Judge: John J. Kralik, Case: 23BBCV00957, Date: 2024-01-19 Tentative Ruling
Case Number: 23BBCV00957 Hearing Date: February 23, 2024 Dept: NCB
North Central District
ROBERT D. MOORE III, Plaintiff, v. BANK OF AMERICA, N.A., et al., Defendants.
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Case No.: 23BBCV00957 Hearing Date: February 23, 2024 [TENTATIVE] ORDER RE: DEMURRER |
BACKGROUND
A. Allegations
Plaintiff Robert D. Moore III (“Plaintiff”) commenced this wrongful foreclosure action against Defendants Bank of America, N.A. (“BOFA”), Quality Loan Service Corporation (“QLS”), and all persons unknown claiming interest in the property located at 11643 Otsego St., North Hollywood, CA 91601. Plaintiff alleges that he purchased the property on December 23, 2002. He entered into a Short Form Deed of Trust on September 18, 2006 with lender BOFA for a home equity line of credit (“HELOC”) in the amount of $400,000, which named BOFA as the beneficiary and Plaintiff as the borrower. On July 20, 2007, Plaintiff entered into a modification of the Short Form Deed dated September 18, 2006 (“HELOC Modification”) changing the principal amount from $400,000 to $500,000, naming BOFA as the lender and Plaintiff as the borrower.
On October 3, 2016, QLS, who was substituted in as trustee of the Short Form Deed executed a Notice of Default (“NOD”) on the HELOC, which stated that Plaintiff owed $119,058.07 as of October 3, 2016. Plaintiff alleges that BOFA and QLS have not sent him a new NOD in the past 7 years.
After the NOD was sent, Plaintiff commenced a lawsuit in 2017 against BOFA and QLS, which settled in 2022. The settlement stated that Plaintiff would pay BOFA $675,000 in exchange for BOFA’s release of the Short Form Deed and lien on the property. Plaintiff alleges that he worked diligently to obtain a new loan to pay the settlement and BOFA needed to make a simple statement to his new lender regarding the payment, but BOFA refused to give Plaintiff’s lender the statement.
On April 11, 2023, QLS recorded and allegedly served on Plaintiff a Notice of Trustee’s Sale (“NOTS”), which stated the indebtedness was for $718,487.03 and set the non-judicial foreclosure on May 4, 2023. Plaintiff alleges that the trustee’s sale has been postponed twice due to the Court granting a TRO in May and a voluntary postponement by the trustee in September. He alleges that the trustee’s sale is set for December 12, 2023. He alleges that the indebtedness in the NOTS is $178,487.03, but that this has no connection with the debt in the 7-year-old NOD. Plaintiff alleges that QLS and BOFA have not sent him an accounting or explanation for the claimed amount. He alleges that he does not know if the indebtedness is based on the NOD or if it is based on default of the settlement agreement, to which then he alleges Defendants are required to send a new NOD and opportunity to cure. Plaintiff alleges that he now has a loan to pay back BOFA the full $675,000 due under the settlement and he has made an offer to tender the full amount, but needs BOFA to cooperate and not obstruct his ability to fulfill the settlement agreement. Plaintiff alleges he needs a new NOD and a 90-day period to complete the proposed loan.
The first amended complaint (“FAC”), filed November 27, 2023, alleges causes of action for: (1) declaratory relief to prevent a pending foreclosure sale that would be wrongful; (2) prohibit or set aside trustee’s sale and any subsequent sale; (3) prohibit or void or cancel trustee’s deed upon sale; (4) quiet title; and (5) claim to all equity proceeds in the event of a foreclosure sale to prevent unjust enrichment.
B. Motion on Calendar
On December 29, 2023, BOFA filed a demurrer. That same day, QLS filed a joinder to the demurrer.
On February 9, 2024, Plaintiff filed an opposition brief.
On February 14, 2024, BOFA filed reply brief.
REQUEST FOR JUDICIAL NOTICE
With the demurrer papers, BOFA submitted a request for judicial notice of Exhibits: (A) Short Form Deed of Trust dated September 18, 2006; (B) Modification of Security Interest dated July 20, 2007; (C) Substitution of Trustee dated September 29, 2016; (D) Notice of Default and Election to Sell Under Deed of Trust dated October 3, 2016; (E) Notice of Trustee’s Sale dated January 16, 2017; (F) Notice of Trustee’s Sale dated January 4, 2018; (G) Notice of Trustee’s Sale dated April 7, 2023; (H) the court docket in Case No. BC648912; (I) the Court’s July 14, 2023 order in this action; and (J) the declaration of Deleyla A. Lawrence dated June 5, 2023 submitted in this action. The request is granted. (See Evid. Code, § 452(d); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-267, disapproved on other grounds.)
DISCUSSION
BOFA demurs to the 1st to 5th causes of action alleged in the FAC. QLS filed a joinder to BOFA’s demurrer to the FAC.
