Yhudai v. Impac Funding Corp.

• Decision Date: 29 July 2016
• Docket Number: B262509
• Citation: 205 Cal.Rptr.3d 680,1 Cal.App.5th 1252
• Court: California Court of Appeals Court of Appeals
• Parties: Moshe YHUDAI, Plaintiff and Appellant, v. IMPAC FUNDING CORPORATION, et al., Defendants and Respondents.

1 Cal.App.5th 1252

205 Cal.Rptr.3d 680

Moshe YHUDAI, Plaintiff and Appellant

v.IMPAC FUNDING CORPORATION, et al., Defendants and Respondents.

B262509

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

Filed July 29, 2016

Richard L. Antognini, Lincoln, for Plaintiff and Appellant.

Reed Smith, Michael Gerst, Kasey J. Curtis, Los Angeles, and Elena Gekker, San Francisco, for Defendants and Respondents.

ROTHSCHILD

, P.J.

Appellant Moshe Yhudai sued his lender and other parties alleging causes of action arising from the nonjudicial foreclosure sale of his residence. The trial court sustained the respondents' demurrer to Yhudai's second amended complaint without leave to amend and entered a judgment dismissing the case with prejudice.¹ Yhudai appealed. We affirm.

FACTUAL AND PROCEDURAL SUMMARY

Yhudai owned a residence in Los Angeles. In February 2007 he borrowed $1,802,500 from Impac Funding, and secured the loan with a deed of trust against the residence. Impac Funding is named as the “lender” and MERS as the “beneficiary.” The deed of trust provides that (1) MERS “is acting solely as a nominee for Lender and Lender's successors and assigns” and (2) Yhudai's promissory note, together with the deed of trust, “can be sold one or more times without prior notice to [Yhudai].”

On March 29, 2007, Impac Funding sold Yhudai's promissory note and other promissory notes to a certain securitized investment trust (the ISA Trust). Deutsche Bank is the trustee of the ISA Trust, which was formed under New York law pursuant to a pooling and service agreement (PSA).² Under the PSA, in order for a loan to be included in the ISA Trust, it must be transferred into the trust by the “closing date” of March 29, 2007.

More than two years after the ISA Trust's closing date, MERS, as nominee for Impac Funding, recorded an “Assignment of Deed of Trust,” purporting to assign to Deutsche Bank, as trustee of the ISA Trust, “[a]ll beneficial interest” under the deed of trust “together with the Promissory Note secured by said Deed of Trust” (the 2009 assignment). The 2009 assignment is dated August 31, 2009, signed on October 15, 2009, and recorded in Los Angeles County on October 22, 2009.

On February 22, 2012, Deutsche Bank, as trustee for the ISA Trust, recorded a substitution of trustee naming ReconTrust Company, N.A. (ReconTrust) the trustee under the deed of trust. The same day, ReconTrust recorded a notice of default and election to sell the property pursuant to the deed of trust. About three months later, ReconTrust recorded a notice of trustee's sale. On June 15, 2012, ReconTrust conducted a trustee's sale and sold the property to Deutsche Bank, as trustee for the ISA Trust.

In his second amended complaint, Yhudai alleged that the 2009 assignment is void because it occurred after the ISA Trust's closing date, and that Deutsche Bank's and ReconTrust's actions, including the trustee's sale, are void because they are derived from the void 2009 assignment.³ He asserted causes of action for: (1) negligent misrepresentation; (2) slander of title; (3) fraud; (4) quiet title; (5) declaratory and injunctive relief; and (6) violation of Business and Professions Code section 17200

. Yhudai sought damages and equitable relief, including orders ifying and rescinding the foreclosure sale, cancellation of the notice of default and notice of trustee's sale, and a judgment quieting his title to the property. The trial court sustained the respondents' demurrer to the entire pleading without leave to amend, and thereafter entered a judgment of dismissal. Yhudai appealed.

DISCUSSION

I. Standard Of Review

On appeal from a judgment after the court sustains a general demurrer without leave to amend, “we determine whether the complaint states facts sufficient to constitute a cause of action.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58

.) “ ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]” (Ibid. ) When the demurrer is sustained without leave to amend, we reverse if “there is a reasonable possibility that the defect can be cured by amendment.” (Ibid. )

II. Yhudai's Contention That The 2009 Assignment Is Void.

In Yhudai's opening brief on appeal, he acknowledged that the viability of his claims, as well as a proposed new cause of action for “wrongful foreclosure,” “turns on his ability to challenge” the 2009 assignment. This challenge is based solely on the premise that the 2009 assignment is void because it occurred after the ISA Trust's closing date, as established in the PSA.

