Spencer as Successor-in-Interest vs. The Bank of New York Mellon Trustee

“[A]t the pleading stage, a plaintiff satisfies the control requirement by alleging facts from which an inference can be drawn that the defendant ‘had the power to control the general affairs of the entity primarily liable,” and “had the requisite power to directly or indirectly control or influence the [conduct or policy] which resulted in the primary liability.” (Hellum v. Breyer (2011) 194 Cal. App. 4th 1300, 1317.) “Control is a question of fact that ‘will not ordinarily be resolved summarily at the pleading stage.’” (Id.)

The court finds that Plaintiffs have sufficiently alleged LAG Fit’s indirect control of AKT Franchisor as Plaintiffs have alleged that LAG Fit holds a nearly one-fifth voting block of an entity that indirectly controls AKT Franchisor and is the entity through which Geisler exercises his control of AKT Franchisor. While Geisler Defendants argue that the “minority” voting block does not constitute control of AKT Franchisor, that is a disputed issue of fact that should not be decided at the pleading stage.

As Plaintiffs have adequately alleged CFIL liability as to LAG Fit based on its alleged indirect control of AKT Franchisor, the court OVERRULES Geisler Defendants’ demurrer to the CFIL causes of action.

Geisler Defendants are ordered to give notice of this ruling.

9 30-2025-01454520 MOTION 1 Spencer as Successor-in- Defendants Newrez LLC dba Shellpoint Mortgage Servicing Interest vs. The (“Shellpoint”), The Bank of New York Mellon fka The Bank of Bank of New York Mellon Trustee New York, as Trustee for the Certificateholders of the CWABS Inc., Asset-Backed Certificates, Series 2006-24 ("BNYM") (erroneously sued as "The Bank of New York Mellon Trustee c/o Newrez LLC dba Shellpoint Mortgage Servicing) and Mortgage Electronic Registration Systems, Inc.’s (collectively, “Shellpoint Defendants” or “Defendants”) Demurrer to Plaintiffs’ Second Amended Complaint (“SAC”) is SUSTAINED WITH LEAVE TO AMEND as to the First, Second, Third and Fourth Causes of Action and SUSTAINED WITHOUT LEAVE TO AMEND as to the Fifth, Sixth and Seventh Causes of Action improperly added by Plaintiffs to the SAC without leave of court.

IT IS ORDERED THAT WITHIN twenty (20) days of this ruling, Plaintiffs shall file and serve Defendants an amended complaint.

A. New Causes of Action Added Without Leave of Court

“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order.” (Harris v. Wachovia Mortg., FSB (2010) 185 Cal. App. 4th 1018, 1023.) Here, the court only granted “leave to amend as to all causes of action by [Plaintiffs],” the court did not authorize the addition of any new causes of action. (ROA 169 at p. 2.) Yet Plaintiff added three causes of action for slander of title, violation of UCC § 9-210, and unfair business practices. The court SUSTAINS both Shellpoint Defendants and Auction.com’s demurrer to these causes of action WITHOUT LEAVE TO AMEND as they were added by Plaintiffs without leave of court. The court also SUSTAINS Defendants’ Demurrer to these causes of action based on the additional grounds stated below.

B. Grounds for Finding the Subject Adverse Claims Unenforceable, Void or Voidable

In this action, Plaintiffs allege that the following instruments are adverse claims that cloud Plaintiffs’ title to the subject property: (a) Deed of Trust recorded October 26, 2006, Document No. 2006000724403; (b) Assignment of Deed of Trust recorded August 22, 2011, Document No. 2011000411728 — void ab initio as set forth herein; (c) Substitution of Trustee purporting to appoint The Mortgage Law Firm, PC as substitute trustee — void ab initio as set forth herein; (d) All Notices of Default recorded after October 26, 2006; and (e) All Notices of Trustee's Sale recorded after October 26, 2006, including the Notice scheduling foreclosure for May 18, 2026. (SAC ¶ 40.)

Plaintiffs contend that each adverse claim identified in the SAC is void or unenforceable for one or more of the following independent reasons: (a) The Assignment (Document No. 2011000411728) was executed nearly five years after the CWABS 2006-24 Trust closed on December 29, 2006 - confirmed by Exhibit J - making it void under New York Estates, Powers and Trusts Law section 7-2.4 and under Glaski v. Bank of America (2013) 218 Cal.App.4th 1079;

(b) MERS had no authority to transfer the Note, rendering the Assignment void for want of authority in the assignor; (c) The Assignment was signed by a ReconTrust employee posing as a MERS officer, creating a direct conflict of interest as ReconTrust simultaneously served as trustee under the Deed of Trust; (d) Defendants failed to respond to two UCC section 9-210 demands, estopping them from claiming any security interest; and (e) The substitution of trustee was executed by a party with no valid interest in the Deed of Trust. (SAC ¶ 42.)

