Vincent Tang v. JPMorgan Chase Bank

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Case Name: Tang v. JPMorgan Chase Bank, et al.
Case No.: 17-CV-307324

This is a wrongful foreclosure action initiated by plaintiff Vincent Tang (“Plaintiff”) against defendants JPMorgan Chase Bank (“JPMorgan”), Quality Loan Service Corporation (“QLS”), Deborah Brignac (“Brignac”), U.S. Bank, N.A. (“U.S. Bank”), Select Portfolio Servicing (“SPS”), Orchid Terrace Inc. (“Orchid Terrace”), Monte Vista Oaks, Inc. (“MVO”), Monte Vista Oaks DB Plan (“DB Plan”), and KIP Dream Homes (“KIP”).

According to the operative second amended complaint (“SAC”), Plaintiff owns property located at 2739 Clover Meadow Court, San Jose, CA (“Subject Property”). (SAC, ¶ 2.) On June 27, 2005, Plaintiff obtained a loan from Washington Mutual Bank (“WaMu”) in the amount of $825,000.00 and secured the loan by a deed of trust (“DOT”) on the Subject Property. (Id. at ¶ 42.) The DOT and promissory note (“Note”) named WaMu as the beneficiary and California Reconveyance Company (“CRC”) as the trustee. (Id. at ¶ 43.) On October 2, 2008, JPMorgan purchased WaMu as a result of a receivership ordered by the Federal Deposit Insurance Corporation (“FDIC”). (Id. at ¶ 44.)

On March 1, 2010, CRC recorded a notice of default on the Subject Property (“NOD”). (SAC, ¶ 45.) That same day, an assignment of the DOT (“ADOT”) to Bank of America (“BANA”), as successor by merger to LaSalle Bank NA and as trustee to the WaMu Mortgage Pass-Through Certificate Series 2005-AR19 (“WaMu AR19”), was recorded. (Id. at ¶ 47.) The ADOT is void because its executor, Brignac, represented that she signed it “under the authority of being a Vice President of [JPMorgan],” she but never held that position. (Id. at ¶ 50.) Instead, she was a foreclosure specialist and supervisor for CRC. (Ibid.) The ADOT is additionally void because it purported to transfer the DOT into WaMu AR19 on or about February 26, 2010, almost five years after the pool had closed. (Id. at ¶ 52.)

Thereafter, U.S. Bank, through SPS, substituted ALAW as trustee (“SOT1”). (SAC, ¶¶ 56-57.) There is no recorded document transferring interest to U.S. Bank. (Ibid.) The SOT1 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note at that time, and therefore had no interest to assign. (Ibid.) Two years later, QLS was substituted as trustee (“SOT2”). (Id. at ¶ 58.) The SOT2 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note at that time. (Id. at ¶ 59.) QLS then recorded three notices of trustee sale on March 24, 2016, June 14, 2016, and November 1, 2016 (“Three NOTS”). (Id. at ¶ 60.)

QLS subsequently sold the Subject Property to Orchid Terrace, MVO, DB Plan, and KIP (collectively “Investors”) at a foreclosure sale. (SAC, ¶ 62.) Their status as bona fide purchasers is “void and voidable at the option of the Plaintiff” because they do not have certificates of qualification as required for foreign business entities and are not registered with the California Secretary of State. (Id. at ¶ 63.) After the sale, a trustee’s deed upon sale (“TDUS”) was recorded, which is also void because defendants did not have the lawful authority to foreclose. (Id. at ¶¶ 64-65.)

Plaintiff asserts causes of action for: (1) declaratory judgment; (2) “statutory violations;” (4) unlawful foreclosure; (5) slander of title; (6) cancellation of instruments; and (7) unfair business practices.

Presently before the Court are: (1) Brignac’s demurrer to the SAC; and (2) Brignac’s joinder to JPMorgan’s motion to strike portions of the pleading.

I. Brignac’s Demurrer

A. Request for Judicial Notice

First, Brignac requests judicial notice of the Notice of Ruling on Demurrer and Motion to Strike Portions of Plaintiff’s First Amended Complaint and Ruling Taking Pending Demurrers Off Calendar, filed on August 1, 2017 by JPMorgan in this action. This court record is a proper subject of judicial notice under Evidence Code section 452, subdivision (d). In addition, it is relevant to issues raised herein. (See People ex rel. Lockyer v. Shamrock Foods Co., supra, 24 Cal.4th at p. 422, fn. 2.)

