Kiet v. Litton Loan Servicing
Filed 7/2/13 Kiet v. Litton Loan Servicing CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
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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opinion has not been certified for publication or ordered published for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 THREE
TANG KIET,
Plaintiff and
Appellant,
v.
LITTON LOAN SERVICING, LP, et al.,
Defendants and
Respondents.
G047505
(Super. Ct.
No. 30-2010-00432088)
O P I N I O
N
Appeal from a judgment
of the Superior Court
of
County, Karen J. Bravata, Temporary Judge. (Pursuant to Cal.
Const., art. VI, § 21.) Affirmed.
Law Office of Quyen Kiet
and Quyen Kiet for Plaintiff and Appellant.
Houser & Allison,
Eric D. Houser and M. Benjamin Susman for Defendants and Respondents.
The first deed of trust
on residential real property was foreclosed upon and bought by the lender at
the nonjudicial foreclosure sale for a full credit bid, leaving appellant Tang
Kiet as a sold-out junior lien holder.
Kiet did not appear at or bid at the trustee’s sale, nor did he
otherwise attempt to cure the default on the senior lien. Instead, he filed the instant action against
the lenders, Bank of America (as successor to Countrywide Home Loans, Inc.
(Countrywide)) and the Bank of New York as Trustee for the Certificate Holders
CWL, Inc. Asset-Backed Certificates, Series 2002-03 (BNY), the loan servicer,
Litton Loan Servicing, LP (Litton), and Mortgage Electronic Registration
Systems, Inc. (MERS) (hereafter collectively referred to as the Defendants
unless the context indicates otherwise), seeking to recover from them the
amount of his extinguished junior lien.
Kiet appeals from the
judgment in favor of the Defendants that followed their successful
credit bid included amounts the lender was not entitled to add to the secured
debt (specifically property taxes and hazard insurance premiums paid by the
lender), and included inflated amounts of principal and interest. Kiet urges the amounts improperly included in
the lender’s full credit bid constitute surplus sales proceeds that should have
been made available to satisfy his junior lien.
We reject Kiet’s contentions and affirm the judgment.
FACTS AND PROCEDURE
The Complaint
In April 2002,
Countrywide made an adjustable rate real estate loan of $437,750 to Lan Anh
Truong (Borrower), evidenced by a promissory note (the Note) and secured by a
recorded first deed of trust on residential property located in
Fountain Valley. By the time of the
foreclosure, BNY was the lender’s assignee via MERS,
and Litton was the loan servicer. In
December 2003, Kiet, who is an attorney, was named beneficiary of a second deed
of trust on the property securing a $75,000 note.
Kiet alleged that when
he learned of Borrower’s March 2006 default on the payments on the loan secured
by the first deed of trust, he contacted Litton in August 2006 to advise it of
his secured interest in the property.
The trustee’s sale was set for December
19, 2008, and the notice of the trustee’s sale set the minimum bid
at $559,806, which Kiet alleged was enough to cover both liens. The property was purchased by lender BNY at
the trustee’s sale for a full credit bid of $622,136. Kiet’s post-sale requests that his junior
lien be satisfied went unanswered by Litton.
Kiet alleged Defendants “inflated†the amount of the bid on the property
by including amounts to which they were not entitled. He alleged the difference between the amounts
Borrower really owed on the Note and BNY’s bid was at least $75,182—an amount
that should have been available to pay off the second deed of trust. Based on the foregoing allegations, Kiet’s
complaint contained causes of action against all the Defendants for
misrepresentation, enforcement of lien, breach of implied in fact contract,
common counts, and unjust enrichment.
Summary Judgment Motion
The Defendants moved for
summary judgment. Before setting forth
the facts contained in the separate statements, we describe the trust deeds in
more detail.
