Kitajima v. Mortgage Electronic Registration Systems
Filed 5/24/13 Kitajima v. Mortgage Electronic Registration
Systems CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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
SECOND APPELLATE
DISTRICT
DIVISION THREE
OSAMU
KITAJIMA et al.,
Plaintiffs and Appellants,
v.
MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS, INC., et al.,
Defendants and Respondents.
B236915
(Los Angeles County
Super. Ct. No. LC092283)
APPEAL
from a judgment of the Superior Court
of
County,
Michael B. Harwin, Judge. Affirmed.
Law
Office of Nick A. Alden and Nick A. Alden for Plaintiffs and Appellants.
Dykema
Gossett, Brian H. Newman and Vivian S. Lee for Defendants and Respondents.
_____________________
Plaintiffs
and appellants Doctor Osamu Kitajima and Yoko Kitajima appeal a
trial court sustained the demurrer of defendants and respondents Deutsche Bank
National Trust Company (Deutsche Bank), First Franklin, a division of National
City Bank of Indiana (First Franklin) and Mortgage Electronic Registration
Systems, Inc. (MERS) to plaintiffs’ first amended complaint (FAC) without leave
to amend. The gravamen of the FAC is
that defendants commenced and conducted nonjudicial foreclosure proceedings on
plaintiffs’ residential real property in Woodland Hills (the property) in
violation of certain statutes and in breach
of the deed of trust plaintiffs executed.
We shall reject all of plaintiffs’ arguments and affirm the judgment.
Plaintiffs
acquired the property in 1990. In March
2006, using the property as collateral, plaintiffs obtained a $632,000 loan
from First Franklin. The loan was
memorialized by a promissory note and secured by a deed of trust. The deed of trust named First Franklin as the
“Lender,†plaintiffs as the “Borrower,†and Financial Title Company as the
“Trustee.†MERS was identified as the
“nominee for Lender and Lender’s successors and assigns,†as well as the “beneficiaryâ€
under the security instrument.
The
deed of trust further provided:
“Borrower understands and agrees that MERS holds only legal title to the
interests 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 including, but not limited to,
releasing and canceling this Security Instrument.â€
The
deed of trust also contained this statement about the promissory note
plaintiffs executed in First Franklin’s favor:
“The Note or a partial interest in the Note (together with this Security
Instrument) can be sold one or more times without prior notice to
Borrower. A sale might result in a
change in the entity (known as the ‘Loan Servicer’) that collects Periodic
Payments due under the Note and this Security Instrument and performs other
mortgage loan servicing obligations under the Note, this Security Instrument,
and Applicable law.â€
Additionally,
the deed of trust provided: “Lender, at
its option, may from time to time appoint a successor trustee to any Trustee
appointed hereunder by an instrument executed and acknowledged by Lender and
recorded in the office of the Recorder of the county in which the Property is
located.â€
In
August 2009, MERS executed and recorded an assignment of deed of trust. This document assigned First Franklin’s
interest in the deed of trust and promissory note
Deutsche Bank, as Trustee for First Franklin Mortgage Loan Trust 2006-FF9,
Mortgage Pass-Through Certificates, Series 2006-FF9 (the Trust).
On
March 22, 2010, T.D.
Service Company recorded a notice of default and election to sell under deed of
trust (notice of default). This document
stated that plaintiffs were in default of their obligations under the
promissory note, that they owed Deutsche Bank $59,202.65 as of March 26, 2010, and that in order to
arrange for payment to stop nonjudicial foreclosure proceedings pursuant to the
deed of trust, plaintiffs could contact Deutsche Bank at a certain address and
telephone number.
Attached
to the notice of default was a notice of default declaration executed by an
employee of Home Loan Services, Inc., the “authorized agent for the mortgagee
and/or beneficiary.†This notice stated
that the borrower was not contacted pursuant to Civil Code section 2923.5,
subdivision (a)(2) “despite the due diligence†of the authorized agent. We shall discuss this notice in more detail
On
May 4, 2010, Home Loan Services, Inc., “as servicer†for Deutsche Bank,
recorded a substitution of trustee, naming T.D. Service Company as the trustee
of the deed of trust in lieu of Financial Title Company. This document was executed on March 29, 2010, which is
by T.D. Service Company.
