Opinion
E050478 Super.Ct.No. RIC527248
08-08-2011
TERRY ROBINSON-HINES et al, Plaintiffs and Appellants, v. U.S. BANK NATIONAL ASSOCIATION, as trustee, etc., Defendant and Respondent.
Terry Robinson-Hines and Tony Hines, in pro. per., for Plaintiffs and Appellants. Alvaradosmith, John M. Sorich, S. Christopher Yoo and Lashon Harris for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
OPINION
APPEAL from the Superior Court of Riverside County. Mark E. Johnson, Judge. Affirmed.
Terry Robinson-Hines and Tony Hines, in pro. per., for Plaintiffs and Appellants.
Alvaradosmith, John M. Sorich, S. Christopher Yoo and Lashon Harris for Defendant and Respondent.
I
INTRODUCTION
This action arises from plaintiffs Terry Robinson-Hines and Tony Hines (plaintiffs) defaulting on a $665,469 home loan, secured by a deed of trust. As beneficiary of the loan, U.S. Bank National Association, as trustee for Lehman Brothers Structured Asset Securities Corporation SASCO 2007-BNC1 (US Bank), initiated nonjudicial foreclosure proceedings, resulting in a trustee's sale of plaintiffs' property to US Bank.
Plaintiffs filed a complaint to set aside the foreclosure sale and cancel the trustee's deed. US Bank demurred to the complaint and first amended complaint, with the trial court sustaining US Bank's demurrer to the first amended complaint, without leave to amend, on the ground plaintiffs did not allege they cured the original default on the loan by tendering the amount in default. The trial court also found there was no enforceable modification agreement precluding foreclosure.
Plaintiffs appeal the judgment of dismissal. They contend they were not required to tender the amount in default. Plaintiffs also argue that the foreclosure sale was void because the original deed of trust and assignment were void. We reject plaintiffs' arguments. Since plaintiffs did not allege they tendered the amount in default, they cannot prevail on their amended complaint. The judgment is affirmed.
II
FACTUAL AND PROCEDURAL BACKGROUND
In reviewing the lower court's ruling on demurrer, we base our statement of the factual and procedural background on the pleadings and such matters as may be judicially noticed. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)
After US Bank foreclosed on plaintiffs' property, plaintiffs filed a complaint in May 2009, against US Bank, challenging the nonjudicial foreclosure sale. US Bank demurred to the complaint, and the trial court sustained the demurrer, with leave to amend, on the ground plaintiffs did not allege they cured the default by tendering the amount in default. Plaintiffs also failed to allege there was an enforceable agreement to modify and reinstate the loan.
First Amended Complaint
In November 2009, plaintiffs filed a first amended complaint against US Bank (amended complaint), containing the following causes of action: (1) wrongful foreclosure, (2) to cancel trustee's deed upon sale, (3) to vacate and set aside foreclosure sale, (4) quiet title, (5) declaratory relief, (6) fraud, (7) negligent representation, (8) abuse of process, (9) unfair business practices, and (10) conspiracy.
Plaintiffs alleged in their amended complaint the following facts. Lehman Brothers Structured Asset Securities Corporation SASCO 2007-BNC1 (Lehman Bros.) issued securities in the form of collateralized mortgage obligations, collateralized debt obligations and other collateralized investment vehicles. U.S. Bank National Association acted as trustee for Lehman Bros. in connection with Lehman Bros.'s collateralized investments.
On June 20, 2007, plaintiffs purchased real property located at 17121 Spring Canyon Place, in Riverside (the property) for $749,400. Plaintiffs paid a downpayment of $37,470 and obtained a $665,469 loan from BNC Mortgage, Inc. (BNC), secured by a recorded deed of trust.
On March 20, 2008, the trustee under the deed of trust for the subject property, First American LoanStar Mortgage Services, LLC (First American), recorded a notice of default.
On May 15, 2008, First American caused an assignment of deed of trust (assignment) to US Bank to be recorded. The assignment was executed in Texas, by Chet Sconyers, as "certifying officer" of Mortgage Electronic Registration Systems, Inc. (MERS). As of November 9, 2004, MERS was unauthorized to conduct business in California.
