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 (“Quality”), Deborah Brignac (“Brignac”), U.S. Bank, N.A. (“U.S. Bank”), Select Portfolio Servicing (“SPS”), Orchid Terrace Inc., Monte Vista Oaks, Inc., Monte Vista Oaks DB Plan, and Kip Dream Homes.
According to the operative first amended complaint (“FAC”), Plaintiff owns property located at 2739 Clover Meadow Court, San Jose, CA (“Subject Property”). (FAC, ¶ 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 ¶ 29.) The DOT and promissory note (“Note”) named WaMu as the beneficiary. (Id. at ¶ 30.) On October 2, 2008, JPMorgan purchased WaMu as a result of a receivership ordered by the Federal Deposit Insurance Corporation (“FDIC”). (Id. at ¶ 31.)
On March 1, 2010, the California Reconveyance Company recorded notice of default on the Subject Property (“NOD”). (FAC, ¶ 32.) That same day, Brignac executed an assignment of the DOT (“ADOT”), which purported to assign the DOT 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”). (FAC, ¶ 34.) The ADOT was fraudulent because Brignac represented she signed it “under the authority of being a Vice President of [JPMorgan]” but never held that position. (Id. at ¶ 36.) Instead, she was a foreclosure specialist and supervisor for the California Reconveyance Company. (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 ¶ 38.)
Thereafter, on March 10, 2014, SPS executed a substitution of trustee, substituting ALAW as trustee (“SOT1”). (FAC, ¶¶ 39-40.) The SOT1 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note in March 2014, and therefore had no interest to assign. (Ibid.) Two years later, on March 21, 2016, Quality was substituted as trustee (“SOT2”). (Id. at ¶ 41.) The SOT2 is void because neither U.S. Bank, SPS, nor WaMu AR19 had a beneficial interest in the DOT or Note in March 2016. (Id. at ¶ 42.) Quality then recorded three notices of trustee sale on March 24, 2016, June 14, 2016, and November 1, 2016 (“Three NOTS”). (Id. at ¶ 43.)
Quality sold the Subject Property to Orchid Terrace, Inc., Monte Vista Oaks Inc., Monte Visa Oaks DB Plan, and KIP Dream Homes on February 8, 2017. (FAC, ¶ 46.) 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. (Ibid.) 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 ¶ 48.)
Plaintiff asserts causes of action for: (1) “statutory violations;” (2) unlawful foreclosure; (3) slander of title; (4) cancellation of instruments; and (5) unfair business practices.
JPMorgan (“Defendant”) presently demurs to the FAC on the grounds of failure to state sufficient facts to constitute a cause of action and misjoinder, and additionally moves to strike portions of the pleading.
I. Request for Judicial Notice
In support of its demurrer, Defendant requests judicial notice of ten documents recorded in connection with the Subject Property pursuant to Evidence Code section 452, subdivision (h), which allows a court to take judicial notice of facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. Recorded property instruments are proper subjects of judicial notice under this provision. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265, disapproved of on other grounds in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919.)
In opposition, Plaintiff “points out” these documents are attached to the FAC and their “veracity” is in dispute. Plaintiff does not, however, actually contest the authenticity of the documents; rather, as discussed in more detail relative to the merits of the demurrer, he argues they are void because a signatory lacked authority to sign the ADOT. Because the authenticity of the documents themselves are not in dispute, they may be judicially noticed. (See Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 265 [stating courts may judicially notice documents if the authenticity is not disputed].) In addition, the documents are relevant to the underlying issues to be resolved in the demurrer. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [any matter to be judicially noticed must be relevant to a material issue].) Consequently, the recorded documents are proper subjects of judicial notice.
Defendant additionally requests judicial notice of the Purchase and Assumption Agreement between the FDIC and itself. The subject Purchase and Assumption Agreement is a proper subject of judicial notice under Evidence Code section 452, subdivision (c), which provides the court may take judicial notice of official acts of the executive branch. (See Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 753 [“As JPMorgan argues, the FDIC’s official acts of seizing WaMu’s assets and publishing the P&A Agreement are judicially noticeable. Moreover, as explained post, the FDIC’s official act of transferring certain WaMu assets (but not certain liabilities) to JPMorgan as of September 25, 2008—as evinced by the P&A Agreement—is an official act subject to judicial notice under section 452, subdivision (c) under the circumstances of this case.”].)
