Opinion
B229763
09-28-2011
LOLITA MADARANG et al., Plaintiffs and Appellants, v. U.S. BANK NATIONAL ASSOCIATION et al., Defendants and Respondents.
Kenneth Lance Haddix for Plaintiffs and Appellants. Albertson Law, Gina L. Albertson 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. NC054137)
APPEAL from a judgment of the Superior Court of Los Angeles County. Ross M. Klein, Judge. Affirmed.
Kenneth Lance Haddix for Plaintiffs and Appellants.
Albertson Law, Gina L. Albertson for Defendants and Respondents.
Plaintiffs Lolita and Ramon Madarang appeal the judgment entered following the successful demurrer of defendants U.S. Bank National Association (the "Bank") and Select Portfolio Servicing, Inc. ("SPS"). Finding no error, we affirm.
FACTUAL AND PROCEDURAL SUMMARY
In November 2005, Mr. Madarang obtained a mortgage loan in the principal amount of $460,800 (the "Loan") from First Franklin Financial Corporation. Mr. Madarang executed a promissory note (the "Note") secured by a deed of trust (the "Deed of Trust") on the Madarangs' home in Long Beach (the "Property"). By assignment dated January 31, 2009, defendant Bank succeeded to the interest of beneficiary under the Deed of Trust. SPS serviced the Loan on behalf of the Bank.
In late 2008, the Note became delinquent. A Notice of Default and Election to Sell Under Deed of Trust was recorded on February 11, 2009. On May 18, 2009, a Notice of Trustee's Sale was recorded, with a foreclosure sale date of June 3, 2009.
In order to avoid loss of their home, plaintiffs requested SPS to forbear from foreclosing on the Property. To that end, on May 12, 2009, Mr. Madarang and SPS entered into a Forbearance to Modification Agreement (the "Forbearance Agreement"), which provided a window of time within which the Bank would evaluate a possible loan modification. Under this agreement, Mr. Madarang agreed to make certain payments during the months of May, June and July of 2009. In return, SPS agreed to consider Mr. Madarang's application for a loan modification and to stay the foreclosure proceedings. In accordance with this agreement, the foreclosure sale scheduled for June 3, 2009 was postponed.
Plaintiffs complied with the terms of the Forbearance Agreement, making the payments required thereunder and providing to SPS the financial information necessary to enable SPS to consider a loan modification. Unfortunately, SPS determined, based on the financial information provided, that plaintiffs did not qualify for the federal Home Affordable Modification Program, because they did not pass the U.S. Treasury's Net Present Value test. SPS notified Mr. Madarang of this fact by letter dated November 11, 2009, and urged him "to contact SPS immediately as we may have other options available for you." SPS sent a second letter the following day stating in bold type "The time to act is now if you want to avoid losing your home!"
On December 2, 2009, the Property was sold to the Bank at public auction; a Trustee's Deed granting and conveying to the Bank all right, title and interest under the Deed of Trust was recorded on December 16, 2009.
Plaintiffs filed their complaint in this action on July 12, 2010, alleging causes of action for wrongful foreclosure, to set aside foreclosure sale, cancellation of Trustee's Deed Upon Sale, quiet title, declaratory relief, unfair business practices and injunctive relief. After providing the background information set forth above, the original complaint alleged that "Pursuant to SPS'[s] advice, Plaintiffs contacted SPS numerous times, and inquired about the options being provided by SPS that would allow Plaintiffs to keep their Property. SPS advised Plaintiffs to check with them as soon as Plaintiffs' finances improve. However, much to Plaintiffs' surprise, SPS foreclosed on their Property on or about December 16, 2009. However, at no time during the entire negotiation between Plaintiffs and SPS [were] Plaintiffs informed of SPS'[s] intent to proceed with its foreclosure. In fact, during the loan modification negotiations, Plaintiffs continued to inquire whether the Property is in . . . danger of being foreclosed, and were informed on several occasions not to worry as it will not commence foreclosure proceedings against the Property as long as negotiations were continuing."
