Crites v. OneWest Bank
Filed 1/23/13 Crites v. OneWest Bank CA4/2
NOT TO BE
PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION TWO
CHARLES
R. CRITES II,
Plaintiff and Appellant,
v.
ONEWEST
BANK, FSB et al.,
Defendants and Respondents.
E053274
(Super.Ct.No. RIC10002121)
OPINION
APPEAL
from the Superior Court of
County. Paulette
Durand-Barkley, Temporary Judge.
(Pursuant to Cal. Const., art.
VI, § 21.) Affirmed.
The
Advocates Law Firm and Francisco J. Aldana for Plaintiff and Appellant.
Allen
Matkins Leck Gamble Mallory & Natsis, Andrew E. Miller and Eleanor M. Ord
for Defendants and Respondents.
On
March 24, 2011, the trial
court issued its order sustaining the demurrer of defendants OneWest Bank, FSB;
Seaside Financial Corporation; and T.D. Service Company to plaintiff Charles R.
Crites II’s second amended complaint.
Plaintiff then filed his notice of appeal from the judgment dismissing
his complaint.
On
appeal, plaintiff argues that he successfully pled various causes of action
arising from defendants’ foreclosure of his home in Corona. The second amended complaint attempts to
allege five causes of action, entitled (1) violation of Civil Code section
2923.5, (2) fraud, (3) violation of Business and Professions Code section
17200, (4) quiet title, and (5) violation of Civil Code section 2932.5.
I
STANDARD OF REVIEW
A
demurrer is used to test the sufficiency of the factual allegations of the
complaint to state a cause of action.
(Code Civ. Proc., § 430.10, subd. (e).)
The facts pled are assumed to be true, and the only issue is whether
they are legally sufficient to state a cause of action.
“In
reviewing the sufficiency of a complaint against a general demurrer, we are
guided by long-settled rules. ‘
pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]
We also consider matters which may be judicially noticed.’ [Citation.]
Further, we give the complaint a reasonable interpretation, reading it
as a whole and its parts in their context.
[Citation.] When a demurrer is
sustained, we determine whether the complaint states facts sufficient to
constitute a cause of action.
[Citation.] And when it is
sustained without leave to amend, we decide whether there is a reasonable
possibility that the defect can be cured by amendment: if it can be, the trial
court has abused its discretion and we reverse; if not, there has been no abuse
of discretion and we affirm.
[Citations.] The burden of
proving such reasonable possibility is squarely on the plaintiff. [Citation.]â€
(Blank v. Kirwan (1985) 39
Cal.3d 311, 318.)
II
FIRST
CAUSE OF ACTION ‑‑
ALLEGED VIOLATION OF SECTION 2923.5
Section
2923.5 applies to certain real estate transactions occurring between January 1, 2003, and December 31, 2007.
on a delinquent residential mortgage to satisfy certain due diligence
requirements by contacting the homeowner, discussing the delinquency with the
homeowner, and certifying compliance with the due diligence requirements.
In an extremely thorough opinion, our
colleagues in Division Three have discussed section 2923.5 in detail. (Mabry
v. Superior Court (2010) 185 Cal.App.4th 208.) Relevant here, the court held,
“ . . . If section 2923.5 is not complied with, then there
is no valid notice of default and, without a valid notice of default, a
foreclosure sale cannot proceed. The
available, existing remedy is found in the ability of a court in section 2924g,
subdivision(c)(1)(A), to postpone the sale until there has been compliance with
section 2923.5. Reading section 2923.5
together with section 2924g, subdivision (c)(1)(A) gives section 2923.5 real
effect.†(Id. at p. 223.) The court
further stated that, if the lender did not comply with section 2923.5, and the
foreclosure sale has already been held, the noncompliance does not affect title
to the foreclosed property. (
A. The
Allegations
In
general allegations, plaintiff alleges that he purchased property in Corona in 2005 and
financed it through First Federal Bank.
The loan papers state the amount of the loan as $1,330,000. Plaintiff alleges that the declaration
attached to the notice of due diligence was false and misleading, thereby
voiding the notice of default. First
Federal Bank was not listed on the notice of default,
alleges that none of the entities listed “can prove they have the authority to
conduct the foreclosure.†Plaintiff
further alleges that the foreclosure sale failed to meet the requirements of
sections 2924 and 2923.5 and that he had an
Bank not to foreclose on the property.