Plaintiff objects to the request for judicial notice of this document on the basis it is irrelevant. The subject document is relevant to the demurrer because it reflects the merger of WaMu and Defendant, who was allegedly transferred Plaintiff’s loan. The document helps establish the chain of title of the DOT and reflects how Defendant came to have an interest in it. It is therefore relevant to issues in the demurrer relating to Defendant’s interest in the DOT. As such, the agreement is a proper subject for judicial notice.
Accordingly, the request for judicial notice is GRANTED.
II. Demurrer
A. Misjoinder
Defendant demurs to the entire FAC on the ground of misjoinder of parties, arguing Plaintiff fails to include an indispensable party, his wife Lien Tang. Defendants contend she is indispensable because she is on the DOT and all of mortgage documents, and her exclusion in this action could leave it open to additional lawsuits. In opposition, Plaintiff contends the requirements set forth in Code of Civil Procedure section 389, subdivision (a) are not fulfilled in this instance.
A party may demur to a pleading on the ground “[t]here is a defect or misjoinder of parties.” (Code Civ. Proc., § 430.10, subd. (d).) When the basis for such a demurrer is the nonjoinder of a necessary and indispensable party, Code of Civil Procedure section 389 is implicated. (Countrywide Home Loans v. Super. Ct. (1999) 69 Cal.App.4th 785, 791-793.) Section 389 provides a person shall be joined as a party to the action if his or her absence may “leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.” While Defendant correctly asserts Lien Tang is on all of the mortgage documents, it advances no arguments or facts supporting finding that there is a substantial risk of her filing suit. “[A] substantial risk means more than a theoretical possibility of the absent party’s asserting a claim that would result in multiple liability. The risk must be substantial as a practical matter.” (Van Zant v. Apple Inc. (2014) 229 Cal.App.4th 965, 977, citations and quotations omitted.) Lien Tang’s name being on the mortgage documents only presents a mere possibility she could file suit. For these reasons, the demurrer to the entire FAC on the ground of misjoinder of parties is not sustainable.
B. Failure to State Sufficient Facts to Constitute A Cause of Action
Defendant advances arguments applicable to all causes of action in addition to arguments applicable to individual causes of action. The Court will first address the arguments applicable to all causes of action.
1. Arguments Applicable to All Causes of Action
a. Civil Conspiracy and Joint Venture Allegations
Plaintiff alleges that each defendant is and at all times was the agent, employee, alter-ego, principal, employer, or co-conspirator of each of the remaining co-defendants. (FAC, ¶ 15.) Plaintiff additionally alleges each defendant was engaged in a joint venture for the purpose of enforcing an alleged secured indebtedness upon the Subject Property and extracting money from Plaintiff. (Id. at ¶ 19.) Plaintiff pleads each defendant financially benefitted and complied with the requirements of the other defendants to insure their goal of obtaining money was fulfilled. (Ibid.) Plaintiff also alleges Defendant participated in this joint venture and conspiracy by attempting to claim a beneficial interest in the Subject Property, instructing Quality to initiate foreclosure proceedings, and failing to review competent evidence giving it the right to initiate foreclosure proceedings. (Id. at ¶ 21.) Defendant asserts Plaintiff inadequately pleads the existence of a conspiracy and joint venture. Defendant does not state the consequence of failing to plead the existence of a conspiracy or joint venture, and simply concludes Plaintiff fails to do so. In opposition, Plaintiff merely states he pleads sufficient facts.
