copy of any notice of default or notice of sale.

In January 2016, “Bank of America, as attorney in fact for Nationstar,” recorded a “Corrective Assignment of Deed of Trust,” to assign the deed of trust to BNY Mellon. The document explained that in August 2013, Bank of America, “inadvertently recorded” an assignment of the deed of trust, in which Bank of America (then the servicer of the loan) purported to assign the deed of trust to Nationstar. The document further explained that “[Nationstar] has executed this Corrective Assignment of Deed of Trust (i) to ensure that the beneficiary of record immediately prior to the recordation of the Prior Assignment is re-established as the current beneficiary of record, and (ii) to transfer such prior beneficiary of record all of its rights, title and interest, if any, as beneficiary under the Deed of Trust.”

In May 2016, Nationstar, as attorney in fact for BNY Mellon, substituted NBS Default Services, LLC (NBS) as the trustee under the deed of trust.

In May 2016, NBS recorded a “Notice of Default and Election to Sell under Deed of Trust,” reflecting that Heriberto had fallen behind $24,391.92 on his loan payments and was now in default.

On August 26, 2016, NBS recorded a “Notice of Trustee’s Sale,” which indicated that the Watsonville property would be sold on September 19, 2016.

On August 30, 2016, plaintiff, appearing pro per, filed the instant action against defendants. At some point during the trial court proceedings, default judgment was entered against defendant BNY Mellon, which later moved to set aside the default judgment based on the assertion that it was never served. The trial court set aside the default judgment.

Defendants demurred, and the trial court sustained the demurrer with leave to amend. Plaintiff then filed his amended complaint in February 2017, alleging the following six claims: (1) rescission of contract pursuant to Civil Code sections 1688 and 1689; (2) enforcement of rescission pursuant to title 15 United States Code section 1635 (Truth in Lending Act (TILA); 15 U.S.C. § 1601 et seq.) and Regulation Z; (3) cancellation of instruments; (4) quiet title; (5) fraud on the court, conspiracy to obstruct justice, and obstruction of justice; and (6) declaratory relief.

Defendants again demurred. Defendants also filed a motion to require plaintiff to post a bond because plaintiff had been deemed a vexatious litigant.

In June 2017, the trial court sustained defendants’ demurrer without leave to amend. Based on plaintiff’s designation as a vexatious litigant, the court also granted defendants’ request to require plaintiff to post bond and set the bond amount at $25,000. The court entered a judgment of dismissal. Plaintiff retained counsel and appealed.

 

II. Discussion

A. Standard of Review

“On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. [Citations.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]” (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865 (Dinuba).) When the trial court has sustained the demurrer without leave to amend, this court must determine “whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse. [Citation.]” (Ibid.) The burden is on the plaintiff to show a reasonable possibility of curing a defect. (Barroso v. Ocwen Loan Servicing, LLC (2012) 208 Cal.App.4th 1001, 1008 (Barroso).)

B. Rescission

In his amended complaint, plaintiff alleged that rescission of the note and deed of title was justified under Civil Code sections 1688 and 1689. Plaintiff alleged that the note and deed of trust were void documents, because America’s Wholesale Lender was not capable of entering into a contract and because it did not fund the loan. Plaintiff further alleged that two days after the loan was executed, Heriberto, the borrower, “rescinded the loan . . . and thereafter again . . . Plaintiff as assignee of the borrowers [sic] named on the deed of trust mailed a confirmatory Notice of rescission.”

“Standing is a threshold issue necessary to maintain a cause of action, and the burden to allege and establish standing lies with the plaintiff. [Citations.]” (Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 809.) “California law does not give a party personal standing to assert rights or interests belonging solely to others.” (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 936 (Yvanova).) Civil Code section 1689, subdivision (b) provides that “[a] party to a contract may rescind the contract” under specified circumstances. (Italics added.) “As a general rule a party to the contract or a privy thereto, and he alone, is entitled to maintain a suit to cancel or rescind it . . . .” (Reina v. Erassarret (1949) 90 Cal.App.2d 418, 423-424.)

Here, plaintiff lacked standing to challenge the validity of the note and deed of trust on the basis of rescission. While a “foreclosed-upon borrower clearly meets the general standard for standing to sue by showing an invasion of his or her legally protected interests” (Yvanova, supra, 62 Cal.4th at p. 937), plaintiff is not the borrower or a party to the loan agreement. He is a stranger to the debt and to the security instrument that secured the debt. Under the deed of trust, plaintiff could assume the borrower’s obligations under the instrument only with the express written permission of the lender. Plaintiff failed to allege in his amended complaint that he obtained such permission.

