Case Name: Edward Perales v. JPMorgan Chase, NA, et al.
Case No.: 118CV328058

This is an action claiming that an ambiguity exists as to title to real property located at 1588 Calco Creek Drive, San Jose, California 95127 (“Subject Property”).

The verified Complaint filed by Plaintiff Edward Perales (“Plaintiff”) on May 14, 2018 states two causes of action; 1) Declaratory Relief (seeking an unspecified declaration of the parties’ rights and duties regarding the subject property), and 2) Quiet Title. Plaintiff alleges that he has a legal and equitable interest in the subject property by virtue of being an “Optionor in an Option Contract.” A copy of the option contract, identifying Ralph Neal as “Seller/Optionor” and Plaintiff as “Buyer/Purchaser/Optionee” and recorded April 19, 2018 is attached to the Complaint as exhibit A. Attached to the Complaint as exhibit B is a copy of a Grant Deed recorded September 10, 2008, whereby Ralph Neal transferred the subject property to Daniel and Helen Filby Attached to the Complaint as exhibit C is a copy of the September 25, 2008 Purchase and Assumption Agreement between the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Washington Mutual Bank, and JP Morgan Chase Bank, N.A., whereby the FDIC transferred the assets, but not the liabilities, of Washington Mutual Bank to JPMorgan Chase Bank.

Currently before the Court is a demurrer to the Complaint by Defendants Select Portfolio Servicing, Inc. (“SPS”) and U.S. Bank, NA, successor trustee to Bank of America, NA, successor in interest to La Salle Bank, NA, as trustee on behalf of the holders of WAMU Mortgage Pass-Through Certificates Series 2007-OA6 (“Trust”).

Request for Judicial Notice
In support of their Demurrer Defendants SPS and Trust (collectively “Defendants”) have submitted a request for the Court to take judicial notice of four documents, attached as exhibits A-D to the request.

Exhibit A is a copy of a Deed of Trust (“DOT”) applicable to the Subject Property, identifying Ralph Neal as the “borrower” and Washington Mutual Bank as the “lender,” recorded May 25, 2007. Exhibit B is a copy of an “Assignment of Deed of Trust” recorded November 4, 2010, transferring the Deed of Trust submitted as exhibit A from JPMorgan Chase to “Bank of America, NA, successor in interest to La Salle Bank, NA, as trustee on behalf of the holders of WAMU Mortgage Pass-Through Certificates Series 2007-OA6,” which eventually became Defendant Trust. Exhibit C is a copy of a Grant Deed recorded on April 19, 2018 whereby Ralph Neal purportedly transferred his interest in the subject property to himself and Plaintiff as tenants in common. Exhibit D is a copy of a “Notice of Option Contract for Sale and Purchase,” also recorded on April 19, 2018 whereby Ralph Neal (identified as “Seller/Optionor”) sold Plaintiff (identified as “Buyer/Purchaser/Optionee”) an option to purchase the subject property.

Notice of all four documents is GRANTED. Evidence Code §452(c) states the court may take judicial notice of “any official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.” This has been interpreted to include documents recorded by a government department. (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265, disapproved on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919 [“[t]he official act of recordation and the common use of a notary public in the execution of such documents assure their reliability, and the maintenance of the documents in the recorder’s office makes their existence and text capable of ready confirmation, thereby placing such documents beyond reasonable dispute. . . . 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 . . . [and, f]rom this, the court may deduce and rely upon the legal effect of the recorded document””])

A person receiving a deed to, or a deed of trust on, property acquires his or her title or lien subject to all previous transfers of title of which or he or she has actual or constructive notice. The beneficiary of a mortgage or deed of trust on real property given as a portion of the purchase price of real property has priority over all other liens created against the purchaser, subject to the operation of the recording laws. (4 Miller & Starr, Cal. Real Estate (4th ed. 2016) Recording and Priorities, § 10:1; Civ. Code §§ 1213, 1217, 2898.) “‘The act of recording creates a conclusive presumption that a subsequent purchaser has constructive notice of the contents of the previously recorded document.’ Additionally, a party may not ignore information coming from outside the recorded chain of title, to the extent such information puts the party on notice of information that reasonably brings into question the state of title reflected in the recorded chain of title. Stated differently, a good faith purchaser ‘is not entitled to interpret ambiguities in his own favor nor is he entitled to ignore reasonable warning signs that appear in the recorded documents.’” (612 South LLC v. Laconic Limited Partnership (2010) 184 Cal.App.4th 1270, 1278-1279, internal citations omitted.)

Granting judicial notice of the recorded documents submitted by Defendants and the Purchase and Assumption Agreement attached as an exhibit to the Complaint, establishes that anyone who claims to have a acquired an interest in the subject property after the recording of the DOT did so subject to the DOT now assigned to Defendant Trust, and that there is no “ambiguity” to the title to the property as Plaintiff alleges.

