Judge: Mark H. Epstein, Case: 24SMCV01240, Date: 2024-11-27 Tentative Ruling

Case Number: 24SMCV01240    Hearing Date: November 27, 2024    Dept: I

The demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

This is a wrongful foreclosure case.  According to the operative First Amended Complaint (FAC), plaintiff borrowed money with Encore Credit Corporation in the amount of $712,000.  Plaintiff also executed the typical documents that accompany such a loan, such as a deed of trust.  On April 20, 2011, defendant MERS (not the moving party) recorded an assignment of the deed conveying the beneficial interest to the Bank of New York (BONY).  Plaintiff alleges that MERS lacked the authority to do so because it was not the noteholder in due course, a party to the contract that secured the note, or a third party beneficiary.  Plaintiff alleges that ReCon Trust unlawfully caused a substitution of attorney to be filed on December 9, 2005 that substituted it as the trustee, but plaintiff alleges that there was no valid power of attorney recorded as to that document nor a certificate of mailing.  Plaintiff contends that Peak Foreclosure Services (PFS) then unlawfully recorded a notice of default without reaching out to plaintiff to explore other options.  Roll Tide then bought the property by submitting the winning bid at the auction in March 2023.  Peak recorded a Notice of Trustee’s Sale on or about February 21, 2024.  The instant demurrer is brought by Recon Trust and it is unopposed.  The court sustained an earlier demurrer with leave to amend because the documents attached to the original complaint belied the allegations against Recon Trust.  Recon Trust’s request for judicial notice is GRANTED.

ReCon Trust’s demurrer is again well taken.  Although plaintiff alleges that ReCon Trust caused the wrongful substitution of attorney to be filed, the document attached to the FAC does not so state.  Rather, it indicates that Lisa Sirianni was the original trustor and MERS was the original beneficiary under the original deed of trust, and that she was substituting ReCon Trust in as the new trustee.  But that is a document that does not really concern plaintiff or give plaintiff any rights.  As the underlying documents indicate, Sirianni is the prior owner of the property.  The document in question is part of a process showing that the deed of trust she had signed was being released.  It is plain that this document has nothing to do with this plaintiff or this case.  There are no other allegations of wrongdoing by ReCon Trust.

Plaintiff might be claiming that defendants wrongfully foreclosed because they did not perfect a security interest in the property.  Plaintiff notes that such an interest could be established by a lawful possession and proper transfer only.  But ReCon Trust persuasively argues that plaintiff is simply recasting the “holder of the note” theory of liability that has been rejected in California.  (Shuster v. BAC home Loans Servicing, LP (2012) 211 Cal.App.4th 505.)  Plaintiff’s own exhibits demonstrate that MERS, as the original beneficiary, had the power to assign the deed of trust, which it did to BONY which substituted Peak as the trustee.  Peak had the power to foreclose under California law.

The court also believes that plaintiff’s individual claims against ReCon Trust fail.  Many of the acts alleged are privileged, and thus do not properly form the basis for liability here.  And there are no facts to support a theory of constructive fraud.  The UCL cause of action stands or falls with the rest of the case as does the IIED cause of action (and there are no allegations that would satisfy that cause of action’s requirements). 

Because plaintiff has not come close to alleging anything that ReCon Trust allegedly did wrong, and because leave to amend was previously given and plaintiff was unable to come close to a proper amendment, the court sees no purpose in giving leave to amend again.  In fact, plaintiff has not even opposed the motion, indicating that plaintiff agrees that it cannot allege anything against this defendant.  Therefore, the demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.  ReCon Trust will submit an Order of Dismissal within 10 days.