As to conspiracy, Defendant argues Plaintiff fails to allege any facts detailing how all defendants conspired together, what each defendant knew during this alleged conspiracy, what each defendant did in furtherance of that conspiracy, and how it benefited from that conspiracy. Defendant misstates what is required to plead the existence of a conspiracy. Civil conspiracy is not an independent cause of action; it is a “legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-11.) “[A] plaintiff must allege that the defendant had knowledge of and agreed to both the objective and the course of action that resulted in the injury, that there was a wrongful act committed pursuant to that agreement, and that there was resulting damage.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823 (“Berg & Berg”).) Thus, there is no authority supporting that Plaintiff must allege what each defendant knew during the alleged conspiracy or how it benefited from the conspiracy. The Court otherwise finds Plaintiff alleges the existence of a conspiracy. He pleads: (1) the defendants acted together with the purpose of enforcing indebtedness upon the Subject Property and extracting money from Plaintiff, which was the goal of the conspiracy (FAC, ¶ 19); (2) wrongdoing occurred in furtherance of that goal, namely initiating foreclosure proceedings without proper authority (id. at ¶ 21); and (3) the Subject Property was sold (id. at ¶ 46).
With respect to joint venture, Defendant asserts Plaintiff fails to allege any facts reflecting the existence of a joint venture. A joint venture is an undertaking of two or more people jointly to carry out a single business enterprise for profit. (Nelson v. Abraham (1947) 29 Cal.2d 745, 749.) There are “three elements to show the existence of a joint venture, which are similar to a general partnership: (1) joint interest in a common business; (2) with an understanding to share profits and losses; and (3) a right to joint control.” (Jacobs v. Locatelli (2017) 8 Cal.App.5th 317, 328, fn. 10.) The FAC is silent as to the sharing in profits and losses in their endeavor and the right to joint control. Thus, Plaintiff fails to plead Defendant formed a joint venture.
With that said, the demurrer is not sustainable due to Plaintiff’s failure to plead joint venture. Defendant has not articulated any reason how this failure renders the pleading susceptible to demurrer and joint venture is not asserted as a cause of action.
b. “Proper Party”
Defendant asserts it is not the “proper party to Plaintiff’s claims relating to the recording of the SOT1, SOT2, NOTS1, NOTS2, NOTS3, and the TDUS.” Defendant contends the exhibits to the FAC reveal these documents were recorded by other parties, it thus cannot be liable for any claim. Defendant concludes Plaintiff cannot maintain the position that it has any beneficial interest under the DOT, and no claim can be stated against it.
Defendant’s argument is not well-taken. As aptly stated by Plaintiff in opposition, Defendant’s liability is predicated on the existence of a conspiracy and joint venture. Because Plaintiff pleads Defendant was a member of the conspiracy, it may be held liable for the wrongful acts of the other defendants. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510 [stating conspiracy imposes liability on parties who share in the design of a wrongful plan].) In addition, Defendant is not only allegedly liable based on conspiracy liability, Plaintiff alleges he is liable for recording a void NOD and ADOT. Thus, even if Plaintiff failed to plead the existence of a conspiracy, Defendant would not be absolved of liability as to each cause of action. Because a demurrer does not lie to a portion of a cause of action, the demurrer cannot be sustained. (See PH II, Inc. v. Super. Ct. (1995) 33 Cal.App.4th 1680, 1682 [demurrer does not lie to a portion of a cause of action].)
c. Standing
Plaintiff alleges the ADOT is void based on Brignac’s lack of authority to execute it and each subsequently executed document is void because it is fruit of the poisonous tree. Plaintiff additionally alleges the ADOT is void because the DOT was not timely assigned into WaMu AR 19. Defendant challenges both allegations and asserts Plaintiff lacks standing to challenge the ADOT on these bases.
“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.) For context, 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.) 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.)
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. (FAC, ¶ 36.) Plaintiff pleads Brignac was actually a foreclosure specialist and supervisor for the California Reconveyance Company. (Ibid.)
Defendant characterizes this allegation as one of “robo-signing.” Robo-signing is the failure to conduct a review of the evidence substantiating a borrower’s default prior to recording or filing certain documents, including an assignment of a deed of trust. (Michael J. Weber Living Trust v. Wells Fargo Bank, N.A. (N.D. Cal., Mar. 25, 2013, No. 13-CV-00542-JST) 2013 WL 1196959, at *4.) Plaintiff disputes this characterization and states the allegation is not one of “robo-signing” but one of a lack of authority to execute the documents in the first instance. Plaintiff insists that instead of alleging Brignac is a robo-signer, he pleads she never worked for Defendant.