Plaintiffs allege the assignment states plaintiffs' loan is the property of US Bank, trustee for Lehman Bros., which offers mortgage backed securities. BNC Mortgage, LLC is allegedly the originator of the mortgages, owned by Lehman Bros. Structured Asset Securities Corporation (SASCO) was the depositor for the trust called "Structured Asset Securities Corporation SASCO 2007 - BNC1."
The assets of the trust fund consisted primarily of two mortgage pools of conventional, adjustable and fixed rate residential mortgage loans, with a principal balance of $746,499,907. SASCO, as depositor, assigned the mortgage loans in the pools to US Bank as Lehman Bros.'s trustee. Immediately before transfer and assignment of the mortgage loans to US Bank, SASCO was the sole owner and holder of each mortgage loan, and had good and marketable title and full right to transfer and sell each mortgage loan to US Bank. Concurrently with the execution and delivery of assignment of plaintiffs' trust deed to US Bank (exh. B to the amended complaint), SASCO transferred and conveyed all of its right, title and interest in the mortgage loans.
On June 25, 2008, a notice of trustee's sale of plaintiffs' property was recorded. On July 14, 2008, the property was sold to US Bank as trustee for Lehman Bros. and was recorded on July 18, 2008.
On July 28, 2008, a notice of rescission of trustee's sale and trustee's deed upon sale was recorded. The notice stated that the sale was rescinded because the beneficiary under the promissory note and plaintiffs, as trustors, "'entered into a legally binding and enforceable agreement to modify the repayment terms of the loan.'" The notice further stated that "'the Trustee's Sale and the resulting Trustee's Deed Upon Sale were null, void and legally ineffective to transfer all or an interest in the Property to U. S. BANK National Association, as trustee for [Lehman Bros.]'"
Between July 2008 and the date of the foreclosure sale in October 2008, plaintiffs attempted in good faith to negotiate with US Bank a revision of the promissory note and reinstatement of the terms and conditions of the note. Attached as exhibit A to the amended complaint is a reinstatement quote generated by Chase Home Finance LLC in October 2008, stating the amount due to reinstate the loan totaled $72,197.79. This quote was declared valid through November 11, 2008.
According to the SASCO-BNC1 prospectus, JPMorgan Chase Bank was one of the primary servicers for the mortgage loans included in the SASCO-BNC1 trust fund. The primary servicing could be transferred to servicers other than the initial servicers, as apparently occurred in the instant case, with Chase Home Finance LLC servicing plaintiffs' mortgage loan.
A second notice of trustee's sale was recorded on October 2, 2008. The sale was noticed for October 20, 2008, but was delayed until October 27, 2008. A notice of the trustee's sale was recorded on October 30, 2008. Plaintiffs' property was sold to US Bank for $304,518.07. US Bank received a trustee's deed upon sale, which was recorded on October 30, 2008.
Plaintiffs allege in their amended complaint that the loan documents, including the assignments, show that plaintiffs' mortgage was not conveyed to the trust that foreclosed on plaintiffs' property. Rather, the trust deed was assigned to US Bank as trustee. The assignments are invalid and unenforceable because of the following irregularities: (1) the documents are not effective because they lack the requisite formalities; (2) the only entity that could convey the mortgage to the trust was SASCO; (3) therefore the assignments, which assign the trust deed to US Bank, as trustee, failed to convey the mortgage to the trust, since the assignors were required to comply with the terms of the trust agreement; (4) there was no assignment to the depositor, SASCO, and conveyance of the mortgage to the trust was endorsed with recourse, instead of without recourse. Plaintiffs do not allege that they tendered the amount owed on the loan.
In the first cause of action for wrongful foreclosure, plaintiffs allege the foreclosure was unlawful and void or voidable because US Bank lacked title and thus standing to initiate foreclosure. In addition, the default was inflated and there were illegal mortgage servicing practices. The foreclosure sale also was fraudulent in that plaintiffs were falsely told the foreclosure would be delayed. In addition, the foreclosing entity did not comply with statutory foreclosure requirements or engage in loss mitigation.
