Schep v. Capital One, N.A., B269724

• Decision Date: 26 June 2017
• Docket Number: B269724
• Citation: 12 Cal.App.5th 1331,220 Cal.Rptr.3d 408
• Court: California Court of Appeals Court of Appeals
• Parties: Raymond A. SCHEP, Plaintiff and Appellant, v. CAPITAL ONE, N.A., Defendant and Respondent.

12 Cal.App.5th 1331

220 Cal.Rptr.3d 408

Raymond A. SCHEP, Plaintiff and Appellant,

v.CAPITAL ONE, N.A., Defendant and Respondent.

B269724

Court of Appeal, Second District, Division 2, California.

Filed June 26, 2017

As Modified on Denial of Rehearing July 18, 2017

George E. Omoko, Los Angeles, for Plaintiff and Appellant.

Doll Amir Eley, Hunter R. Eley, Los Angeles, and Amy I. Borland for Defendant and Respondent.

HOFFSTADT, J.

Are a trustee's acts in recording a notice of default, a notice of sale, and a trustee's deed upon sale in the course of a nonjudicial foreclosure privileged under Civil Code section 47 ?¹ We conclude that they are and that a plaintiff does not state a cause of action for slander of title based on the recording of those documents. Accordingly, we affirm the trial court's order sustaining a demurrer to plaintiff's slander of title claim without leave to amend.

FACTS AND PROCEDURAL BACKGROUND

I. Factual Background

A. Original loan and deed of trust

In April 2007, Raymond A. Schep (plaintiff) borrowed $910,000 from a mortgage company secured by a deed of trust to a home in Beverly Hills (the property). The deed of trust designated Chevy Chase Bank, F.S.B. (Chevy Chase) the trustee and Mortgage Electronic Registration Systems, Inc. (MERS) the beneficiary. In July 2009, Chevy Chase merged with defendant Capital One, N.A. (Capital One), and Capital One became the new trustee to the deed of trust.

B. Arrears and foreclosure

By October 2009, plaintiff was $29,206.66 behind on his loan payments. In the fall of 2009, MERS named defendant T.D. Service Company (T.D. Service) as the new trustee on the deed of trust, and T.D. Service recorded a "Notice of Default and Election to Sell Under Deed of Trust" (Notice of Default). In April 2010, T.D. Service recorded a Notice of Trustee's Sale. In January 2011, Capital One purchased the property at the foreclosure auction, and T.D. Service recorded the Trustee's Deed Upon Sale.

C. Wild deed

In February 2010, after the Notice of Default was recorded and before the Notice of Trustee's Sale was recorded, Timothy Fitzgerald (Fitzgerald) of US Banc Trustee TTE, recorded a "Substitution of Trustee and Full Reconveyance." In this document, Fitzgerald inaccurately represented that he was the "Original Beneficiary" of the April 2007 deed of trust and purported to "substitute [himself] as the new Trustee" and to "reconvey, without warranty," the deed of trust to plaintiff.

II. Procedural Background

In the operative second amended complaint (SAC), plaintiff sued Capital One and T.D. Service for slander of title.²

Plaintiff based his claim on the "filing ... of the Notice of Default, of the Notice of Auction Sale, and of the Trustee's Deed Upon Sale." Capital One demurred, arguing that the filing of the three documents underlying the claim was privileged and thus could not form the basis for a slander of title claim; plaintiff opposed the motion.

The trial court sustained the demurrer without leave to amend. The court cited two reasons: (1) the slander of title claim was based entirely on the recording of documents in nonjudicial foreclosure proceedings that are privileged communications; and (2) plaintiff lacked standing to bring the claim because he had no titular or possessory interest in the property.

Plaintiff filed a motion for reconsideration. The trial court denied the motion because it failed to raise new facts or law that would compel reconsideration.

After the court entered judgment, plaintiff filed a timely notice of appeal.

DISCUSSION

I. Demurrer

In reviewing a trial court's order sustaining a demurrer without leave to amend, we must ask (1) whether the demurrer was properly sustained, and (2) whether leave to amend was properly denied. The first question requires us to " ‘ "determine whether the complaint states facts sufficient to constitute a cause of action." ’ " ( Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010, 209 Cal.Rptr.3d 280, 382 P.3d 1116.) In so doing, we independently " ‘examine the complaint ... to determine whether it alleges facts sufficient to state a cause of action.’ " ( Lee v. Hanley (2015) 61 Cal.4th 1225, 1230, 191 Cal.Rptr.3d 536, 354 P.3d 334.) We accept as true "all material facts properly pled" in the operative complaint. ( Winn v. Pioneer Medical Group, Inc. (2016) 63 Cal.4th 148, 152, 202 Cal.Rptr.3d 447, 370 P.3d 1011 ( Winn ); accord, Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58 ( Blank ).) We also accept as true all materials properly "subject to judicial notice," and disregard any allegations in the operative complaint that those judicially noticed facts contradict or negate. ( Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20, 40 Cal.Rptr.3d 205, 129 P.3d 394 ( Evans ) ["a demurrer assumes the truth of the complaint's properly pleaded allegations, but not of mere contentions or assertions contradicted by judicially noticeable facts"]; Stanton v. Dumke (1966) 64 Cal.2d 199, 201-202, 49 Cal.Rptr. 380, 411 P.2d 108 [same].) The second question "requires us to decide whether ‘ " ‘there is a reasonable possibility that the defect [in the operative complaint] can be cured by amendment.’ " ' " ( McClain v. Sav-On Drugs (2017) 9 Cal.App.5th 684, 695, review granted June 14, 2017, S241471.)