Next, Brignac requests judicial notice of a federal district court trial ruling. This request is misguided because she fails to demonstrate how a court document from an unrelated case is relevant to any matter under review herein. (See People ex rel. Lockyer v. Shamrock Foods Co., supra, 24 Cal.4th at p. 422, fn. 2.)

In light of the above, the request for judicial notice is GRANTED IN PART AND DENIED IN PART. The request is GRANTED as to the Notice of Ruling and DENIED as to the federal district court trial ruling.

B. Merits of the Demurrer

Brignac demurs to the entire SAC on the ground of failure to state sufficient facts to constitute a cause of action, arguing Plaintiff lacks standing. She also demurs to each individual cause of action on the ground of failure to state sufficient facts to constitute a cause of action based on a variety of other arguments.
As an initial matter, for the same reasons discussed above relative to Investors’ demurrer, the first cause of action is additionally stricken from the SAC as to Brignac. As such, the demurrer to the first cause of action on the ground of failure to state sufficient facts to constitute a cause of action is MOOT.

As a preliminary matter, the Court previously sustained JPMorgan’s demurrers to the complaint and the first amended complaint. Those pleadings asserted five causes of action for “statutory violations,” unlawful foreclosure, slander of title, cancellation of instruments, and unfair business practices. Although the prior orders did not permit Plaintiff to amend the pleading to include a new cause of action, he asserts a declaratory relief cause of action for the first time in the SAC.

“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” (Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023, internal citations omitted.) A court may, in its discretion, strike new causes of action when they are not drawn in conformity with its prior order. (See Code Civ. Proc., § 436, subd. (b); Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528 [“[Section 436] is commonly invoked to challenge pleadings filed in violation of a deadline, court order, or requirement of prior leave of court”].) As Plaintiff did not seek permission to include the declaratory relief cause of action, it is hereby stricken. It is therefore unnecessary to discuss the merits of the demurrer relative to the first cause of action. The demurrer to the first cause of action on the grounds of failure to state sufficient facts to constitute a cause of action and uncertainty is thus MOOT.

2. Failure to State Sufficient Facts

Brignac argues Plaintiff fails to state sufficient facts as to the third, fifth, and sixth causes of action because he lacks standing to sue. There are two bases alleged by Plaintiff to assert standing to initiate this action. First, the ADOT is void based on Brignac’s lack of authority to execute it. Second, the ADOT is void because the DOT was not timely assigned into WaMu AR19. Brignac asserts Plaintiff does not have standing under either theory.

“Standing is a threshold issue, because without it no justiciable controversy exists. Standing goes to the existence of a cause of action. Pursuant to Code of Civil Procedure section 367, ‘[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.’” (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 813 (“Saterbak”), internal citations and quotation marks omitted.) A plaintiff who initiates a post-foreclosure action has standing to challenge the validity of an assignment if it is void. (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 943 (“Yvanova”).) The difference between void and voidable is crucial for the discussion of standing as “[a] void contract is without legal effect” and may not be ratified by the parties, while a voidable contract is still subject to ratification by the parties. (Id. at pp. 929-930.) Thus, while a plaintiff has standing to challenge a void assignment, he or she lacks standing to challenge one that is merely voidable. (Saterbak, supra, 245 Cal.App.4th at p. 815.) To plead an assignment is void, a plaintiff may not simply allege as much as a conclusion; rather, he or she must allege a factual basis supporting the conclusion. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1156.)

First, Plaintiff alleges Brignac’s recording of the ADOT was fraudulent because she executed it “under the authority of being a Vice President of Defendant,” however, she never held that position. (SAC, ¶ 50.) Plaintiff pleads Brignac was actually a foreclosure specialist and supervisor for the California Reconveyance Company. (Ibid.)

This allegation fails to confer standing on Plaintiff; allegations that a written instrument is void because the signatory was allegedly employed by another entity are insufficient to invalidate the instrument. (See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 46; see also Rahbarian v. JP Morgan Chase (E.D. Cal., Nov. 10, 2014, No. 2:14-CV-01488 JAM) 2014 WL 5823103, at *8 [“The mere fact that Derborah [sic] Brignac was not an employee of JPMorgan and Colleen Irby was not an employee of CRC does not give rise to a reasonable inference that they did not have the authority to sign documents on behalf of those companies.”].) Being an employee of one entity does not necessarily disqualify a signatory from being authorized to sign on another entity’s behalf. (Mendoza, supra, 6 Cal.App.5th at p. 819.) Moreover, contrary to Plaintiff’s arguments, the emphasis of his allegations is on Brignac’s employment, not her lack of authority to execute the ADOT. (See SAC, ¶ 50.) Plaintiff does not actually allege she was not authorized to execute the ADOT.
The allegations are additionally insufficient to confer standing because where a plaintiff alleges that a document is void due to the signatory’s lack of authority to execute the document, yet does not contest the validity of the underlying debt, the plaintiff lacks standing to contest the assignment. (Pratap v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 63 F.Supp.3d 1101, 1109.) Further, it is well-established that these allegations render an assignment only voidable, not void. (Mendoza, supra, 6 Cal.App.5th at p. 819; Javaheri v. JPMorgan Chase Bank, N.A. (C.D. Cal., Aug. 13, 2012, No. 2:10-CV-08185-ODW) 2012 WL 3426278, at *6.) Because the ADOT would only be voidable, Plaintiff lacks standing to challenge the foreclosure based on Brignac’s execution of the document.

