Brown v. Deutsche Bank Nat'l Trust Co.

• Citation: 201 Cal.Rptr.3d 892,247 Cal.App.4th 275
• Decision Date: 09 May 2016
• Docket Number: A144339
• Court: California Court of Appeals
• Parties: Cecilia E. BROWN, Plaintiff and Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, etc., et al., Defendants and Respondents.

247 Cal.App.4th 275

201 Cal.Rptr.3d 892

Cecilia E. BROWN, Plaintiff and Appellant,

v.DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, etc., et al., Defendants and Respondents.

A144339

Court of Appeal, First District, Division 1, California.

Filed May 9, 2016

Counsel for Appellant: Law Offices of Jason Estavillo, Jason W. Estavillo, Oakland

Counsel for Respondents: Bryan Cave, Glenn Plattner, Santa Monica, Joseph J. Poppen, San Francisco

Humes, P.J.Appellant Cecilia Brown defaulted on her home mortgage, and foreclosure proceedings commenced. She brought three lawsuits to stop the foreclosure by alleging that it was initiated on behalf of an entity to which the deed of trust was never validly assigned. In this third lawsuit, defendants Deutsche Bank National Trust Company (Deutsche Bank), JPMorgan Chase Bank, N.A. (Chase), and California Reconveyance Company (CRC) demurred to her amended complaint, and the trial court sustained the demurrer without leave to amend. We affirm.

I.

FACTUAL AND PROCEDURAL BACKGROUND

In 2004, Brown obtained a $450,000 loan secured by a deed of trust recorded against her property in Oakland. The deed of trust identifies Washington Mutual Bank, F.A. (Washington Mutual) as the lender and beneficiary and CRC as the trustee.

Washington Mutual failed in 2008, and the Federal Deposit Insurance Corporation (FDIC) was appointed its receiver. As receiver, the FDIC agreed to sell to Chase many of Washington Mutual's assets and liabilities, including loans, loan commitments, and mortgage-servicing rights. This transaction was memorialized in a September 2008 Purchase and Assumption Agreement (P & A Agreement).

In March 2011, CRC recorded a notice of default as trustee for Chase, claiming that Brown was in arrears on her loan in the amount of $60,984.42. The next month, Chase assigned the deed of trust to Deutsche Bank with CRC remaining as the trustee. Two months after that, CRC recorded a notice of sale.

In January 2012, Brown filed the first of three lawsuits challenging the foreclosure proceedings. Over the next year and a half, she voluntarily dismissed the first lawsuit without prejudice, filed a second lawsuit when a new notice of sale was executed, and, after defendants' demurrer was sustained with leave to amend, voluntarily dismissed that lawsuit without prejudice as well.

In July 2013, CRC executed a third notice of sale. Two days later, Brown filed her third lawsuit, which is the case now before us. In her complaint, Brown alleged that the assignment of the deed of trust to Deutsche Bank was invalid and the foreclosure proceedings were initiated without authority. Defendants filed a demurrer and a request for judicial notice. In July 2014, the trial court granted the request for judicial notice, sustained the demurrer, and gave Brown leave to amend her complaint.

This time, instead of dismissing the suit, Brown amended her complaint. In the amended complaint, she asserted six causes of action: cancellation of instruments under Civil Code ¹ section 3412 ; unfair competition under Business and Professions Code section 17200 et seq uitur; foreclosure commenced by entity lacking a beneficial interest in violation of sections 2924, subdivision (a)(6) and "2924(f)(3)" [sic]; declaratory relief; and two causes of action for violation of the California Homeowner Bill of Rights (HBOR) (Assem. Bill No. 278; Sen. Bill No. 900 (2011–2012 Reg. Sess.)). No cause of action described as a claim for wrongful foreclosure was asserted, and there was no allegation that the property had been sold: rather, Brown alleged that she "continue[d] to be the owner of the property" under the deed of trust. Defendants once again filed a demurrer and a request for judicial notice.

