Case Number: KC069579 Hearing Date: March 14, 2018 Dept: J

Re: Mehdi Johari, et al. v. U.S. Bank, N.A., etc., et al. (KC069579)

DEMURRER TO FIRST AMENDED COMPLAINT

Moving Party: Defendant Federal National Mortgage Association (erroneously sued as Federal National Mortgage Association as Trustee for Fannie Mae Remic Trust 2007-26)

Respondents: No timely opposition filed (due 3/1/18)

POS: Moving OK

This is a wrongful foreclosure action involving plaintiffs’ residential property located at 411 N. Shellman Avenue in San Dimas. The complaint was filed 8/24/17. The First Amended Complaint, filed 12/1/17, asserts causes of action against Defendants U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust, Caliber Home Loan, Inc., Federal National Mortgage Association (erroneously sued as Federal National Mortgage Association as Trustee for Fannie Mar Remic Trust 2007-26) and Does 1-5 for:

1. Lack of Standing/Wrongful Foreclosure

2. Fraud in the Concealment

3. Fraud in the Inducement

4. Unconscionable Contract

5. Breach of Fiduciary Duty

6. Quiet Title

7. Slander of Title

8. Declaratory Relief

On 2/9/17, this case was removed to the U.S. District Court for the Central District of California; on or about 2/15/18, the case was remanded.

A Case Management Conference and Order to Show Cause re dismissal/ sanctions are set for 3/14/18.

Defendant Federal National Mortgage Association (erroneously sued as Federal National Mortgage Association as Trustee for Fannie Mae Remic Trust 2007-26) (“defendant”) demurs, per CCP § 430.10(e)&(f), to the first through eighth causes of action in Plaintiffs Mehdi Johari’s and Sherry Johari’s (“plaintiffs”) First Amended Complaint (“FAC”), on the basis that they each fail to state facts sufficient to constitute causes of action and are uncertain.

REQUEST FOR JUDICIAL NOTICE:

At the outset, defendant’s request for judicial notice (“RJN”) is ruled on as follows: grant as to Exhibit “1” (i.e., Chapter 13 Voluntary Petition filed 10/18/12 in the U.S. Bankruptcy Court, Central District of California, Case No. 2:12-bk-45065-SK); grant as to Exhibit “2” (i.e., “Order Granting Relief from the Automatic Stay Under 11 U.S.C. § 362” filed and entered 10/18/13 in Case No. 2:12-bk-45065-SK); grant as to Exhibit “3” (i.e., deed of trust recorded 2/13/07); grant as to Exhibit “4” (i.e., “Assignment of Deed of Trust” recorded 9/22/15); grant as to Exhibit “5” (i.e., “Opposition to Motion for Relief from Automatic Stay” filed 8/26/13 in Case No. 2:12-bk-45065-SK); grant as to Exhibit “6” (i.e., “Assignment of Deed of Trust” recorded 10/2/13); grant as to Exhibit “7” (i.e., “Assignment of Deed of Trust” recorded 2/1/17) and grant as to Exhibit “8” (i.e., “Stipulation resolving Motion for Relief from the Automatic Stay” filed 10/18/13).

“[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, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265, disapproved of on other grounds by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.)

The judicially noticeable exhibits reflect as follows: On 2/13/07, a deed of trust was recorded on the subject property, which identified IndyMac Bank, FSB as the lender, United General Title Insurance Company as trustee and MERS as beneficiary. (RJN, Exhibit “3”). On 10/18/12, plaintiff Mehdi Johari (“M. Johari”) filed for Chapter 13 bankruptcy. (Id., Exhibit “1”). On 10/2/13, an “Assignment of Deed of Trust” was recorded, wherein OneWest assigned the beneficial interest in the deed of trust to Ocwen Loan Servicing, LLC (“Ocwen”). (Id., Exhibit “6”). On 10/18/13, OneWest, “its assigns and/or successors in interest” and M. Johari entered into a “Stipulation Resolving Motion for Relief from the Automatic Stay.” (Id., Exhibit “8”). On 9/22/15, another “Assignment of Deed of Trust” was recorded, providing that Ocwen assigned the beneficial interest in the deed of trust to defendant. (Id., Exhibit “4”). On 2/1/17, another “Assignment of Deed of Trust” was recorded, providing that defendant assigned the beneficial interest in the deed of trust to U.S. Bank Trust, N.A., as trustee for LSF9 Master Participation Trust (“U.S. Bank Trust”). (Id., Exhibit “7”).

