Opinion
B292319
05-29-2020
JOHN F. GROSS, Plaintiff and Appellant, v. DLI PROPERTIES, LLC., Defendant and Respondent.
Beverly Law, Michael Shemtoub for Plaintiff and Appellant. Law Offices of Elkanah J. Burns, Elkanah J. Burns; Harris L. Cohen, Harris L. Cohen 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC628671) APPEAL from judgment of the Superior Court of Los Angeles County, David S. Cunningham, Judge. Affirmed. Beverly Law, Michael Shemtoub for Plaintiff and Appellant. Law Offices of Elkanah J. Burns, Elkanah J. Burns; Harris L. Cohen, Harris L. Cohen for Defendant and Respondent.
Appellant John Gross purchased a home in 2007 with a secured bank loan. He defaulted in 2011. The lender foreclosed. Respondent DLI Properties (DLI) is the bona fide purchaser for value (BFP) that successfully bid for the property at public auction in 2016.
Gross sued DLI to cancel the trustee's deed upon sale; to quiet title; and for declaratory relief. The trial court gave Gross five opportunities to state a cause of action, then sustained DLI's demurrers without leave to amend and dismissed the case. Gross contends that he unilaterally canceled his obligation to repay the purchase money loan and is entitled to keep the property without tendering the debt. He is mistaken and his claims are untimely. We affirm the judgment in favor of DLI.
FACTS AND PROCEDURAL HISTORY
The facts are derived from pleadings, exhibits attached to the pleadings, and recorded documents whose existence, contents and legal effect are subject to judicial notice. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924, fn. 1; Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1101.)
On July 5, 2007, Gross obtained a purchase money loan (Loan) from Indymac Bank (Bank) for $855,000, secured by a deed of trust (DOT) on property on Dorrington Avenue in West Hollywood (the Property). Gross also received a home equity line of credit (HELOC) secured by a lien on the Property.
The Bank officer who facilitated the Loan orally told Gross he could rescind the Loan and the HELOC. A "Notice of Right to Cancel" appended to the HELOC stated that Gross could cancel the transaction within three business days, under federal law. Gross alleges that he "had not received a Right to Rescind addendum to his main purchase money loan." The HELOC cancellation notice required Gross to "offer to return the money or property" and if the Bank failed to "take possession of the money or property within 20 calendar days of your offer, you may keep it without further obligation."
Days after obtaining the Loan, Gross decided that its terms were unsatisfactory. He sent the Bank a letter on July 8, 2007. It read, "I wish to cancel my Home Loan . . . and Home Equity Line of Credit . . . per the Notice of Right to Cancel attached. [¶] Please contact me to advise of next steps." He sent a second letter on August 9, 2007, advising the Bank "that I have cancelled this loan as per the right to cancel Notice sent on July 8, 2007 . . . . I have not heard anything back." Neither the July nor the August 2007 letters contains an offer to tender the Bank's money or the Property.
Gross alleges that he rescinded the Loan before making the first payment but "was hamstrung for nearly 3 years based on assertions of 'legal is dealing with it.' " He started making payments because the Bank told him that failure to pay would damage his credit rating.
In February 2011, Gross wrote the Bank to say he was "upset" at receiving a delinquency notice for $165,744.33; he referenced his 2007 cancellation letters. Gross informed the Bank that he has "stopped making any further payments." In 2013, Gross wrote to the Bank's loan servicing company, saying he canceled the Loan in 2007 and "I contend that I no longer owe any money on this loan."
The lender and its agents ignored Gross's letters and foreclosed on the Property. After Gross received notice under the DOT, a trustee's sale was conducted in June 2016. DLI purchased the Property at public auction for $1,250,000. Gross filed suit against the lender, the lender's agents, and DLI on July 28, 2016. A series of demurrers and amended pleadings followed.
The operative pleading is Gross's fifth attempt to state a cause of action. He asserts claims against DLI for cancellation of instruments connected to the foreclosure sale; to quiet title to the Property; and for a declaration that he canceled the Loan and is under no obligation to pay it.
