Judge Salvatore Sirna, Case 21PSCV00617 2023-01-05 Tentative Ruling

Judge: Salvatore Sirna, Case: 21PSCV00617, Date: 2023-01-05 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 21PSCV00617 Hearing Date: January 5, 2023 Dept: G

Defendants’ Fleet Capital, Inc., Inco Builders, and Sam Ostayan’s Demurrer to First Amended Complaint

Respondent: Plaintiff Diana Culkin

TENTATIVE RULING

Defendants’ Fleet Capital, Inc., Inco Builders, and Sam Ostayan’s Demurrer to First Amended Complaint is SUSTAINED with twenty (20) days leave to amend.

BACKGROUND

This action arises from an alleged wrongful foreclosure.

On July 30, 2021, Plaintiff Diana Culkin, also known as Diana Jannette Marmolejo Corona, filed a complaint against Fleet Capital, Inc. (Fleet Capital), Best Alliance Foreclosure and Lien Services Corp. (Best Alliance), Inco Builders (Inco), and Does 1-25, alleging the following causes of action: (1) violation of California's non judicial foreclosure statutes, (2) wrongful foreclosure, (3) conversion, (4) unfair business practices, and (5) declaratory relief.

On February 9, 2022, Inco filed a cross-complaint against Plaintiff, Michael Culkin, and Roes 1-10, alleging the following causes of action: (1) trespass and (2) slander of title.

On February 23, 2022, Fleet Capital and Inco filed a motion for judgment on the pleadings as to Plaintiff’s complaint. On August 4, the court granted the motion with leave to amend.

On October 7, 2022, Plaintiff filed a First Amended Complaint (FAC) against the same defendants as well as Sam Ostayan (Ostayan), alleging the following causes of action: (1) violation of California's nonjudicial foreclosure statutes, (2) wrongful foreclosure, (3) quiet title, (4) unfair business practices, and (5) declaratory relief.

On December 6, 2022, Fleet Capital, Inco, and Ostayan (collectively, Defendants) filed the present demurrer. Prior to filing the demurrer on November 29, 2022, Defendants’ counsel met and conferred with Plaintiff’s counsel over the telephone and was unable to come to an agreement on Defendants’ objections to the FAC. (Meleski Decl., ¶ 4.)

A hearing on the demurrer is set for January 5, 2023. A case management conference is also set for March 9.

REQUEST FOR JUDICIAL NOTICE

Defendants ask the court to take judicial notice of seven documents: (1) a grant deed recorded May 2, 2018, (2) a deed of trust recorded May 2, 2018, (3) a substitution of trustee recorded February 17, 2021, (4) a notice of default and election to sell under deed of trust recorded February 17, 2021,(5) a notice of trustee sale recorded May 20, 2021, (6) a trustee’s deed upon sale recorded June 22, 2021, and (7) this court’s order granting Defendants’ motion for judgment on the pleadings.

The existence and factual contents of documents including recorded deeds of trust, notices of default and trustee’s sale, and trustee’s deeds upon sale can be noticed under Evidence Code sections 452, subdivisions (c) and (h), and 453. (Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919, 924, fn. 1.) Because the court may consider judicially noticeable matters while reviewing a demurrer, the court GRANTS Defendants’ request while noting “judicial notice of matters upon demurrer will be dispositive only in those instances where there is not or cannot be a factual dispute concerning that which is sought to be judicially noticed.” (Cruz v. County of Los Angeles (1985) 173 Cal.App.3d 1131, 1133-1134.)

LEGAL STANDARD

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)

ANALYSIS

Defendants demur to Plaintiff’s first cause of action (violation of California's non-judicial foreclosure statutes), second cause of action (wrongful foreclosure), third cause of action (quiet title), fourth cause of action (unfair business practices), and fifth cause of action (declaratory relief).

For the following reasons, the court SUSTAINS Defendants’ demurrer in its entirety.

California’s Non-Judicial Foreclosure Statutes (First Cause of Action)

Defendants argue Plaintiff cannot state a cause of action for violations of California’s non-judicial foreclosure statutes as a matter of law. The court agrees.

Plaintiff’s FAC alleges Defendants violated California’s non-judicial foreclosure statutes by (1) erroneously claiming Plaintiff was in default pursuant to Civil Code section 2932 without proper notice pursuant to Civil Code section 2966, (2) failing to provide notice of default and notice of trustee’s sale pursuant to Civil Code sections 2932.5 and 2924b, and (3) utilizing a trustee as notary for the trustee’s deed upon sale in violation of Government Code section 8224.

Plaintiff’s Default

Plaintiff argues the notice of default and subsequent actions are invalid pursuant to Civil Code section 2932 because no default occurred. (FAC, ¶ 41, 43.) Plaintiff claims Defendants needed to first provide at least 90 days written notice of when the balloon payment was due pursuant to Civil Code section 2966. (FAC, ¶ 41-42.) In their demurrer, Defendants argue Civil Code section 2966 does not apply because (1) default was not based on the balloon payment but rather Plaintiff’s failure to pay installments and/or interest and (2) there are no allegations the lien here is the type of purchase money lien covered by Civil Code section 2966.

