Opinion
C072288
06-02-2017
SEAN PATRICK SOLOMON et al., Plaintiffs and Appellants, v. E-LOAN, INC., et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 75565)
Plaintiffs Sean Patrick Solomon and Karen J. Solomon (collectively Solomon) appeal from a judgment of dismissal after the trial court sustained without leave to amend demurrers by defendants E-Loan, Inc. (E-Loan), Wells Fargo Bank, N.A. and Wells Fargo Mortgage (Wells Fargo), Mortgage Electronic Registration Systems, Inc. (MERS), and the Federal Home Loan Mortgage Corporation (FHLMC). We shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The Loan
In September 2004 Solomon borrowed $254,500 from E-Loan to refinance their existing mortgage on real property located in Grass Valley. To secure the loan, Solomon executed a deed of trust in favor of E-Loan which was recorded in September 2004. Under the deed of trust, MERS was the nominee as beneficiary for lender E-Loan, its successors and assigns, and Lender's First Choice was the original trustee. In October 2004 E-Loan transferred all rights in the note and deed of trust to Merrill Lynch Mortgage Capital, Inc.
Solomon's First Complaint
Solomon made payments for five years, but failed to make the December 1, 2009, payment. Three weeks later Solomon, proceeding in pro. per., filed suit against E-Loan, Wells Fargo, MERS, and Lender's First Choice. The complaint argued defendants could not enforce the loan and did not have the authority to foreclose because MERS lacked standing on the original note. Solomon also asserted violations of the Truth in Lending Act and a violation of the Real Estate Settlement Procedures Act (RESPA). Wells Fargo removed the case to federal court on the basis of federal question jurisdiction because the Solomon complaint alleged a violation of RESPA.
Nonjudicial foreclosure proceedings were initiated in March 2010. A notice of default was recorded on March 12, 2010, by Cal-Western Reconveyance Corporation (Cal-Western) as "either the original trustee, the duly appointed substituted trustee, or acting as agent for the trustee or beneficiary."
In federal court, Wells Fargo moved to dismiss Solomon's complaint. The district court held a hearing on the motion to dismiss. In an order filed May 6, 2010, the magistrate judge noted during the hearing, Sean Solomon "acknowledged that the first payment on the loan was due in November 2004 and that plaintiffs were the parties responsible for payments on the loan. Under these circumstances, plaintiffs cannot invoke equitable tolling of the applicable statutes of limitations." The magistrate judge found Solomon's claims time barred by the statutes of limitations applicable to their RESPA, fraud, and Unfair Competition Law claims. In addition, Solomon's state law claims failed due to a failure to allege tender and Wells Fargo was not a debt collector.
In the order, the magistrate judge recommended that the district judge issue an order granting Wells Fargo's motion to dismiss in its entirety, dismiss the RESPA claims as to all defendants, and decline to exercise supplemental jurisdiction over the remaining state law claims against the non-moving defendants. The district court adopted the recommendation and findings.
Foreclosure proceedings continued. A substitution of trustee, signed by MERS as nominee for E-Loan and the original beneficiary, and substituting Cal-Western, was recorded on April 28, 2010. The same day, assignment of the deed of trust, executed by MERS and assigning the deed of trust to Wells Fargo "together with the note or notes therein described or referred to, the money due and to become due thereon with interest, and all rights accrued or to accrue under said Deed of Trust" was recorded. A notice of trustee's sale, signed by Cal-Western was recorded on June 14, 2010. On August 20, 2010, another assignment of the deed of trust to Wells Fargo signed by MERS was recorded.
On July 1, 2010, Solomon filed for Chapter 13 bankruptcy protection and in connection therewith filed an adversary complaint against the defendants in August 2010. Multiple motions to dismiss were filed.
The assigned magistrate judge of the district court recommended dismissal with prejudice based on the res judicata effect of the prior district court order. Shortly thereafter, on April 5, 2011, while the recommendation was pending, Solomon filed a notice of dismissal.
