Ram v. OneWest Bank, FSB

• Decision Date: 06 February 2015
• Docket Number: A139055
• Court: California Court of Appeals Court of Appeals
• Parties: Bhika RAM et al, Plaintiffs and Appellants, v. ONEWEST BANK, FSB et al, Defendants and Respondents.

234 Cal.App.4th 1

183 Cal.Rptr.3d 638

Bhika RAM et al, Plaintiffs and Appellants

v.ONEWEST BANK, FSB et al, Defendants and Respondents.

A139055

Court of Appeal, First District, Division 4, California.

Filed February 6, 2015

Counsel for Appellant: William E. Gilg, San Bruno.

Counsel for Respondent: Michael R. Farrell ; Tim C. Hsu, Los Angeles.

RUVOLO, P.J.

I.INTRODUCTION

Bhika Ram and his spouse, Asharfun Nisha Hafiz, purchased a home subject to a deed of trust in 2005. After they defaulted on their home loan, nonjudicial foreclosure proceedings were initiated, and the beneficiary of the deed of trust, OneWest Bank, FSB (OneWest), purchased the property at the foreclosure sale. Ram and Hafiz filed this action against OneWest and other entities, alleging that the sale was void due to irregularities in the foreclosure proceedings. OneWest filed a demurrer, which was sustained by the trial court with leave to amend some claims. Ram and Hafiz did not amend their complaint, and the trial court dismissed the case against OneWest.

On appeal, Ram and Hafiz challenge this dismissal, principally claiming that the foreclosure sale was void because the predicate notice of default was executed and recorded by an entity claiming to be the trustee of OneWest several weeks before OneWest signed and recorded documents formally designating that entity as such.

We conclude that there was no statutory defect in the manner or timing of the trustee substitution, but even if so, the entity was otherwise authorized to act for OneWest in filing the notice of default because it was alleged that the entity was at all times acting as the agent of OneWest.

Alternatively, we conclude that any alleged defect or omission in the representation of OneWest at the time the notice of default was filed was not substantial within the meaning of the law of foreclosure, making the subsequent sale at most voidable, and not void. Because the sale was, at worst, only voidable, the borrowers in default were required to allege tender and prejudice, which they did not do.

Accordingly, the trial court was correct in sustaining OneWest's demurrer, and in subsequently dismissing the action.

II.

FACTUAL AND PROCEDURAL

BACKGROUNDS

A. The Loan and the Foreclosure Proceedings

In 2005, Ram and Hafiz obtained a loan for $396,200 to purchase a home in Pleasant Hill. They executed and recorded a deed of trust listing the lender and beneficiary as First Federal Bank of California (First Federal) and the trustee as Seaside Financial Corporation. The loan carried a variable interest rate and had a term of 40 years.

Thereafter, First Federal was ordered closed by the federal government, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver. At the end of March 2010, the FDIC assigned the loan to OneWest and a deed of trust confirming that assignment was recorded in Contra Costa County on April 23, 2010.

On September 7, 2010, a notice of default was executed and recorded by Aztec Foreclosure Corporation (Aztec) “[a]s [t]rustee.”¹ The notice stated that, as of that time, Ram and Hafiz were almost $16,000 in default on their mortgage payments due under the loan. The borrowers were told in this notice that foreclosure could be stopped by payment of the arrearages. Also, it stated that “[u]pon your written request, the beneficiary or mortgagee will give you a written itemization of the entire amount you must pay. You may not have to pay the entire unpaid portion of your account, even though full payment was demanded, but you must pay all amounts in default at the time payment is made. However, you and your beneficiary and mortgagee may mutually agree in writing prior to the time the notice of sale is posted ... to, among other things, (1) provide additional time in which to cure the default by transfer of the property or otherwise; or (2) establish a schedule of payments in order to cure your default....”

The notice also indicated that contact should be made with OneWest in care of Aztec. An address and two telephone numbers were provided. It also was accompanied by the declaration of a person with INDYMAC Mortgage Servicing indicating that due diligence had been exercised in trying to contact Ram and Hafiz to discuss their financial situation and to explore options to avoid foreclosure and that more than 30 days had elapsed since those efforts had been completed, in conformance with California law.

OneWest did not formally execute a substitution naming Aztec as the trustee until September 24, 2010, several weeks after it was identified as trustee on the notice of default. This substitution was recorded on December 9, 2010, the same day that Aztec recorded a notice of trustee's sale. The foreclosure sale was postponed until April 18, 2011, and then again postponed until June 6, 2011, when the property was finally sold to OneWest for an amount far less than what was then owed by Ram and Hafiz on the loan.

