Case Name: Severino L. Estillore v. Bank of America, N.A., et al.
Case No.: 2015-1-CV-287733

(1) Demurrer by Defendant JPMorgan Chase Bank, N.A. to Plaintiff Severino L. Estillore’s Second Amended Complaint; (2) Special Motion by Defendant Severson & Werson, PC to Strike Plaintiff Severino L. Estillore’s Second Amended Complaint; and (3) Demurrer by Defendants Bank of America, N.A., Countrywide Home Loans, CTC Real Estate Services, America’s Wholesale Lender, Mortgage Electronic Registration Systems, Inc., Specialized Loan Servicing, LLC, and Severson & Werson, PC to Plaintiff Severino L. Estillore’s Second Amended Complaint

Factual and Procedural Background

On or about November 16, 2005, plaintiff Severino L. Estillore (“Plaintiff”) and co-borrower Victor Lain (“Lain”) obtained two loans from defendant America’s Wholesale Lender (“AWL”) secured by deeds of trust (“DOTs”) on real property located at 1574 Albatross Drive, Sunnyvale, California (“Property”). (Second Amended Complaint (“SAC”), ¶¶ 5-8, Exs. B, E.) Plaintiff alleges that the defendants lack authority to initiate foreclosure proceedings against the Property because Lain never signed the promissory notes that were secured by the DOTs; the promissory notes were altered or forged; the initials on the DOTs were “forged or altered by one or more of the named Defendants;” various other documents recorded against the Property were “fabricated or altered;” the nominee under the DOTs—defendant Mortgage Electronic Registration System, Inc. (“MERS”)—does not have the authority to sign legal documents or transfer interest in the Property; AWL was never a valid corporation; defendant Lehman XS Trust Mortgage was in bankruptcy and defendant Veriprise Processing Solutions LLC “failed to provide proof that the Lehman Bankruptcy Trustee provided approval to proceed with the [Notice of Default];” defendant Countrywide Home Loans, Inc. (“CHL”) used AWL “in an effort to misrepresent and mislead … Plaintiff that [it] was the lender when in fact it was not;” “Defendants using MERS misled Plaintiff … as to who was the lender, and who held the DOT[s];” and “MERS and its employees knew or should have known that [the true] Lender was never a member of MERS and that Lender was not a New York corporation.” (Id., at ¶¶ 6-11.)

On April 25, 2016, Plaintiff filed the operative SAC against numerous defendants (including defendants Bank of America, N.A. (“BOA”), Countrywide Home Loans (“Countrywide”), CTC Real Estate Services (“CTC”), MERS, AWL, Specialized Loan Servicing, LLC (“SLS”) (collectively “Defendants”), Severson & Werson, PC (“S&W”), and JPMorgan Chase Bank, N.A. (“JPMorgan”), alleging causes of action for: (1) fraud and conspiracy; (2) misrepresentation; (3) cancellation of instruments; (4) unfair, unlawful, and fraudulent business practices; (5) quiet tittle; (6) accounting and equitable relief; and (7) declaratory relief.

Currently before the Court are the following matters: (1) the demurrer by JPMorgan to the SAC; (2) the special motion by S&W to strike the SAC; and (3) the demurrer by Defendants and S&W to the SAC. Plaintiff only filed papers in opposition to the demurrer by Defendants and S&W.

Discussion

I. JPMorgan’s Demurrer

JPMorgan demurs to each and every cause of action of the SAC on the ground of failure to allege facts sufficient to constitute a claim. (See Code Civ. Proc., § 430.10, subd. (e).)

As indicated above, Plaintiff did not file any opposition to JPMorgan’s demurrer. In addition, on June 30, 2016, Plaintiff requested that the SAC against JPMorgan be dismissed with prejudice. The dismissal was entered on the same date.

Given the dismissal, the Court finds that JPMorgan’s demurrer to the SAC is MOOT.

II. S&W’s Special Motion to Strike

Pursuant to Code of Civil Procedure section 425.16, S&W moves to strike the SAC on the ground that the claims alleged against it are based on protected activity (i.e., its representation of Defendants in this case) and Plaintiff cannot demonstrate a probability of prevailing on his causes of action.