The April 2002 loan to
Borrower was an adjustable rate loan based on the LIBOR (London Interbank
Offered Rate) plus six percent. The Note
specifically referred to and was incorporated into the first deed of trust. As relevant to the issues raised in this
appeal, the first deed of trust defined the secured loan as including “the debt
evidenced by the Note, plus interest, any prepayment charges and late charges
due under the Note, and all sums due under this [first deed of trust] plus
interest.†The first deed of trust
provided Borrower “shall pay all taxes, assessments, charges, fines, and
impositions attributable to the [secured property] which can attain priority
over this [first deed of trust.]†If
Borrower failed to pay property taxes, the lender could do so in order to
protect its security interest in the property, and any amounts so expended
would become additional debt secured by the first deed of trust bearing
interest at the same rate as the Note from the date of disbursement. The first deed of trust further provided
Borrower must maintain hazard insurance on the property and if Borrower failed
to do so, the lender could obtain the insurance and any amounts expended by the
lender in maintaining hazard insurance coverage “shall become additional debt
of Borrower secured by this [first deed of trust]†bearing interest at the rate
provided for in the Note.
The Second Deed of
Trust
On December 8, 2003,
without obtaining the required approval from the lender, Borrower executed a
grant deed transferring title of the property to St. Thomas Corp., and a
few days later Phan Anh Do as president of St. Thomas Corp. executed a
promissory note for $75,000 payable to Kiet secured by a second deed of trust
recorded against the property with Kiet as beneficiary. The reasons for this transaction are not
entirely clear. At his deposition, Kiet
testified he was the attorney for St. Thomas and the $75,000 note was for
attorney fees related to a bankruptcy proceeding, but he could not explain why
the property had been transferred to St. Thomas or what Borrower’s relationship
was with St. Thomas.
Borrower stopped paying
on the loan secured by the first deed of trust in March 2006 and a notice of
default was recorded on March 31, 2008. On October
28, 2008, the foreclosure trustee executed a notice of trustee’s
sale to take place on November 26,
2008, which set a minimum bid of $559,806. The notice of the trustee’s sale was recorded
on November 7, 2008. On December
19, 2008, the property was sold at public auction for a full credit
bid by BNY. The full credit bid amount
of $622,136, included, among other amounts, unpaid principal and interest of
$560,910, property taxes of $42,002, hazard insurance premiums of $13,812,
attorney fees of $1,770, and statutory disbursements of $1,983.
Defendants put forth the
following as undisputed facts: The first
deed of trust was senior to the second deed of trust. It was foreclosed by a trustee’s sale on December 19, 2008, for a full credit
bid representing the amount of unpaid debt and costs owed by Borrower. Kiet did not attend the foreclosure sale,
cure the default on the first deed of trust prior to foreclosure, or redeem the
property at the foreclosure sale. Kiet
did not communicate with MERS, Bank of America, or BNY. Litton did not promise Kiet it would pay him
surplus funds from the foreclosure sale.
Kiet was aware of the foreclosure on the first deed of trust since 2006,
and he testified at his deposition that when he contacted Litton he was told
Litton could not discuss the first deed of trust with him because he was not
the borrower. Kiet did not record a
request for special notice of the trustee’s sale until December 16, 2008. Kiet testified he made no attempts to collect
on the promissory note from St. Thomas.
Kiet’s Opposition
Kiet’s opposition
included his declaration in which he attempted to dispute many of Defendants’
undisputed facts. Kiet’s declaration
attached as exhibits many of the same documents included in Defendants’ moving
papers. Kiet declared he contacted
Litton after the trustee’s sale to
ask for payment of his second deed of trust, was told they were reviewing the
matter, and “promised that I would be paid if there was a surplus of funds.†In his declaration, Kiet stated he was “led
by Litton[]†to believe the sales price obtained was sufficient to cover the
first deed of trust and the second deed of trust. Kiet attached as exhibit M what appears to be
an Internet printout from Zillow, dated December 26, 2008 (i.e., after the trustee’s sale) listing the two liens on the property
(the $437,750 first deed of trust and the $75,000 second deed of trust), which
showed the minimum foreclosure bid price of $559,806. He attached as exhibit H, a letter dated January 2, 2009 (i.e.,
Litton asking for payment of the debt secured by the second deed of trust. Kiet also included a declaration from
Borrower in which she stated she had never “acknowledged†the amounts expended
to pay property taxes or hazard insurance premiums, to be part of the amount
she owed under the Note.
