Opinion
A141354
12-06-2017
ISTVAN VARGA et al., Plaintiffs and Appellants, v. WELLS FARGO BANK, N.A., 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. HG13674034)
Plaintiffs Istvan and Irene Varga (the Vargas) brought a single cause of action against Wells Fargo Bank, N.A. (Wells Fargo) to quiet title to real property in Castro Valley by alleging that their lender was a suspended corporation at the time the deed of trust securing their loan was executed. The trial court sustained Wells Fargo's demurrer without leave to amend because the Vargas did not allege they were prepared to tender the outstanding loan balance. For the reasons that follow, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On or around October 5, 2005, the Vargas executed a deed of trust securing a note for $536,000 on real property in Castro Valley (the Property). The deed of trust names the Vargas as the borrower, Mortgagepointer.com, Inc. (Mortgagepointer) as the lender, and North American Title Company as trustee. On October 7, 2005, Mortgagepointer assigned its interest under the deed of trust to Option One Mortgage Corporation. On August 31, 2011, "Sand Canyon Corporation [f/k/a] Option One Mortgage Corporation" assigned its interest under the deed of trust to Wells Fargo "as Trustee for Option One Mortgage Loan Trust 2006-1, Asset Backed Certificates, Series 2006-1, c/o of American Home Mortgage Servicing Inc."
The Vargas allege that Mortgagepointer was a suspended California corporation at the time of the execution of the deed of trust. The Vargas further allege that no corporation under the name Option One Mortgage Corporation exists or existed at the time Mortgagepointer purportedly transferred its interest in the Property to that entity. The Vargas allege that because Mortgagepointer was a suspended corporation at the time of its execution, the deed of trust is "void ab initio," and thus no interest under the deed of trust could ever have been legally transferred to Wells Fargo.
In support of this allegation, the Vargas attached a printout from the California Secretary of State website to their amended complaint, indicating that, as of October 1, 2013, Mortgagepointer had a status of "suspended." Wells Fargo filed a request for judicial notice before this court of records from the California Secretary of State showing that Mortgagepointer was incorporated on March 28, 2000, and the California Franchise Tax Board suspended its powers, rights, and privileges on February 2, 2009. The Vargas did not oppose the request, which we granted. Although these documents cast doubt on the Vargas' allegation that Mortgagepointer was suspended at the time of execution of the deed of trust in October 2005, we will assume that allegation is true for the purpose of evaluating the trial court's ruling on Wells Fargo's demurrer.
In support of this allegation, the Vargas likewise attached a printout from the California Secretary of State website indicating that, as of October 1, 2013, the status of Option One Mortgage Capital Corporation was "merged out" and Option One Mortgage Corp. was "suspended." Again, although this document does not support the allegation that these corporations did not exist as of October 2005, we will assume that allegation is true for the limited purpose of evaluating the trial court's ruling on Wells Fargo's demurrer.
In April 2013, the Vargas brought a single claim to quiet title against Wells Fargo, Mortgagepointer, and all other persons and entities claiming any interest in the Property. Wells Fargo demurred to the complaint and the trial court sustained the demurrer, specifically granting the Vargas leave to amend in order to identify the amount still owed on their loan and to allege, if possible, that "they are currently willing and able to tender the entire amount owed on that debt." In October 2013, the Vargas filed an amended complaint, which failed to specify the amount still owed and alleged that they were not required to tender because the deed of trust was "invalid and void."
The trial court again sustained Wells Fargo's demurrer, this time without leave to amend. The trial court found that even if Mortgagepointer was suspended when the deed of trust was executed, the deed would only be voidable, not void, and only if the Vargas repaid the full amount of the loan. The trial court held that the quiet title claim failed because the Vargas had not alleged tender, and that to the extent the Vargas sought declaratory relief, they had failed to allege that anyone other than Wells Fargo was or claimed to be the "true beneficiary" of the deed of trust. The Vargas appeal.
