Case Number: KC066741    Hearing Date: July 22, 2014    Dept: J

Re: Ella M. Anderson, et al. v. HSBC Bank USA, N.A., etc., et al. (KC066741)

DEMURRER TO COMPLAINT

Moving Party: Defendant HSBC Bank USA, N.A.

Respondents: Plaintiffs Ella M. Anderson and Willie Anderson

POS: Moving OK; Opposing served by regular mail contrary to CCP § 1005(c)

In this action, Plaintiffs allege that Defendants are not entitled to foreclose on the subject property. The Complaint, filed by Plaintiffs in pro per on 3/20/14, asserts causes of action for:

1. Quiet Title
2. Wrongful Foreclosure

The Trial Setting Conference is set for 7/22/14.

[Procedural Note: The court takes judicial notice that the demurrer herein was filed by Defendant HSBC Bank USA, N.A. (“HSBC”) on April 21, 2014, one day prior to HSBC’s default being improperly entered by the default clerk upon request of the Plaintiffs. Said default is therefore ordered set aside.]

JUDICIAL NOTICE:

The court takes judicial notice of the documents recorded with the Los Angeles County Recorder’s Office, attached to Defendant’s request as Exhibits 1-4, 10-12 and 17, and the court records, attached to Defendant’s request as Exhibits 5-9, 12-16, but not as to the truth of the statements contained therein. (See Fremont Indem. Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 113 – “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.”)

The court declines to take judicial notice of the “Consent Order” and amendment thereto attached to Plaintiffs’ request as Exhibits 1-2. It is unclear whether these documents are part of the official record of the Department of the Treasury Comptroller of the Currency. [The documents attached are not certified and/or file-stamped, and it is unclear where they were obtained from.]

DEMURRER:

Defendant HSBC Bank USA N.A. (“Defendant”) demurs to the Complaint on the grounds that it fails to state sufficient facts to constitute a cause of action against Defendant.

DEMURRER BASED ON JUDICIAL ESTOPPEL:

The doctrine of judicial estoppel may be invoked to prevent a party from asserting claims inconsistent with claims that party has previously asserted with success: “[A]bsent any good explanation, a party should not be allowed to gain an advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an incompatible theory.” (New Hampshire v. Maine (2001) 532 US 742, 749 (internal quotes omitted).) The doctrine is intended to protect the integrity of the judicial process and “to prevent parties from playing fast and loose with the courts.” (Id. at 749–750.) Judicial estoppel is an equitable doctrine a court invokes at its discretion. (Id. at 750.)

“In completing bankruptcy schedules, a debtor should list any legal claims against a creditor whose wrongful conduct caused the bankruptcy; otherwise, an action on the claim is barred.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1609-1614 – Where the borrower failed to list a possible claim for fraud and breach of contract against a lender for conduct alleged to involve a fraudulent scheme by the lender and other defendants to wrongfully deprive them of title to property without notice of foreclosure and for predatory lending practices, the court of appeal held that the borrower’s failure to list such claims on its bankruptcy schedules gave rise to a judicial estoppel that could be asserted on demurrer against a subsequent post-bankruptcy complaint against the lenders filed by the borrowers.)

The judicially noticed documents demonstrate that Plaintiffs did not list any of their claims asserted in the Complaint as assets in their bankruptcy proceedings. (RJN, Exhs. 7, 9, 14 and 16.) Thus, the demurrer based on judicial estoppel is sustained.

FIRST CAUSE OF ACTION FOR QUIET TITLE:

To state a cause of action for quiet title, the complaint must allege: (1) a description of the property; (2) plaintiff’s title or interest therein and the basis; (3) defendant’s assertion of an adverse claim or antagonistic property interest; (4) the date as of which the determination is sought; and (5) a prayer for determination of title. (CCP §761.020.) Further, a mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee.” (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707.)

The allegations in the Complaint demonstrate that Plaintiffs obtained the benefits of their loan and, in exchange, admittedly executed the note and deed of trust. (Complaint ¶ 3, Exhs. C and D.) The Complaint, however, does not allege that Plaintiffs have paid their debt. Instead, Plaintiffs offer vague and ambiguous theories as to why the loan is no longer enforceable, e.g., the recorded assignment of deed of trust is invalid and the process of transferring the loan to a securitized trust somehow fully satisfied their obligation to repay the loan. The Complaint, however, fails to allege adequate facts demonstrating that the assignment is invalid or how the securitization satisfied their obligations.