While Plaintiff correctly recites the allegations in the FAC, his position is not well-taken. Robo-signing claims are often predicated on a plaintiff alleging an employee of an entity without the proper authority signed an assignment. (See Pratap v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 63 F.Supp.3d 1101, 1109; see also Baldoza v. Bank of America, N.A. (N.D. Cal., Mar. 12, 2013, No. C-12-05966 JCS) 2013 WL 978268, at *13 (“Baldoza”) [characterizing a claim that an employee did not work for MERS but executed an assignment on its behalf as “robo-signing”].) In any event, whether Brignac’s actions can be characterized as “robo-signing” does not alter the alleged facts. Allegations that a written instrument is void because the signatory was allegedly employed by another entity are insufficient to invalidate the instrument. (See 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 on behalf of another entity to sign on its behalf. (See ibid.) Moreover, the emphasis of Plaintiff’s allegations is on Brignac’s employment, not her lack of authority to execute the ADOT. (See FAC, ¶ 36.)
The allegations are additionally insufficient to confer standing because “where a plaintiff alleges that a document is void due to robo-signing, yet does not contest the validity of the underlying debt, and is not a party to the assignment, the plaintiff does not have standing to contest the alleged fraudulent transfer.” (Pratap v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 63 F.Supp.3d 1101, 1109.) Such is the case here. Further, it is well-established that allegations of robo-signing render an assignment only voidable, not void. (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 Defendant’s authority based on Brignac’s execution of the document.
Next, Plaintiff alleges the ADOT is void because the DOT was transferred into WaMu AR 19 on or about February 26, 2010, almost five years after the pool had closed. (FAC, ¶ 38.) Defendant challenges Plaintiff’s allegation that the ADOT is void because of the transfer to the pool on two bases.
Defendant first insists Plaintiff’s claim is baseless to the extent he pleads the beneficial interest could not have been properly assigned based upon the date in the recorded ADOT. Defendant argues Plaintiff misinterprets the effect of recording an assignment. According to Defendant, a recorded assignment is not a necessary document in completing nonjudicial foreclosure proceedings and its only purpose is to provide constructive notice. Defendant asserts that because Plaintiff’s allegation that the loan was improperly securitized is based on the date of the recording of an assignment, the loan could have been assigned prior to that time and could have actually been transferred prior to the closing date of the pool. This argument lacks merit because the FAC does not only allege the ADOT was recorded after the closing of the pool, it also alleges the ADOT was actually assigned after the pool closed. (FAC, ¶ 38.) The pleading clearly reflects the ADOT was allegedly assigned after the closing date and does not state the assignment could have actually been executed prior to the closing of the pool.
Defendant 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. In support, Defendant cites Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, which holds that a defect in the securitization of a loan renders the assignment merely voidable. In opposition, Plaintiff only addresses this argument by stating Saterbak is inapplicable because the plaintiff initiated the action prior to the foreclosure sale occurring. While it is true that in Saterbak the plaintiff initiated the action prior to the sale of the subject property, that fact does not alter the principle that a defect in the securitization process renders the assignment voidable. (See Saterbak, supra, 245 Cal.App.4th at p. 815.) Whether a case is initiated post- or pre- foreclosure does not have any relation to the securitization of a loan. 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.
In sum, Plaintiff lacks standing to assert each cause of action stated in the pleading. Plaintiff urges the Court to nevertheless disregard Defendant’s standing arguments because 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. As aptly noted by Defendant, Plaintiff misstates paragraph 22 of the DOT. 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. As such, Plaintiff’s argument that the DOT language states he has standing is meritless.
Accordingly, the demurrer to each cause of action is sustainable based on Plaintiff’s lack of standing.
2. Arguments Applicable to Individual Causes of Action
a. First Cause of Action – Statutory Violations
Plaintiff pleads Defendant violated Civil Code sections 2924, subdivision (a)(6) (“Section 2924(a)(6)”), 2924.17, subdivision (b) (“Section 2924.17(b)”), and 2924f, subdivision (b)(1) (“Section 2924f(b)(1)”), as well as Penal Code sections 115, subdivision (a) (“Section 115(a)”) and 115.5, subdivision (a) (“Section 115.5(a)”).