DLI argued that Gross's claims are barred by the statute of limitations; the right to cancel under the federal Truth-in-Lending Act (TILA) does not apply to residential purchase money loans; he cannot claim rescission because he did not tender the debt; a quiet title claim is unavailable because Gross no longer has title; his complaint is barred by laches; and he challenged title in an unlawful detainer action that was decided against him and is res judicata. The trial court sustained demurrers to Gross's fourth amended complaint without leave to amend and entered judgment for DLI.
DISCUSSION
1. Appeal and Review
Appeal lies from the judgment of dismissal after demurrers are sustained without leave to amend. (Code Civ. Proc., §§ 581d, 904.1, subd. (a)(1); Serra Canyon Co. v. California Coastal Com. (2004) 120 Cal.App.4th 663, 667.) We review pleadings de novo to determine if a cause of action has been stated; we assume the truth of properly pleaded material facts but not the truth of contentions or conclusions of fact or law. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.)
2. Statute of Limitations
Gross obtained the Loan on July 5, 2007; he alleges that he rescinded it three days later. The Bank rejected the rescission and demanded that Gross pay his obligation, which he did. In 2013 he announced, "I no longer owe any money on this loan." He received notice of default and the lender foreclosed in 2016.
Gross knew in 2007 that the Bank did not intend to honor his rescission notice. He paid the mortgage for years to avoid damaging his credit. Gross's claims accrued in 2007, following the Bank's rejection of his rescission notice and its demands that he make Loan payments. Gross's 2011 letter makes clear his belief that the Bank violated the Loan terms by ignoring his 2007 rescission. His lawsuit filed in July 2016 exceeds any applicable limitation period. (See, e.g., Code Civ. Proc., § 337, subd. (a) [four-year limit on claims for breach of a written contract].)
3. Cancellation of Instruments
Gross asserts that the trustee's deed of sale to DLI and the instruments leading up to the sale must be canceled. The law provides that "A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled." (Civ. Code, § 3412.)
Gross's claim to ownership of the Property stems from his purported rescission of the Loan in July 2007 which, in his view, led to rescission of the DOT by operation of law. We conclude that Gross could not rely on TILA to rescind the Loan or on an alleged oral promise from a Bank officer. Moreover, he did not tender his debt if he wished to rescind under state law. As a result, there is no legal basis for Gross to claim that the instruments are void and must be canceled to avoid serious injury.
Gross relies on a rescission notice attached to his HELOC. He invoked it in July 2007, days after obtaining the Loan and the HELOC. The right to cancel the HELOC arises under federal law, specifically, TILA. (15 U.S.C.S. § 1601 et seq.) Gross's pleadings alleged that the Bank's failure "to honor the rescission demand . . . was a TILA violation." TILA allows rescission "to protect borrowers. It is not meant to provide borrowers with a free house or other financial windfall," which is why rescission is conditioned "on the borrower's tender of the loan proceeds to the lender." (Palmer v. Ameribanq Mortg. Group (E.D. PA 2010) 2010 U.S. Dist. LEXIS 107340, 62.)
Gross's pleading acknowledges that he did "not receive[ ] a Right to Rescind addendum to his main purchase money loan." There is a good reason why the Loan did not have a right to rescind addendum. Simply put, TILA's rescission rights do not apply to residential purchase money loans like the one that Gross attempted to cancel. (15 U.S.C.S. §§ 1602(x), 1635(a), (e)(1); Williams v. Homestake Mortgage Company (11th Cir. 1992) 968 F.2d 1137, 1139, fn. 5.) We cannot reasonably construe the Loan as incorporating a notice attached to a different contract. Gross had no right to rescind the Loan under TILA.
Gross relies on a recently recalled 2007 conversation in which he was told that the right to rescind addendum applied to both the Loan and the HELOC. Parole evidence may explain ambiguities in a contract, if the terms are reasonably susceptible of that meaning. But it cannot be used to contradict the contract or add new terms. "[T]he terms contained in an integrated written agreement may not be contradicted by prior or contemporaneous [oral] agreements. [This] necessarily bars consideration of extrinsic evidence of prior or contemporaneous negotiations or agreements at variance with the written agreement. '[A]s a matter of substantive law such evidence cannot serve to create or alter the obligations under the instrument.' " (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 344; Civ. Code, § 1625; Code Civ. Proc., § 1856, subd. (a).) Gross's pleading admits that a cancellation clause is not part of his Loan. He cannot use an alleged oral promise to rewrite the Loan to add new terms that violate TILA.