Moreover, the authority of the lender’s (beneficiary’s) nominee to initiate nonjudicial foreclosure proceedings is beyond judicial challenge notwithstanding the fact the nominee merely holds legal title to the subject property and is not the owner of the underlying promissory note. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 — the authority of lender’s nominee (“MERS”) to initiate foreclosure proceedings could not be challenged where trust deed named lender’s nominee and granted it foreclosure rights; see also Siliga v. Mortgage Electronic Registration Systems (2013) 219 Cal.App.4th 75, 82 – Allowing a trustor-debtor under a deed of trust to pursue preemptive judicial action challenging the authority of a foreclosing beneficiary or beneficiary’s agent, absent a specific factual basis for alleging that the foreclosure was not initiated by the correct party, would unnecessarily interject the courts into the comprehensive nonjudicial foreclosure scheme created by the Legislature, and would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive, and efficient remedy.)

Further, the alleged “securitization of the loan does not in fact alter or affect the legal beneficiary’s standing to enforce the deed of trust.” (Reyes v. GMAC Mortgage LLC (D.Nev. Apr. 5, 2011) 2011 WL 1322775, at *2; see also Nguyen v. Bank of Am. Nat’l Ass’n (N.D.Cal. Nov. 15, 2011) 2011 WL 5574917, at *9 – securitization of mortgage loan does not provide mortgagor with cause of action.) “[S]ecuritization merely creates ‘a separate contract, distinct from [p]laintiffs[’] debt obligations” under the note, and does not change the relationship of the parties in any way. (Commonwealth Prop. Advocates, LLC v. First Horizon Home Loan Corp. (D.Utah Nov. 16, 2010) 2010 WL 4788209, at *2.)

The Complaint fails to allege adequate facts demonstrating that Defendant is asserting an adverse claim or antagonistic property interest to the property. The Complaint also fails to allege that Plaintiffs have paid their debt. Thus, the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR WRONGFUL FORECLOSURE:

To assert a claim for wrongful foreclosure, plaintiff must allege that: (1) the trustee or mortgagee caused an illegal, fraudulent or willfully oppressive sale of real property; (2) pursuant to a power of sale contained in a mortgage or deed of trust; and (3) the trustor or mortgagor sustained damages. (Munger v. Moore (1970) 11 Cal. App. 3d 1, 7; See also Sierra-Bay Fed. Land Bank Ass’n v. Sup. Ct. (1991) 227 Cal. App. 3d 318, 337 – trustee sale under deed of trust presumed valid, but debtors may obtain equitable relief to set aside a foreclosure, upon showing unfairness or irregularity of the sale, inadequate price, and an offer to pay the debt.)

A plaintiff in an action to set aside a trustee’s sale must offer to do equity through redemption of the property, that is, must tender the outstanding indebtedness. (Karlsen v. American Sav. & Loan Asso. (1971) 15 Cal.App.3d 112.) Tender is required whoever the plaintiff may be, trustor (mortgagor) or junior lienor. (Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575.) California Courts have expanded the application of the tender rule to any cause of action that is based upon allegations of wrongful foreclosure or that seeks redress from foreclosure. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109.)

In reliance on California Commercial Code § 3301, Plaintiffs allege Defendant is not in possession of the note and is therefore not entitled to enforce the deed of trust. (Complaint ¶ 10.) However, as to nonjudicial foreclosure sales, reliance upon provisions of the California Commercial Code, pertaining to negotiable instruments, is misplaced. (Debrunner v. Deutsche Bank Nat. Trust Co. (2012) 204 Cal.App.4th 433, 440.)

Plaintiffs also allege that the assignment of deed of trust was recorded in violation of Civil Code § 2932.5. (Complaint ¶¶ 13-15.) However, 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; see also Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 518 – 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.)

The Complaint fails to allege an illegal, fraudulent or willfully oppressive sale of real property. The Complaint also fails to allege tender. Accordingly, the demurrer to the second cause of action is sustained.

The court will hear from Plaintiffs as to whether leave to amend is requested, and will require an offer of proof as to what additional facts can be alleged if so.