Tonini v. Recontrust Co. CA4/1 (2016) · DecisionDepot
Tonini v. Recontrust Co. CA4/1
California Court of Appeal Jul 14, 2016 No. D066600Unpublished
Filed 7/14/16 Tonini v. Recontrust Co. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
RICHARD B. TONINI, D066600
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2013-00072864- CU-PT-NC) RECONTRUST COMPANY, N.A. et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Diego County,
Timothy M. Casserly, Judge. Affirmed.
Richard B. Tonini, in pro. per., and Charles T. Marshall for Plaintiff and
Appellant.
Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendants and
Respondents.
This action arises out of a real estate loan made to Richard Tonini (Plaintiff),
secured by a deed of trust, on a residential property he purchased in Carlsbad, California.
Plaintiff brings six related causes of action against his lender's successors and their
appointed trustees, alleging wrongful nonjudicial foreclosure and other theories. Four of
the defendants and respondents, ReconTrust Company, N.A. (ReconTrust, the current
trustee), Deutsche Bank National Trust Company (Deutsche Bank, the holder of the
beneficial interest in the trust deed), Bank of America, N.A. (BANA, the loan servicer),
and Mortgage Electronic Registration Systems, Inc. (MERS, the assignor), filed a
demurrer to the operative pleading, the first amended complaint (FAC).1 The court
sustained the demurrer without leave to amend and dismissed the complaint.
On appeal, Plaintiff claims that he can bring this action on a preemptive basis, to
establish that the notices of default and an upcoming foreclosure sale of the property were
not initiated by the correct party and were thus "invalid." He argues Defendants lacked
authority to foreclose on the property, because he is informed that the 2012 MERS
assignment of the trust deed with power of sale to Deutsche Bank, and its subsequent
designation of ReconTrust as trustee, occurred later than the closing date found in the
pooling and servicing agreement (PSA) that is referred to in the assignment (2006).
Plaintiff also contends the assignment was defectively prepared (robo-signed) and
therefore insufficient to confer any rights upon Deutsche Bank or the trustee. He further
1 We refer to the defendants and respondents collectively as Defendants, where appropriate. Deutsche Bank also appeared for an erroneously sued entity, IMPAC Secured Assets Corporation. The sixth defendant sued by Plaintiff was the original lender, American Brokers Conduit (ABC), which did not appear in the action and need not be discussed, as its interests were acquired or pursued by the other Defendants. 2
argues the lender's underlying assignment of the deed of trust and its beneficial interest
did not effectively convey both the note and/or the trust deed.
In response to the California Supreme Court's issuance of its opinion in Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal.4th 919, 942-943 (Yvanova), resolving
questions of law about standing to sue in a similar factual and legal context, we obtained
supplemental briefing on the impact of those views on the issues in this case. There, the
high court decided that in a borrower's action to set aside an allegedly wrongful but
completed foreclosure on a deed of trust securing a home loan, the borrower sufficiently
alleged facts supporting her standing to challenge the assignment of the note and deed of
trust, by pleading the assignment was allegedly void (not voidable). "A foreclosure
initiated by one with no authority to do so is wrongful for purposes of such an action."
(Id. at p. 929.) The court limited its decision to the standing issue alone, disapproving in
part several cases on that point. (Id. at p. 939, fn. 13.)2
In reviewing this judgment of dismissal, we read the allegations of the FAC
broadly to consider if Plaintiff has set forth sufficient facts supporting his six substantive,
2 To the extent four cases had stated a borrower who suffered or who was about to suffer a noticed nonjudicial foreclosure could not allege standing to sue, by claiming the foreclosure was based on void documents, Yvanova, supra, 62 Cal.4th at page 939, footnote 13 disapproved them on the standing issue alone. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 (Jenkins); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 (Fontenot); Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75 (Siliga); Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495 (Herrera).) To the extent those four cases set forth and apply other rules of law, they evidently remain valid authority and we will cite them without repeating this disapproval history. (See Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1098-1100 (Glaski) [borrowers have standing to assert a foreclosure sale was void if directed or conducted by a party other than the true owner of the note].) 3
related claims. Even if we assume his causes of action are framed in terms of an
allegedly void assignment, he has still failed to plead any facts that establish he has
standing to sue on a preemptive basis, to pursue these theories of wrongful nonjudicial
foreclosure and related claims of invalidity. (Saterbak v. JPMorgan Chase Bank, N.A.
