Thomas v. Bank of America CA4/1

• Court: California Court of Appeal
• Decided: May 31, 2013
• Docket: D061012
• Status: Unpublished

Opinion

Filed 5/31/13 Thomas v. Bank of America CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

RUDIE THOMAS, D061012

Plaintiff and Appellant,

v. (Super. Ct. No. 37-2009-00073376- CU-OR-SC) BANK OF AMERICA, N.A.,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, William S.

Cannon, Judge. Affirmed.

David A. Kay for the Plaintiff and Appellant.

The Ryan Firm, Timothy M. Ryan and Michael W. Stoltzman, Jr., for Defendant

and Respondent. INTRODUCTION

Rudie Thomas appeals from a judgment dismissing his second amended complaint

(SAC) for wrongful foreclosure related causes of action after the trial court sustained a

demurrer to it without leave to amend. Thomas asserts numerous grounds of error. We

conclude none of them has merit and affirm the judgment.

BACKGROUND

Because this appeal arises from the sustaining of a demurrer, we summarize the

underlying facts stated in the SAC. We accept as true the SAC's properly pleaded

material factual allegations and facts properly judicially noticed. (Debrunner v. Deutsche

Bank National Trust Co. (2012) 204 Cal.App.4th 433, 435-436 (Debrunner).)

In March 2006 Thomas borrowed over $600,000 from Resmae Mortgage

Corporation (Resmae). The loan was secured by a trust deed on real property. The trust

deed was recorded evidencing the secured loan. The trust deed identified Chicago Title

Company as the trustee and Mortgage Electronic Registration Systems, Inc. (MERS) as

the nominee beneficiary for Resmae.1

1 " 'MERS is a private corporation that administers the MERS System, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the mortgagee of record for participating members through assignment of the members' interests to MERS. MERS is listed as the grantee in the official records maintained at county register of deeds offices. The lenders retain the promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to investors without having to record the transaction in the public record. MERS is compensated for its services through fees charged to participating MERS members.' [Citation.] 'A side effect of the MERS system is that a transfer of an interest in a mortgage loan between two MERS 2 On August 24, 2007, MERS assigned the trust deed and promissory note to

LaSalle Bank, N.A. as Trustee for the MLMI Trust Series 2006-RM2 (LaSalle). The

assignment was recorded on October 1, 2007.

On August 15, 2007, LaSalle recorded a default notice alleging the obligations

secured by the trust deed had been breached. The same day, Wilshire Credit Corporation,

on LaSalle's behalf, executed a substitution of trustee substituting Quality Loan Service

Corporation (Quality) as trustee under the trust deed. The substitution of trustee was

recorded on November 21, 2007.

A notice of trustee's sale was issued on November 16, 2007. On April 29, 2008,

Quality issued a trustee's deed upon sale indicating Quality sold the secured property to

LaSalle at a public auction on April 28, 2008. The trustee's deed was recorded on

May 5, 2008.

In January 2009 Thomas filed a complaint to quiet title to the real property and for

injunctive relief.2 In April 2009 he filed an amended complaint alleging the same causes

of action. Bank of America demurred to the amended complaint, arguing in part that the

amended complaint failed to state a claim because Thomas had not alleged he had

members is unknown to those outside the MERS system.' " (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151-1152 (Gomes).)

2 The complaint named LaSalle as the defendant. The parties stipulated LaSalle merged into and with Bank of America, N.A. (Bank of America) effective October 17, 2008. They also stipulated Bank of America is the proper defendant in this matter. The trial court accepted the stipulation and amended the defendant's name accordingly. We refer to LaSalle in our summary and discussion because its name appears on the key documents.

3 tendered or attempted to tender the amount he owed on the promissory note. The trial

court overruled the demurrer and Bank of America answered the complaint.

In August 2011 Thomas obtained leave to file the SAC. The SAC contained five

causes of action: one to set aside the trustee's sale and cancel the trustee's deed, one for

cancellation of recorded instruments, two to quiet title, and one for declaratory relief.