On
June 23, 2010, T.D. Service
Company, as trustee of the deed of trust, recorded a notice of trustee’s
sale. This notice stated that plaintiffs
were in default and that T.D. Service Company would hold a public auction of
the property on July 13, 2010. Subsequently, the sale was postponed to January 14, 2011.
On
December 30, 2010,
plaintiffs commenced this action by filing a complaint in superior court
against T.D. Servicing Company
name="_ftnref3" title="">[3]
and Deutsche Bank, as trustee of the Trust.
On the same day, plaintiffs filed an ex parte application for an order
to show cause (OSC) regarding a preliminary injunction and a temporary restraining
order (TRO) prohibiting the pending trustee’s sale of plaintiffs’
property. The trial court issued the TRO
and an OSC, and scheduled a hearing on January
20, 2011. Plaintiffs’
counsel, however, inadvertently did not appear for the January 20, 2011, OSC hearing. Consequently, the TRO was dissolved.
On
January 28, 2011,
plaintiffs filed another ex parte application for an OSC regarding a
preliminary injunction and a TRO. The
trial court issued the TRO and an OSC, setting a hearing for February 15, 2011. This hearing, however, did not take place
because on February 14, 2011,
the parties filed a stipulation and proposed order regarding the nonjudicial
foreclosure proceedings. Under the
stipulation, plaintiffs agreed to not seek a preliminary injunction and
requested the trial court to dissolve the TRO.
Defendants agreed that “pending the outcome of this case, they will not
take any step to foreclose on the property.â€
The trial court entered an order adopting the stipulation.
On
February 28, 2011, Deutsche
Bank and T.D. Service Company filed a demurrer to the complaint. Before a hearing on the demurrer was held,
plaintiffs filed the FAC against MERS, Deutsche Bank, First Franklin and T.D.
Service Company. The FAC purported to
set forth causes of action for breach of contract, violation of statutory
duties, unfair business practices and quiet title.
On
June 24, 2011, Deutsche Bank, First Franklin and MERS filed a demurrer to the
FAC on the ground that the pleading failed to state sufficient facts to
constitute a cause of action. The trial
court sustained the demurrer without leave to amend on August 12, 2011, and
then entered a judgment of dismissal in favor of the demurring parties on
August 25, 2011. Plaintiffs filed a
timely notice of appeal of the judgment of dismissal.
The
issue in this case is whether the trial court erroneously sustained defendants’
demurrer to plaintiffs’ FAC without leave to amend and, if so, whether the
court committed reversible error.
1. Standard
of Review
We
review an order sustaining a general demurrer de novo to determine whether the
pleading alleges facts sufficient to state a cause of action. (SC
Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68,
82.) “Regardless of the label attached
to the cause of action, we examine the complaint’s factual allegations to
determine whether they state a cause of action on any available legal
theory.†(Doe v. Doe 1 (2012) 208 Cal.App.4th 1185, 1188; accord
“ ‘ “We assume
the truth of the properly pleaded factual allegations, facts that reasonably
can be inferred from those expressly pleaded, and facts of which judicial
notice can be taken. [Citation.] We construe the pleading in a reasonable
manner and read the allegations in context.
[Citation.]†’ [Citation.] However, we need not accept as true
plaintiff’s contentions, deductions or conclusions of fact or law.†(Maxton
v. Western States Metals (2012) 203 Cal.App.4th 81, 87 (
Additionally,
if we conclude that the trial court erred, we cannot reverse the judgment
unless plaintiffs show that the error was prejudicial. (Century
Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 963 (Century).) “[W]e cannot
presume prejudice and will not reverse the judgment in the absence of an
affirmative showing there was a miscarriage of justice. (Cal. Const. art. VI, § 13;
[Citations].)†(Century, at p. 963; accord (Kyne
v. Eustice (1963) 215 Cal.App.2d 627, 635 [requiring affirmative showing of
miscarriage of justice to reverse order sustaining a demurrer].)
2. Breach
of Contract
The
first cause of action in the FAC is for breach
of contract. The elements of a breach of contract cause of action are (1) the existence
of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3)
defendant’s breach, and (4) the resulting damages to plaintiff. (Armstrong
Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th
1375, 1391, fn. 6.)
