Filed 4/23/20 Banks v. Wells Fargo Bank, N.A. CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION ONE

JAMES D. BANKS,

Plaintiff and Appellant,

v.

WELLS FARGO BANK, N.A. et al.,

Defendants and Respondents.

A156501

(San Francisco City & County

Super. Ct. No. CGC18564504)

Plaintiff James D. Banks appeals from a judgment of dismissal following the sustaining of demurrers to his second amended complaint without leave to amend. This case arises from the confluence of several events—the death of Banks’ mother which triggered the right of Wells Fargo Bank to foreclose on the “reverse mortgage” she had obtained and secured through a deed of trust on the property in dispute, and Banks’ subsequent quiet title action against his siblings based on his claim that he once jointly owned the property with his mother and, at the time she obtained the reverse mortgage, she promised to leave the property to him in her will (a claim on which he was eventually successful). We affirm the judgment.

BACKGROUND

Prior Lawsuit

In 1974, Banks and his mother purchased the San Francisco property at issue, taking title as joint tenants. Banks then moved out of the area. On retiring, he returned in 2003, moving in with his mother to be her caretaker. The following year, he and his mother looked into a “reverse mortgage.” Wells Fargo advised that, given Banks’ age (then less than 62 years old), if he remained on the title, it could not provide such a mortgage. Banks transferred his interest to his mother. She, in turn, orally promised to bequeath the property to him by will.

Wells Fargo and his mother then entered into a reverse mortgage agreement in early 2005, and over the years she borrowed slightly more than $200,000. His mother, however, failed to prepare the anticipated will prior to her death in 2014 and died intestate.

Under the deed of trust securing the loan, payoff was required when the borrower died and the property securing the loan was not the principal residence of at least one surviving borrower. On the occurrence of such event, the deed of trust authorized the lender to invoke the power of sale and hold a foreclosure sale. Wells Fargo contacted Banks about the mortgage loan and allegedly advised Banks he could request an extension to repay the loan and if his mother’s estate was in probate, the bank could request an extension from the Department of Housing and Development (HUD) before foreclosure commenced.

Banks submitted the documentation Wells Fargo requested and asked for forbearance of acceleration and foreclosure. He advised the bank he intended to gain full ownership of the property through the probate court and thereafter would refinance the property and pay off the Wells Fargo loan. Wells Fargo allegedly told him HUD had approved an extension through mid-September 2015, and that subsequent extension requests would be considered on submission of additional documentation.

Rather than working with Banks to obtain a further delay of foreclosure, Wells Fargo, in mid-September, proceeded to exercise its right to foreclose and referred the loan to First American Title for commencement of foreclosure proceedings. Banks appealed through the Wells Fargo internal review process but was told no further extensions were possible and his only alternative was to pay off the loan. He did not do so, and a notice of trustee’s sale was recorded in January 2016.

In the meantime, instead of prosecuting his claim of ownership of the property through the probate court, Banks filed a quiet title action against his siblings, claiming to be the sole owner of the property. Following the recording of the notice of trustee’s sale, Banks filed a complaint against First American seeking injunctive relief to prevent the foreclosure sale until his quiet title claims against his siblings were resolved. The trial court issued a temporary restraining order, but shortly denied his request for a preliminary injunction.

Several months later, Banks filed an amended complaint, adding Wells Fargo as a defendant. Banks claimed Wells Fargo had entered into an “implied contract” to postpone foreclosure pending requests to HUD for extensions. The trial court again issued a temporary restraining order, but denied preliminary injunctive relief, ruling Banks had not shown likelihood of success on the merits.

Banks and Wells Fargo then engaged in settlement discussions over the course of about three months, during which Wells Fargo was excused from filing a responsive pleading and refrained from moving forward with a foreclosure sale. During these discussions, in a “third and final” settlement offer, Wells Fargo offered to postpone the sale until mid-December. The parties did not settle. Banks refused to do so because he was concerned the quiet title trial, set for mid-November, might be continued and because he was not comfortable with some of the terms Wells Fargo required in a release.

Settlement discussions having failed, Wells Fargo demurred to the first amended complaint. It maintained Banks lacked standing to interfere with the foreclosure sale and further maintained it had made no promise to Banks to further delay the sale. Banks moved to strike the demurrer on numerous grounds, including because it was “a sham” as the parties had reached a “[c]onditional” settlement.