A. 1st cause of action for declaratory relief to prevent a pending foreclosure sale that would be wrongful
A cause of action for declaratory relief is a remedy created by CCP § 1060 and it is pleaded if it: (1) sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties and (2) requests that the rights and duties be adjudged. (City of Tiburon v. Northwestern Pac. R.R. Co. (1970) 4 Cal.App.3d 160, 170; see CCP § 1060 [identifying the remedy of declaratory relief].) If these requirements are met, the Court must declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to a favorable declaration. (Id.) Declaratory relief is a broad remedy, and the rule that a complaint is to be liberally construed is particularly applicable to one for declaratory relief. (Id.)
Further, a demurrer is a procedurally inappropriate method for disposing of a complaint for declaratory relief. (Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134 Cal. App. 4th 187, 221.) This is based on the reasoning that an order sustaining the demurrer would leave the parties where they were, with no binding determination of their rights, to await an actual breach and ensuing litigation. (Id.) This would defeat a fundamental purpose of declaratory relief, which is to remove uncertainties as to legal rights and duties before breach and without the risks and delays that it involves. (Id.) The object of declaratory relief is not necessarily a beneficial judgment; instead, it is a determination, favorable or unfavorable, that enables the plaintiff to act with safety. (Id.) This reasoning has established the rule that the defendant cannot, on demurrer, attack the merits of the plaintiff's claim (italics added for emphasis). (Id.) Accordingly, a complaint is sufficient if it shows an actual controversy; it need not show that plaintiff is in the right. (Id.)
In the 1st cause of action, Plaintiff alleges that an actual controversy has arisen between Plaintiff and Defendants concerning their respective rights and duties in that Plaintiff contends that the proposed foreclosure sale would be wrongful, while Defendants contend that it would not be wrongful. (FAC, ¶32.) Plaintiff alleges that the pending foreclosure sale would be void and wrongful since it was not founded upon a proper NOD (id., ¶¶35-41), BOFA obstructed Plaintiff’s efforts to pay off the settlement (id., ¶¶42-46), BOFA’s defenses are inapposite (id., ¶¶47-52), and Plaintiff has made an offer of tender of the full amount of indebtedness under the settlement agreement (id., ¶¶53-54).
Defendants argue that this cause of action is a claim of relief in equity that is dependent on other causes of action, such that it fails. However, declaratory relief causes of action are commonly alleged as separate causes of action. The Court will not sustain the demurrer on this basis.
Defendants also argue that Plaintiff’s contention that a proper NOD was not provided is false because QLS recorded the NOD on October 5, 2016 and thus the NOD never expired. They also argue that Plaintiff’s contentions that BOFA obstructed his efforts to secure financing does not save the claim. Finally, they argue that per the settlement agreement, Plaintiff explicitly agreed to an uncontested foreclosure. In opposition, Plaintiff argues that Defendants attempt to argue the facts of the case, as opposed to the legal sufficiency of the claims.
The Court notes that it preliminarily addressed much of Defendants’ claims in its order on the motion for preliminary injunction. However, the standard for a preliminary injunction (wherein, the Court may consider the parties’ argument based on presented evidence) is different from that of a demurrer. In addition, the Court declines to rule on the merits of the declaratory relief cause of action. In their demurrer papers/joinder, Defendants essentially argue that Plaintiff’s claims fail because they did not need to provide another NOD and the settlement agreement included a release—however, the crux of the declaratory relief claim is to determine whether another NOD was necessary and whether the settlement agreement was obstructed or complied with. The Court will not prematurely sustain the demurrer on this cause of action. As stated above, “the defendant cannot, on demurrer, attack the merits of the plaintiff's claim. The complaint is sufficient if it shows an actual controversy; it need not show that plaintiff is in the right.” (Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 187, 221.)
Accordingly, the demurrer to the 1st cause of action is overruled.
B. 2nd cause of action to prohibit or set aside trustee’s sale and any subsequent sale and 3rd cause of action to prohibit or void or cancel trustee’s deed upon sale
In the 2nd and 3rd causes of action, Plaintiff alleges that Defendants do not have the legal authority to foreclose because a foreclosure would be wrongful. (FAC, ¶¶61, 65.) In connection with the 2nd cause of action, Plaintiff seeks an order prohibiting the trustee’s sale. (Id., ¶62.) In connection with the 3rd cause of action, Plaintiff seeks an order that the issuance of a Trustee’s Deed Upon Sale be prohibited. (Id., ¶66.)
Defendants rely on the same arguments above. They also argue that no Trustee’s Deed Upon Sale has been recorded since no foreclosure sale has occurred, such that these causes of action seek premature remedies.
These causes of action appear to be duplicative in nature to the declaratory relief cause of action. Further, as no foreclosure sale has been scheduled, these causes of action are speculative and premature as there is no pending trustee’s sale, the property has not been sold, and thus there is no Trustee’s Deed Upon Sale that will be recorded. In the opposition brief, Plaintiff argues that a wrongful foreclosure claim is a claim in equity, and that any foreclosure that was wrongfully performed makes the foreclosure void or voidable. However, again, no foreclosure sale is pending at this time. (The Court notes that Plaintiff initially alleged a wrongful foreclosure claim in the complaint, but removed the cause of action following the Court’s denial of Plaintiff’s motion for preliminary injunction.)