The
FAC clearly sets forth facts showing the existence of a contract, namely the
deed of trust. The FAC also alleges that
plaintiffs “performed all conditions, covenants, and promises†required by the
contract. Defendants argue that this
allegation is “plainly false†as plaintiffs “admittedly stopped paying their
mortgage loan years ago.†Nothing in the
body of the FAC, however, states that plaintiffs breached the contract by
failing to make the payments due under the promissory note.
accept the factual allegations in the FAC as true, however improbable they may
be. (Berg
& Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.)
Defendants
argue plaintiffs cannot claim they were in full compliance with their
obligations under the promissory note because the notice of default, which is
attached to the FAC, indicates that plaintiffs were in default and that there
was a balance due in the amount of $59,202.65, as of March 26, 2010. As a general rule, when there is a conflict
between the facts alleged in the body of the complaint and the facts stated in
an exhibit attached to the complaint, the facts in the exhibit take
precedence. (Tucker, supra,
208 Cal.App.4th at p. 210.) Under
this rule, the plaintiff cannot contradict the plain meaning of words of an
attached document. (See e.g.
(1990) 222 Cal.App.3d 1624, 1627 [the court held that a signature card for bank
account shows plaintiff’s corporation, not plaintiff individually, was the
customer].)
The
FAC, for example, states that Commonwealth Land Title (Commonwealth) was the
trustee named in the March 13, 2006, deed of trust attached to the FAC. The attached deed of trust, however, states
that Financial Title Company was the original trustee. We assume for purposes of defendants’
demurrer, that the trustee was Financial Title Company, not Commonwealth. This is because where, as here, the language
of a writing is unambiguous, its interpretation is an issue of law determined
by the court. (Iglesia Evangelica Latina, Inc. v. Southern Pacific Latin American
Dist. of the Assemblies of God (2009)
173 Cal.App.4th 420, 432-433.)
The
statement in the notice of default that plaintiffs were in default of their
obligations under the promissory note is different. Although it cannot be disputed what the
document states, the document does not conclusively establish that plaintiffs
were in breach of their contract at the time the notice of default was
recorded. At the pleading stage, in
light of FAC’s statement that plaintiffs performed all of their obligations
under the contract, we must assume that T.D. Service Company
and that plaintiffs denied that claim.
We
now turn to the third element of this cause of action—defendants’ breach of the
contract. The FAC states: “In breach of the terms of the Deed of Trust,
[T.D. Service Company], as agent for the beneficiary, recorded a Notice of
Default before it was duly appointed as Trustee.†This is the sole purported breach of the
contract contained in the FAC.
The
FAC does not state sufficient facts to constitute a breach of contract cause of
action against MERS. Under the plain
terms of the deed of trust, MERS is a separate corporation and the nominee the
Lender, which in essence means an agent of the Lender. (Fontenot,
supra, 198 Cal.App.4th at p.
270.) MERS had no power to act in its
own right. (Ibid.) There are no facts
alleged in the FAC indicating that T.D. Service Company was an agent of
MERS. Accordingly, T.D. Service
Company’s act of recording the notice of default cannot serve as the basis for
holding MERS liable for breach of contract.
As
the trustee of the deed of trust, T.D. Service Company acted as a limited
common agent for the plaintiffs, as trustors, on the one hand, and First
Franklin or Deutsche Bank, as the beneficiary, on the other.
v. Fidelity Nat. Tit. Ins. Co. (1999) 73 Cal.App.4th 668, 677.) Under this agency relationship, T.D. Service
Company’s duties were: “(1) upon default
[of the trustors] to undertake the steps necessary to foreclose the deed of
trust; or (2) upon satisfaction of the secured debt to reconvey the deed of
trust.†(Ibid.)
As
T.D. Service Company’s alleged principal, First Franklin or Deutche Bank, can
be held vicariously liable for T.D. Service Company’s acts within the scope of
its agency. (Civ. Code, § 2330.) The FAC, however, does not allege any facts indicating
that T.D. Service Company breached the terms of the deed of trust.
Plaintiffs
argue that defendants breached paragraph 24 of the deed of trust, which
provides that “Lender, at its option, may from
time to time appoint a successor trustee to any Trustee appointed hereunder
. . . .†(Italics added.) By appointing T.D. Service Company as a
successor trustee when it did, First Franklin or Deutsche Bank did not breach
the terms of paragraph 24.