Initially, plaintiffs’ claims appear to be preempted by the Home Owners’ Loan Act (“HOLA”). Plaintiffs’ lawsuit against defendant is predicated on the alleged improperly recorded “Assignments of Deed of Trust,” which plaintiffs allege have failed to be perfected. 12 C.F.R. § 560.2 expressly states that “OTS [The Office of Thrift Supervision] is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA…”

Federal courts have deemed that claims arising from the “[p]rocessing, origination, servicing, sale or purchase or, or investment or participation in, mortgages” are preempted by HOLA. 12 C.F.R. § 560.2(b)(1)). In Castillo v. Wachovia (N.D.Cal. Apr. 11, 2012) 2012 WL 1213296, at *5, the district court held that HOLA preempted plaintiff’s claims based on the argument that defendants did not have authority to foreclose his home because the deed of trust was void from being sold to various investors: “Although Plaintiff’s allegations are not entirely clear and he only explicitly alleges a quiet title claim, the gravamen of his complaint is essentially that Defendants wrongfully foreclosed on his home and that he is the rightful owner of the subject property. Plaintiff alleges that Defendants did not have the authority to foreclose because they failed to produce the promissory note, MERS has “sold the Deed of Trust over and over[,] and the true beneficiary is unknown and has separated the Note and Deed of Trust making the deed of trust null and void.” Such claims, based on Defendants’ alleged failure to follow proper procedures in maintaining and servicing a loan and failure to demonstrate their authority to foreclose, have consistently been determined to fall under the umbrella of claims preempted by HOLA.”

In this case, the deed of trust identifies the originating lender as Indymac Bank, FSB; as such, plaintiff’s action is subject to HOLA preemption. Courts, moreover, have allowed successor entities not subject to HOLA to assert HOLA where the loan at issue originated with a federal savings bank. Osorio v. Wachovia Mort. F.S.B. (S.D. Cal. May 8, 2012) 2012 WL 1610110.

Plaintiffs’ claims appear to fall within the purview of HOLA preemption. Like the plaintiff in Castillo, plaintiffs here allege that defendants lack standing to foreclose because they “have failed to perfect any security interest in the Real Property collateral.” (FAC, ¶ 20). Each cause of action appears to be based on the claim that defendant, along with the other defendants, was not the actual beneficiary; accordingly, plaintiffs’ entire action concerns loan servicing and is thus preempted by HOLA.

Defendant next contends that plaintiffs’ claims are barred by the doctrine of judicial estoppel, on the basis that M. Johari did not disclose any of their current claims in his ongoing bankruptcy proceedings. “’”Judicial estoppel sometimes referred to as the doctrine of preclusion of inconsistent positions, prevents a party from ‘asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding…’”…It is an “’extraordinary remed[y] to be invoked when a party’s inconsistent behavior will otherwise result in a miscarriage of justice.’”’ (Daar & Newman v. VRL International (2005) 129 Cal.App.4th 482, 490-491).” Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 130-131. “In California, courts consider five factors in determining whether to apply judicial estoppel: ‘The doctrine [most appropriately] applies when “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.”’ (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986-987, quoting Jackson [v. County of Los Angeles (1997)] 60 Cal.App.4th [171,] at p. 183; accord, MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 422).” Id. at 131. “Judicial estoppel is an equitable doctrine and its application by the court is discretionary.” Levin v. Ligon (2006) 140 Cal.App.4th 1456, 1468.

“The meaning of ‘acceptance’ in the bankruptcy context is construed broadly to ‘protect[ ] the integrity of the bankruptcy process.’ Id. at 785. Among other possibilities, the grant of a discharge (even if later revoked) or the confirmation of a plan may constitute sufficient ‘acceptance’ of the accuracy of schedules so as to permit judicial estoppel.” In re An-Tze Cheng (9th Cir. BAP2004) 308 B.R. 448, 453. As an initial matter, the court notes that the Chapter 13 bankruptcy appears to involve only M. Johari. The bankruptcy is represented as ongoing. It does not appear, then, that defendants have established the third element of judicial estoppel.

Defendant next contends that plaintiffs acknowledged the validity of defendant’s ability to foreclose by stipulating to resolve the motion for relief from automatic stay and are thus estopped from taking a contradictory position. Again, however, the Chapter 13 bankruptcy appears to involve only M. Johari.

With that said, plaintiffs’ causes of action are not properly brought against defendant, as it is no longer the beneficiary and has no interest in the property. Again, plaintiffs’ claim is apparently based on the allegation that defendant “failed to perfect any security interest” in the property. (FAC, ¶ 20). Plaintiffs refer to “highly qualified expert witness, Michael Carrigan,” who claims that “the NOTE was sold, transferred, assigned and securitized into the FANNIE MAE REMIC TRUST 2007-26 with a Closing Date of September 28, 2005.” (Id., ¶ 15, 7:3-4). Plaintiffs adopt Carrigan’s conclusion that the transfer into the trust was allegedly made “[a]pproximately six (6) years” after the purported closing date, and claims that the assignment “is a document of impropriety requiring rescission for rightful foreclosure to take place[.]” (Id., 7:13-15).