A. Was the demurrer properly sustained?

To state a claim for slander of title, a plaintiff must allege "(1) a publication, (2) which is without privilege or justification," (3) which is false, and (4) which "causes direct and immediate pecuniary loss." ( Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1050-1051, 93 Cal.Rptr.3d 457 ; La Jolla Group II v. Bruce (2012) 211 Cal.App.4th 461, 472, 149 Cal.Rptr.3d 716.)

Plaintiff failed to state a cause of action for slander of title because all of the documents underlying his claim are privileged.

The recording of a notice of sale and notice of default are privileged. Section 2924, subdivision (d)(1), provides that "[t]he mailing, publication, and delivery of notices as required" by section 2924 "constitute privileged communications pursuant to Section 47." (§ 2924, subd. (d)(1).) Section 2924 mandates the recording of both a notice of default (id. , subd. (a)(1)), and a notice of sale (id. , subd. (a)(3)). Indeed, plaintiff conceded in his SAC that the recording of both of these documents was privileged.

The recording of a trustee's deed upon sale is also privileged. Section 2924, subdivision (d)(2) complements and broadens subdivision (d)(1) by providing that "[p]erformance of the procedures set forth in this article" also "constitute privileged communications pursuant to Section 47." (§ 2924, subd. (d)(2).) Section 2924 is part of the article dealing with "Mortgages in General," and two other sections within that article—sections 2924.12 and 2924.19—specifically contemplate and anticipate that a trustee's deed upon sale will be recorded as the capstone of the process of nonjudicial foreclosure. (See §§ 2924.12, subds. (a)(1), (b) & 2924.19, subds. (a)(1), (b).) That these statutes do not expressly mandate that a trustee's deed upon sale be recorded is of no consequence because recording of that deed will occur as a practical matter in every case and, more to the point, the recording of that deed is one of the "procedures set forth in th[e] article." Our Legislature's purpose in declaring these procedures privileged was "to give trustees some measure of protection from tort liability arising out of the performance of their statutory duties." ( Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 340, 85 Cal.Rptr.3d 532 ( Kachlon ).) That purpose is fulfilled only if all of the procedural steps attendant to a nonjudicial foreclosure are privileged, from the recording of the notice of default and notice of sale through the recording of the trustee's deed upon sale following the foreclosure sale. (Accord, Ward v. Pickett (N.D.Cal. 2013, No. C-13-01735 DMR), 2013 WL 5496549, 2013 U.S.Dist. Lexis 144129 [recording a trustee's deed upon sale is authorized by statute and therefore privileged under §§ 47 and 2924 ].) What is more, that purpose is fulfilled only if the privilege applies with equal force to both the trustee who actually records the trustee's deed upon sale as well as the principal who directs that recording. The statute itself speaks in terms of the "[p]erformance of the procedures" ( § 2924, subd. (d)(2) ; Kachlon , at p. 333, 85 Cal.Rptr.3d 532 ), not who performs them. (See § 2924, subd. (a)(1)-(6) [authorizing filing of foreclosure notices by a "trustee, mortgagee, or beneficiary, or any of their authorized agents"]; but see Kachlon , at pp. 344-345 [not extending privilege to beneficiary that "present[ed] ... written instructions, [ ] declar[ed] ... default, and [ ] demand[ed] ... sale" because those acts were not "procedures set forth in the statutory scheme"].) Because Capital One could not be liable for slander of title based on the recording of the trustee's deed upon sale unless T.D. Service was acting as its agent ( Alpers v. Brown (1882) 60 Cal. 447, 451 ["The act of the agent is the act of the principal"]; Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 302, 216 Cal.Rptr. 443, 702 P.2d 601 ["The principal is held vicariously liable ... because justice requires that the enterprise be responsible for the risks of conducting its business"] ), and because plaintiff so alleges, the privilege attaching to T.D. Service's performance of procedures attaches to Capital One's as well.

Plaintiff points to the allegation in his SAC that the privilege does not extend to the recording of a trustee's deed upon sale. However, this allegation is a legal conclusion that we are to ignore. ( Winn , supra , 63 Cal.4th at p. 152, 202 Cal.Rptr.3d 447, 370 P.3d 1011 [on demurrer, courts may disregard "logical inferences, contentions, or conclusions of fact or law" pled in the operative complaint].)

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