Gross did not recall a conversation with a Bank officer in his first four pleadings. The alleged promise does not appear until his most recent pleading.
To the extent Gross relies not on federal law but on state rescission law, this too fails. To rescind, he had to tender the debt. He alleges the ability to pay but this is insufficient. A tender is an offer to pay the creditor the full amount due. (Gaffney v. Downey Savings & Loan Assn. (1988) 200 Cal.App.3d 1154, 1165.) "'The tenderer must do and offer everything that is necessary on his part to complete the transaction, and must fairly make known his purpose without ambiguity, and the act of tender must be such that it needs only acceptance by the one to whom it is made to complete the transaction.' " (Ibid.) Gross's letters to the Bank did not offer the full amount of debt. Instead, they state that he is canceling the Loan while keeping the borrowed funds and the Property.
Gross's belief that he owns the Property free of liens—without repaying the money he borrowed—is untenable. As our colleagues in Division Six wrote, "A person who borrows money from a bank to purchase or refinance a home has a reasonable expectation that the bank will fund the loan. The bank has a reasonable expectation that monthly mortgage payments will be made. Here, appellant's reasonable expectations were met. The bank's were not. Nonpayment of the mortgage for approximately eight years while the borrower remains in possession is an egregious abuse." (Gillies v. JPMorgan Chase Bank N.A. (2017) 7 Cal.App.5th 907, 909.)
4. Quiet Title Claim
A cause of action to quiet title must describe (1) the property, (2) the basis of plaintiff's title, (3) the adverse claims to plaintiff's title, (4) the date as of which the determination is sought, and (5) a prayer for giving superior title to plaintiff against the adverse claims. (Code Civ. Proc., § 761.020.)
As discussed above, Gross cannot claim superior title based on his unsupported belief that he was not required to repay his purchase money Loan. DLI purchased the Property at a public auction as a BFP. Gross did not allege (1) the DOT was void because his signature is forged or he did not know what he was signing, or (2) the DOT was voidable because DLI knew it was obtained by fraud. (Schiavon v. Arnaudo Bros. (2000) 84 Cal.App.4th 374, 378-380; Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106.) The pleading does not allege that DLI knew about Gross's transactions with the Bank. Thus, DLI took valid and conclusive title as the BFP. (Moeller v. Lien (1994) 25 Cal.App.4th 822, 831-832.)
The judgment in DLI's unlawful detainer action against Gross declares that DLI is a BFP. Gross is collaterally estopped from denying that DLI is a BFP. (Malkoskie v. Option One Mortgage Corp. (2010) 188 Cal.App.4th 968, 976 [unlawful detainer judgment has a claim preclusive effect in a subsequent action challenging the validity of title acquired by the purchaser of the property at a foreclosure sale].) --------
5. Declaratory Relief
Gross's request for declaratory relief is based on his failed claim that he rescinded the Loan. Requests for declaratory relief derivative of other failed claims are subject to demurrer. (Smyth v. Berman (2019) 31 Cal.App.5th 183, 191-192; Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800.) As we have discussed, Gross's claims to the Property do not survive scrutiny. The pleading does not present an "actual controversy relating to the legal rights and duties of the respective parties" regarding the Property. (Code Civ. Proc., § 1060.)
6. Request to Amend
Gross requests the right to amend on appeal. (Code Civ. Proc., § 472c, subd. (a); City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 746.) The burden of demonstrating a reasonable possibility that defects can be cured "is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.)
Gross did not carry his burden by spelling out in detail in his brief how an amendment could cure a defect or change the legal effect of the pleading. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349-350; Hendy v. Losse (1991) 54 Cal.3d 723, 743.) Instead, he repeats the allegations in his current pleading and writes, "All of the elements of each cause of action have been properly pled." The trial court did not abuse its discretion by sustaining DLI's demurrers without leave to amend.
DISPOSTION
The judgment is affirmed. Respondent is entitled to recover its costs on appeal from appellant Gross.
NOT TO BE PUBLISHED.
LUI, P. J. We concur:
ASHMANN-GERST. J.
HOFFSTADT, J.