Wells Fargo took ownership of the property following a trustee's sale on June 20, 2011. On June 27, 2011, E-Loan filed a notice of remand and a demurrer to the original complaint. After Cal-Western recorded the trustee's deed upon sale, Wells Fargo conveyed the property by grant deed to FHLMC.
Supplemental Complaint
Solomon then filed a supplemental complaint setting forth 14 causes of action based on state law. Solomon argued MERS improperly assigned the note to Wells Fargo. Solomon alleged MERS was not disclosed as beneficiary of the loan; MERS was never a valid beneficiary of the loan; the loan's chain of title was flawed because it was sold on the secondary market; defendants no longer possessed the original note; and the non-judicial foreclosure notices were flawed.
Wells Fargo, MERS, and E-Loan demurred to the supplemental complaint, asserting res judicata based on the district court's earlier order adopting the magistrate judge's finding, Solomon's failure to allege facts supporting misapplication of payments, and failure to allege prejudice from any irregularities in the foreclosure process. The trial court issued an order denying Solomon's motion for leave to file a second amended complaint due to failures to comply with procedural requirements; sustaining Wells Fargo's demurrer to the supplemental complaint without leave to amend; overruling MERS' demurrer in part and sustaining it in part with leave to amend; and sustaining E-Loans' demurrer to the supplemental complaint with leave to amend and overruling it in part.
Second Amended Complaint
Solomon filed a second amended complaint in November 2011 setting forth 17 causes of action. The complaint named FHLMC as a defendant and asserted claims against Wells Fargo. Solomon alleged that FHLMC improperly purchased the note in the secondary market. In addition, the complaint alleged foreclosure notices were not properly acknowledged under Civil Code section 1189, Solomon's payments were not properly credited, and lack of compliance with Civil Code sections 2923.5 and 2923.6. MERS, FHLMC, and E-Loan filed a demurrer and motion to strike.
The Trial Court's Ruling
The trial court began by describing Solomon's situation: "The Court is not insensitive to the plight of plaintiffs who lack formal representation and face the daunting task of navigating a complex legal system, especially in the ever evolving area of modern day foreclosure law. However, the Court's concerns cannot and should not give way to abandonment of fundamental legal principles, procedure and fairness. 'Fairness' in this sense is not necessarily the wrongs suffered by the plaintiffs, but at this stage, the right of the Plaintiffs to have a fair opportunity to state a legally supportable case and the right of the defendants to have a fair opportunity to object."
The court noted this was Solomon's third effort to plead a viable cause of action and described the second amended complaint as "a broad spectrum approach to pleading, being some 83 pages in length, together with over 100 pages of Exhibits. The pleading is not only long, but suffers from a number of structural defects, including missing exhibits referenced in the complaint and disjointed text flow, as well as the inclusion of improper legal argument, improper legal and factual conclusions, evidentiary material, partial document images . . . and continuing to assert causes of action against the previously dismissed defendant Wells Fargo Bank. At various points the [second amended complaint] is repetitive, rambling and difficult to follow. The plaintiffs' style tends to flow through their arguments on the Demurrers and Motion to Strike, and these arguments do not clearly address the legal arguments set forth in the moving papers."
The trial court narrowed down Solomon's allegations to two basic issues: (1) allegations based on defendants' improper conduct at the inception of the loan in 2004; and (2) allegations based on the foreclosure proceedings and transfers of loan documents, having the legal effect of invalidating foreclosure proceedings.
As to the first, the court noted Solomon claimed defendants falsified the loan applications and processing documents, engaged in predatory lending, created a sham loan process, breached fiduciary duty, and engaged in misrepresentations and fraud in the loan process. However, the court found the second amended complaint revealed the loan was made in September 2004 and the action was not filed until December 2009, over five years later. The court held defendants correctly invoked the statute of limitations pursuant to Code of Civil Procedure sections 338, subdivision (d) and 343 and Business and Professions Code section 17208. Therefore, the court sustained the defendants' respective demurrers as to the first, second, third, fourth, sixth, twelfth, fourteenth, and fifteenth causes of action (fraud, breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, fraud/forgery, breach of contract, unjust enrichment, violation of Bus. & Prof. Code §17200 et seq.), all of which were based on fraud or contract.
