Opinion
F074613
09-27-2018
ALAN GJUROVICH, et al., Plaintiffs and Appellants, v. MARTHA BEATRIZ CAMPOS, Defendant and Respondent.
Alan Gjurovich and Star Hills, in pro. per, for Plaintiffs and Appellants. Hennelly & Grossfeld, Paul T. Martin, Thomas H. Case, and Susan J. Williams for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. BCV-16-100873)
OPINION
APPEAL from a judgment of the Superior Court of Kern County. Lorna H. Brumfield, Judge. Alan Gjurovich and Star Hills, in pro. per, for Plaintiffs and Appellants. Hennelly & Grossfeld, Paul T. Martin, Thomas H. Case, and Susan J. Williams for Defendant and Respondent.
-ooOoo-
Plaintiffs, Alan Gjurovich and Star Hills, were evicted from certain real property on Linden Avenue in Bakersfield, California (the property), after ownership of the property was lost due to nonjudicial foreclosure. More than five years after these events, plaintiffs commenced the present action to quiet title to the same property. Defendant, Martha Campos, the current owner of the property, demurred to the complaint on the ground the applicable statute of limitations had expired. The trial court sustained the demurrer, without leave to amend. Plaintiffs appeal from the resulting judgment of dismissal. We conclude the trial court correctly held the complaint was barred by the statute of limitations, and we find the complaint was fatally deficient for other reasons as well. Accordingly, we affirm the judgment.
FACTS AND PROCEDURAL HISTORY
In 2007, plaintiff Hills borrowed the sum of $222,000 from a lender known as Mortgageit, Inc., and the loan was secured by a deed of trust against the property. Under the terms of the deed of trust, Old Republic Title Company was named as the trustee, and Mortgage Electronic Registration Systems, Inc. (or MERS) was described as "acting solely as a nominee for Lender and Lender's successors and assigns" and was also "the beneficiary" under "this security instrument." The deed of trust provided that the lender may "from time to time appoint a successor" trustee by recording an instrument memorializing the substitution of trustee. Although plaintiff Hills was the owner of the property at the time the deed of trust was executed, plaintiff Gjurovich alleges he subsequently obtained a fifty percent interest in the real property by quitclaim deed.
At some point, plaintiff Hills stopped paying on the loan. On June 16, 2008, MERS caused a "Substitution of Trustee" to be recorded, reflecting that ETS Services, LLC (ETS) was substituted as trustee under the deed of trust in place of Old Republic Title Company. That same day, the trustee recorded a "Notice of Default and Election to Sell Under Deed of Trust." In October 2008, a "Notice of Trustee's Sale" set the date of the trustee's sale of the property for November 13, 2008. According to the "Trustee's Deed Upon Sale," GMAC Mortgage, LLC (GMAC) purchased the property at the foreclosure sale and became the new owner, as of November 13, 2008. GMAC's "Trustee's Deed Upon Sale" was recorded on November 26, 2008.
After the property was foreclosed on, plaintiffs refused to vacate the premises, which led GMAC to initiate unlawful detainer proceedings in 2009. After a default judgment, GMAC obtained a writ of possession in late 2009. However, the process of evicting plaintiffs was delayed by plaintiffs' multiple bankruptcy filings and frivolous federal lawsuits. Efforts to complete the eviction process had to wait until the bankruptcy stays were lifted. Eventually, GMAC evicted plaintiffs from the property on December 8, 2010. GMAC transferred the property to REO Properties Corporation, which then sold it to defendant Campos in 2011. The deed from GMAC to REO Properties Corporation was recorded on July 12, 2011, although it appears to have been executed by the grantor, GMAC, on March 8, 2010. The deed from REO Properties Corporation to defendant Campos was recorded on July 25, 2011.
The trial court noted plaintiffs' numerous prior lawsuits concerning the same property, and it announced that if plaintiffs' tactics continued, "the court will entertain a motion to declare the plaintiffs vexatious litigants." As noted by defendant, at least two federal court orders addressing plaintiffs' multiple bankruptcy and other federal court filings in this matter concluded that such filings were solely for the purpose of delay or to improperly thwart the new owner's entitlement to possession of the real property.
On April 20, 2016, plaintiffs filed their complaint to quiet title to the property. Plaintiffs' complaint claimed the prior foreclosure and eviction were "void" because ETS, the substituted trustee, allegedly had no authority to act as trustee. Plaintiffs' theory was that MERS had no power to appoint a substitute trustee under the terms of the deed of trust, and therefore ETS had no authority to act in that capacity. Further, since the foreclosure sale was allegedly void, so also were the eviction and subsequent transfers of title.
