2013-00153984-CU-OR

Michael J Santos vs. Bank of America NA

Nature of Proceeding:   Hearing on Demurrer to Cross-Complaint

Filed By:  Enos, Robert J.

***  If oral argument is requested, the parties must at the time oral argument is
requested notify the clerk and opposing party of the specific causes of action
that will be addressed at the hearing.  The parties are also reminded that
pursuant to local court rules, only limited oral argument is permitted on law and
motion matters.  ***

Plaintiff/cross-defendant Santos’ demurrer to Bank of America’s (“Bank”) cross-
complaint is SUSTAINED in part and OVERRULED in part, with leave to amend, as
follows.

Moving counsel is admonished because the notice of demurrer does not provide the
correct address for Dept. 54.

This case arises out of a $360,000 mortgage which plaintiff obtained in 2006 and
which was secured by a recorded deed of trust.  According to plaintiff’s own complaint,
mortgage payments have not been made since before October 2009 and yet in April
2010, without plaintiff’s knowledge, MERS, acting as nominee of the lender, executed
and recorded both a substitution of trustee and full reconveyance. (Compl., ¶¶7, 11.)
Additionally, the complaint alleges in Paragraph 12 that despite the 2010
reconveyance, Bank recorded in August 2013 a notice of default and election to sell.
Plaintiff then filed in November 2013 his complaint asserting causes of action (“COA”)
for declaratory and injunctive relief, quiet title, slander of title and unfair competition.

Claiming that the April 2010 reconveyance to plaintiff was an error, Bank filed a cross-
complaint against plaintiff which purports to state five (5) causes of action (“COA”) for  quiet title, declaratory relief, unjust enrichment, judicial foreclosure and breach of
contract.  Plaintiff now demurs to all COA on various grounds but primarily the statute
of limitations.  Bank opposes.

th
Breach of Contract.  Plaintiff demurs to the 5   COA claiming that it is barred by the
four year statute of limitations because the cross-complaint itself specifically alleges
plaintiff has not made any payment on his mortgage loan “since at least 2008.” (Cr-
compl., ¶55.)

The demurrer to the contract COA is overruled.  In Aryeh v. Canon Business Solutions,
Inc., the California Supreme Court stated in January 2013:

Generally speaking, continuous accrual applies whenever there is a continuing
or recurring obligation: “When an obligation or liability arises on a recurring
basis, a cause of action accrues each time a wrongful act occurs, triggering a
new limitations period.” [Citation omitted.]  Because each new breach of such
an obligation provides all the elements of a claim –wrongdoing, harm, and
causation [Citation omitted] — each may be treated as an independently
actionable wrong with its own time limit for recovery. (Aryeh v. Canon Business
Solutions, Inc. (2013) 55 Cal.4th 1185, 1199.)

Here, the promissory note attached to the cross-complaint expressly provides in
Paragraph 3.(A) that the borrower, identified on Page 6 as “Michael J. Santos,” shall
make a payment on the first day of each month and moreover, Paragraph 7.(D) states
that the “Note Holder[’s]” failure to enforce the contract upon plaintiff’s default does not
waive the former’s right to enforce it if there is a subsequent default.  Accordingly, the
Court must reject plaintiff’s suggestion that the contract claim is barred by the statute
of limitations.

rd
Unjust Enrichment.  Plaintiff contends the 3   COA fails because “unjust enrichment”
is not in California a valid COA but merely a remedy and because it is barred by the
three year statute of limitations governing claims for relief based on “mistake.”

This demurrer is overruled as well.  Although there is some authority for the
proposition that “unjust enrichment” is itself not a valid COA in this state, the Federal
Deposit Insurance Corp. v. Dintino decision (not only cited by plaintiff himself in
connection with his statute of limitations argument but also very similar factually to the
case at bar) required the Court of Appeal to consider whether the trial court properly
denied the borrower’s motion for summary adjudication of the lender’s COA for “unjust
enrichment” and “money lent.” (Federal Deposit Insurance Corp. v. Dintino (2008) 167
Cal.App.4th 333, 338, 359.)  Inasmuch as the denial of summary adjudication was
affirmed as to the “unjust enrichment,” this Court declines to sustain the demurrer to
the “unjust enrichment” claim on the ground it is not a valid COA particularly given the
factual similarities between Dintino and the case at bar.