Demurrer to Complaint
The Court in ruling on a demurrer treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Allegations are not accepted as true on demurrer if they contradict or are inconsistent with facts judicially noticed. Similarly, facts appearing in exhibits attached to the complaint (part of the “face of the pleading”) are given precedence over inconsistent allegations in the complaint. (See Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal.App.4th 1443, 1447; Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1474 [rejecting allegation contradicted by judicially noticed facts]. See also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[T]o the extent the factual allegations conflict with the content of the exhibits to the complaint, we rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”] See also Witkin, California Evidence (4th Ed., 2000) 1 Judicial Notice §3(3) [“It has long been established in California that allegations in a pleading contrary to judicially noticed facts will be ineffectual; i.e., judicial notice operates against the pleader.”])

In ruling on a demurrer the Court may not consider any extrinsic evidence. Accordingly the Court has not considered the declaration from Plaintiff submitted with the opposition to the demurrer, or any of the exhibits attached to the opposition.

As an initial matter Defendants’ demurrer to the entire Complaint and both causes of action on grounds of uncertainty is OVERRULED. Uncertainty is a disfavored ground for demurrer and is typically sustained only where the pleading is so bad the responding party cannot reasonably respond. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”]) Here it is apparent from Defendants’ more specific arguments that they understand what the Complaint at least attempts to allege and that there is no true uncertainty.

First Cause of Action—Declaratory Relief
To qualify for declaratory relief, a Plaintiff must demonstrate that his or her action presents two essential elements: (1) a proper subject of declaratory relief, and (2) an actual present controversy involving justiciable questions relating to Plaintiff’s rights or obligations. (Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1582. In order for a party to pursue an action for declaratory relief, the actual, present controversy must be pleaded specifically. Thus, a claim must provide specific facts, as opposed to conclusions of law, which show a controversy of concrete actuality. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal App 4th 497, 513-514, disapproved in part on another ground in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13.) A plaintiff may not use a claim for declaratory relief to create a cause of action that otherwise does not exist. (Id. at 513. See also Cotati v. Cashman (2002) 29 Cal.4th 69, 79-80 [a plaintiff cannot establish existence of actual, present controversy by pointing to the lawsuit in which he or she seeks declaratory relief].) Nor may a plaintiff use a claim for declaratory relief to evade the requirements of a specific statutory scheme, such as the statutory scheme governing non-judicial foreclosures. (See Filarsky v. Superior Court (2002) 28 Cal.4th 419, 433 [“[T]he court properly may refuse to grant relief where an appropriate procedure has been provided by special statute and the court believes that more effective relief can and should be obtained through that procedure. … In such a situation, the superior court would abuse its discretion if it permitted the plaintiff, by initiating an ordinary declaratory relief action, to circumvent the particular procedures and other provisions specified in the Legislature in the statutory scheme that was intended to govern such disputes.”])

Defendants’ demurrer to the first cause of action on the ground that it fails to state sufficient facts is SUSTAINED.

The Complaint fails to specifically plead the existence of any actual present controversy as to the parties’ rights and duties regarding the subject property. The Complaint consists of little more than general conclusory allegations (often alleged on information and belief) that Defendants’ interest in the subject property is somehow in doubt because of “securitization of loans” and alleged robo-signing of assignments.

Even if it is assumed for purposes of argument that Borrower/Owner Ralph Neal is not an indispensable party (as Defendants argue) and that Plaintiff’s ability to bring the claims alleged in the Complaint is equal to that of Neal (which Plaintiff has not established), Plaintiff still fails to state sufficient facts as neither Neal or Plaintiff have standing to bring any claim based on an allegedly unlawful assignment, securitization of the promissory note or deed of trust or robo-signing. (See Mendoza v. JPMorgan Chase, N.A. (2016) 6 Cal.App.5th 802, 815, noting that “post-Yvanova California appellate courts, in published opinions, have embraced the emerging consensus that assignments, which allegedly violate PSA’s and federal law are voidable rather than void, and as a result, borrowers do not have standing to challenge late transfers or other defects in the securitization process.”) As for robo-signing, Mendoza further stated that “[a]lthough the robo-signing allegation has been launched in many cases, plaintiff fails to cite any authority in which a court set aside a trustee’s sale based on a robo-signed document. To the contrary, a federal court explained: ‘[T]o the extent that an assignment was in fact robo-signed, it would be voidable, not void, at the injured party’s option.’ The bank, not the borrower would be the injured party.” (Id. at 819, citing Pratap v. Wells Fargo Bank, N.A. (N.D.Cal. 2014) 63 F.Supp.3d 1101, 1109.) The Mendoza Court noted that Pratap and another federal decision (Maynard v. Wells Fargo Bank, N.A. (S.D.N.Y. Sept. 11, 2013, No. 12cv1435 AJB (JMA)) 2013 WL 4883202) were “consistent with the prevailing view that plaintiff homeowners lack standing to challenge the validity of robo-signers.” (Id. at 820.)