The SAC generally alleged the trustee's sale was void because it was predicated on void

documents. More specifically, the SAC alleged:

1. The assignment of the trust deed and promissory note to LaSalle was void

because it contained a forged notary acknowledgment.

2. The assignment of the trust deed and promissory note was void because

MERS was not authorized to do business in California at the time.

3. The assignment of trust deed and promissory note was void because the

person who executed the assignment for assignor MERS was actually an employee of

assignee LaSalle's loan servicer.

4. The assignment of the promissory note was void because MERS had no

beneficial interest in the promissory note to assign. Its only beneficial interest was in the

trust deed.

5. The substitution of Quality as trustee was void because MERS had not yet

assigned the trust deed and promissory note to LaSalle at the time the substitution of

trustee was executed.

6. The substitution of trustee was void because it contained a forged notary

acknowledgment.

4 Bank of America demurred to the SAC, arguing Thomas's allegations were not

sufficient to state a cause of action. Bank of America also reiterated its argument

Thomas was obliged and failed to allege he had tendered or attempted to tender the

amount he owed on the promissory note. The trial court agreed with Bank of America's

arguments, including its tender argument, and sustained the demurrer without leave to

amend.

DISCUSSION

I

Standard of Review

" ' "On appeal from an order of dismissal after an order sustaining a demurrer, our

standard of review is de novo, i.e., we exercise our independent judgment about whether

the complaint states a cause of action as a matter of law." ' [Citation.] 'A judgment of

dismissal after a demurrer has been sustained without leave to amend will be affirmed if

proper on any grounds stated in the demurrer, whether or not the court acted on that

ground.' [Citation.] In reviewing the complaint, 'we must assume the truth of all facts

properly pleaded by the plaintiffs, as well as those that are judicially noticeable.'

[Citation.]

"Further, '[i]f the court sustained the demurrer without leave to amend, as here, we

must decide whether there is a reasonable possibility the plaintiff could cure the defect

with an amendment. . . . If we find that an amendment could cure the defect, we

conclude that the trial court abused its discretion and we reverse; if not, no abuse of

discretion has occurred. . . . The plaintiff has the burden of proving that an amendment

5 would cure the defect.' [Citation.] '[S]uch a showing can be made for the first time to the

reviewing court . . . .' " (Gomes, supra, 192 Cal.App.4th at pp. 1153-1154.)

II

Notice of Default

The viability of Thomas's causes of action turns on whether any of the alleged

documentary defects are actionable by him. Among these documentary defects, he

contends the notice of default was void because LaSalle recorded it on August 15, 2007,

but MERS did not assign the trust deed and promissory note to LaSalle until August 24,

2007. This contention was not asserted below. Generally, points not raised in the trial

court cannot be asserted for the first time on appeal. (Greenwich S.F., LLC v. Wong

(2010) 190 Cal.App.4th 739, 767; People ex rel. Dept. of Transportation v. Superior

Court (2003) 105 Cal.App.4th 39, 46.)

To the extent Thomas raises this point on appeal to demonstrate his SAC stated a

claim or could have been successfully amended to do so, his efforts fail because he has

not alleged any facts or suggested he could allege any facts showing the delayed

assignment prejudiced him. " '[A] plaintiff in a suit for wrongful foreclosure has

generally been required to demonstrate [that] the alleged imperfection in the foreclosure

process was prejudicial to the plaintiff's interests.' (Fontenot v. Wells Fargo Bank, N.A.

(2011) 198 Cal.App.4th 256, 272 [Fontenot], citing Melendrez v. D & I Investment, Inc.

(2005) 127 Cal.App.4th 1238, 1258, [presumption that nonjudicial foreclosure sale was

conducted regularly and fairly may be rebutted only by substantial evidence of

'prejudicial procedural irregularity'].)" (Debrunner, supra, 204 Cal.App.4th at p. 443.)

