Judge Gail Killefer, Case Number: 24STCV02223, Date: 2024-06-18 Tentative Ruling

TENTATIVE: Defendant Quality Loan’s demurrer to Plaintiff’s Complaint is sustained without leave to amend. Defendant to give notice.

On January 29, 2024, Sanda D. Gaslin (“Plaintiff”) filed a Complaint against First Guaranty Financial Corporation dba Hillcrest, Fund; Marmat Peterson Inc.; and Quality Loan Service Corporation (“Quality Loan”).

The Complaint alleges four causes of action: (1) To Set Aside Sale, (2) Cancel Deed of Trust , (3) Quiet Title, and (4) Wrongful Foreclosure.

demurrer to complaint[1]

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. (CCP § 430.30(a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿“To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.”¿(C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)¿For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)¿A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿(Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿¿

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452(c), (d), and (h).)

1) Exhibit A: Deed of Trust recorded on 3/4/2002, in LOS ANGELES County Recorder’s Office as Instrument Number 02-0497791.

3) Exhibit C: Substitution of Trustee recorded on 4/18/18, in the LOS ANGELES County Recorder’s Office as Instrument Number 20180373917.

4) Exhibit D: Substitution of Trustee recorded on 4/18/18, in the LOS ANGELES County Recorder’s Office as Instrument Number 20180373917.

5) Exhibit E: Notice of Trustee’s Sale recorded on 10/1/2018, in the LOS ANGELES County Recorder’s Office as Instrument Number 20180998830.

6) Exhibit F: Trustee’s Deed Upon Sale recorded on 11/14/18, in the LOS ANGELES County Recorder’s Office as Instrument Number 20181148642.

Defendant’s request for judicial notice is granted. “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

Plaintiff alleges she was the owner of the real property located at 6709 S. Victoria Avenue, located in Los Angeles, CA (the “Property”). (Compl., ¶ 1.) On September 27, 2018, Defendant Marmat Peterson (“Marmat”) bought the deed from Quality Loan in response to a notice of intent to sell the Deed of Trust of Property at auction on October 25, 2018. (Compl., ¶ 9.)

Plaintiff alleges that the Sale of the Deed of Trust was improper because the sale occurred while Plaintiff’s appeal time of a repayment plan for the mortgage was occurring. (Compl., ¶ 10.) Midland Mortgage rejected Plaintiff’s chosen payment plan on September 7, 2018, so from that date to October 7, 2018, Plaintiff had a month to appeal, and the trustee was required to halt foreclosure proceedings during the time of appeal. (Compl., ¶ 10.) Plaintiff asserts that posting the sale of the Deed of Trust during the time of appeal was dual tracking and in violation of the Homeowner Bill of Rights (“HBOR”). (Compl., ¶ 10.) Accordingly, the dual tracking made the sale of the Deed of Trust invalid. (Compl., ¶¶ 10, 11, 15.)

B. First and Second Causes of Action – Set Aside Sale and Cancel Deed of Trust

The Homeowner Bill of Rights (“HBOR”) was enacted “to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure.” (Civ. Code, § 2923.4.)^{^[2]}

Among other things, HBOR prohibits “dual tracking,” which occurs when a bank forecloses on a loan while negotiating with the borrower to avoid foreclosure. (§ 2923.6.) HBOR provides for injunctive relief for statutory violations that occur prior to foreclosure (§ 2924.12, subd. (a)), and monetary damages when the borrower seeks relief for violations after the foreclosure sale has occurred. (§ 2924.12, subd. (b).)

In other words, under section 2942.12 of the HBOR, a Plaintiff may seek injunctive relief to stop the sale of the deed of trust, but not to undo the sale. (Civ Code, § 2924.12(a)(1) [“(a)(1) If a trustee's deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section” 2923.6].) “After a trustee's deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages pursuant to Section 3281, resulting from a material violation of Section” 2923.6. (Civ. Code, § 2924.12.) Therefore, as the Sale of the Deed of Trust occurred on October 25, 2018, Plaintiff cannot seek to have the Sale set aside under the HBOR and can only sue for damages.