impermissibly interjecting the courts into legislative nonjudicial foreclosure scheme];
Jenkins, supra, 216 Cal.App.4th at p. 513.) We find no error or abuse of discretion and
affirm the judgment of dismissal.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Loan, Default and Foreclosure Proceedings
It is not disputed that Plaintiff obtained a loan in September 2006 from ABC on a
residential property in Carlsbad. His promissory note is secured by a deed of trust that
encumbers the property. This deed of trust identifies MERS as beneficiary, as the
nominee for the lender and the lender's successors and assigns, who may hold legal title
and act for the lender. Alliance Title was identified as trustee. Plaintiff defaulted on his
payments.
In April 2012, MERS assigned the beneficial interest in the deed of trust to
Deutsche Bank, with the assistance of BANA, the loan servicer. Deutsche Bank
substituted ReconTrust as the trustee. In August 2012, ReconTrust recorded a notice of
default, giving the balance owed as $84,568.49 as of that time. Since Plaintiff had not
cured the default, ReconTrust and its affiliated title company recorded a notice of
trustee's sale in October 2013.
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B. This Action and Demurrer
Plaintiff filed this action in October 2013, and the FAC in January 2014. On
information and belief, he alleges the MERS assignment of the deed of trust to Deutsche
Bank was defective, because it was recorded after the 2006 PSA trust closing date, and/or
the signature was invalid (robo-signed). Also on information and belief, he claims the
promissory note "was split off from the deed of trust and sold separately on Wall Street,"
such that Deutsche Bank does not own the underlying debt and should not foreclose.
Based on that scenario, he asserts causes of action for (1) wrongful foreclosure; (2) quiet
title; (3) declaratory relief; (4) fraud and deceit; (5) violation of Business and Professions
Code section 17200 et seq. (unfair business practices; the UCL); and (6) civil conspiracy.
He attached the trust deed and foreclosure notice documents as exhibits to the FAC, to
allege no proper transfers were shown.
Defendants demurred to the FAC, arguing that all causes of action failed because
Plaintiff was not entitled to enforce the terms of the underlying PSA on his theory that the
beneficial interest in the trust deed was invalidly transferred due to improper
securitization. Also, Plaintiff's claim failed because he had not alleged he had tendered
the amount in default, to prevent the trustee's sale from taking place. Along with the
demurrer, Defendants sought judicial notice of the 2006 trust deed and the subsequent
assignment and substitution of trustees. Judicial notice was also sought of the notices of
default and trustee's sale (same documents as attached to FAC). (Evid. Code, §§ 451,
subd. (f) [facts and propositions of generalized knowledge], 452, subds. (c), (g), (h)
[recorded documents/common knowledge].)
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C. Ruling; Motion for Judicial Notice and Letter Briefs, Pending Appeal
Over Plaintiff's opposition, the trial court sustained the demurrer without leave to
amend. First, the court agreed to take judicial notice of the existence of the recorded
documents that showed the course of the assignments of the lender's interests in the note
and deed of trust. However, the court declined to take judicial notice establishing the
truth of statements of fact recited within those documents, or to resolve the case upon
those documents alone. (Herrera, supra, 205 Cal.App.4th at p. 1509; Fontenot, supra,
198 Cal.App.4th at p. 265; see fn. 2, ante.)
In issuing its ruling, the trial court concluded that Plaintiff could not demonstrate
that the transfer of the obligation into the trust was improper, because he had no standing
to do so. Plaintiff did not dispute that he had defaulted on the loan and had not tendered
the amount owing. He was not entitled to delay the foreclosure without such a tender.