Kiet also included with
his opposition a document designated exhibit F, of which he asked the court to
take judicial notice. Exhibit F was a printout of what Kiet
described as “a true and correct copy of table of historical 6-month LIBOR
rates†from January 2002 to July 2012, published “on-line†at a website found
at the Internet address “www.moneycafe.com.â€
He also included exhibit G, which was “a true and correct copy of
Lender’s Officer’s Certificate produced by [d]efendant L[itton] in
discovery.†The document has Borrower’s
name and address at the top, and three columns comprised of a list of dates
followed by the amount of principal and interest due on each date, beginning
March 2006 and ending May 2009.
Defendants objected to both exhibits as inadmissible hearsay and lacking
relevance.
Ruling
The trial court granted
Defendants’ summary judgment motion. As
relevant to the issues Kiet raises in his appeal, the court found he could not
prevail on his cause of action for enforcement of lien because his junior lien
was extinguished by the foreclosure of the senior lien by the lender’s full credit
bid at the trustee sale, which left no surplus as a matter of law. The court rejected Kiet’s argument inclusion
of property taxes and insurance advances in the full credit bid was improper—it
was undisputed Borrower did not make all of her property tax and insurance
payments and the first deed of trust specifically provided property taxes and
insurance advanced by the lender became part of the total debt owed under the
first deed of trust. Additionally, Kiet
had no standing to enforce the terms of the Note or the first deed of trust as
he was not a party to, or third party beneficiary of, either. The court found there were no triable issues
of fact as to Kiet’s common counts and unjust enrichment causes of action. The court sustained Defendants’ objections to
exhibits F and G, and declined to take judicial notice of either document.
DISCUSSION
Summary Judgment Standard of Review
“Summary judgment is
appropriate only if there is no triable issue of material fact and the moving
party is entitled to judgment in its favor as a matter of law. [Citation.] . . . A
defendant moving for summary judgment . . . must show that
one or more elements of the plaintiff’s cause of action cannot be established
or that there is a complete defense.
[Citation.] The defendant can
satisfy its burden by presenting evidence that negates an element of the cause
of action or evidence that the plaintiff does not possess and cannot reasonably
expect to obtain evidence needed to support an element of the cause of action. [Citation.]
If the defendant meets this burden, the burden shifts to the plaintiff
to set forth ‘specific facts’ showing that a triable issue of material fact
exists. [Citation.] [¶] We
review the trial court’s ruling de novo, liberally construe the evidence in
favor of the party opposing the motion, and resolve all doubts concerning the
evidence in favor of the opposing party.
[Citation.] We will affirm an
order granting summary judgment . . . if it is correct on
any ground that the parties had an adequate opportunity to address in the trial
court, regardless of the trial court’s stated reasons. [Citations.]â€
(Securitas Security Services USA,
Inc. v. Superior Court (2011) 197 Cal.App.4th 115, 119‑120.)
“‘A different analysis
is required for our review of the trial
court’s . . . rulings on evidentiary objections. Although it is often said that an appellate
court reviews a summary judgment motion ‘de novo,’ the weight of authority
holds that an appellate court reviews a court’s final rulings on evidentiary
objections by applying an abuse of discretion standard. [Citations.]’
[Citation.]†(
(2010) 187 Cal.App.4th 1326, 1335.)
Evidentiary Rulings
Kiet contends the trial
court erred by not admitting into evidence his exhibit F, a printout of
LIBOR rates from January 2002 to July 2012, he found “on-line,†and exhibit G,
a document titled “Lender’s Officer’s Certificate,†which he states was
produced by Litton in discovery. The
trial court sustained Defendants’ relevance and hearsay objections to both
documents.
“‘On appeals challenging
discretionary trial court rulings, it is appellant’s
burden to establish an abuse of discretion.
