2018-00227481-CU-OR

Lydia Sandejas vs. Ocwen Loan Servicing, LLC

Nature of Proceeding: Motion for Judgment on the Pleadings

Filed By: Whittaker, Keola R.

Defendants Ocwen Loan Servicing LLC and Deutsche Bank national Trust’s

Motion for Judgment on the Pleadings as to the First Amended Complaint is granted, without leave to amend.

The Court notes that the meet and confer declaration indicates that counsel was unable to meet and confer by telephone or in person because plaintiff’s counsel did not return phone calls. Because the parties met and conferred by telephone before the demurrer to the original Complaint was filed, and, because in light of the ruling on the demurrer plaintiff has not cured the defects, the Court is not requiring a further meet and confer in person before this demurrer is ruled upon because it is apparent that no cause of action can be stated as a matter of law. Under such circumstances, a plaintiff may not evade the statutory requirements to meet and confer, in order to forestall an inevitable adverse determination and stave off court review. Indeed, although CCP section 430.41(a) does require a party seeking to file a demurrer (in this case, Ocwen) to meet and confer with the other side prior to filing its demurrer, it does not prohibit the trial court from ruling on a demurrer absent such a conference. To the contrary, section 430.41, subdivision (a)(4) states that even a determination that “the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.”

According to the First Amended Complaint (“FAC”), in July 2005, Plaintiff Lydia Sandejas obtained an adjustable rate mortgage loan from Downey Savings and Loan Association (DSLA). The Loan was secured by a Deed of Trust, which Plaintiff executed on July 1, 2005. (FAC. Exh. A.) The Deed of Trust identifies Downey as the beneficiary and lender, DSL Service Company a trustee, and Plaintiff as borrower. (Id.) The Deed, which Plaintiff signed, reflects her acknowledgment and agreement that interest in the Note could be sold without notice to Plaintiff, which might result in changes to the loan servicer that collects the monthly loan payments. (Id.) According to Plaintiff, the Loan was later sold to Deutsche Bank in September 2005 as part of a complicated series of transactions in a loan pooling agreement (PSA). (FAC. ¶¶ 7-8.) Deutsche Bank purchased the loans in its capacity as trustee for the DSLA Mortgage Loan Trust. (Exh. B to FAC.) As alleged, the sale of the loan to Deutsche Bank served to extinguish the interest in Plaintiff’s loan formerly held by original lender DSLA. Plaintiff claims that it is the “certificate holders of the Trust who are entitled to a portion of the income stream generated by the polled mortgage loans.” (FAC. ¶ 9.) Plaintiff expressly does not challenge the securitization process applicable to the loan. (FAC ¶ 12.)

Plaintiff claims, however, that the Loan was not assigned to Deutsche Bank thereafter. Specifically, Plaintiff contends that the promissory note applicable to her loan shows no endorsements from original lender DSLA to any other entity. Upon Plaintiff’s inquiry, Ocwen confirmed that it was the loan servicer and Deutsche Bank was the owner of the Note (debt). (FAC. ¶ 13.) Plaintiff disputes this representation by Ocwen because her “review of land records maintained by the Sacramento County Recorder’s Office found no assignment of the Note or beneficial interest in Plaintiff’s DOT on file.” (Id.) Plaintiff alleges that the California Commercial Code requires a noteholder to transfer a mortgage Note only by endorsing the Note to the transferee. Without an endorsement to Deutsche Bank, Plaintiff alleges that Deutsche Bank “is not a valid beneficiary and, consequently, [defendant] Ocwen has no authority to serve as servicing agent” for Deutsche Bank. (FAC ¶ 15.)

Plaintiff filed this suit on February 21, 2018, alleging causes of action for declaratory relief; quiet title; violation of Business & Professions Code § 17200; and, unjust enrichment. On May 22, 2018 the Court sustained the demurrer to the Complaint with leave to amend. The Court sustained the demurrer to the declaratory relief claim because plaintiff had not alleged ay independent viable claim to support the requested relief, citing to Lane v. Vitek Real Estate Indus. Group (E.D. Cal 2010) 713 F. Supp.2d 1092, 1101. The court ruled that plaintiff had failed to plead facts to establish any unlawful activity with regard to the alleged invalidity of the assignment to Deutsche Bank.