On June 3, 2016, defendant Campos filed her general demurrer to plaintiff's complaint, asserting the complaint was barred by the applicable statute of limitations. As a further ground for demurrer, Campos argued that even had the statute of limitations not expired, plaintiffs' complaint failed to state a cause of action because ETS had authority to conduct the trustee's sale, and plaintiffs also failed to allege they tendered the debt or suffered prejudice.
On July 6, 2016, in response to the demurrer, plaintiffs filed (i) a motion demanding an "immediate ruling" that the foreclosure and eviction were "void ab initio," and (ii) opposition to the demurrer. Defendant filed her reply in support of demurrer on July 7, 2016.
The demurrer hearing was held on July 15, 2016. The trial court denied plaintiffs' motion for an immediate ruling as an improper attempt to obtain summary judgment without complying with Code of Civil Procedure section 437c. The trial court then sustained defendant's demurrer to the complaint, without leave to amend, on statute of limitations grounds. On September 26, 2016, having sustained the demurrer without leave to amend, the trial court dismissed plaintiff's complaint with prejudice.
Subsequent statutory references are to the Code of Civil Procedure unless otherwise stated.
Plaintiffs' notice of appeal timely followed.
DISCUSSION
I. Standard of Review
On appeal from a judgment dismissing an action after sustaining a demurrer, we review de novo whether the complaint states facts sufficient to constitute a cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879.) "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." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) We also consider matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank).)
"[W]hen [a demurrer] is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank, supra, 39 Cal.3d at p. 318.)
II. Statute of Limitations
A demurrer on the ground the complaint or a cause of action is barred by the statute of limitations may be made where the defect appears on the face of the complaint or from matters judicially noticed. (Black v. Department of Mental Health (2000) 83 Cal.App.4th 739, 745; § 430.30, subd. (a).) In an action to quiet title, as here, the applicable statute of limitations is determined by the theory of relief underlying the action. As explained in Salazar v. Thomas (2015) 236 Cal.App.4th 467 (Salazar), at pages 476-477: "The Legislature has not established a specific statute of limitations for actions to quiet title. [Citation.] Therefore, courts refer to the underlying theory of relief to determine the applicable period of limitations. [Citations.] An inquiry into the underlying theory requires the court to identify the nature (i.e., the 'gravamen') of the cause of action. [Citation.] [¶] Generally, the most likely time limits for a quiet title action are the five-year limitations period for adverse possession, the four-year limitations period for the cancellation of an instrument, or the three-year limitations period for claims based on fraud and mistake." (Fns. omitted.) Similarly, actions to set aside a foreclosure sale are governed by the gravamen of the action. (Hatch v. Collins (1990) 225 Cal.App.3d 1104, 1110.)
The specific statutory sections alluded to by Salazar were as follows: Claims for adverse possession or for recovery of real property have a five-year limitation period under sections 318, 319, 320 and 321; actions for cancellation of an instrument are subject to the four-year catchall provision of section 343 (see, Moss v. Moss (1942) 20 Cal.2d 640, 644-645); and actions for relief on the ground of fraud or mistake are governed by the three-year limitation period set forth at section 338, subdivision (d). (See Salazar, supra, 236 Cal.App.4th at pp. 476-477, fns. 7, 8 & 9.)