The court sustained the demurrer without leave to amend because Solomon failed to plead facts which would cure this fundamental defect: "In particular, despite three attempts, plaintiffs have failed to allege any facts to support delayed discovery or equitable tolling and have not set forth any arguments that such facts exist."
The second group of causes of action consisted of declaratory relief, cancellation of voidable contract, to set aside trustee's sale, to void trustee's deed, to void assignment of deed of trust, wrongful foreclosure, quiet title, and slander of title (causes of action fifth, seventh through eleventh, sixteenth, and seventeenth.) The court sustained the demurrer without leave to amend as to these causes of action.
As to MERS, the court found under both statutory and case law that it was not required to be licensed to do business in California, did not need to be in possession of the note, and was not required to record a notice of assignment of the deed of trust. In addition, Solomon could not raise the issue of a defective acknowledgment, nor did the second amended complaint show prejudice from any of the alleged irregularities.
The court noted Solomon did not allege E-Loan was a foreclosing defendant, nor did E-Loan initiate the foreclosure proceedings against Solomon. Therefore the causes of action related to "the foreclosing defendants" did not apply to E-Loan. The court determined this defect was incapable of amendment.
The court found the second amended complaint's allegations against FHLMC, since it acquired its interest in the property following foreclosure, were directly derivative of the remainder of the action. Since the balance of Solomon's claims lacked merit, the court sustained FHLMC's demurrer.
As a separate basis to sustain the demurrers, defendants argued a lack of tender. The court found that, post-foreclosure, tender of the amount due is required in order for Solomon to proceed in equity. According to the court: " 'Assuming plaintiffs otherwise had a viable claim attacking the sale, the second amended complaint merely alleged offers to tender. A full tender must be made to set aside a foreclosure sale, based on equitable principles.' "
Aftermath
Subsequently, Solomon filed several motions, among them a motion for reconsideration. Following oral argument, the court adopted its tentative ruling, but also expanded its analysis. The court broke the foreclosure claims into three categories: (1) issues related to the chain of ownership; (2) issues related to Wells Fargo resolved in federal court; and (3) issues relating to the Solomon bankruptcy.
During oral argument, the court encouraged Solomon to seek some sort of pro bono legal counsel "and try to get it organized in a way that is going to make more sense [on appeal]."
The court reviewed and commented upon each of the relevant documents relating to the property and the foreclosure. The review convinced the court there was no substantial defect in the chain of title to the loan documents: "MERS had authority from the original loan recordation to execute the documents appearing in the chain of title. Cal-Western acquired authority from MERS to conduct non-judicial foreclosure proceedings. Clear legal authority is dispositive of Plaintiffs' remaining arguments concerning the chain of ownership and the regularity of the foreclosure proceedings."
In addition, the court found the prior federal action resolved all issues Solomon alleged against Wells Fargo and was res judicata to the present action: "The federal case was dismissed with prejudice and is deemed a judgment on the merits."
Even if the claims against Wells Fargo were not precluded, the court determined the "subsequent actions in giving Notice of Trustee's Sale, conducting the sale and issuing a Trustee's Deed were both regular and lawful, given the analysis concerning chain of ownership."
Finally, the court considered Solomon's contention that foreclosure and sale were precluded because such claims were inconsistent with Solomon's Chapter 13 Plan of Reorganization. However, the Plan itself did not mention these claims and Solomon relies on general provisions relating to unsecured claims and the court declined to interpret an ambiguous order. The court concluded it was "fully prepared to defer to a valid order of the federal Bankruptcy Court; however, in the absence of such order, the Court is of the view that the property, long sold at trustee sale, is no longer part of the bankruptcy estate. If Plaintiffs claim the property is subject to Bankruptcy Court protection, Plaintiffs need to demonstrate that fact with an appropriately certified copy of a federal judge's order of the bankruptcy court so indicating."