A. Legal Standard

A defendant may bring a special motion to strike a cause of action “arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” (Code Civ. Proc., § 425.16, subd. (b)(1).) “The analysis of an anti-SLAPP motion . . . involves two steps.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 819-820.) The initial burden rests with the defendant to demonstrate that the challenged pleading arises from protected activity. (Code Civ. Proc., § 425.16, subd. (e); Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) To satisfy this burden, the defendant need only make a prima facie showing that the complaint “arises from” their constitutionally-protected free speech or petition activity. (See Governor Gray Davis Committee v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 458-459.) In determining whether the defendant has sustained this initial burden of proof, the court relies on the pleadings and declarations or affidavits. (Code Civ. Proc., § 425.16, subd. (b).)

Once the defendant makes a prima facie showing, the burden shifts to the plaintiff to establish a “probability” that it will prevail on whatever claims are asserted against the defendant. (See Code Civ. Proc., § 425.16, subd. (b).) The plaintiff’s burden in the second prong “is subject to a standard similar to that used in deciding a motion for nonsuit, directed verdict, or summary judgment.” (Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1570.) It requires the plaintiff to show that the complaint is both legally sufficient and supported by a sufficient prima facie evidence to sustain a favorable judgment. (Premier Med. Mgmt. Systems, Inc. v. Cal. Ins. Guar. Ass’n (2006) 136 Cal.App.4th 464, 476.) “The plaintiff need only establish that his or her claim has ‘minimal merit’ [citation] to avoid being stricken.” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 (“Soukup”).)

“In making its determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Code Civ. Proc., § 425.16, subd. (b)(2).) The evidence considered is that which would be admissible at trial. (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.) The court considers both parties’ pleadings and evidence without weighing “the credibility or comparative probative strength”; however, “it should grant the motion if, as a matter of law, the defendant’s evidence … defeats the plaintiff’s attempt to establish evidentiary support for the claim.” (Soukup, supra, at p. 291.) “The plaintiff may not rely on the allegations in the complaint or assertions in a declaration based on information and belief.” (Wong v. Tai Jing (2010) 189 Cal.App.4th 1354, 1368; accord Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1497.) Affidavits or declarations not based on personal knowledge, or that contain hearsay or impermissible opinions, or that are argumentative, speculative or conclusory, are insufficient to show a “probability” that the plaintiff will prevail. (Gilbert v. Sykes (2007) 147 Cal.App.4th 13, 26; Dwight R. v. Christy B. (2013) 212 Cal.App.4th 697, 714.)

B. Analysis

S&W argues that Plaintiff’s claims against it are based on protected activity. S&W points out that while Plaintiff names it as a defendant in the SAC, the allegations of the SAC do not identify any conduct by it that serves as a basis for Plaintiff’s claims. S&W states that its only connection to this case is its representation of Defendants in this matter and the only actions it has taken is filing demurrers to the operative pleadings.

Under Code of Civil Procedure section 425.16, protected acts include: any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; and any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law. (Code Civ. Proc., § 425.16, subd. (e)(1)(2).) Thus, protected activity includes statements, writings, and pleadings made and/or filed in connection with civil litigation. (See Ludwig v. Super. Ct. (1995) 37 Cal.App.4th 8, 17-19 [protected activity includes the filing, funding, and prosecution of a civil action]; see also Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1478 [statements, writings, and pleadings in connection with civil litigation are covered by the anti-SLAPP statute]; Haight Ashbury Free Clinic, Inc. v. Happening House Ventures (2010) 184 Cal.App.4th 1539, 1548.)
Here, S&W’s representation of Defendants in this action and the filing of demurrers on their behalf indisputably constitutes protected activity. Thus, S&W meets its initial burden and the burden shifts to Plaintiff to establish a probability that he will prevail on his claims against S&W. As articulated above, Plaintiff did not file any opposition to the instant motion. Consequently, Plaintiff fails to meet his burden.