The demurrer to the 2nd and 3rd causes of action is sustained without leave to amend. If the circumstances change where a foreclosure/trustee’s sale is pending, Plaintiff may move to amend the complaint at that time.
C. 4th cause of action for quiet title
CCP § 761.020 states that a quiet title complaint shall be verified and include the following: “(a) A description of the property that is the subject of the action. … In the case of real property, the description shall include both its legal description and its street address or common designation, if any. [¶] (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession. [¶] (c) The adverse claims to the title of the plaintiff against which a determination is sought. [¶] (d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought. [¶] (e) A prayer for the determination of the title of the plaintiff against the adverse claims.” (CCP § 761.020.)
In the 4th cause of action, Plaintiff alleges that he is the rightful owner of the subject property. (FAC, ¶69.) He alleges that Defendants seek to claim an interest in his home by acquiring it through a (wrongful) foreclosure sale, and either acquiring it for themselves or selling it to another bidder at that sale. (Id., ¶70.) Plaintiff alleges that he seeks to quiet title against the claims of Defendants as they hold themselves out as entitled to fee simple ownership of Plaintiff’s home. (Id., ¶71.) Plaintiff alleges that Defendants have no right to title or interest in Plaintiff’s home and no right to entertaining any rights of ownership. (Id., ¶72.)
As stated in Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 747–748: “Generally, a deed of trust creates a tripartite relationship between the trustor (debtor), the trustee, and the beneficiary (creditor). Under such an arrangement the ordinary trust deed conveys the legal title to the trustee only so far as may be necessary to the execution of the trust. As pointed out in MacLeod v. Moran (1908) 153 Cal. 97, 99–100 [94 P. 604], and reaffirmed in Bank of Italy etc. Assn. v. Bentley (1933) 217 Cal. 644, 656 [20 P.2d 940]: ‘It carries none of the incidents of ownership of the property, other than the right to convey upon default on the part of the debtor in the payment of his debt.’”
As currently alleged, the allegations are speculative in nature. Again, no foreclosure sale has been alleged—one has not been scheduled imminently and a sale has not occurred. While the Court accepts the allegations as true, Plaintiff essentially alleges hypothetical facts that Defendants seek to acquire the property themselves or plan on selling it to another bidder. At this time, no injury has occurred. According to the terms of the note, if Plaintiff defaults on the loan (which does not appear to be contested in the FAC), then Defendants may declare a default. However, at this time, there is no adverse claim to title in the subject property and thereby no title to quiet.
Thus, the demurrer to the 4th cause of action is sustained without leave to amend. Again, if the circumstances change such that there is an adverse claim to title, then Plaintiff may seek leave to amend the complaint at that time.
D. 5th cause of action for claim to all equity proceeds in the event of a foreclosure sale to prevent unjust enrichment
In the 5th cause of action, Plaintiff alleges in relevant part:
76. In the unfortunate event that there is a foreclosure sale on the property PLAINITFF’S HOME, PLAINTIFFS hereby claim any and all Equity Proceeds from that Foreclosure Sale to prevent Unjust Enrichment of the DEFENDANTS. This claim is based on the PLAINTIFF’s right to title to the property as set forth in the Fourth Cause of Action referred to above. As the lawful owners of the property PLAINTIFF’S HOME, PLAINTIFF would be entitled to any and all such Equity Proceeds – i.e., any proceeds received by the Trustee after the indebtedness claimed in the Notice of Trustee’s Sale and other charges have been recouped by DEFENDANTS.
77. PLAINTIFF hereby request a Court Order to this effect, and that these Equity Proceeds be placed in escrow pending the completion of the distribution of these proceeds.
(FAC, ¶¶76-77.)
Defendants demur to this cause of action, arguing that no foreclosure sale has occurred, the claim is premature, and this is merely a request but not a valid cause of action. For similar reasons discussed above, the demurrer to this cause of action is sustained. Again, no foreclosure action is pending nor has one occurred.
In addition, to the extent this is a cause of action for unjust enrichment, the claim fails. Under California law, unjust enrichment is not a cause of action. (Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794.) Instead, it is the failure to make restitution under circumstances where it is equitable to do so. (Id.) Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself. (Id.) It is synonymous with restitution. (Id.) This is the basis for the general rule in California, which finds that unjust enrichment is not a cause of action, but a claim for restitution. (Hill v. Roll Int'l Corp. (2011) 195 Cal. App. 4th 1295, 1307.) Therefore, the Court sustains the demurrer to the 5th cause of action because there is no cause of action for unjust enrichment. Further, it is not possible to correct this by amendment because unjust enrichment is not a cause of action. Accordingly, the Court will not grant leave to amend.
CONCLUSION AND ORDER
Defendant Bank of America, N.A.’s demurrer to the 1st cause of action in the First Amended Complaint is overruled. The demurrer to the 2nd, 3rd, 4th, and 5th causes of action is sustained without leave to amend.
Defendant Quality Loan Service Corporation’s demurrer to the First Amended Complaint (by joinder) is overruled as to the 1st cause of action and sustained without leave to amend as to the 2nd, 3rd, 4th, and 5th causes of action.