The FAC thus failed to support its allegations of wrongful foreclosure, and Plaintiff could
not show prejudice entitling him to such relief or a quiet title decree.
In analyzing the related causes of action for declaratory relief, fraud, unfair
competition, and conspiracy, the court ruled that Plaintiff's allegations of defects in the
assignment of the beneficial interest in the trust deed (as untimely or invalid within the
terms of the PSA) were inadequate to support those theories as well. The court found no
indication of how Plaintiff could amend the FAC to state viable causes of action, and
sustained the demurrers without leave to amend. Judgment was entered accordingly.
Plaintiff timely filed his notice of appeal. Defendants filed their brief responding
to the appeal and also brought a motion requesting this court to take judicial notice of
6
records in a previous federal court action brought by Plaintiff, which had also challenged
the foreclosure proceedings and was dismissed without prejudice as to some of its claims.
Defendants sought to rely on that material in support of their initial appellate argument
about whether collateral estoppel should bar this action. The motion was deferred to the
merits panel, and was denied in a separate order. We need not further discuss the
collateral estoppel arguments and instead address the other dispositive legal questions
presented.
Following the issuance of Yvanova, we obtained and considered supplemental
briefing on its impact on the issues in this case, as will next be discussed.
DISCUSSION
I
APPLICABLE STANDARDS
The nonjudicial foreclosure statutory scheme was intended to provide systematic
protections for creditors, debtors, and bona fide purchasers alike. (Moeller v. Lien (1994)
25 Cal.App.4th 822, 830.) Such a sale is entitled to a presumption of regularity, with the
burden of proof resting on the party seeking to overcome the presumption. (Fontenot,
supra, 198 Cal.App.4th at p. 270.) Standing to pursue a cause of action must be
demonstrated through the party's allegation of facts to show there was such a claimed
impropriety. (Saterbak, supra, 245 Cal.App.4th at pp. 813-814.)
"A demurrer tests the legal sufficiency of the factual allegations in a complaint."
(Siliga, supra, 219 Cal.App.4th at p. 81.) On appeal, we review the complaint de novo to
determine whether the complaint alleges facts sufficient to state a cause of action. (Ibid.)
7
We "assume the truth of the properly pleaded factual allegations, facts that reasonably
can be inferred from those expressly pleaded and matters of which judicial notice has
been taken. [Citation.] We construe the pleading in a reasonable manner and read the
allegations in context. [Citation.] We must affirm the judgment if the sustaining of a
general demurrer was proper on any of the grounds stated in the demurrer, regardless of
the trial court's stated reasons." (Ibid.; Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6
(Evans).)
If a demurrer is sustained without leave to amend, we utilize an abuse of discretion
standard in reviewing the trial court's decision to deny leave to amend. (Gomes v.
Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 (Gomes).) "It is an
abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable
probability that the defect can be cured by amendment. [Citation.] [However, t]he
burden is on the plaintiff to demonstrate how the complaint can be amended to state a
valid cause of action. [Citation.] The plaintiff can make that showing for the first time
on appeal." (Siliga, supra, 219 Cal.App.4th at p. 81.)
II
CLAIMS OF INVALID ASSIGNMENT OF BENEFICIAL INTEREST
A. Invalidity; Void or Voidable Transactions
Plaintiff's various theories for asserting the assignment of the lender's beneficial
interest in the trust deed was wrongful or invalid mainly depend on his claim he has other
information and belief about the PSA underlying the documents attached to his FAC. He
seeks to show the assignments and foreclosure notices were subject to additional
8
requirements that were not met (e.g., timeliness). In light of the rules announced in
Yvanova, we address the issues of law presented.