Defendant first asserts Plaintiff does not state a violation of the Homeowner Bill of Rights (“HBOR”) with respect to the recordation of the NOD in 2010 because the statute is not retroactive. The HBOR is not retroactive and, thus, does not apply to conduct that occurred before January 1, 2013, when it was enacted. (See Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 158; Rockridge Trust v. Wells Fargo, N.A. (N.D. Cal. 2013) 985 F.Supp.2d 1110, 1153.) As the NOD was recorded before the HBOR came into effect, Plaintiff cannot successfully challenge its validity under that statutory framework. With that said, this cause of action is predicated on the SOT1, SOT2, Three NOTS, and TDUS in addition to the NOD. Further, the claim alleges violations of the Penal Code in addition to violations of the HBOR.
Thus, Plaintiff’s failure to plead a violation of the HBOR based on the NOD does not dispose of the entire claim. Consequently, it is not susceptible to demurrer on the basis the HBOR does not apply retroactively. (See PH II, Inc. v. Super. Ct., supra, 33 Cal.App.4th at p. 1682.)
In addition, Defendant advances arguments specific to three of the subject statutes. Defendant first contends Section 2924(a)(6) does not create a private right of action because Civil Code section 2924.12 specifically enumerates certain actionable statutory provisions, and this statute is not among them. Plaintiff does not address this argument in opposition.
As Defendant observes, the HBOR makes certain violations actionable. Specifically, Civil Code section 2924.12 states “a borrower may bring an action” for violations of only “Sections[s] 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.” From the plain language of the statute, borrowers are not permitted to bring a civil action for a violation of Section 2924(a)(6). (See Cornejo v. Ocwen Loan Servicing, LLC (E.D. Cal. 2015) 151 F.Supp.3d 1102, 1117–18 [finding there is no private right of action under Civil Code section 2924, subdivision (a)(5) for the same reason].) As such, a violation of Section 2924(a)(6) may not be a basis for this cause of action.
Defendant next asserts Plaintiff does not state a claim for a violation of Sections 115(a) and 115.5(a) because he has no standing to enforce criminal statutes. As persuasively argued by Defendant, “[g]enerally, criminal statutes do not confer private rights of action, and thus any party asserting such a private right bears the burden of establishing its existence.” (Grajeda v. Bank of America, N.A. (S.D. Cal., June 10, 2013, No. 12-CV-1716- IEG NLS) 2013 WL 2481548, at *2 [dismissing claim under Section 115(a) in a wrongful foreclosure case because the plaintiff provided no authority supporting contention a private right of action exists].) Here, Plaintiff provides no authority demonstrating a private right of action and does not even address this argument in opposition. Courts have otherwise held Section 115 does not provide citizens with a private right of action. (Patino v. Franklin Credit Management Corporation (N.D. Cal., Aug. 29, 2016, No. 16-CV-02695-LB) 2016 WL 4549001, at *3.) As such, Plaintiff fails to state a claim for violations of Sections 115(a) and 115.5(a).
In sum, Defendant does not advance any argument except for Plaintiff’s lack of standing that would render the pleading susceptible to demurrer. Defendant’s argument fails to dispose of the entire cause of action because it does not provide arguments specific to Section 2924.17(b) and Section 2924f(b)(1). The only argument advanced to those sections is one based on retroactivity, and for the reasons discussed above, it does not dispose of the claim.
b. Second Cause of Action – Unlawful Foreclosure
Plaintiff alleges Defendant wrongfully foreclosed on the Subject Property because the DOT and Note were “improperly moved” into WaMu AR19 and Brignac fraudulently executed the ADOT. (FAC, ¶ 70.) As a result, subsequently executed documents are void. (Id. at ¶ 71.)
Defendant contends Plaintiff fails to plead he tendered the sum of indebtedness.