The above judicially noticeable documents, however, reflect that the chain of title is clear and unbroken. Plaintiffs’ contention that the assignment from Ocwen to defendant is void for being made after the purported “closing date” of the “Fannie Mae REMIC Trust 2007-26” fails, because the assignment was never made to an entity called the “Fannie Mae REMIC Trust 2007-26;” rather, it was assigned to defendant. (RJN, Exhibit “4”). Regardless, “an assignment to a securitized trust made after the trust’s closing date is merely voidable.” Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 43. Plaintiffs also fail to allege any steps taken by defendant towards foreclosure. Again, defendant is not the current beneficiary of the mortgage. The bankruptcy is ongoing, and there is no indication that the automatic stay is not still in effect. Plaintiffs do not allege that a notice of default or notice of trustee’s sale has been recorded by any party.

Plaintiffs’ FAC fails for the following additional reasons:

SECOND AND THIRD CAUSES OF ACTION (i.e., FRAUD IN THE CONCEALMENT AND FRAUD IN THE INDUCEMENT, RESPECTIVELY):

“’”The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”’ (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638). ‘”Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 234.

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Archuleta v. Grand Lodge etc. of Machinists (1968) 262 Cal.App.2d 202, 208–209; Gautier v. General Telephone Co. (1965) 234 Cal.App.2d 302, 308; Mason v. Drug, Inc. (1939) 31 Cal.App.2d 697, 703; Sanders v. Ford Motor Co. (1979) 96 Cal.App.3d Supp. 43, 46; see Grossman & Van Alstyne, California Practice (2d ed. 1976) § 984, pp. 111–114.).” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.

Plaintiffs have failed to articulate what, if any, fraudulent misrepresentations were made to them, or by whom. Plaintiffs have not pled any factual allegations establishing some duty to disclose. They have failed to articulate how any action by defendant was either fraudulent, or how it induced them to act to their detriment.

FOURTH CAUSE OF ACTION (i.e., UNCONSCIONABLE CONTRACT):

The statute of limitations for claims based on a written contract is four years. CCP § 337(1). Any purported unconscionability claim began to accrue as soon as plaintiffs entered into the written agreements at issue (i.e., presumably the note and deed of trust, although they do not specifically allege which contracts they claim are voidable). Plaintiffs admit to acquiring the loan on 2/5/07. (FAC, ¶ 15, 6:26).

“An unconscionability claim accrues at the moment when the allegedly unconscionable contract is formed. Under California law, unconscionability of a contract or a contract clause is determined based on the law and facts at the time of the agreement.” Yerkovich v. MCA, Inc. (1997) 11 F.Supp.2d 1167, 1173. Plaintiffs’ claim, then, appears to be time-barred.

Additionally, plaintiffs have not alleged any specific facts concerning the circumstances surrounding the alleged unconscionability. No facts are alleged concerning duress or undue influence, or any other factual allegations concerning what transpired when the loan documents were signed. Defendant, moreover, was not the originating lender, as evidenced by the judicially noticeable documents.

FIFTH CAUSE OF ACTION (i.e., BREACH OF FIDUCIARY DUTY):

“The elements of a cause of action for breach of fiduciary duty are: 1) the existence of a fiduciary duty; 2) a breach of the fiduciary duty; and 3) resulting damage. (City of Atascadero v. Merill, Lynch, Pierce, Fenner & Smith, Inc. (1999) 68 Cal.App.4th 445, 483).” Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.

Here, defendant owed no fiduciary duties to plaintiff. “The relationship between a lending institution and its borrower-client is not fiduciary in nature.” Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1093, fn. 1.

SIXTH THROUGH EIGHTH CAUSES OF ACTION (i.e., QUIET TITLE, SLANDER OF TITLE AND DECLARATORY RELIEF, RESPECTIVELY):

Plaintiffs’ sixth through eighth causes of action are all based on the allegation that the recorded “Assignment[s] of Deed of Trust” somehow “cloud” their title and “void” the beneficiary’s right to enforce the deed of trust. However, as noted above, the judicially noticeable documents reflect that the chain of title is clear and unbroken. Additionally, plaintiffs lack standing to challenge any irregularities associated with the assignments.

Accordingly, defendant’s demurrer to plaintiffs’ entire FAC is sustained as to defendant Federal National Mortgage Association. The court will hear from plaintiffs 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 to state a valid cause of action against Fannie Mae if so.