Filed 4/21/17 Cruz v. Countrywide Home Loans CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO



LOUIS CRUZ et al.,

Plaintiffs and Appellants,

v.

COUNTRYWIDE HOME LOANS, INC. et al.,

Defendants and Respondents.


E063881

(Super.Ct.No. MCC1400816)

OPINION


APPEAL from the Superior Court of Riverside County. Gloria Connor Trask, Judge. Affirmed.
Rodriguez Law Group, Patricia Rodriguez and George M. Hill for Plaintiffs and Appellants.
Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendants and Respondents Countrywide Home Loans, Inc. dba America’s Wholesale Lender.
Wright, Finlay & Zak, Gwen H. Ribar and Marvin B. Adviento for Defendants and Respondents Select Portfolio Servicing, Inc., Mortgage Electronic Registration Systems, Inc., and the Bank of New York Mellon fka The Bank of New York as Trustee, etc.
In a Second Amended Complaint (SAC), Louis and Donna Cruz (the Cruzes) sued (A) Countrywide Home Loans, Inc. (Countrywide) ; (B) Bank of New York Mellon (BNYM), formerly known as the Bank of New York; (C) Select Portfolio Servicing, Inc.; (D) Mortgage Electronic Registration Systems Inc. (MERS); and (E) Does 1 through 10. The causes of action included (1) wrongful foreclosure (Civ. Code, § 2924, subd. (a)(6)); (2) cancellation of a contract; (3) breach of the covenant of good faith and fair dealing; (4) unfair competition (Bus. & Prof. Code, § 17200); and (5) “violation of Finance Lender[s] Law” (Fin. Code, §§ 22000 et seq., 50000 et seq.). The trial court sustained two demurrers against the SAC without leave to amend.
The Cruzes raise four issues on appeal. First, the Cruzes contend the trial court erred by sustaining the demurrer on the wrongful foreclosure cause of action. Second, the Cruzes assert the trial court erred by sustaining the demurrer on the cause of action for breach of the covenant of good faith and fair dealing. Third, the Cruzes contend the trial court erred to the extent it relied on the alleged truth of judicially noticed documents. Fourth, the Cruzes assert the trial court erred by denying them leave to amend. We affirm the judgment.
FACTUAL AND PROCEDURAL HISTORY
A. SECOND AMENDED COMPLAINT
The facts in this subsection are taken from the SAC. In February 2006 the Cruzes mortgaged their home in Murrieta (the property) through America’s Wholesale Lender, i.e. Countrywide. The mortgage was for $1,375,000, secured by a deed of trust on the property. MERS was listed as a beneficiary and nominee in the deed of trust. In May 2011 the mortgage was sold to BNYM. The assignment of the deed of trust was signed by MERS. Select Portfolio Servicing, Inc. was the loan servicer. A Notice of Default and Election to Sell was recorded against the property.
In the wrongful foreclosure cause of action, the Cruzes allege the May 2011 assignment that transferred interest to BNYM was void. The Cruzes asserted the note was transferred without a complete chain of transfers and assignments.
In the cause of action for breach of the covenant of good faith and fair dealing, the Cruzes allege (1) they were not informed that their note and deed of trust were transferred into a securitized trust or assigned to BNYM; and (2) the covenant was breached when a nonbeneficiary of the deed of trust filed foreclosure paperwork against the property.
B. COUNTRYWIDE’S DEMURRER
Countrywide demurred to the SAC. Countrywide asserted the wrongful foreclosure claim failed because the claim relied upon Civil Code section 2924, subdivision (a)(6), which requires a foreclosure sale, and the Cruzes did not allege a foreclosure sale occurred. Additionally, Countrywide asserted the Notice of Default was properly recorded in compliance with section 2924, subdivision (a)(6).
As to the cause of action for breach of the covenant of good faith and fair dealing, Countrywide asserted the claim failed because they had no obligation to notify the Cruzes of the sale of the note and deed of trust. Additionally, Countrywide asserted the Cruzes’ lawsuit failed because the Cruzes did not allege they tendered funds to cure their default.
In support of its opposition, Countrywide requested the trial court take judicial notice of (1) a 2003 grant deed; (2) a 2006 deed of trust; (3) a 2008 quitclaim deed; (4) a 2011 assignment of the deed of trust; (5) a 2014 substitution of trustee; (6) a March 2014 notice of default and election to sell under deed of trust; and (7) a June 2014 notice of trustee’s sale. All the documents had been recorded in the Riverside County Recorder’s Office.
C. SECOND DEMURRER
BNYM, MERS, and Select Portfolio Servicing, Inc. (the Second Defendants) also demurred to the SAC. The Second Defendants asserted the Cruzes’ SAC failed because the Cruzes did not allege they tendered a sum sufficient to cure their default.