In the second cause of action for cancellation of the trust deed, third cause of action to vacate and set aside the foreclosure sale, and fourth cause of action to quiet title, plaintiffs allege US Bank had no right, title or interest to plaintiffs' property, as alleged in the first cause of action.
In the fifth cause of action for declaratory relief, plaintiffs allege the trustee's sale is null and void because it was not properly noticed and was conducted in violation of Civil Code section 2924. Plaintiffs requested the court to declare the sale and trust deed void and that the defendants did not hold any right or title to the property
Plaintiffs allege in the sixth cause of action for fraud and seventh cause of action for negligent misrepresentation that US Bank falsely stated orally and in writing that US Bank promised plaintiffs that no foreclosure or trustee's sale proceedings would occur during the pendency of the loan reinstatement period, ending on November 8, 2008. In reliance on this representation, plaintiffs provided US Bank with all the requested forms and documents. Plaintiffs mistakenly believed US Bank was the holder of plaintiffs' mortgage, when in fact, US Bank was the trustee, with no power to act beyond the powers granted in the trust agreement.
Plaintiffs allege in the eighth cause of action for abuse of process that US Bank maliciously, and with hostility and ill will, initiated foreclosure without believing it had a valid claim. In the ninth cause of action for unfair business practices, plaintiffs allege US Bank committed unfair competition acts, in violation of Business and Professions Code section 17200, by committing predatory financing and mortgage lending practices, asserting a nonexistent interest to unjustly enrich US Bank at the expense of consumers, and constructing and propounding an elaborate Ponzi scheme.
The tenth cause of action (erroneously entitled the ninth cause of action) is for conspiracy. Plaintiffs allege US Bank conspired in constructing and coordinating a series of "special purpose invest vehicles," which served as the foundation for a Ponzi scheme, for the purpose of unjustly enriching US Bank at the expense of plaintiffs' rights and privileges. In addition, US Bank breached its covenants of good faith and fair dealing.
In the amended complaint prayer, plaintiffs request a declaration that the foreclosure was wrongful and reinstatement of the original promissory note obligation; cancellation of the trustee's deed upon sale; an order vacating and setting aside the foreclosure sale; quiet title; compensatory and punitive damages; injunctive relief preventing the defendants from selling the property; an accounting of the amount due and owing; issuance of a new deed of trust; and recovery of plaintiffs' attorneys' fees and costs.
On December 11, 2009, US Bank demurred to plaintiffs' first amended complaint and concurrently requested judicial notice of the grant deed, dated June 4, 2007, granting title to the property to plaintiffs (exh. 1) and the original deed of trust encumbering plaintiffs' property (exh. 2). The deed of trust states that plaintiffs were the borrowers, BNC was the original lender, T.D. Service Company was the trustee, and MERS was a separate corporation acting solely as a nominee for the lender, and was the beneficiary under the security instrument.
US Bank also requested judicial notice of the notice of default and election to sell under deed of trust, dated March 19, 2008, stating plaintiffs were in default and owed $24,957.28 on their home loan (exh. 3); the substitution of trustee, dated April 21, 2008, substituting First American as trustee, in place of T.D. Service Company (exh. 4); the assignment of deed of trust, dated April 25, 2008 and recorded on May 15, 2008, assigning MERS's interest in the trust deed, as beneficiary, to US Bank (exh. 5); notice of rescission of trustee's sale and trustee's deed upon sale, dated July 24, 2008, rescinding the trustee's sale to US Bank on July 14, 2008 (exh. 6); notice of trustee's sale, dated September 24, 2008, notifying plaintiffs they were in default on their home loan and a trustee's sale was scheduled for October 20, 2008 (exh. 7); trustee's deed upon sale, dated October 28, 2008, stating US Bank foreclosed on plaintiffs' property and purchased the property at the trustee's sale on October 27, 2008, for $304,518.07, with plaintiffs owing $736,440.94 on the loan (exh. 8); and a copy of a federal court minute order, dated July 29, 2009, granting US Bank's motion to dismiss and remand back to the state court plaintiffs' wrongful foreclosure action (exh. 9). The trial court did not rule on US Bank's request for judicial notice.
