Opinion
B222134
12-08-2011
GLOBAL WEST MANAGEMENT, INC. et al., Plaintiffs and Appellants, v. DEUTSCHE BANK NATIONAL TRUST COMPANY et al., Defendants and Respondents.
Law Offices of John Levine, John Levine for Plaintiffs and Appellants. Litchfield Cavo, Edward D. Vaisbort, and Melinda W. Ebelhar for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC404632)
APPEAL from a judgment of the Superior Court of the State of California, David Minning, Judge. Affirmed.
Law Offices of John Levine, John Levine for Plaintiffs and Appellants.
Litchfield Cavo, Edward D. Vaisbort, and Melinda W. Ebelhar for Defendants and Respondents.
INTRODUCTION
Plaintiffs Global West Management, Inc. and Global Range, LLC (plaintiffs) filed a verified complaint against, inter alia, defendants and respondents Deutsche Bank Trust Company (Deutsche Bank)—the lender—and America's Servicing Company (Servicing Company)—the lender's servicing agent. The complaint arose from a nonjudicial foreclosure pursuant to a power of sale in deed of trust and a suspended trustee's sale of the subject residential property. On appeal, plaintiffs contend that the trial court erred in sustaining defendants' demurrers to the complaint without leave to amend. According to plaintiffs, because their predecessor-in-interest was the successful bidder at the trustee's sale, there are sufficient facts to show a binding agreement to purchase the property that can be specifically enforced or, at a minimum, entitles them to damages from Deutsche Bank and Servicing Company. Plaintiffs in essence assert that the trial court abused its discretion in not allowing them to amend because their proposed amended complaint states a cause of action.
Deutsche Bank and Servicing Company are collectively referred to as defendants.
We hold that because the trustee's sale was suspended prior to the issuance of the trustee's deed, plaintiffs' remedies under the comprehensive statutory scheme governing nonjudicial foreclosures are limited to the return of the purchase price plus interest. There are no other common law or tort remedies available to them under the facts alleged. Because plaintiffs proposed amended complaint does not allege a failure to return the purchase price, and plaintiffs concede in their opening brief that the purchase price was returned to their predecessor-in-interest, we affirm the trial court's order sustaining defendants' demurrers without leave to amend and dismissing the complaint against defendants.
FACTUAL BACKGROUND
The facts are taken from the allegations of and the exhibits attached to the complaint as they pertain to plaintiffs' claims against Deutche Bank and Servicing Company.
The property in issue is 8746 Rangely Avenue, West Hollywood, California (the property). In 2006, the owner, Fredrika Hill, obtained a loan from WMC Mortgage Corp. (WMC Mortgage) in the amount of $784,000. As security for the loan, Hill executed a deed of trust. The deed of trust was recorded on January 12, 2006, and it identified Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee of the lender and as the beneficiary of the deed of trust.
On June 23, 2006, Hill executed another deed of trust on the property in favor of MERS as nominee for Countrywide Bank N.A. securing an additional indebtedness of $485,000. Thereafter, Hill and her husband Dulany executed grant deeds purporting to grant interests in the property to various persons and entities. One of those grant deeds purported to grant the Hill's entire interest in the property to the 8746 Rangley Avenue Trust. That deed was recorded on May 1, 2008. Another deed purported to grant all of the 8746 Rangely Avenue Trust's interest in the property to Shimase LLC Trust. That deed was also recorded on May 1, 2008.
In February 2007, Fredrika executed a grant deed conveying her interest in the property to her and Dulany as their sole and separate property as joint tenants.
On January 3, 2008, MERS as nominee for WMC Mortgage, executed an assignment of the WMC Mortgage deed of trust in favor of Deutsche Bank. On January 5, 2008, Deutsche Bank issued a notice of default on the property in the amount of $20,895.04.
On January 31, 2008, the trustee of the Shimase LLC Trust executed a trust transfer grant deed to Pacifica Group 49/II purporting to transfer a 50% interest in the Shimase LLC Trust to Pacifica Group 49/II. But that deed was not recorded.
On July 8, 2008, a notice of trustee's sale was issued setting the date of the sale for August 7, 2008. On July 22, 2008, Eli Adams, doing business as Pacifica Group 49/II, filed a Chapter 13 bankruptcy petition.