B. The Procedural Background

The operative complaint is the first amended complaint (FAC) which states 13 causes of action against OneWest, Aztec, and First Federal: wrongful foreclosure, intentional and negligent fraud, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, negligence, unfair business practices, cancellation of deed upon sale, quiet title, declaratory relief, wrongful eviction, willful lockout, and injunctive relief. In the FAC, Ram and Hafiz alleged that the foreclosure sale was void because Aztec had not been substituted as trustee at the time it recorded the notice of default and therefore it lacked the authority to initiate the foreclosure proceedings. The FAC does not allege that Ram and Hafiz tendered, or were ready, willing, and able to tender, the amount owed on the loan at any time between the time of the notice of default was recorded in early September and the foreclosure and sale that took place nine months later on June 6, 2011.

In sustaining One West's demurrer, the trial court reasoned that Ram and Hafiz failed to state a claim for wrongful foreclosure based on the timing of Aztec's substitution as trustee “because a notice of default can be recorded before a notice of substitution of trustee.” The court further held that where “the alleged wrongful foreclosure is the result of a defect in the required notice, the transaction is voidable, not void” and that in any further amendment to the complaint Ram and Hafiz would have to “allege sufficient facts of tender.” The court also sustained the demurrer to the causes of action for intentional and negligent fraud, breach of the implied covenant of good faith and fair dealing, and negligence with leave to amend. It determined that the causes of action for unfair business practices, cancellation of deed upon sale, quiet title, and declaratory relief were “predicated on the wrongful foreclosure and fraud causes of action to which demurrers ha[d] been sustained with leave to amend,” and it therefore sustained the demurrer with leave to amend as to those causes of action as well. Finally, the court sustained the demurrer without leave to amend as to the remaining claims.

After Ram and Hafiz failed to amend the complaint, the trial court granted OneWest's application for an order dismissing the action against OneWest with prejudice.²

III.DISCUSSION

A. The Order of Dismissal Against OneWest Is an Appealable Judgment

The order dismissing the action against OneWest did not dismiss the action against Aztec or First Federal. Ram and Hafiz argue that this order is nevertheless an appealable final judgment. Although OneWest does not contend otherwise, “we are dutybound to consider” the question of appealability because it implicates our jurisdiction. (Olson v. Cory (1983) 35 Cal.3d 390, 398, 197 Cal.Rptr. 843, 673 P.2d 720.) “Under the ‘one final judgment’ rule, an order or judgment that fails to dispose of all claims between the litigants is not appealable under Code of Civil Procedure section 904.1, subdivision (a).” (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 436, 129 Cal.Rptr.2d 436.) This rule does not apply, however, “ ‘when the case involves multiple parties and a judgment is entered which leaves no issue to be determined as to one party. [Citations.]’ ” ( Id . at p. 437, 129 Cal.Rptr.2d 436.) Accordingly, the “one final judgment” rule does not bar this appeal.

B. Standard of Review

We review de novo a dismissal after a demurrer is sustained. (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1501, 82 Cal.Rptr.2d 368.) Regardless of the label given to a cause of action, “[o]ur task is to determine whether the pleaded facts state a cause of action on any available legal theory.” (Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908, 274 Cal.Rptr. 186.) “We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions[,] or conclusions of law.” (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865, 62 Cal.Rptr.3d 614, 161 P.3d 1168.) “[W]e are not bound by the trial court's analysis” of questions of law and “independently construe statutory law.” (City of Morgan Hill v. Bay Area Air Quality Management Dist. (2004) 118 Cal.App.4th 861, 870, 13 Cal.Rptr.3d 420.)

In addition, when a demurrer is sustained with leave to amend, but the plaintiff elects not to amend, it is presumed on appeal that the complaint states the strongest case possible. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091, 32 Cal.Rptr.3d 483, 116 P.3d 1162.) Thus, a judgment of dismissal following the failure to amend must be affirmed if the unamended complaint is objectionable on any ground raised in the demurrer. (Soliz v. Williams (1999) 74 Cal.App.4th 577, 585, 88 Cal.Rptr.2d 184.)

C. Statutory Framework Governing Nonjudicial Foreclosure Sales

We begin with a general overview of the applicable...