In
addition to the general allegations, the alleged first cause of action alleges
that defendants cannot prove that the nonjudicial foreclosure was conducted in
accordance with sections 2923.5 and 2924.
The complaint quotes section 2923.5 in detail, and plaintiff contends
that defendants failed to follow the procedural requirements of that section.
The
declaration contained in the notice of default alleges that the contact
provisions of section 2923.5 were complied with. The first cause of action asserts the lack of
knowledge by the person signing the declaration and concludes that various
alleged deficiencies in the declaration voided it.
The
prayer for relief does not seek specific relief for the alleged first cause of
action. It contains a number of
requests, including general, specific, and punitive damages and declaratory and
injunctive relief. Plaintiff also asks
that title to the property be restored to him and that defendants be ordered
not to offer the property for sale or auction.
He further asks that the note be reformed to reflect the present
appraised value of the property and that he recover his attorney fees.
B. Sufficiency
of the Allegations
Defendants
argue that there is no private right of action under section 2923.5 once the
foreclosure sale has occurred.
v. Superior Court, supra,
Legislature did nothing to affect the rule regarding foreclosure sales as
finalâ€].) As quoted above, the
remedy available is a presale remedy, i.e., the power to postpone the pending
sale until there has been compliance with section 2923.5. (Id. at
pp. 221-224, 226-232.)
Another
passage in Mabry explains why
noncompliance with section 2923.5 before the foreclosure sale does not affect
title after the foreclosure sale. (
Plaintiff simply cannot use section 2923.5 as a cause of action to
affect postsale title.
We
therefore agree with defendants that the trial court properly sustained a
demurrer to plaintiff’s first cause of action.
We also agree with defendants that the declaration did not need to be
individualized. Again,
so. (Mabry
v. Superior Court, supra,
C. Wrongful
Foreclosure
On
appeal, plaintiff argues that he has actually stated a cause of action for
wrongful foreclosure because he mentions section 2924 in his first cause of
action. Without citing authority, he
argues that he just has to allege a violation of that section in order to state
a valid cause of action for wrongful foreclosure.
Section
2924 section contains the procedures governing the conduct of a foreclosure
sale, including who can bid, where the sale must be held, and bids prior to
sale. Section 2924 generally applies to
presale and sale procedures: “Before the
foreclosure sale, the client still has hope of seeking
noticed foreclosure sale or one based on fraud.
However, after the sale has been conducted, a client seeking to avoid
foreclosure is usually out of options.
If the foreclosure sale is final, and the client’s property is sold to a
bona fide purchaser for value, the client will be unable to recover the
property, even if the default and foreclosure sale were improperly
noticed. Even if the purchaser is
purported not to be bona fide, attacking a completed foreclosure sale is an
extremely difficult process that may prove too costly for most clients.†(Northrup & Luong, Locked Out: In Fighting a Potential Foreclosure, the Time to Act Is
Before the Sale Takes Place (2008) 30
L.A. Law. 34, fns. omitted.)
Although
we accept the complaint’s factual allegations of irregularities in the
foreclosure process as true for purposes of the demurrer, any such
irregularities are not enough to allow the property to be restored to
plaintiff. The trial court found that,
since the sale here had been completed, the irregularities were insufficient to
state a cause of action for wrongful
foreclosure because the complaint does not contain any allegations of
prejudice.
The
trial court relied on Knapp v. Doherty
(2004) 123 Cal.App.4th 76. In that case,
the foreclosed homeowners sued to set aside the trustee’s sale, claiming that
the sale notice was never served on them or that it was served
prematurely. (Id. at pp. 81, 89.) The
trial court granted summary judgment to defendants, and the appellate court
affirmed. (Id. at p. 81.)
Although
the appellate court found that the notice was served prematurely, it found that
there was no showing of any prejudicial procedural irregularity. (Knapp
v. Doherty, supra, 123
Cal.App.4th at pp. 93-94.)
In
our case, there were no allegations of prejudice. Even conceding the irregularities alleged for
purposes of the demurrer, the trial court questioned plaintiff’s counsel
closely on the prejudice issue and presumably found no allegations of prejudice
that would justify setting aside a completed sale. Since plaintiff must plead and prove an
improper procedure and resulting prejudice (Knapp
v. Doherty, supra, 123
Cal.App.4th at p. 86, fn. 4), allegations of procedural irregularities are
insufficient in the absence of a showing of actual prejudice to the debtor or
to the fairness of the sale. (See
generally 1 Bernhardt, Cal. Mortgages, Deeds of Trust and Foreclosure
Litigation (Cont.Ed.Bar), §§ 2.49, 2.63, 7.23-7.24, 7.67C.)