Defendants demur to all of the causes of action on the grounds that Plaintiffs have not demonstrated that these adverse claims are void, voidable or otherwise unenforceable.

First, Defendants argue that Plaintiffs’ SAC is premised primarily on their incorrect allegation that the 2011 Assignment of Deed of Trust (“2011 ADOT”) is void because it was executed nearly five years after the December 29, 2006 closing date for the securitized trust, as set forth in the PSA. (SAC ¶¶ 42, 43.)

New York Estates, Powers & Trusts Law section 7–2.4, provides: “If the trust is expressed in an instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.” Plaintiffs rely on the opinion of one court that held that “the acceptance of the note and mortgage by the trustee after the date the trust closed, would be void.” (Glaski v. Bank of Am. (2013) 218 Cal. App. 4th 1079, 1097.) However, more recent cases have held that “under New York law, an untimely assignment to a securitized trust made after the trust's closing date” is merely voidable by the trust beneficiaries. (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal. App. 4th 808, 814 [emphasis added] [noting that Glaski relied on a New York case that has since been overturned].)

Plaintiffs do not oppose this argument, instead arguing new grounds for why the chain of title is invalid. (Herzberg v. Cnty. of Plumas (2005) 133 Cal. App. 4th 1, 20 [When “Plaintiffs did not oppose the [] demurrer [to a] cause of action and have submitted no argument on the issue in their briefs on appeal,” courts have held that plaintiffs “have abandoned the issue.”].) Thus, the court finds that Plaintiff has failed to demonstrate that the purportedly untimely recording of the 2011 ADOT is a basis for finding that it

is void.

Second, Defendants contend that Plaintiffs’ claim that the 2011 ADOT was void because MERS had no authority to transfer the Note is contrary to law. Here, the Deed of Trust states: “The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender’s successors and assigns) and the successors and assigns of MERS. . . . Borrower understands and agrees that MERS holds only legal title to the interest granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender . . .” (SAC, Ex. C.) Defendants argue that Plaintiffs authorized MERS to make the challenged assignment.

A claim based on MERS’ lack of authority to foreclose fails as a matter of law if the plaintiff “distinctly granted MERS the right to foreclose . . . giving MERS the right to conduct the foreclosure process under [Civil Code s]ection 2924,” and therefore “[s]ince Plaintiff granted MERS the right to foreclose in his contract, his argument that MERS cannot initiate foreclosure proceedings is meritless.” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal. App. 4th 1149, 1158.) “[T]he use of MERS does not invalidate a foreclosure sale that is otherwise substantively and procedurally proper.” (Fontenot v.

Wells Fargo Bank, N.A. (2011) 198 Cal. App. 4th 256, 267.) “[T]he lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note,” when “the assignment of deed of trust states that MERS was acting as nominee for the lender, which did possess an assignable interest.” (Id. at 270 [emphasis in original].)

Plaintiffs also fail to address this issue in opposition, instead relying on allegations of fact outside the scope of the SAC. Plaintiffs argue that William C. Hultman, the Chief Financial Officer of MERS, purportedly testified under oath in Bank of New York v. Ukpe, New Jersey Superior Court Docket No. F- 10209-08 (April 7, 2010), that MERS signing officers lacked board authority to assign mortgage note, and argues that therefore the MERS assignment of the deed of trust was executed without authority. “[C]ourts generally permit challenges to assignments if such challenges would prove that the assignments were void as opposed to voidable.” (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal. 4th 919, 940.) “[T]he foreclosure deed is facially

void . . . when the entity that initiated the sale lacked authority to do so.” (Id. at 929 n.3.) However, Plaintiffs cite to no case law or facts alleged in the SAC that demonstrate that MERS had no authority to assign the deed of trust.

The court finds that Plaintiff has failed to demonstrate that MERS lacked authority to assign the deed of trust so as to render the 2011 ADOT a void or voidable instrument.

Third, Defendants contend that Plaintiffs have not adequately alleged facts showing that the 2011 ADOT was void because it was signed by T. Sevillano, purportedly an employee of ReconTrust, not MERS. Plaintiffs argue that this created a direct conflict of interest as ReconTrust simultaneously served as trustee under the Deed of Trust. (SAC ¶ 42.) Plaintiffs allege that “T. Sevillano was not a MERS employee — she was a ReconTrust Company employee granted a blanket corporate resolution by MERS to sign as a MERS officer.” (Id. ¶ 16.) Defendants argue that the allegations of other employment by T. Sevillano does not preclude her ability to sign on behalf of MERS, as she was given authority to sign as a MERS officer.

Plaintiffs fail to oppose this argument, and have therefore abandoned it. The court finds that Plaintiff has failed to demonstrate that the fact the 2011 ADOT was signed by T. Sevillano rendered the 2011 ADOT a void or voidable instrument.