Next, Plaintiff alleges the ADOT is void because the DOT was transferred into WaMu AR19 on or about February 26, 2010, almost five years after the pool had closed. (SAC, ¶ 52.) Brignac also contends Plaintiff lacks standing to challenge the transfer to the pool because a defect in the securitization only renders the assignment voidable and not void. This argument is well-taken. Plaintiff does not address this argument in opposition, tacitly conceding its merit. A defect in the securitization process only renders the assignment voidable, not void. (See Saterbak, supra, 245 Cal.App.4th at p. 815.) Because a plaintiff does not have standing to challenge an assignment that is merely voidable, Plaintiff lacks standing here to the extent the action is predicated on the transfer of the DOT into the pool.
Plaintiff does not advance any arguments supporting the conclusion that he has standing to sue. Plaintiff asserts he has standing pursuant to paragraph 22 of the DOT. Paragraph 22 of the DOT states Plaintiff shall have the right to bring a court action to assert the non-existence of a default or any other defense to the sale. Plaintiff insists the DOT is essentially a contract and should be governed by contract law and not foreclosure statutes. Paragraph 22 does not purport to grant Plaintiff standing in any context to initiate an action; it states that prior to “acceleration,” the lender must provide Plaintiff with written notice of certain information, including that he has “the right to bring a court action to assert the non-existence of a default or any other defense . . . to acceleration and sale.” Insuring Plaintiff is informed of his ability to initiate an action does not confer standing on him. (See Saterbak, supra, 245 Cal.App.4th at p. 816 [stating similar “provisions do not change [a plaintiff’s] standing obligations under California law”]; see also Yhudai v. Impac Funding Corporation (2016) 1 Cal.App.5th 1252, 1260.) As such, paragraph 22 of the DOT does not confer standing on Plaintiff.

In sum, Plaintiff lacks standing and the demurrer is therefore sustainable to the second, third, fourth, fifth, and sixth causes of action. Plaintiff’s lack of standing is a non-curable defect. Plaintiff has twice amended the pleading and failed to allege new facts curing this deficiency. In addition, he fails to provide any facts suggesting he would be able to do so. As noted above, the newly claimed theory of forgery does not cure the standing problems. (See Saterbak, supra, 245 Cal.App.4th at p. 814 [lack of standing when plaintiff expressly alleged assignment was forged].) It also does not appear that any argument predicated on the “staleness” of the NOD would cure such defect as there are no statutory provisions requiring a foreclosing entity to re-issue a notice of default after a specified time. As such, leave to amend is not warranted. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [a “[p]laintiff must show in what manner he [or she] can amend his [or her] complaint and how that amendment will change the legal effect of the pleading”].) Accordingly, Brignac’ demurrer to the first through sixth causes of action on the ground of failure to state sufficient facts to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

II. Brignac’s Motion to Strike

As the demurrer to the entirety of the SAC was sustained, the motion to strike is MOOT.

III. Professionalism

In his opposition to Brignac’s demurrer, Plaintiff’s counsel compared Brignac to a Nazi soldier who was simply following orders. These statements are outrageous and deeply offensive.

The Judges of the Santa Clara County Superior Court have adopted by standing order the Santa Clara County Bar Association’s Code of Professionalism and expect attorneys to comport themselves in accordance with the guidelines set forth therein. Section 7 of the Code of Professionalism provides that written materials submitted to the court should not unfairly attack the opposing party, such as degrading his or her ethics, morals, or personal behavior, unless such issues are specifically at issue in the proceeding. Plaintiff’s counsel Thomas Spielbauer certainly violated this rule by comparing Brignac’s behavior of executing foreclosure-related documents to the acts of Nazis. Plaintiff’s counsel is admonished to comply with the Code of Professionalism in the future.

The Court will prepare the order.

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