We
therefore agree with the trial court that plaintiff did not state a cause of action
for wrongful foreclosure.
III
SECOND CAUSE OF ACTION ‑‑ FRAUD
AND FIFTH CAUSE OF ACTION ‑‑ VIOLATION
OF SECTION 2932.5
The complaint combines an alleged second
cause of action for fraud and an alleged fifth cause of action for violation of
section 2932.5.
name="_ftnref4" title="">[4]
“[F]raud must be specifically
pleaded. This means: (1) general
pleading of the legal conclusion of fraud is insufficient; and (2) every
element of the cause of action for fraud must be alleged in full, factually and
specifically, and the policy of liberal construction of pleading will not
usually be invoked to sustain a pleading that is defective in any material
respect. [Citation.] ‘It is bad for courts to allow and lawyers to
use vague but artful pleading of fraud simply to get a foot in the courtroom
door.’ [Citation.]†(Wilhelm
v. Prey (1986) 186 Cal.App.3d 1324, 1331.)
Plaintiff alleges that defendant OneWest
Bank engaged in fraudulent behavior and that it violated section 2932.5 because
the power of sale is only given to the person entitled to payment of the
mortgage, and the First Federal mortgage was not properly assigned to OneWest
Bank.
title="">[5]
In support of the alleged causes of
action, plaintiff alleges that his note was no longer negotiable because the
assignment of the deed of trust was not attached to the note, OneWest Bank
intentionally misrepresented its status, the assignment was not duly
acknowledged and recorded prior to the foreclosure sale,
statutory compliance OneWest Bank had no authority to proceed with the sale. The complaint further alleges
misrepresentation by defendants because of the declaration in the notice of
default that they had complied with section 2923.5.
Plaintiff claims reliance on the alleged
misrepresentation and concludes that defendants willfully intended to deceive
him into believing that they had the authority to foreclose on the
mortgage. Plaintiff also attacks other
alleged defects in the notice of default and states that defendants made the
intentional misrepresentations to induce his reliance on the documents and to
confuse him.
While the sufficiency of the facts
alleged in support of this cause of action are questionable,
necessary to discuss the allegations because it is clear that plaintiff has
failed to plead any facts showing that he suffered any harm from the alleged
misrepresentations. Certainly, there was
no harm in the lender or its assignees pursuing their legal remedies due to
nonpayment of the mortgage, even though it acted through agents.
As discussed above, Mabry makes the point clear:
“There is nothing in section 2923.5 that even hints that noncompliance
with the statute would cause any cloud on title after an otherwise properly
conducted foreclosure sale. We would
merely note that under the plain language of section 2923.5, read in
conjunction with section 2924g, the only remedy provided is a
postponement of the sale before it happens.â€
(Mabry v. Superior Court,
Defendants argue that the fraud claim
fails because plaintiff has failed to demonstrate any harm: “ . . . Crites cannot
claim damage because he was in default and could not redeem the loan.
[Citation.] The ensuing foreclosure was thus inevitable.â€
We agree with defendants and the trial
court: “ . . . ‘“As
a general rule, there is a common law rebuttable
presumption that a foreclosure sale has been conducted regularly and
fairly.†[Citations.] Accordingly, “[a] successful challenge to the
sale requires evidence of a failure to comply with the procedural requirements for
the foreclosure sale that caused
prejudice to the person attacking the sale.†[Citation.] . . . [T]he
presumption must prevail when the record lacks
[Citations.]†(
Plaintiff has failed to allege sufficient
facts to establish a fraud or misrepresentation cause of action. The trial court properly granted defendants’
demurrer to this cause of action.
IV
THIRD CAUSE OF ACTION ‑‑ VIOLATION
OF
BUSINESS AND PROFESSIONS CODE SECTION
17200
Plaintiff realleges his earlier
allegations and concludes that “[d]efendants’ practices are likely to mislead
the general public, and therefore, constitute a fraudulent business act [or]
practice within the meaning of Business and Professions Code
§ 17200.†He relies on his earlier
allegations of procedural irregularities, including the fraud allegations and
the alleged violation of Civil Code section 2923.5.
