Case Number: KC069393 Hearing Date: February 22, 2018 Dept: J

Re: Kathy Jones v. Casita Financial, Inc., et al. (KC069393)

(1) MOTION FOR JUDGMENT ON THE PLEADINGS; (2) MOTION FOR AN ORDER TO AMEND COMPLAINT

Moving Parties: (1) Defendants Maven Asset Management, Inc., Sandcastle Trustee Services (a DBA), Kyla D. Sullivan, individually and as designated officer of Casita Financial, Maven Asset Management, Inc. and Sandcastle Trustee Services, Paul A. Torok and DLI Properties, LLC; (2) Plaintiff Kathy Jones

Respondents: (1) Plaintiff Kathy Jones; (2) FCI Lender Services[1] and Defendants Maven Asset Management, Inc., Sandcastle Trustee Services, Kyla D. Sullivan, Sandcastle Trustee Services and Paul A. Torok; and DLI Properties, LLC

POS: (1) Moving OK (Notice of Errata untimely served and filed); Opposing untimely served and filed; (2) Moving & FCI, et al.’s opposition OK; DLI Properties, LLC’s opposition untimely filed

This is a wrongful foreclosure action involving plaintiff’s residential property located at 1903 S. Shadydale Avenue in West Covina. The complaint, filed 6/19/17, asserts causes of action against Defendants Casita Financial, Inc. (“CFI”), Maven Asset Management, Inc., Sandcastle Trustee Services (“Sandcastle”), Kyla D. Sullivan, individually and as designated officer of Casita Financial, Maven Asset Management, Inc. and Sandcastle, Paul A. Torok (“Torok”), DLI Properties, LLC (“DLI”) and Does 1-10 for:

1. Cancellation of Trustee Sale (Civil Code § 3412)

2. Cancellation of Deed

3. Wrongful Foreclosure

4. Fraud

5. Conspiracy to Commit Fraud

6. Intentional Infliction of Emotional Distress

7. Violation of CA Business and Professions Code

On 7/11/17, the court denied plaintiff’s ex parte application for order to show cause and temporary restraining order. On 7/31/17, DLI’s demurrer to the fifth and sixth causes of action was sustained; said causes of action were dismissed with prejudice at the time of the hearing. On 8/31/17, DLI filed its cross-complaint, asserting causes of action against plaintiff, Cross-Defendants Torok, Sandcastle and Roes 1-40 for:

1. Restitution Based on Unjust Enrichment

2. Equitable Indemnity and Attorneys’ Fees

3. Equitable Contribution

4. Declaratory Relief

5. Attorneys’ Fees and Damages Based on the Tort of Another

6. Wrongful Foreclosure

7. Negligence and Negligence Per Se

8. Negligent Misrepresentation

9. Rescission and Restitution Based on Mistake

10. Equitable Subrogation

On 9/18/17, plaintiff filed an “Amendment to Complaint,” wherein FCI Lender Services, Inc. was named in lieu of Doe 1. On 9/21/17, plaintiff filed her “Amended Notice of Pending Action.” On 10/23/17, the court denied plaintiff’s motion for preliminary injunction. On 10/24/17, CFI’s default was entered.

A Case Management Conference is set for 4/19/18.

(1) MOTION FOR JUDGMENT ON THE PLEADINGS:

Defendants Maven Asset Management, Inc., Sandcastle Trustee Services (a DBA), Kyla D. Sullivan, individually and as designated officer of Casita Financial, Maven Asset Management, Inc. and Sandcastle Trustee Services, Paul A. Torok and DLI Properties, LLC (“DLI”) (collectively, “defendants”) move for judgment on the pleadings as to the first, second, third, fourth, and seventh causes of action in Plaintiff Kathy Jones’ (“plaintiff”) complaint.