The Complaint fails to allege facts to show that other provisions of the HBOR permit the court to Set Aside the Sale of the Deed of Trust and Cancel the Deed of Trust. “We hold that the availability of injunctive relief under the HBOR is governed exclusively by its two provisions—sections 2924.12, subdivision (a)(1) and 2924.19, subdivision (a)(1) (sections 2924.12(a)(1) and 2924.19(a)(1))—in which the Legislature authorized the courts to interpose such relief into the nonjudicial foreclosure scheme.” (Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 155.)

Defendant Quality Loan further asserts that Plaintiff’s Complaint is barred by the statute of limitations. Under CCP § 338, a three-year statute of limitation applies for “[a]n action upon liability creates by statute, other than a penalty or forfeiture.” (CCP § 338(a).) Therefore, because the sale on the Deed of Trust occurred on October 25, 2018, Plaintiff’s claims brought under the HBOR are time-barred because this action was not filed until January 29, 2024. (Compl., ¶ 10.)

Therefore, the demurrer to the first and second causes of action is sustained without leave to amend.

In an action for quiet title, a plaintiff must plead: 1) a description of the property that is the subject of the action, specifically the location of tangible personal property and the legal description and street address or common designation of real property, 2) the title of the plaintiff as to which a determination under this chapter is sought and the basis of the title, 3) the adverse claims to the title of the plaintiff against which a determination is sought, 4) the date as of which the determination is sought, and 5) a prayer for the determination of the title of the plaintiff against the adverse claims. (See CCP § 761.020.) This cause of action also requires tender of indebtedness. (Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477.) A lis pendens must be filed in a quiet title action. (CCP, § 741.010(b); see also Carr v. Rosien (2015) 238 Cal.App.4th 845, 851.)

Defendant Quality Loan asserts that because Plaintiff’s third cause of action is premised on violation of the HBOR, a three-year statute of limitations applies and Plaintiff’s claim for quiet title is time-barred. (See Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476 [For a quiet title action “courts refer to the underlying theory of relief to determine the applicable period of limitations”].) Defendant Quality Loan further asserts that a claim for quiet title cannot be alleged against it because it does not have title or hold ownership in the Property, only Defendant Marmat does. (Compl., ¶ 14, Ex. 2.)

Moreover, while a cause of action for violation of the HBOR does not require tender, a claim for wrongful foreclosure does. “In short, we agree with plaintiffs that a tender of the amount due under section 2923.6.” (Valbuena, supra, 237 Cal.App.4th at p. 1274.) “A borrower may not, however, 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.) Lastly, Plaintiff failed to file a lis pendens. (CCP § 741.010(b).)

Based on the above, the demurrer to the third cause of action is sustained without leave to amend.

“The basic elements of a tort cause of action for wrongful foreclosure track the elements of an equitable cause of action to set aside a foreclosure sale. They 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.’ ” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 408 quoting Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.)

Defendant Quality Loan again asserts that the third cause of action is barred by the three-year statute of limitations. (CCP § 338(a); see Engstrom v. Kallins (1996) 49 Cal.App.4th 773, 781 [Applying the three-year statute of limitations to a wrongful foreclosure action].) Plaintiff has not opposed this demurrer nor does the Complaint cite facts to show that the statute of limitations has not accrued. Therefore, the demurrer to the third cause of action is sustained without leave to amend.

Defendant Quality Loan’s demurrer to Plaintiff’s Complaint is sustained without leave to amend. Defendant to give notice.

[1] Pursuant to CCP § 430.41, before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred to. Defendant’s counsel asserts that they tried to telephone and email Plaintiff based on the information provided in the Complaint, but the telephone number has been disconnected and the email returned as undeliverable. (Phillips Decl. ¶¶ 3-4.) The court notes that Plaintiff was served with notice of this demurrer at the address listed in the Complaint, but no opposition has been filed. “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (CCP § 430.41(a)(4).)

[2] All statutory citations are to the Civil Code unless otherwise noted.