At the August 7, 2008, trustee's sale, the property was sold to the highest bidder, George Yousefzadeh, for $857,797.89. Later that same day, however, an entity called West Coast Mortgage sent a fax to the trustee advising that the sale should be suspended because of an active bankruptcy. Attached to the fax was a copy of the Eli Adams bankruptcy petition filed on July 22, 2008. Although the Eli Adams bankruptcy proceeding was still pending at the time of the August 7, 2008, trustee's sale, the property was not listed as an asset in the bankruptcy petition. Nevertheless, the trustee suspended or cancelled the sale of the property to Yousefzadeh and refused to give him a trustee's deed.
The complaint identifies West Coast Mortgage only as a "business entity of unknown form which was and is qualified to do business in the State of California."
According to plaintiffs' opening brief, the cashier's checks that Yousefzadeh tendered for the purchase of the property at the trustee's sale were returned to him.
On October 14, 2008, Servicing Company, as servicing agent for Deutsche Bank, moved for relief from the stay in the Eli Adams bankruptcy. On October 23, 2008, the bankruptcy court granted Servicing Company's motion for relief from the stay, thereby permitting Servicing Company to notice a sale of the property. In ruling on that motion, the bankruptcy court found that the Eli Adams bankruptcy petition was part of a scheme to delay, hinder, and defraud creditors.
On October 28, 2008, Yousefzadeh quitclaimed his entire interest in the property to plaintiff Global Range, LLC.
Although plaintiff Global West Management, Inc. alleged in the complaint that it also had an equitable interest in the property, the alleged nature and extent of that interest is not clear from the complaint.
PROCEDURAL BACKGROUND
On December 29, 2008, plaintiffs filed a complaint against a number of defendants, including Deutsche Bank and Servicing Company. As against the latter two defendants, plaintiffs asserted causes of action for quiet title, declaratory relief, breach of contract, specific performance, and injunction. Deutsche Bank and Servicing Company filed demurrers to each of the causes of action asserted against them, and plaintiffs opposed those demurrers. After hearing argument on the demurrers, the trial court issued a minute order that adopted its tentative ruling in its entirety and sustained the defendants' demurrers without leave to amend. The trial court subsequently issued an order of dismissal as to Deutsche Bank and Servicing Company. Plaintiffs timely appealed from that order.
DISCUSSION
A. Standards of Review
The trial court's ruling on the demurrer is reviewed under a de novo standard. "On review from an order sustaining a demurrer, 'we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose. [Citations.]' (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189].) We may also consider matters that have been judicially noticed. (Serrano v. Priest (1971) 5 Cal.3d 584, 591 [96 Cal.Rptr. 601, 487 P.2d 1241]; City of Morgan Hill v. Bay Area Air Quality Management Dist. (2004) 118 Cal.App.4th 861, 869-870 .)" (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) "On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126 [119 Cal.Rptr.2d 709, 45 P.3d 1171].) 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. (Ibid.; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967 [9 Cal.Rptr.2d 92, 831 P.2d 317] (Aubry).) When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. (Zelig, supra, 27 Cal.4th at p. 1126.) And when it 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. (Ibid.)" (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.)
B. Legal Principles
Each cause of action against defendants in the complaint and proposed amended complaint is premised upon plaintiffs' assertion that the trustee's acceptance of the bid of their predecessor-in-interest created a binding agreement for the purchase of the property entitling plaintiffs to quiet title to the property, declaratory relief, damages for breach of contract, specific performance of the purchase agreement, and an injunction against defendants prohibiting them from selling the property to another purchaser. Because the nonjudicial foreclosure that gave rise to the trustee's sale in issue was governed by a comprehensive statutory scheme that, inter alia, defines and circumscribes a successful bidder's rights and remedies under the circumstances alleged in the complaint, we begin our analysis with a summary of that statutory scheme.
"A nonjudicial foreclosure sale is a creature of statute. (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 334 ['The Civil Code contains a comprehensive statutory scheme regulating nonjudicial foreclosure'].)" (Pro Value Properties, Inc. v. Quality Loan Service Corp. (2009) 170 Cal.App.4th 579, 583 (Pro Value Properties).) "Civil Code sections 2924 through 2924k 'provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.' (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830 .)" (Biancalana v. T.D. Service Co. (2011) 200 Cal.App.4th 527, 532.)