Plaintiff does not allege that there has been any default on the loan or commencement of foreclosure proceedings.

Plaintiff’s FAC has not cured the defects in the Complaint. Because plaintiff has made no showing that the defects can be cured, the motion for judgment on the pleadings is granted, without leave to amend.

The motion is made pursuant to Section 438(c)(1)(B)(ii) and (d) of the California Code of Civil Procedure on the ground that the FAC fails to state facts sufficient to constitute any cause of action against Defendants.

A motion for judgment on the pleadings is the equivalent of a general demurrer but is made after the time for a demurrer has expired. (Alterra Excess & Surplus Ins. Co. v. Snvder (2015) 234 Cal.App.4th 1390, 1400.) “A motion for judgment on the pleadings serves the function of a demurrer, challenging only defects on the face of the complaint.” (Richardson-Tunnell v. School Ins. Program for Employees (2007) 157 Cal.App.4th 1056,1061) As with a demurrer, “[t]he grounds for a motion for judgment on the pleadings must appear on the face of the complaint or from a matter of which the court may take judicial notice.” (Ibid, citing Code Civ. Proc, § 438, subd. (d); see also Howard Jarvis Taxpayers Assoc. v. Riverside (1999) 73 Cal. App. 4th 679, 685. The motion should be granted if, taking all of the allegations of the complaint to be true, the defendant is entitled to judgment as a matter of law. Consolidated Fire Protection Dis. v. Howard Jarvis Taxpayers’ Ass’n. (1998) 63 Cal. App. 4th 211, 219. A Motion for Judgment on the Pleadings is property granted without leave to amend when there is no reasonable possibility that the defect can be cured by amendment. See Schonfeldt v. State of California (1998) 61 Cal. App. 4th 1462, 1465 (“If there is no liability as a matter of law, leave to amend should not be granted.”)

The Court may also take judicial notice of exhibits attached to the complaint. If facts appearing in the exhibits contradict those alleged in the complaint, the facts in the exhibits take precedence. (Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 567-568; Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal. App. 3d 1624, 1627.)

Plaintiff essentially argues that because her loan was allegedly transferred into a securitized trust, and because the transfer was allegedly improper, no entity has authority to enforce the Deed of Trust, and the Note and Deed of Trust should therefore be cancelled while Plaintiff maintains possession of the Property free and clear. This theory has been rejected in California as the law does not countenance such an inequitable result. A similar challenge was made in Gomes v. Countrywide Home Loans (2011) 192 Cal.App.4th 1149. The Gomes court rejected the argument stating:

“By asserting a right to bring a court action to determine whether the owner
of the Note has authorized its nominee to initiate the foreclosure process. Gomes is attempting to interject the courts into this comprehensive non- judicial scheme. As Defendants correctly point out, Gomes has identified no legal authority for such a lawsuit. Nothing in the statutory provisions establishing the non-judicial foreclosure process suggests that such a judicial proceeding is permitted or contemplated. Id. at 1154.”

The Court in Gomes found that if borrowers could challenge to the transfer of interest in a Note, the Legislature’s decision to establish the remedy of non-judicial foreclosure for creditors would be thwarted, since every non-judicial foreclosure could be turned into a judicial proceeding by borrowers filing lawsuits “solely for the purposes of delaying valid foreclosures.” Id. (affirming the trial court’s decision to sustain the demurrer without leave to amend). See also Debrunner v. Deutsche Bank National Trust Co.(2012) 204 Cal.App.4th 433, 440-442 (a party may commence non-judicial foreclosure pursuant to statute without proving that it is the holder of the secured note).