In this case, Plaintiff did allege both notes were purchase money instruments. (FAC, ¶ 17.) However, Civil Code section 2966 does not apply in this case as the alleged default was not based on a failure to make the balloon payment. Instead, the notice of default was based on a failure to make installment payments of $7,357.51 as of February 10, 2021. (Request for Judicial Notice (RJN), Ex. 4.) Furthermore, even if section 2966 was applicable, it also provides that failure to provide notice “does not extinguish any obligation of payment by the trustor” (Civ. Code, § 2966, subd. (b)) or “affect the validity of a sale in favor of a bona fide purchaser or the rights of an encumbrancer for value and without notice” (Civ. Code, § 2966, subd. (c)).

Thus, Plaintiff’s FAC does not establish the notice of default was in error.

Notice

Plaintiff contends Defendants failed to (1) provide notice of assignment pursuant to Civil Code section 2932.5 (FAC, ¶ 47); (2) record a notice of trustee’s sale against APN 8448-007-040 (FAC, ¶ 50); (3) provide notice of default via mail pursuant to Civil Code section 2924b, subdivision (c)(1) (FAC, ¶ 48, 56(d)); and (4) provide notice of trustee’s sale by mail pursuant to Civil Code section 2924b, subsection (c)(1) (FAC, ¶ 57(c)).

In response to Plaintiff’s first contention, Defendants’ demurrer misquotes the FAC by replacing Civil Code section 2932.5 with Civil Code section 2923.5. (Demurrer, p. 4:7-10.) Thus, it is unclear if Defendants’ argument that “Civil Code section 2923.5 has nothing to do with notice to a property owner of an assignment of a deed of trust” is based on Civil Code section 2923.5 or if Defendants are referring to Civil Code section 2932.5 and merely mistyped the section number. In either case, Civil Code section 2932.5 merely requires assignment of the power of sale to be signed and recorded and mentions nothing about notice being required. Thus, this allegation is without merit.

The court has not located a response in Defendants’ demurrer to Plaintiff’s second contention. However, the court finds this allegation is also without merit as the recorded notice of trustee’s sale provided to the court lists APN 8448-007-010. (RJN, Ex. 5.)

In response to Plaintiff’s third and fourth contentions, Defendants argue Plaintiff has failed to rebut the presumption of proper notice provided by Civil Code section 2924, subdivision (c). In relevant part, the code section states as follows:

“A recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.” (Civ. Code, § 2924, subd. (c).)

Here, the trustee’s deed upon sale includes recitals that the notice of default and notice of sale were sent within the proper time limits by certified mail “to each person entitled to notice in compliance with California Civil Code 2924b” and that “[a]ll requirements per California Statutes regarding the mailing, personal delivery and publication of copies of Notice of Default and Election to Sell under Deed of Trust and Notice of Trustee’s Sale” were complied with. (RJN, Ex. 6.) Thus, Plaintiff must overcome this presumption “by pleading and proving an improper procedure and the resulting prejudice.” (Knapp v. Doherty (2004) 123 Cal.App.4th 76, 86, fn. 4, quoting Miller & Starr, Cal. Real Estate (3d ed. 2000) § 10:211, p. 679.)

Previously, this court granted Defendant Inco’s motion for judgment on the pleadings with regards to Plaintiff’s first cause of action on the grounds that Plaintiff’s claim that Plaintiff never received the notices was insufficient to overcome this presumption of compliance. The court also noted that these statutes do not require actual notice and “simply mandate certain procedural requirements reasonably calculated to inform those who may be affected by a foreclosure sale and who have requested notice in the statutory manner that a default has occurred and a foreclosure sale is imminent.” (Id., at p. 89, quoting Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 746-747.)

Despite the court’s previous ruling, Plaintiff’s FAC continues to allege the notices were not mailed and that Plaintiff did not have actual notice. (FAC, ¶ 48, 56(d), 58.) Furthermore, Plaintiff fails to plead facts establishing any resulting prejudice. Instead, on April 28, 2021, Plaintiff discussed paying the entire amount due in emails with Defendants’ representatives. (FAC, ¶ 24.) Plaintiff also received a demand statement on May 5, 2021, with the amount due. (FAC, ¶ 27.) From June 2 to June 9, Plaintiff communicated back and forth with Defendants over the payoff amount before Plaintiff tried to request an extension. (FAC, ¶ 29-31.) The trustee’s sale occurred on June 10, 2021. (FAC, ¶ 32.) Thus, Plaintiff still has not pled sufficient facts to prove improper procedure and prejudice.

Government Code Section 8224

Plaintiff maintains the trustee’s deed upon sale is void because Government Code section 8224 prohibited the trustee from notarizing the deed. Defendants demur on the grounds that Plaintiff’s claim is without merit. The court agrees.