"The statutory scheme [governing nonjudicial foreclosures] can be briefly summarized as follows. Upon default by the trustor, the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. (Civ. Code, § 2924; 4 Miller & Starr [Cal. Real Estate (2d ed. 1989)] at § 9:131, p. 415.) The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. (Civ. Code, § 2924; 4 Miller & Starr, supra, at § 9:131, p. 416.) After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. (Civ. Code, § 2924, subd. (b); 4 Miller & Starr, supra, at § 9:145, p. 471.) After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. (Civ. Code, § 2924f; 4 Miller & Starr, supra, at § 9:146, p. 472.) The trustee may postpone the sale at any time before the sale is completed. (Civ. Code, § 2924g, subd. (c)(1); 4 Miller & Starr, supra, at § 9:148, p. 481.) If the sale is postponed, the requisite notices must be given. (Civ. Code, § 2924g, subd. (d).) The conduct of the sale, including any postponements, is governed by Civil Code section 2924g. (Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 317 .) The property must be sold at public auction to the highest bidder. (Civ. Code, § 2924g, subd. (a); Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424, 433 .)" (Moeller v. Lien, supra, 25 Cal.App.4th at p. 830.)
"The trustee's role in preparing for and conducting the sale is set forth in detail in Civil Code section 2924 et seq. 'The trustee in nonjudicial foreclosure is not a true trustee with fiduciary duties, but rather a common agent for the trustor and beneficiary. (Vournas [v. Fidelity Nat. Tit. Ins. Co. (1999)] 73 Cal.App.4th [668,] 677 .) The scope and nature of the trustee's duties are exclusively defined by the deed of trust and the governing statutes. No other common law duties exist. (I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 287-288 [216 Cal.Rptr. 438, 702 P.2d 596] . . . ; Residential Capital v. Cal-Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 827 [(Residential Capital)].)' (Kachlon v. Markowitz, supra, at p. 335.) In short, the trustee does not contract with the purchaser for the sale of the foreclosed property, but performs ministerial acts which, when properly executed, result in the transfer of title to the purchaser." (Pro Value Properties, supra, 170 Cal.App.4th at p. 583.)
As the court in Residential Capital, supra, 108 Cal.App.4th 807 explained, the rights of a bidder at a foreclosure sale are not governed by common law contract principles, but are determined by "principles of interpretation of the statutory scheme setting forth the rules of trust deed nonjudicial foreclosure sales." (Residential Capital, supra, 108 Cal.App.4th at pp. 820-821; see also California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070 [availability of particular remedy determined by consideration of "the policies advanced by the statutory scheme, and whether those policies would be frustrated by the allowance of the additional remedy"]; I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285; Moeller v. Lien, supra, 25 Cal.App.4th at p. 834].) The remedy for a bidder when a foreclosure sale is procedurally defective is restitution of the purchase price plus interest. (Residential Capital, supra, 108 Cal.App.4th at p. 823.)
"Although a nonjudicial foreclosure sale is generally complete upon acceptance of a bid by the trustee, the conclusive presumption [that the sale has been conducted regularly and properly] does not apply until a trustee's deed is delivered. Thus, if there is a defect in the procedure which is discovered after the bid is accepted, but prior to delivery of the trustee's deed, the trustee may abort a sale to a bona fide purchaser, return the purchase price and restart the foreclosure. (Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354 ; Whitman v. Transtate Title Co., supra, 165 Cal.App.3d 312; 4 Miller & Starr, supra, at § 9:151, pp. 499-500.)" (Moeller v. Lien, supra, 25 Cal.App.4th at p. 832.)
"As a general rule, the purchaser at a nonjudicial foreclosure sale receives title under a trustee's deed free and clear of any right, title or interest of the trustor. (4 Miller & Starr, supra, at § 9:152, p. 502.) A properly conducted nonjudicial foreclosure sale constitutes a final adjudication of the rights of the borrower and lender. (Smith v. Allen (1968) 68 Cal.2d 93, 96 [65 Cal.Rptr. 153, 436 P.2d 65].) Once the trustee's sale is completed, the trustor has no further rights of redemption. (Ballengee v. Sadlier (1986) 179 Cal.App.3d 1, 5 .)" (Moeller v. Lien, supra, 25 Cal.App.4th at p. 831.)
