ReconTrust Co.
Filed 12/2/13 Moore v. ReconTrust Co. CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
BETSY E. MOORE, AS TRUSTEE,
ETC.,
Plaintiff and Appellant,
v.
ReconTrust COMPANY N.A. et al.,
Defendants and Respondents.
D062845
(Super. Ct. No. 37-2011-00053009- CU-BC-NC)
APPEAL from
a judgment of the Superior Court
of
County, Timothy M. Casserly, Judge. Affirmed.
Leon E.
Campbell for Plaintiff and Appellant.
Bryan
Cave, Sean D. Muntz and David J.
Joerger for Defendants and Respondents.
Betsy E.
Moore (Betsy Moore), trustee under the Betsy Elizabeth Moore Trust, appeals a
judgment dismissing her amended complaint
against ReconTrust Company, N.A. (ReconTrust) (erroneously sued as Reconstruct
Company, RA) and Bank of America, N.A. (successor by merger to BAC Home Loans
Servicing, LP, erroneously sued as BAC Home Loans Servicing, LP) (collectively
defendants) after the trial court sustained defendants' demurrer without leave
to amend. Betsy Moore contends: (1) the court erred in sustaining the demurrer
because, she argues, the amended complaint states a cause of action for a
abused its discretion in sustaining the demurrer without leave to amend. We disagree.
The court did not err in sustaining the unopposed demurrer without leave
to amend because the requests for declaratory judgment regarding the formation
of the deed of trust are barred by the statute
of limitations and because the deed of trust is enforceable by its
terms. Betsy Moore has not met her
burden of showing the defects in the complaint can be cured. Therefore, we affirm.
FACTUAL AND
PROCEDURAL BACKGROUND
In
reviewing an order sustaining a demurrer, "[w]e treat the demurrer as
admitting all material facts properly pleaded, but not contentions, deductions
or conclusions of fact or law. [Citation.]
We also consider matters which may be judicially noticed. [Citation.]" (Serrano
v. Priest (1971) 5 Cal.3d 584, 591.)
Accordingly, we derive the facts from the operative complaint and the
judicially noticed material.
Kevin Charles
Moore borrowed $640,000 and signed a deed of trust in August 2005 securing his
repayment obligations with property in Escondido, California. The deed of trust identified Chicago Title as
the original trustee and Mortgage Electronic Registration Systems, Inc. (MERS)
as the beneficiary acting as the nominee for the lender and the lender's
successors and assigns.
MERS
substituted ReconTrust as the new trustee.
Thereafter, in January 2007, ReconTrust recorded notice that Mr. Moore
had defaulted on the loan. He was behind
in his payments by more than $10,000 and owed more than $690,000. Thus, the beneficiary elected to sell the
property to satisfy the loan obligations and scheduled a public sale. The sale apparently did not occur because, several
years later, ReconTrust recorded another notice of trustee's sale indicating
Mr. Moore now owed more than $850,000.
The Kevin
Charles Moore Trust, allegedly a revocable living trust represented by Betsy
Moore as trustee, filed a complaint on March 30, 2011, against Countrywide Home
Loans, BAC Home Loans Servicing LP, ReconTrust, MERS and Bank of America
asserting causes of action for breach of contract, fraud, breach of covenant of
good faith and fair dealing and requesting "specific performance" to
prevent a sale of the property scheduled for April 2011. The defendants filed a demurrer to the
original complaint.
Before the
initial demurrer was heard, Betsy Moore, as the trustee of the Betsy Elizabeth
Moore Trust, filed an amended complaint under Code of Civil Procedure section
472. (All statutory references are to
the Code of Civil Procedure unless otherwise specified.) The amended complaint asserted only one cause
of action for declaratory judgment against "[ReconTrust] Company, RA"
and "BAC Home Loans Servicing, LP." The amended complaint did not name either Mr.
Moore or his trust as a plaintiff. Betsy
Moore alleged she is "the successor in title to the real property
hereinafter described from Kevin Charles Moore."
