Judge: Bruce G. Iwasaki, Case: 22STCV25801, Date: 2023-05-09 Tentative Ruling

Case Number: 22STCV25801    Hearing Date: May 9, 2023    Dept: 58

Judge Bruce G. Iwasaki

Department 58

Hearing Date:             May 9, 2023

Case Name:                Aposta Inc. v. New Rez LLC dba Shellpoint Mortgage Servicing, Bank of New York Mellon N.A., Countrywide Financial Corporation, Woodside Pointe, LLC, Foreclosure Consultants, Inc., Mortgage Electronic Registration Systems, Inc., ZBS Law LLP, Bank of America N.A., Countrywide Home Loans, Inc., Dennis Majors, Bank of New York Mellon, A2Z Homes, and Travis Azevedo

Case No.:                    22STCV25801

Motion:                       Demurrer

Moving Party:             New Rez LLC dba Shellpoint Mortgage Servicing, Bank of New York Mellon N.A., Bank of New York Mellon, Mortgage Electronic Registration Systems, Inc., A2Z Homes, and Travis Azevedo

Opposing Party:          Aposta, Inc.

This case turns on competing claims to an interest in real property.  Plaintiff Aposta Inc. (“Plaintiff” or “Aposta”) claims sole title to 10031 La Salle Avenue, in Los Angeles (the property), and that there are no encumbrances or other claims to it.  Defendants New Rez LLC dba Shellpoint Mortgage Servicing (“Shellpoint”), Bank of New York Mellon, Mortgage Electronic Registration Systems, Inc., (“MERS”) A2Z Homes, and Travis Azevedo (“Azevedo”) (collectively, “Defendants”) claim that they held a deed of trust on the property that was in default.  In August 2022, according to the First Amended Complaint (Complaint), the property was sold at a foreclosure sale.  Plaintiff contends that this foreclosure was improper, arguing that Defendants had no rights in the property and thus the sale should be set aside.  Plaintiff alleges other claims that all relate to this contention and its theories supporting it.  Demurring to the Complaint, Defendants contend that recorded title instruments demonstrate that Plaintiff’s claims lack merit and that accordingly, the Complaint fails to state causes of action.

Procedural and factual background.

            The Complaint is not always clear, but in general, along with documents of record, it sets forth the competing title claims of each side. The property was purchased by one Sharon Baxter subject to a deed of trust dated November 2005 and recorded in December 2005.  One year later, in December 2006, Baxter executed a grant deed to DBJ Investment Corporation. Plaintiff Aposta’s title claim flows from the December 2006 grant deed.  Aposta claims ownership of the property through a quitclaim deed recorded in June 2018 from an entity called ICMS.  ICMS acquired title through a quitclaim deed in January 2015 from Defendant Dennis Majors. Plaintiff alleges that Majors received title in December 2007 in a foreclosure sale on a deed of trust granted by one Danyelle Lee dated March 2007. 

            Defendants’ claim of right to foreclose stems from the November 2005 deed of trust from purchaser Baxter.  Under that deed of trust, recorded in December 2005, the trustee was Quality Home Loans, the lender was QHL Holdings, and Mortgage Electronic Recording Systems, Inc. (MERS) was designated the beneficiary under the deed of trust as the lender’s nominee. The Complaint alleges that in May 2007 a notice of default and election to sell was recorded, and, on information and belief, that the property was sold pursuant to a trustee’s sale in September 2007 to BAG Fund LLC.  Plaintiff concedes that the purported trustee’s deed upon sale was not recorded.  In November 2007, however, as provided with Defendants’ reply memorandum, a notice of rescission of the notice of trustee’s sale was recorded.  Plaintiff insists, however, that the sale occurred, which, it alleges, terminated Defendants’ right to foreclose on the property in 2022.  In April 2011, QHL Holdings, the holder of the November 2005 deed of trust, assigned the deed of trust to The Bank of New York Mellon as trustee; the assignment was recorded.  Aposta’s Complaint alleges that this recordation was improper “because the underlying trust deed had been extinguished” by the unrecorded deed upon sale to BAG Fund LLC.  

            Among other things, Defendants argue that their claim is superior because the November 2005 deed of trust was recorded prior to Baxter’s December 2006 grant deed to DBJ investment.  And, the April 2011 assignment to The Bank of New York was recorded seven years before the June 2018 quitclaim from ICMS to Aposta.  Moreover, Defendants assert, no trustee’s sale to BAG Fund in September 2007 was ever properly conducted or recorded, and thus Plaintiff’s main assertion for why Defendants had no right to foreclose, is eviscerated.

On January 4, 2023, Plaintiff Aposta Inc. (“Aposta”) amended its complaint (“Complaint”) alleging causes of action for breach of contract, wrongful foreclosure, recission/cancellation of trustee’s deed upon sale, violation of Civil Code section 2943, and declaratory relief against Defendants.

            Defendants demur to the second, third, fourth, and fifth causes of action for failure to state facts sufficient to constitute causes of action and the complaint in its entirety for uncertainty regarding defendants MERS, A2Z, and Travis Azevedo.  The parties do not appear to have met and conferred. Additionally, Defendants request the court to take judicial notice of various deeds, notice of default, notice of trustee’s sale, assignment of deed of trust, and a notice of recission of notice of trustee’s sale.