As to the wrongful foreclosure cause of action, the Second Defendants asserted (1) there is no private right of action under section 2924, subdivision (a)(6); (2) the recorded documents reflect defendants could lawfully foreclose; and (3) without a valid tender by the Cruzes, there cannot be a wrongful foreclosure.
In support of their opposition, the Second Defendants requested the trial court take judicial notice of (1) the 2006 deed of trust; (2) the 2011 assignment of the deed of trust; (3) the March 2014 substitution of trustee; (4) the March 2014 notice of default and election to sell; (5) the June 2014 notice of trustee’s sale; (6) the Cruzes’ complaint filed in the federal district court; and (7) the January 2015 dismissal of the federal case.
D. OPPOSITION TO THE DEMURRERS
The Cruzes opposed the two demurrers. The Cruzes asserted they were not required to tender funds to cure their default because their claims against “[d]efendants and others will more than off-set any amount claimed to be due.” Additionally the Cruzes contended it would be inequitable to require tender because it might be shown that the foreclosure is wrongful.
As to the wrongful foreclosure cause of action, the Cruzes contended they adequately alleged a violation of section 2924, subdivision (a)(6) because they asserted the original lender (Countrywide) did not foreclose, and the parties who did foreclose (BNYM and Select Portfolio Servicing) were not legitimate beneficiaries, and therefore the notice of default and notice of trustee’s sale were illegally recorded.
In regard to the cause of action for breach of the covenant of good faith and fair dealing, the Cruzes asserted they sufficiently pled the claim because they alleged defendants recorded documents “indicating [d]efendants were the beneficiaries of the loan when they were not.”
E. RULING
The trial court issued a tentative ruling sustaining the demurrers without leave to amend. Oral argument was not requested. The trial court’s tentative ruling became its final ruling. Reasons for the trial court’s rulings were not stated on the record. The record reflects the trial court granted the Second Defendants’ request for judicial notice, but it is unclear if Countrywide’s request for judicial notice was also granted. The trial court dismissed the case.
DISCUSSION
A. WRONGFUL FORECLOSURE
The Cruzes contend the trial court erred by sustaining the demurrer on the wrongful foreclosure cause of action.
We apply the de novo standard when reviewing the sustaining of a demurrer. Our task in conducting the review is to determine if the complaint states a cause of action. (Nolte v. Cedars Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1405-1406.)
The Cruzes’ wrongful foreclosure cause of action is based on section 2924, subdivision (a)(6), which provides, in relevant part, “No entity shall record or cause a notice of default to be recorded or otherwise initiate the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original trustee or the substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest.” In other words, the Cruzes are alleging BNYM did not have authority to foreclose upon the property.
The 2013 Homeowner’s Bill of Rights (HBOR) became effective on January 1, 2013. (Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 157.) “In the HBOR, the Legislature authorized a private right of action to enjoin a nonjudicial trustee’s sale where a lender violates any one of nine statutory provisions.” (Id. at p. 158.) Section 2924, subdivision (a)(6), is not among those nine provisions. (Lucioni, at p. 158.) Therefore, under the HBOR, “a plaintiff may not seek to enjoin a foreclosure based on a claim that the foreclosing party lacked the necessary authority to foreclose.” (Id. at p. 159.)
The notice of default in this case was recorded in March 2014. The HBOR was in effect at that time. (Lucioni v. Bank of America, N.A., supra, 3 Cal.App.5th at p. 157.) Therefore, the Cruzes’ wrongful foreclosure claim, which relies on section 2924, subdivision (a)(6), does not state a cause of action because there is no private right of action associated with that subdivision. (Lucioni, at p. 158.) As a result, we conclude the trial court properly sustained the demurrer on the wrongful foreclosure cause of action.
B. BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
The Cruzes contend the trial court erred by sustaining the demurrer to the cause of action for breach of the covenant of good faith and fair dealing.
As set forth ante, we apply the de novo standard in determining whether the complaint sets forth a cause of action. “Because a demurrer tests only the legal sufficiency of the pleading, we accept as true even the most improbable alleged facts, and we do not concern ourselves with the plaintiff[s’] ability to prove [their] factual allegations.” (Nolte v. Cedars Sinai Medical Center, supra, 236 Cal.App.4th at pp. 1405-1406.)