We are unpersuaded by plaintiff’s contention that the grant deed “was effective, together with the conveyance of title, to transfer all rights, claims, and interests in the property to [plaintiff].” Plaintiff relies on Civil Code section 954, which states: “A thing in action, arising out of the violation of a right of property, or out of an obligation, may be transferred by the owner.” Civil Code section 954, however, is not applicable here. “Assignability under [Civil Code] section 954 is limited to ‘a thing of action,’ a term defined in [Civil Code] section 953 as ‘a right to recover money or other personal property by a judicial proceeding.’ By definition, ‘[t]he words “personal property” include money, goods, chattels, things in action, and evidences of debt,’ and do not include ‘lands, tenements, and hereditaments,’ which instead are ‘real property.’ [Citation.]” (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1032.) Here, the rescission cause of action under state law involved a right to recover an ownership interest in real property, not a “ ‘ “right to recovery money or other personal property.” ’ ” The rescission cause of action was not assignable under Civil Code section 954.

In arguing that he has standing, plaintiff relies on Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270 (Hacker). Hacker, however, is distinguishable from this case. In Hacker, the plaintiff, who like plaintiff in this case was not in privity with the lender, sued for wrongful foreclosure and cancellation of instruments. (Id. at p. 274.) The Court of Appeal determined that the plaintiff’s claim of ownership, based on a grant deed, was sufficient “to establish a colorable claim that [the plaintiff] was the owner of the property at the time of the foreclosure” sale. (Id. at p. 280). This, in turn, gave the plaintiff standing “to pursue an action for wrongful foreclosure,” as well as other claims for slander of title, declaratory relief, unfair business practices, and cancellation of instruments. (Id. at pp. 281, 283, italics added.) The Court of Appeal found that the plaintiff had standing to pursue these other causes of actions because they were “derivative” of the wrongful foreclosure cause of action. (Id. at p. 283.) Thus, in Hacker, standing was predicated on: (1) an assertion of an ownership interest, by way of the grant deed; and (2) a challenge to that ownership interest, by way of the alleged wrongful foreclosure. Although plaintiff in this case asserts an ownership interest by means of a grant deed, plaintiff has not pleaded an action for wrongful foreclosure. In the absence of a wrongful foreclosure claim, plaintiff’s reliance on Hacker is unavailing.

Because plaintiff lacked standing to pursue a rescission cause of action, the trial court did not err in sustaining the demurrer to this cause of action. (Dinuba, supra, 41 Cal.4th at p. 865.)

C. TILA and Regulation Z

Plaintiff’s second cause of action sought retroactive rescission of the note and deed of trust based on violations of the TILA and Regulation Z. Plaintiff alleged that America’s Wholesale Lender was incapable of entering into a contract, that the loan documents “contain[ed] material facts that [were] either factually untrue or misrepresented,” and that the “true and de-facto lender” failed to provide disclosures under the TILA.

Title 15 of the United States Code, section 1635(a), the TILA, states in pertinent part: “Disclosure of obligor’s right to rescind. Except as otherwise provided in this section, in the case of [an applicable] consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later . . . . The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Bureau, to any obligor in a transaction subject to this section the rights of the obligor under this section . . . .” (Italics added.)

As with plaintiff’s rescission cause of action based on state law, plaintiff also lacks standing to assert this cause of action under federal law. Plaintiff is plainly not the obligor. Plaintiff points to no authority that a claim under the TILA can be assigned, and as we have explained, state law does not allow assignment of such claims.

We conclude that the trial court did not err in sustaining defendants’ demurrer to the rescission cause of action based on federal law. (Dinuba, supra, 41 Cal.4th at p. 865.)

D. Cancellation of Instruments

In his cancellation of instruments cause of action, plaintiff alleged that all recorded documents and assignments, including the note and the deed of trust, must be nullified. This is so, he argued, because the original loan transaction was made with a nonexistent entity, because the loan transaction was rescinded pursuant to the TILA, and because the subsequent assignments of the deed of trust were “ineffective, null and void.”

“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.” (Civ. Code, § 3412.) “To prevail on a claim to cancel an instrument, a plaintiff must prove the instrument is void or voidable . . . .” (U.S. Bank National Assn. v. Naifeh (2016) 1 Cal.App.5th 767, 778.)