The Bank demurred to the first amended complaint, the operative pleading, arguing first that it did not contain a proper allegation of tender of payment, a prerequisite for a wrongful foreclosure action, and that in any event, it failed to state a cause of action based on the foreclosure proceedings, because they were conducted in accordance with Civil Code section 2924 et seq., which regulates nonjudicial foreclosure sales. Concurrently with its demurrer, the Bank filed a request for judicial notice of the following documents, which the trial court granted: (1) the Note; (2) the Deed of Trust; (3) the assignment of the Deed of Trust to the Bank; (4) the Notice of Default; (5) the Substitution of Trustee; (6) the Notice of Trustee's Sale; and (7) the Trustee's Deed Upon Sale. With the exception of the Note, each of the foregoing documents was recorded in the Los Angeles County Recorder's Office, and bore that office's instrument number and date of recordation. The trial court granted the demurrer without leave to amend. Plaintiffs appeal the judgment of dismissal which followed that ruling.
STANDARD OF REVIEW
"'Our only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action.'" (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) We assume the truth of the allegations in the first amended complaint that have been properly pleaded, and give it a reasonable interpretation by reading it as a whole and with all its parts in their context. (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 300.) However, the assumption of truth does not apply to contentions, deductions, or conclusions of law and fact. (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at pp. 300-301; Moore v. Regents of University of California, supra, 51 Cal.3d at p. 125.) Furthermore, any allegations that are contrary to the law or to a fact of which judicial notice may be taken will be treated as a nullity. (Interinsurance Exchange v. Narula (1995) 33 Cal.App.4th 1140, 1143; Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955.) "On appeal from a judgment of dismissal entered after a demurrer has been sustained without leave to amend, unless failure to grant leave to amend was an abuse of discretion, the appellate court must affirm the judgment if it is correct on any theory. [Citations.] If there is a reasonable possibility that the defect in a complaint can be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend. [Citation.] The burden is on plaintiff, however, to demonstrate the manner in which the complaint might be amended. [Citation.]" (Hendy v. Losse (1991) 54 Cal.3d 723, 742; Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)
DISCUSSION
1. Cause of action for wrongful foreclosure
The complaint's first cause of action, for wrongful foreclosure, is based on what plaintiffs maintain were three irregularities in the foreclosure proceedings which rendered the foreclosure sale void. First, plaintiffs allege that the sum required to bring the Loan current, as stated in both the Notice of Default and the Notice of Trustee Sale, "was inaccurate and did not properly credit Plaintiffs for all payments made since inception of the loan." The Notice of Default stated that, as of February 11, 2009, the amount due was $14,878.08. The complaint alleged that "This amount is inaccurate because as of that date, Plaintiffs believe that they only owed the sum of not more than $12,000.00 on the Note and Deed of Trust."
Plaintiffs were not prejudiced by this supposed error. If they were prepared to pay the $12,000 which the complaint acknowledges that they owed at the time, they could have done so; the Bank would then be required to establish that an additional $2,878.08 remained outstanding if it wished to proceed with the foreclosure. (See, e.g., Tomczak v. Ortega (1966) 240 Cal.App.2d 902.) However, plaintiffs do not allege that they would have brought the Loan current following receipt of the Notice of Default had the notice reflected the correct reinstatement amount. They thus were not harmed by the alleged error.
Moreover, on May 12, 2009, by executing the Forbearance Agreement, a copy of which plaintiffs attached to their initial complaint, Mr. Madarang acknowledged that the sum required to reinstate the Loan was $32,579.03, well in excess of $12,000. The Notice of Trustee's Sale was executed the following day and recorded on May 18, 2009. Plaintiffs may not avoid demurrer by relying on facts alleged in the complaint which are contradicted by facts appearing in exhibits to the complaint. (Mintz v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1603.)
Plaintiffs next allege that "At the commencement of the foreclosure process, the foreclosing Trustee did not have legal standing to publish and/or record either the [Notice of Default] or [Notice of Trustee's Sale] as no Substitution of Trustee has been recorded as required under Cal. Civ. Code §2934a." A Substitution of Trustee dated February 11, 2009 and recorded on March 27, 2009 and substituting Quality Loan Service as trustee under the Deed of Trust was judicially noticed by the trial court. Thus, documents properly before the court establish that there was no irregularity with respect to the "legal standing" of Quality Loan Service to publish and record the Notice of Default and Notice of Trustee's Sale.