As a general rule, a debtor cannot set aside a foreclosure without also alleging he or she paid the secured debt before the action is commenced. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112; Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86-87.) This is often referred to as the “tender rule.” (See Lona v. Citibank, N.A., supra, 202 Cal.App.4th at p. 115.) Here, Plaintiff does not allege he tendered the amount due on his loan or made an offer to do so. Instead, he insists the tender rule is inapplicable because he alleges the documents initiating the foreclosure are void. Tender is not required where “the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face.” (Id. at pp. 112-113.) As discussed above, even assuming he adequately alleges Brignac lacked authority and the securitization was defective, these defects only render the ADOT voidable, not void. Therefore, the exception to the tender rule is inapplicable and Plaintiff is required to plead he tendered the amount due. As he does not allege such, his claim fails.
c. Third Cause of Action – Slander of Title
Plaintiff alleges the DOT and Note were “improperly moved” into WaMu AR19 and Brignac fraudulently executed the ADOT. (FAC, ¶ 79.) As a result, all subsequently executed documents, including the NOD, SOT1, SOT2, Three NOTS, and TDUS, are void. (Id. at ¶ 81.)
Slander of title occurs when there is an unprivileged publication of a false statement which disparages title to the property and causes pecuniary loss. (Stalberg v. Western Title Ins. Co. (1994) 27 Cal.App.4th 925, 929.) In order to state a claim for slander of title, a plaintiff must allege: “(1) a publication, (2) which is without privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss.” (Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal. App. 4th 1040, 1051.)
Defendant asserts the claim fails because Plaintiff fails to plead the subject documents are without privilege. Civil Code section 2924, subdivision (d) provides in pertinent part: “All of the following shall constitute privileged communications pursuant to Section 47: [¶] (1) The mailing, publication, and delivery of notices as required by this section. [¶] (2) Performance of the procedures set forth in this article.” Civil Code section 47 (“Section 47”) provides there are two forms of privilege: “(1) an absolute privilege, commonly called the litigation privilege, that applies irrespective of the speaker’s motive; and (2) a qualified privilege that applies only to communications made without malice.” (Schep v. Capital One, N.A. (2017) 12 Cal.App.5th 1331, at *3 (“Schep”).) The privilege afforded under Civil Code section 2924 is the qualified common interest privilege of Section 47, and applies to “the statutorily required mailing, publication, and delivery of notices in nonjudicial foreclosure, and the performance of statutory nonjudicial foreclosure procedures[.]” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 333.) The common interest privilege does not apply if the defendant allegedly acted with actual malice, i.e., motivated by hatred or ill will, or in reckless disregard of the plaintiff’s rights. (Id. at p. 336.)
In support, Defendant only cites the recently published case, Schep. Defendant interprets this case as holding “a borrower does not state a claim for slander of title when challenging documents recorded in connection with non-judicial foreclosure, such as a notice of default . . . because the recordation of such instrument[] is privileged under Civil Code § 47.” (Mem. Ps. & As., p. 11: lis. 12-14.) This is the entirety of Defendant’s argument as to the applicability of privilege here. Defendant fails to distinguish between the absolute and qualified privileges and is silent as to whether a plaintiff must allege malice as an exception to the privilege rule. As such, it appears Defendant construes Schep as holding the absolute privilege applies. To the extent Defendant asserts such, it is mistaken. Schep explicitly states the court “need not take a position” as to which privilege applies because the documents at issue there were privileged even under the “narrower qualified privilege” since the plaintiff did not allege the defendant acted with malice. (Schep, supra, 12 Cal.App.5th at * 3.) Such a conclusion would also be contrary to other California legal authority providing the privilege is conditional. (See Kachlon v. Markowitz, supra, 168 Cal.App.4th at p. 333.) Further, Plaintiff alleges Defendant acted with malice, and it entirely fails to address these allegations. (See FAC, ¶¶ 76, 84.) As such, Defendant fails to substantiate its argument that the subject documents are privileged.
Next, Defendant insists this cause of action is barred by the statute of limitations “to the extent Plaintiff relies upon the recordation of the NOD or Assignment in 2010 to support this claim[.]” (Mem. Ps. & As., p. 11: lis. 24-25.) A general demurrer will lie where a statute of limitations defense appears clearly and affirmatively from the face of the complaint. (E-Fab., Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315-16.) In determining whether a claim is time-barred, a court must determine (1) which statute of limitations applies and (2) when the plaintiff’s claim accrued. (Id. at p. 1316.)
Defendant correctly states the claim is governed by the three-year statute of limitations set forth in Code of Civil Procedure section 338, subdivision (g), which provides an action for slander of title is subject to a three-year limitation period. However, Defendant fails to address when Plaintiff’s claim accrued. This is particularly problematic because the cause of action is predicated on the recording of eight separate documents, each forming a basis for the cause of action. Defendant’s failure to identify when the claim accrued relative to each document renders its argument unsubstantiated.