Pursuant to Government Code section 8224, “[a] notary public who has a direct financial or beneficial interest in a transaction shall not perform any notarial act in connection with such transaction.” However, the section also states “a notary public has no direct financial or beneficial interest in a transaction where the notary public acts in the capacity of an agent, employee, insurer, attorney, escrow, or lender for a person having a direct financial or beneficial interest in the transaction.” (Gov. Code, § 8224.)

Here, the trustee’s deed upon sale was signed by Cindy Sandoval on the behalf of Best Alliance. The notary was Sid Richman, who Plaintiff alleges is the CEO, secretary, CFO, and director of Best Alliance. (FAC, ¶ 59.) Thus, because Richman was acting as an agent for Best Alliance, Richman did not have a direct financial and beneficial interest in the transaction. Furthermore, while Plaintiff fails to provide any additional authority to support invalidating the deed on this ground, Defendants’ demurrer provides authority suggesting the opposite. (See Osterberg v. Osterberg (1945) 68 Cal.App.2d 254, 262 [“In California the acknowledgment of a deed is not essential to its validity. The acknowledgment of a deed is merely evidentiary in character and is required only to entitle it to be recorded so as to render it competent evidence of the conveyance without further proof.”]; Gov. Code, § 8222 [granting authority to Secretary of State to pursue injunctions for violations of notary statutes].)

Accordingly, the court SUSTAINS Defendants’ demurrer to this cause of action.

Wrongful Foreclosure (Second Cause of Action)

Defendants contend Plaintiff cannot state a cause of action for wrongful foreclosure as a matter of law. The court agrees.

The elements of a cause of action for wrongful foreclosure 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 Co. (2015) 236 Cal.App.4th 394, 408, quoting Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.)

In this case, Defendants note Plaintiff alleges the foreclosure was wrongful for the same reasons in the first cause of action. While Plaintiff also alleges the foreclosure was wrongful because Fleet Capital failed to record a substitution of Best Alliance as trustee, Defendants have established that is inaccurate through a substitution of trustee recorded February 17, 2021. (FAC, ¶ 67; RJN, Ex. 3.) Plaintiff also claims to have offered to pay the sums due with money held in escrow. (FAC, ¶ 73(c).) However, Plaintiff’s FAC establishes Plaintiff contested the amount due before requesting an extension. (FAC, ¶ 23, 29, 30, 31.) Thus, Plaintiff has failed to state a claim for wrongful disclosure.

Accordingly, the court SUSTAINS Defendants’ demurrer to this cause of action.

Quiet Title (Third Cause of Action)

Defendants maintain Plaintiff cannot state a cause of action for quiet title as a matter of law. The court agrees.

“To prevail on a quiet title claim, a plaintiff must establish title to the property in dispute.” (Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193.) Here, Plaintiff claims title to the property and alleges the non-judicial foreclosure by Defendants dispossessed Plaintiff of the property. (FAC, ¶ 80-82.) However, unlike wrongful judicial foreclosure actions which do not require full payment of debt secured by the disputed property, Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250, 1281, Plaintiff cannot seek to quiet title “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.) Thus, because Plaintiff does not plead any facts establishing Plaintiff tendered full payment, Plaintiff’s cause of action fails.

Accordingly, the court SUSTAINS Defendants’ demurrer to this cause of action.

Unfair Business Practices (Fourth Cause of Action)

Defendants argue Plaintiff cannot state a cause of action for unfair business practices as a matter of law. The court agrees.

To state a cause of action for unfair business practices, a plaintiff must establish defendant engaged in “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” (Bus. & Prof. Code, § 17200.) This section establishes three types of unfair competition, prohibiting “practices that are either ‘unfair,’ or ‘unlawful,’ or ‘fraudulent.’” (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1496.) Thus, “An act or practice may be actionable as “unfair” under the unfair competition law even if it is not ‘unlawful.’” (Chavez v. Whirlpool Corp. (2001) 93 Cal.App.4th 363, 374.)

In this case, Plaintiff’s FAC admits this cause of action is derivative of the first and second causes of action. (FAC, ¶ 87.) Thus, for reasons above, this cause of action also fails as a matter of law. Accordingly, the court SUSTAINS Defendants’ demurrer to this cause of action.

Declaratory Relief (Fifth Cause of Action)

Defendants contend Plaintiff cannot state a cause of action for declaratory relief as a matter of law. The court agrees as Plaintiff’s request for declaratory relief is derivative of and based on the other four causes of action to which Defendants now have demurred successfully, leaving no grounds to grant Plaintiff declaratory relief. Accordingly, the court SUSTAINS Defendants’ demurrer to this cause of action.

CONCLUSION

Based on the foregoing, Defendants’ demurrer to Plaintiff’s FAC is SUSTAINED as to all causes of action with twenty (20) days leave to amend.