Analogously, in Saterbak v. JPMorgan Chase Bank, N.A., (2016) 245 Cal.App.4th 808, the Court of Appeal for the Fourth District considered whether the trial court erred in finding that a plaintiff who was seeking to stop a threatened foreclosure did not have standing to bring the suit. The plaintiff alleged that the assignments of her loan were invalid because of untimely securitization of the deed of trust and robo-signing. Saterbak, 245 Cal.App.4th at 812. However, the court found that “California courts do not allow such preemptive suits because they ‘would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.'” Id. at 814. Allowing a plaintiff to bring such a suit would impose an additional requirement that the defendant demonstrate that it is authorized to initiate a foreclosure which “would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.” Id. at 814-15 (quoting Gomes v. Countrywide Home Loans, Inc., supra, at p. 1156.). Since the plaintiff had brought a pre-foreclosure action challenging the lenders ability to foreclose, she did not have standing. Saterbak, supra, at p. 815.

In opposition, plaintiff cites two cases which she claims holds that a borrower can initiate a preforeclosure action challenging the assignment of the loan. Plaintiff first cite Jenkins v. JPMorgan Chase Bank, N.A.(2013) 216 Cal. App. 4th 497, 512 (2013). But the Jenkins court confirmed the holding of Gomes that “no express or implied grounds for allowing such a preemptive action.” Id. at 512. Indeed, as noted in Jenkins, “the provisions setting forth California’s nonjudicial foreclosure scheme (§§ 2924-2924k) cover every aspect of the exercise of a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the beneficiary-creditor with a quick, inexpensive and efficient remedy against a defaulting trustor-debtor; (2) to protect the trustor-debtor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” Id at pp. 509-510. “The comprehensive statutory framework established [in sections 2924 to 2924k] to govern nonjudicial foreclosure sales is intended to be exhaustive.” Debrunner v. Deutsche Bank Nat. Tr. Co., supra, at p. 440. As noted, allowing a plaintiff to bring a preemptive suit to preclude foreclosure would impose an additional requirement that the defendant demonstrate that it is authorized to initiate a foreclosure which “would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.” Saterbak, supra, at pp. 814-815.

Plaintiff also cites to the California Supreme Court decision in Yvanova v. New Century Mortgage Corp.(2016) 62 Cal.4th 919, which held that a borrower has standing to sue for wrongful foreclosure where an alleged defect in the assignment renders the assignment void. But the Supreme Court’s ruling “is expressly limited to the post-foreclosure context.” Yvanova, 62 Cal.4th at 934-935. The California Supreme Court has not held that a borrower may file a preemptive challenge to stop foreclosure and the holding in Yvanova is “narrow,” and established “only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment.” Id. at 924. Further, the Supreme Court stated that they did “not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed.” Yvanova, at p. 924.

1st cause of action Declaratory Relief

The motion for judgment on the pleadings is granted, without leave to amend.

As the Court noted in its prior decision on demurrer, Plaintiff is not entitled to declaratory relief absent an independent viable claim. Lane v. Vetek Real Estate Indus. Group (E.D. Cal. 2010) 713 F. Sup. 2d 1092, 1101. Plaintiff has failed to plead an independent viable claim.

An Assignment of a Deed of Trust does not require a corresponding transfer of a Promissory Note. See, e.g., Ghuman v. Wells Fargo Bank N.A., 989 F. Supp. 2d 994 (E.D. Cal. 2013) (beneficiary retains right to enforce deed of trust when promissory note sold or otherwise transferred); Lane v. Vitek Real Estate Indus. Group (E.D. Cal. 2010) 713 F. Supp. 2d 1092, 1098-99 (party enforcing secured obligation not required to have beneficial interest in, or physical possession of, promissory note); Debrunner v. Deutsche Bank Nat’l Trust Co., 204 Cal. App. 4th 433, 440-42 (2012) (foreclosing party need not possess promissory note). In fact, a borrower’s obligation to repay the underlying loan does not change based on who has possession of the Note, as the obligation to repay is unaffected by any transfer of the Note. As explained in Jenkins v. JPMorgan Chase Bank, N.A.:

Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor…. [The] assignment merely
substituted one creditor for another, without changing [the borrower’s] obligations under the note. As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [the borrower] lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions…. Courts have consistently rejected the argument that Plaintiff makes here, that ” [ i ] f the alleged ‘Lender’ is not the true ‘Lender,’ it has no right to order a foreclosure sale.” Saterbak v. JPMorgan Chase Bank, N.A.(2016) 245 Cal.App.4th 808, 814.