Defendant’s argument is additionally defective because, as stated above, the claim is predicated on the existence of eight allegedly fraudulent documents. Defendant’s defense based on the statute of limitations is only asserted “to the extent” the claim is based on the NOD and ADOT. As Defendant’s argument does not reach every basis for this cause of action, i.e. the Three NOTS, SOT1, SOT2, and TDUS, it would not dispose of the entire claim. For that reason, the demurrer is not sustainable based on the statute of limitations defense. (See PH II, Inc. v. Super. Ct., supra, 33 Cal.App.4th at p. 1682 [demurrer does not lie to a portion of a cause of action].)
Accordingly, Defendant fails to advance any substantiated argument as to why the demurrer should be sustained as to this cause of action, with the exception of Plaintiff’s lack of standing.
d. Fourth Cause of Action – Cancellation of Instruments
Plaintiff seeks a judicial determination that the DOT was illegally and improperly moved into WaMu AR19 and the transfer was void. (FAC, ¶ 89.) Plaintiff additionally seeks to have the ADOT declared null and void because it was fraudulently executed. (Id. at ¶ 90.) Plaintiff also seeks to have the subsequently executed documents, including the NOD, SOT1, SOT2, Three NOTS, and TDUS, declared null and void. (Id. at ¶¶ 91-95.)
Civil Code section 3412 states: “A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” In order to state a claim for cancellation of instrument, a plaintiff must specifically allege the particular instrument he or she asserts constitutes a cloud on his or her title and state facts “showing the apparent validity of the instrument designated, and point out the reason for asserting that it is actually invalid.” (Ephriam v. Metropolitan Trust Co. of Cal. (1946) 28 Cal.2d 824, 833-34.)
First, Defendant argues this claim fails “to the extent [it] seeks a judicial declaration as to past wrongs[.]” (Mem. Ps. & As., p. 12: lis. 17-18.) Though not clearly articulated, Defendant apparently construes this claim as one for declaratory relief. Defendant then cites to Code of Civil Procedure section 1060, a statute governing declaratory relief claims, which provides a party requesting a judicial declaration may request one as to an actual controversy. Defendant, however, does not explain how alleges a past wrong instead of an actual controversy. As such, it fails to substantiate his argument that this claim is predicated on “past wrongs.”
Next, Defendant contends there is a presumption of validity in a foreclosure sale in favor of a bona fide purchaser. Defendant asserts Plaintiff fails to “demonstrate” that the statutory presumption of the validity of a foreclosure sale in the bona fide purchaser’s favor is inapplicable here. Defendant’s argument is problematic for a host of reasons. The argument assumes, without providing any support thereto, that there is a bona fide purchaser. Defendant does not identify the bona fide purchaser or state the requirements of one. As the Sixth District Court of Appeal has explained, a bona fide purchaser “‘is one who pays value for the property without notice of any adverse interest or of any irregularity in the sale proceedings.’” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1250 (“Melendrez”), citations omitted.) Thus, to qualify as a bona fide purchaser, the buyer must: “(1) purchase the property in good faith for value, and (2) have no knowledge or notice of the asserted rights of another.” (Id. at p. 1251, original italics.) There are no allegations in the pleading reflecting any party satisfies these requirements. In fact, the FAC specifically alleges the purchasers are not bona fide purchasers. (FAC, ¶ 36.) As such, it is not evident that a bona fide purchaser exists. To that point, whether an entity is a bona fide purchaser is a factual matter not appropriately resolved on demurrer. (Melendrez, supra, 127 Cal.App.4th at p. 1256; see also OC Interior Services, LLC v. Nationstar Mortgage, LLC (2017) 7 Cal.App.5th 1318, 1331.)
