Smith v. OneWest Bank Group
Filed 7/3/12 Smith v.
OneWest Bank Group CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
SIX
CHARLES SMITH et. al,
Plaintiffs and Appellants,
v.
ONEWEST BANK GROUP, LLC, et al.,
Defendants and Respondents.
2d
Civil No. B234037
(Super.
Ct. No. CV100717A)
(San Luis Obispo County)
Appellants
Charles and Deborah Smith obtained a loan in 2004 to purchase a vacation
home. They did not make the required
payments and the lender foreclosed in 2009.
Almost a year after the foreclosure sale, appellants filed this action
seeking damages and injunctive relief
for alleged wrongful foreclosure. Citing
numerous pleading defects, the trial court sustained the respondents' demurrers
to the complaint without leave to amend.
We affirm.
PROCEDURAL
AND FACTUAL BACKGROUND
On
October 7, 2004, IndyMac Bank, F.S.B. (IndyMac Bank) loaned appellants $310,000
to purchase a vacation condominium located at 2698 Spyglass Drive, Unit 1,
Shell Beach, California (Property).
Appellants made a down payment of approximately 5 percent of the
purchase price and executed a promissory
note in the amount of $294,500, secured by a deed of trust on the
Property. The deed of trust named
Mortgage Electronic Registration Systems, Inc. (MERS) as beneficiary and
"nominee for Lender and Lender's successors and assigns." First American Title Insurance Company (First
American) was the named Trustee.
In
2008, the Office of Thrift Supervision, which regulated the operations of
federally-chartered savings banks and savings and loan associations, closed
IndyMac Bank and appointed the Federal Deposit Insurance Company (FDIC) as
receiver. Substantially all of IndyMac
Bank's assets were transferred to a new institution, IndyMac Federal Bank,
F.S.B. (IndyMac Federal). The FDIC subsequently
arranged for the sale of IndyMac Federal to OneWest Bank, F.S.B.
(OneWest). (See Lutz v. Stewart Mich. Title (E.D. Mich. 2011) 781 F.Supp.2d 526,
529.)
By
early 2009, appellants had ceased making payments on the loan. In August 2009, OneWest instituted
On
September 3, 2009, MERS assigned the note and deed of trust to OneWest. OneWest substituted MTC Financial Inc., dba
Trustee Corps (Trustee Corps) in place of First American as trustee on the deed
of trust. OneWest also assigned the note
and deed of trust to Federal Home Loan Mortgage Corporation (Freddie Mac).
The
trustee's sale was held on December 11, 2009.
Freddie Mac purchased the Property with a credit bid of $287,650. The trustee's deed upon sale was recorded on
December 21, 2009. According to
appellants, Fidelity National Title Insurance Company (Fidelity) caused the
trustee's deed and certain other documents to be recorded.
On or
about October 25, 2010, appellants sent an "affidavit" to IndyMac
Mortgage Services requesting certain information regarding their loan. IndyMac Mortgage Services responded on
November 5, 2010.
On
November 30, 2010, almost a year after the foreclosure sale, appellants filed a
complaint in propria persona against OneWest, Trustee Corps, MERS, First
American and Fidelity. The 43-page
complaint alleges causes of action for (1) fraud, (2) rescission and
damages under the Truth-in-Lending Act (TILA), (3) damages under the Real
Estate Settlement Procedures Act (RESPA), (4) infliction of emotional
distress, (5) conspiracy, (6) unfair business practices,
(7) breach of fiduciary duty, (8) slander of title, (9) quiet
title and (10) temporary restraining order and preliminary injunction.
Trustee
Corps removed the complaint to federal court.
OneWest, MERS and Trustee Corps moved to dismiss the complaint for
failure to state a claim for relief. The
federal court remanded the case to state court, which treated the motions as
general demurrers and sustained them without leave to amend. The court also sustained the demurrers of
First American and Fidelity without leave to amend.