Finally, plaintiffs allege that "At the commencement of the foreclosure process, the foreclosing Trustee did not represent the true owner or real party in interest to the Note." Plaintiffs do not explain how this allegation supports their cause of action for wrongful foreclosure. Plaintiffs have no standing to contest the agency relationship between the trustee and the beneficiary under the Deed of Trust. The beneficiary under the Deed of Trust had full power and authority to designate the trustee of its choice, and to execute a Substitution of Trustee, at any time. If the entity which acted as trustee on behalf of the beneficiary was not in fact authorized to do so, the beneficiary alone would have cause to complain. The Bank, beneficiary under the Deed of Trust, has not done so, but rather affirms the authority of the substituted trustee to act in that capacity under the Deed of Trust.
2. Cause of action for unfair business practices
The complaint's second cause of action, for unfair business practices, is based upon the various allegations concerning the conduct of the Bank and its agents which plaintiffs contend constitute unfair business practices. We consider each instance of improper conduct in turn.
First, plaintiffs allege that SPS assured Mr. Madarang that it would "not proceed with its foreclosure proceedings while the parties are in negotiations, and that Plaintiff will be given sufficient notice in the event of the denial of his loan modification application." Indeed, this promise is contained in the Forbearance Agreement. However, plaintiffs acknowledge that SPS agreed to stay the foreclosure proceedings only while their application to modify the Loan was under consideration by the Bank. Plaintiffs learned on or about November 11, 2009 that their application had been denied, resulting in the termination of the Forbearance Agreement. Thus, pursuant to the terms of that agreement, SPS's promise to forbear from pursuing foreclosure of the Property expired. It is not an unfair business practice to duly perform one's contractual obligations.
Next, plaintiffs allege that defendants "induced [them] to make installment payments pursuant to the Agreement based on their false assurance that they would provide Plaintiffs with an affordable lower mortgage payment[] in order to allow them to stay at the Property." The Forbearance Agreement does not support this conclusion. Rather, the agreement states that SPS will consider plaintiffs' loan modification application, based upon the financial information and documentation requested by SPS "to verify the income and assets that will support Borrower's ability to repay." The contract which plaintiffs attach to the complaint thus contradicts the allegation that SPS promised to lower their mortgage payments to a level which would allow them to keep their home.
Lastly, plaintiffs allege as an unfair business practice that SPS failed to notify them that there would be no loan modification and that they were proceeding with the foreclosure sale. Again, these alleged facts are contradicted by the contents of the letters, dated November 11 and 12, 2009, which SPS sent to Mr. Madarang notifying him that his loan modification application had been denied. "The time to act is now if you want to avoid losing your home!" is a clear indication that a foreclosure sale is imminent.
The additional actions which plaintiffs allege constitute unfair business practices consist of defendants' conduct, described above, in connection with the foreclosure proceedings. As we determined that the complaint fails to state a cause of action for wrongful foreclosure, the lawful actions which the Bank took in foreclosing on the Property cannot be the basis of a claim of unfair business practices.
In short, plaintiffs' real complaint is that the Bank did not modify their loan, and that as a consequence, they lost their home to foreclosure. However, all of the matters brought before the court by way of attachments to the complaint and judicial notice establish that the Bank and its agents processed the foreclosure in accordance with the law and fulfilled their obligations to Mr. Madarang under the loan documents and the Forbearance Agreement. The complaint fails to state a cause of action for unfair business practices.
3. The remaining causes of action
Plaintiffs' remaining causes of action, to set aside foreclosure sale, to cancel Trustee's Deed Upon Sale, quiet title, breach of covenant of good faith and fair dealing, and declaratory relief, all rely on the premise that the Bank improperly foreclosed on the Property. Inasmuch as we have ruled that the complaint fails to state a cause of action for wrongful foreclosure, these causes of action likewise fail to state a claim for relief.
DISPOSITION
The judgment is affirmed. Respondents to recover costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ARMSTRONG, Acting P. J. We concur:
MSOK, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.