Plaintiffs opposed US Bank's demurrer to the amended complaint. Plaintiffs attached to their opposition copies of the entire SASCO prospectus (exh. A); the SASCO trust (exh. B); and printouts from the California Secretary of State's website, showing BNC's status as surrendered and "merged out," as of January 15, 2010, (exh. C).
On February 26, 2010, the trial court heard US Bank's demurrer to plaintiffs' amended complaint and sustained the demurrer without leave to amend on the grounds plaintiffs did not allege they cured the loan default by tendering the amount in default. Plaintiffs also failed to allege an enforceable agreement to reinstate the loan by agreeing to modification. Even if there was such an agreement to delay foreclosure, it was gratuitous and could be rescinded.
III
STANDARD OF REVIEW
Without specifying any particular cause of action, plaintiffs contend the trial court erred in sustaining US Bank's demurrer without leave to amend. We review de novo the order sustaining US Bank's demurrer, treating the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In reviewing the lower court's ruling on demurrer, we base our statement of the factual and procedural background on the pleadings and such matters as may be judicially noticed. (Careau & Co. v. Security Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1381, 1386; Hendy v. Losse, supra, 54 Cal.3d at p. 742.)
If judicially noticeable facts render an otherwise facially valid complaint defective, the complaint is subject to demurrer. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.) "Under the doctrine of truthful pleading, the courts 'will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts that are judicially noticed.' [Citation.] 'False allegations of fact, inconsistent with annexed documentary exhibits [citation] or contrary to facts judicially noticed [citation], may be disregarded . . . .'" (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400; accord, C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094, 1102.)
IV
VALIDITY OF ORIGINAL TRUST DEED
Plaintiffs argue the foreclosure sale of their property is a nullity because the original trust deed between the lender, BNC, and plaintiffs, the borrowers, is void since BNC was legally incapable of executing the deed as a surrendered foreign corporation. BNC therefore could not obtain or exercise any contractual or equitable rights and, under Revenue & Taxation Code section 23302, subdivision (d), BNC could not "sell, transfer, or exchange" real property in California. But plaintiffs did not allege BNC's legal incapacity in their amended complaint or provide any judicially noticed documents attached to the amended complaint, establishing this.
In opposition to the demurrer, plaintiffs provided a printout from the California Secretary of State's website, which showed that BNC was a surrendered corporation. The printout is dated January 21, 2010, and states that "Data is updated weekly and is current as of Friday, January 15, 2010. It is not a complete or certified record of the entity." The printout further states that BNC's corporate status at the time of the printout was "SURRENDER." The printout states BNC is a Delaware corporation, with an agent for service of process in California. A second printout from the same website, printed a minute after the first printout, states that BNC's corporate status was "MERGED OUT," and the agent for service of process "RESIGNED ON 02/09/2009." The entity number differs from the entity number used for the first printout.
The website defines the term "Entity Number" as "The identification number assigned to a business entity by the Secretary of State at the time of filing." The term "surrender" is defined as "Foreign corporations - The business entity surrendered its right to transact business in the State of California." The term, "merged out" is defined as "The business entity merged out of existence in California into another business entity. The name of the surviving entity can be obtained by ordering a copy of the filed merger document containing the name of the surviving entity, or by ordering a status report." (<http://www.sos.ca.gov/business/be/cbs-field-status-definitions.htm> [as of Aug. 5, 2011].)
Even assuming the printouts are judicially noticeable, they do not establish that BNC was a surrendered corporation in California at the time the original deed of trust took effect on June 4, 2007. The two printouts, which refer to BNC under two different entity numbers, both state that BNC registered as a business entity doing business in California, before execution of the trust deed. The first printout, as to entity number C2082592, states BNC filed on March 11, 1998, with no indication as to when BNC surrendered its California corporate status. The second printout, as to entity number C1762864, states BNC filed on May 2, 1995, with no indication as to when BNC "merged out" its California corporate status.
Plaintiffs have not demonstrated that the original deed of trust was void, since plaintiffs have not established that BNC was a surrendered corporation in California when it executed the original trust deed. For this same reason Revenue and Taxation Code section 23302, subdivision (d) is inapplicable.