C. Conclusion

For these reasons, S&W’s special motion to strike is GRANTED.

III. Defendants and S&W’s Demurrer

Defendants and S&W demur to each and every cause of action of the SAC on the ground of failure to allege facts sufficient to constitute a claim. (See Code Civ. Proc., § 430.10, subd. (e).)

A. Demurrer as it Pertains to S&W

As an initial matter, given the ruling on S&W’s special motion to strike, the demurrer is MOOT to the extent it is brought by S&W.

B. Request for Judicial Notice

Defendants’ request for judicial notice of various documents recorded against the Property is GRANTED. (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265 (“Fontenot”) [permitting judicial notice of recorded documents].)

C. Demurrer as it Pertains to Defendants

1. First and Second Causes of Action

The demurrer to the first cause of action for fraud and the second cause of action for negligent misrepresentation is SUSTAINED, without leave to amend.

“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. Super. Ct. (1996) 12 Cal.4th 631, 638 (“Lazar”); see also Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.) “Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) “The pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” (Commonwealth Mortgage Assurance Co. v. Super. Ct. (1989) 211 Cal.App.3d 508, 518.) “[T]his particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Lazar, supra, 12 Cal.4th at p. 645.)

Here, Plaintiff fails to plead sufficient facts supporting its claims. First, there are no allegations whatsoever demonstrating that: SLS made any false representations whatsoever to Plaintiff; SLS intended to defraud Plaintiff; Plaintiff relied on those representations; or Plaintiff was damaged as a result of the representations. The only allegation concerning SLS provides that SLS is a business entity. (SAC, ¶ 4.) This is wholly insufficient to state a claim for fraud and/or negligent misrepresentation against SLS.

Second, as Defendants persuasively argue, insofar as the claims are based on allegations relating to the loan’s origination (i.e., irregularities with respect to Lain’s signature and the DOTs) they are barred by the applicable statute of limitations. Claims for fraud are subject to a three-year statute of limitations (see Code Civ. Proc., § 338, subd. (d)); the DOTs were executed and the loan originated in 2005; and Plaintiffs filed this action on November 4, 2015.

Third, the particularized allegations asserted against BOA and MERS, which pertain to the recording of Assignments of Deed of Trust (“ADOTs”) in 2011 and 2013, are not sufficient to state a claim for fraud. Plaintiff alleges that the ADOTs were fraudulent, null, and void because MERS was merely acting as a nominee and, consequently, MERS and BOA did not have authority to execute the documents or otherwise assign the DOTs. (SAC, ¶¶ 17-19.) However, this argument was squarely rejected in Fontenot. (See Fontenot, supra, 198 Cal.App.4th at pp. 270-71, disapproved on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.)

Fourth, the remaining allegations regarding the misrepresentations made by AWL and Countrywide about the true identity of the lender and AWL’s status as a New York corporation fail to state a claim for fraud and/or negligent misrepresentation because Plaintiff fails to allege facts showing that he sustained damages as a result of the alleged misrepresentations.

2. Third Cause of Action

The demurrer to the third cause of action for cancellation of instruments is SUSTAINED, without leave to amend.

Civil Code section 3412 states that “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” In order to state a claim for cancellation of instruments, a plaintiff must specifically allege the particular instrument that he or she asserts constitutes a cloud on his or her title and “state facts, not mere conclusions, showing the apparent validity of the instrument designated, and point out the reason for asserting that it is actually invalid.” (Ephriam v. Metropolitan Trust Co. of Cal. (1946) 28 Cal.2d 824, 833-834.)

To the extent that this claim is based on the alleged invalidity of the loan documents due to fraud, Plaintiff fails to allege a valid fraud claim against Defendants to support cancellation. Furthermore, to obtain “rescission or cancellation, the rule is that the complainant is required to do equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the plaintiff has received in the transaction …. The rule applies although the plaintiff was induced to enter into the contract by the fraudulent representations of the defendant.” (Fleming v. Kagan (1961) 189 Cal.App.2d 791, 796.) Plaintiff has not alleged that he returned any of the funds that he received in connection with the loans. Therefore, Plaintiff fails to state a claim for cancellation of instruments.

