Smith v. Wells Fargo Bank
Filed 2/27/12
Smith v. Wells Fargo Bank CA2/8
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IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
EIGHT
NEIL SMITH,
Plaintiff and Appellant,
v.
WELLS FARGO BANK, N.A.,
Defendant and Respondent.
B230190
(Los Angeles County
Super. Ct. No. BC427643)
APPEAL from an order of the
Superior Court of
County, Teresa Sanchez-Gordon, Judge.
Affirmed in part; reversed in part.
Aidan W. Butler for Plaintiff and
Appellant.
The Ryan Firm, Timothy M. Ryan, and
Daniel J. Lee for Defendant and Respondent.
* * * * * * * *
Appellant Neil Smith sought to save
his home from foreclosure by filing a complaint for
Fargo Bank, N.A. (Wells Fargo), and Smith appeals from that dismissal. We conclude the court properly sustained the
demurrer to the quiet title cause of
action but should have overruled the demurrer to the declaratory relief cause
of action because Smith stated a claim for violation of Civil Code section
2923.5 (section 2923.5). We reverse the
order of dismissal.
In
his first amended complaint, Smith alleged causes of action against Wells Fargo
for declaratory relief and quiet title.
in Altadena, California. Smith borrowed
money and signed a note for $259,000.
Smith’s note and deed of trust were sold on the secondary market. His note and deed of trust were “pooled
together with many other consumer mortgage deals pursuant to the terms of a
pooling and servicing agreement” to which Wells Fargo was a party. The assignment of the deed of trust and note
to Wells Fargo was not in accordance with the provisions of the
Smith
also alleged that Wells Fargo did not contact him to discuss his financial
condition or to explore options for avoiding foreclosure as required by section
2923.5. (Id., subd. (a)(1) & (2).)
That statute provides in pertinent part a notice of default may not be
filed until 30 days after “[a] mortgagee, beneficiary, or authorized
agent . . . contact[ed] the borrower in person or by telephone
in order to assess the borrower’s financial situation and explore options for
the borrower to avoid foreclosure.” (
Smith’s
declaratory relief cause of action was based on a controversy over whether the assignment
of deed of trust to Wells Fargo was void because it failed to comply with the
pooling and servicing agreement. Smith
also alleged that “another controversy exists in that [Smith] contends that
[Wells Fargo has] failed to comply with the requirements of . . .
section 2923.5, compliance with which [is] now a legal prerequisite to
conducting [a] foreclosure in California of an owner-occupied residence.” The quiet title cause of action was based on the
allegation that the note was not properly pooled into the trust, for which
Wells Fargo is trustee. Smith explains
that the “gist of the allegations is that [his] note never properly became part
of the securitized trust that [Wells Fargo] acts as trustee for, and therefore,
[Wells Fargo] does not have any valid claim to ownership of the note.”
Wells
Fargo demurred to the first amended complaint, arguing among other things that
Smith was not a party to the pooling and servicing agreement and could not rely
on the provisions in that agreement and that Smith was required to tender the
full amount owed in order to state any cause of action. The court permitted Smith to amend his
complaint to allege a tender of the entire sum due under the note/deed of
trust. Because Smith did not amend the
first amended complaint, the court dismissed the action as to Wells Fargo.
“On appeal
from a judgment dismissing an action after sustaining a demurrer without leave
to amend, the standard of review is
well settled. The reviewing court gives
the complaint a reasonable interpretation, and treats the demurrer as admitting
all material facts properly pleaded.
[Citations.] The court does not,
however, assume the truth of contentions, deductions or conclusions of law. [Citation.]
The judgment must be affirmed ‘if any one of the several grounds of
demurrer is well taken. [Citations.]’ [Citation.]
However, it is error for a trial court to sustain a demurrer when the
plaintiff has stated a cause of action under any possible
And it is an abuse of discretion to sustain a demurrer without leave to
amend if the plaintiff shows there is a reasonable possibility any defect
identified by the defendant can be cured by amendment.” (Aubry
v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)
As we shall
explain, the trial court should have allowed Smith to proceed on his alleged
violation of section 2923.5. The
remainder of Smith’s claims are based on alleged violations of the pooling and
servicing agreement, which he lacked standing to challenge.
1. Standing
As mentioned, Smith states that the “gist of the
allegations [in his first amended complaint] is that [his] note never properly
became part of the securitized trust that [Wells Fargo] acts as trustee for,
and therefore, [Wells Fargo] does not have any valid claim to ownership of the
note.” Smith lacked standing to
challenge the process under the pooling agreement because he was not a party to
those agreements. (In re Correia (Bankr. 1st Cir. 2011) 452 B.R. 319 [debtors lacked
standing to raise violations of the pooling and service agreement];
B.R. 140, 149, fn. 4 [same].) The
alleged violation of the pooling and servicing agreement was the sole basis for
Smith’s claim that Wells Fargo does not own the note, which in turn was the
principal basis for his declaratory relief cause of action and the sole basis
of his quiet title cause of action.
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Section 2923.5
The only
remaining portion of Smith’s complaint is his request for a declaration that
Wells Fargo violated section 2923.5.
violation of section 2923.5, when that claim is made before a sale. (Mabry
v. Superior Court (2010) 185 Cal.App.4th 208, 214.) Smith’s allegations that Wells Fargo did not
contact him to discuss his financial condition or ways of avoiding foreclosure
were sufficient to state a cause of action under section 2923.5. (Mabry,
at pp. 213-214 [before filing notice of default lender must contact borrower to
assess borrower’s financial situation and explore options to prevent
foreclosure].) The private right of
action under section 2923.5 “is limited to obtaining a postponement of an impending
foreclosure to permit the lender to comply with section 2923.5.” (Mabry,
at p. 214.) The lender is not required
to agree to a loan modification. (
(2011) 195 Cal.App.4th 1602, 1617.) The
trial court should have overruled the demurrer to Smith’s cause of action for
declaratory relief insofar as he alleges a violation of section 2923.5.
DISPOSITION
The order
dismissing Wells Fargo is reversed. The
case is remanded to the trial court. The
trial court shall enter a new order sustaining the demurrer to the quiet title
cause of action and overruling the demurrer to the declaratory relief cause of
action only insofar as that cause of action alleges a violation of section
2923.5. The parties shall bear their own
costs on appeal.
FLIER, J.
We concur:
BIGELOW,
P. J.
SORTINO,
J.
additional causes of action against other defendants, but those defendants are
not parties to this appeal.
Smith lacks standing to challenge the pooling and servicing agreements, we need
not discuss Smith’s argument that he was not required to allege a tender to
pursue these claims.