Plaintiffs
also argue that defendants breached paragraph 22 of the deed of trust, which
provides: “If Lender invokes the power
of sale, Lender shall execute or cause Trustee to mail a written notice of the
occurrence of an event of default and of Lender’s election to cause the
Property to be sold. Trustee shall cause
this notice to be recorded in each county in which any part of the Property is
located.†By recording the notice of
default on March 22, 2010, T.D. Service Company and its principal did not
breach paragraph 22.
T.D.
Service Company’s act of recording the notice of default before it was duly
appointed as the trustee was not a breach of any of the terms of the deed of
trust. The FAC thus fails to state
sufficient facts to constitute a cause of action for breach of contract.
Our
analysis of the facts in the first cause of action, however, does not end with
this conclusion. The question we must
determine is whether T.D. Service Company’s act of recording a notice of
default before it was appointed a trustee supports any cause of action,
regardless of whether the FAC mislabeled it.
“California’s
nonjudicial foreclosure scheme is set forth in Civil Code sections 2924 through
2924k, which ‘provide a comprehensive framework for the regulation of a
nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of
trust.’ †(Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149,
1154.) This statutory scheme
contemplates precisely the situation presented here. Civil Code section 2934a, subdivision (c)
provides: “If the substitution [of
trustee] is effected after a notice of default has been recorded but prior to
the recording of the notice of sale, the beneficiary or beneficiaries or their
authorized agents shall cause a copy of the substitution to be mailed, prior
to, or concurrently with, the recording thereof, in the manner provided in
Section 2924b, to the trustee then of record and to all persons to whom a copy
of the notice of default would be required to be mailed by the provisions of
Section 2924b. An affidavit shall be
attached to the substitution that notice has been given to those persons and in
the manner required by this subdivision.â€
The
substitution of trustee in this case was recorded on May 4, 2010. This was after the notice of default was
recorded but prior to the recording of the notice of trustee’s sale, which
occurred on June 23, 2010. Thus if
defendants or their authorized agents timely mailed a copy of the substitution
in the manner provided in Civil Code section 2924b, they fully complied with
their statutory duties. The FAC does not
allege any facts indicating that defendants breached the requirements of Civil
Code section 2934a, subdivision (c).
Accordingly, the FAC fails to state a cause of action based on T.D.
Service Company’s act of recording the notice of default before it was duly
appointed the trustee of the deed of trust.
3. Violation
of Statutory Duties
The
second cause of action in the FAC is for violation of statutory duties. The FAC alleges that defendants violated two
provisions of the statutory scheme governing nonjudicial foreclosures, namely
former Civil Code section 2923.5, subdivision (a)(1) and Civil Code section
2924f, subdivision (b)(3).
name="_ftnref8" title="">[8]
a. Former
Civil Code Section 2923.5, Subdivision (a)(1)
Former
Civil Code section 2923.5, subdivision (a)(1), which was applicable at the time
the notice of default in this case was recorded, provided: “A mortgagee, trustee, beneficiary, or
authorized agent may not file a notice of default pursuant to Section 2924
until 30 days after initial contact is made as required by paragraph (2) [
name="_ftnref9" title="">[9]]
diligence requirements as described in subdivision (g).â€
added.) A trustor (borrower) can
maintain a private cause of action for a violation of former Civil Code section
2923.5, but the trustor’s remedy is limited to obtaining a postponement of an
impending foreclosure to permit the lender to comply with the statute. (Mabry
v. Superior Court (2010) 185 Cal.App.4th 208, 214.)
The
FAC alleges: “No one ever contacted
Plaintiffs to discuss his financial situation and/or explore options to avoid
foreclosure in the 30 days that preceded the recording of the Notice of
Default.†Plaintiffs contend that this
factual allegation is sufficient to state a cause of action for violation of
former Civil Code section 2923.5, subdivision (a)(1). We disagree.
