Jackson v. Specialized Loan Servicing CA4/2

• Court: California Court of Appeal
• Decided: November 15, 2021
• Docket: E074576
• Status: Unpublished

Opinion

Filed 11/15/21 Jackson v. Specialized Loan Servicing CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

PHILLIP D. JACKSON,

Plaintiff and Appellant, E074576

v. (Super.Ct.No. CIVDS1902207)

SPECIALIZED LOAN SERVICING OPINION LLC,

Defendant and Respondent.

APPEAL from the Superior Court of San Bernardino County. Donna G. Garza,

Judge. Affirmed.

Phillip D. Jackson in pro. per.

Yu Mohandesi LLP, Pavel Ekmekchyan and Sara E. Stratton for Defendant and

Respondent.

Plaintiff Phillip Jackson defaulted on his home loan mortgage resulting in a notice

of default and intent to foreclose by defendant Specialized Loan Servicing, LLC (SLS),

1 the successor in interest under the deed of trust securing the mortgage. Plaintiff filed suit

on grounds the proposed foreclosure proceeding violated the Fair Debt Collection

Practices Act (Civ. Code, § 1788, et seq.), violations of Civil Code sections 2924,

subdivision (a)(6) and 2924.17 [asserting that SLS lacked authority to issue the notice of

default or initiate foreclosure], and violation of Business and Professions Code section

17200 [unfair and deceptive business practices]. Defendant’s demurrer to the second

amended complaint was sustained without leave to amend and a judgment of dismissal

was entered. Plaintiff appeals.

On appeal, plaintiff argues: (1) the trial court erred in sustaining the demurrer

without leave to amend based on judicially noticed documents; (2) the demurrer should

not have been sustained as to plaintiff’s claimed violations of the Rosenthal Debt

Collection Practices Act (Civ. Code, §§1788, et seq. and 15 U.S.C. 1692, et seq.) because

the assignment of the deed of trust did not establish SLS’s rights thereunder; (3) the

demurrer should not have been sustained as to plaintiff’s claimed violations of Civil Code

section 2924, et seq.; and (4) the demurrer should not have been sustained as to plaintiff’s

cause of action for violation of the Unfair Business Practices law. (Bus. & Prof. Code,

§ 17200, et seq.) We affirm.

2 BACKGROUND1

On June 14, 2006, plaintiff purchased a home, executing an adjustable note in the

amount of $391,999, agreeing to repay Mountain West Financial, Inc. the amount of the

loan, which was secured by a deed of trust. The deed of trust described Mountain West

Financial, Inc. as the lender, First American Title Insurance Co. as the trustee, and MERS

(Mortgage Electronic Registration Systems, Inc.) as a nominee for the lender and the

beneficiary under the security instrument.2

While plaintiff was still in default, the deed of trust was assigned to Aurora Bank

on August 12, 2011, followed by another assignment of the deed of trust to Federal Home

Loan Mortgage Corporation on May 21, 2012. On May 14, 2014, the deed of trust was

assigned to Nationstar. At this point, plaintiff obtained a loan modification from

Nationstar, but did not make any payments under the loan modification agreement.

On December 28, 2017, plaintiff received a notice of servicing transfer, whereby

the servicing of the loan was transferred from Nationstar to SLS. On January 21, 2018,

SLS served a default notice and notice of intent to foreclose on plaintiff. On January 30,

2018, Nationstar executed an assignment of the deed of trust to SLS. Plaintiff remained

1 We take the facts from the second amended complaint, which was the subject of the ruling from which the appeal is taken. “On appeal from dismissal following a sustained demurrer, we take as true all well-pleaded factual allegations of the complaint.” (Haggis v. City of Los Angeles (2000) 22 Cal.4th 490, 495.)

2 “A ‘nominee’ is a person or entity designated to act for another in a limited role—in effect, an agent.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270, and cases there cited.) MERS was acting as nominee for the lender, which did possess an assignable interest. (Ibid.)