6 More particularly, he has not shown the delayed assignment impaired his ability to

contest or avert the foreclosure sale. (Id. at pp. 443-444.) Although he argues the

delayed assignment precluded him from being assured his payment of the arrearage

amount would have resulted in the reinstatement of his loan or the redemption of the real

property, he did not allege nor does he suggest he could allege he ever attempted to pay

the arrearage amount or otherwise avert the foreclosure sale. Accordingly, he has not

established his SAC stated or could be amended to state a claim based on the delayed

assignment.

Miller v. Cote (1982) 127 Cal.App.3d 888 (Miller), upon which Thomas relies,

does not alter our conclusion. The court in Miller held a notice of default was fatally

defective in part because, at the time the notice was filed and recorded, no default had

actually occurred and permitting premature filing of the notice would effectively shorten

the statutory reinstatement period. (Id. at pp. 894-895.) Thomas does not claim he was

not in default at the time the notice of default in this case was filed. He also does not

claim the delayed assignment shortened the time for him to exercise his statutory

reinstatement rights. Miller, therefore, has no application here.

III

Assignment of Trust Deed and Promissory Note

A

Forged Notary Acknowledgment

Thomas contends the assignment of the trust deed and promissory note was void

because its notary acknowledgment was forged. Assuming, without deciding, Thomas

7 has adequately pleaded facts showing the notary acknowledgment was forged, such facts

are not sufficient to state a claim. As Bank of America points out, an assignment of a

trust deed does not have to be acknowledged by a notary to be valid. (Lewis v. Booth

(1935) 3 Cal.2d 345, 349; Osterberg v. Osterberg (1945) 68 Cal.App.2d 254, 262.) It

also does not have to be recorded to be valid. It is valid against anyone with actual notice

of it, except a bona fide purchaser. (See Farmers' Exchange Bank v. Purdy (1900) 130

Cal. 455, 458; Johndrow v. Thomas (1947) 31 Cal.2d 202, 206; Ahmad v. Wells Fargo

Bank N.A. (E.D. Cal. Mar. 30, 2011, No. CIV S-09-1200 JAM DAD PS) [2011 WL

1260054, at 9].)3

Civil Code section 2932.5, which requires an assignment to be duly acknowledged

and recorded before an assignee may exercise the power of sale, does not affect our

conclusion.4 This code section only applies to mortgages. It does not apply to trust

deeds. (Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495,

1509; Haynes v. EMC Mortgage Corp. (2012) 205 Cal.App.4th 329, 333-334; Calvo v.

HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 122.)

3 " 'Although we may not rely on unpublished California cases, the California Rules of Court do not prohibit citation to unpublished federal cases, which may properly be cited as persuasive, although not binding, authority.' " (Gomes, supra, 192 Cal.App.4th at p. 1155, fn. 6.)

4 Civil Code section 2932.5 provides: "Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded." (Italics added.)

8 B

MERS Not Qualified to Conduct Business in California

Thomas additionally contends the assignment of the trust deed and promissory

note was void because MERS was not authorized to do business in California at the time

of the assignment. Generally, a foreign corporation may not conduct intrastate business

without first obtaining a certificate of qualification from the Secretary of State. (Corp.

Code, § 2105, subd. (a).) A foreign corporation does not conduct intrastate business by

"[c]reating evidences of debt or mortgages, liens or security interests on real or personal

property." (Corp. Code, § 191, subd. (c)(7).) A foreign corporation also does not

conduct intrastate business by engaging in activities necessary for "[t]he ownership of

any loans and the enforcement of any loans by trustee's sale, judicial process or deed in

lieu of foreclosure or otherwise." (Id., subds. (d)(3) & (7).)

MERS's assignment of the trust deed and promissory note falls squarely within

these exceptions. Thus, any failure by MERS to have a certificate of qualification from

the Secretary of State at the time of the assignment did not invalidate the assignment.

(See Castaneda v. Saxon Mortg. Servs. (2009) 687 F.Supp.2d 1191, 1195, fn. 3; Ramirez

v. Right-Away Mortg., Inc. (N.D. Cal. Aug. 11, 2011, No. C 11-01839 WHA) [2011 WL

3515931, at 2].)