3. Fourth Cause of Action

The demurrer to the fourth cause of action for unfair, unlawful, and fraudulent business practices is SUSTAINED, without leave to amend.

The viability of this claim is dependent upon the antecedent substantive causes of action. (See Price v. Starbucks Corp. (2011) 192 Cal.App.4th 1136, 1147; see also Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178.) Since the first through third causes of action do not survive demurrer, the fourth cause of action fails as well.

4. Fifth Cause of Action

The demurrer to the fifth cause of action for quiet title is SUSTAINED, without leave to amend.

Generally, a borrower may not quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based. (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707 [stating that a “mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee”]; Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 [finding that a borrower cannot quiet title without discharging the debt].) While there are a number of exceptions to the tender rule in the context of an action to set aside or prevent a foreclosure sale, those exceptions do not apply to an action to quiet title. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 87.) Here, Plaintiff fails to allege that he has tendered or is able to tender the debt secured by the Property. Thus, the fifth case of action fails to state a claim.

5. Sixth Cause of Action

The demurrer to the sixth cause of action for an accounting and equitable relief is SUSTAINED, without leave to amend.
The claim for an accounting is derivative of Plaintiff’s other causes of action and those causes of action do not survive demurrer. (See Janis v. Cal. State Lottery Com. (1998) 68 Cal.App.4th 824, 833 [“A right to accounting is derivative; it must be based on other claims.”].) Furthermore, “[a] cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) Plaintiff fails to allege a relationship existing between him and Defendants that requires an accounting. Lenders and loan servicers are not fiduciaries of a borrower as a matter of law. (See Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 312 [stating that no fiduciary duty exists between a borrower and lender in an arm’s length transaction]; Khan v. CitiMortgage, Inc. (E.D. Cal. 2013) 975 F.Supp.2d 1127, 1147 [stating that a loan servicer does not owe a fiduciary duty to a borrower].) Since Plaintiff does not allege any other facts indicating that the relationship between the parties requires an accounting, the sixth cause of action fails to state a claim.

6. Seventh Cause of Action

The demurrer to the seventh cause of action for declaratory relief is OVERRULED as to BOA, MERS, AWL, and CTC and SUSTAINED, without leave to amend, as to SLS and Countrywide.

A claim for declaratory relief must “set[] forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a contract and request[] that these rights and duties be adjudged by the court.” (Columbia Pictures Corp. v. De Toth (1945) 26 Cal.2d 753, 760; see also Code Civ. Proc., § 1060.) Code of Civil Procedure section 1060 specifically provides:

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.

Here, Plaintiff alleges that “[a]n actual controversy has arisen and now exists … concerning the use of SOT, AODOT, MERS and the validity of Defendants’ actions with respect to the Notes, DOTs and liens established by the Defendants.” (SAC, ¶ 50.) Plaintiff seeks a declaration providing that: “any action taken by Defendants, or any of their agents or representative[s] with respect to original loans and liens are null and void an have no effect whatsoever;” “any action taken by Defendants, or any of their agents or representative[s] that purports to bind Plaintiff contractually, or otherwise are null and void and have no effect;” and “[a]ny instrument executed or entered into by Defendants or any of their agents or representative[s] that purports to be on behalf of Plaintiff are null, void and unenforceable.” (SAC, ¶ 51.) As set forth in Code of Civil Procedure section 1060, Plaintiff can properly seek declaratory relief concerning his rights or duties with respect to another, or in respect to, in, over or upon a written instrument or property. Since BOA, MERS, AWL, and CTC are parties to the written instruments attached to the SAC and allegedly claim an interest in the Property, the claim for declaratory relief is proper. However, as the claim pertains to SLS and Countrywide, Plaintiff has failed to establish that declaratory relief is warranted. Based on the allegations of the SAC, those defendants are not parties to any of the documents attached to the SAC. Moreover, Plaintiff does not allege any facts demonstrating that those defendants are attempting to assert or otherwise claim any rights in the Property.