The trial court denied Banks’ motion to strike, the court’s minutes stating Wells Fargo had properly interposed a demurrer in light of the parties “failed settlement negotiations.” (Capitalization omitted.) The court ordered the prevailing party, i.e., Wells Fargo, to prepare a written order in accordance with California Rules of Court, rule 3.1312(b). Banks maintains Wells Fargo failed to prepare the order “prior to the deadline set by the court.”

As for Wells Fargo’s demurrer, the court continued the hearing for a month, until December, observing that it “appears that [Banks] is considering a dismissal” and authorizing Banks to “file a dismissal in lieu of opposition” to the demurrer.

Banks choose to file a dismissal with prejudice. At this point, the quiet title claims against his siblings were set for trial in mid-December and the foreclosure sale was set for early January 2017.

Trial on his quiet title claims was continued again, to early February. In February, after a quarter day of trial, Banks obtained judgment on his claims.

In the meantime, the foreclosure sale proceeded, and the property was sold on January 31 to Courthouse Ventures Inc.

The Present Lawsuit

A year later, in February 2018, Banks filed the instant case against Wells Fargo and Courthouse Ventures Inc. Each interposed a demurrer, which the trial court sustained with leave to amend.

In June, Banks filed a first amended complaint, adding four new defendants who allegedly had an interest in the property. He alleged the same causes of action asserted in his original complaint. All defendants filed demurrers, which the court again sustained with a final opportunity to amend.

Banks filed a second amended complaint in September. He again re-alleged the causes of action in his original complaint—for “breach of implied contract,” “breach of implied promise,” “unjust enrichment,” “wrongful foreclosure,” and “quiet title.” The quiet title cause of action was asserted only against Courthouse Ventures Inc. and the individual defendants.

All defendants again interposed demurrers, which the trial court sustained, this time without leave to amend. The court subsequently entered a judgment of dismissal.

DISCUSSION

All of Banks’ causes of action are ultimately grounded on the claim Wells Fargo, by allegedly failing to timely prepare the court-requested written order denying his motion to strike in the prior lawsuit, and by virtue of its postponement of the foreclosure sale during settlement negotiations and its continued postponement during the motion to strike and demurrer proceedings in the prior lawsuit, made an “implied” settlement offer to further postpone the foreclosure sale until resolution of his quiet title action against his siblings, which he “accepted” by filing the dismissal.

As we explain, these allegations do not suffice to support any of Banks’ five causes of action.

Breach of “Implied” Contract

Banks’ first cause of action is entitled, “Breach of Implied Contract.” For there to be an enforceable contract, whether express or implied-in-fact, there must, among other things, be a mutual meeting of the minds. (See Division of Labor Law Enforcement v. Transpacific Transportation Co. (1977) 69 Cal.App.3d 268, 275 [a “vital element[] of a cause of action based on contract [is] mutual assent (usually accomplished through the medium of an offer and acceptance)” and is a requisite element of both express and implied-in-fact contracts].)

“ ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’ ” (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208, quoting Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141; see Meyer v. Benko (1976) 55 Cal.App.3d 937, 942–943, disapproved on another ground in Reid v Google (2010) 50 Cal.4th 512, 524 [existence of mutual consent “is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe”].)

Banks has not alleged conduct by Wells Fargo that can, under an objective standard, reasonably be understood as manifesting an intent to enter into a settlement agreement consisting of a promise by it to further postpone the foreclosure sale until the conclusion of Banks’s quiet title action against his siblings, upon Banks’ filing a dismissal.

As we have recited, Banks alleged he and Wells Fargo entered into settlement negotiations and during that period of time, Wells Fargo refrained from proceeding with the foreclosure sale and was excused from filing a response to Banks’ complaint. During these negotiations, Wells Fargo offered to postpone the sale until mid-December. Banks further alleged, however, that the parties did not reach a settlement, because he feared his quiet title case against his siblings would be continued past December and because he would not agree to Wells Fargo’s required release language. Wells Fargo therefore filed a responsive pleading, demurring to the complaint. Banks responded with a motion to strike the demurrer, claiming he and Wells Fargo had reached a “[c]onditional” settlement. Wells Fargo disputed this assertion, and the trial court denied Banks’s motion, with the court’s minutes stating Wells Fargo had properly interposed a demurrer given the parties “failed settlement negotiations.” (Capitalization omitted.) The court then gave Banks the option of dismissing Wells Fargo or responding to its demurrer. The court also asked Wells Fargo to prepare a written order for the court’s signature, memorializing the court’s ruling.