Moreover, even if MERS was required to have a certificate of qualification at the

time of the assignment, its subsequent attainment of one in July 2010 retroactively

validated its past activities. (See United Medical Management Ltd. v. Gatto (1996) 49

Cal.App.4th 1732, 1741 [upon qualifying, a foreign corporation has full legal 9 competency and its prior transactions have full legal effect]; Hill v. Mortgage Elect.

Registration Systems, Inc. (C.D. Cal. Jan. 6, 2012, No. CV 11-8036-ODW (FFMx))

[2012 WL 94476, at 4]; Adam v. Mortgage Electronic Registration Systems, Inc. (C.D.

Cal. Jan. 4, 2011, No. CV 10-7886 PSG (PLAx)) [2011 WL 63651, at 3]; Perlas v.

Mortgage Elec. Registration Systems, Inc. (N.D. Cal. Aug. 6, 2010, No. C 09-4500 CRB)

[2010 WL 3079262, at 7].) Although Thomas contends, "there are still factual issues as

to whether MERS paid taxes and penalties necessary to maintain the action," he did not

raise this contention below and he has not offered any facts demonstrating he could

successfully amend his SAC to allege such issues actually exist. Therefore, he has not

established his SAC stated or could be amended to state a claim based on MERS's

corporate status at the time of the assignment.

C

Not Signed by MERS Employee

Thomas next contends the assignment was void because it was executed on

MERS's behalf by an employee of assignee LaSalle's loan servicer rather than by a

MERS employee. Assuming Thomas's factual allegations on this point are true, they are

unavailing because they do not preclude the possibility the person was, in fact, an agent

of MERS and had the authority to execute the assignment for MERS. (Gill v. Wells

Fargo Bank, N.A. (E.D. Cal. June 20, 2011, No. 1:11-cv-00218 OWW GSA) [2011 WL

2470678, at 6]; see also Frame v. Cal-Western Reconveyance Corp. (D. Ariz.

Sept. 2, 2011, No. CV-11-0201-PHX-JAT) [2011 WL 3876012, at 10].)

10 Although Thomas argues it would have been an obvious conflict of interest for the

person to act as a dual agent, he does not cite any authority for this proposition. We,

therefore, treat this argument as waived and pass it without consideration. (People v.

Stanley (1995) 10 Cal.4th 764, 793.)

Thomas also asserts it was highly unlikely the person was a dual agent. Again,

even if Thomas's postulate is correct, it falls short of demonstrating Thomas could

successfully amend the SAC to state facts showing the person was not, in fact, acting as

MERS's authorized agent when she executed the assignment. (Fontenot, supra,

198 Cal.App.4th at p. 270 [plaintiff has burden to affirmatively plead facts demonstrating

an assignment of trust deed was improper].)

Thomas further asserts the equal dignities rule in Civil Code section 2309 required

the person to have written authority to act on behalf of both parties and she did not. This

argument is not cognizable on appeal because it was not raised below. (Greenwich S.F.,

LLC v. Wong, supra, 190 Cal.App.4th at p. 767; People ex rel. Dept. of Transportation v.

Superior Court, supra, 105 Cal.App.4th at p. 46.) This point also does not persuade us

Thomas could successfully amend his SAC to state a cause of action because, even if the

equal dignities rule applied to the assignment, Thomas offers no factual allegations

showing the person executing the assignment did not have the requisite written authority

or that compliance with the equal dignities rule was not waived or ratified by the parties

to the assignment.

11 D

MERS's Lack of Beneficial Interest in Promissory Note

Thomas further contends the assignment of the promissory note was void because

MERS had no beneficial interest in the note to assign. Its only beneficial interest was in

the trust deed. However, the lack of a beneficial interest in the note would not

necessarily have prevented MERS from having the authority to assign it. Even if MERS

had no assignable interest of its own, MERS could have assigned the note as the nominee

or agent of the lender, who did possess an assignable interest, provided the agency

agreement between MERS and the lender granted MERS such authority. (Fontenot,

supra, 198 Cal.App.4th at pp. 270-271.)