3 in default. In March 2018, SLS became aware that plaintiff had filed for bankruptcy and

that his debt obligation had been discharged. On June 11, 2018, a substitution of trustee

was recorded naming Zieve, Brodnax and Steele, LLP (ZBS) as the foreclosing trustee.

On January 2, 2019, ZBS recorded a notice of trustee’s sale as to the property.

Plaintiff’s first amended complaint3 against SLS and ZBS alleged violations of the

Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), as well as

violations of Civil Code section 2924, et seq., Unfair Business Practices (Bus. & Prof.

Code, § 17200), and violations of Business and Professions Code section 6077.5,

subdivision (e) (against ZBS only). Defendant SLS demurred to the FAC and the

demurrer was sustained without leave to amend as to those causes of action.

On August 23, 2019, plaintiff filed his second amended complaint (SAC), alleging

(1) violations of the Rosenthal Fair Debt Collection Practice Act; (2) violation of Civil

Code sections 2924.17 and 2924, subdivision (a)(6); (3) violation of Business and

Professions Code, section 17200, and violation of Business and Professions Code section

6077.5, subdivision (e) (against ZBS only).

Defendant filed a demurrer to the SAC, arguing that it failed to state facts

sufficient to constitute a cause of action against it, pointing out that the previous demurrer

to the allegations pertaining to violations of the Rosenthal Act (Civ. Code, §§ 1788 et

seq.) and violations of Civil Code section 2924, et seq., had been sustained without leave

to amend, barring inclusion of those counts in the SAC. Defendant requested that the

3 The original complaint is not a part of the record on appeal.

4 court take judicial notice of the original deed of trust executed June 13, 2006, the

substitution of trustee dated June 11, 2018, and the court’s minute order sustaining the

demurrer to the FAC in its entirety. After hearing argument, the court sustained the

demurrer to the SAC in its entirety without leave to amend and entered a judgment of

dismissal of plaintiff’s complaint in favor of SLS.

Plaintiff appeals.

DISCUSSION

Plaintiff argues that the trial court erred in sustaining the demurrer to the SAC

without leave to amend. In part, his challenges are based on the mistaken notion that the

trial court was required to accept only plaintiff’s allegations and could not consider

matters of which it could take judicial notice. We disagree.

1. Standards of Review

The standard of review on appeal from a judgment dismissing an action after

sustaining a demurrer without leave to amend is well settled. (City of Dinuba v. County

of Tulare (2007) 41 Cal.4th 859, 865.) Demurrers raise a question of law, so on appeal

the standard of review is de novo. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178

Cal.App.4th 1020, 1034.) In reviewing demurrers, “‘we give the complaint a reasonable

interpretation, reading it as a whole and its parts in their context.’ [Citation.]” (Ibid.)

Further, we treat the demurrer as admitting all material facts properly pleaded, but do not

assume the truth of contentions, deductions or conclusion of law.

5 “When a demurrer is sustained, we determine whether the complaint states facts

sufficient to constitute a cause of action.” (City of Dinuba v. County of Tulare, supra, 41

Cal.4th at p. 865.) “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. [Citations.] When a demurrer is sustained, we

determine whether the complaint states facts sufficient to constitute a cause of action.

[Citation.]” (Ibid.)

If the demurrer is sustained without leave to amend, we also ask whether there is a

reasonable probability that the defect can be cured by amendment. (City of Dinuba v.

County of Tulare, supra, 41 Cal.4th at p. 865.) In this regard, we consider whether on the

pleaded and noticeable facts there is a reasonable possibility of an amendment that would

cure the complaint’s legal defect or defects. (Schifando v. City of Los Angeles (2003) 31

Cal.4th 1074, 1081.)

“The plaintiff has the burden of proving that an amendment would cure the

defect.” (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) Where the

defect can be cured by amendment, we find the trial court abused its discretion and

reverse. (City of Dinuba v. County of Tulare, supra, 41 Cal.4th at p. 865.) Otherwise, we

affirm.

6 2. The Trial Court Properly Considered Judicially Noticeable Documents in

Ruling on the Demurrer.