The amended
complaint alleged Mr. Moore executed a deed of trust as a single man and that,
upon information and belief, Mr. Moore lacked sufficient mental capacity at the
time of execution to know the nature and legal effect of the deed of trust and
that he did not read or write. Betsy
Moore alleged a dispute exists between "plaintiff and defendants" and
sought a declaratory judgment declaring "the respective rights of the
parties under said deed of trust" based upon the following: "(A) Plaintiff contends that said deed of
trust is of no legal effect because of said mental incapacity of Kevin Charles
Moore at the time he executed the deed of trust[;] (B) Plaintiff contends that
said deed of trust is not enforceable since defendant BAC Home Loan[s]
Servicing, LP was not qualified to do business in California at the time of the
execution of the said deed of trust, or alternatively, is not qualified to
enforce said deed of trust because it is no longer qualified to do business in
California[; and] (C) Plaintiff contends that said deed of trust is subject to
rescission based on intentional or negligent misrepresentation of material facts,
or concealment thereof, at the time Kevin Charles Moore executed said deed of
trust."
Defendants
filed a demurrer to the amended complaint.
Defendants argued the amended complaint does not state a cause of action
for declaratory judgment because: (1) the agreement is enforceable despite
claimed illiteracy or incapacity; (2) the agreement is enforceable because the
deed of trust provides for the right of successor entities to foreclose; and (3)
any claim for rescission based upon misrepresentation is barred by the statute
of limitations and does not state a claim.
Defendants also argued plaintiff lacks standing to challenge the pending
foreclosure sale because she did not tender the amount owing on the loan. Defendants asked the court to deny leave to
amend.
Counsel for
Betsy Moore chose not to oppose the demurrer believing the amended complaint
sufficiently stated a cause of action for declaratory relief. Instead, after reviewing an adverse tentative
ruling, counsel attempted to file a second amended complaint in which he
corrected only the spelling of party names.
Plaintiff's counsel submitted the second amended complaint to the clerk's
office on the morning of the demurrer hearing.
He did not appear at the hearing because he believed the hearing should
be taken off calendar.
The hearing
went forward and the trial court sustained the unopposed demurrer without leave
to amend. The clerk of the court returned
the second amended complaint unfiled because leave of court was necessary.
Betsy Moore's
counsel moved to vacate the order sustaining the demurrer and sought leave to
file a second amended complaint under
section 473. In a declaration, Betsy
Moore's counsel argued that he thought section 472 provided a right to amend a
complaint once as a matter of course before an answer or demurrer is filed and
another opportunity to amend again after a demurrer is filed, but before trial
of the issue of law. Defendants opposed
the motion to vacate arguing that counsel had not demonstrated excusable
neglect under section 473 because section 472 allows only one opportunity to
amend a complaint as a matter of right before leave of court is necessary. The court denied the motion to vacate and entered
a judgment of dismissal with prejudice.
Betsy Moore
moved for new trial. Because the hearing
on the motion for new trial was set more than 60 days after service of notice
of entry of judgment, the court had no power to grant a new trial under section
660.
DISCUSSION
I
"On appeal from a judgment after a demurrer is
sustained without leave to amend, we review the trial court's ruling de novo,
exercising our independent judgment on whether the complaint states [facts
sufficient to constitute] a cause of action." (Lincoln
Property Co., N.C., Inc. v. Travelers Indemnity Co. (2006) 137 Cal.App.4th
905, 911.) " ' "[W]e
may affirm a trial court judgment on any basis presented by the record whether
or not relied upon by the trial court." ' " (Maystruk
v. Infinity Ins. Co. (2009) 175 Cal.App.4th 881, 887.)
We will
reverse an order denying leave to amend for abuse of discretion only if there
is a reasonable possibility that the pleading can be cured by amendment. (Campbell
v. Regents of University of California (2005) 35 Cal.4th 311, 320.) " 'The burden of proving such reasonable
possibility is squarely on the plaintiff.' " (Maxton
v. Western States Metals (2012) 203 Cal.App.4th 81, 95 (
II
The Amended Complaint Does Not State a Cause of Action for Declaratory
Relief
Declaratory
relief is available to "[a]ny person interested under a written instrument . . . who
desires a declaration of his or her rights or duties with respect to another,
or in respect to, in, over or upon property . . . in cases
of actual controversy relating to the legal rights and duties of the respective
parties . . . ."