The
trial court determined that "based on the long interval between
[appellants'] purchase of their Condo and the allegations of wrongdoing in the
foreclosure process, it does not seem plausible that [they] can plead valid
causes of action for common law fraud or violations of the TILA, RESPA or for
wrongful foreclosure." The court
referenced appellants' statement at oral argument that the "loss" of
the Property was not caused by defendants, but by "the loss of employment
and an inability to make the mortgage payments."
A
judgment of dismissal was entered as to OneWest and MERS on April 28,
2011, as to First American on May 18, 2011, and as to Fidelity on July 11,
2011. The record does not reflect entry
of judgment as to Trustee Corps.
On June
17, 2011, appellants filed a notice of appeal from "[j]udgment of
dismissal after an order sustaining a demurrer." Although the notice of appeal was filed
before entry of the judgment in favor of Fidelity, we treat it as filed
immediately after entry of judgment.
(Cal. Rules of Court, rule 8.104(d)(1).)
In the interests of justice and to avoid delay, we construe the
April 12, 2011 order dismissing the complaint as to Trustee Corps to
incorporate a judgment of dismissal
and treat the notice of appeal as applying to that judgment. (Cohen
v. Equitable Life Assurance Society of the U.S. (1987) 196 Cal.App.3d 669,
671; Taylor v. State Personnel Bd.
(1980) 101 Cal.App.3d 498, 501, fn. 1.)
DISCUSSION
We
review an order sustaining a demurrer de novo, exercising our independent
judgment to determine whether a cause of action has been stated under any legal
theory. (Ochs v. PacifiCare of Cal. (2004) 115 Cal.App.4th 782, 788.) We accept as true properly pleaded
allegations of fact, but not contentions, deductions or conclusions of fact or
law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) We also consider matters subject to judicial
notice. (Dunn v. County of Santa Barbara (2006) 135 Cal.App.4th 1281,
1298.) "The burden is on
[appellant] to demonstrate the manner in which the complaint might be amended,
and the appellate court must affirm the judgment if it is correct on any
theory. [Citations.]" (City
of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68
Cal.App.4th 445, 459-460.)
Sufficiency of the Allegations
Appellants
allege they are "victim[s] of the mortgage lending mess created by Wall
Street, mortgage lenders and servicers . . . and various and assorted other
vultures who are engaged in a pattern and business practices intended to
deceive and mislead homeowners regarding application of their payments and the
amounts owing under notes and deeds of trust . . . ." Their lengthy complaint contains
"boilerplate" causes of action that appear to be taken, at least in
part, from another case.
name="_ftnref1" title="">[1] They seek damages, rescission of the
promissory note and deed of trust and an injunction preventing the sale of the
Property.
The
parties filed a total of six briefs. We
have considered the numerous issues and contentions in these briefs. Because we conclude that certain issues are
dispositive, we do not address the parties' alternative issues and contentions.
The
first cause of action alleges that as a direct result of certain
misrepresentations and fraudulent conduct, appellants "obtained mortgage
loan financing and [have] now suffered damages in an amount to be proven." The claim appears to be against all
respondents, but names only OneWest, which did not exist at the time of the
loan.
To
plead fraud, a plaintiff must allege:
(1) misrepresentation of a material fact; (2) knowledge of falsity; (3)
intent to defraud; (4) justifiable reliance on the misrepresentation; and (5)
resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) "In California, fraud must be pled
specifically; general and conclusory allegations do not suffice." (Id. at
p. 645.) The plaintiff must plead facts
which show how, when, where, to whom, and by what means the alleged
representations were made. (
When pleading fraud against a corporate defendant, the requirements are
even greater. A plaintiff must
"allege the names of the persons who made the allegedly fraudulent
representations, their authority to speak, to whom they spoke, what they said
or wrote, and when it was said or written.
[Citations.]" (
2 Cal.App.4th 153, 157. The complaint
contains no such information, and thus the allegations are not specific enough
to state a claim for fraud. (See
138 Cal.App.4th 1371, 1381.)
The
cause of action also is barred by the three-year statute of limitations for
fraud claims. (Code Civ. Proc., § 338,
subd. (d).) Appellants obtained the loan
in 2004, but did not file the complaint until six years later.