DISCUSSION
"We review de novo the trial court's order sustaining a demurrer." (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1468.) We accept as true all well-pleaded allegations in the complaint, and treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.) We will also consider facts and documents of which the trial court properly took judicial notice. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 751-752.)
The elements of an action to quiet title are: (1) "the plaintiff is the owner and in possession of the land," and (2) "the defendant claims an interest therein adverse to [the plaintiff]." (South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 740; see Code Civ. Proc., § 761.020.) In general, a "borrower may not . . . quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based." (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86 (Lueras); see Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707 ["mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee"]; Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 [borrower cannot quiet title without discharging the debt]; Burns v. Hiatt (1906) 149 Cal. 617, 622 ["As long as the obligation to pay the debt exists, it is not equitable that the mortgagor should have relief against the mortgage given to secure the same, and such relief can be given only on condition that he discharges the obligation"].)
The trial court sustained Wells Fargo's demurrer to the Vargas' quiet title cause of action because they had not alleged tender of the amount owed, relying on Lueras. In Lueras, the defendant falsely represented in writing to Lueras that no foreclosure sale would occur while he was being considered for " 'other foreclosure avoidance programs,' " but then foreclosed on and sold his home anyway. (Lueras, supra, 221 Cal.App.4th at p. 55.) Lueras then asserted several causes of action against his lender, including quiet title. The court found that defendants' demurrer to the quiet title cause of action was properly sustained because a "borrower may not . . . quiet title against a secured lender without first paying the outstanding debt on which the mortgage or deed of trust is based." (Id. at p. 86.)
The Vargas argue that tender is not required where a foreclosure sale has not yet taken place, relying on Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250 (Pfeifer). In Pfeifer, the court held that the borrowers had stated a claim for wrongful foreclosure and declaratory and injunctive relief based on allegations that their lenders failed to comply with certain face-to-face interview requirements imposed by the Department of Housing and Urban Development before conducting a foreclosure. (Id. at p. 1255.) The face-to-face interview and other servicing requirements imposed by federal regulations were conditions precedent to acceleration of the debt and foreclosure. (Ibid.) The court concluded the borrowers were not required to tender before seeking to enjoin the foreclosure sale because "to permit a foreclosure when the lender has not complied with the requirements that may have prevented any need for a foreclosure would defeat a salient purpose of the . . . regulations." (Id. at p. 1280.) In addition, the Pfeifer court observed that "[a] number of courts have explicitly held that the tender rule applies only in cases seeking to set aside a completed sale, rather than an action seeking to prevent a sale in the first place." (Ibid.)
We conclude that the Vargas' failure to allege tender dooms their quiet title claim. In Lueras, the borrower likewise relied on Pfeifer to argue that he was not required to tender to maintain an action for quiet title, but the court rejected that argument, finding that "[Pfeifer] and the other tender cases are inapplicable here because Lueras has not sued to set aside or prevent a foreclosure sale." (Lueras, supra, 221 Cal.App.4th at p. 87.) The Vargas have likewise not alleged that any foreclosure sale has taken place or is contemplated, and thus the cases they rely on are inapposite. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1054; McGarvey v. JP Morgan Chase Bank, N.A. (E.D. Cal. Oct. 11, 2013, No. 2:13-cv-01099-KJM-EFB) 2013 WL 5597148 at p. *11; Vong v. Bank of America, N.A. (E.D. Cal. May 22, 2013, No. CIV. S-12-2860 LKK/DAD) 2013 WL 2254243 at p. *8.) In addition, the Vargas have not alleged any exception to the tender requirement. Tender may be excused where: (1) the borrower's action attacks the validity of the underlying debt; (2) the borrower has a counterclaim or setoff against the beneficiary; (3) it would be inequitable to impose such a condition on the borrower; or (4) the trustor is not required to rely on equity to attack the deed because the trustee's deed is void on its face. (See Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-113.)