The implied covenant of good faith and fair dealing “requires mutual fairness in applying a contract’s actual terms[; the implied covenant] cannot substantively alter those terms.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 327.)
In the SAC, the Cruzes allege the defendants “willfully withheld numerous disclosures.” For example, “Defendants allegedly did not inform Plaintiff[s] of the transfer of the Note and Deed of Trust into a Securitized Trust.” The Cruzes’ claim fails because they do not cite contract language requiring defendants to provide notice to the Cruzes. Thus, they fail to show a breach of the contract. Moreover, contrary to the Cruzes’ allegation, the deed of trust provides, “The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower.”
Also in the SAC, the Cruzes allege that, under “paragraph 22 of the Deed of Trust, only the Lender is authorized to accelerate the loan, stating: [¶] ‘Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Investment . . .’ [¶] ‘If Lender invokes the power of sale, Lender shall execute or cause Trustee to execute a written notice of the occurrence of an event of default and of Lender’s election to cause the Property to be sold . . .’.” The Cruzes allege, “Defendants breached the provisions as contained within the ‘Deed of Trust’ which cited the lender as [Countrywide], by allowing a nonbeneficiary to try to foreclose.”
The Cruzes cause of action fails because the deed of trust terms cited by the Cruzes do not reflect that only the lender may foreclose. Rather, the terms set forth a procedure for foreclosing if a lender chooses to foreclose. The cited terms do not exclude other entities from foreclosing or limit foreclosure authorization to Countrywide. As a result, the Cruzes have failed to set forth a term of the contract that was breached by defendants. Accordingly, we conclude the trial court properly sustained the demurrer on the cause of action for breach of the implied covenant of good faith and fair dealing.
In the Cruzes Appellants’ Opening Brief, they allege, “Defendants breached the implied covenant by recording documents with the county recorder indicating Defendants were the beneficiaries of the loan when they were not.” The Cruzes do not refer to any contract language that would support a conclusion that this alleged action by the defendants was in breach of a contract. Accordingly, we find the Cruzes’ contention to be unpersuasive.
C. JUDICIAL NOTICE
In regard to the trial court’s grant of judicial notice, the Cruzes contend the trial court erred to the extent it “assumed the truth or validity of Defendants’ foreclosure documents simply because they were recorded.”
“While courts take judicial notice of public records, they do not take notice of the truth of matters stated therein.” (Herrera v. Deutsche Bank Nat. Trust Co. (2011) 196 Cal.App.4th 1366, 1375.) An appellant bears the burden of showing the trial court erred. (Jones v. Department of Corrections and Rehabilitation (2007) 152 Cal.App.4th 1367, 1376.)
The record does not include any reasons for the trial court’s ruling. Thus, we have no basis for inferring the trial court erred. There is nothing in the record indicating the trial court found the judicially noticed documents were true, and then relied upon that conclusion. The Cruzes provide no record citations supporting their assertion that the trial court may have relied upon the alleged truth of the judicially noticed documents. (Cal. Rules of Court, rule 8.204(a)(1)(C).) Accordingly, no error has been demonstrated.
D. AMENDMENT
The Cruzes contend the trial court erred by denying them the opportunity to file a third amended complaint.
We apply the abuse of discretion standard of review. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The Cruzes bear the burden of explaining in what manner they can amend their complaint and how that amendment will change the legal effect of their pleading. (Ibid.)
In the Cruzes’ Appellants’ Opening Brief, they do not explain how they would amend the SAC. The Cruzes did not request oral argument in the trial court, and therefore did not offer any explanation of how they would amend the SAC at that point. In the Cruzes’ two oppositions to the demurrers to the SAC, they did not explain how they would amend the SAC. Given the lack of explanation as to how the Cruzes would amend the SAC so as to cure the deficiencies, we conclude the trial court’s denial of leave to amend was reasonable. In sum, the trial court did not err.
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS


MILLER
J.


We concur:


HOLLENHORST
Acting P. J.


CODRINGTON
J.