NOTICE OF ERRATA:

The court notes that defendants’ “Notice of Errata” filed 1/29/18 and mail-served 1/24/18 is untimely pursuant to CCP § 1005(b). Said notice indicates that defendants learned from one of the parties that page 14 may be missing in some copies. The court’s copy was, in fact, missing page 14, which contains paragraphs 1 through portions of paragraph 5 of the Declaration of James Mortensen. The court elects to consider the “Notice of Errata” for purposes of deeming the meet and confer requirement set forth in CCP § 439 fulfilled.

At the outset, the court notes that defendants are not seeking judgment on the pleadings as to plaintiff’s fifth and sixth causes of action, on the basis that they “were dismissed pursuant to the demurrer of other defendants.” (Motion, 2:8-9). The fifth and sixth causes of action, however, appear to have been dismissed as against DLI only, in connection with plaintiffs’ statement, made in opposition to DLI’s previous demurrer, that she “has decided to dismiss the actions for fraud and infliction of emotional distress against DLI.” (7/21/17 Opposition, 2:5-6; emphasis added). The fifth and sixth causes of action, then, remain with respect to all other defendants.

FIRST, SECOND CAUSES OF ACTION (i.e., CANCELLATION OF TRUSTEE SALE, CANCELLATION OF DEED AND WRONGFUL FORECLOSURE, RESPECTIVELY):

Plaintiff asserts that “[t]he sale of the properly [sic] was improperly held, and the trustee’s deed was illegally executed, delivered and recorded, in that (1) the amount quoted as owed to beneficiary/trustee is fraudulent[,] (2) there was no notice of transfer of trust deed from Casita to Maven and the notice of transfer to Torok is fraudulent, (3) there is no record of the existence of the entity Sandcastle in both California and Nevada; therefore, Sandcastle had no legal capacity as Trustee to conduct the sale of plaintiff’s property, and (4) Sullivan, acting as the designated officer of both Maven and Sandcastle, is enmeshed in serious ethical violations…which cast serious doubts on her duty as the purported trustee to protect the plaintiff’s rights in the transactions.” (Complaint, ¶ 48).

Initially, plaintiff’s allegations regarding Sullivan’s purported “unethical conduct” is irrelevant for purposes of these causes of action.

Additionally, borrowers have standing to sue for wrongful foreclosure on grounds that an assignment of note and deed of trust was void, not voidable. See Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919. “Section 2924, subdivision (a)(1) states that a ‘trustee, mortgagee, or beneficiary, or any of their authorized agents’ may initiate the foreclosure process. However, nowhere does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and we see no ground for implying such an action. (See Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 596 [legislative intent, if any, to create a private cause of action is revealed through the language of the statute and its legislative history].) Significantly, ‘[n]onjudicial foreclosure is less expensive and more quickly concluded than judicial foreclosure, since there is no oversight by a court, “[n]either appraisal nor judicial determination of fair value is required,” and the debtor has no postsale right of redemption.’ (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236.) The recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the noteholder would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.” Gomez v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155.

Plaintiff’s “broken” chain of title argument, moreover, fails. Plaintiff claims that the substitution of trustee is void because it was not executed by Paul A. Torok (“Torok”). (Complaint, ¶ 17). The “Long Form Deed of Trust and Assignment of Rents for Home Equity Revolving Line of Credit” (“Long Form Deed of Trust”) recorded 6/11/07 (Id., Exhibit “A”) identifies First American Title as the trustee and Casita Financial, Inc. (“Casita”) as the beneficiary. On 4/20/15, an Assignment of Deed of Trust was recorded, wherein Casita assigned its beneficial interest in the Long Form Deed of Trust to Torok. (Id., Exhibit “I”). On 10/20/15, a “Substitution of Trustee” was recorded, wherein Maven, as the authorized agent for Torok, substituted Sandcastle Trustee Services (“Sandcastle”) in for First American Title as trustee. (Id., Exhibit “K”). This procedure is authorized by Civil Code § 2924a(d), which provides in pertinent part that “[a] trustee named in a recorded substitution of trustee shall be deemed to be authorized to act as the trustee under the mortgage or deed of trust for all purposes from the date the substitution is executed by the mortgagee, beneficiaries, or by their authorized agents.” (emphasis added).