Plaintiff argues that it was improper for the trial court to consider judicially

noticed documents in ruling on the demurrer. Instead, pointing to the judicial policy and

language of Code of Civil Procedure section 430.10, subdivision (e), that the demurrer

tests the sufficiency of the complaint solely by accepting as true plaintiff’s allegations

therein, he posits that contradictory information, even when subject to judicial notice,

cannot be considered. This is incorrect, and plaintiff’s misconception affects all his

claims on appeal.

Code of Civil Procedure section 430.30 provides, “(a) When any ground for

objection to a complaint, cross-complaint, or answer appears on the face thereof, or from

any matter of which the court is required to or may take judicial notice, the objection on

that ground may be taken by a demurrer to the pleading.” Additionally, although a court,

in ruling on a demurrer, accepts the truth of material facts properly pleaded in the

operative complaint, it does not accept as true the contentions, deductions, or conclusions

of fact or law. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.)

False allegations of fact, or allegations that are inconsistent with annexed documentary

exhibits or contrary to facts judicially noticed, may be disregarded. (Hoffman v.

Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400, italics added.)

“Judicial notice may be taken of the existence and facial contents of recorded real

property records where, as here, the authenticity of the document is not challenged.”

7 (Evid. Code §§ 452, subds. (c) and (h), 453; San Francisco CDC LLC v. Webcor

Construction L.P. (2021) 62 Cal.App.5th 266, 288, fn. 5, citing Yvanova v. New Century

Mortgage Corp., supra, 62 Cal.4th 919, 924, fn. 1 [noting propriety of taking judicial

notice of deed of trust, assignment of deed of trust, notice of default, notice of sale, and

trustee’s deed upon sale], 925.)

It was proper for the trial court to take judicial notice of the recorded documents

reflecting defendant SLS’s beneficial interest in the property under the assignment of the

deed of trust. (San Francisco CDC LLC v. Webcor Construction L.P., supra, 62

Cal.App.5th at p. 288.) When a court is required to rule on a demurrer, the discretion

provided by Evidence Code section 452 allows the court to take judicial notice of a fact

or proposition within a recorded document “‘that cannot reasonably be controverted, even

if it negates an express allegation of the pleading.’ [Citation.]” (Fontenot v. Wells Fargo

Bank, N.A., supra, 198 Cal.App.4th 256, 264 [overruled on a different point in Yvanova

v. New Century Mortgage Corp., supra, 62 Cal.4th at p. 939, fn.13], quoting Poseidon

Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.)

Plaintiff’s complaint alleged the assignment of the deed of trust was void because

the note for which it provided security was not assigned with it. This is not a requirement

and plaintiff provides no authority aside from his own legal conclusions to support the

claim of a void assignment. This premise is erroneous. The deed of trust is inseparable

from the note it secures and follows it even without a separate assignment. (Civ. Code,

§ 2936; Yvanova v. New Century Mortgage Corp., supra, 62 Cal.4th at p. 927.) SLS was

8 the servicing agent for the lender and also the assignee of the deed of trust. As such, it

could give notice of default. On June 18, 2018, ZBS became the trustee, entitled to

conduct the trustee’s sale. (Nguyen v Calhoun (2003) 105 Cal.App.4th 428, 440; see

also, Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 10, citing Haynes v. EMC

Mortgage Corp. (2012) 205 Cal.App.4th 329, 333–336 [“[u]nder 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.”].)

Plaintiff’s SAC advances no other legal theories to support the assertion that the

deed of trust is void or voidable aside from his legal conclusion to that effect. The

judicially noticed documents demonstrate that at the time they were recorded, SLS was

the loan servicer and beneficiary under the assignment of the deed of trust. Even if we

could construe his complaint as making a claim that the assignment was void, he has

failed to allege facts in the complaint sufficient to state a cause of action on that basis.

