Short v. New Penn Fin., LLC
| Decision Date | 10 April 2019 |
| Docket Number | C081419 |
| Parties | ROBERT QUIRKE SHORT, Plaintiff and Appellant, v. NEW PENN FINANCIAL, LLC, et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Plaintiff Robert Quirke Short filed this action against the defendants banking and financial services entities after they recorded a notice of default against his property. Defendants rescinded the notice of default, but after the trial court sustained their demurrers, plaintiff filed an amended complaint alleging defendants injured him by initiating nonjudicial foreclosure when they had no interest, personally or as agents, in the deed of trust. Plaintiff alleged damages in tort. The trial court sustained defendants' demurrers with prejudice and entered a judgment of dismissal. Because plaintiff did not, and cannot, plead sufficient facts to recover on his theory that defendants initiated foreclosure proceedings without the authority to do so, we affirm the judgment.
In 2006, plaintiff obtained a loan which was secured by a deed of trust on real property he owns in Truckee.
In 2010, beneficial interest in the deed of trust was assigned to The Bank of New York Mellon (BNYM), fka the Bank of New York, as Trustee for the Certificateholders of CWABS Asset-Backed Notes Trust 2007-SD1.
Plaintiff defaulted on the loan, and the loan servicer, defendant New Penn Financial, LLC, d/b/a Shellpoint Mortgage Servicing (Shellpoint), recorded a notice of default on February 13, 2015. The notice of default named the beneficiary with a slightly different name than that stated on the assignment of the deed of trust. The notice named the beneficiary as defendant The Bank of New York Mellon, fka the Bank of New York, as Trustee for the Benefit of the Certificateholders of the CWABS, Inc. Asset-Backed Certificates, Series 2007-SD-1. In brief, the assignment of the deed of trust referred to the "Asset-Backed Notes Trust," while the notice of default referred to the "Asset-Backed Certificates." For ease of reference only, we refer to the entity named in the assignment as the Notes Trust, and the entity named in the notice of default as defendant Certificates Trust.
Plaintiff filed this action on August 4, 2015, against Shellpoint, the Certificates Trust, the trustee, and other parties. Defendants filed demurrers, and the trial court sustained the demurrers with leave to amend.
Meanwhile, on August 27, 2015, the trustee on plaintiff's deed of trust recorded a notice of rescission rescinding the notice of default. The property has not been sold.
Although the foreclosure process had been terminated, plaintiff filed an amended complaint on November 23, 2015. He named as defendants Shellpoint; the Bank of New York Mellon as trustee of the Certificates Trust; CWABS, Inc.; Resurgent Mortgage Servicing, L.P.; Old Republic Default Management Services; and the group of investors who purchased interests in the Certificates Trust. He expressly alleged he filed the suit to stop the sale of his home and determine his rights to the property. He pleaded causes of action for negligence, concealment and misrepresentation, unfair business practices under Business and Professions Code section 17200, civil conspiracy, and quiet title.
Plaintiff alleged his obligation under the note had been performed but defendants continued to charge him and foreclose on the deed of trust. His obligation had been fulfilled either by a settlement in mortgage securitization litigation involving the Certificates Trust or through the payment of a mortgage insurance policy, yet defendants continued to impose charges on him, misrepresented the amount he owed, and wrongfully initiated foreclosure proceedings. Furthermore, the defendants conspired to maximize their profits by transferring the servicing of the loan from one related company to another to overcome statutory limits on servicing fees.
Plaintiff further asserted the Certificates Trust and its agents had no authority to initiate foreclosure. He alleged the deed of trust was assigned to the Certificates Trust, but no such assignment was recorded. This separated the note from the deed of trust and broke the chain of title, resulting in defendants not being holders in due course with authority to enforce the deed of trust. Moreover, the recorded assignment stated the deed of trust was assigned to the Notes Trust, not the Certificates Trust which recorded the notice of default. Plaintiff alleges defendants conspired to record the assignment of the deed of trust to the Notes Trust in order to cover up the break in the chain of title and ultimately allow them to foreclose on his property unlawfully.
Plaintiff also contended the defendants failed to comply with statutory requirements for noticing and conducting a nonjudicial foreclosure.
The trial court sustained defendants' demurrers to the amended complaint with prejudice. The court dismissed the negligence claim because financial institutions do not owe a duty of care to a borrower unless they exceed the scope of their traditional role as a lender of money. Plaintiff did not allege the defendants exceeded their roles.
The court dismissed the concealment and misrepresentation cause of action because plaintiff had not pleaded fraud with specificity. It dismissed the unfair business practices claim because it was predicated on the dismissed negligence and fraud claims. The court dismissed the civil conspiracy claim because plaintiff did not allege any facts in support of a conspiracy. It dismissed the claim to quiet title because plaintiff did not first tender performance. The court entered a judgment of dismissal in favor of defendants.
Plaintiff contends the trial court erred. He asserts the discrepancy between naming the Notes Trust in the assignment of the deed of trust as the beneficiary and the Certificates Trust in the notice of default as the beneficiary establishes that the defendants, who are the parties named in the notice of default, have no interest in his property and unlawfully initiated foreclosure proceedings. In particular, they violated Civil Code section 2924, subdivision (a)(6), which prohibits anyone other than the trustee, the beneficiary or its agents from filing a notice of default. Plaintiff claims this fact justified overruling the demurrer against each of his causes of action.
Plaintiff also claims he pleaded sufficient facts to recover for a civil conspiracy because defendants conspired to acquire his property wrongfully, and because Shellpoint conspired to increase the servicing charges imposed on him by switching servicers within its corporate umbrella after accumulating the maximum amount of service charges the entity could charge, in violation of Civil Code section 2924c, subdivision (d).
Plaintiff argues the trustee's rescission of the notice of default does not affect this action. He claims the rescission did not erase the notice of default from his record of title. The faulty notice informs the world that Shellpoint has the authority to act as an agent for the beneficiary when it does not. Rescission also did not erase "the emotional and monetary damage" plaintiff suffered.
Defendants contend the trial court correctly sustained their demurrers with prejudice. They claim plaintiff has no standing to bring this action because California law prohibits a borrower from attacking the lender's authority to foreclose until after the trustee sale has occurred. They also argue the trustee's rescission of the notice of default moots much of plaintiff's attack against them. BNYM further argues a breach of the nonjudicial foreclosure statutes should not be a basis for a preemptive action for damages.
Defendants also contend that in any event, plaintiff did not allege sufficient facts, justifiable reliance, or damages to support any of his causes of action.
We conclude the trial court correctly sustained the demurrers with prejudice. In his amended complaint, plaintiff essentially alleged the defendants initiated foreclosure without the authority to do so, and he suffered damages from that attempt. We agree with the trial court that plaintiff did not, and cannot, plead sufficient facts to recover on that theory.
Defendants first ask us to resolve this matter based on plaintiff's lack of standing. The issue is not as clear as defendants argue. As defendants state in their briefs, districts of the Court of Appeal have held a borrower cannot preemptively challenge a lender's authority to pursue nonjudicial foreclosure. The leading cases are Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 511 (Jenkins), disapproved on another ground in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939, fn. 13 (Yvanova); and Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154-1157 (Gomes); see also Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814 (Saterbak); Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 743 (Kan).)
In Jenkins, the court of appeal, relying on Gomes, stated California law does not permit "preemptive judicial actions to challenge the right, power, and authority of a foreclosing 'beneficiary' or beneficiary's 'agent' to initiate and pursue foreclosure." (Jenkins, supra, 216 Cal.App.4th at p. 511.) ...
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