Fourth, Defendants argue that Plaintiffs’ contention that Defendants are estopped from claiming any security interest in the subject property because Defendants failed to respond to two UCC section 9-210 requests for accounting is without merit. The Commercial Code provides that “[i]f a secured party fails to comply with a request regarding a list of collateral or a statement of account under Section 9210, the secured party may claim a security interest only as shown in the list or statement included in the request as against a person that is reasonably misled by the failure.” (Cal.

Com. Code § 9625(g).) Plaintiffs claim that their accounting “demands identified no valid collateral,” so “Defendants are therefore estopped from claiming any enforceable security interest in the Property.” (Compl. ¶ 22.) However, UCC section 9-210 and Division 9 of the Commercial Code does not apply to “[t]he creation or transfer of an interest in or lien on real property, including a lease or rents thereunder[.]” (Cal. Com. Code § 9109(d)(11).) Plaintiffs do not provide any contrary authority.

The court finds that Plaintiffs have failed to show that Defendants’ purported non-compliance with UCC 9-210 estops Defendants from claiming a security interest in the subject property.

Fifth, Defendants argue that since the 2011 ADOT is not void, Plaintiffs’ derivative challenge to the Substitution of Trustee based on the allegedly void 2011 ADOT is without merit. (SAC ¶ 27.) Plaintiffs do not address this argument in their opposition. The court finds that Plaintiffs have also failed to demonstrate that the Substitution of Trustee is void.

In sum, all the grounds for which Plaintiffs seek to invalidate, void or cancel the 2011 ADOT and related foreclosure instruments are without merit and/or abandoned by Plaintiffs.

C. First Cause of Action: Quiet Title (Against All Defendants)

To quiet title, the complaint must (1) be verified; (2) describe the property that is subject to the action; (3) state the title of the plaintiff as to which a determination is sought; (4) state the adverse claims against which a determination is sought; (5) state the date as of which the determination is sought; and (6) contain a prayer for the determination of the title of the plaintiff against the adverse claims. (CCP § 761.020.)

As discussed above, the court finds that Plaintiffs have not established any grounds for which the court can make determinations against the adverse claims. On the grounds of failure to state a claim, the court SUSTAINS WITH LEAVE TO AMEND the demurrer as to the First Cause of Action.

Defendants also contend that the quiet title claim fails because Plaintiffs did not and cannot allege that they paid off the indebtedness with any valid tender of lawful money. “[A] mortgagor cannot quiet his title against the mortgagee without paying the debt secured.” (Shimpones v. Stickney (1934) 219 Cal. 637, 649.) Plaintiffs argue that the debt was extinguished by a setoff, but that is not pled in the SAC. For this additional reason, the court SUSTAINS WITH LEAVE TO AMEND the demurrer as to the First Cause of Action.

D. Second Cause of Action: Cancellation of Void Instruments (Against All Defendants)

“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.” (Cal. Civ. Code § 3412.) “To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable...and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position.” (U.S. Bank Nat’l Assn. v. Naifeh (2016) 1 Cal. App. 5th 767, 778.)

“To state a cause of action under section 3412, [a plaintiff] must allege the assignment was void or voidable against her.” (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal. App. 4th 808, 818.) Further, “even if the assignment were invalid,” it would not be canceled if a plaintiff has defaulted on the loan and payments are in arrears, as the void or voidable assignment did not “cause serious injury.” (Id. ¶ 819.) “[B]ecause a cause of action to cancel a written instrument under section 3412 sounds in equity, a debtor must generally allege tender or offer of tender of the amounts borrowed as a prerequisite to such claims.” (Id.)

As discussed above, Plaintiffs have not established any grounds for cancellation of the various challenged instruments. Plaintiffs fail to allege any facts or assert any authority to show that the subject instruments are void or voidable, instead raising new theories and new facts outside of the SAC. Thus, the court SUSTAINS WITH LEAVE TO AMEND the demurrer as to the Second Cause of Action.

E. Third Cause of Action: Declaratory Relief (Against All Defendants)

Plaintiffs request a judicial declaration that: (a) The Assignment of Deed of Trust (Document No. 2011000411728) is void ab initio; (b) Defendants have no right, title, purporting to appoint TMLF is void; (d) Any foreclosure sale of the Property based on the void Assignment is void; and (e) Plaintiffs are the lawful feesimple owners of the Property, free and clear of all Defendants' claims. (Compl. ¶ 58.)

Pursuant to CCP section 1060, “[a]ny person interested ... under a contract ... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action ... in the superior court for a declaration of his or her

rights and duties ... including a determination of any question of construction or validity arising under the ... contract.”