Banks’ “implied” settlement theory is predicated entirely on Wells Fargo’s alleged failure to timely submit the requested written order, which conduct he claims constituted an “offer” by Wells Fargo to further postpone the foreclosure sale until after the conclusion of his quiet title action against his siblings. This simply is not a “reasonable meaning” that can be ascribed to Wells Fargo’s alleged failure to prepare a written order at the trial court’s directive and pursuant to the California Rules of Court. And while Banks alleges he believed Wells Fargo’s alleged failure to timely prepare the written order was such an offer in light of its postponement of the foreclosure sale during the parties’ settlement negotiations and during the motion and demurrer proceedings, his subjective belief does not substitute for statements or conduct by Wells Fargo that could reasonably be understood to manifest assent to the “implied” settlement agreement Banks alleged. (See Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1587 [“[m]utual assent to contract is based upon objective and outward manifestations of the parties; a party’s ‘subjective intent, or subjective consent, therefore is irrelevant,’ ” italics added].)

For this reason, alone, Banks failed to sufficiently allege the requisite elements of a cause of action for breach of implied contract, and Wells Fargo’s demurrer to this cause of action was properly sustained.

Breach of “Implied Promise”

To the extent Banks’ second cause of action entitled “Breach of Implied Promise” is a recycling of his breach of implied contract theory, his allegations are insufficient for the reason we have discussed above.

To the extent this cause of action is one for “promissory estoppel,” as Banks suggests in his appellate briefing, his allegations are likewise deficient for the reason we have discussed in connection with his breach of implied contract cause action. “[E]xcept for its equitable nature and the lack of a necessity for consideration, promissory estoppel claims are akin to contract actions.” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 903.) Promissory estoppel substitutes reliance on a promise as a substitute for bargained-for consideration. (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1412–1413 (Fleet).) Thus, just as a breach of contract claim must be based on an express promise, or on conduct that reasonably is understood to convey such a promise, so too must an equitable estoppel claim seeking to enforce the asserted promise. (See US Ecology, at p. 904 [“promissory estoppel claims are aimed solely at allowing recovery in equity where a contractual claim fails for a lack of consideration, and in all other respects the claim is akin to one for breach of contract”].) As we have discussed above, Banks has not alleged conduct by Wells Fargo that reasonably could be understood as evidencing a promise to further postpone the foreclosure sale until resolution of Banks’s quiet title action against his siblings on Banks’s filing of a dismissal.

Additionally, “a cause of action for promissory estoppel is inconsistent with a cause of action for breach of contract based on the same facts.” (Fleet, supra, 229 Cal.App.4th at p. 1413.) Only “ ‘[w]hen a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.’ ” (Ibid.; accord, Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2016) 6 Cal.App.5th 1207, 1224–1225.) Here, Banks’ original and amended complaints reflected no “doubt” as to the conduct he claims gave rise to an implied settlement agreement. On the contrary, he consistently, and specifically, identified the conduct by Wells Fargo on which he based his breach of implied contract claim. Accordingly, for this reason as well, he failed to allege a viable promissory estoppel cause of action.

Unjust Enrichment

As for Banks’ third cause of action for “Unjust Enrichment,” there is no independent cause of cause of action in California for unjust enrichment. “ ‘The phrase “Unjust Enrichment” does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.’ (Lauriedale Associates, Ltd. v. Wilson (1992) 7 Cal.App.4th 1439, 1448. . . .) Unjust enrichment is ‘ “a general principle, underlying various legal doctrines and remedies,” ’ rather than a remedy itself. (Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1315 . . . .) It is synonymous with restitution. (Id. at p. 1314.)” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793 (Melchior).)

Banks correctly points out that in a recent opinion issued by a different division of this Court, the court commented “this Appellate District appears split” on whether unjust enrichment stands as an independent cause of action. (O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, 791.) The court went on to explain, however, that the nomenclature is essentially irrelevant, as this district, as does every other, equates a claim for “unjust enrichment” as a claim for “restitution.” (Ibid.; see, e.g., Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1132; Melchior, supra, 106 Cal.App.4th at p. 793.)