Under Revenue and Taxation Code section 23304.1, contracts executed in California by a foreign corporation are voidable only if the contract is entered into during the suspension period. Furthermore, under Revenue and Taxation Code section 23304.5, the contract is not void until it is set aside by the court during a lawsuit brought by either party to the contract with respect to the contract, and the delinquent party is to be given a reasonable opportunity to cure the voidability. In addition, if the contract is rescinded, plaintiffs must provide the other party with full restitution of the benefits provided under the contract. (Rev. & Tax Code, § 23304.5.)
Here, there are no allegations or judicially noticed evidence showing that BNC executed the original trust deed or assignment of the deed when it was a suspended California business entity or corporation. Plaintiffs also have not brought an action to declare the original deed void and BNC was not given an opportunity to cure the alleged voidability.
Because plaintiffs have not alleged or established by any judicially noticed document that the original trust deed is void, we reject plaintiffs' contention US Bank could not foreclose on the deed under Civil Code section 2924.
V
VALIDITY OF ASSIGNMENT OF TRUST DEED
Plaintiffs alternatively contend that, if this court concludes the trust deed is valid, the assignment of the trust deed to US Bank is void under Government Code section 8227.3. Plaintiffs argue that the "security interest died at the point of the unauthorized notarization of the Assignment [of the deed of trust, by MERS to US Bank], thus rendering the underlying obligation unenforceable as a secured debt, . . ."
Plaintiffs claim assignment of the trust deed to US Bank is void and unenforceable because it was notarized in Texas by Bruce Cocklin, a notary public commissioned in Texas. Plaintiffs' reliance on Government Code section 8227.3 and Commercial Code section 3301, in support of this proposition is misplaced. Government Code section 8227.3 states: "Any person who is not a duly commissioned, qualified, and acting notary public who does any of the acts prohibited by Section 8227.1 in relation to any document or instrument affecting title to, placing an encumbrance on, or placing an interest secured by a mortgage or deed of trust on, real property consisting of a single-family residence containing not more than four dwelling units, is guilty of a felony."
The judicially noticed assignment shows that, when the assignment was notarized, the notary public was a duly commissioned, qualified, and acting notary public in the State of Texas. There is no reason to believe the notary public was not a duly commissioned, qualified, and acting notary public when the assignment was executed or that the person who signed the document on behalf of MERS was not authorized to sign the deed on behalf of MERS. There thus is no basis for finding the assignment unenforceable under Government Code section 8227.3 or Commercial Code section 3301, since the assignment was properly notarized. Commercial Code section 3301 merely defines who is entitled to enforce an instrument. As the beneficiary under a valid, enforceable assignment of the trust deed, US Bank was entitled to foreclose under the trust deed.
Commercial Code section 3301 states: "'Person entitled to enforce' an instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3309 or subdivision (d) of Section 3418. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument."
Citing Civil Code section 2932.5, plaintiffs alternatively argue MERS was unauthorized to execute the assignment of the trust deed to US Bank. Plaintiffs assert, based on the SASCO-BNC1 trust prospectus attached to plaintiffs' opposition to US Bank's demurrer, securitization mortgages were pooled together and deposited in a trust, referred to as SASCO-BNC1. Plaintiffs argue that, according to the trust prospectus, BNC Mortgage, LLC was the originator of the loans in the loan pool. We note the prospectus was not judicially noticed and is not legally dispositive of any title or interest in plaintiffs' property.
Plaintiffs conclude that, since plaintiffs' deed of trust is in the name of BNC, as lender, and there is no recorded assignment of the deed of trust to BNC Mortgage, LLC, the structured asset pool, SASCO-BNC1, never acquired the BNC deed of trust. Therefore the deed of trust was void under Civil Code section 2932.5, and US Bank did not have authority to foreclose on plaintiffs' property.
Civil Code section 2932.5 states: "Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded." (Italics added.)
Regardless of the prospectus stating BNC Mortgage, LLC was the originator of loans deposited in the trust, US Bank, as beneficiary under the recorded assignment of the trust deed securing plaintiffs' property loan, was entitled to foreclose on plaintiffs' property. Recording assignment of BNC's interest in the property, to BNC Mortgage, LLC, if such assignment actually occurred, was not required under Civil Code section 2932.5.