Moreover, in order to establish a claim that LaSalle lacked authority to foreclose

because it never received a proper assignment of the debt, it is not enough for Thomas to

allege MERS's assignment of the promissory note to LaSalle was void. (Fontenot, supra,

198 Cal.App.4th at p. 271.) Thomas must also allege facts showing LaSalle did not

receive a valid assignment of the note in any other manner, including in an unrecorded

document. (Id. at pp. 271-272.) As Thomas's SAC does not allege such facts and he has

not demonstrated he could amend it to allege such facts, Thomas has not stated a cause of

action based on LaSalle's lack of a valid interest in the note. (Ibid.)

Rather than discuss or attempt to distinguish Fontenot, supra, 198 Cal.App.4th

256, Thomas supports his contention with citations to LaSalle Bank, N.A. v. Bouloute

(N.Y.S. 2010) 28 Misc.3d 1227 (A) [958 N.Y.S.2d 61] (unreported disposition) and

Landmark Nat. Bank v. Kesler (2009) 289 Kan. 528 [216 P.3d 158]. We find these cases

12 unpersuasive because they do not purport to apply California foreclosure law and Thomas

has not shown how the law they do purport to apply is analogous to California

foreclosure law. (See, e.g., Gomes, supra, 192 Cal.App.4th at pp. 1155-1156 [cases

from outside of California are inapposite because they do not apply California foreclosure

law].)

E

Lack of Prejudice

Even if Thomas had or could allege specific facts showing the assignment of the

trust deed and promissory note was void, he cannot state a cause of action unless he can

also allege specific facts showing he was prejudiced by the assignment. (Herrera v.

Federal National Mortgage Assn., supra, 205 Cal.App.4th at pp. 1508-1509; Fontenot,

supra, 198 Cal.App.4th at p. 272.) As the Fontenot court noted, "Even if MERS lacked

authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by

MERS's purported assignment, and there is no allegation to this effect. Because a

promissory note is a negotiable instrument, a borrower must anticipate it can and might

be transferred to another creditor. As to plaintiff, an assignment merely substituted one

creditor for another, without changing [plaintiff's] obligations under the note." (Fontenot,

at p. 272.) Thus, in order to state a viable claim, Thomas must allege facts showing the

assignment changed his contractual obligations, interfered with his ability to pay his debt,

or caused him to face foreclosure where, under the same circumstances, he otherwise

would not have. (Ibid.) As Thomas has not alleged such facts or shown he could allege

13 such facts, he has not demonstrated his SAC did or could be amended to state a viable

cause of action.

IV

Substitution of Trustee

Premature Substitution

Thomas contends LaSalle's substitution of Quality as trustee was void because the

substitution of trustee was executed before MERS assigned the trust deed and promissory

note to LaSalle. However, a substitution of trustee may be executed by a trust deed

beneficiary or an authorized agent. (Civ. Code, § 2934a, subd. (d).) The fact LaSalle

may not have been a trust deed beneficiary at the time it signed the substitution of trustee

does not preclude the possibility LaSalle was an authorized agent of the beneficiary.

(See, e.g., Wadhwa v. Aurora Loan Services, LLC (E.D. Cal. Feb. 11, 2013, Civ. No. S-

11-1784 KJM KJN) [2013 WL 528541, at 5].)

Moreover, the substitution of trustee did not become effective until it was recorded

on November 21, 2007. (Civ. Code, § 2934a, subd. (a)(1) [trust deed beneficiary or

successor may substitute trustee by recording the substitution in the county where the

secured property is located].) As MERS assigned the trust deed and promissory note to

LaSalle on August 24, 2007, and the assignment was recorded October 1, 2007, LaSalle

had the authority to substitute the trustee well before the substitution became effective.

14 2

Forged Acknowledgment

Thomas alternatively contends the substitution of trustee was void because its

notary acknowledgment was forged requiring its recording to be cancelled. Even

assuming the substitution of trustee was procedurally defective in this manner, this is not

sufficient by itself to state a cause of action by Thomas. Thomas must also state facts

showing the defect impaired his rights in some way. (See, e.g., U.S. Hertz, Inc. v.