And regardless of whether a separate “claim” can be made for restitution, “restitution is a remedy and not a freestanding cause of action” (Reid v. City of San Diego (2018) 24 Cal.App.5th 343, 362, italics added; McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 (McBride)), and must be sought in connection with a legally cognizable theory that can support restitutionary relief. (McBride, at p. 387 [whether amended complaint claiming unjust enrichment and seeking restitutionary relief “was properly sustained depends . . . not on the nature of the damages [the plaintiff] seeks, but rather on the viability of the causes of action he has attempted to plead].)

McBride, decided by the same division of our court that decided O’Grady, explained, “[t]here 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. (See generally 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, §§ 148–150, pp. 218–220; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, §§ 112, 118, pp. 137–138, 142–144.) 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’). (See, e.g., Murrish v. Industrial Indemnity Co. (1986) 178 Cal.App.3d 1206, 1209 . . . [election to waive tort and sue in assumpsit is a fiction that broadens remedies available to plaintiff, but does not create a contract where none existed]; see generally 55 Cal.Jur.3d (May 2004) Restitution and Constructive Contracts, § 21.) In such cases, where appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to the parties’ intent, in order to avoid unjust enrichment. (See generally 1 Witkin, Summary of Cal. Law, supra, Contracts, §§ 91, 95–96, 99–110, 116, pp. 122–123, 125–126, 128–136, 140–141; 3 Witkin, Cal. Procedure, supra, Actions, § 160, pp. 229–230; see also 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 517, pp. 607–608 [discussing use of common count to seek quasi-contractual restitution in lieu of tort damages].)” (McBride, supra, 123 Cal.App.4th at p. 388.)

In McBride, the court pointed out the plaintiff had “abandoned” any contract claim, and therefore examined his allegations to determine whether any supported a quasi-contractual or assumpsit theory of recovery based on the defendant’s allegedly tortious conduct. (McBride, supra, 123 Cal.App.4th at pp. 388–389) and concluded, largely for public policy reasons, that they did not. (Id. at pp. 389–395.)

Here, in contrast, Banks never “abandoned” his contract claim. On the contrary, he consistently pleaded that he and Wells Fargo entered into an implied agreement. Nor did he ever allege this implied agreement “is unenforceable or ineffective for some reason” (McBride, supra, 123 Cal.App.4th at p. 388), necessitating recovery through a quasi-contractual claim and restitution.

Furthermore, Banks’ allegations do not support quasi-contractual recovery for “fraud, duress, conversion, or similar conduct” such that restitution would be warranted to avoid “unjust enrichment.” As we have discussed, he has not alleged any conduct by Wells Fargo that could reasonably constitute a promise to further postpone the foreclosure sale on which Banks could reasonably rely. In short, Banks’ allegations do not allege a circumstance where Wells Fargo’s conduct, by any reasonable measure, induced an injustice. (See McBride, supra, 123 Cal.App.4th at p. 389 [restitution is available only if “ ‘the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.’ ”]; see also Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1250 [causes of action for “unjust enrichment, rescission, or restitution” properly dismissed where they were simply “ ‘derivative . . . [of] other causes of action’ ” as to which no sufficient factual bases were alleged].)

Wrongful Foreclosure

In his second amended complaint, Banks alleged that his fourth cause of action, for “wrongful foreclosure,” was “derivative” of his first three causes of action, and in his opening brief on appeal he asserts the same. Because we have concluded Banks’ first three causes of action fail to sufficiently allege a claim, his fourth, derivative cause of action, also necessarily fails. (See Krantz v. BT Visual Images (2001) 89 Cal.App.4th 164, 178 [where remaining causes of action are “incidental to and depend upon the validity (or invalidity) of the preceding claims for relief,” their viability “depend[s] on the fate of the antecedent substantive causes of action”].)

Quiet Title

Banks’ fifth cause for “quiet title” is asserted against Courthouse Ventures Inc., which purchased the property in 2017 at the foreclosure sale, and the two individuals who subsequently purchased the property in 2018 from Courthouse and the two individuals who funded that purchase.

A quiet title cause of action generally has two elements: (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 West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 802–803; Code Civ. Proc., § 761.020.)