As explained in Roque v. Suntrust Mortg., Inc., 2010 WL 546896, 3 (N.D. Cal., 2010), "California law recognizes two distinct ways in which a loan may be secured by real property, either by a mortgage or by a deed of trust. [Citation.] A deed of trust generally involves three parties, the borrower/trustor . . . who conveys the right to sell the property to the trustee, for the benefit of the lender/beneficiary. [Citation.] The practical effect is the creation of a lien on the subject property. [Citation.] Notwithstanding that the right of sale is formally with the trustee, both the beneficiary and the trustee may commence the non-judicial foreclosure process. [Citation.] (citing Cal.Code. Civ. Proc. § 725a). [¶] Section 2932.5 applies to mortgages, not deeds of trust. It applies only to mortgages that give a power of sale to the creditor, not to deeds of trust which grant a power of sale to the trustee. Trustees regularly foreclose on behalf of assignees for the original beneficiary. [Citation.] . . . As the court previously concluded, non-judicial foreclosures are governed exclusively by Cal. Civ.Code Section 2924-2924i."
The nonjudicial foreclosure statutory scheme, Civil Code sections 2924-2924i, is intended to be "exhaustive" and courts will not incorporate unrelated provisions into statutory nonjudicial foreclosure proceedings. (See Moeller v. Lien (1994) 25 Cal.App.4th 822, 834.) Under the nonjudicial foreclosure statutory scheme, a "trustee, mortgagee or beneficiary or any of their authorized agents" may record the notice of default—the document that initiates the non-judicial foreclosure process. (§ 2924, subd. (a)(1); see also § 2924b, subd. (b)(4) ["A 'person authorized to record the notice of default or notice of sale' shall include an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee"].) Here, the nonjudicial foreclosure statutory scheme, Civil Code sections 2924-2924i, governs plaintiffs' foreclosure.
Even assuming Civil Code section 2932.5 applies to trust deeds, as well as mortgages, since, in effect, there is no real distinction between deeds of trust and mortgages (Domarad v. Fisher & Burke, Inc. (1969) 270 Cal.App.2d 543, 553; see also 4 Miller & Starr Cal. Real Estate (3d ed. 2010) § 10:1, p. 13, fn. 9), we nevertheless reject plaintiffs' contention the trust deed is void under Civil Code section 2932.5.
Plaintiffs have not established they are entitled to relief from foreclosure under Civil Code section 2932.5, the Commercial Code, or any other statute. The amended complaint allegations and judicially noticeable documents show that US Bank, as the beneficiary under a recorded assignment of the trust deed, had authority to foreclose on plaintiffs' property. The original trust deed states that MERS, as the beneficiary under the trust deed and, as nominee for the lender, had the right to exercise any of the interests of the lender, BNC, including the right to foreclose and sell the property. By recorded assignment of the trust deed, MERS assigned its interest and rights to US Bank, as beneficiary. The assignment was recorded on May 15, 2008, before the foreclosure sale on October 27, 2008. Under the recorded assignment of the trust deed, US Bank was entitled to foreclose on plaintiffs' property.
VI
TENDER OF AMOUNT IN DEFAULT
Because the trust deed was valid and enforceable, as was the assignment of the trust deed to US Bank as beneficiary, plaintiffs cannot prevail on their amended complaint unless they tendered the amount owed on their loan, secured by the trust deed. We conclude the trial court properly sustained US Bank's demurrer on the ground plaintiffs failed to allege compliance with this tender requirement.
As succinctly stated in Miller & Starr, California Real Estate (3d ed. 2010), volume four, section 10:212, at pages 685-686: "A challenge to the validity of the trustee's sale is an attempt to have the sale set aside and to have the title restored. The action is in equity,[] and a trustor seeking to set the sale aside is required to do equity before the court will exercise its equitable powers.[] Therefore, as a condition precedent to an action by the trustor to set aside the trustee's sale on grounds that the sale is voidable, the trustor must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before an action is commenced[] or in the complaint.[] Without an allegation of such a tender in the complaint that attacks the validity of the sale, the complaint does not state a cause of action.[]"
Plaintiffs argue that under Civil Code section 2923.6, tender was not required. Civil Code section 2923.6 states: "(a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to any particular party in the loan pool or investor under a po[o]ling and servicing agreement, and that a servicer acts in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if it agrees to or implements a loan modification or workout plan . . . ."
