Case Number: KC069773 Hearing Date: February 23, 2018 Dept: J

Re: Jose Campa, et al. v. Deutsche Bank National Trust Company, etc., et al. (KC069773)

DEMURRER TO COMPLAINT

Moving Parties: Defendants Deutsche Bank National Trust Company, as Trustee for GSAA Home Equity Trust 2006-17, Asset-Backed Certificates, Series 2006-17 and Litton Loan Servicing, LLC

Respondents: Plaintiffs Jose Campa and Esther M. Campa

POS: Moving OK; Opposing OK; Reply OK

This is a wrongful foreclosure action involving plaintiffs’ residential property located at 13241 Dart Street in Baldwin Park. The complaint, filed 11/6/17, asserts causes of action against Defendants Deutsche Bank National Trust Company, as Trustee for GSAA Home Equity Trust 2006-17, Asset-Backed Certificates, Series 2006-17 and Litton Loan Servicing, LLC for:

1. 1. Wrongful Foreclosure

2. 2. Negligence

3. 3. Violation of Business & Professions Code § 17200

A Case Management Conference is set for 4/2/18.

Defendants Deutsche Bank National Trust Company, as Trustee for GSAA Home Equity Trust 2006-17, Asset-Backed Certificates, Series 2006-17 and Litton Loan Servicing, LLC (“defendants”) demur, per CCP § 430.10(e), to the first through third causes of action in Plaintiffs Jose Campa’s and Esther M. Campa’s (“plaintiffs”) complaint, on the basis that they each fail to state facts sufficient to constitute causes of action.

REQUEST FOR JUDICIAL NOTICE:

Defendants’ request for judicial notice (“RJN”) is ruled on as follows: GRANT as to Exhibit “1” (i.e., voluntary Chapter 13 bankruptcy petition filed 9/19/09 in Case No. 2:09-bk-34961-VK); GRANT as to Exhibit “2” (i.e., voluntary Chapter 13 bankruptcy petition filed 12/2/09 in Case No. 2:09-bk-44042-EC) and GRANT as to Exhibit “3” (i.e., voluntary Chapter 13 bankruptcy petition filed 3/3/10 in Case No. 2:10-bk-17833-VZ).

At the outset, plaintiffs’ complaint appears to be time-barred. On or about 6/19/06, plaintiffs borrowed $360,000.00, which was secured by a deed of trust against the property located at 13241 Dart Street in Baldwin Park. (Complaint, ¶ 17, Exhibit “A”). Plaintiffs fell behind on their mortgage payments in or about 2009, and a “Notice of Default and Election to Sell Under Deed of Trust” was recorded on or about 4/9/09. (Id., ¶¶ 18 and 20, Exhibit “B”). On or about 7/17/09, a “Notice of Trustee’s Sale” was recorded, scheduling an auction sale date of 8/6/09 at 10:30 a.m. in Norwalk. (Id., ¶ 22, Exhibit “C”). Plaintiffs claim that they were unaware of the ongoing foreclosure proceedings. (Id., ¶ 23). Plaintiffs complain that they had no contact with defendants yet inconsistently also allege that they were “under the impression that they were being reviewed for a loan modification.” (Id., ¶¶ 20-23). The trustee’s sale of the property occurred on 4/12/10, over seven years before the complaint herein was filed. (Id., ¶ 24, Exhibit “D”). The statute of limitations for plaintiffs’ first and second causes of action, for Wrongful Foreclosure and Violation of Civil Code § 2924(a)(1), respectively, is three years. CCP § 338(a). The statute of limitations for plaintiffs’ third cause of action, for Violation of Business and Professions Code § 17200 et seq., is four years. B&P Code § 17208.

“Civil actions, without exception, can only be commenced within the periods prescribed in this title, after the cause of action shall have accrued, unless where, in special cases, a different limitation is prescribed by statute.” CCP § 312. “The general rule for defining the accrual of a cause of action sets the date as the time when the cause of action is complete with all of its elements.” Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 389.

An exception to the general rule of accrual is the “discovery rule,” “which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action, until, that is, he at least suspects, or has reason to suspect, a factual basis for its elements.” Id. “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’ (McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160). In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’ (Ibid.)” Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 (emphasis theirs).

Here, plaintiffs’ causes of action accrued upon the sale of the property at public auction on 4/21/10. While plaintiffs allege that they “did not become aware of their legal right to pursue…relief until 2016 when they met with a loan representative at a non-profit foreclosure agency” (Complaint, ¶ 14), they provide no facts to suggest that they were unaware of the foreclosure of the property until 2016. Plaintiffs admittedly signed loan documents granting the power of sale to defendants in the event of their default on the loan. (Id., ¶ 17). They also admittedly fell behind on their mortgage payments in 2009. (Id., ¶ 18). Instead, plaintiffs appear to base their claim for tolling on ignorance of the law. However, “[i]t is irrelevant [to tolling] that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action.” Gutierrez v. Mofid (1985) 39 Cal.3d 892, 898.