Following entry of judgment, Solomon filed a timely notice of appeal.
DISCUSSION
I
The function of a demurrer is to test the sufficiency of the complaint by raising questions of law. We give the complaint a reasonable interpretation and read it as a whole with all parts considered in their context. A general demurrer admits the truth of all material factual allegations. We are not concerned with the plaintiff's ability to prove the allegations or with any possible difficulties in making such proof. We are not bound by the construction placed by the trial court on the pleadings; instead, we make our own independent judgment. (Herman v. Los Angeles County Metropolitan Transportation Authority (1999) 71 Cal.App.4th 819, 824.)
Where the trial court sustains the demurrer without leave to amend, we must decide whether there is a reasonable possibility the plaintiff can cure the defect with an amendment. If we find that an amendment could cure the defect, we must find the court abused its discretion and reverse. If not, the court has not abused its discretion. The plaintiff bears the burden of proving an amendment would cure the defect. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 (Gomes).)
II
On appeal, a party challenging an order has the burden to show error by providing an adequate record and making coherent legal arguments, supported by authority, or the claims will be deemed forfeited. (See People v. Freeman (1994) 8 Cal.4th 450, 482, fn. 2; Ballard v. Uribe (1986) 41 Cal.3d 564, 574-575; In re S.C. (2006) 138 Cal.App.4th 396, 408.) The rules of appellate procedure apply to Solomon even though they are representing themselves on appeal. (Leslie v. Board of Medical Quality Assurance (1991) 234 Cal.App.3d 117, 121.) A party may choose to act as his or her own attorney. We treat such a party like any other party, and he or she " 'is entitled to the same, but no greater consideration than other litigants and attorneys. [Citation.]' [Citation.]" (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1247.) A plaintiff proceeding in pro. per. is not entitled to lenient treatment. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 984-985.)
III
We have reviewed Solomon's briefs and find them both disjointed and difficult to follow. However, in essence, Solomon appears to challenge the trial court's finding that the prior federal action was res judicata as to Wells Fargo and argues the court improperly adjudicated factual disputes in sustaining the demurrers. We find no merit in either contention.
As in the trial court, Solomon argues the prior federal action was in error and did not preclude the suit against Wells Fargo for later developments concerning the trustee's sale. The trial court considered the argument and determined: "[T]he prior Federal action did, in fact, resolve all issues concerning the statute of limitations, issues directly litigated and decided in federal court. The decision of the federal judge on those issues is final and res judicata as to this action. The federal case was dismissed with prejudice and is deemed a judgment on the merits." We agree with the trial court's analysis.
Res judicata applies when the cause of action in the earlier and later suits are identical, the prior judgment is final and on the merits, and the two actions involve the same parties. (Consumer Advocacy Group, Inc. v. ExxonMobil Corp. (2008) 168 Cal.App.4th 675, 685-686.) In addition, if an issue could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pled. (Sutphin v. Speik (1940) 15 Cal.2d 195, 202; Wade v. Ports America Management Corp. (2013) 218 Cal.App.4th 648, 657.)
All three requirements are met in the present case. Solomon's supplemental complaint and the first complaint which was removed to federal court involved the same parties, the same facts, and the same causes of action. Both complaints alleged, as to Wells Fargo: (1) flaws or fraud regarding the chain of title documents; (2) Wells Fargo is not the actual lender and cannot foreclose; (3) Wells Fargo has no right to service the loan; (4) the foreclosure process was defective; (5) the loan assignment was defective; and (6) Wells Fargo failed to produce the original note. The federal court dismissed the case with prejudice making it a judgment on the merits as to Wells Fargo. Since res judicata applies, amendment will not save the causes of action against Wells Fargo.