In his brief, plaintiff argues that “[a]
private right of action lies for [Civil Code § 2923.5(a)] under California
Business & Professions Code § 17200, et seq., even if the underlying
statute confers no right of action.†He
cites Stop Youth Addiction,
(held superseded by statute in Robinson
v. HSBC Bank USA (2010) 732 F.Supp.2d 976.)
In Stop Youth Addiction, our
Supreme Court said, “[A]s we have long recognized, it is in
enacting the [Unfair Competition Law] itself, and not by virtue of particular
predicate statutes, that the Legislature has conferred upon private plaintiffs
‘specific power’ [citation] to prosecute unfair competition claims.†(Stop
Youth Addiction, Inc., at p. 562.)
However, in Robinson, the
court noted that the holding was superseded because
“ . . . Proposition 64 took away the ability of non-injured
plaintiffs to sue on behalf of the general public under the UCL. [Citation.]â€
(Robinson, at p. 989, fn. 8.)
We need not discuss the issue further
because it is clear that plaintiff bases his Business and Professions Code
section 17200 claim on his claim of actual fraud under Civil Code section
1752. Since plaintiff’s fraud claim was
insufficient to state a cause of action, it is apparent that the Business and
Professions Code claim must also fail since it is based on the same
allegations. Plaintiff has simply failed
to plead facts demonstrating any fraudulent practices under Business and
Professions Code section 17200.
V
FOURTH CAUSE OF ACTION ‑‑ QUIET
TITLE
Under this alleged cause of action,
plaintiff seeks to quiet title in himself as of the date of the trustee’s
sale. At that time, the allegedly void
trustee’s deed upon sale was issued.
In his brief, plaintiff only cites Code
of Civil Procedure section 761.020. That
section specifies the contents of an action for quiet title.
It is apparent from the complaint that
plaintiff is seeking to use a quiet title cause of action to attack the
completed foreclosure sale. His grounds
for doing so are alleged procedural deficiencies in the presale documents,
including alleged violations of section 2923.5.
As we have demonstrated above, however,
such violations cannot be the basis for an action to set aside a completed
sale. “A
primary reason for California’s comprehensive regulation of foreclosure in the
Civil Code is to ensure stability of title after a trustee’s sale. [Citation.]
[¶] There is nothing in section
2923.5 that even hints that noncompliance with the statute would cause any
cloud on title after an otherwise properly conducted foreclosure sale. We would merely note that under the plain
language of section 2923.5, read in conjunction with section 2924g, the only
remedy provided is a postponement of the sale before it happens.†(Mabry
v. Superior Court, supra, 185
Cal.App.4th at p. 235.)
name="_ftnref8" title="">[8]
V
DENIAL OF LEAVE TO AMEND THE COMPLAINT
Finally, plaintiff contends that, if he
stated a cause of action under any theory, the trial court abused its
discretion in refusing to give him the opportunity to amend his complaint. Similarly, he contends that discretion is
abused if he could have amended his complaint to state a cause of action.
“Leave to amend is properly denied when
the facts are not in dispute and the nature of the claim is clear, but there is
no liability under substantive law.
[Citation.] ‘[All] intendments
weigh in favor of the regularity of the trial court proceedings and the
correctness of the judgment. Unless
clear error of abuse of discretion is demonstrated, the trial court’s judgment
of dismissal following the sustaining of defendants’ demurrer will be affirmed
on appeal [citation].’ [Citation.]†(Wilhelm
v. Pray, supra, 186 Cal.App.3d at
p. 1330.)
title="">[9]
The trial court did not abuse its
discretion in denying plaintiff leave to amend his complaint for a third
time. This is particularly true when
plaintiff has not made any showing of the changes he would make to state any
cause of action. Under the facts here,
he simply cannot establish substantive liability under the law.
VI
DISPOSITION
The
judgment is affirmed. Respondents are
awarded costs on appeal.
NOT
TO BE PUBLISHED IN OFFICIAL REPORTS
RICHLI
J.
We concur:
McKINSTER
Acting
P. J.
KING
J.
name="_ftn1" title=""> [1] Unless otherwise stated, all further
statutory references are to the Civil Code.
effective January 1, 2013. The fact of
repeal does not excuse the alleged failure of the defendants to follow the
statute while it was in effect.