The
second cause of action seeks damages and rescission for violations of TILA
which, in its broadest sense, requires that a lender disclose certain terms of
the lending arrangements. (See 15 U.S.C.
§ 1601 et seq.) TILA gives a borrower
the right to recover damages "within one year from the date of the
occurrence of the violation . . . ." (15 U.S.C. § 1640(e).) The limitations period begins to run on the
date of execution of the loan documents.
(King v. State of Cal. (9th
Cir. 1986) 784 F.2d 910, 913-915.) Here,
the one-year period commenced when the loan was finalized on October 7,
2004. Appellants did not file an action
within one year; therefore, their claim for damages is time-barred.
The
remaining portion of the TILA claim fails because rescission is available only
for consumer loans involving principal dwellings. (15 U.S.C. § 1635(a);
U.S. 410, 411.) Appellants acknowledge
the Property was their "second home," not their principal home. Even if appellants had a right to rescind,
however, it would have terminated in 2007, three years after the date of the original
loan transaction. (15 U.S.C. § 1635(f);
12 C.F.R. § 226.23(a)(3); see Meyer
v. Ameriquest Mortg. Co. (9th Cir. 2003) 342 F.3d 899, 902.) Because Title 15 United States Code section
1635(f) is a statute of repose, it is not subject to equitable tolling. (Lane
v. Vitek Real Estate Indus. Group (E.D. Cal. 2010) 713 F.Supp.2d 1092,
1099; see Beach, at p. 411 ["§ 1635(f) completely extinguishes the right of
rescission at the end of the 3-year period"].)
The
third cause of action alleges that respondents violated RESPA (12 U.S.C. §
2605) by failing to provide appellants with certain disclosures at the time of
closing and by failing to adequately respond to their qualified written request
(QWR) dated October 25, 2010. The
nondisclosure claim fails because no private right of action exists for RESPA
disclosure violations. (
F.Supp. 1377, 1384-1385.) The QWR claim
fails because appellants' written request was outside the scope of RESPA.
Title
12 United States Code section 2605(e)(1)(B) defines a QWR as a written
correspondence to a loan servicer that includes the name and account number of
the borrower, and contains a statement of the reasons for the borrower's belief
that the account is in error or provides sufficient detail to the servicer
regarding other information sought by the borrower. Appellants did not submit their request for
information until after the foreclosure sale, which had effectively
extinguished their loan obligation. (
F.3d 1555, 1558 ["'Foreclosure of a mortgage extinguishes the debt. . .
.'"].) Appellants provide no
authority for the proposition that RESPA applies to a former loan servicer or to an obligation that has been extinguished
by a foreclosure sale. (See
(N.D. Cal. 2009) 660 F.Supp.2d 1089, 1097 [dismissing RESPA claim where
plaintiff alleged only harm as a result of foreclosure].) In any event, the documents produced by appellants
confirm that IndyMac Mortgage Services provided a timely written response to
their request.
The
fourth cause of action seeks emotional distress damages for the alleged RESPA
violations. Because appellants have not
properly pled such violations, this cause of action also fails.
The
fifth cause of action alleges that respondents violated Title 18 United States
Code section 241 by conspiring to deprive appellants of their civil
rights. The trial court properly
sustained the demurrers because this statute does not create a private right of
action. (Tsabbar v. Booth (S.D.N.Y. 2003) 293 F.Supp.2d 328, 335; see
F.2d 1089, 1092 [noting that 18 U.S.C. § 241 is a criminal statute that
"provide[s] no basis for civil liability"].)
The
sixth cause of action alleges that respondents engaged in unfair business
practices in violation of Business and Professions Code section 17200. The claim is based on the alleged fraud and
RESPA violations. Having failed to
adequately plead those causes of action, appellants have not stated a claim
under Business and Professions Code section 17200. In addition, the claim is barred by the
four-year statute of limitations, which began to run on the date the cause of
action accrued, not on the date of discovery.