While Dintino did conclude that the three year statute of limitations applicable to claims
based on “mistake” also governed the lender’s “unjust enrichment” claim, the Fourth
District also held that the “discovery rule” may delay the commencement of the
limitations period.  However, this Court rejects plaintiff’s argument that Bank in the
present case “knew or should have known” of the April 2010 mistaken reconveyance
at the latest in May 2010, when plaintiff failed to make his monthly mortgage payment.
(Mov. Memo. P&A, p.3:13-p.4:4.)  Had he been current on his loan just prior to the
mistaken reconveyance in April 2010, plaintiff’s argument might have merit but here,
both his own complaint and the cross-complaint specifically allege that plaintiff had
stopped making all monthly payments long before the mistaken reconveyance.  As
such, the non-receipt of a mortgage payment in May 2010 did not under those
circumstances give Bank any reason to investigate.  Coupled with the allegation in
Paragraph 46 that Bank only “recently” discovered the 2010 mistaken reconveyance,
the Court must reject plaintiff’s statute of limitations argument regarding the 3rd COA.

st
Quiet Title.  Plaintiff maintains that the 1   COA is deficient because (1) Bank did not
specify the date as of which the determination of title is sought or include all necessary
parties who will be affected by the Court’s determination and (2) it is barred by the
three year statute of limitations governing claims for relief based on “mistake,” as
discussed in Dintino.

The demurrer based on the statute of limitations is overruled for the same reasons
discussed above in connection with the “unjust enrichment” claim.  To the extent the
demurrer is based on the failure to join all necessary parties, it is overruled because
plaintiff failed to identify any necessary parties who have not been named in the cross-
complaint.  However, since the Court agrees that the cross-complaint does not comply
with the requirements of Code of Civil Procedure §761.020(d) relating to the date as of
which the determination of title is sought, the demurrer is sustained in part.

th
Judicial Foreclosure.  Plaintiff insists the 4   COA is “frivolous” because it is barred by
the four year statute of limitations governing claims based on a written contract and
because Bank admits in its cross-complaint that plaintiff defaulted on his mortgage
loan back in 2008, which is more than four years before the cross-complaint was filed
in January 2014.

The Court overrules the demurrer based on the two grounds advanced by plaintiff.
The Court rejects the statute of limitations argument for the same reasons cited in
st
connection with plaintiff’s demurrer to the 1   COA for breach of contract.  Although the
April 2010 mistaken reconveyance currently precludes Bank from foreclosing on the
subject property, the cross-complaint adequately alleges that the relief pled in the 4th
COA will be sought in the event the Court determines Bank’s claimed lien against the
property is “valid and enforceable.”  This is sufficient to survive demurrer.

Declaratory Relief.  Plaintiff demurs to the 2nd COA, arguing that it is barred by the
three year statute of limitations governing claims for relief based on “mistake,” as
discussed in Dintino.

This demurrer is overruled for the reasons set forth above in connection with the 3rd
COA for “unjust enrichment” claim.  In short, while a three year statute of limitations
may apply here, the “discovery rule” effectively extends the time when the limitations
period commences and the Court rejects plaintiff’s suggestion that Bank “knew or
should have known” of the April 2010 mistaken reconveyance at the latest in May 2010
since plaintiff had not made any monthly mortgage payments for many months
according to his own complaint, longer according to the cross-complaint.
Consequently, the Court holds that Bank had no reason to investigate based on
plaintiff’s failure to pay in May 2010 or in the months thereafter.

Where the demurrer has been sustained, leave to amend is granted as this is the first
challenge to Bank’s cross-complaint.  Bank may file and serve an amended cross-            complaint no later than 7/7/2014.  Although not required by court rule or statute,
Bank is directed to present a copy of this order when the amended pleading is
presented for filing.

Plaintiff to respond within 10 days if the amended cross-complaint is personally
served, 15 days if served by mail.

If plaintiff demurs to the amended cross-complaint or moves to strike, a copy of the
amended cross-complaint shall be included with the moving papers.

This minute order is effective immediately.  No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)