Actions for recovery of real property are governed by the five-year statute of limitations set forth in section 318, which section provides as follows: "No action for the recovery of real property, or for the recovery of the possession thereof, can be maintained, unless it appear that the plaintiff, his ancestor, predecessor, or grantor, was seized or possessed of the property in question, within five years before the commencement of the action." Based on this section and the similar provision in section 319 (relating to title to real property), the Court of Appeal in Robertson v. Superior Court (2001) 90 Cal.App.4th 1319 (Robertson) explained as follows: "The overall effect of these sections is manifest: actions relating to either the possession of or title to real property (or, of course, both) must be commenced within five years from the end of possession or seizin of that property by the claimant or his or her predecessor in interest, unless his or her chain of title includes a person who was either a minor or insane ...." (Id. at p. 1328.) Here, of course, the end of plaintiffs' possession was December 8, 2010, the date they were finally evicted from the premises. A. The Complaint was Barred by Statute of Limitations
The crux of plaintiffs' complaint to quiet title was that the substitution of ETS as trustee by MERS was allegedly unauthorized under the terms of the deed of trust, and consequently, the subsequent (i) foreclosure sale and trustee's deed upon sale, (ii) unlawful detainer judgment and writ of possession, and (iii) transfers of ownership were all allegedly void ab initio. As a result of the allegedly void foreclosure proceedings and transfers of title, plaintiffs' complaint seeks the recovery of possession and title to the property. To the extent the relief sought in the complaint would implicitly require the setting aside or cancellation of the foreclosure sale and the trustee's deed upon sale, along with the subsequent conveyances, the action is arguably one for cancellation of an instrument (or instruments) subject to the catchall four-year limitations period. (See § 343; see Robertson, supra, 90 Cal.App.4th at p. 1326 [" 'Ordinarily a suit to set aside and cancel a void instrument is governed by section 343 of the Code of Civil Procedure' "].) On balance, however, it appears that the substance of the action was one for the recovery of possession and title to real property, and therefore the action was subject to section 318's five-year limitations period. Under that section, plaintiffs were required to bring their action within five years of the date their possession of the property ended, i.e., December 8, 2010. (Robertson, supra, 90 Cal.App.4th at p. 1326.) Thus, December 8, 2010, was the date of accrual for purposes of the five-year period, and plaintiffs' complaint filed on April 20, 2016 was clearly time-barred.
Even under more general principles of accrual that are not necessarily tied to the date possession was lost, the result is the same. As explained in Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797 (Fox): "Generally speaking, a cause of action accrues at 'the time when the cause of action is complete with all of its elements.' [Citation.] An important exception to the general rule of accrual is the 'discovery rule,' which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action. [Citations.] [¶] A plaintiff has reason to discover a cause of action when he or she 'has reason at least to suspect a factual basis for its elements.' [Citations.] Under the discovery rule, suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period. [Citations.] Norgart [v. Upjohn (1999) 21 Cal.4th 383] explained that by discussing the discovery rule in terms of a plaintiff's suspicion of 'elements' of a cause of action, it was referring the 'generic' elements of wrongdoing, causation, and harm. [Citation.] In so using the terms 'elements,' we do not take a hypertechnical approach to the application of the discovery rule. Rather than examining whether the plaintiffs suspect facts supporting each specific legal element of a particular cause of action, we look to whether the plaintiffs have reason to at least suspect that a type of wrongdoing has injured them. [¶] ... [¶] The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of any injury if they have ' " 'information of circumstances to put [them] on inquiry' " ' or if they have ' " 'the opportunity to obtain knowledge from sources open to [their] investigation.' " ' [Citations.] In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation." (Fox, supra, 35 Cal.4th at pp. 806-808, fn. omitted; accord, Gutierrez v. Mofid (1985) 39 Cal.3d 892, 896-897.) Finally, in order to rely on the discovery rule for delayed accrual of a cause of action, a plaintiff whose complaint shows on its face that his or her claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. (Fox, supra, 35 Cal.4th at p. 808.)
In this case, the purported injury to plaintiffs, if any, occurred when the foreclosure of the property occurred in 2008, and again when plaintiffs were evicted from the property on December 8, 2010. In the months prior to their eviction, plaintiffs were already challenging the validity of the foreclosure sale in federal court filings. Therefore, by that time plaintiffs suspected or believed there was wrongdoing that affected the foreclosure's validity. Clearly, plaintiffs were on inquiry notice and were charged with information that a reasonable investigation would have revealed. A review by plaintiffs of the recorded foreclosure documents at any time after the foreclosure process began would have fully disclosed the June 2008 substitution of trustee (i.e., the allegedly unauthorized substitution of ETS as trustee by MERS), which is the basis for plaintiffs' claim that subsequent actions or conveyances were void. Therefore, even under more general principles of accrual, we conclude that plaintiffs' cause of action for quiet title accrued no later than December 8, 2010. Plaintiff's complaint was not filed until April 20, 2016, more than five years and four months after accrual of the cause of action. Accordingly, the trial court correctly sustained defendant's demurrer on statute of limitations grounds. B. Plaintiffs' Arguments Unavailing
Plaintiffs argue their complaint to quiet title was not subject to any statute of limitations and could be brought at any time because the foreclosure sale and trustee's deed upon sale (and all subsequent transfers) were allegedly "void ab initio" because MERS had no power to appoint a substitute trustee. Plaintiffs are mistaken. A quiet title action based on a theory that a deed or other instrument was void ab initio is nonetheless subject to the applicable statutes of limitation. (Walters v. Boosinger (2016) 2 Cal.App.5th 421, 433 [rejecting contention that statutes of limitation would not apply where deed or instrument was allegedly void ab initio]; Robertson, supra, 90 Cal.App.4th at pp. 1326-1329 [holding statutes of limitation apply whether the document under challenge is asserted to be void or voidable].) Plaintiffs appear to be relying on the principle that a "judgment void on its face," such as where jurisdiction is lacking, is subject to collateral attack at any time (see Rochin v. Pat Johnson Manufacturing Co. (1998) 67 Cal.App.4th 1228, 1239). However, that is plainly distinguishable from the situation presented here of a complaint challenging a foreclosure sale and/or the validity of a trustee's deed and other matters relating to title that do not constitute void judgments. Accordingly, we reject plaintiffs' argument they could bring this action at any time, without regard to the statute of limitations.