[Citations.]’ [Citation.]†(Ramos
v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4th 615, 624 (
Kiet has failed to establish an abuse of discretion here.
The trial court did not
err by declining to take judicial notice of exhibit F, the printout of the
website found at the Internet address “www.moneycare.com†listing historical
LIBOR rates. Judicial notice is a
court’s recognition of the existence of a matter of law or fact relevant to an
issue as a substitute for formal proof of that matter. (Fontenot,
supra, 198 Cal.App.4th at p. 264; Poseidon
Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th
1106, 1117.) “‘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.’
[Citation.] While courts take
judicial notice of public records, they
do not take notice of the truth of matters stated therein. [Citation.]
‘When judicial notice is taken of a
document, . . . the truthfulness and proper interpretation
of the document are disputable.’
[Citation.]†(
(2011) 196 Cal.App.4th 1366, 1375, italics added; see also
207 Cal.App.4th 1266, 1275, fn. 4 [judicial “notice [of court record] is
limited to the existence of the documents and is not the same as taking notice
of the truth of any matters or facts stated thereinâ€].) Although the printout might be an accurate
representation of the website Kiet found at “www.moneycare.com,†that does not
allow the trial court to take judicial notice of the facts that were asserted on that webpage. Accordingly, the trial court correctly ruled
the document inadmissible.
Nor has Kiet
demonstrated the trial court abused its discretion by excluding his exhibit
G. Kiet contends the one-page document,
titled “Lender’s Officer’s Certificate†was admissible because it was produced
by Litton in discovery, and relevant because it has Borrower’s name and loan
number on it. Kiet offers no reasoned
legal analysis of the issues to which the document pertains or how its exclusion
prejudiced him. The document is a list
of payment dates beginning in March 2006 and ending May 2009, followed by
amounts of principal and interest due on each date. In his opposition to the summary judgment
motion, Kiet asserted it showed the “lender†charged interest after the
foreclosure. But there is nothing
explaining who created the document, when it was prepared, what it was for, or
how it relates to the amounts calculated for BNY’s full credit bid. Kiet has failed to demonstrate the document’s
relevance and has failed to meet his appellate burden. (Ramos,
supra, 82 Cal.App.4th at p. 624.)
C. Enforcement of Lien Cause of Action
As to the enforcement of
lien cause of action, Kiet claimed there were “surplus funds†from the
trustee’s sale that should have been made available to pay his junior lien on
the property in accordance with the priorities set forth in Civil Code
section 2924k, subdivision (a).
Defendants moved for summary judgment on the grounds lender BNY’s full
credit bid extinguished the junior lien, which left no surplus sale proceeds as
a matter of law, and Kiet took no steps to protect his junior lien prior to its
extinguishment. Defendants are correct.
Civil Code
section 2924k, subdivision (a), requires the foreclosure trustee to
distribute the proceeds of the trustee’s sale in the following order of
priority: (1) the allowable costs and
expenses associated with exercising the power of sale; (2) payment of the
obligations secured by the deed of trust being foreclosed upon (e.g., the
senior lien); (3) satisfying junior liens and encumbrances; and then (4) to the
trustor.
The holder of a
subordinate deed of trust will recover all or a portion of the debt secured by
the subordinate deed of trust only if the successful trustee’s sale bidder pays
enough to pay off all of senior and all or a portion of the junior
indebtedness. (South Bay Building Enterprises, Inc. v. Riviera Lend-Lease,
1120-1121; FPCI RE-HAB 01 v. E & G
Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1023 (
subd. (a).) If the successful bidder
purchases at a price insufficient to pay off any of the junior indebtedness
after the proceeds of the sale are applied to the senior indebtedness (and other
statutory costs and expenses attributable to the sale see Civil Code, § 2924k,
subd. (a)), then the holder of the junior deed of trust is out of luck. Kiet is out of luck.
In this case, the lender
BNY was the only bidder at the trustee’s sale, and it made a full credit
bid. A “full credit bid†is described as
follows: “At a nonjudicial foreclosure
sale, if the lender chooses to bid, it does so in the capacity of a purchaser. [Citation.]