The Vargas argue that this statement in Lueras is dicta because in that case a foreclosure sale had already taken place. (See Lueras, 221 Cal.App.4th at p. 59.) But the court relied on the fact that Lueras did not seek to set aside the sale, not the fact that a sale had allegedly already occurred. (Id. at p. 87.) In addition, although the majority opinion did not consider this fact, it appears that the sale at issue in Lueras was "rescinded" before it took place. (See id. at pp. 61-62, 91-92 [Thompson, J., conc. and dis.].)
We note that to the extent the Vargas attempt to preemptively test whether Wells Fargo has the authority to initiate a foreclosure, their claim fails. (See Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513 (Jenkins) [allowing a "preemptive" action "would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature"]; Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 ["Nothing in the statutory provisions establishing the nonjudicial foreclosure process suggests that such a judicial proceeding is permitted or contemplated"]; see also Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 743-744 [applying Gomes rule to a quiet title action to prevent foreclosure].) In Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, the Supreme Court expressly commented it was not disapproving "[t]his aspect of Jenkins, disallowing the use of a lawsuit to preempt a nonjudicial foreclosure" in ruling on "a borrower's standing to challenge an assignment in an action seeking remedies for wrongful foreclosure." (Id. at p. 934, italics omitted; see Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 815.)
The Vargas do not dispute that they executed the deed of trust or that they owe the underlying debt. In their brief and in their opposition to Wells Fargo's demurrer, they state that they "do not seek to avoid their obligations under the promissory note," and before the trial court they sought resolution of the "title issues so the true beneficiary can step forward to be paid monthly." The Vargas' main contention is that the deed of trust was "void ab initio" because it was allegedly executed by a suspended corporation. But as the Vargas appear to concede in their brief on appeal, even if their lender was a suspended corporation as alleged, the deed of trust would be voidable, not void. (See Rev. & Tax. Code, § 23304.1, subd. (a) ["Every contract made in this state by a taxpayer during the time that the taxpayer's powers, rights, and privileges are suspended . . . shall . . . be voidable at the request of any party to the contract other than the taxpayer"].) The Vargas have not sought to void the deed of trust, and to do so they would need to provide "restitution of the benefits provided by [Mortgagepointer] under the contract." (Rev. & Tax. Code, § 23304.5; see Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal.App.4th 659, 669.) Finally, as the trial court noted, it would plainly be inequitable to grant the Vargas free and clear title to the property without requiring them to satisfy the underlying debt. (See Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 47 ["we do not consider it 'inequitable' to apply the tender rule here as the [plaintiffs] concede they owed the debt"]; Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526 ["Allowing plaintiffs to recoup the property without full tender would give them an inequitable windfall, allowing them to evade their lawful debt"]; Shimpones v. Stickney (1934) 219 Cal. 637, 649 [plaintiff in a quiet title action must "do equity by paying her debt"].) For these reasons, the Vargas' quiet title action fails and the trial court did not err in sustaining the demurrer.
At oral argument, counsel for the Vargas argued that the deed of trust was void under Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304. But Cal-Western concerned the question of whether the plaintiff could sue to enforce a judgment it had been assigned by a suspended corporation, and expressly acknowledged that the question of whether the assignment itself was void or voidable was not relevant. (Id. at p. 313.)
We reject the Vargas' argument that they need not pay off the loan in order to void the contract because Mortgagepointer has already been compensated for its interest under the deed of trust. It would plainly be inequitable to permit the Vargas' to avoid the restitution required under section 23304.5 simply because the original lender transferred its interest under the deed of trust. (See Gardiner Solder Co. v. Supalloy Corp. (1991) 232 Cal.App.3d 1537, 1543-1544.)
Because we conclude that the demurrer was properly sustained on the ground that the Vargas failed to allege tender, we need not reach the issue of whether the Vargas have standing to challenge the assignment from Mortgagepointer to Option One Mortgage Corporation under Jenkins, supra, 216 Cal.App.4th 497.
DISPOSITION
The judgment is affirmed. Wells Fargo shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
/s/_________
REARDON, J. We concur: /s/_________
RUVOLO, P. J. /s/_________
RIVERA, J.