Because most of plaintiff’s claims are reliant upon a theory that the trial court

improperly considered the judicially noticed documents demonstrating defendant’s

beneficial interest under the assigned deed of trust, this determination is fatal to his

arguments. All his claims that SLS lacked authority to initiate foreclosure are based on a

legal conclusion—not facts—that the deed of trust had not been assigned to it. The

judicially noticed documents disprove this assertion and plaintiff alleged no other facts

that would demonstrate the assignment of the deed of trust was void or voidable. The

trial court properly sustained the demurrer without leave to amend.

9 3. The Court Properly Sustained Without Leave to Amend the Causes of

Action Ground on Violations of Civil Code Section 1788.

Plaintiff argues the trial court erroneously sustained without leave to amend his

claim that defendant violated Civil Code section 1788 et seq. Specifically, he argues that

by considering the judicially noticed documents of equitable title in favor of SLS, the

trial court failed “allegations as true but instead relied on Respondent’s disputed and

hearsay documents.” We disagree.

It is true that “properly pleaded” facts are accepted as true, but “facts appearing in

exhibits attached to the complaint will also be accepted as true and, if contrary to the

allegations in the pleading, will be given precedence.” (Dodd v. Citizens Bank of Costa

Mesa (1990) 222 Cal.App.3d 1624, 1627, citing Del E. Webb Corp. v. Structural

Materials Co. (1981) 123 Cal.App.3d 593, 604.) Here, plaintiff attached a copy of the

corporate assignment of deed of trust from Nationstar Mortgage, LLP in favor of SLS.

This documented transfer contradicts plaintiff’s allegation that SLS had no authority to

serve the notice of default or to initiate nonjudicial foreclosure proceedings. His

allegations to the contrary were therefore not “properly pled.” Thus, the court was not

bound to accept them as true.

In arguing that judicial notice was inappropriate, plaintiff also argues that a

defendant may not offer evidence of additional facts to support a demurrer. He quotes

our Supreme Court as stating, “facts have no place in a demurrer,” citing Bainbridge v.

Stoner (1940) 16 Cal.2d 423, 431. Plaintiff has taken the point out of context and cited it

10 for the wrong premise. In Bainbridge, the plaintiff/appellant challenged a ruling

sustaining a demurrer grounded on a statute of limitations bar. There, the plaintiff argued

that the defendant should have but did not allege facts that would demonstrate that the

statute of limitations had lapsed before plaintiff brought his action. The court there held

that for purposes of a demurrer, the defendant need only plead the statute governing the

limitation of actions. (Id., at p. 431.)

Bainbridge does not stand for the proposition that a trial court cannot take judicial

notice of documents that have been duly recorded in considering the adequacy of

plaintiff’s complaint. Thus, the trial court was not precluded from taking judicial notice

of facts that are beyond dispute, such as recorded documents or court files, within the

meaning of Evidence Code section 452.

Plaintiff also argues that the trial court was required to accept as true the

allegations of fact and documentary exhibits to his complaint. This is correct only to the

extent that his allegations and exhibits were not inconsistent with, or contrary, to facts

judicially noticed. (Hoffman v. Smithwoods RV Park, LLC, supra, 179 Cal.App.4th at p.

400.) Like the trial court, we “will not close [our] eyes to situations where a complaint

contains allegations of fact inconsistent with attached documents, or allegations contrary

to facts which are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co.,

supra, 123 Cal.App.3d at p. 604.)

Turning to the merits, Civil Code section 1788, known as the Rosenthal Fair Debt

Collection Practices Act, governs unlawful or deceptive debt collection practices. The

11 act defines a “debt collector” as “any person who, in the ordinary course of business,

regularly, on behalf of that person or others, engages in debt collection.” (Civ. Code,

§ 1788.2, subd. (c).)

The Rosenthal Act incorporates the federal Fair Debt Collection Practices Act

(FDCPA). (15 U.S.C. § 1692 et seq.; Best v. Ocwen Loan Servicing, LLC (2021) 64

Cal.App.5th 568, 576.) Both Acts protect consumers against unfair or deceptive acts or

debt collection practices. California has adopted additional protections for consumers

against the unreasonable and harassing debt collection practices by certain lenders. (Best

v. Ocwen Loan Servicing, supra.) But neither Act holds that a debt collector lacks

recourse to initiate a nonjudicial foreclosure when a debtor is in default on a secured debt

and the debt collector has a valid interest in the security for the debt under an assigned

deed of trust.