Plaintiffs argue that the running of the statutory period for filing suit should be postponed because they did not discover the post-foreclosure transfers of title from GMAC to REO, and from REO to Campos, until 2015, when they visited a "Real Estate Office in Porterville, California." Plaintiffs assert that such transfers of ownership were concealed from them, including the fact that the deed from GMAC to REO was signed in March 2010, but was not actually recorded until July 2011. But the delayed discovery of such purported facts could have no impact on the accrual of the cause of action in this case. As we have explained above, plaintiffs lost their property through foreclosure and eviction, and were clearly on inquiry notice of the basis for their quiet title action (i.e., the allegedly unauthorized substitution of trustee) no later than December 8, 2010. Plaintiffs' lack of knowledge of post-foreclosure transfers of title, whether such ignorance was due to their own neglect or GMAC's concealment, could not change the pertinent facts triggering accrual of their quiet title action predicated on the allegedly unauthorized substitution of trustee. Thus, no grounds for postponing accrual under the doctrine of delayed discovery have been shown. (See Fox, supra, 35 Cal.4th at pp. 807-808 [delayed discovery requires specific facts showing that despite diligent investigation of the circumstances of the injury, the plaintiff could not have reasonably discovered facts supporting the cause of action within the applicable limitations period].)
Finally, plaintiffs argue the statute of limitations should be tolled on equitable grounds because they had filed a prior lawsuit concerning the property. Plaintiffs identify the prior lawsuit as Kern County Superior Court Case No. S-1500-CV-271292, which is now pending on appeal in our Case No. F064464. The prior lawsuit was against MERS, GMAC, ETS and certain individuals challenging the foreclosure process and trustee's sale based on alleged failure to honor a notice of rescission and other wrongful or fraudulent conduct including an allegation that MERS lacked authority to substitute ETS as trustee. The prior lawsuit resulted in a judgment in favor of the defendants in that case after their demurrers to the first amended complaint therein were sustained without leave to amend. Notice of entry of the judgment of dismissal was filed in that case on January 5, 2012. Plaintiffs' appeal in Case No. F064464 remains stayed pending a lengthy bankruptcy.
We grant plaintiffs' request that we judicially notice the pleadings and records on file in F064464.
Plaintiffs argue that had they known of defendant Campos's ownership of the property at the time of the prior lawsuit, they might have amended to insert a quiet title claim against her or timely named her as one of the Doe defendants in that action. At this stage, in light of the pleadings in this case and the prior lawsuit, such an argument falls short and must be rejected. The sole ground for a quiet title claim against Campos in the former action could only have been the same one alleged here - namely, that MERS had no authority to substitute a new trustee and therefore ETS was unauthorized to act in that capacity. However, as we explain in part III of this opinion, post, based on the allegations of plaintiffs' complaint, the language of the attached deed of trust and the recorded substitution of trustee document, the substitution of trustee was authorized under the terms of the deed of trust and pursuant to relevant statutory provisions. Therefore, plaintiffs could not have stated a valid cause of action against Campos in the prior lawsuit, just as they could not do so here. (See, e.g., 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 1198, p. 630 [amendment may properly be denied where pleading is insufficient to state a cause of action]; Woo v. Superior Court (1999) 75 Cal.App.4th 169, 176 [a doe amendment may relate back to original filing date, but only as to a person against whom a cause of action was stated in the original complaint].) The theoretical potential that plaintiffs may have been able to file a baseless amendment in the prior action will not be heard at this time to defeat the statute of limitations.