Plaintiffs’ estoppel argument likewise fails. “An estoppel against a limitations defense usually ‘”arises as a result of some conduct by the defendant, relied on by the plaintiff, which induces the belated filing of the action.”’ (Prudential-LMI Com. Insurance v. Superior Court [(1990)] 51 Cal.3d [674,] at pp. 689-690; Velasquez v. Truck Ins. Exchange (1991) 1 Cal.App.4th 712, 723; 3 Witkin, Cal. Procedure (3d ed.1985), Actions, § 523, p. 550.).” Spray, Gould & Bowers v. Associated Internat. Ins. Co. (1999) 71 Cal.App.4th 1260, 1267-1268.

“’”Four elements must ordinarily be proved to establish an equitable estoppel: (1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon the conduct to his injury.”’ (DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Café & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59).” Id. at 1268. Plaintiffs have not pled these elements.

Additionally, plaintiffs’ complaint fails for lack of pleading tender. “[A]s a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. (Abdallah [v. United Savings Bank (1996)] 43 Cal.App.4th [1101,] at p. 1109; Onofrio [v. Rice (1997) 55 Cal.App.4th 413,] at p. 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action].) ‘The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].’ (FPCI RE-HAB 01 v. E&G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022.)” Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.

There are exceptions to the requirement to tender the debt, which are: 1) the borrower attacks the validity of the debt (e.g., based on fraud); 2) the borrower has a counter-claim or set-off against the beneficiary sufficient to cover the amount due; 3) it would be inequitable as to a party not liable for the debt; and 4) the trustee’s deed is void on its face, apart from equitable principals (e.g., trustee lacked power to convey property). Id. at 112-113. Plaintiffs assert that they should be excused from tender “because the assignment that was recorded was void due to transferring of the loan’s security instrument into a closed trust.” (Opposition, 3:21-23). Any such transfer, however, would merely be voidable by the parties to the transfer, not by plaintiffs. See Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 815 (“an untimely assignment to a securitized trust made after the trust’s closing date is…merely voidable”).[1] Plaintiffs also contend that requiring them to tender would be inequitable, but present no facts to support their contention.

Plaintiffs have also failed to join the indispensable third party purchaser, NBG Properties, LLC, as a party to this action. Plaintiffs seek, inter alia, “[a] judicial declaration of the rights, duties and interests of the respective parties and the validity of the sale” and “[f]or issuance of an order cancelling the Notice of Default, Notice of Trustee’s Sale and Trustee’s Deed Upon Sale.” (Prayer, ¶¶ 1 and 4). Defendants have not specially demurred on this ground per CCP § 410.10(d) (although they reference the need to add the third party purchaser in 14:11-12 of their demurrer), but it is nevertheless noted.

Plaintiffs’ causes of action also fail for the following additional reasons:

FIRST CAUSE OF ACTION (i.e., WRONGFUL FORECLOSURE):

“The HBOR took effect on January 1, 2013. See Sabherwal v. Bank of New York Mellon (S.D.Cal. Sept. 10, 2013) 2013 WL 4833940, at * 10. ‘California courts comply with the legal principle that unless there is an express retroactivity provision, a statute will not be applied retroactively unless it is very clear from extrinsic sources that the Legislature … must have intended a retroactive application.’ Id. (quoting Myers v. Philip Morris Cos., Inc. (2002) 28 Cal.4th 828, 841). The HBOR does not state that it has retroactive effect. Id.” Rockridge Trust v. Wells Fargo, N.A. (N.D.Cal. 2013) 985 F.Supp.2d 1110, 1152. The provisions cited by plaintiff, i.e., Civil Code §§ 2923.5, 2923.55, 2924.12 and 2924.17, are thus inapplicable to plaintiffs’ loan, as the foreclosure notices and trustee’s sale all took place in or before the year 2010.

Additionally, HBOR is inapplicable to the loan and property at issue because plaintiffs did not reside at the subject property as their principal residence, as evidenced by their bankruptcy filings. Civil Code § 2924.15 provides that the certain provisions of HBOR “apply only to first lien mortgages or deed of trust that are secured by owner-occupies residential real property…”

Accordingly, defendants’ demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION (i.e., NEGLIGENCE/VIOLATION OF CIVIL CODE § 2924(A)(1)):

Plaintiffs’ allegations are based on the conclusion that the loan was improperly securitized and is thus void. More specifically, plaintiffs claim that the loan was not transferred into the securitized trust prior to the closing date under the pooling and servicing agreement.