Moreover, it is the general rule that the holder of equitable title cannot maintain a quiet title action against a legal owner. (See G.R. Holcomb Estate Co. v. Burke (1935) 4 Cal.2d 289, 297 [“[i]t has been repeatedly held in this state that an action to quiet title will not lie in favor of the holder of an equitable title as against the holder of a legal title”].) The limited exception permitting the holder of an equitable interest to maintain a quiet title action against a legal owner is relatively narrow and has been recognized primarily in cases involving fraud or breach of fiduciary duty by the holder of legal title. (See, e.g., Strong v. Strong (1943) 22 Cal.2d 540, 545–546 [equitable rights could not be established in quiet title action absent finding of fraud]; Warren v. Merrill (2006) 143 Cal.App.4th 96, 110–112 [quieting title in condominium purchaser where real estate agent breached fiduciary duty to purchaser by fraudulent procuring title to property]; see generally, 5 Witkin, Cal. Procedure (2020) Pleading, § 667 [“plaintiff who attacks the legal title on equitable grounds is in effect contending that the defendant obtained legal title by fraud or similar inequitable conduct, and must specifically allege the facts constituting that conduct”].)

At all relevant times—that is, after Banks conveyed his interest in the property to his mother until after the foreclosure sale—Banks could make no claim of holding legal title. Rather legal title was first held by his mother, and after the foreclosure sale, by Courthouse Ventures Inc., and later, by the two individuals who purchased the property from Courthouse. That Banks ultimately prevailed on his quiet title claims against his siblings, did not alter the fact that, by then, Courthouse Ventures Inc. held title to the property. Accordingly, he could not then claim more than a beneficial ownership interest in the property.

Thus, to sufficiently allege a quiet title claim against Courthouse Ventures Inc. and its transferees, Banks was required to allege the kind of egregious conduct by the holders of legal title necessary to bring his quiet title cause of action within the limited exception discussed above. He did not so, and his allegations are therefore insufficient to support his cause of action for quiet title.

Banks maintains he alleged an alternative quiet title “theory” based on his “claim of an oral agreement between [Banks] and his mother dating to December 2004.” Such agreement “pre-dated the Deed of Trust” and Banks thus alleged his claim “therefore was superior to it” and “therefore was not foreclosed by the trustee sale.” Banks further alleged Courthouse Ventures Inc. had “constructive notice” of his “pre-Deed of Trust unrecorded ownership claim [i.e., the claim based on the oral agreement with his mother] by the lis pendens” he recorded at the outset of his quiet title action. According to Banks, Courthouse thus “took its trustee deed subject to the judgment” subsequently entered in his quiet title action. Banks further alleged that because the sale to Courthouse “extinguished” the Deed of Trust securing the reverse mortgage, the language of the quiet title judgment expressly making his newly confirmed title subject to the Deed of Trust, was rendered “a legal nullity.” Banks thus alleged the trustee deed conveying the property to Courthouse Ventures Inc. was “void.”

This “theory” is unavailing for at least two reasons. First, Banks’ assertion that the oral promise by his mother was first in time and therefore superior to the Wells Fargo deed of trust is incorrect. The first in time priority rule applies only to properly recorded interests in real property. (See generally Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1099.) The alleged oral promise by his mother to bequeath the property to him is not an ownership interest. At most, Banks had an expectancy of an ownership interest in the future.

Second, because the Wells Fargo deed of trust was properly recorded, it secured the priority of not only its ownership interest, but also the priority of its successor’s ownership interest. As the court explained in Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1498: “Title conveyed by a trustee’s deed relates back to the date when the deed of trust was executed. (Bank of America v. Hirsch Merc. Co. (1944) 64 Cal.App.2d 175, 184 . . . .) The trustee’s deed therefore passes the title held by the trustor at the time of execution. (Hohn v. Riverside County Flood Control etc. Dist. (1964) 228 Cal.App.2d 605, 612, [superseded by statute on another ground as stated in Miller v Provost (1994) 26 Cal.App.4th 1703, 1707–1708]. . . .).” Accordingly, Courthouse Ventures took the title held by Wells Fargo at the time Banks’ mother executed the deed of trust—title that was unencumbered by any subsequent ownership claim by Banks. The same goes for the title Courthouse conveyed to individual defendants.

While Banks claims he could amend to include a legal description of the property—also a requirement for a quiet title claim that he admittedly failed to plead—he has not suggested how he could overcome the hurdle he faces pursuing a quiet title claim against the legal owners whose title derives from Wells Fargo Bank’s first in time interest.

DISPOSITION

The judgment of dismissal is AFFIRMED. The parties to bear their own costs on appeal.

 

_________________________

Banke, J.

We concur:

_________________________

Margulies, Acting P.J.

_________________________

Sanchez, J.

A156501, Banks v. Wells Fargo Bank