To qualify for declaratory relief under this provision, two elements exist: “(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party.” (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546.) “The ‘actual controversy’ language in ... section 1060 encompasses a probable future controversy relating to the legal rights and duties of the parties.” (Id.) “It does not embrace controversies that are ‘conjectural, anticipated to occur in the future, or an attempt to obtain an advisory opinion from the court.” (Id.) “To determine whether an issue is ripe for review, we evaluate two questions: the fitness of the issue for judicial decision and the hardship that may result from withholding court consideration.” (Id. at 547.)

“[T]he declaratory procedure operates prospectively, and not merely for the redress of past wrongs.” (Travers v. Louden (1967) 254 Cal. App. 2d 926, 931.) “It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” (Id.)

Defendants argue that Plaintiffs are not entitled to declaratory relief because the theories as to why the instruments are void, why the foreclosure was void, and why Plaintiffs are the owners of the property are inadequately pled and fail as a matter of law. As with the Second Cause of Action, Plaintiffs fail to allege any facts or assert any authority to show that the subject instruments are void or voidable, instead raising new theories and new facts outside of the SAC. The court SUSTAINS WITH LEAVE TO AMEND the demurrer as to the Third Cause of Action.

F. Fourth Cause of Action: Wrongful Foreclosure (Against All Defendants)

The elements of a wrongful foreclosure cause of action 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, 112.)

“[A] wrongful foreclosure plaintiff has standing to claim the foreclosing entity's purported authority to order a trustee's sale was based on a void assignment of the note and deed of trust.” (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal. 4th 919, 939.) “[A] borrower lacks standing to challenge an assignment of the note and deed of trust to which the borrower was neither a party nor a third party beneficiary,” in situations when the “claimed defects [] would make the assignment merely voidable, but not as to alleged defects rendering the assignment absolutely void.” (Id.) “Where an assignment is merely voidable at the election of the assignor, third parties, and particularly the obligor, cannot ... successfully challenge the validity or effectiveness of the transfer.” (Glaski v. Bank of Am. (2013) 218 Cal. App. 4th 1079, 1094–95.)

Defendants argue that Plaintiffs’ wrongful foreclosure claim fails as they do not allege any facts establishing that the non-judicial foreclosure proceedings or May 2026 foreclosure sale was illegal, fraudulent or willfully oppressive. Further, Plaintiffs have not demonstrated that they have standing to bring the claim based on any void, rather than voidable, instrument.

Defendants also contend that the claim fails because Plaintiffs do not plead valid tender or facts excusing tender. “As a general rule, a debtor cannot set aside the foreclosure based on irregularities in the sale without also alleging tender of the amount of the secured debt.” (Ram v. OneWest Bank, FSB (2015) 234 Cal. App. 4th 1, 18.)

Plaintiffs fail to allege any facts or assert any authority to show that the subject instruments are void or voidable to establish their standing, or allegations that the transactions were otherwise illegal, fraudulent, or willfully oppressive. The court SUSTAINS WITH LEAVE TO AMEND the demurrer as to the Fourth Cause of Action.

G. Fifth Cause of Action: Slander of Title (Against All Defendants)

“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.’” (Schep v. Cap. One, N.A. (2017) 12 Cal. App.

5th 1331, 1336.) However, the claim cannot be based upon privileged communications pursuant to CCP § 47. (Id.) “The mailing, publication, and delivery of notices” required by the nonjudicial foreclosure statutes are privileged under CCP § 47. (Cal. Civ. Code § 2924(d).) Courts are unsettled as to whether this confers absolute privilege, or a qualified privilege based on communications made without malice. “For the purposes of section 47 ’s qualified privilege, ‘malice’ means that the defendant (1) ‘was motivated by hatred or ill will towards the plaintiff,’ or (2) ‘lacked reasonable grounds for [its] belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.’” (Schep, 12 Cal. App. 5th at 1337.)

Defendants argue that Plaintiffs’ claim is based on privileged documents, i.e. the recording of the challenged foreclosure documents, and that Plaintiffs fail to overcome the qualified privilege by alleging malice. Defendants also argue that the claim is inadequately pled because Plaintiffs do not plead which specific recording was false, why it was false, and how that recording caused a direct pecuniary loss. Defendants argue that Plaintiffs fail to allege direct pecuniary loss, and instead allege generalized categories of harm, including attorneys’ fees and costs, damage to credit, impairment of their ability to sell or refinance the Property, and emotional distress.

Plaintiffs do not address any of these issues, thereby abandoning this claim. On the additional ground of failure to state a claim, the court SUSTAINS WITHOUT LEAVE TO AMEND the demurrer as to the Fifth Cause of Action.

H. Sixth Cause of Action: Violation of UCC § 9-210 (Against Defendants NewRez LLC and BNYM)

As discussed in more detail above, Defendants argue that the accounting demand requirements under UCC § 9-210 do not apply to deeds of trust like the 2011 ADOT, and therefore, this claim fails as a matter of law. On the additional ground of failure to state a claim, the court SUSTAINS WITHOUT LEAVE TO AMEND the demurrer as to the Sixth Cause of Action.

