Case Number: BC587615 Hearing Date: April 26, 2018 Dept: 53

sunny kim vs. wilmington savings fund society , et al.,

BC587615, APRIL 26, 2018

[Tentative] Order RE: DEFENDANTS BANK OF AMERICA, N.A. AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’S DEMURRER TO PLAINTIFF’S THIRD AMENDED COMPLAINT

Defendants BANK OF AMERICA, N.A. and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’s Demurrer to Plaintiff’s Third Amended Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

BACKGROUND

Plaintiff Sunny Kim (“Plaintiff”) filed this action on July 9, 2015 against numerous defendants. On that same date, Plaintiff filed a Notice of Pendency of Action (lis pendens) on the property described below. Plaintiff filed the operative Third Amended Complaint (“TAC”) on October 6, 2017.

This action arises from a dispute over a mortgage on real property located in Los Angeles (the “Property”). Plaintiff alleges that, on June 17, 2005, she borrowed $382,500 secured by a Note and Deed of Trust (“DOT”) in favor of Countrywide Bank (“Countrywide”) encumbering the Property. Plaintiff alleges that Susan Douglas, alleging to be vice president of Mortgage Electronic Registration Systems (“MERS”) (the beneficiary under the DOT), executed a document dated September 23, 2011 entitled Assignment of Deed of Trust, transferring all beneficial interest under the DOT together with the promissory note secured by that DOT to Bank of America. Plaintiff alleges that the assignment is void as it fails to comply with Civil Code section 1095 because MERS signed the assignment in its own name, and not in the name of the principal, nor as attorney in fact of its principal, and MERS does not own the note, the DOT, nor the beneficial interest in either. Further, Plaintiff alleges that the DOT does not comply with California Probate Code sections 4121 or 4122, such that MERS does not have authority to act as an attorney in fact for Countrywide.

Because the initial assignment of the DOT is allegedly void, Plaintiff alleges that all that follows is void, thus rendering any attempts to foreclose on the Property invalid. A foreclosure of the Property took place on July 14, 2015, five days after the lis pendens was filed, and a Trustee’s Deed Upon Sale was recorded on July 27, 2015. Prima Property, LLC (“Prima”) was the purchasing party in the foreclosure sale on July 14, 2015.

The TAC asserts causes of action for (1) quiet title; (2) cancellation of instrument; and (3) wrongful foreclosure.

Defendants Bank of America, N.A. and Mortgage Electronic Registration Systems, Inc. (“Defendants”) now demur to each cause of action of the TAC on the grounds it fails to state facts sufficient to constitute a cause of action. No opposition to the demurrer was filed.

JUDICIAL NOTICE

The Court grants Defendants’ Request for Judicial Notice as to Exhibits A through I.

DISCUSSION

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

A. First and Second Causes of Action – Quiet Title and Cancellation of Instrument

The elements of an action to quiet title are: (1) a description of the property; (2) plaintiff’s title or interest and the basis of the title; (3) defendant’s asserted adverse claim; (4) the date as of which the determination is sought; and (5) a prayer for determination of title. (CCP §761.020.) “[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.)

“A borrower may not, however, quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86.) Plaintiff alleges that she is willing and able to tender, but she has not alleged that the debt has already been paid off by Plaintiff. (See TAC ¶1.) Furthermore, because the Property has been sold, Plaintiff is no longer legal owner of the Property, and thus cannot quiet title in her name. (See Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1866 (“Fontana has never had standing to bring a quiet title action, because whatever interest it might have is only equitable, and the holder of equitable title cannot maintain a quiet title action against the legal owner.”))

These causes of action also fail because, while premised on a violation of Civil Code §1095, the TAC’s allegations do not establish such a violation. Section 1095 provides that: “When an attorney in fact executes an instrument transferring an estate in real property, he must subscribe the name of his principal to it, and his own name as attorney in fact.” (Civ. C. §1095.) This statute is inapplicable where, as here, the 2011 Assignment was not based on a power of attorney. (See Coburn v. Bank of N.Y. Mellon, N.A. (E.D. Cal. 2011) 2011 WL 1103470, at *3.) Further, even if §1095 were applicable, it is satisfied where, as here, the principal is clearly identified on the face of the assignment. (Gyene v. Steward Fin., Inc. (C.D. Cal. 2013) 2013 WL 146191, at *3.)