Niobrara Farms (1974) 41 Cal.App.3d 68, 85.)

As previously discussed, "a plaintiff in a suit for wrongful foreclosure has

generally been required to demonstrate the alleged imperfection in the foreclosure

process was prejudicial to the plaintiff's interests." (Fontenot, supra, 198 Cal.App.4th at

p. 272.) As to Thomas, the substitution merely substituted one trustee for another

without changing his contractual obligations. He does not allege that he was not in

default, that the substitution of Quality as trustee interfered with his ability to pay his

debt, or that LaSalle would have refrained from foreclosure under the circumstances.

(Ibid.) Absent such allegations, he has not shown his SAC stated or could be amended to

state a claim based on any improprieties in the substitution of trustee.

Thomas's reliance on this court's decision in Dimock v. Emerald Properties (2000)

81 Cal.App.4th 868 (Dimock) is misplaced. In Dimock, we concluded a foreclosure sale

conducted by the original trustee after another trustee had been substituted in was void

because the substitution gave the second trustee the exclusive power under Civil Code

section 2934a to conduct the sale. (Dimock, supra, at pp. 874-875.) In this case, Thomas

15 has not alleged or indicated he could allege that Quality conducted the foreclosure sale

after another trustee was substituted in. Accordingly, Dimock has no application here.

V

Tender Requirement

Thomas contends the trial court wrongly determined he had to allege compliance

with the tender rule to state of a cause of action in his SAC. "As a general rule, a debtor

cannot set aside the foreclosure based on irregularities in the sale without also alleging

tender of the amount of the secured debt. [Citations.] 'The rationale behind the rule is

that if [the borrower] could not have redeemed the property had the sale procedures been

proper, any irregularities in the sale did not result in damages to the [borrower].' "

(Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 512-513; Lona

v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 111-114; Arnolds Management Corp. v.

Eischen (1984) 158 Cal.App.3d 575, 578-579.)

There are, however, many exceptions to the tender rule. These exceptions include:

(1) when the borrower is attacking the validity of the underlying debt; (2) when the party

attacking the foreclosure sale has a counterclaim against the beneficiary equal to or

greater than the amount of the tender; (3) when the party attacking the foreclosure sale is

not liable for the debt; and (4) when the party attacking the foreclosure sale is not relying

on equity because the trustee's deed upon sale is void on its face. (Shuster v. BAC Home

Loans Servicing, LP, supra, 211 Cal.App.4th at p. 512; Lona v. Citibank, N.A., supra,

202 Cal.App.4th at pp. 112-113.) We need not determine whether an exception applies in

16 this case because we have upheld the trial court's decision on multiple other grounds.

(Gomes, supra, 192 Cal.App.4th at p. 1157, fn. 8.)

For the same reason, we also need not address Thomas's related claim that the trial

court's application of the tender rule to the SAC violated the requirements in Code of

Civil Procedure section 1008 for reconsidering prior decisions. We note, nonetheless, the

improper reconsideration argument is not cognizable on appeal because Thomas did not

raise it below. (Greenwich S.F., LLC v. Wong, supra, 190 Cal.App.4th at p. 767; People

ex rel. Dept. of Transportation v. Superior Court, supra, 105 Cal.App.4th at p. 46.) We

also note Thomas's SAC is far more factually detailed than his prior amended complaint

and he filed the SAC almost two and a half years after he filed the amended complaint.

In the interim, state and federal courts issued several new decisions in wrongful

foreclosure cases. Thus, had Thomas asserted his improper reconsideration argument

below, the trial court would have had little difficulty finding the requirements for

reconsideration under Code of Civil Procedure section 1008 had been met.

17 DISPOSITION

The judgment is affirmed. Respondent is awarded its appeal costs.

MCCONNELL, P. J.

WE CONCUR:

HUFFMAN, J.

IRION, J.