Furthermore, even if any subsequent transfers … were invalid, [the borrower] is not the victim of such invalid transfers because her obligations under the note remained unchanged. 216 Cal. App. 4th 497, 515 (2013) (internal citations omitted) (disapproved of in part on other grounds by Yvanova v. New Century Mortgage Corp .(2016) 62 Cal. 4th 919, 942-43.

2nd cause of action Quiet Title

The motion for judgment on the pleadings is granted without leave to amend. The defects of the Complaint have not been cured.

Plaintiffs claim fails under Code of Civil Procedure § 761.020 because the FAC is not verified. Lewis v. Superior Court, 30 Cal. App. 4th 1850, 1866 (1994) (“[There is no quiet title claim because.. .the complaint was not verified as required by the quiet title statute.”). Second, a notice of pendency of action is required in any quiet title action. Code Civ. Proc. § 761.010. The Court’s docket does not reflect that Plaintiff filed any Lis Pendens and Plaintiff does not allege that she recorded a Lis Pendens in the public record. Additionally, the FAC fails to adequately allege that Deutsche Bank, as beneficiary under the Deed of Trust, has any adverse claim against the actual title of the Property. Generally, “a deed of trust creates a tripartite relationship between the trustor (debtor) the trustee, and the beneficiary (creditor).” Lupertino V. Carbahal (1973) 35 Cal.App.3d 742, 747-48. Here, the Deed of Trust lists Plaintiff as the

borrower (i.e., as the trustor or the debtor), non-party DSL Service Company as the Trustee, and Downy Savings and Loan as the lender (i.e., the beneficiary or creditor). (See FAC, Ex. A.) According to Plaintiff’s own allegations, the DSLA Mortgage Loan Pooling and Service Agreement conveyed Plaintiffs loan via the Deed of Trust to Deutsche Bank, with Ocwen as the servicer. (See FAC, Exs. B and C.) A Deed of Trust “carries none of the incidents of ownership of the property other than the right to convey upon default on the part of the debtor in the payment of his debt.” Lupertino, 35 Cal.App.3d at

748 (citation omitted). Thus, “[a] security interest in a deed of trust is not an adverse claim to a plaintiffs property.” Chan Tang v. Bank of Am., N.A., No. SACV 11-2048 DOC, 2012 WL 960373, at *14 (CD. Cal. Mar. 19,2012). (“[B]ecause Defendants’ only interest in the property is a security interest evidenced by the Deed of Trust, Plaintiffs have failed to show an adverse claim to their home.”). Thus, while the Deed of Trust encumbers the Property to secure the underlying loan, it does not give Deutsche Bank any other incidents of ownership, and therefore is not an adverse claim against title. Vega v. JPMorgan Chase Bank N.A

.(E.D. Cal. 2009) 654 F. Supp. 2d 1104, 1121. Finally, with respect to tender, it is Plaintiff’s responsibility to make an unambiguous tender of the entire amount due under the note or else suffer the consequence that any tender is of no effect. Nguyen v. Calhoun (2003) 105 Cal.App.4th 428,439). “It is settled in California that a mortgagor cannot quiet his title against the mortgagee without paying the debt secured.” Shimpones v. Stickney (1981) 219 Cal. 637,649 (1934); see Mix v. Sodd (1981) 126 Cal,App.3d 386, 390 (“a mortgagor in possession may not maintain an action to quiet title, even though the debt is unenforceable”); Aguilar v.Bocci (1974) 39 Cal.App.3d 475,477 (1974) (trustor is unable to quiet title “without discharging his debt”). Here, Plaintiff fails to allege actual tender, or even the ability to tender.

3rd cause of action Violation of Business & Profession Code section 17200

The motion for judgment on the pleadings is granted without leave to amend.

“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’ ([Bus. & Prof. Code, ]§ 17200.) Its purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320 [citations omitted].)

“A private person has standing to sue under the UCL only if that person has suffered injury and lost money or property as a result of such unfair competition” (Darol v. Superior Court (2007)] 151 Cal.App.4th 1079, 1098.) To satisfy the UCL standing requirement, the plaintiff must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Two Jinn, Inc. v. Government Payment Service, Inc. (2015) 233 Cal.App.4th 1321, 1331.) “In order to pursue a UCL claim, the plaintiff must show that the practices that it characterizes as unlawful caused it to suffer an actual economic injury.” (Id. at p. 1333.)