I. Seventh Cause of Action: Unfair Business Practices

Plaintiffs allege that “Defendants have engaged in unlawful, fraudulent, and unfair business practices, including: (a) Pursuing foreclosure based on a void assignment that transferred no interest to BNYM; (b) Recording false and void instruments in

the Official Records of Orange County, clouding Plaintiffs' title; (c) Failing to respond to two UCC section 9-210 demands while continuing to pursue collection and foreclosure; (d) Asserting ownership and enforcement rights through a void assignment; (e) Refusing to produce the original promissory note for inspection while claiming the right to foreclose; (f) Failing to respond to any discovery while simultaneously pursuing the seizure of Plaintiffs' home; (g) Pyramiding fees, costs, and capitalized interest from $16,083 in 2019 delinquency to $793,261.22 in claimed payoff by 2026 — an increase of $777,178.22 — without adequate disclosure or authorization; and (h) Collecting insurance proceeds or third-party payments against the alleged default while simultaneously pursuing the full balance against Plaintiffs.” (SAC ¶ 75.)

Defendants argue that Plaintiffs’ UCL claim fails because they cannot establish standing. Standing under the UCL is established only where the plaintiff “has suffered injury in fact and has lost money or property” as a result of the alleged unfair practices. (Bus. & Prof. Code § 17204.) Standing under Business and Professions Code section 17204 requires a plaintiff “to plead a causal link between her economic injury, the impending nonjudicial foreclosure of her home, and the [] unfair or unlawful acts allegedly committed by Defendants.” (Jenkins v.

JPMorgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497, 522.) A plaintiff cannot show causation if she “admits in both her SAC and opening brief that she defaulted on her loan,” and it is “indisputable [her] default triggered the lawful enforcement of the power of sale clause in the deed of trust, and it was the triggering of the power of sale clause that subjected [her] home to nonjudicial foreclosure.” (Id.)

Defendants argue that Plaintiffs also cannot satisfy the causation requirement of the UCL because Plaintiffs’ own default caused any possible damages, not any conduct by Defendants.

Defendants also argue that Plaintiffs fail to allege any wrongful conduct under the UCL. For the theories involving the void or voidable instruments, Defendants have argued that those theories are without merit. As to Defendants’ alleged refusal to produce the original promissory note, Defendants argue they are not required to produce it as a condition to nonjudicial foreclosure. “[T]he foreclosing beneficiary-creditor need not produce the promissory note or otherwise prove it holds the note to nonjudicially foreclosure on a real property security.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal. App. 4th 497, 512.)

As to Defendants’ alleged failure to respond to discovery while pursuing foreclosure, Defendants argue that discovery disputes are governed by the Civil Discovery Act with its own remedies for discovery misuse and does not state a claim under the UCL.

As to the alleged pyramiding of fees, costs, and capitalized interest, and collection of insurance proceeds or third-party payments, Defendants argue that Plaintiffs have not demonstrated that this conduct was unlawful, unfair or fraudulent. Defendants contend that Plaintiffs have not pled facts showing that the amounts were improperly assessed, unauthorized under the Deed of Trust, or caused by anything other than Plaintiffs’ missed loan payments and the resulting accrual of interest, fees, and costs over time.

Plaintiffs fail to address the UCL claim at all in opposition, thereby abandoning that claim. On this additional ground of failure to state a claim, the court SUSTAINS WITHOUT LEAVE TO AMEND the demurrer as to the Seventh Cause of Action.

J. New Arguments Raised by Plaintiffs

In opposition, Plaintiffs argue that the transactions are void because The CWABS 2006-24 Trust is not a covered person under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and therefore cannot hold legal title to the debt or enforce the debt. This argument relies on facts outside of the SAC and therefore cannot be a basis to overrule the demurrer. (C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal. App. 3d 1055, 1062 [“Doubt in the complaint may be resolved against plaintiff and facts not alleged are presumed not to exist.”].)

Second, Plaintiffs argue that the securitization chain is void because the recorded assignments transferred only the security instrument and not the underlying note, and also argue that the underlying note was destroyed in the securitization warehousing process. Plaintiffs contend that the transfer of the mortgage without the note transfers nothing, citing to a 1872 case that held: “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” (Carpenter v. Longan (1872) 83 U.S. 271, 274.) Here, there is no assignment of a mortgage, but rather a deed of trust. Further, this is a new argument not included in the SAC.

Third, Plaintiffs argue that under the UCC § 9-210, Defendants are estopped from collecting against a property when it fails to respond to a request for an authenticated accounting. As discussed above, the UCC does not apply to the instruments at issue and thus this claim fails.

Fourth, Plaintiffs argue that The CWABS 2006-24 Trust was created through securities fraud. However, Plaintiffs cite to no case law and no allegations in the SAC that support this argument.