“[T]he elements of an equitable cause of action to set aside a foreclosure sale are: (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. If the borrower’s actions attack the validity of the underlying debt, tender is not required. Id. at 112.

Plaintiff has alleged that the amount owed is disputed and seeks to set aside the foreclosure on this basis. Accordingly, defendants’ motion for judgment on the pleadings as to these causes of action is denied.

THIRD CAUSE OF ACTION (i.e., FRAUD):

“’”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. Superior Court (1996) 12 Cal.4th 631, 638). ‘”Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 234.

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written, authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Archuleta v. Grand Lodge etc. of Machinists (1968) 262 Cal.App.2d 202, 208–209; Gautier v. General Telephone Co. (1965) 234 Cal.App.2d 302, 308; Mason v. Drug, Inc. (1939) 31 Cal.App.2d 697, 703; Sanders v. Ford Motor Co. (1979) 96 Cal.App.3d Supp. 43, 46; see Grossman & Van Alstyne, California Practice (2d ed. 1976) § 984, pp. 111–114.).” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.

Plaintiff alleges that the debt upon which the foreclosure is based on is fraudulent. She alleges that received a cash loan advance of $7,885.00 on/about 7/25/07 and that, before she was given the check, she was “compelled” to make a declaration promising to repay the loan “pursuant to the terms and conditions of” her line of credit Agreement. (Id., ¶ 14). She alleges that when she later received her Lender Disclosure Agreement “she found that a sum of $20,080 had been credited to her account out of which Casita paid itself the sum of $10,420.00 for assorted services. For instance, Casita claimed a fee of $600 for Title Insurance, $3,850.00 as ‘Loan Fee’ and $5,970 for ‘Other,’ for a total of $20,080 as claimed payment to plaintiff.” (Id., ¶ 15). She alleges she was not aware of these terms until after she had cashed her $7,885 check and “was shocked to find that she had been scammed.” (Id., ¶ 16). “[T]he limitations period begins when the plaintiff suspects, or should suspect, that she has been wronged.” Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1114. Plaintiff knew of her claims based on the funding of the loan in 2007, yet waited until June 2017 to file this lawsuit.

The statute of limitations for any cause of action on the ground of fraud is three years from the date of “the discovery, by the aggrieved part, of the facts constituting the fraud.” CCP § 338(d). This cause of action is time-barred. Defendants’ motion for judgment on the pleadings as to this cause of action is granted.

SEVENTH CAUSE OF ACTION (i.e., VIOLATION OF CALIFORNIA BUSINESS AND PROFESSIONS CODE SECTION 17200):

Plaintiff’s seventh cause of action is asserted against “Defendants Bank of America, BAC, Wells Fargo, MERS and Does-10,” not moving defendants. Additionally, this cause of action also appears to be time-barred, as it is predicated on plaintiff’s fraud cause of action. The statute of limitations for actions brought under § 17200 is “four years after the cause of action accrued.” B&P Code § 17208.

Defendants’ motion for judgment on the pleadings as to this cause of action is granted.

(2) MOTION TO AMEND COMPLAINT:

Plaintiff Kathy Jones (“plaintiff”) moves the court for an order granting her leave to file her proposed First Amended Complaint (“FAC”).

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading…” CCP § 473(a)(1); and see § 576. A motion for leave to amend must (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments, (2) state what allegations in the previous pleading are proposed to be deleted, if any, and where (by page, paragraph and line number) the deleted allegations are located, and (3) state what allegations are proposed to be added to the previous pleading, if any, and where (by page, paragraph, and line number) the additional allegations are located. California Rules of Court (“CRC”) Rule 3.1324(a). Additionally, a separate declaration must accompany the motion and must specify (1) the effect of the amendment, (2) the reason why the amendment is necessary and proper, (3) the time when the facts giving rise to the amended allegations were discovered, and (4) the reasons why the request for amendment was not made earlier. CRC Rule 3.1324(b).