(Bus. & Prof. Code, § 17208; Karl
Storz Endoscopy-America, Inc. (9th Cir. 2002) 285 F.3d 848, 857.) Because any purported misrepresentations
resulting in the loan agreement occurred, by necessity, before the loan was
finalized in 2004, this claim is at least two years too late.
The
seventh cause of action is for breach of fiduciary duty. "[A]s a general rule, a financial
institution owes no duty of care to a borrower when the institution's
involvement in the loan transaction does not exceed the scope of its
conventional role as a mere lender of money.
[Citations.]" (
Ass'n. (1991) 231 Cal.App.3d 1089, 1096; see Oaks Management Corp. v. Superior Court (2006) 145 Cal.App.4th 453,
466 [noting relationship between banks or lenders and their loan customers is
not a fiduciary one].) The complaint
does not allege any special circumstances that would create such a relationship
with the lender or with any of the other respondents. Moreover, the statute of limitations for an
alleged breach of fiduciary duty is four years.
(Code Civ. Proc., § 343; Stalberg
v. Western Title Ins. Co. (1991) 230 Cal.App.3d 1223, 1230.) The complaint was filed more than four years
after the loan was made.
The
eighth cause of action alleges slander of title based upon "numerous false
documents" respondents caused to be recorded in the records of San Luis
Obispo County. These documents include
the original deed of trust plus certain documents recorded during the
foreclosure process. The recording of
the latter documents is protected under Civil Code section 2924, subdivision
(d). This statute "makes the
recording of the notice of default by the beneficiary, and any other
statutorily authorized act of the beneficiary acting as trustee, a privileged
communication under [Civil Code] section 47." (Kachlon
v. Markowitz (2008) 168 Cal.App.4th 316, 333-334, 340.)
With
respect to the deed of trust, appellants allege that the deed falsely named
MERS as the nominee for the beneficiary.
doing business in California from the time the deed was recorded until after
the completion of the foreclosure sale.
The
trial court properly concluded that MERS, as a Delaware corporation, is not
required to obtain a certificate of qualification to conduct business in
California. (Corp. Code, §§ 167,
171.) Courts recognize that MERS does
not "transact intrastate business" within the meaning of the
Corporations Code. (E.g.,
(E.D. Cal. 2009) 687 F.Supp.2d 1191, 1195 & fn. 3.) Moreover, California's nonjudicial
foreclosure law does not permit an action to determine whether MERS has been
authorized by the lender to initiate a foreclosure. (Gomes
v. Countrywide Home Loans, Inc.,
supra, 192 Cal.App.4th at pp. 1156-1157.)
The
ninth cause of action against OneWest and MERS seeks to quiet title to the
Property. An action to quiet title may
be brought against a party making an adverse claim to real property. (Code Civ. Proc., § 760.020, subd. (a).) It is undisputed that Freddie Mac purchased
the Property at the foreclosure sale.
Freddie Mac is not a party to this action, and neither OneWest nor MERS
claims an adverse interest in the Property.
Nonetheless,
"[i]t is settled in California that a mortgagor cannot quiet his title
against the mortgagee without paying the debt secured. [Citation.]" (Shimpones
v. Stickney (1934) 219 Cal. 637, 649.)
The borrower must allege tender of the amount of the debt to challenge
any irregularity in the sale procedures and to void the sale. (Abdallah
v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109;
Systems, Inc. (N.D. Cal. 2009) 642 F.Supp.2d 1048, 1057 [noting that a
basic requirement of a quiet title action is an allegation that plaintiffs
"are the rightful owners of the property, i.e., that they have satisfied
their obligations under the Deed of Trust"].) In his affidavit dated October 25, 2010,
Charles Smith stated he "is prepared to discuss a tender obligation,
should it arise, and satisfactory ways in which to meet this
obligation." In the absence of an
actual tender, however, appellants cannot state a claim for quiet title. (Abdallah,
The
tenth and final cause of action seeks a temporary restraining order and
preliminary injunction preventing respondents from selling the Property. This claim fails because respondents are not
in a position to sell the Property.