To the extent the Complaint also appears to allege (at ¶ 32) that Defendants’ interest in the subject property would be in doubt if they cannot show possession of the promissory note or DOT, this also fails to allege any actual present controversy. The so-called “holder of the note” argument has been consistently and repeatedly rejected by the courts. (See, e.g., Debrunner v. Deutsche Bank Nat. Trust Co. (2012) 204 Cal.App.4th 433, 440; see also McCain v. Bank of America, N.A. (E.D. Cal. 2011) 2010 U.S. Dist. LEXIS 113956, 3 [stating that the “holder of the note” assertion is “untenable because under the California nonjudicial foreclosure statutes, the trustee or beneficiary is not required to a be a holder in due course of the instrument”].)

Leave to amend is DENIED as the defect cannot be cured. Even if Plaintiff were to exercise his option and purchase the subject property immediately there is no amendment he could make that would provide him standing to challenge any alleged unlawful assignment or securitization of the DOT or promissory note. Furthermore, the judicially noticed material establishes that there is no ambiguity to title to the subject property. Any ownership interest in the subject property Plaintiff currently has or may acquire from Ralph Neal by exercising his option to purchase will be subservient to Defendant Trust’s interest as he has always had, at a minimum, constructive notice of the recorded DOT and the recorded assignment. In addition, “[t]he court may refuse to exercise to the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc. § 1061; see also DeLaura v. Beckett (2006) 137 Cal.App.4th 542, 545 [stating “[t]he court also may sustain a demurrer without leave to amend if it determines that a judicial declaration is no ‘necessary or proper at the time under all the circumstances.’”]) There is no actual present controversy presented by the Complaint. There is no foreclosure pending, any interest in the subject property Plaintiff has is subject to the DOT, and Plaintiff has not exercised his option to purchase the property. Therefore, pursuant to Code Civ. Proc. § 1061, the Court finds that it is not necessary or proper at this time to make the requested declaration.

Second Cause of Action—Quiet Title
The elements of an action to quiet title are: (1) “the plaintiff is the owner and in possession of the land,” and (2) “the defendant claims an interest therein adverse to [the plaintiff].” (South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 740; see Code Civ. Proc., § 761.020.) In general, a “borrower may not … quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86 (Lueras); see Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707 [“mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee”]; Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 [borrower cannot quiet title without discharging the debt]; Burns v. Hiatt (1906) 149 Cal. 617, 622 [“As long as the obligation to pay the debt exists, it is not equitable that the mortgagor should have relief against the mortgage given to secure the same, and such relief can be given only on condition that he discharges the obligation”].)

A complaint in quiet title shall include the following: (1) a description of the property that is the subject of the action; (2) the title of the plaintiff as to which a determination is sought and the basis of that title; (3) the adverse claims to the title; (4) the date as of which the determination is sought; and (5) a prayer for determination of title against the adverse claims. (Code Civ. Proc., § 761.020.)

Defendants’ demurrer to the second cause of action on the ground that it fails to state sufficient facts is SUSTAINED. Again, even if it is assumed for purposes of argument that Owner/Borrower Neal is not an indispensable party and that Plaintiff may bring this claim based solely on his alleged “legal and equitable interest on the subject property being an Option holder,” Complaint at ¶ 43, the claim fails to state sufficient facts. Again, neither Plaintiff nor Neal have standing to bring any claim based on an alleged unlawful assignment, securitization of the promissory note or deed of trust or robo-signing. The Complaint’s vague, conclusory (and legally inaccurate) allegations that Defendants are somehow not holders in due course of the promissory note or DOT for the subject property because of securitization of the loan, etc. also do not adequately allege any “adverse claims to the title.”

Finally, as Plaintiff is not challenging the validity of the underlying debt (evidenced by the DOT), and is not suing to set aside or prevent a foreclosure sale, full tender is required. “A borrower may not, however, quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based.” (Lueras, supra, 221 Cal.App.4th at p. 86.)

As this is the first challenge to the pleading, 10 days’ leave to amend is GRANTED as to the second cause of action, but if Plaintiff cannot allege compliance with the tender rule the claim will not survive a further demurrer.

Plaintiff is cautioned that when a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the cause of action to which the demurrer has been sustained, not add entirely new causes of action. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) To raise claims entirely unrelated to those originally alleged requires either a new lawsuit or a noticed motion for leave to amend. Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion to strike. (See also Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [“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.”])