Legal Standard

            A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice.  (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.”  (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.)  “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.”  (Code Civ. Pro., § 452.)  The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . ..” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) 

Discussion

            Preliminarily, the court grants Defendant’s request for judicial notice of the various deeds, notice of default, notice of trustee’s sale, assignment of deed of trust, and a notice of recission of notice of trustee’s sale.  (Evid. Code, § 452(h); Scott v J.P. Morgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 754–755, 761 n. 9.)  Plaintiff’s objection to the declaration of Kayleigh Thomas filed April 26, 2023, is sustained.

Second Cause of Action: Wrongful Foreclosure

            “The elements of a wrongful foreclosure cause of action are: (1) The trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.” (Citrus El Dorado, LLC v. Chicago Title Co. (2019) 32 Cal.App.5th 943, 948, quotation marks and brackets omitted.) 

            Plaintiff alleges that Defendant Shellpoint initiated a foreclosure proceeding when it did not have a beneficial interest in the subject deed of trust. Shellpoint, according to Plaintiff, could not have acquired the rights to the deed of trust because of a prior foreclosure sale in September 2007, when, it asserts on information and belief, a Deed Upon Sale was issued to BAG Fund LLC.  That purported sale was never recorded, however, because on November 19, 2007, a Notice of Rescission of Notice of Trustee’s Sale of the subject property was recorded.  The record does not support Plaintiff’s claim of ownership.

Plaintiff also argues that QHL was in bankruptcy (2007 to 2016) at the time of the alleged assignment in 2011 to the Bank of New York Mellon, and that the assignment is void because of the automatic stay. in place. But unlike judicial proceedings, assignments are permitted and not stayed during bankruptcy proceedings. (11 U.S.C. § 362 (a).)

Plaintiff further alleges that Shellpoint did not comply with Civil Code section 2923.5, subdivision (a) by failing to contact the original borrowers or any of her successors or assigns and failed to fully comply with the due diligence requirements of this statute. Defendants argue that Plaintiff is not the borrower and lacks standing to sue for this violation. In opposition, Plaintiff argues that it has standing based on language in the Deed of Trust and AB 3088. However, nowhere in Civil Code section 2923.5 does it state that a successor in interest has standing, and the reference to successor in interest in AB 3088 is about small landlords and homeowner relief.

Plaintiff also alleges that any attempt to foreclose on the property violated the statute of limitation on right of power of sale. A lien of a mortgage or deed of trust expires and is not enforceable by foreclosure, power of sale, or other means ten years after the secured debt’s maturity date, if that date is ascertainable from the recorded evidence of indebtedness. (Civ. Code § 882.020(a)(1).) Here, the loan secured by the deed of trust anticipated payments through 2035, so the limitations period has not expired.

            In addition, Plaintiff argues that it has a fee simple interest by way of quitclaim deed. A quitclaim deed, however, “transfers only whatever interest the grantors possess at the time of the conveyance.” (In re Marriage of Broderick (1989) 209 Cal.App.3d 489, 496.) Plaintiff does not allege what interest it received from ICMS, but it appears to derive from the December 2006 grant deed conveyed to DBJ Investment after the November 2005 trust deed was recorded. Accordingly, whatever interest Plaintiff received was junior to that trust deed.

            The Court sustains the second cause of action for wrongful foreclosure. Because the third cause of action for rescission, and fifth cause of action for declaratory relief are based on the theory that Defendants’ 2022 foreclosure was improper, the Court also sustains the demurrer to the third and fifth causes of action.

Fourth Cause of Action: Violation of Civil Code section 2943

            Pursuant to Civil Code section 2943, the trustor or mortgagor of, or his or her successor in interest in, the mortgaged or trust property is entitled to request a payoff demand statement. (Civ. Code, § 2943, subd. (a)(4).) A beneficiary, or his or her authorized agent, shall, within 21 days of the receipt of a written demand by an entitled person or his or her authorized agent, prepare and deliver to the person demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any modification thereto, and a beneficiary statement. (Civ. Code, § 2943, subd. (b)(1).)

            Plaintiff alleges that between May 2019 and August 2022 it sent multiple letters requesting beneficiary information and payoff statements and including offers to tender the note. Defendants counter that Plaintiff’s interest, if any, stems from quitclaim deeds that are subordinate to the 2005 deed of trust they acquired. That is, Plaintiff’s claim did not arise from succeeding to the trustor of that trust deed. Because Plaintiff is not the mortgagor, trustor, or a successor in interest, it is not entitled to the information authorized by Civil Code section 2943. The Court sustains the demurrer to the fourth cause of action alleging a violation of that statute.

Defendants MERS, A2Z Homes, and Azevedo

The Complaint names MERS, A2Z Homes, and Azevedo as Defendants, but avers no factual allegations concerning them.  They are simply lumped in with “all defendants” in the declaratory relief cause of action.  The Court sustains the demurrer as to these three defendants on all causes of action.

The Demurrer is sustained without leave to amend.

            Plaintiff has the burden of showing how its complaint can be amended to state a cause of action. (Hernandez v. City of Pomona (2009) 46 Cal.4^th 501, 520, fn. 16. [“plaintiffs must identify some legal theory or state of facts they wish to add by way of amendment that would change the legal effect of their pleading”].) Plaintiff has not shown how amendment would cure the defects in its Complaint.  Because Plaintiff’s claims are based on recorded title documents that do not support its theory, the Court concludes leave to amend would be futile.  Accordingly, the Court sustains the demurrer without leave to amend.