After considering briefing and argument, the trial court granted the request for judicial notice, which covered foreclosure-related documents, filings from the earlier lawsuits, and the P & A Agreement. The court then sustained the demurrer without leave to amend and dismissed the case. It found that the causes of action for cancellation of instruments, foreclosure by entity lacking a beneficial interest, and declaratory relief failed for three reasons: (1) the causes of action were "barred as a matter of law" because there is no recognized cause of action that allows a borrower to test the legal authority of the entity initiating nonjudicial foreclosure proceedings in a suit brought before the foreclosure sale occurs (a "preemptive action"); (2) Brown lacked standing; and (3) Brown's "contention that [Deutsche Bank and CRC] lack[ed] authority to enforce the Deed of Trust [was] contradicted by matters subject to judicial notice." The court also found that Brown had not alleged a sufficient injury in fact to support her unfair competition claim and that her claims under the HBOR failed because she had not explained why that law applied, given that the foreclosure process was initiated before the law's effective date.²

II.

DISCUSSION

A. The Standard of Review.

The rules governing our review of the trial court's ruling are well settled. "We review de novo the trial court's order sustaining a demurrer." (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1468, 169 Cal.Rptr.3d 619.) In doing so, this court's only task is to determine whether the complaint states a cause of action. (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 824, 121 Cal.Rptr.2d 703.) We accept as true all well-pleaded allegations in the operative complaint, and we will reverse the trial court's order of dismissal if the factual allegations state a cause of action on any available legal theory. (Id. at pp. 824–825, 121 Cal.Rptr.2d 703.) We treat defendants' demurrer as admitting all properly pleaded material facts, but not contentions, deductions, or conclusions of fact or law. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6, 40 Cal.Rptr.3d 205, 129 P.3d 394.) We also consider matters that may be judicially noticed, and a " ‘ "complaint otherwise good on its face is subject to demurrer when facts judicially noticed render it defective." ’ " (Ibid. ) Where, as here, "the trial court sustains a demurrer without leave to amend, we review the determination that no amendment could cure the defect in the complaint for an abuse of discretion. [Citation.] The trial court abuses its discretion if there is a reasonable possibility that the plaintiff could cure the defect by amendment. [Citation.] The plaintiff has the burden of proving that amendment would cure the legal defect, and may meet this burden on appeal. [Citations.]" (Cansino, at p. 1468, 169 Cal.Rptr.3d 619.)

Our review of the trial court's order is limited to issues that have been adequately raised and supported in the appellate briefs. (Ram v. OneWest Bank, FSB, supra, 234 Cal.App.4th at p. 9, fn. 2, 183 Cal.Rptr.3d 638 ; Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6, 76 Cal.Rptr.2d 457 ; see also Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4, 188 Cal.Rptr. 115, 655 P.2d 317 [issues not raised on appeal are waived].)

B. The California Nonjudicial Foreclosure Process.

We begin with a general overview of the nonjudicial foreclosure process. A nonjudicial foreclosure sale is a "quick, inexpensive[,] and efficient remedy against a defaulting debtor/trustor." (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777.) To preserve this remedy for beneficiaries while protecting the rights of borrowers, "sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust." (Moeller, at p. 830, 30 Cal.Rptr.2d 777.) Under a deed of trust, the trustee holds title and has the authority to sell the property in the event of a default on the mortgage. (See Haynes v. EMC Mortgage Corp. (2012) 205 Cal.App.4th 329, 333–336, 140 Cal.Rptr.3d 32.) To initiate a foreclosure, "[t]he trustee, mortgagee, or beneficiary, or any of their authorized agents" must first record a notice of default. (§ 2924, subd. (a)(1).) The notice of default must identify the deed of trust "by stating the name or names of the trustor or trustors" and provide a "statement that a breach of the obligation for which the mortgage or transfer in trust is security has occurred" and a "statement setting forth the nature of each breach actually known to the beneficiary and of his or her election to sell or cause to be sold the property to satisfy [the] obligation ... that is in default." (§ 2924, subd. (a)(1)(A)-(C).) After three months, a notice of sale must then be published, posted, mailed, and recorded in accordance with the time limits prescribed by the statute. (§§ 2924, subd. (a)(3), 2924f.)

" ‘The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive[,] and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.’ " (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154, 121 Cal.Rptr.3d 819.)

C. The Demurrer Was Properly Sustained Even Assuming Brown Has Standing and Her Suit Is Otherwise Authorized.

Turning to the merits of Brown's appeal, we conclude that the trial court properly sustained the demurrer without leave to amend because Brown failed to sufficiently allege that CRC lacked authority to initiate foreclosure proceedings.

We begin by mentioning, without deciding, two threshold issues. First, some courts have held that borrowers cannot bring a preemptive action to challenge an entity's authority to foreclose, reasoning that these actions would " ‘fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.’ " (Jenkins v. JP Morgan...