Fifth, Plaintiffs argue that The Barredas executed a lawful setoff against the alleged debt. Plaintiffs rely on facts entirely outside of the SAC.

In sum, none of the arguments raised by Plaintiffs in their opposition are sufficient to cure the defects in Plaintiffs’ claims.

Moving defendants are ordered to give notice of this ruling.

MOTION 2

Defendant Auction.com LLC’s (“Auction.com”) Demurrer to Plaintiffs’ SAC is SUSTAINED WITH LEAVE TO AMEND as to the First, Second, Third and Fourth causes of action asserted by Plaintiffs against Auction.com, and SUSTAINED WITHOUT LEAVE TO AMEND as to the Fifth, Sixth and Seventh Causes of Action improperly added by Plaintiffs to the SAC without leave of court. IT IS ORDERED THAT WITHIN twenty (20) days of this ruling, Plaintiffs shall file and serve Defendants an amended complaint.

Requests for Judicial Notice

The court GRANTS Auction.com’s requests for judicial notice of recorded instruments relating to the subject property, as well as filings and orders in George Barreda’s bankruptcy proceeding filed in the United States Bankruptcy Court for the Central District of California, Case No. 8:25-bk-11411, on June 24, 2025.

The court GRANTS Plaintiffs’ requests for judicial notice of case law (Items 1-9), statutes and regulations (Items 10-11, 17-18), and commentary on regulations (Item 12) that Plaintiffs cite in their opposition. (Cal. Evid. Code § 452(a), (b), and (d).) The court DENIES Plaintiffs’ requests for judicial notice of documents purportedly concerning Countrywide and its successor

Bank of America mortgage servicing practices (Items 13-15), as they are irrelevant to these demurrers and are not the proper subject of judicial notice. The court DENIES Plaintiffs’ request for judicial notice of the deposition testimony of William C. Hultman, the CEO of MERS in an unrelated action, as it is improperly offered for the truth of the matters stated.

The court GRANTS Auction.com’s request for judicial notice of a federal court order sanctioning Plaintiffs’ counsel Peter Winkler, in Mharla Simmons v. Selene Finance, LP, N.D. Cal. Case No. 3:26-cv-00198-TLT. (Cal. Evid. Code § 452(d).)

Auction.com’s Demurrer to Plaintiffs’ SAC

As a threshold matter, Plaintiffs argue that Auction.com’s demurrer should be overruled as untimely. CCP § 430.40(a) states that a demurrer may be filed “within 30 days after service of the complaint.” Auction.com explains that the demurrer is timely as the Plaintiffs electronically filed and served the SAC on April 23, 2026, thirty days from which was Saturday, May 23, 2026. The next week day was Memorial Day, so Tuesday, May 26, 2026 was the initial deadline. However, the deadline was extended another two court days because the SAC was electronically served, which set the deadline as May 28, 2026. (CCP § 1010.6(a)(2)(B).) Auction.com’s Demurrer was filed on May 27, 2026, so it is timely.

As another threshold matter, Auction.com argues that Plaintiffs’ counsel should be sanctioned for using artificial intelligence to draft the opposition because it contains a citation to a nonexistent case. Specifically, Plaintiffs cite to Carlson v. State of California, 68 Cal. App. 4th 1268 (1998), to argue that courts can disregard untimely demurrers, but there is no such case. Auction.com argues that Plaintiffs’ counsel, Peter Winkler, has previously been sanctioned in federal court for similar misconduct. (ROA 278, Ex. 1.)

“[R]elying on fabricated legal authority is sanctionable.” (Noland v. Land of the Free, L.P. (2025) 114 Cal. App. 5th 426, 445.) “[B]efore filing any court document, an attorney must ‘carefully check every case citation, fact, and argument to make sure that they are correct and proper.’” (Id. at 446.) “Attorneys cannot delegate that role to AI, computers, robots, or any other form of technology.” (Id.) “Just as a competent attorney would very carefully check the veracity and accuracy of all case citations in any pleading, motion, response, reply, or other paper prepared by

a law clerk, intern, or other attorney before it is filed, the same holds true when attorneys utilize AI or any other form of technology.” (Id.)

The court sets an Order to Show Cause on November 17, 2026 at 9:00 a.m. as to why the court should not order monetary sanctions against Plaintiffs’ counsel for falsely citing a non-existent case. Plaintiffs’ counsel shall file any responsive briefing at least 10 days before the hearing date for the OSC.

