Case Number: KC066754    Hearing Date: August 19, 2014    Dept: J

Re: Janina Storace v. NDEX West, LLC, etc., et al. (KC066754)

DEMURRER TO COMPLAINT; MOTION TO STRIKE

Moving Parties: Defendants Wells Fargo Bank, N.A. and US Bank, N.A.

Respondent: No timely opposition filed

POS: Moving OK

The Complaint herein, filed on, 3/27/14, asserts causes of action for:

1. Wrongful Foreclosure
2. Injunctive Relief
3. Fraud in the Concealment
4. Intentional Infliction of Emotional Distress
5. Quiet Title
6. Slander of Title
7. Declaratory Relief
8. Rescission
9. Violation of Bus & Prof C § 17200

The Case Management is set for 8/19/14.

DEMURRER:

Defendants Wells Fargo Bank, N.A. and US Bank, N.A. (collectively “Defendants”) demur to the Complaint on the grounds that it fails to state facts sufficient to constitute a cause of action against Defendants.

JUDICIAL NOTICE:

The court takes judicial notice of the documents recorded with the Los Angeles County Recorder’s Office, attached to Defendants’ request as Exhibits A-E. (Ev C § 452(c); Lockhart v. MVM, Inc. (2009) 175 Cal.App.4th 1452, 1460.) The court also takes judicial notice of the court records, attached to Defendants’ request as Exhibits F-G.) (Ev C § 452(d).)

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 Complaint essentially alleges that Defendants did not have standing to foreclose on the subject property due to improper securitization and transfer of Plaintiff’s loan, and that Defendants failed to give statutory notice of the foreclosure. The loan originated on or about March 15, 2006 (Complaint ¶ 14) and the Notice of Default was recorded on or about January 7, 2011 (ID. ¶ 19).

However, the judicially-noticed documents demonstrate that Plaintiff did not list any of her claims asserted in the Complaint as assets in her February 12, 2013 Chapter 7 bankruptcy petition. (RJN, Exh. G.) Thus, the demurrer based on judicial estoppel is sustained.

FIRST CAUSE OF ACTION FOR WRONGFUL FORECLOSURE:

“Case law instructs that the elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.” (Long v. Citibank, N.A. (2011) Cal.App.4th 89, 104, internal quotes omitted.)

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.)

The Complaint alleges that Defendants wrongfully foreclosed on Plaintiff’s property based on untrue and fabricated documents that were “promulgated through counterfeit securities and/or assignments [sic] instruments” and that Defendants lacked the authority to foreclose on Plaintiff’s property. (Complaint ¶¶45-64.) The Complaint further alleges that she was not contacted to explore options to avoid foreclosure, that Defendants violated CC §§ 2924(a)(6), 2923.5(a), 2923.5(g)(2) and 2923.6, and that there was no declaration in the notice of default in violation of CC § 2923.5(b). (Id. ¶¶ 45-64.)

However, the Complaint fails to adequately allege facts demonstrating that Plaintiff suffered any prejudice and/or tendered the amount of the indebtedness. Moreover, while the Complaint alleges that Defendants lack standing to foreclose of Plaintiff’s property, 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 — 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.)

To the extent that Plaintiff’s cause of action is based on violations the Perata Mortgage Relief Act (CC § 2923.5 et seq.), the only remedy for a violation of the statute requiring a lender to contact the borrower to explore options to prevent foreclosure before filing a notice of default is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with the statute (See Mabry v. Super.Ct. (Aurora Loan Services) (2010) 185 Cal.App.4th 208, 223); and the judicially noticed documents demonstrate the subject property has already been sold at a trustee’s sale. (Defendants’ RJN, Exh. E.) Thus, the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR INJUNCTIVE RELIEF:

Injunctive relief requires a wrongful act stating a cause of action and basis for equitable relief (e.g., ordinarily irreparable harm must be threatened, or a remedy at law is inadequate). (Brownfield v. Daniel Freeman Marina Hosp. (1989) 208 Cal. App. 3d 405, 410.)

The Complaint fails to adequately allege a wrongful act by Defendants as a basis for the injunction. Therefore, the demurrer to second cause of action is sustained.

THIRD CAUSE OF ACTION FOR FRAUD IN THE CONCEALMENT:

The elements of fraud are: (1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. (See CC § 1709.) Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. (See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.) The statute of limitations for actions based on fraud is three years. (CCP § 338(d).)

The Complaint fails to adequately allege fraud with the required specificity. Moreover, the Complaint alleges that the fraud occurred during the origination of the loan, on or about March 14, 2006. (Complaint ¶¶ 14, 79-83.) However, Plaintiff did not bring this action until March 27, 2014, after the statute of limitations expired. Thus, the demurrer to the third cause of action is sustained.

FOURTH CAUSE OF ACTION FOR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS:

Intentional Infliction of Emotional Distress requires (1) outrageous conduct by defendant; (2) intentional or reckless causing emotional distress; (3) severe emotional distress; and (4) causation. (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal. App. 4th 1228, 1259.) Conduct is extreme and outrageous when it exceeds all bounds of decency usually tolerated by a decent society, and is of a nature which is especially calculated to cause, and does cause, mental distress. Liability does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590; see also Cochran v. Cochran (1998) 65 Cal.App.4th 488, 494.)