(§ 1060; Maguire v. Hibernia
S. & L. Soc. (1944) 23 Cal.2d 719, 728 ["[a] complaint for
declaratory relief is legally sufficient if it sets forth facts showing the
existence of an actual controversy relating to the legal rights and duties of
the respective parties under a written instrument and requests that these
rights and duties be adjudged by the court"] (Maguire).)
Once the
court determines an "actual controversy" exists (Maguire, supra, 23 Cal.2d at p. 728), the trial court has
discretion under section 1061 to refuse to make a declaration of rights and
duties "including a determination of any question of construction or
validity arising under a written instrument or contract, 'where its declaration
or determination is not necessary or proper at the time under all the
circumstances.' " (
complaint for declaratory relief is reviewed on appeal for abuse of
discretion. (Orloff v. Metropolitan Trust Co. (1941) 17 Cal.2d 484, 485.)
A
We note at
the outset that neither party explains how Betsy Moore or the Betsy Elizabeth
Moore Trust, as "successor in title to the real property," has an
interest in or rights under the deed of trust executed by Kevin Charles Moore. However, given our decision herein, there is
no reasonable possibility an amendment could cure the defects in the amended
complaint. (Campbell v. Regents of University of California, supra, 35 Cal.4th
at p. 320; Fladeboe v. American Isuzu
Motors Inc., (2007) 150 Cal.App.4th 42, 55-56 [dismissal of declaratory
relief action proper when plaintiffs cannot prevail on the merits even if
standing can be established].)
B
Betsy Moore requests declaratory judgment contending that
the deed of trust has no legal effect because Mr. Moore had a "mental
incapacity" at the time he executed the deed of trust. However, the amended complaint does not allege
that Mr. Moore was entirely without understanding when he executed the deed of
trust, which is what is required under Civil Code section 38 to render a
contract void and unenforceable. (
[a complaint alleging mental incapacity of a grantor must allege the plaintiff
was " 'entirely without understanding' " to be void].) Here, Betsy Moore alleged that Mr. Moore "lacked
sufficient mental capacity to know
the nature and legal effect of said deed of trust. At that
time Kevin [Charles] Moore could not read or write." (Italics added.) Read as a whole, the amended complaint asserts
that Mr. Moore did not sufficiently understand the deed of trust either because
he could not read or write or because he was of unsound mind. (Zelig
v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126 [" '[W]e give
the complaint a reasonable interpretation, reading it as a whole and its parts
in their context.' "].) This
interpretation is supported by Betsy Moore's opening brief wherein she claims
the complaint could be amended to allege undue influence because "one
mortgagor did not know how to read or write."
Illiteracy
is not a basis to declare a contract void.
Illiterate adults are expected to be prudent in business
transactions. (Alfaro v. Community Housing Improvement System & Planning Assn.,
Inc. (2009) 171 Cal.App.4th 1356, 1393 ["it would be prudent for an
illiterate first-time homebuyer to get the help of a trusted person in reading
and translating the documents seemingly essential to becoming a homeowner"].)
Nor is a
contract void if a party is of unsound mind.
Civil Code section 39 provides that a contract with "a person of
unsound mind, but not entirely without understanding, made before the
incapacity of the person has been judicially determined, is subject to
rescission . . . ."
Thus, the contract at issue here may be voidable by rescission, but it is
not void.
Based on
the facts alleged in this case, declaratory relief cannot be granted because an
action for rescission is barred by the statute of limitations. If declaratory relief is sought based upon a
written obligation and the time to commence an action for relief under that
obligation is barred by the statute, the right to declaratory relief is also
barred. (Maguire, supra, 23 Cal.2d at p. 734.) Under section 337, an action upon any
contract, obligation or liability founded upon an instrument in writing must be
brought within four years. For
rescission of a written contract, "[t]he time begins to run from the date
upon which the facts that entitle the aggrieved party to rescind occurred." (§ 337, subd. 3.)