A. Judicial Estoppel & Res Judicata

On May 27, 2025, George Barreda filed for Chapter 7 bankruptcy protection in the Central District of California. (Auction.com’s RJN, Ex. 13.) George Barreda did not disclose any claim against Auction.com or related to the Loan in his schedules. (Id., Ex. 14.) On November 17, 2025, George Barreda received a bankruptcy discharge. (Id., Ex. 15.) While the bankruptcy was pending, George Barreda filed an adversary complaint, naming BNYM, NewRez, MERS, and Auction.com as defendants. (Id., Ex. 16.) The adversary complaint challenged the defendants’ ability to foreclose on the Property. (Id.) BNYM and NewRez moved to dismiss; MERS filed a joinder. (Id., Exs. 17 and 18.) On November 13, 2025, the court dismissed the adversary complaint with prejudice as to all defendants. (Id., Ex. 19.)

First, Auction.com argues that Plaintiffs are judicially estopped from asserting any claim against Auction.com that arose before George Barreda’s November 17, 2025 bankruptcy discharge. “Once an individual declares bankruptcy, any legal or equitable interests he or she had in a particular property belongs to the bankruptcy estate, as represented by the bankruptcy trustee.” (Vertkin v. Wells Fargo Home Mortg., (N.D. Cal. Sept. 9, 2010) No. C 10-00775 RS, 2010 WL 3619798, at *2.) “In the bankruptcy context, a party is judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor's schedules or disclosure statements.” (Hamilton v.

State Farm Fire & Cas. Co. (9th Cir. 2001) 270 F.3d 778, 783.) A party is therefore “precluded from pursuing claims about which he had knowledge, but did not disclose, during his bankruptcy proceedings,” and “a discharge of debt by a bankruptcy court, under these circumstances, is sufficient acceptance to provide a basis for judicial estoppel.” (Id. at 784.)

Plaintiffs fail to address this argument in its opposition. The court SUSTAINS WITH LEAVE TO AMEND Auction.com’s

demurrer as to all causes of action against it on the grounds of judicial estoppel.

Second, Auction.com argues that Plaintiffs’ claims are barred by res judicata. “The prerequisite elements for applying the doctrine [of res judicata] to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.” (Boeken v.

Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 797.) Auction.com contends that Plaintiffs’ claims are barred because there is a final judgment on the merits of Plaintiffs’ claims since the Adversary Complaint (which involved both George Barreda and Auction.com) containing the same claims at issue in this action, which ended in an order in all defendants’ (including Auction.com) favor and against George Barreda. (Auction.com’s RJN, Ex. 19.)

Plaintiffs fail to address this argument in its opposition. The court SUSTAINS WITH LEAVE TO AMEND Auction.com’s demurrer as to all causes of action against it on the additional grounds of judicial estoppel.

B. Statute of Limitations

Third, Auction.com argues that Plaintiffs’ securitization challenge is time-barred. The Corporation Assignment of Deed of Trust was publicly recorded on August 22, 2011. (Auction.com’s RJN, Ex. 2.) Plaintiffs brought this action more than four years after that on January 21, 2025. (ROA 2.) Auction.com argues that to the extent the claims pertain to the assignment of the Loan, they are time-barred. (CCP § 337 [providing for four-year statute of limitations for any action “upon any contract, obligation or liability founded upon an instrument in writing” such as breach of contract]; CCP § 338 [providing for three-year statute of limitations for causes of action arising from fraud]; CCP § 343(a) [four-year “catch all” statute of limitations].)

Auction.com argues that even if the claims are “tolled” due to George Barreda’s bankruptcy cases by 2,180 days, Plaintiffs’ deadline to file an action challenging the Assignment of Deed of Trust expired July 30, 2021 (four years plus 2,180 days).

Plaintiffs fail to address this argument in its opposition and does not dispute the applicability of these statutes of limitation to their

claims. The court SUSTAINS WITH LEAVE TO AMEND Auction.com’s demurrer as to all causes of action against it on the additional grounds that the claims are barred by applicable statutes of limitation.

C. Failure to State a Claim

Fourth, like the other Defendants, Auction.com argues that Plaintiffs’ attempts to challenge the foreclosure, pre-foreclosure sale, are improper due to failure to demonstrate any void or voidable instruments, failure to establish standing, the inapplicability of the UCC to the subject instruments, and failure to allege tender of payment for Plaintiffs’ debts to support Plaintiffs’ claims.

Fifth, Auction.com argues that Plaintiffs fail to state any facts suggesting any wrongdoing by Auction.com specifically. Auction.com notes that the only allegations against it in the SAC are that (1) it has scheduled a foreclosure sale of the Property on behalf of Defendants and is a “for-profit enterprise that earns fees from completed foreclosure auctions and has a direct financial interest in the outcome of this action.” (SAC ¶ 11); and (2) it “has scheduled a foreclosure sale for May 18, 2026” (SAC ¶ 26).