The
FAC does not allege that defendants
failed to use “due diligence†to contact plaintiffs. Although plaintiffs claim in their opening
brief that defendants failed “to ever call†plaintiffs, there is no such allegation
in the FAC. The FAC merely alleges that
“[n]o one every contacted Plaintiffs.â€
Further, the FAC indicates that defendants in fact used due diligence. Attached to the FAC is a copy of the notice
of default declaration executed by Home Loan Services, Inc., as the authorized
agent for the beneficiary of the deed of trust.
This declaration states facts that, if true, indicate defendants
complied with the due diligence requirements of former Civil Code section 2923.5.
The
FAC does not allege that the facts stated in the declaration are untrue or that
defendants failed to use due diligence in attempting to contact them. By merely alleging defendants did not contact
them without alleging that defendants did not exercise due diligence in
attempting to do so, the FAC does not state sufficient facts to constitute a
cause of action under former Civil Code section 2923.5, subdivision (a)(1).
b. Civil
Code Section 2924f, Subdivision (b)(3)
Civil
Code section 2929f provides that before
a nonjudicial foreclosure sale pursuant to a deed of trust can take place, at
least 20 days before the date of sale, a notice of sale containing certain
information must be posted in a conspicuous place on the property to be
sold. (Civ. Code, § 2929f, subd.
(b)(3).) The FAC alleges that T.D.
Service Company failed to comply with the requirements of Civil Code section
2924f “by failing to give notice to the Plaintiff or post notice of Trustee’s
Sale on the property.†The FAC seeks a declaration
that in light of defendants’ violation of Civil Code section 2924f, the notice
of trustee’s sale is “null and void.â€
By
August 2011, when the trial court held a hearing on defendants’ demurrer to the
FAC, plaintiffs’ claim for declaratory relief was moot. At that time, there was no pending trustee’s
sale pursuant to the notice of trustee’s sale recorded on June 23, 2010, or
otherwise.
Moreover,
defendants could no longer conduct a trustee’s sale pursuant to the notice of
trustee’s sale recorded on June 23, 2010.
Under Civil Code section 2924g, subdivision (c)(1), a trustee’s sale can
be postponed “at any time prior to the completion of the sale for any period of
time not to exceed a total of 365 days from the date set forth in the notice of
sale.†The notice of trustee’s sale in this
case scheduled the trustee’s sale on July 13, 2010. Thus by August 2011, defendants were required
to record a new notice of sale in order to complete a nonjudicial foreclosure
of plaintiffs’ property. (Civ. Code, §
2924g, subd. (c)(2)[“In the event that the sale proceedings are postponed for a
period or periods totaling more than 365 days, the scheduling of any further
sale proceedings shall be preceded by giving a new notice of sale in the manner
prescribed in Section 2924fâ€].)
By
the time the trial court heard the demurrer, a judicial declaration regarding
whether defendants complied with Civil Code section 2924f by posting the notice
of trustee’s sale on plaintiffs’ property was an issue of no legal
consequence. The trial court therefore
correctly sustained defendants’ demurrer to the FAC to the extent it was based
on defendants’ alleged violation of Civil Code section 2924f.
c. Civil
Code Section 2924g, Subdivision (d)
Civil
Code section 2924g, subdivision (d) provides:
“The notice of each postponement [of a trustee’s sale] and the reason
therefor shall be given by public declaration by the trustee at the time and
place last appointed for sale.†(Civ.
Code, § 2924g, subd. (d).) In their
opening brief, plaintiffs allege that the foreclosure sale was repeatedly
postponed “without giving Plaintiff any notice.†The FAC, however, does not allege any facts
indicating that defendants failed to comply with the notice requirements of
Civil Code section 2924g. In any case,
plaintiffs concede that at this time there is no scheduled sale. Thus any previous alleged failure by
defendants to provide notice of a postponement of a nonjudicial foreclosure
sale cannot be the basis for a cause of action at this time.
4. Unfair
Business Practices
a. The
FAC Fails to Allege Actionable Violations of California Law
The
third cause of action in the FAC is for unfair business practices in violation
of Business and Professions Code section 17200.
This claim is based on six different acts that plaintiffs contend are
violations of California law. The first is T.D. Service Company’s act of
recording the notice of default before it was duly appointed trustee of the
deed of trust. As we explained
sufficient facts to support a claim based on T.D. Service Company’s recording
of the notice of default.