Moreover, Plaintiff’s challenge to MERS’s assignment here mirrors a challenge raised in Fontenot v. Wells Fargo Bank, N.A., where the court of appeal found that MERS, in similar circumstances, did have the authority to assign the DOT. ((2011) 198 Cal.App.4th 256, 270-271 (disapproved of on other grounds.)) In that case:

the complaint allege[d] MERS lacked the authority to assign the note because it was merely a nominee of the lender and had no interest in the note. Contrary to plaintiff’s claim, the lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note. While it is true MERS had no power in its own right to assign the note, since it had no interest in the note to assign, MERS did not purport to act for its own interests in assigning the note. Rather, the assignment of deed of trust states that MERS was acting as nominee for the lender, which did possess an assignable interest. A “nominee” is a person or entity designated to act for another in a limited role—in effect, an agent. . . . The extent of MERS’s authority as a nominee was defined by its agency agreement with the lender, and whether MERS had the authority to assign the lender’s interest in the note must be determined by reference to that agreement. . . . Accordingly, the allegation that MERS was merely a nominee is insufficient to demonstrate that MERS lacked authority to make a valid assignment of the note on behalf of the original lender.

(Id.) Even though the Assignment here does not contain any statement, as the one in Fontenot did, that MERS was acting as a nominee for Countrywide, the Assignment is nevertheless valid as the DOT does so state. Additionally, no power of attorney is required to be attached where an agent nominated in the deed of trust acts on behalf of the principal. In Kalnoki v. First American Trustee Servicing Solutions, LLC, the court stated:

Nor is [the substitution of trustee] invalid because it lacks an attached power of attorney. Nowhere in the nonjudicial foreclosure statutes or the deed of trust does it require a beneficiary to provide copies of any power of attorney to the borrower. “‘California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute’” due to its comprehensive nature. . . .

In Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 83, . . . for example, the court rejected the borrower’s argument that the lender’s nominee required written authorization to assign the deed of trust and note and there was no evidence that the nominee had such written authorization. The court found the argument amounted to “a preemptive claim seeking to require the foreclosing party to demonstrate in court its authority to initiate a foreclosure,” which was invalid and subject to demurrer. (Siliga, supra, 219 Cal.App.4th at pp. 84–85, 161 Cal.Rptr.3d 500.) The Kalnokis’ similar claim that there is no evidence that the beneficiary’s agent had a written power of attorney authorizing it to substitute a trustee fails for the same reason.

Because the remaining documents required in the trustee sale are alleged to be void because they are based on the initial allegedly void assignment, Plaintiff also fails to allege they are void. Plaintiff likewise does not sufficiently allege they are void due to fraud, as she has not sufficiently alleged fraud with specificity. She has not pled facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.) Nowhere in Plaintiff’s allegations regarding MERS’s allegedly void assignment are there any allegations fraudulent misrepresentations. Therefore, because both Plaintiff’s quiet title and cancellation of instrument causes of action are based upon this alleged fraud, both causes of action fail. Because Plaintiff fails to allege a void assignment, she fails to challenge MERS’s standing to foreclose under Yvanova v. New Century, supra, at 928. For the foregoing reasons, the demurrer to the first and second causes of action is sustained.

B. Third Cause of Action – Wrongful Foreclosure

To state a claim for wrongful foreclosure, plaintiff must allege “(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.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.)

Finally, Defendants argue that Plaintiff’s wrongful foreclose claim fails as against them because the allegations show that Defendants had no role in the foreclosure or interest in the Property at the time the foreclosure was commenced and completed. Therefore, the wrongful foreclosure claim is inadequately pled against them and the demurrer is sustained as to that cause of action.

CONCLUSION

For the foregoing reasons, Defendants’ demurrer is sustained to all three causes of action in the TAC. Because this was Plaintiff’s Third Amended Complaint and it failed to remedy the same defects that were present in the SAC, the Court does not find that there is a reasonable probability Plaintiff can amend the TAC to adequately state any cause of action against Defendants. Accordingly, the demurrer is sustained without leave to amend. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

Defendants are ordered to file a proposed Judgment within 5 court days from this Order.

Defendants are ordered to provide notice of this ruling.

DATED: April 26, 2018

_____________________________

Howard L. Halm

Judge of the Superior Court