Case Number: KC066489 Hearing Date: June 09, 2014 Dept: J

Re: Ella M. Anderson, et al. v. Grand River Investment, LLC, etc., et al. (KC066489)

DEMURRER TO FIRST AMENDED COMPLAINT

Moving Parties: Defendants BSI Financial Services, Inc. and CAM V Trust

Respondents: No timely opposition filed

POS: Moving OK

Plaintiffs allege that Defendants are third-party strangers to their mortgage loan and did not have authority to foreclose on the subject property. Plaintiffs also challenge the assignment and securitization of the loan. The Complaint, filed by Plaintiffs on 11/12/13, has been superseded by the filing of the operative First Amended Complaint on 2/25/14 asserting causes of action for:

1. Quiet Title – CCP § 760.020
2. Violation of Bus & Prof C § 17200, et seq.
3. Wrongful foreclosure
4. Quasi Contract
5. Violation of Homeowner Bill of Rights – CC § 2924.17

The Case Management Conference is set for 6/09/14.

REQUEST FOR JUDICIAL NOTICE:

The court takes judicial notice of the documents recorded with the Los Angeles County Recorder’s Office attached to Defendant’s RJN, Exhs. A-D. (Ev C § 452(c); Lockhart v. MVM, Inc. (2009) 175 Cal.App.4th 1452, 1460.)

DEMURRER:

Defendant BSI Financial Services, Inc. and Cam V Trust’s (“Defendants”) demur to the First Amended Complaint (“FAC”) of Plaintiffs Ella Anderson and Willie Anderson (collectively “Plaintiffs”) on the grounds that it fails to state facts sufficient to constitute a cause of action pursuant to CCP 430.10(b).

FIRST CAUSE OF ACTION FOR QUIET TITLE:

To state a cause of action for quiet title, the complaint must allege: (1) a description of the property; (2) plaintiff’s title or interest and the basis; (3) defendant’s assertion of an adverse claim or antagonistic property interest; (4) the date as of which the determination is sought; and (5) a prayer for determination of title. (CCP §761.020.) Further, 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.)

Plaintiffs appear to seek to quiet title on the subject property based on the ground that Defendants did not have authority to foreclose on the subject property because they were not the real parties in interest due to improper assignment and securitization of the promissory note (“Note”) and deed of trust (“DOT”). (FAC, page 5, line 26 to page 9, line 12). However, the authority of the lender’s nominee to initiate nonjudicial foreclosure proceedings is beyond judicial challenge notwithstanding the fact the nominee merely holds legal title to the subject property and is not the owner of the underlying Note. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154—authority of lender’s nominee (“MERS”) to initiate foreclosure proceedings could not be challenged where trust deed named lender’s nominee and granted it foreclosure rights.) Further, as an unrelated third party to the contract, and not the victim, plaintiffs lack standing to claim invalid transfers of beneficial interests under promissory notes. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 514-15 – Plaintiff lacked standing to enforce investment trust‘s pooling and servicing agreement and so there was no actual controversy supporting declaratory relief.) In addition, there are no facts alleged in the FAC demonstrating that Plaintiffs were prejudiced by the alleged lack of authority to transfer the Note. As to claims of illegal assignments, borrowers must allege and show prejudice as to claims of the lack of authority to transfer a promissory note. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272 – noting that it is difficult to conceive how borrowers could show prejudice from an unauthorized transfer, because borrowers must anticipate the legal possibility of note transfers to different creditors, defaults in payments on the note cause any prejudice via foreclosure, and original lenders would be the ones prejudiced by an unauthorized loss; Accord Herrera v. Fed. Nat’l Mort. Assoc. (2012) 205 Cal.App.4th 1495, 1508.) Finally, “securitization merely creates ‘a separate contract, distinct from [p]laintiffs[’] debt obligations” under the note, and does not change the relationship of the parties in any way. (See Commonwealth Prop. Advocates, LLC v. First Horizon Home Loan Corp. (D.Utah Nov. 16, 2010) 2010 WL 4788209, at *2.)

The Complaint also fails to allege that Plaintiffs have paid their debt. A borrower cannot “quiet title without discharging his debt. The cloud upon his title persists until the debt is paid.” Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477.

Further, MERS may assign the loan as provided in the language contained in the DOT. Herrera, supra at 1499. Thus, MERS’s assignment of the deed of trust was valid, and the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR VIOLATION OF BUS & PROF C § 17200 and THIRD CAUSE OF ACTION FOR WRONGFUL FORECLOSURE:

In order to properly assert a claim for Unfair Business Practices, Bus & Prof C. § 17200, the complaint must allege a business practice that is unfair, unlawful or fraudulent, and an authorized remedy. (Bus & Prof C § 17200.)

The FAC fails to allege adequate facts to support a claim for unfair business practices against Defendant. Accordingly, the demurrers to the second and third causes of action are sustained.

FOURTH CAUSE OF ACTION FOR QUASI CONTRACT:

The elements for breach of contract cause of action are: (1) the existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach (or anticipatory breach); and (4) resulting damage. (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

The FAC fails to adequately allege an existence of contract and/or the terms of the contract between the parties. Thus, the demurrer to the fourth cause of action is sustained.

FIFTH CAUSE OF ACTION FOR VIOLATION OF HOMEOWNERS BILL OF RIGHTS:

Under the Homeowner Bill of Rights, mortgage servicers must, prior to recording a notice of default, review “competent and reliable evidence” to substantiate the borrower’s default and the right to foreclose, and must ensure that the recorded document is accurate, complete and supported by reliable evidence. (CC § 2924.17(a),(b).)

The FAC fails to adequately allege facts demonstrating that the recording instruments were inaccurate, but only allege that Defendant violated the notice by not complying with CC § 2924.17 and have failed to provide competent and relevant support to the recorded Assignment of DOT and the Substitution of Trustee. (FAC ¶ 40.) CC § 2924.17 applies only to inaccurate documents, not where documents have not been provided to the borrower. Finally, Plaintiffs must provide evidence of prejudice. Herrera, supra at 1507-1508. They have not done so. Thus, the demurrer to the fifth cause of action is sustained.

The court will hear from counsel for Plaintiffs as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.