Finally, plaintiffs argue that the defendant should be equitably estopped from asserting the statute of limitations, or the statutory period should have been tolled, based on alleged concealment of the fact Campos is the current property owner under a post-foreclosure transfer. The general rule is that while ignorance of the existence of the injury or the facts of the cause of action may delay the running of the statute until the date of discovery, ignorance of the identity of the defendant is not essential to a claim and therefore will not toll the statute. (Benson v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 932 (Benson).) The issue in Benson was whether an exception to the general rule should be recognized where, as had occurred in that case, " 'the plaintiff is not only unaware of the defendant's identity, but is effectively precluded as a practical matter from ascertaining it through normal discovery procedures.' " (Id. at p. 943.) The Supreme Court concluded that the statute of limitations would be tolled under those exceptional circumstances, but "only until such time that the plaintiff knows, or through the exercise of reasonable diligence should have discovered, the defendant's identity." (Id. at p. 936.)
Here, plaintiffs' complaint does not and cannot come within the Benson rule because there is no reason that plaintiffs, in exercising reasonable diligence, could not have discovered that Campos had become the owner, which fact could have been learned by simply checking the recorded title documents at the county recorder's office. As we have noted, plaintiffs had five years from accrual of the cause of action to timely file their quiet title action against defendant Campos, but failed to do so. If anything, the existence of plaintiffs' prior lawsuit against other parties involving similar issues of title to the property should have made plaintiffs all the more vigilant to investigate and keep themselves apprised of the actual status of the recorded title. Yet plaintiffs have admitted in their complaint on file in the present action that they waited until April 2015 to check the record title, and upon learning of the transfers from GMAC to REO, and from REO to Campos, plaintiffs delayed another year - i.e., until April 20, 2016 - to file their complaint to quiet title against defendant Campos. That profound lack of diligence will not support an equitable basis for excusing or tolling the statute of limitations. In sum, plaintiffs had to file their complaint within five years of the date on which they were ousted from possession of the property (§ 318), had ample time to do so after learning Campos's identity as owner, but did not.
As noted, the deed to Campos was recorded in July 2011, when there was still plenty of time (nearly four and one-half years) remaining prior to expiration of the statutory five-year period that commenced when plaintiffs were evicted from the property on December 8, 2010.
In passing, we would note one additional ground for tolling not present here. This was not an instance where special grounds for equitable tolling might potentially apply based on a party pursuing remedies in one forum prior to filing suit in another, or pursuing alternative remedies as a precursor to a subsequent suit. Plaintiffs did not raise this particular theory in the trial court, nor did they do so on appeal, and therefore it has been waived. (See Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1381 [failure to raise issue in trial court waives the point on appeal]; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 685 [appellant's failure to raise issue in opening brief constitutes a waiver].) But even had it been adequately raised, we would conclude it does not extricate plaintiffs from the statute of limitations defense. This distinct ground for equitable tolling typically arises "when the plaintiff first files a claim before an administrative agency and then files a second proceeding after the limitation period has expired. Under these circumstances, courts have held the policy underlying the statute of limitations - prompt notice to permit complete and adequate defense - has been satisfied and that the period should be tolled in equity to preserve the plaintiff's claim." (Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, 690; see Martell v. Antelope Valley Hospital Medical Center (1998) 67 Cal.App.4th 978, 985 [stating general rule that "[u]nder equitable tolling, the statute of limitations in one forum is tolled as a claim is being pursued in another forum"].) The doctrine is not limited to the situation of pursuing administrative remedies, but is applicable " ' "when an injured person has several legal remedies and, reasonably and in good faith, pursues one." ' " (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 100 (McDonald).) However, for this basis for equitable tolling to apply, three elements must be shown: " 'timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff.' " (Id. at p. 102.) Among other things, the first two elements require that " ' "the filing of the first claim must alert the defendant in the second claim of the need to begin investigating the facts which form the basis for the second claim. Generally, this means that the defendant in the first claim is the same one being sued in the second." ' " (Id. at p. 102, fn. 2; see Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934, 955 [no equitable tolling when first proceeding did not involve or give notice to defendant sued in second proceeding].) Further, to qualify for this ground of equitable tolling, the plaintiff must have diligently pursued his or her claim in the first action. (Hull v. Central Pathology Service Medical Clinic (1994) 28 Cal.App.4th 1328, 1336 [failure to amend in first action showed lack of diligence precluding equitable tolling].)