Freddie Mac, which took title to the Property after the foreclosure
sale, is not a named defendant.
Moreover, appellants acknowledge the Property was sold to a third party
on June 28, 2011, effectively mooting any claim for injunctive relief.
Denial of Leave to Amend
Appellants
contend the trial court abused its discretion by sustaining the demurrers
without leave to amend. "The burden
is on the plaintiff, however, to demonstrate the manner in which the complaint
might be amended. [Citation.]" (Hendy
v. Losse (1991) 54 Cal.3d 723, 742.)
Appellants have not met that burden.
Appellants
were unable to explain to the trial court how they could amend the complaint to
cure the various defects.
name="_ftnref3" title="">[3] As discussed above, most of appellants'
claims are time-barred on their face.
They filed this action almost a year after the foreclosure sale and more
than six years after obtaining the loan.
They have not alleged or proffered sufficient facts excusing this
significant delay.
Even if
appellants could plead sufficient facts to circumvent the timeliness issues, as
well as their failure to tender the amount due, they still must allege facts
demonstrating that an irregularity in the loan or foreclosure process
prejudiced their interests. (See
(2012) 204 Cal.App.4th 433, 443-444; Melendrez
v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1257-1258
[presumption that nonjudicial foreclosure sale was conducted regularly and
fairly may be rebutted only by substantial evidence of "prejudicial
procedural irregularity"].) They
have not overcome this hurdle. According
to the trial court, appellants acknowledged at oral argument that they lost the
Property because they could no longer afford the mortgage payments. "Public policy does not impose upon the
[lender] absolute liability for the hardships which may befall the [borrower]
it finances. [Citation.]" (Wagner
v. Benson (1980) 101 Cal.App.3d 27, 34.)
The success of the borrower's investment "is not a benefit of the
loan agreement which the [lender] is under a duty to protect [citation]." (Ibid.)
As the
trial court observed, "[a]bsent concrete, understandable allegations of
fraud, reliance, and prejudice, courts are loath to entertain hyper-technical
attacks on trustee's sales."
Because appellants failed to demonstrate an ability to amend the
complaint to surmount the substantial pleading defects, the trial court
properly sustained the demurrers without leave to amend.
DISPOSITION
The
judgments of dismissal are affirmed.
Respondents shall recover their costs on appeal.
NOT
TO BE PUBLISHED.
PERREN,
J.
We concur:
GILBERT,
P.J.
YEGAN,
J.
>
Charles S.
Crandall, Judge
Superior
Court County of San Luis Obispo
______________________________
Charles
Smith, in pro. per., for Plaintiff and Appellant; Deborah M. Smith, in pro.
per. for Plaintiff and Appellant.
Malcolm
♦ Cisneros, William G. Malcolm, Don Robinson and Brian S. Thomley for
Defendants and Respondents OneWest Bank, FSB and Mortgage Electronic
Registration Systems, Inc.
Turner,
Reynolds, Greco & O'Hara, Richard J. Reynolds and Fabio R. Cabezas for Defendant
and Respondent MTC Financial, Inc., Trustee Corps.
Ogden
& Fricks, Roy E. Ogden and Sue N. Carrasco for Defendant and Respondent
First American Title Insurance Company.
Fidelity
National Law Group and Susan M. Hutchinson for Defendant and Respondent
Fidelity National Title Insurance Company.
For example, the
ninth cause of action alleges that "Bank of America, N.A. and Quality Loan
Service Corp. wrongfully claim an interest in the property." Neither entity is involved here, and we
assume the allegation should have referenced OneWest and MERS.
"As case law explains, 'MERS is a private corporation that administers the
MERS System, a national electronic registry that tracks the transfer of
ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the
mortgagee of record for participating members through assignment of the
members' interests to MERS. MERS is
listed as the grantee in the official records maintained at county register of
deeds offices. The lenders retain the
promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to
investors without having to record the transaction in the public record. MERS is compensated for its services through fees
charged to participating MERS members.'
[Citation.]" (
(2011) 192 Cal.App.4th 1149, 1151.)