Specifically, for the First Cause of Action to quiet title, Auction.com argues that Plaintiffs have not shown that Auction.com has any interest in title in the property to warrant a quiet title action. As to the Second Cause of Action for cancellation of instruments and Fifth Cause of Action for slander of title, Auction.com argues there is no allegation that it recorded any documents that would be the subject of cancellation or slander. As to the Third Cause of Action for declaratory relief, Auction.com argues there is no controversy as to Auction.com because Plaintiffs have not alleged Auction.com has any interest in title to the property, recorded any of the subject instruments, or that it has done anything other than schedule a foreclosure sale.

As to the Seventh Cause of Action for violation of the UCL, Auction.com argues that Plaintiff has not alleged any specific statute violated by Auction.com to satisfy the unlawful prong, have not alleged any facts as to any unfair business practice, or any facts to state a claim of fraud committed by Auction.com. Auction.com also contends that Plaintiffs have failed to allege any lost property as a result of Auction.com’s conduct to support the UCL claim.

The court SUSTAINS WITH LEAVE TO AMEND Auction.com’s demurrer as to all causes of action against it on the additional ground that Plaintiffs fail to state these claims as against Auction.com.

D. New Arguments Raised by Plaintiffs

In opposition, Plaintiffs argue that the foreclosure is void because The CWABS 2006-24 Trust is not a covered person under 12 Code of Federal Regulations section 1026.39, which sets forth the rules governing mortgage transfer disclosures, and concludes that “[a] party without legal title to the debt cannot enforce it.” Plaintiffs fail to explain how this statute demonstrates that Defendants could not enforce the debt against Plaintiffs or how this renders the instruments void or voidable. Further, this is not a theory asserted in the SAC. (C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal. App. 3d 1055, 1062 [“Doubt in the complaint may be resolved against plaintiff and facts not alleged are presumed not to exist.”].)

Second, Plaintiffs argue that the securitization chain is void because the original promissory note was destroyed. Plaintiffs cite to a 1872 case that held: “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” (Carpenter v. Longan (1872) 83 U.S. 271, 274.) Here, there is no assignment of a mortgage, but rather a deed of trust, and the applicability of this action to the facts alleged in this case is unclear. Further, this is a new theory not included in the SAC.

Third, Plaintiffs argue that William C. Hultman, the Chief Financial Officer of MERS, purportedly testified under oath in Bank of New York v. Ukpe, New Jersey Superior Court Docket No. F-10209-08 (April 7, 2010), that MERS signing officers lacked board authority to assign mortgage notes, and argues that therefore the MERS assignment of the deed of trust was executed without authority. “[C]ourts generally permit challenges to assignments if such challenges would prove that the assignments were void as opposed to voidable.” (Yvanova v.

New Century Mortg. Corp. (2016) 62 Cal. 4th 919, 940.) “[T]he foreclosure deed is facially void . . . when the entity that initiated the sale lacked authority to do so.” (Id. at 929 n.3.) However, Plaintiffs cite to no case law or facts alleged in the SAC that demonstrate that MERS had no authority to assign a deed of trust or that doing so rendered the assignment void.

Fourth, Plaintiffs argue that under the UCC § 9-210, Defendants are estopped from collecting against a property when it fails to respond to a request for an authenticated accounting. As discussed above, the UCC does not apply to the instruments at issue and thus this claim fails.

Fifth, Plaintiffs argue that The CWABS 2006-24 Trust was created through securities fraud. Plaintiffs rely on allegations of fact outside of the SAC and provides not authority demonstrating how these new allegations support Plaintiffs’ existing claims.

Sixth, Plaintiffs argue that The Barredas executed a lawful setoff against the alleged debt. However, there are no allegations of any setoff in the SAC.

In sum, none of the arguments raised by Plaintiffs in their opposition are sufficient to cure the defects in Plaintiffs’ claims.

Moving defendant is ordered to give notice of this ruling.

10 30-2026-01555500 DEMURRER TO COMPLAINT Hek vs. La Mirada Post Acute LLC Defendants La Mirada Post Acute LLC, Sun Meridian Management Services LLC, Sun Mar Management Services, Frank D. Johnson and David Johnson’s (collectively, “Defendants”) Demurrer to Plaintiff Humphrey Van Hek’s (“Plaintiff”) Complaint is OVERRULED. IT IS ORDERED THAT Defendants must file and serve their answer to Plaintiff’s Complaint within twenty (20) days of this ruling.

As a threshold matter, the court declines to rule on arguments that Defendants raise for the first time in their reply brief as Plaintiff has had no opportunity to respond to them: • Defendants argue that the subject Admission Agreement for the facility cannot be the basis of any claim because the form is mandated by law. (Cal. Health & Safety Code § 1599.61.) • Defendants argue that the facts regarding the staffing at the facility were not concealed from Plaintiff or the class because it was reported to the State. • Defendants argue that there is no allegation that Sun Mar, or the Johnsons acquired any money belonging to Plaintiff and the class so as to justify restitution for the unfair competition claim.

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