Plaintiffs also failed to make any reference in the trial court to the existence of the prior lawsuit, which was not mentioned in plaintiffs' complaint nor in their opposition to the demurrer.
As should be clear from our discussion above, this was not an instance of asserting alternative remedies against or with notice to defendant Campos as a precursor to a later suit against her, but was a failure to timely bring suit against defendant Campos, the owner of the property, due to a lack of diligence. We conclude that equitable tolling under the theory of pursuing alternative remedies did not apply here, even had that issue not been forfeited on appeal by plaintiffs.
For all of the reasons articulated above, we conclude that plaintiffs' arguments for delayed discovery and/or for equitable relief from the statute of limitations are to no avail, and that the trial court correctly ruled the complaint to quiet title was barred by the statute of limitations. The complaint had to be filed within five years of plaintiffs being dispossessed of the property (§ 318), but they failed to do so.
III. Plaintiffs' Complaint Fatally Deficient on Other Grounds
An order sustaining a demurrer may be affirmed if any ground for the demurrer is valid, regardless of whether the trial court relied on that ground. (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.) As explained below, defendant's demurrer included additional grounds that supported the trial court's ruling, including that the recorded documents show the substituted trustee had authority to act, and that plaintiffs failed to allege tender of the debt or facts establishing prejudice. Thus, even if the statute of limitations did not bar plaintiffs' claims, the demurrer was nonetheless correctly sustained. A. ETS Had Authority to Conduct Trustee's Sale as Substituted Trustee
The underlying theory upon which plaintiffs' quiet title claim rests is that the foreclosure sale and the resulting trustee's deed upon sale (showing title vested in GMAC) were void because, allegedly, MERS had no authority to substitute ETS as trustee and therefore ETS was not the proper trustee under the deed of trust and did not have authority to conduct the foreclosure sale. A suit in equity to set aside a foreclosure sale requires the pleading of three elements: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust, (2) the party attacking the sale suffered prejudice or harm, and (3) the trustor tenders the amount of the secured indebtedness or was excused from tendering. (Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 10-11 (Ram).) The first element - wrongfulness - may be found where there were substantial defects in the process such as a failure to give notice or where the foreclosure sale was conducted by an entity that lacked authority to do so. (Id. at p. 11.) However, nonjudicial foreclosure sales are presumed to have been conducted regularly and properly, and thus the party challenging the sale has the burden of affirmatively pleading and proving an improper procedure. (Id. at p. 14; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270 (Fontenot), disapproved on other grounds in Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939, fn. 13.)
Here, plaintiffs' quiet title claim fails because the language of the deed of trust reflected that MERS did have authority to undertake a substitution of trustee. The deed of trust stated MERS was acting as "nominee for Lender and Lender's successors and assigns" and was also "the beneficiary under this Security Instrument." The security instrument was "this document," i.e., the subject deed of trust, under which the borrower granted a power of sale to the trustee to secure the underlying loan. The deed of trust further provided the borrower understood MERS held legal title to the interests granted by the borrower in the security instrument, and if necessary to comply with law or custom MERS (as nominee for lender or lender's successors) had the right to exercise any or all of those interests, "including, but not limited to, the right to foreclose and sell the Property."
A copy of the deed of trust was incorporated by reference into plaintiffs' complaint and was also attached as an exhibit thereto.
The deed of trust also had a specific provision relating to substitution of the trustee. That provision, set forth in paragraph 24 of the deed of trust, stated: "Lender, at its option, may from time to time appoint a successor trustee to any Trustee appointed hereunder by an instrument executed and acknowledged by Lender and recorded in the office of the Recorder of the county in which the Property is located. The instrument shall contain the name of the original Lender, Trustee and Borrower.... [T]he successor trustee shall succeed to all the title, powers and duties conferred upon the Trustee herein and by Applicable Law. This procedure for substitution of trustee shall govern to the exclusion of all other provisions for substitution."
By document recorded on June 16, 2008, MERS, acting "as nominee for Mortgageit, Inc.," which was the original lender under the deed of trust, substituted ETS as the trustee under the deed of trust in place of Old Republic Title Company.
