Case Name: Nava v. Nationstar Mortgage, LLC, et al.
Case No.: 2015-1-CV-288628

Defendant Vertera Investment, LLC (“Vertera”) demurs to the first amended complaint (“FAC”) filed by plaintiff Teresa Nava (“Plaintiff”).

This is an action for wrongful foreclosure. According to the allegations of the FAC, on March 4, 2015, Plaintiff obtained a loan in the amount of $256,000 from Countrywide Home Loans secured by a deed of trust recorded against real property located at 247 North Capitol Avenue, San Jose, California (the “Property”). (FAC, ¶¶ 13, 14.)

Plaintiff subsequently ran into financial difficulties which caused her to fall several months behind on her mortgage payments. (Id., ¶ 15.) On January 15, 2015, Plaintiff completed and sent a loan modification application to defendant Nationstar Mortgage, LLC, et al. (“Nationstar”). (Id., ¶ 16.) On February 26, 2015, Nationstar caused to be recorded a Notice of Trustee’s Sale against the Property. (Id., ¶ 17.) By that point in time, Plaintiff had not yet received a denial letter in connection with her application for a loan modification. (Id., ¶ 18.) On September 9, 2015, Plaintiff contacted Nationstar and was informed that she was in modification review and the sale of the Property was consequently on hold, with no pending sale date. (Id., ¶ 19.) Despite what she was told, on October 7, 2015, the Property was sold to a third party, Vertera. (Id., ¶ 20.) Plaintiff alleges Vertera is an experienced buyer of foreclosed properties and was aware of the fact that she was under review for a modification and thus that Nationstar had no right to move forward with the foreclosure sale. (Id., ¶¶ 20, 21.)

On May 3, 2016, Plaintiff filed the FAC asserting the following causes of action: (1) violation of Homeowner’s Bill of Rights (“HBOR”) (against Nationstar and defendant NBS Default Services, LLC (“NBS”)); (2) wrongful foreclosure (against Nationstar and NBS); (3) promissory estoppel (Nationstar and NBS); (4) violation of Business and Professions Code § 17200 (against Nationstar and NBS); (5) negligence (against Nationstar and NBS); (6) declaratory and injunctive relief (against all defendants); and (7) quiet title (against Vertera).

On June 15, 2016, Vertera filed the instant demurrer to the sixth and seventh causes of action on the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty. (Code Civ. Proc., § 430.10, subds. (e) and (f).) Plaintiff opposes the motion.

As an initial matter, Vertera requests that the Court take judicial notice of the following items: (1) the Trustee’s Deed Upon Sale, dated October 22, 2015, recorded on November 2, 2015 (Exhibit 1); (2) unlawful detainer complaint filed in Santa Clara Superior Court as Case No. 2015-1-CV-287951 (the “UD Action”) (Exhibit 2); (3) order on demurrer to the complaint filed in the foregoing case (Exhibit 3); (4) copy of request for entry of default and default entered on December 17, 2015 in the UD Action (Exhibit 4); (5) the default judgment entered in the UD Action on December 17, 2015 (Exhibit 5); and (6) a copy of the Writ of Possession issued on December 17, 2015 in the UD Action (Exhibit 6.) In her opposition, Plaintiff objects to the consideration of these materials by the Court for Vertera’s failure to comply with California Rules of Court, rule 3.1113(l), which provides that a request for judicial notice must be made in a separate document listing the specific items for which notice is requested.

While it is true that Vertera did not make its request for judicial notice in a separate document, the Court in its discretion declines to favor form over substance in this instance and will consider the exhibits attached to Vertera’s supporting memorandum. Each of these items is a proper subject of judicial notice pursuant to Evidence Code section 452, subdivisions (d) and (h). (See also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [“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 the effect is clear on its face”]; Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1367, fn. 8.) Accordingly, Vertera’s request for judicial notice is GRANTED.

Vertera’s demurrer to the sixth and seventh causes of action on the ground of uncertainty is OVERRULED. A demurrer based on uncertainty is disfavored and will be sustained only where the allegations of the complaint are so unintelligible that the defendant cannot reasonably respond to them. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) Here, not only does Vertera not articulate how the allegations of the FAC are uncertain or unintelligible, but the basis of Plaintiff’s claims otherwise appears to be straightforward and clear to the Court.

In demurring to the two claims asserted against it in the FAC on the ground of failure to state facts sufficient to constitute a cause of action, Vertera first asserts that neither of these causes of action can be maintained because it is a bona purchaser of the Property for which the trustee’s sale is conclusively presumed to be valid.

Under Civil Code section 2924, which is part of the comprehensive statutory framework that regulates nonjudicial foreclosures, there is a conclusive presumption created in favor of a bona fide purchaser who receives a trustee’s deed that contains a recital that the trustee has fulfilled its statutory notice requirements. The presumption does not arise from the conduct of the sale but from the execution and delivery of the trustee’s deed. (Baincalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 814.) When the trustee’s deed contains the requisite recitals and the sale is voidable, the trustor who challenges the validity of the sale must prove that the conclusive presumption is not applicable either because it does not apply to the buyer since the buyer is the beneficiary, or because there are grounds for equitable relief such as fraud, or because the presumption does not apply to the third party buyer because the buyer is not a bona fide purchaser. (Wolfe v. Lipsy (1985) 163 Cal.App.3d 633, 639-640.) In the context of this code section, a bona fide purchaser (“BFP”) is defined as “one who pays for value for the property without notice of any adverse interest or of any irregularity in the sale proceedings. [Citations.]” (Melendrez v. D & I, Investment, Inc. (2005) 127 Cal.App.4th 1238, 1250.)