The purposes of both the Rosenthal Act and the FDCPA relates to debt collectors

who engage in “unfair or deceptive acts or practices in the collection of consumer debts,”

but the Rosenthal Act does not stop there: it goes on to state that the purpose of the Act

is “to require debtors to act fairly in entering into and honoring such debts.” (Civ. Code,

§ 1788.1, italics added.) This is the rub.

Plaintiff begins by arguing that SLS is a “debt collector” under the Rosenthal Act.

This may be. (Best v. Ocwen Loan Servicing, LLC, supra, 64 Cal.App.5th at p. 580.)

Mortgage lenders and mortgage servicers may, under certain circumstances, be

considered debt collectors under the Act. (Davidson v. Seterus, Inc. (2018) 21

12 Cal.App.5th 283, 303.) However, the act of foreclosing on a mortgage loan does not

constitute debt collection. (Pfeifer v. Countrywide Home Loans, Inc. (2012) 211

Cal.App.4th 1250, 1264.) Further, “giving notice of a foreclosure sale to a consumer as

required by the Civil Code does not constitute debt collection activity under the FDCPA.”

(Ibid.)

Whether or not SLS is a debt collector or was engaged in debt collection, does not

establish a cause of action under the Act, without alleging any acts by SLS that can be

described as unfair or deceptive practices. Plaintiff’s complaint admits he was in default

in mortgage payments since 2007. The court took judicial notice of the assignment of

deed of trust conferring in SLS a beneficial interest in the security for plaintiff’s

mortgage. The only correspondence between SLS and plaintiff, according to the

complaint, was a notice that SLS was taking over as loan servicer, and an

acknowledgment of plaintiff’s bankruptcy. This was not prohibited correspondence in

violation of the act, and the subsequent notice of intent to foreclose was similarly not

unlawful. The complaint has not stated facts sufficient to constitute violations of the

Rosenthal Act.

In his SAC, plaintiff disputed the validity of the documents that were judicially

noticed by the trial court in finding that SLS was authorized to proceed by virtue of the

assignment of the deed of trust in its favor. The recorded documents that the court was

permitted to consider by way of judicial notice speak for themselves as to SLS’s right to

13 foreclose, the notice of default, and the notice of intent to foreclose. None of the conduct

alleged in the SAC rises to the level of a violation under the Rosenthal Act.

Because the sole prohibited act alleged in the SAC is grounded on whether SLS

had a right to initiate foreclosure proceedings, it stands or falls on the question of whether

SLS had authority to engage in the debt collection activity. The court took judicial notice

of, among other documents, the assignment of the deed of trust to SLS, a document also

appended to plaintiff’s complaint, the recorded deed of trust demonstrates SLS did have

the requisite authority and beneficial interest to initiate foreclosure. Plaintiff alleges no

other acts that would qualify as an unfair or deceptive debt collection practice. Thus, the

actions by SLS were neither void nor voidable fatally undermining the sole basis for

stating a cause of action for a violation under the Rosenthal Act.

Having admitted to being in default and having failed to point to any invalidity in

defendant’s authority to foreclose or unfairness in its practices, plaintiff cannot state a

cause of action against the nonjudicial foreclosure by a debt collector on the basis of

false, deceptive or misleading practices.

4. The Demurrer to the Claims Under Civil Code Section 2924, et seq., Were

Properly Sustained Without Leave to Amend.

Plaintiff claims the court erred in sustaining the demurrer without leave to amend

as to the causes of action alleging violations of Civil Code section 2924, et seq., because

SLS was not the holder of the beneficial interest under the deed of trust. We disagree.

14 As pointed out in the previous discussion, the trial court properly took judicial

notice of the recorded documents demonstrating SLS’s beneficial interest. Plaintiff

believes that because he did not append the document to his complaint, it cannot be

considered, but this is incorrect for reasons we have already explained. (See Code Civ.