The only distinction between the lender and any other bidder is that the
lender is not required to pay cash, but is entitled to make a credit bid up to
the amount of the outstanding indebtedness.
[Citations.] The purpose of this
entitlement is to avoid the inefficiency of requiring the lender to tender cash
which would only be immediately returned to it.
[Citation.] A ‘full credit bid’
is a bid ‘in an amount equal to the unpaid principal and interest of the
mortgage debt, together with the costs, fees and other expenses of the
foreclosure.’ [Citation.] If the full credit bid is successful, i.e.,
results in the acquisition of the property, the lender pays the full
outstanding balance of the debt and costs of foreclosure to itself and takes
title to the security property, releasing the borrower from further obligations
under the defaulted note.
[Citation.]†(
10 Cal.4th 1226, 1238.)
In other words, when the
foreclosing lender makes a full credit bid on the property, by its very nature,
no money changes hands. The full credit
bid conclusively establishes the value of the property. (Bank
of America v. Quackenbush (1997) 56 Cal.App.4th 1167, 1171). There is no “surplus†to distribute. The lender’s debt is extinguished, and it
gets title to the property. “If a junior
lienor does not cure the default in the senior obligation or redeem at the
senior foreclosure, its lien will be extinguished at the foreclosure
sale . . . .†(
at p. 1023.)
We reject Kiet’s
argument the lender’s full credit bid improperly included amounts not included
in the debt secured by the first deed of trust, somehow requiring the lender
(or one of the other defendants) to now pay those overbid amounts to Kiet—the
sold-out junior. Kiet primarily argues
the lender’s payment of $42,002 in delinquent property taxes and $13,812 in
hazard insurance premiums was voluntary and those amounts cannot be considered
part of the debt secured by the first deed of trust. Nonsense.
The first deed of trust
specifically requires Borrower to pay property taxes and maintain insurance,
and provides if Borrower defaults in those obligations, the lender may advance
those costs and add them to the debt secured by the first deed of trust. Kiet provides no authority supporting his
contention the absence of provisions concerning the lender’s payment of taxes
and insurance in the Note controls; it is well established that a promissory
note and deed of trust are part of a single transaction and are read together. (See Huckell
v. Matranga (1979) 99 Cal.App.3d 471, 481.)
Moreover, numerous
statutes and cases specifically validate the lender’s rights in this regard so
as to protect its security interest in the property. For example, by statute liens for real
property taxes have priority over all
private liens, regardless of the time of their creation. (See Rev. & Tax. Code, §§ 2192.1,
3712; Gov. Code, § 53935.) And when the
trustor on a deed of trust fails to pay property taxes when due, the
lender/beneficiary may make the payments, add the amount paid to the principal
indebtedness and foreclose the security if those amounts are not
reimbursed.
(
212 Cal. 64, 68-69.) Indeed Civil
Code section 2876 specifically provides that when a lien holder “is compelled
to satisfy a prior lien for his own protection, he may enforce payment of the
amount so paid by him, as a part of the claim for which his own lien
exists.â€
Similarly, case law has
acknowledged that both the borrower/trustor and the lender/beneficiary have
separate insurable interests in the property (Mosee v. Firemen’s Ins. Co. of Newark (1927) 87 Cal.App. 473, 475;
Cal.App. 186, 188), and if the borrower/trustor defaults on the
obligations set forth in the deed of trust to keep the property adequately
insured for the benefit of both, the lender beneficiary is entitled to insure
or pay the premium and add that amount to the secured debt. (See Campbell
v. Realty Title Co. (1942) 20 Cal.2d 195; 27 Cal.Jur. 3d (2013) Deed of
Trust, § 99; Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure
Litigation (Cont.Ed.Bar 4th ed. 2012) Trustor’s Failure to Insure, § 8.58,
p. 683; see also Fin. Code, §§ 1487 & 7461 [allow enforcement of
provisions in mortgages and deed of trusts accelerating the debt and
foreclosing for nonpayment of taxes and insurance whether or not lender’s
security interest in the property has been impaired].)