“While a motion to permit an amendment to a pleading to be filed is one addressed to the discretion of the court, the exercise of this discretion must be sound and reasonable and not arbitrary or capricious. Richter v. Adams [(1941)] 43 Cal.App.2d 184, 187; Eckert v. Graham [(1933)] 131 Cal.App. 718, 721. And it is a rare case in which ‘a court will be justified in refusing a party leave to amend his pleadings so that he may properly present his case.’ Guidery v. Green [(1892)] 95 Cal. 630, 633; Marr v. Rhodes [(1900)] 131 Cal. 267, 270. If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion. Nelson v. Superior Court [(1950)] 97 Cal.App.2d 78; In re Estate of Herbst [(1938)] 26 Cal.App.2d 249; Norton v. Bassett [(1910)] 158 Cal. 425, 427.” Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.

Plaintiff’s motion reflects compliance with CRC Rule 3.1324(a). Plaintiff’s counsel, Alaba S. Ajetunmobi (“Ajetunmobi”), filed a declaration in connection with plaintiff’s previous motion for leave to amend, advising therein that “[a]t the initial stage when I was consulted by plaintiff concerning this action, I requested for and she brought me papers that related to her complaint. In several pre-filing interviews I conducted with plaintiff she seemed confused and was not able to explain how the defendants came about the figures she was said to have owed and upon which the foreclosure of her property was based. She continued to maintain that she was given only $7,8885 [sic] from the $30,000 credit line. And to back up her story, she showed me a notarized declaration she had to sign when she received the money. But I found among the papers given to me an unsigned and undated Lender Disclosure Agreement with some figures which seemed to tally with the credit line defendants credited plaintiff received. I declare sincerely that, even then, plaintiff could not say with certainty when she received the agreement; whether they were some of the papers given to her by her bankruptcy attorney. Anyway, because the exaggerated figures in the agreement seemed to add up to the figures in the credit line, I naturally assumed that the baseline upon which the foreclosure figures came from was the lender disclosure agreement. I was mistaken. Since the complaint started, I sent some discovery requests to defendants (except DLI). To my surprise, the responses came back with disclosures that defendants were not relying on the figures in the lender disclosure agreement. They stated unequivocally that plaintiff was actually paid checks, $20,000 in the first instance and then $7,885, from the credit line. They went on to assert that they paid plaintiff’s delinquent property taxes and mortgage defaults to add to the money plaintiff received…These revelations came as a bug surprise to plaintiff. She continued to maintain that she never received more than $7,8885 [sic] from defendants and she never authorized defendants to pay, and that defendants never paid, her taxes and default mortgage payments….” (Ajetunmobi Decl., ¶¶ 2-8).

In denying plaintiff’s previous motion without prejudice on 1/17/18, the court noted that court plaintiff’s complaint is verified and that plaintiff failed to submit a declaration in support of the motion. The court advised that any renewed motion under these circumstances needed to be accompanied by plaintiff’s declaration.

Although plaintiff has now submitted a declaration, she does not offer up any explanation as to why she should be able to omit references (i.e., ¶¶ 14-16) to when she learned that she had allegedly been defrauded. “’”Where a verified complaint contains allegations destructive of a cause of action, the defect cannot be cured in subsequently filed pleadings by simply omitting such allegations without explanation.” (Lamoreaux v. San Diego etc. Ry. Co. (1957) 48 Cal.2d 617, 623; see Cothran v. San Jose Water Works (1962) 58 Cal.2d 608, 615; Hardy v. Admiral Oil Co. (1961) 56 Cal.2d 836, 840; Wennerholm v. Stanford University School of Medicine (1942) 20 Cal.2d 713, 716). Hendy v. Loss (1991) 54 Cal.3d 723, 742-743.

The motion is denied.