Plaintiffs, however, lack standing to challenge the transfer. In Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, the California Supreme Court held that a borrower had standing to sue for wrongful foreclosure based on an allegation that the assignment of the note and deed of trust was void. However, Yvanova declined to hold that an allegation that a loan was transferred into a securitized trust after the trust’s closing date is a sufficient allegation to maintain a claim that an assignment was “void” rather than “voidable.” Id. at 931 (“We did not include in our order the question or whether a postclosing date transfer into a New York securitized trust is void or merely voidable, and though the parties’ briefs address it, we express no opinion on the question here”). Again, as previously discussed an untimely assignment to a securitized trust made after the trust’s closing date is voidable. Staerbak, supra, 245 Cal.App.4th at 815 and Kalnoki, supra, 8 Cal.App.5th at 43.

Additionally, the securitization and/or assignment of the loan did not cause plaintiffs prejudice, as their obligations under the loan remained the same. “[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…” Reyes v. GMAC Mortg. LLC (D. Nev. 2011) 2011 WL 1322775, at *3.

Also, plaintiffs base their claim on the recorded “Assignment of Deed of Trust.”(Complaint, ¶ 40). The recording of an assignment of deed of trust in California is permissive under its nonjudicial foreclosure scheme. See Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 122. Recorded assignments of deed of trust merely provide constructive notice. Civil Code § 2934. Transfer of the loan carries with it the deed of trust as a matter of law. Civil Code § 2936 (“[t]he assignment of a debt secured by mortgage carries with it the security”). The date of the recorded “Assignment of Deed of Trust,” then, does not denote the actual date that Investor acquired the loan.

Defendants’ demurrer to the second cause of action, then, is sustained.

THIRD CAUSE OF ACTION (i.e., VIOLATION OF BUSINESS & PROFESSIONS CODE § 17200):

“Business and Professions Code section 17200…establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent.” Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647. “The ‘unlawful’ practices prohibited by section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made. (People v. McHale (1979) 25 Cal.3d 626, 632).” Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838-839. If a business practice is alleged to be “unlawful,” then the complaint “must state facts supporting the statutory elements of the alleged violation.” 5 Witkin, Cal. Procedure (5th ed. 2008), Pleading, § 779, p. 196.

Moreover, “any finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 186-187. Lastly, “[a] fraudulent business practice under section 17200 ‘is not based upon proof of the common law tort of deceit or deception, but is instead premised on whether the public is likely to be deceived.’ (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1498). Stated another way, ‘In order to state a cause of action under the fraud prong of [section 17200] a plaintiff need not show that he or others were actually deceived or confused by the conduct or business practice in question. “The ‘fraud’ prong of [section 17200] is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived.” [Citations.]’ (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167).” Progressive West Ins. Co. v. Yolo County Superior Court (2005) 135 Cal.App.4th 263, 284.

Plaintiffs have not factually alleged any unlawful, or unfair, or fraudulent business practice by defendants.

Additionally, plaintiffs cannot show any compensable injury in fact to demonstrate standing to recover under Business & Professions Code § 17200. “A private plaintiff must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition. (§ 17204; Buckland [v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798] at p. 817).” Peterson v. Celico Partnership (2008) 164 Cal.App.4th 1583, 1590. Here, plaintiffs do not allege that there is actual monetary loss or property loss. Plaintiffs cannot allege property loss. They concede that they fell behind in making payments on the loan and thus defaulted. See Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 614 (“his prospect of losing the home to foreclosure is the result of default, not the alleged conduct of defendants”); see also Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099 (i.e., causation requirement of UCL not met if plaintiffs would have suffered “the same harm whether or not a defendant complied with the law”).

Finally, the viability of an unfair competition law cause of action stands or falls with plaintiffs’ other causes of action, which are insufficiently pled, for the reasons set forth above. See Krantz v. BT Visual Images, L.L.C. (2001) 89 Cal.App.4th 164, 178.

Defendants’ demurrer to the third cause of action is sustained.

The court will hear from counsel for plaintiffs as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

[1] Although the Sixth District Court of Appeal in Glaski v. Bank of America, National Association (2013) 218 Cal.App.4th 1079 determined that an assignment of a deed of trust to a securitized trust governed by New York law that is made after the trust’s closing date is void, the Third District Court of Appeal in Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23 noted that Glaski acknowledged that “its holding was at odds with numerous decisions finding that a plaintiff lacks standing to challenge the validity of the securitization process because any alleged irregularities merely render such an assignment voidable not void. (Glaski, supra, 218 Cal.App.4th at pp. 1096-1097).” Id. at 43. The Kalnoki Court of Appeal further noted that “the trial court decision upon which Glaski relied has also since been overturned. (Wells Fargo Bank, N.A. v. Erobobo (N.Y. App. Div. 2015) 127 A.D.3d 1176, 1178).” Id. The Kalnoki Court of Appeal declined to follow Glaski and “conclude[d] that an assignment to a securitized trust made after the trust’s closing date is merely voidable.” Id.