Next,
the FAC alleges that, contrary to the notice of default declaration, plaintiffs
“were not contacted in the thirty (30) days prior to the recording of the
Notice of Default, received no first-class letter or certified mail, with
return receipt requested.†This argument
misrepresents the contents of the notice of default declaration. The declaration states that plaintiffs were
diligence, and thus does not state a factual basis for plaintiffs’ claim that
defendants violated Civil Code section 2923.5.
The
FAC alleges that notice of trustee’s sale is defective in that it violated
former Civil Code section 2923.53. As we
explained ante, however, plaintiffs
cannot base a private action on this statute.
(Vuki , supra, 189 Cal.App.4th at p. 794.)
The
FAC also alleges that Deutsche Bank had no authority to initiate the
foreclosure because MERS “never possessed the promissory note†and did not have
authority to assign the deed of trust to Deutsche Bank. We reject this claim. As nominee of the initial lender, MERS had
authority to assign the promissory note and deed of trust, even if it lacked
possession of the promissory note. (Fontenot,
supra, 198 Cal.App.4th at p.
270.)
The
FAC further alleges, based on “information and belief,†that First Franklin
“went out of business in 2008,†and, “as a result, MERS no longer had the
authority to act as its agent.†This
allegation is based on Civil Code section 2356, which provides: “(a) Unless the power of an agent
is coupled with an interest in the subject of the agency, it is terminated by
any of the following:
“(1)
Its revocation by the principal.
“(2)
The death of the principal.
“(3)
The incapacity of the principal to contract.â€
Plaintiffs
have not cited any authority, and we have found none, to support their
contention that Civil Code section 2356 applies to a corporate entity,
including a national bank association such as First Franklin. Further, the FAC’s allegation that First
Franklin “went out of business†is fatally vague and insufficient. It is unclear whether plaintiffs contend that
First Franklin voluntarily dissolved (see 12 U.S.C. § 181), filed a petition
for bankruptcy, or ceased to operate for some other reason. The FAC thus does not state sufficient facts
to support plaintiffs’ claim that MERS was no longer First Franklin’s agent
when it assigned the promissory note and deed of trust to Deutsche Bank.
Moreover,
the deed of trust provides that MERS was not only First Franklin’s nominee, it
was also the nominee of First Franklin’s “successors and assigns.†The deed of trust also provides: “Borrower understands and agrees that MERS
holds only legal title to the interests 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.†(Italics added.) Accordingly, even if First Franklin was “out
of business†at the time MERS assigned its interests in the deed of trust and
promissory note, under the plain terms of the deed of trust MERS had the
authority to make the assignment.
Finally,
based on “information and belief,†the FAC alleges that “[T.D. Service Company]
Used a Robo Signers to execute the Notice of Default and the Notice of
Trustee’s Sale, including the declarations attached to them.†This vague and factually devoid allegation
does not support a cause of action. In
any case, plaintiffs do not make any arguments in support of this allegation in
their briefs, and thus forfeited the claim on appeal.
The
FAC fails to alleges facts supporting any violations of California law or any
other basis for an unfair business practices claim pursuant to Business and
Professions Code section 17200.
b. Plaintiffs’
Standing to Pursue an Unfair Business Practices Claim
With
the exception of certain government officials, a Business and Professions Code
section 17200 claim can only be maintained “by a person who has suffered injury
in fact and has lost money or property as a result of the unfair
competition.†(Bus. & Prof. Code, §
17204.) To satisfy the “injury in factâ€
requirement a party must show that he or she suffered economic injury and that
such injury was the result of, i.e., caused by, the unfair business
practice. (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.)
Defendants
argue that plaintiffs lack standing to pursue an unfair business practices
claim because the FAC does not allege facts indicating that plaintiffs have
suffered injury in fact. We do not reach
this issue because we hold that the FAC does not state sufficient facts to
support an unfair business practices claim for the reasons stated
5. Quiet
Title
The
fourth and final cause of action in the FAC is for quiet title. The FAC alleges that plaintiffs seek to quiet
title against the claims of MERS, Deutsche Bank, First Franklin, T.D. Service
Company and all unknown persons “claiming any legal or equitable right, title,
estate, lien, or interest in the property.â€
In other words, plaintiffs seek to extinguish the deed of trust and
promissory note. The FAC, however,
states no facts indicating that plaintiffs have a right to do so. In particular, the FAC does not allege that
plaintiffs have paid the amount due under the promissory note or made a tender
to do so.