Subdivision (b) of Civil Code section 2923.6 further states: "It is the intent of the Legislature that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority."
Plaintiffs argue that under Civil Code section 2923.6 and under the loan pooling and servicing agreements, US Bank owed plaintiffs a duty to modify the loan so as to avoid foreclosure on plaintiffs' property. Plaintiffs claim US Bank breached this duty by foreclosing on their property after agreeing to rescind the trustee's first sale of plaintiffs' property. The notice of rescission of trustee's sale states that the initial trustee's sale was rescinded because, before the sale was held, US Bank and plaintiffs "entered into a legally binding and enforceable agreement to modify the repayment terms of the loan and to thereby reinstate the default upon which the foreclosure proceeding was based, thereby divesting the power of sale . . . . Accordingly the Trustee's Sale and the resulting Trustee's Deed Upon Sale were and are null, void and legally ineffective to transfer all or any interest in the Property to [US Bank]."
Plaintiffs assert that, because US Bank agreed to modify the loan and rescinded the first trustee's sale, US Bank breached its duty under Civil Code section 2923.6 to modify the loan when US Bank foreclosed on the property a second time, on October 27, 2008. Plaintiffs conclude that under such circumstances, they were not required to comply with the tender requirement.
We reject this proposition for several reasons. First, Civil Code section 2923.6 does not require a lender to modify a residential loan in default. As explained in Mabry v. Superior Court (2010) 185 Cal.App.4th 208 (Mabry), section 2923.6 "does not operate substantively. Section 2923.6 merely expresses the hope that lenders will offer loan modifications on certain terms.[] . . . In a word, to have required loan modifications would have run afoul of federal law.)" (Mabry, at pp. 222-223.) In a footnote, the Mabry court notes: "The statute [Civil Code section 2923.6] conspicuously does not require lenders to take any action." (Id. at p. 222, fn. 9.)
Second, the notice of rescission shows that US Bank did agree to modify plaintiffs' loan but over three months after rescinding the first trustee's sale, foreclosed on the property a second time because plaintiffs remained in default on the loan. Attached as exhibit A to the amended complaint is a copy of a reinstatement quote provided on October 20, 2008, stating that plaintiffs owed $67,871.64 in overdue mortgage payments, plus various penalty fees.
Civil Code section 2923.5, subdivision (c) required US Bank, "as part of the notice of sale filed pursuant to Section 2924f, include a declaration that . . . . [¶] . . . States that the borrower was contacted to assess the borrower's financial situation and to explore options for the borrower to avoid foreclosure." In compliance with this requirement, the notice of the second trustee's sale, dated September 24, 2008, contains a declaration of compliance with Civil Code section 2923.5, subdivision (c), stating: "The mortgagee, beneficiary or authorized agent contacted the borrower to discuss the borrower's financial situation and to explore options for the borrower to avoid foreclosure in compliance with Cal. Civ. Code Section 2923.5."
Plaintiffs have not demonstrated compliance with the tender requirement or that compliance was not required. Civil Code section 2923.6 does not require lenders to take any action (Mabry, supra, 185 Cal.App.4th at p. 222) and, even though US Bank agreed to modify the loan, the notice of trustee's sale thereafter indicates plaintiffs remained in default. Because plaintiffs failed to comply with the tender requirement, they could not prevail on their amended complaint. Furthermore, since plaintiffs did not show they were capable of successfully amending their complaint, the trial court did not err in sustaining US Bank's demurrer to plaintiffs' first amended complaint without leave to amend.
VII
DISPOSITION
The judgment is affirmed. US Bank is awarded its costs on appeal. NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Codrington
J.
We concur:
McKinster
Acting P.J.
King
J.