IV
Solomon also contends the trial court adjudicated factual disputes and "came to its own conclusions about disputed facts" in ruling on the demurrer. To the contrary, we find the trial court properly reviewed Solomon's allegations to determine whether the facts alleged stated a cause of action under any possible legal theory. In turn, we review the trial court's findings de novo for an abuse of discretion. (Gomes, supra, 192 Cal.App.4th at p. 1153.)
As the trial court noted, Solomon's complaint involved two sets of actions: the inception of the loan in 2004 and subsequent foreclosure proceedings and transfer of the loan documents. Solomon claimed defendants falsified loan documents, engaged in predatory lending, breached their fiduciary duty, made misrepresentations, and committed fraud in the loan process. The second amended complaint states the loan was made in September 2004, but Solomon did not file the complaint until December 2009, over five years later. The trial court correctly concluded Solomon's causes of action for fraud, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, fraud, breach of contract, and unjust enrichment stemming from the loan origination were barred by the three- and four-year limitation periods in Code of Civil Procedure sections 338, subdivision (d), 337, subdivision (1), and 343, and Business and Professions Code section 17208. Since Solomon presented no facts to cure this defect, the court did not abuse its discretion in denying leave to amend.
In connection with the transfer of loan documents and subsequent foreclosure, Solomon makes a variety of allegations surrounding six documents. We consider the court's findings on each document to ascertain whether it abused its discretion in sustaining the demurer on the related causes of action.
The court found as to the deed of trust recorded on September 29, 2004, Solomon admitted borrowing the money, executing a note and deed of trust, and accepting the benefits of a loan, including the payoff of a then existing mortgage and credit card debt. Solomon contended they were offered and accepted a different loan from a different lender, but the court found the loan documents signed by Solomon controlled. In addition, despite Solomon's claim to the contrary, a valid non-judicial foreclosure does not require the production of an original promissory note prior to the foreclosure sale. The court's conclusion is correct. (Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433, 440-443.)
The notice of default recorded March 12, 2010, was recorded prior to the substitution of trustee. However, the court determined this facial defect did not invalidate the non-judicial foreclosure sale. The note of default specified that Cal-Western could act as agent for the beneficiary, MERS, and was permitted to record the notice of default. We agree.
Solomon argues that MERS had no authority to execute the substitution of trustee recorded April 28, 2010. However, the court noted, as the nominal beneficiary, MERS possessed the right to execute a substitution of trustee. Again, the court's assessment is correct. (Robinson v. Countrywide Home Loans, Inc. (2011) 199 Cal.App.4th 42, 46-47.)
As for the notice of trustee's sale recorded June 14, 2010, the court found the substitution of trustee had confirmed Cal-Western's authority to record the notice of sale.
The court rejected Solomon's objections to the assignment of deed of trust recorded on August 20, 2010, since the complaint failed to show any prejudice from the assignment. The assignment did not change Solomon's obligations under the note and the deed of trust stated it could be sold without prior notice to the borrower. Nor did the failure to record an earlier assignment of the loan and deed of trust from E-Loan to Wells Fargo invalidate the foreclosure process. Case law supports the trial court's conclusions. (Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 121-125.)
Finally, Solomon argued non-compliance with Civil Code section 2923.5 in conjunction with the trustee's deed recorded on July 1, 2011. The court determined Civil Code section 2923.5 does not cause a cloud on title after an otherwise properly conducted foreclosure sale, and the only remedy provided is a postponement of the sale, citing Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 221. Again, case law supports the trial court's finding.
Ultimately we concur with the trial court's conclusion that there was no defect in the chain of title to the loan documents. We agree MERS had authority from the original loan recordation to execute the documents in the chain of title. MERS conferred authority to Cal-Western to conduct the non-judicial foreclosure proceedings.
DISPOSITION
The judgment is affirmed. Defendants shall recover costs on appeal.
RAYE, P. J. We concur: BLEASE, J. ROBIE, J.