An
action to quiet title is equitable in nature, governed by equitable
principles. (Mix v. Sodd (1981) 126 Cal.App.3d 386, 390.) It is well established that under equitable
principles, a mortgagor cannot maintain a quiet title action without first
tendering or discharging his or her debt to the mortgagee. (Ibid.;
Shimpones v. Stickney (1934)
219 Cal. 637, 649; Aguilar v. Bocci
(1974) 39 Cal.App.3d 475, 477-478; Horton
v. California Credit Corp. Retirement Plan (S.D. Cal. 2011) 835 F. Supp.2d
879, 893.) The same equitable principles
prevent a trustor of a deed of trust from maintaining a quiet title action
against a beneficiary, trustee, or nominee of the beneficiary without first
tendering or discharging his or her secured debt.
to constitute a quiet title cause of action.
Plaintiffs
argue that the FAC states a quiet title action against Deutsche Bank because it
alleges that MERS did not have possession of the promissory note or authority
to assign the note to Deutsche Bank. As
we explained ante, however, this
argument is without merit. The trial court correctly sustained defendants’
demurrer to this cause of action.
6. Leave
to Amend the FAC
When
a general demurrer is sustained, the plaintiff must be given leave to amend his
or her complaint when there is a reasonable possibility that the defect can be
cured by amendment. (
“The burden of proving such reasonable possibility is squarely on the
plaintiff.†(Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
“
‘To satisfy that burden on appeal, a plaintiff “must show in what manner he can
amend his complaint and how that amendment will change the legal effect of his
pleading.†[Citation.] The assertion of an abstract right to amend
does not satisfy this burden.’
[Citation.] The plaintiff must
clearly and specifically state ‘the legal basis for amendment, i.e., the
elements of the cause of action,’ as well as the ‘factual allegations that
sufficiently state all required elements of that cause of action.’ †(Maxton,
supra, 203 Cal.App.4th at p. 95.)
Here,
plaintiffs argued in their reply brief that an issue on appeal is whether they
were entitled leave to amend their FAC.
Plaintiffs, however, did not describe in their brief how they would
amend their FAC to cure its defects. We
therefore decline to grant plaintiffs leave to amend because they have not met
their burden of showing there is a reasonable possibility that the deficiencies
in the FAC can be cured by amendment.
The judgment is affirmed. Respondents are awarded
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS
KITCHING,
J.
We concur:
KLEIN,
P. J.
ALDRICH,
J.
name="_ftn1" title="">[1] Because
the principal issue on appeal is whether the trial court erroneously sustained
the defendants’ demurrer to the FAC, our summary of the relevant facts assumes
the factual allegations in the FAC are true, but we do not assume the truth of
the FAC’s contentions, deductions or conclusions of law. (Bower
v. AT&T Mobility, LLC (2011) 196 Cal.App.4th 1545, 1552 (
Many of the facts in our summary are based on documents recorded in the
Los Angeles County Recorder’s office and attached to the FAC. Generally, to the extent there is a conflict
in the facts alleged in the body of the FAC and the attached exhibits, the
exhibits take precedence. (
(2012) 208 Cal.App.4th 201, 210 (Tucker).)
language in this document regarding the assignment of the promissory note is
not a model of clarity. After
identifying the deed of trust by date and instrument number of the Los Angeles
County Recorder’s Office, the assignment of deed of trust states that “Assignor
[First Franklin] hereby assigns unto the above named Assignee [Deutsche Bank,
as trustee of the Trust], the said Deed of Trust . . . . [¶] To
Have and to Hold the said Deed of Trust and Note . . . forever, subject to the
terms contained in said Deed of Trust and Note.†Although the term “Note†is not defined in
the assignment of deed of trust, it is defined in the referenced deed of trust
as the $632,000 promissory note executed by plaintiffs. Further, the assignment of deed of trust
refers to the “Deed of Trust Having an original principal sum of
[$632,000].†In our view, the only
reasonable reading of the assignment of deed of trust is that it conveyed First
Franklin’s interest in both the deed of trust and promissory note to Deutsche
Bank.