Plaintiff’s claim is directed at challenging the recorded mortgage-related documents in order to invalidate the notices of default and trustee’s sale—i.e., to halt the foreclosure sale and gain clear title to the Watsonville property. California courts, however, have repeatedly held that preemptive actions may not be brought to determine whether a foreclosing party may initiate a nonjudicial foreclosure, because such actions are inconsistent with the nonjudicial foreclosure scheme.

In Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808 (Saterbak), the plaintiff brought an action for declaratory relief and cancellation of an instrument, the deed of trust. The plaintiff alleged that the transfer of the deed of trust on her property was void. (Id. at pp. 811-812.) The appellate court concluded that the plaintiff lacked standing to challenge the assignment because the plaintiff’s challenge amounted to an action to determine whether the foreclosing entity has the right to order a foreclosure sale. Such preemptive suits are not allowed, the court reasoned, because they “ ‘would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.’ [Citations.]” (Id. at p. 814.) While the Saterbak court recognized that the California Supreme Court had recently held that a borrower had standing to sue for wrongful foreclosure when an alleged defect in an assignment rendered the assignment void, the court had expressly limited its holding to the postforeclosure context. (Id. at p. 815; see Yvanova, supra, 62 Cal.4th at p. 924 [“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.”].) Like in Saterbak, plaintiff’s preforeclosure challenge to the foreclosing entity’s right to proceed with nonjudicial foreclosure is impermissible.

In addition, to the extent that plaintiff’s cancellation-of-instruments argument depends on his rescission claims and challenge to the original note, we have already rejected those claims. Based on the foregoing, the trial court did not err in sustaining the demurrer to this cause of action. (Dinuba, supra, 41 Cal.4th at p. 865.)

E. Quiet Title

In his amended complaint, plaintiff alleged that he is the current owner of the Watsonville property, that each of the defendants claim an adverse interest in the property, that the defendants are without right to the property, and that their claims constitute a cloud on plaintiff’s title.

Here, plaintiff relies on his previously asserted factual allegations to support this claim. In that respect, this claim amounts to another impermissible attempt to preempt a threatened nonjudicial foreclosure. (Saterbak, supra, 245 Cal.App.4th at pp. 814-815.) Thus, the trial court did not err in sustaining defendants’ demurrer to this cause of action. (Dinuba, supra, 41 Cal.4th at p. 865.)

F. Fraud on the Court, Conspiracy to Obstruct Justice,

and Obstruction of Justice

The factual allegations in this cause of action are difficult to decipher. There are at least two overarching allegations in this cause of action. The first allegation involves the underlying mortgage proceedings. Plaintiff contended that Nationstar executed a “false and fabricated” substitution of trustee, which facilitated the foreclosure. He asserted that the entity Nationstar purported to represent, BNY Mellon, was a “non-existent entity . . . .”

This leads to plaintiff’s second allegation, which is premised on Nationstar and its law firm’s alleged conduct in connection with the instant case. In particular, plaintiff asserted that Nationstar and its law firm “conspired” to cover up Nationstar’s fraudulent activity with respect to the underlying mortgage documents. Plaintiff asserted that he served “all the existing and named defendants in this action” and that none “have actually and factually appeared.” He alleged that despite this fact, Nationstar, with its law firm, purported to represent a “fictitious entity,” namely BNY Mellon, and that the representation was unauthorized. With respect to the law firm’s activities, he asserted that the firm “misrepresent[ed] facts to the court and engaged in deceit a [sic] conduct prejudicial to the administration of justice.” He also asserted that the law firm “conspired with” Nationstar and “acted corruptly with specific intent to obstruct or interfere with the proceedings in this Court.” Plaintiff asked the trial court to exercise its “inherent proper [sic] to vacate its order to set aside default against defendant [BNY Mellon].”

“ ‘The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’ [Citations.]” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).) “In California, fraud must be [pleaded] specifically; general and conclusory allegations do not suffice. [Citations.]” (Id. at p. 645.) “ ‘ “ ‘[T]he policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.’ ” [Citation.] [¶] This particularity requirement necessitates pleading facts which “show how, when, where, to whom, and by what means the representations were tendered.” ’ [Citation.]” (Ibid.)

To the extent plaintiff’s allegations could be construed as alleging that Nationstar fraudulently misrepresented documents underlying the mortgage and subsequent default, plaintiff failed to plead the allegations with sufficient specificity. Fraud must be specifically pleaded—the “ ‘ “how, when, where, to whom, and by what means the representations were tendered” ’ ” must be alleged. (Lazar, supra, 12 Cal.4th at p. 645.) Such specificity was absent from plaintiff’s amended complaint. Beyond making broad legal conclusions, plaintiff failed to particularly allege what material misrepresentations were made, to whom they were made, and when they were made. In addition, plaintiff’s amended complaint did not plead with specificity that he relied at all, let alone justifiably relied, on any representations to his detriment.