We are similarly
unimpressed by Kiet’s argument the lender’s full credit bid was based on
incorrect calculations of the principal remaining due and inflated interest
charges, and therefore either the lender (or one of the other defendants) must
pay those amounts to Kiet. Even if the
amounts of principal and accrued interest owed by Borrower on the Note were
miscalculated, Kiet suggests no basis on which he can assert Borrower’s
rights. It is undisputed Kiet made no
attempt to cure Borrower’s default on the first deed of trust so as to protect
his junior lien, did not bid on the property at the foreclosure sale, or redeem
the property. And there is no evidence
of any irregularities in the trustee’s sale that precluded Kiet from curing the
default on the first deed of trust or prevented a bid by a higher bidder.
damaged by [any] irregularities in the foreclosure sale which dissuaded or
prevented a higher bid, the junior lienor would have to produce a ready,
willing and able buyer who would have paid the higher price but for the
wrongful conduct. Otherwise, damages
alleged would be speculative.†(
1424.) Kiet presented no evidence he or
anyone else was ready, willing, and able to bid on the property at the
trustee’s sale. In short, there was no
material issue of fact as to whether there was any “surplus†of funds from the
trustee’s sale, and the trial court correctly granted summary judgment.
D.
Common Counts and Unjust Enrichment Causes of Action
Kiet contends the trial
court erred by granting summary judgment on his common counts and
analysis of either cause of action. He
provides no citation to authority, or any discussion of the requisites for
those claims. While we perform a de novo
review of summary adjudications, it is always the appellant’s burden on appeal
to demonstrate the trial court erred. (
Cal.App.4th 645, 649-650, [“party asserting trial court error may
not . . . rest on the bare assertion of error but must
present argument and legal authority on each point raisedâ€].) Accordingly, we deem the contentions waived. (Badie
v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [when appellant
raises issue “but fails to support it with reasoned argument and citations to
authority, we treat the point as waivedâ€]; see also Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.)
DISPOSITION
The judgment is
affirmed. Respondents are awarded their
costs on appeal.
O’LEARY,
P. J.
WE CONCUR:
BEDSWORTH, J.
IKOLA, J.
name="_ftn1" title="">[1] “MERS is a private
corporation that administers a national registry of real estate debt interest
transactions. Members of the MERS System
assign limited interests in the real property to MERS, which is listed as a
grantee in the official records of local governments, but the members retain
the promissory notes and mortgage servicing rights. The notes may thereafter be transferred among
members without requiring recordation in the public records. [Citation.]
[¶] Ordinarily, the owner of a
promissory note secured by a deed of trust is designated as the beneficiary of
the deed of trust. [Citation.] Under the MERS System, however, MERS is
designated as the beneficiary in deeds of trust, acting as ‘nominee’ for the
lender, and granted the authority to exercise legal rights of the lender.†(Fontenot
v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 267 (
title="">[2] Kiet makes a passing
reference to the trustee’s sale date being “changed without giving notice to
Borrower and other interested parties,†but he offers no facts indicating an irregularity in the trustee’s sale. The record shows the trustee’s sale was
properly noticed to take place on November 26, 2008. The trustee’s sale actually occurred on
December 19, 2008. Civil Code
section 2924g requires only that a postponement of the trustee’s sale (for
less than 365 days) be orally announced, i.e., “by public declaration by the
trustee at the time and place last appointed for
sale. . . . No other notice of postponement need be
given.†(Civ. Code, § 2924g, subds.
(a) & (d).) The trustee’s deed
states all legal notice requirements were complied with creating a presumption
the sale was conducted regularly and properly.
(Civ. Code, § 2924, subd. (c); Residential Capital v. Cal-Western Reconveyance Corp. (2003)
108 Cal.App.4th 807, 823, fn. 4.)
Kiet presented no evidence rebutting
the presumption notice of any postponement was properly given.