As the key holding in Yvanova, supra, 62 Cal.4th at page 935, the court stated, "If
a purported assignment necessary to the chain by which the foreclosing entity claims that
power is absolutely void, meaning of no legal force or effect whatsoever [citations], the
foreclosing entity has acted without legal authority by pursuing a trustee's sale, and such
an unauthorized sale constitutes wrongful foreclosure." Thus, "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 p. 924.)
In Yvanova, the court declined to decide certain related issues, as not falling within
the scope of the standing question presented: (a) whether a borrower is always precluded
from bringing a preemptive suit to stop a threatened nonjudicial foreclosure, by making
allegations that the foreclosing party's interest is void (Yvanova, supra, 62 Cal.4th at
pp. 924, 934, 939); (b) whether a transfer of trust documents to a securitized real estate
trust after its closing date constitutes a void or a voidable transfer (id. at pp. 931, 933,
fn. 10, 934); (c) whether a plaintiff has to allege tender to state such a cause of action for
a completed wrongful foreclosure upon void documents (id. at p. 929, fn. 4); (d) whether
prejudice is an element of the wrongful foreclosure tort (id. at pp. 929, fn. 4, 937).
Yvanova also declined to review the lower court's holding that the borrower's quiet title
claim was defective in that instance. (Id. at p. 926.) Yvanova further took note that the
9
California Homeowner Bill of Rights applies to title-related documents recorded on or
after the effective date of that legislation, January 1, 2013. (Yvanova, at pp. 941-942).3
As a threshold matter, Plaintiff cannot properly claim in his supplemental briefing
that for purposes of analyzing standing questions, there is no difference between a
completed foreclosure sale, as occurred in Yvanova, and a noticed but pending
foreclosure sale, such as he is still trying to prevent. Yvanova clearly distinguishes for
standing purposes between these two types of wrongful foreclosure actions. In Yvanova,
supra, 62 Cal.4th at pages 924, 934 and 939, the Supreme Court declined to address the
criteria for a borrower to have standing to bring a preemptive action that seeks to prevent
a foreclosure sale from going forward (e.g., on void documents). The court was only
addressing the rights of already foreclosed-upon borrowers, not defaulting borrowers
whose foreclosure sales have not yet occurred. (Id. at pp. 934-935, 939; Saterbak, supra,
245 Cal.App.4th at p. 815 [Yvanova's ruling is expressly limited to the postforeclosure
context].)
Here, the FAC does not utilize the terms void and voidable, instead claiming
"invalidity" of the relevant foreclosure documents. In light of the discussion in Yvanova,
3 "The California Homeowner Bill of Rights prohibits, among other things, 'dual track' foreclosures, which occur when a servicer continues foreclosure proceedings while reviewing a homeowner's application for a loan modification; requires a single point of contact for homeowners who are negotiating a loan modification; and expands notice required to be given to the borrower before the lender can take action on a loan modification or pursue foreclosure. [Citation.] The California Homeowner Bill of Rights became effective on January 1, 2013." (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86, fn. 14 (Lueras); Civ. Code, § 2923.4 et seq.; all further statutory references are to the Civil Code unless noted.) 10
carefully distinguishing between void transactions and voidable transactions, and in this
de novo review of the demurrer ruling, we shall assume for purposes of analysis that
Plaintiff is attempting to allege his best case, that these transactions were based on "void"
documents and he may have standing to bring a preemptive claim. We read the FAC
broadly and assume its properly pleaded facts are true. However, we disregard
contentions, deductions, and conclusory statements of either fact or law. (Evans, supra,
38 Cal.4th at p. 6.)
B. Alleged Defects in Assignments
The elements of the tort of wrongful foreclosure are: "(1) the trustee or mortgagee
caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a
power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but
not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where
the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount
of the secured indebtedness or was excused from tendering." (Lona v. Citibank, N.A.
(2011) 202 Cal.App.4th 89, 104.)
Plaintiff first argues that under the terms of the relevant PSA, his loan was not
securitized and transferred into a trust in a timely manner, until after the closing date of
the trust. He asserts Defendants did not obtain authority to foreclose as assignees of both
the original lender's beneficial interest and the power of sale in the trust deed.