This cause of action fails because Plaintiff lacks standing to bring a claim under the UCL, and because Plaintiff has not alleged any unlawful, unfair, or fraudulent business practice. Plaintiff alleges she “suffered injury in fact,” including “a cloud on the title to her real property,” “monies paid to Ocwen,” and “incurred costs in retaining the services of a forensic mortgage loan auditor and attorneys.” (FAC ¶ 36.) These were the same allegations made in Plaintiffs original Complaint. (See Compl. ¶ 36.) This does not show that Plaintiff has actually lost any money or property, as previously found by the Court.

Under the “unlawful” prong, the UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law. Chabner v. United Omaha Life Ins. Co.(9th Cir 2000) 225 F.3d 1042, 1048. “In effect, the UCL borrows violations of other laws…and makes those unlawful practices actionable under the UCL.” Lazar v. Hertz Corp.,(1999) Plaintiff cannot allege the “unlawful” prong of the UCL because she has failed, after being given leave to amend, to state a single viable cause of action against Defendants.

4th cause of action Unjust Enrichment

The motion for judgment on the pleadings is granted, without leave to amend.

California law does not recognize unjust enrichment as a cause of action “or even a remedy.” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App.4th 221,231; Durrell V. Sharp Healthcare (2010) 183 Cal. App. 4th 1350, 1370 (2010) (“[t]here is no cause of action in California for unjust enrichment. Unjust enrichment is synonymous with restitution.”); McBride v. Boughton, (2004) 123 Cal. App. 4th 379, 387 (“Unjust enrichment is not a cause of action, however, or even a remedy, but rather ‘a general principle, underlying various legal doctrines and remedies'”) (citations omitted). “Rather, unjust enrichment is a basis for obtaining restitution based on quasi-contract or imposition of a constructive trust.” McKell v. Wash. Mut., Inc.(2006) 142 Cal.App.4th 1457, 1490.

(“[U]njust enrichment is an action in quasi-contract, which does not lie when an enforceable, binding agreement exists defining the rights of the parties.”); Cal. Medical Ass ‘n v. Aetna U. S. Healthcare of Cal.(2001) 94 Cal.App.4th 151, 172 (“unjust enrichment does not lie where … express binding agreements exist and define the parties’ rights.”). In this case, any relationship between Plaintiff and Defendants is governed by an express contract and, therefore, a claim for unjust enrichment cannot lie. The Deed of Trust is an express binding agreement which defines the rights of the parties, and consequently an unjust enrichment claim cannot stand. (FAC Ex. A; see supra.) In signing the Deed of Trust, Plaintiff agreed to and acknowledged that the interest in the Note may be sold without prior notice to Plaintiff and that this might result in a change in the loan servicer that collects the monthly payments under the Loan – which is what occurred here. (FAC, Exs. A and C)

Moreover, Plaintiff’s claim is based on the theory that her payments to Ocwen were unjust because Ocwen had no interest in her mortgage. To prove that receipt was unjust, it usually must be shown that “the benefits were conferred by mistake, fraud, coercion or request; otherwise, though there is enrichment, it is not unjust.” Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1316 (1989) (citations omitted). Plaintiff has failed to state a claim for unjust enrichment because Plaintiff has filed to show how payments to Ocwen were “unjust.” As noted in the Court’s decision sustaining the demurrer to the original Complaint, the DSLA Mortgage Loan Pooling and Service Agreement conveyed Plaintiff’s loan via the Deed of Trust to Deutsche Bank, with Ocwen as the servicer, (See FAC, Exs. B and C.)

Plaintiff failed to allege how payments to Ocwen, as loan servicer for a mortgage in excess of $500,000, were unjust because she is not challenging the underlying debt.

As the FAC has shown that the defects in the Complaint could not be cured, the motion for judgment on the pleadings as to each cause of action is granted without leave to amend.

The prevailing party shall prepare a formal order for the Court’s signature pursuant to C.R.C. 3.1312.