Proc., § 430.30, subd. (a).)

Plaintiff also argues that SLS is not a creditor because the assignment of the deed

of trust did not transfer the note, that is, the underlying obligation. Plaintiff cites no

authority for the proposition that the holder of a beneficial interest under an assigned

deed of trust must be the original lender under the promissory note that is secured by the

deed of trust and we have found none, or that the note itself must be assigned. To the

contrary, “[t]he deed of trust, moreover, is inseparable from the note it secures, and

follows it even without a separate assignment. [Citations.]” (Yvanova v. New Century

Mortgage Corp., supra, 62 Cal.4th at p. 927.)

Plaintiff also argues that SLS had the burden of establishing “clear and positive”

documentation of its interest. SLS did so. The assignment of the deed of trust to SLS

was duly recorded, and such a recorded document, as the proper subject of judicial

notice, contradicted the allegations of the complaint that SLS lacked a beneficial interest.

Plaintiff fails to point to any other facts that would render the assignment void or

voidable.

As to whether plaintiff can amend his complaint, we note that the assertions in the

SAC under Civil Code section 2924 et seq. do not allege any unlawful acts on the part of

15 SLS. It does not allege that SLS exercised its power of sale without properly filing a

notice of default, or waiting the statutory period of time before exercising the power of

sale, or giving proper notice of sale, or any of the other acts outlined in Civil Code

section 2924. Absent such allegations, with plaintiff’s admission he was in default, along

with judicial notice that SLS had the requisite authority to act upon plaintiff’s default,

coupled with the lack of properly pleaded allegations that the assignment was void,

plaintiff’s complaint fails to state a cause of action.

5. Dismissal of the Unfair Competition Law Cause of Action Without Leave to

Amend Was Proper.

Plaintiff argues that the trial court erred in sustaining the demurrer to the cause of

action under the Unfair Competition Law (UCL), under Business and Professions Code,

section 17200. We disagree.

Plaintiff’s complaint alleges that SLS’s violations of the Rosenthal Act constituted

unfair competition within the meaning of Business and Professions Code section 17200.

Unfair competition means and includes “any unlawful, unfair or fraudulent business act

or practice and unfair, deceptive, untrue or misleading advertising.” (Bus. & Prof. Code,

§ 17200; Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320.)

“‘The UCL’s “unlawful” prong “borrows violations of other laws . . . and makes

those unlawful practices actionable under the UCL.” [Citation.] ‘“[V]irtually any law or

regulation—federal or state, statutory or common law—can serve as [a] predicate for

16 [an] . . . “unlawful” [prong] violation.”’ [Citation.]” (Randall v. Ditech Financial, LLC

(2018) 23 Cal.App.5th 804, 811.)

When a UCL claim is derivative of other substantive causes of action, the claim

“stands or falls depending on [the] fate of the antecedent substantive causes of action.”

(Williams v. 21st Mortgage Corp. (2020) 44 Cal.App.5th 495, 505, quoting Krantz v. BT

Visual Images, L.L.C. (2001) 89 Cal.App.4th 164, 178.) Plaintiff’s UCL claim depends

on the adequacy of its factual allegations in the claims pled under the Rosenthal Act and

under Civil Code section 2924, et seq.

As we have demonstrated, antecedent substantive causes of action cannot stand:

the plaintiff alleged only that assignment of the deed of trust was not valid, although the

judicially noticed documents contradict this allegation. SLS did not threaten or harass

plaintiff to collect the debt. Additionally, as we have explained, nonjudicial foreclosure

does not constitute a debt collection activity under the Rosenthal Act. Having failed to

allege any “unlawful acts” under either the Rosenthal Act or Civil Code section 2924, et

seq., plaintiff’s UCL claim necessarily fails.

17 DISPOSITION

The judgment is affirmed. Defendant is entitled to costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS RAMIREZ P. J. We concur:

SLOUGH J.

FIELDS J.