Vertera asserts that it is a BFP, and directs the Court’s attention to the Trustee’s Deed Upon Sale attached as Exhibit 1 to its papers, explaining that this document contains all of the recitals necessary to implicate the conclusive presumption contained in Civil Code section 2924. There are a couple of problems with this argument. First, it is questionable as to whether this conclusive presumption even applies to Plaintiff’s claims against Vertera as alleged here. In Melendrez v. D & I Investment, Inc., supra, the court held that Civil Code section 2924’s conclusive presumption language for BFPs “applies only to challenges to statutory compliance with respect to default and sales notices” and not other requirements of the foreclosure process. (Melendrez, supra, 127 Cal.App.4th at 1256, fn. 26 [emphasis added].) Here, Plaintiff’s challenge to the trustee’s sale does not involve claims concerning whether the trustee followed all of the statutory procedures with respect to the default and sales notices; instead, the primary allegation is that Nationstar engaged in prohibited dual tracking by going forward with the trustee’s sale while Plaintiff’s application for a loan modification was pending. (See Civ. Code, § 2923.4, subd. (a).)

Second, even if the conclusive presumption is applicable to the circumstances at bar, whether or not Vertera is actually a BFP is a factual matter not appropriate resolved on demurrer. Plaintiff alleges in the FAC that Vertera is not a BFP because “as an experienced foreclosure sale buyer, Vertera took possession of the property with knowledge of the asserted rights of Plaintiff and that Nationstar had no right to foreclose.” (FAC, ¶ 62.) Although Vertera is correct that the Melendrez court rejected an argument that the third party borrower had imputed knowledge of the plaintiff’s potential adverse claim simply due to the fact that it had had “significant foreclosure experience,” the ultimate determination regarding that party’s status as a BFP was determined by the trial court after an evidentiary proceeding and not at the pleadings stage. Here, Plaintiff alleges that Vertera is not a BFP and these allegations must be accepted as true on demurrer. (Nolte v. Ceders Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.) Whether or not Vertera actually had knowledge of Plaintiff’s situation and claim such that it did not qualify as a BFP is an issue for a later stage of the proceedings. Thus, Vertera’s contention that Plaintiff cannot maintain its claims against it because it is a BFP is not persuasive.

Vertera next argues that Plaintiff’s claims all fail because she has not alleged that she has or is ready, willing and able, to tender the amount due on her loan. Generally, where a party is seeking to set aside a completed foreclosure sale (or quiet title against the lender or other purchaser), as Plaintiff is here, he or she is required to do equity before the court will exercise its equitable powers and therefore must pay, or offer to pay, the secured debt before the action is commenced, or in the complaint. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112; Foge v. Schmidt (1951) 101 Cal.App.2d 681, 683; Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86-87.) This is often referred to as the “tender rule.” Here, Plaintiff does not allege that she has tendered the amount due on her loan, or make an offer to do so. However, she insists in her opposition that the tender rule does not operate to preclude her claims because it would be inequitable to apply it to the circumstances of this action and because the foreclosure sale was void. Courts have held that tender will not be required “where it would be inequitable to impose such condition on the party challenging the sale” and where “the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face.” (Lona v. Citibank, N.A., supra, 202 Cal.App.4th at 112-113.) Upon review, while Plaintiff’s contention that the trustee’s sale is void is questionable, there is case authority which suggests that her failure to plead tender at this stage of the proceedings is not fatal to her claims.

First, Plaintiff cites no authority which stands for the proposition that a trustee’s failure to comply with HBOR renders the trustee’s deed of sale void rather than merely voidable. Plaintiff does not dispute that she defaulted on her loan and in fact expressly pleads as much in the FAC. (FAC, ¶ 15 [stating that Plaintiff’s reduced income made her “fall a few months behind on her mortgage”].) However, there are numerous cases in which courts have declined to apply the tender rule at the pleading stage even following a completed trustee’s sale where there is insufficient “opportunity to undertake a more informed analysis of the equities.” (Munguia v. Wells Fargo Bank, N.A. (C.D. Cal. 2015) 2015 WL 3731811, *2, fn. 4, citing Nguyen v. JP Morgan Chase Bank, N.A. (N.D. Cal. 2013) 2013 WL 2146606, *6; Bingham v. Ocwen Loan Servicing, LLC (N.D. Cal. 2014) 2014 WL 1494005, *8; Stokes v. CitiMortgage, Inc. (C.D. Cal. 2014) 2014 WL 4359193, *9.) Moreover, some case authority suggests that tender need not be alleged when the lawsuit attacking the foreclosure sale is not based on the premise of a defect in the giving of notice but on the statutory grounds laid out in HBOR. (See Valbuena, et al. v. Ocwen Loan Servicing, LLC (2015) 237 Cal.App.4th 1267, 1273-1274.) Consequently, based on the allegations of dual-tracking in the FAC, the Court declines to rule at this stage of the proceedings that Plaintiff’s claims against Vertera fail due to the absence of allegations regarding tender of outstanding amounts owed.

Vertera lastly argues that Plaintiff’s sixth cause of action fails because declaratory relief can only operate prospectively and cannot redress past wrongs such as a completed foreclosure sale. While the Court agrees with the foregoing summation of the law and that an actual, present controversy must exist in order for a claim for declaratory relief to be stated (see Civ. Code, § 1060) and that none has been stated here, the sixth cause of action is also for injunctive relief. None of Vertera’s arguments are persuasive with regards to this component of the sixth cause of action (see above) and because a demurrer does not lie to only part of a cause of action (see PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682), the demurrer cannot be sustained as to the sixth cause of action.

In accordance with the foregoing analysis, Vertera’s demurrer to the sixth and seventh causes of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.