C. Analysis
In the instant case, plaintiffs allege in the complaint that by a series of grant deeds, Shimase LLC Trust held the Hill's entire interest in the property and that, prior to the trustee's sale, Shimase LLC Trust transferred a 50% interest to Pacifica Group 49/II by means of an unrecorded trust transfer grant deed. The plaintiffs also allege that prior to the trustee's sale, Eli Adams, doing business as Pacifica Group 49/II, filed a Chapter 13 bankruptcy proceeding. Fairly read, those allegations establish that Pacifica Group 49/II had an unrecorded 50% interest in the property prior to the trustee's sale and that it filed for bankruptcy prior to that sale. Thus, when West Coast Mortgage informed the trustee of the Eli Adams bankruptcy and advised it to suspend the sale, the trustee, which had the power to suspend the sale at any time before the sale was completed, acted appropriately in suspending or cancelling the sale because all such proceedings against the debtor in bankruptcy were stayed under the Bankruptcy Code. (11 U.S.C. § 362(a)(3) [a bankruptcy petition "operates as a stay, applicable to all entities, of [¶] . . . [¶] any act to obtain possession of property of the estate . . . or to exercise control over property of the estate; . . ."].) In addition, Civil Code section 2949g, subdivision (c)(1)(B) requires a trustee to postpone a sale if the sale is "stayed by operation of law."
Civil Code section 2924g, subdivision (c)(1)(D) provides in pertinent part: "(c)(1) There may be a postponement or postponements of the sale proceedings, . . . , at any time prior to the completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. The trustee shall postpone the sale in accordance with any of the following: [¶] . . . [¶] (D) At the discretion of the trustee."
Plaintiffs contend that because the property was not scheduled in the Eli Adams bankruptcy and because that bankruptcy filing was subsequently determined to be fraudulent, the trustee was under no duty to suspend or cancel the sale to their predecessor-in-interest. Neither contention withstands scrutiny.
Upon the filing of a bankruptcy all property of the debtor becomes the property of the estate, regardless of whether it is scheduled. (11 U.S.C. § 541; In re Dunning Bros. Co. (Bkrtcy E.D. Cal. 2009) 410 B.R. 877, 888 [when the bankruptcy petition is filed "all interests in nonexempt property, scheduled or unscheduled, are in custodia legis of the bankruptcy court on an exclusive in rem basis"].) Thus, once Eli Adams filed for bankruptcy, all of his property, including the 50% interest in the property granted to Pacifica Group 49/II by the Hill's successor-in-interest Shamase LLC Trust, became the property of the bankruptcy estate, regardless of whether the property was scheduled as an asset in the bankruptcy proceeding.
Similarly, although the bankruptcy court ultimately determined that the Eli Adams bankruptcy petition had been filed to delay and defraud creditors, that determination was made well after the trustee's sale. Because the trustee did not have the benefit of that ruling on the day of the sale, it had no basis to question the validity of the stay. The clear implication of the notice of the pending bankruptcy that the trustee received on the day of the sale was that Eli Adams had an interest in the property. Given facts as alleged in the verified complaint, the trustee followed applicable federal and state law and suspended the sale.
Plaintiffs allege that Servicing Company was required to petition the bankruptcy court to life the stay before it could notice another sale and that the bankruptcy court granted the petition and lifted the stay. Those facts suggest that on the day of the foreclosure sale in issue, a stay was in effect.
Plaintiffs alleged in their complaint that Pacifica Group 49/II, which is a d/b/a used by Adams, obtained an unrecorded grant deed to 50% of the property in January 2008. In their proposed amended complaint, they claim that Adams had no interest in the property. Such an allegation that is inconsistent with an allegation in a verified complaint without explanation may be disregarded. (See Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.)
Accordingly, because, as alleged, the trustee here received notice of the Eli Adams bankruptcy, it was required to suspend the sale and withhold the trustee's deed. And, as explained above, because the trustee's deed did not issue, plaintiffs' predecessor-in-interest—as the successful bidder—was entitled only to return of the purchase price plus interest. He had no other common law or tort remedies available to him. Because each of the causes of action asserted against defendants seek remedies that, by law, are unavailable to plaintiffs, the trial court properly sustained the demurrers for failure to state claims upon which relief could be granted. Because plaintiffs do not propose amendments that would allow them to pursue remedies against defendants beyond the return of the purchase price plus interest, there is no reasonable probability that the fundamental defects in the complaint can be cured by amendment. Accordingly, we conclude that the trial court did not abuse its discretion in denying plaintiffs leave to amend.
Respondents' motion for sanctions is denied.
DISPOSITION
The order of dismissal from which plaintiffs appeal is affirmed. Defendants are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MOSK, J. We concur:
TURNER, P. J.
ARMSTRONG, J.