In Saterbak, supra, 245 Cal.App.4th at page 815, this court observed that Yvanova
"expressly offers no opinion as to whether, under New York law, an untimely assignment
to a securitized trust made after the trust's closing date is void or merely voidable."
11
(Yvanova, supra, 62 Cal.4th at pp. 931, 940-941.) In Saterbak, we treated such a delayed
assignment as voidable in nature, not void, and then concluded that the plaintiff lacked
standing to challenge such an alleged defect in the underlying assignment of the trust
deed. (Saterbak, at pp. 814-815; see Rajamin v. Deutsche Bank Nat'l Trust Co. (2d Cir.
2014) 757 F.3d 79, 90 [under New York law, an improper transfer into investment trust is
voidable, not void].) The portion of the holding in Glaski on the purported effect of an
untimely assignment is not controlling and we need not consider it further. (Saterbak, at
p. 815, fn. 5.)
As explained in Saterbak, there are valid statutory and policy reasons for
disallowing preemptive lawsuits that seek to determine whether a representative has been
authorized by the holder of the beneficial interest to initiate a foreclosure. (Saterbak,
supra, 245 Cal.App.4th at pp. 814-815; Gomes, supra, 192 Cal.App.4th at p. 1156.)
Allowing a borrower "to impose the additional requirement that [an entity seeking to
foreclose on a property] demonstrate in court that it is authorized to initiate a
foreclosure . . . would be inconsistent with the policy behind nonjudicial foreclosure of
providing a quick, inexpensive and efficient remedy." (Gomes, at p. 1154, fn. 5.) To the
extent the Supreme Court's views in Yvanova do not preclude the bringing of a
preemptive action to claim a proposed foreclosure would be invalidly based upon void
documents, there are still no sufficient facts in the FAC to support allegations that these
documents are void on their face and thus unsuitable for the initiation of foreclosure
proceedings. (Yvanova, supra, 62 Cal.4th at pp. 924, 934, 939.)
12
In his supplemental letter brief, Plaintiff makes several interesting but meritless
arguments. First, he asserts as a factual matter that the original lender, ABC, could not
have participated in the assignment transactions because ABC went out of business or
bankrupt in 2008. The record does not disclose that information about ABC. Instead,
Plaintiff alleges only on information and belief, as above, that the lender's successor did
not obtain a secured interest in the property.
Generally, the owner of a promissory note secured by a deed of trust is deemed to
be the beneficiary of the deed of trust. (Fontenot, supra, 198 Cal.App.4th at p. 267.)
"Under the MERS System, however, MERS is designated as the beneficiary in deeds of
trust, acting as 'nominee' for the lender, and granted the authority to exercise legal rights
of the lender." (Ibid.) When authority is granted to exercise all of the rights and interests
of the lender, this includes the authority to assign the deed of trust. (Siliga, supra, 219
Cal.App.4th at p. 84; Saterbak, supra, 245 Cal.App.4th at p. 816.) Under these rules,
Plaintiff has not pled or supplied judicially noticeable existing facts to demonstrate the
foreclosure was invalidly initiated. (Herrera, supra, 205 Cal.App.4th at p. 1506.)
Plaintiff alternatively contends the transfer to the real estate trust was invalid due
to signature defects in the assignment documents. Here too, he has no standing to claim
he was caused harm by any variance from the PSA's or other signature requirements, in
the MERS assignment of the beneficial interest in the loan. Even if there had been any
failure to comply with the terms of the PSA, such as if the nominee's or trustee's
representative did not properly execute documents, those unauthorized acts could be
13
ratified and they would not make the transactions void, but voidable by the beneficiary.
(Saterbak, supra, 245 Cal.App.4th at p. 815.)