Our Supreme Court addressed a similar contention in Yvanova, supra, 62 Cal.4th 919, 199 Cal.Rptr.3d 66, 365 P.3d 845

.⁴ In that case, the plaintiff secured a loan with a deed of trust against her property. As in the present case, the loan was sold to Deutsche Bank, as trustee for an investment trust. (Id. at pp. 925–926, 199 Cal.Rptr.3d 66, 365 P.3d 845.) Under the terms of that trust, the closing date for the transfer of loans and trust deeds into the trust was January 27, 2007. (Id. at p. 925, 199 Cal.Rptr.3d 66, 365 P.3d 845.) Almost five years after that date, in December 2011, the plaintiff's lender executed an assignment of the deed of trust to Deutsche Bank, as trustee of the investment trust. Deutsche Bank then caused the plaintiff's property to be sold at a foreclosure sale. (Id. at pp. 924–925, 199 Cal.Rptr.3d 66, 365 P.3d 845

.)

The plaintiff in Yvanova

alleged that the assignment of her deed of trust into the investment trust was void because it occurred after the investment trust's closing date. (Yvanova, supra, 62 Cal.4th at p. 925, 199 Cal.Rptr.3d 66, 365 P.3d 845.) The trial court sustained a demurrer to the complaint, and this court affirmed. The Supreme Court reversed, and held that the plaintiff could state a cause of action for wrongful foreclosure if the assignment of the deed of trust “was void, and not merely voidable at the behest of the parties to the assignment.” (Id. at p. 923, 199 Cal.Rptr.3d 66, 365 P.3d 845.) The court explained that “only the entity holding the beneficial interest under the deed of trust—the original lender, its assignee, or an agent of one of these—may instruct the trustee to commence and complete a nonjudicial foreclosure. [Citations.] If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever [citations], the foreclosing entity has acted without legal authority by pursuing a trustee's sale, and such an unauthorized sale constitutes a wrongful foreclosure.” (Id. at p. 935, 199 Cal.Rptr.3d 66, 365 P.3d 845 ; see Sciarratta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552, 564, 202 Cal.Rptr.3d 219.)

An assignment that is merely voidable , by contrast, does not support a wrongful foreclosure action. “California law,” the Yvanova

court explained, “does not give a party personal standing to assert rights or interests belonging solely to others. [Citations.] When an assignment is merely voidable, the power to ratify or avoid the transaction lies solely with the parties to the assignment; the transaction is not void unless and until one of the parties takes steps to make it so. A borrower who challenges a foreclosure on the ground that an assignment to the foreclosing party bore defects rendering it voidable could thus be said to assert an interest belonging solely to the parties to the assignment rather than to herself.” (Yvanova, supra, 62 Cal.4th at p. 936, 199 Cal.Rptr.3d 66, 365 P.3d 845

; see also Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1094–1095, 160 Cal.Rptr.3d 449 (Glaski ).) Yhudai is such a borrower.

Significantly, Yvanova

did not consider or decide whether the assignment of the plaintiff's deed of trust to the investment trust after the trust's closing date rendered the assignment void, and not merely voidable; that question was a matter to be determined after remand. (Yvanova, supra, 62 Cal.4th at pp. 936 & 942, 199 Cal.Rptr.3d 66, 365 P.3d 845.)

In his second amended complaint, Yhudai alleged that the 2009 assignment is void under New York law (which he alleged governs the ISA Trust) because it occurred after the closing date specified in the PSA. He asserts that, under Yvanova

, this allegation is enough to survive the demurrer. We disagree. Although we must accept the truth of Yhudai's factual allegations when reviewing the ruling on a demurrer, we are not required to accept the truth of his legal conclusions. (See Yvanova, supra, 62 Cal.4th at p. 925, 199 Cal.Rptr.3d 66, 365 P.3d 845 ; Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.)

In opposition to the demurrer, Yhudai relied on Glaski, supra, 218 Cal.App.4th 1079, 160 Cal.Rptr.3d 449

, to support his assertion that the 2009 assignment is void. In Glaski, the plaintiff's loan was pooled with other loans and transferred to an investment trust formed under New York law. (Id. at pp. 1083–1084, 160 Cal.Rptr.3d 449

.) Like Yhudai, the plaintiff alleged that a purported assignment of his note and deed of trust to the investment trust was ineffective because the assignment was made after the trust's closing date. (Id. at p. 1084, 160 Cal.Rptr.3d 449.) To determine whether there was “a legal basis for concluding that the trustee's attempt to accept a loan after the closing date would be void as an act in contravention of the trust document” (id . at p. 1096, 160 Cal.Rptr.3d 449 ), the Court of Appeal looked to a New York statute, which provides: “ ‘If the trust is expressed in an instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the...