In addition, regarding the claim that Nationstar conspired with its law firm to obstruct justice and commit fraud on the court, plaintiff identifies no controlling law allowing for such a cause of action. Penal Code section 182 prohibits obstruction of justice, but it is a criminal conspiracy statute; it does not give rise to a private cause of action. Plaintiff identifies no controlling law that allows him to pursue such a cause of action in a civil case. Plaintiff does assert that the law firm’s actions constitute violations of Business and Professions Code section 6104, which states: “Corruptly or willfully and without authority appearing as attorney for a party to an action or proceeding constitutes a cause for disbarment or suspension.” However, as with the Penal Code, alleged violations of Business and Professions Code section 6104 do not authorize plaintiff to sue Nationstar’s law firm. Violation of a disciplinary rule allows the Supreme Court to suspend or disbar an attorney. (Bus. & Prof. Code, § 6100.) It does not give “ ‘an antagonist in a collateral proceeding or transaction . . . standing to seek enforcement of the rule.’ ” (Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 303.)

Accordingly, the trial court did not err in sustaining defendants’ demurrer to this cause of action. (Dinuba, supra, 41 Cal.4th at p. 865.)

G. Declaratory Relief

In this cause of action, plaintiff requested that the trial court issue an order cancelling and expunging all documents preceding the most recent notice of default and notice of trustee’s sale. Plaintiff’s factual allegations were entirely repetitive of his prior allegations.

The trial court properly sustained the demurrer to this cause of action. “The requirement that plaintiffs seeking declaratory relief allege ‘the existence of an actual, present controversy’ [citation] would be illusory if a plaintiff could meet it simply by pointing to the very lawsuit in which he or she seeks that relief. Obviously, the requirement cannot be met in such a bootstrapping manner; ‘a request for declaratory relief will not create a cause of action that otherwise does not exist’ [Citation.]” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 80.)

Here, plaintiff’s declaratory relief cause of action relies entirely on plaintiff’s other causes of actions. This cause of action is wholly duplicative of plaintiff’s tort causes of action. Such bootstrapping is impermissible. Thus, the trial court properly sustained defendants’ demurrer to this cause of action. (Dinuba, supra, 41 Cal.4th at p. 865.)

H. Leave to Amend

Plaintiff contends that the trial court gave “short shrift” to the possibility for plaintiff to amend the complaint to cure the identified defects. We disagree. The defects in plaintiff’s causes of action are fundamental and fatal, as the defects involve plaintiff’s standing. In his brief, plaintiff asserts that he should be given leave to amend to allege a violation of the Federal Fair Debt Collections Practices Act (FDCPA), citing Dowers v. Nationstar Mortg., LLC (9th Cir. 2017) 852 F.3d 964, 971. However, in that case, the plaintiffs were the borrowers on the loan that they subsequently challenged. In this case, plaintiff is not the borrower, which means that he lacks standing to assert claims, including under the FDCPA, on behalf of the borrower. Amendment on this basis would be futile.

Because there is no reasonable possibility that the defects in plaintiff’s causes of action could be cured by amendment, the trial court did not abuse its discretion in sustaining the demurrer without leave to amend. (Barroso, supra, 208 Cal.App.4th at p. 1008.)

III. Disposition

The judgment is affirmed.

_______________________________

Mihara, J.

WE CONCUR:

_____________________________

Premo, Acting P. J.

_____________________________

Bamattre-Manoukian, J.

Shetty v. Nationstar Mortgage

H045125

Shetty v. Nationstar Mortgage, LLC et al.
Case Number H045125
Party Attorney

Niki-Alexander Shetty : Plaintiff and Appellant
20631 Ventura Blvd, #301
Woodland Hills, CA 91364

Richard Lawrence Antognini
Law Office of Richard L. Antognini
2036 Nevada City Highway
Suite 636
Grass Valley, CA 95945-7700

Paul M Hittelman
Paul M Hittelman Attorney at Law
2530 Wilshire Blvd Fl 2
Santa Monica, CA 90403

Nationstar Mortgage, LLC : Defendant and Respondent
Taylor Reeves Dalton
Hall Griffin LLP
1851 East First Street, 10th Floor
Santa Ana, CA 92705-4052