Even if the pleading reflected the existence of a bona fide purchaser, it is not apparent the conclusive presumption applies. The conclusive presumption referenced by Defendant (though not adequately explained) derives from Civil Code section 2924, which is part of the comprehensive statutory framework regulating nonjudicial foreclosures. The statute dictates that when there is a recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices, there is a presumption of compliance with notice requirements in favor of a bona fide purchaser. This presumption “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, italics added; see also Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1000.) The presumption appears to be inapplicable here because Plaintiff seeks to have instruments cancelled not based in irregularities in the notice requirements, but based on the ADOT’s alleged fraudulent execution and the DOT’s alleged transfer to the pool. Defendant does not cite any legal authority stating the presumption applies equally to defects not relating to notice requirements but rather to defects arising years prior relating to an assignment. As such, the demurrer is not sustainable on the basis there is a presumption in the validity of the sale in favor of a bona fide purchaser.
Last, Defendant insists the claim is barred by the statute of limitations “to the extent the claim seeks to cancel instruments that were recorded on or before March 15, 2014.” (Mem. Ps. & As., p. 13: lis. 14-15.) For the same reasons discussed above relative to the third cause of action, Defendant fails to substantiate its argument because it does not address when the claim accrued. In addition, the demurrer is not sustainable because the claim is predicated on documents recorded after March 15, 2014. The demurrer does not dispose of the entire claim and is therefore not sustainable. (See PH II, Inc. v. Super. Ct., supra, 33 Cal.App.4th at p. 1682.)
In light of the above, Defendant does not successfully advance any arguments specific to this cause of action as to why the demurrer should be sustained; it’s only meritorious argument is that Plaintiff lacks standing.
e. Fifth Cause of Action – Unfair Business Practices
Plaintiff alleges Defendant violated Business and Professions Code section 17200, et seq. (“UCL”) by proceeding with an unlawful nonjudicial foreclosure and caused to be recorded the Three NOT, which were invalid. (FAC, ¶ 106.)
“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’ Its purpose ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.’” (Kwikset Corp. v. Super. Court (2011) 51 Cal.4th 310, 320, citations omitted.)
Defendant contends Plaintiff fails to plead a claim under the UCL because it is predicated on its previous claims for which there is no legal support. Plaintiff’s claim fails because it is based on the same allegations serving as a basis for the other causes of action. As discussed above, Plaintiff insufficiently alleges facts reflecting the assignment is void. It therefore follows that Plaintiff cannot state a claim for violation of the UCL based on the same allegations. (See Avila, supra, (N.D. Cal., Dec. 23, 2016, No. C 16-05904 WHA) 2016 WL 7425925, at *6 [sustaining demurrer as to a UCL claim because the plaintiff’s other theories of “defendant’s impropriety fail”].)
Defendant also argues the claim is barred by the four-year statute of limitations. For the same reasons discussed above relative to the third cause of action, Defendant fails to substantiate its argument that the claim is time-barred because it does not identify when the claim accrued. In addition, the demurrer is not sustainable because the claim is predicated on documents recorded after March 15, 2013. The demurrer does not dispose of the entire claim and is therefore not sustainable. (See PH II, Inc. v. Super. Ct., supra, 33 Cal.App.4th at p. 1682.)
In opposition, Plaintiff insists he adequately alleges a UCL claim because the violation of criminal statutes constitute unfair business practices. While that may be true, Plaintiff has inadequately alleged a violation of either Section 115(a) or 115.5(a). As stated above, these statutes render it punishable to knowingly procure and file false or forged records. For the reasons stated above, Plaintiff fails to adequately allege Brignac forged the ADOT without requisite authority. Plaintiff therefore fails to plead a violation of these statutes for the purpose of stating a UCL claim.
C. Conclusion
In sum, the demurrer to each cause of action on the ground of failure to state sufficient facts to constitute a cause of action is sustainable on the basis Plaintiff lacks standing. The demurrer to the second cause of action is also sustainable because Plaintiff failed to plead he tendered the sum of indebtedness. Last, the demurrer to the fifth cause of action is also sustainable since there is no predicate violation. Accordingly, the demurrer to the first through fifth causes of action on the ground of failure to state sufficient facts to constitute a cause of action is SUSTAINED with 10 days leave to amend.
Additionally, the demurrer to the entire FAC on the ground of misjoinder is OVERRULED.
III. Motion to Strike
As all causes of action have been eliminated by this Court’s ruling on the demurrer, the motion to strike punitive damages is MOOT.