C. Alleged Basis for Standing Under Trust Deed Provisions
To the extent that Plaintiff alternatively contends the assignment was illegal, by
referring to paragraph No. 16 in the trust deed (requiring compliance with governing
law), he does not support such a claim. He cannot properly rely on California Uniform
Commercial Code section 3501 or section 3602 to claim that the presentment of the debt
was not made by a person entitled to receive payment under the instrument. (Id.,
§§ 3501, subd. (a), 3602, subd. (a).) The statutory scheme for nonjudicial foreclosures
(in Civ. Code, § 2924 et seq.) is separate from the California Uniform Commercial Code
negotiable instrument provisions, and these proceedings were not controlled by the
California Uniform Commercial Code. (Debrunner v. Deutsche Bank National Trust Co.
(2012) 204 Cal.App.4th 433, 440-441.)
To claim a lack of adequate notice, Plaintiff relies on the trust deed's paragraph
Nos. 15 (notices) and 16 (governing laws, etc.). He asserts they required that a
notification of change in beneficial interest would be mailed to him by certified mail,
which was not done and thus left him in doubt as to who was the holder that had a right to
be paid or to enforce the privileges granted in the deed of trust. Those cited paragraphs
are more general in nature for requiring methods for notice to be given, and do not
impose separate requirements as claimed. The documents attached to his FAC do not
demonstrate any lack of compliance with the terms of the trust deed.
14
Moreover, Plaintiff was placed on notice through paragraph No. 20 of the trust
deed that the note or security instrument could be sold one or more times without prior
notice to him, and cause a change in the identity of the owner or loan servicer. (Saterbak,
supra, 245 Cal.App.4th at p. 817 [presuit notice provisions in the trust deed documents
do not apply to alleged defects in the PSA].) Nothing in the documents provided shows
that the successor beneficiary, Deutsche Bank, did not have the authority to record the
substitution of trustee document, or to direct the recording of a notice of default and
election to sell under the trust deed securing the debt. Plaintiff cannot rely on
information and belief about the PSA in this respect to support any claims of invalidity or
voidness. (Gomes, supra, 192 Cal.App.4th at pp. 1158-1159.)
In his reply brief, Plaintiff added an argument that the enactment of the
Homeowners Bill of Rights (§ 2923.4 et seq.) shows that public policy supports the
protection of homeowners against abusive practices, such as a foreclosure by the wrong
party. These recorded documents predate the effective date of that legislation and such
policy arguments are not persuasive on this record. (Saterbak, supra, 245 Cal.App.4th at
p. 818.)
D. No Separation of Note and Trust Deed
Plaintiff is incorrect in asserting that his promise to pay is no longer involved in
this lawsuit. He cannot properly claim that "the only matter at issue in this instant case is
the deed of trust and the privileges contained therein." First, he shows no factual basis to
challenge the signature on the trust deed and makes only conclusory claims. (Gomes,
supra, 192 Cal.App.4th at pp. 1158-1159 [pleading must include the information that
15
leads a plaintiff to believe certain allegations are true].) There is no dispute that he
executed the loan note, it is secured by a deed of trust, and he is indebted accordingly.
The right to enforce the deed of trust follows the assignment of the debt as a
matter of statutory law. (§ 2936; Yvanova, supra, 62 Cal.4th at p. 927 [trust deed "is
inseparable from the note it secures, and follows it even without a separate assignment"].)
As explained in Herrera, in the lending industry, the assignment of the underlying debt
(the promissory note) is not commonly a recorded transaction. By contrast, the deed of
trust that is the security for the note is routinely recorded. (Herrera, supra, 205
Cal.App.4th at p. 1506; Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 744, fn.
2 (Kan).) These transactions are not necessarily accomplished at the same time: "[T]he
lender could have assigned the note to the beneficiary in an unrecorded document not
disclosed to plaintiffs." (Herrera, at p. 1506; Fontenot, supra, 198 Cal.App.4th at
p. 272.) There are different requirements for transfers of a power of sale under a
mortgage lien, which is not shown to be involved here. (See Calvo v. HSBC Bank USA,