The Complaint fails to adequate allege facts demonstrating any “outrageous” conduct by Defendants. Accordingly, the demurrer to the fourth cause of action is sustained.

FIFTH CAUSE OF ACTION FOR SLANDER OF TITLE:

Slander of title is a false and unprivileged disparagement, oral or written, of the title to real or personal property, resulting in actual pecuniary damage. (Glass v. Gulf Oil Corp. (1970) 12 Cal.App.3d 412, 419.)

The Complaint alleges that Defendants disparaged Plaintiff’s title by the recording of foreclosure documents, including the Notice of Default, Notice of Trustee’s Sale and Trustee’s Deed, because Defendants had no right, title or interest in the subject property. (Complaint ¶¶ 99-100.) However, as discussed above, these allegations are fundamentally flawed and fail to state any cognizable claim for relief. Further, notices of such as those filed by Defendants in this case pursuant to a non-judicial foreclosure action constitute privileged communications. (See CC § 2924(d).) The Complaint fails to allege adequate facts demonstrating that Defendants disseminated unprivileged, false or malicious communications regarding Plaintiffs’ title to the subject property. Thus, the demurrer to the fifth cause of action is sustained.

SIXTH 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 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 Complaint fails to allege that Plaintiff has paid her debt. Thus, the demurrer to the sixth cause of action is sustained.

SEVENTH CAUSE OF ACTION FOR DECLARATORY RELIEF:

An action for declaratory relief lies when there is an actual bona fide dispute between parties as to a legal obligation arising under the circumstances specified in CCP § 1060 and, in addition, the controversy must be justiciable – i.e., presents a question as to which there is more than one answer. (Western Motors Servicing Corp. v. Land Development & Inv. Co. (1957) 152 Cal.App.2d 509.) CCP § 1060 requires that (1) there is person interested under a written instrument or a contract; or (2) a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property; and, an actual controversy. (CCP §1060; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal. App. 4th 592, 605-06.)

The Complaint fails to adequately allege an actual controversy. Thus, the demurrer to the seventh cause of action is sustained.

EIGHTH CAUSE OF ACTION FOR RESCISSION:

A contract may be rescinded if the consent of the party rescinding was obtained through mistake or fraud. (CC § 1689(b)(1).) The party seeking rescissionary relief must “promptly,” upon discovering the facts entitling him or her to rescind, restore to the other party “everything of value” received under the contract or offer to restore the benefits received “upon condition that the other party do likewise” … unless the other party “is unable or positively refuses to do so.” (CC § 1691(b); see also Myerchin v. Family Benefits, Inc. (2008) 162 Cal.App.4th 1526, 1533.)

The TILA imposes extensive disclosure requirements upon creditors making consumer loans or extending consumer credit. The TILA’s disclosure requirements enable consumers to readily compare various credit terms available to them and avoid the uninformed use of credit. The disclosure requirements also protect consumers against inaccurate and unfair credit practices. (See 15 USC § 1601(a); Ljepava v. M.L.S.C. Props., Inc. (9th Cir. 1975) 511 F2d 935, 942–943.) Broadly, the disclosures must be made clearly and conspicuously in writing (i.e., in a “disclosure statement”). (15 USC § 1632(a); 12 CFR §§ 226.5(a) (1), 226.17(a)(1), 226.31(b).) Generally, TILA provides that borrowers have until midnight of the third business day following the consummation of a loan transaction to rescind the transaction. (15 U.S.C. § 1635(a).) A borrower’s right of rescission is extended from three days to three years if the lender (1) fails to provide notice of the borrower’s right of rescission or (2) fails to make a material disclosure. (12 C.F.R. § 226.23(a)(3).) One year statute of limitation from the date of the loan origination applies to TILA damage claims. (15 U.S.C. § 1640(e).)

The Complaint fails to adequately allege any basis to rescind the loan and/or that Plaintiff is ready, willing, or able to return the consideration she received pursuant to the loan. Moreover, Plaintiff’s request to rescind the loan under TILA is time-barred, i.e., the loan was originated in 2006, but Plaintiff did not file this action until 2014. Thus, the demurrer to the eighth cause of action is sustained.

NINTH CAUSE OF ACTION FOR VIOLATION OF BUS & PROF C § 17200:

In order to properly assert a claim for Unfair Business Practices, Bus & Prof C. § 17200, the complaint must allege a business practice that is unfair, unlawful or fraudulent, and an authorized remedy. (Bus & Prof C § 17200.)

The Complaint fails to allege adequate facts demonstrating a business practice that is unfair, unlawful or fraudulent. Thus, the demurrer to the ninth cause of action is sustained.

MOTION TO STRIKE

Based on the above, the motion to strike is deemed moot.

The court will hear from Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof as to what additional facts can be alleged if leave to amend is granted.