In this
case, Mr. Moore, who allegedly cannot write, executed the deed of trust in 2005
by signing the deed of trust and two riders and initialing each page of each
document in legible penmanship. The
first notice of default and election to sell under the deed of trust was sent
in January 2007. This action was not
commenced until the end of March 2011—more than six years after execution of
the deed of trust and more than four years after the first notice of default
and election to sell. As such, Betsy
Moore's cause of action for declaratory relief based upon a claim of illiteracy
or unsound mind is barred by the statute of limitations.
Similarly, the
third claim for declaratory relief seeking a declaration that the deed of trust
is subject to rescission based upon "intentional or negligent
misrepresentation of material facts, or concealment thereof, at the time Kevin
Charles Moore executed said deed of trust" is barred by the statute of
limitations under section 337. Any claim
of misrepresentation or concealment of material facts occurring at the
inception of the agreement is barred.
Betsy Moore has not alleged delay in discovery of the alleged
misrepresentation that would toll the statute.
Nor has she asserted a legal or factual basis for amendment on this
issue. As such, the claim for rescission
based upon misrepresentation is barred.
Betsy Moore
argues in the appellant's reply brief that the statute of limitations should
not bar her claim because she seeks monetary "offsets" in the form of
attorney fees and that her claims could lead to compensatory or punitive
damages. However, the amended complaint
does not plead that Betsy Moore is entitled to offsets. Nor was this issue raised or discussed in the
opening brief. As such, the issue is
waived. (Tan v. California Fed. Sav.
800, 811 [issues not raised in an appellant's brief are deemed waived or
abandoned].)
Finally, the
trial court did not err in sustaining the demurrer without leave to amend with
respect to the request for declaratory relief regarding the enforceability of
the deed of trust based upon the corporate status of BAC Home Loans Servicing,
LP.
The deed of
trust stated: "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." Additionally, the deed of trust provided that
the note and the security instrument could be sold without prior notice to the
borrower and that such a sale might result in a change of the loan
servicer. MERS substituted ReconTrust as
the trustee in place of the original lender.
Therefore,
regardless of the corporate status of BAC Home Loans Servicing, LP or its
successor, ReconTrust, as the trustee substituted by MERS, was authorized to
initiate the foreclosure proceedings.
(Civ. Code, § 2924, subd. (a).)
"The authority to exercise all of the rights and interests of the
lender necessarily includes the authority to assign the deed of trust." (Siliga
v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th
75, 84.) There is no statutory cause of
action for declaratory relief or wrongful initiation of foreclosure based upon
Civil Code section 2924 et seq. (
199 Cal.App.4th 42, 46.) Betsy Moore
failed to allege facts showing prejudice as a result of any lack of authority
of the parties participating in the foreclosure process. The assignment of the deed of trust did not
change Mr. Moore's obligations under the note or the fact that ReconTrust was
authorized to initiate foreclosure
proceedings. As such, Betsy Moore
cannot complain about any alleged lack of authority with regard to BAC Home
Loan Servicing LP. (Siliga, at p. 85.) The trial
court was within its discretion to refuse to make a declaration of rights under
the circumstances and to sustain the demurrer without leave to amend. (Maguire,
supra, 23 Cal.2d at p. 730 [§ 1061 gives the trial court "discretion
to refuse to make a binding declaration of rights and duties, including a
determination of any question of . . . validity arising
under a written instrument . . . 'where its declaration or
determination is not necessary or proper at the time under all the
circumstances' "].)
III
There Is No Basis to Grant Leave to Amend
Betsy Moore
has not met her burden of establishing that she can amend her complaint to cure
the defects in the complaint. She
asserts in her opening brief only that "the complaint can be revised to
state one or more conventional causes of action in which facts are alleged to
meet the requirements of a conventional cause of action. For example, undue influence can be
specifically alleged, including the fact that one mortgagor did not know how to
read or write."
A plaintiff
must show in what manner she can amend her complaint and how the amendment will
change the legal effect of the pleading.
" '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
v. Western States Metals, supra, 203 Cal.App.4th at p. 95.) Betsy Moore did not meet this burden.
DISPOSITION
The judgment is affirmed.
Respondents are awarded their costs on appeal.
McINTYRE,
J.
WE CONCUR:
HUFFMAN, Acting P. J.
HALLER, J.