The above documents and the language therein indicate MERS had authority to substitute ETS as trustee, and MERS did so in accordance with the terms of the deed of trust. To reiterate, MERS was both the "beneficiary" and the lender's "nominee" for purposes of the deed of trust. A nominee acts as an agent for another - here, MERS was nominee or agent for the lender in regard to the deed of trust - and our courts have recognized that such language in a deed of trust is ordinarily sufficient to allow MERS to exercise rights under the deed of trust as the lender's agent. (Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 125; Fontenot, supra, 198 Cal.App.4th at p. 270.) Acting as nominee of the lender, MERS followed the provision in the deed of trust relating to substitution of trustees by recording the document naming ETS as the trustee in place of Old Republic Title Company. Based on the foregoing, we conclude that plaintiffs' complaint failed to state facts showing the substitution of trustee was void or unauthorized. Instead, it appears from the judicially noticeable deed of trust and substitution of trustee the substitution of trustee was within MERS's authority as nominee or agent.
Moreover, the authority of the substituted trustee in this case is confirmed and validated under Civil Code section 2934a. Under subdivision (a)(1) of that section, the trustee under a deed of trust "may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by ... all of the beneficiaries under the trust deed, or their successors in interest, and the substitution shall be effective notwithstanding any contrary provision in any trust deed executed on or after January 1, 1968 ...." When this is done, the trustee named in the recorded substitution of trustee "shall be deemed to be authorized to act as the trustee under the mortgage or deed of trust for all purposes from the date the substitution is executed by the mortgagee, beneficiaries, or by their authorized agents." (Civ. Code, § 2934a, subd. (d).) Finally: "Once recorded, the substitution shall constitute conclusive evidence of the authority of the substituted trustee or his or her agents to act pursuant to this section." (Id., ital. added.) Here, MERS, which was both the beneficiary named in the deed of trust and the nominee or agent for the lender, followed the statutory procedure to effectuate a substitution of trustee. It is therefore established that ETS had authority to act as trustee under the deed of trust. (See Ram, supra, 234 Cal.App.4th at pp. 12-13 [demurrer properly sustained to quiet title action based on allegation that the trustee was unauthorized to conduct nonjudicial foreclosure where, as here, the trustee was properly substituted under the deed of trust and Civ. Code § 2934a].) B. Failure to Tender Indebtedness and Show Prejudice
Additionally, we note that Civil Code section 2924, subdivision (a)(1), authorizes a notice of default to be recorded by "[t]he trustee, mortgagee, or beneficiary, or any of their authorized agents." An authorized agent is deemed to include "an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substation of trustee, or an agent of that substituted trustee." (Civ. Code, § 2924b, subd. (b)(4).)
Ordinarily, an equitable action to set aside a foreclosure sale requires tender of the indebtedness. An exception exists where the trustee's deed is void on its face. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 113 (Lona).) Here, plaintiffs did not allege that they tendered the amount of the indebtedness, nor have they argued they could do so, but instead have relied wholly on the voidness exception to the tender requirement. However, because the allegations and judicially noticeable deeds and foreclosure documents failed to show a facially "void" foreclosure sale, any irregularity was at worst "voidable," and thus plaintiffs were required to allege a tender of the indebtedness as a requirement for proceeding with an action to set aside the foreclosure. (Ram, supra, 234 Cal.App.4th at pp. 11-12, 18-19; Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 512; Lona, supra, 202 Cal.App.4th at p. 112.) Consequently, plaintiffs' failure to allege they tendered the debt is fatal to their quiet title action, and provides an additional rationale for sustaining the judgment of the trial court.
Finally, to challenge a foreclosure sale, plaintiffs were required to allege they suffered prejudice from the alleged failure to comply with the procedural requirements for the foreclosure sale. (Angell v. Superior Court (1999) 73 Cal.App.4th 691, 700.) Prejudice is not presumed from mere irregularities in the foreclosure process. (Ram, supra, 234 Cal.App.4th at p. 11.) Here, plaintiffs have failed to allege prejudice resulted to their interests from having a substituted trustee conduct the foreclosure process, rather than the original trustee, given that plaintiffs do not deny they were in default under the loan and were unable to cure the default. (See Fontenot, supra, 198 Cal.App.4th at p. 272.) Thus, the failure to allege prejudice is yet another basis for sustaining the judgment of the trial court.
DISPOSITION
The trial court's judgment is affirmed. Martha Campos is awarded her costs on appeal.
/s/_________
SNAUFFER, J. WE CONCUR: /s/_________
LEVY, Acting P.J. /s/_________
MEEHAN, J.