Le Beau v. Bank of
Filed 4/26/13 Le Beau v. Bank of America CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
CHARLES P. LE BEAU, et al.,
Plaintiffs and Appellants,
v.
BANK OF AMERICA,
N.A., et al.,
Defendants and Respondents.
D061045
(Super. Ct. No. 37-2009-00083414-CU-OR-CTL)
APPEAL from
a judgment of the Superior Court of San
Diego County, Joel M. Pressman, Judge.
Affirmed; judicial notice granted.
Plaintiffs
and appellants Charles P. Le Beau and Victoria J. Le Beau
(Plaintiffs) appeal a summary judgment granted in favor of defendant and respondent
Bank of America, N.A. (the Bank) and its substituted trustee, defendant and
respondent Northwest Trustee Services, Inc. (Northwest; sometimes together,
Defendants), in this action alleging various claims arising out of nonjudicial
foreclosure. In 1988, Plaintiffs
refinanced their La Jolla home with Gibraltar Savings (Gibraltar
or the lender), obtaining a mortgage loan secured by a deed of trust recorded
against the home. By 1991, the Gibraltar
note and trust deed had been transferred to Security Pacific Bank (Security
Pacific), through savings and loan insolvency procedures involving the
Bank, and Plaintiffs made payments to the Bank until 2007. Plaintiffs then experienced financial
difficulties and stopped making regular mortgage payments, as well as related
insurance policy payments.
In 2008,
based on Plaintiffs' defaults, nonjudicial foreclosure
proceedings were commenced by the Bank, in its capacity as the successor in
interest to the lender, acting through its newly substituted trustee
Northwest. In February 2009, Plaintiffs
brought suit against the Bank and Northwest, alleging causes of action for
quiet title, tort and contract theories, all claiming Defendants lacked
authority to proceed with the foreclosure.
After extensive motion practice, the trial court granted a joint motion
for summary judgment by Defendants on the first amended
cross-motion for summary judgment. (Code
Civ. Proc., § 437c; all further statutory references are to this code
unless noted.)
On appeal,
Plaintiffs contend there were procedural irregularities in the manner in which
the foreclosure proceedings were conducted, because of the complicated history
of the transfer of the loan, its note and trust deed among the various
financial institutions involved.
Plaintiffs also contend the trial court committed several evidentiary,
procedural, and substantive legal errors in ruling on Defendants'
cross-motion, or abused its discretion.
Plaintiffs contend they raised meritorious objections that must have
been inadequately considered.
We reject
Plaintiffs' challenges to the court's granting of the joint Bank/Northwest
motion for summary judgment. Because we
conclude the Bank demonstrated as a matter of law that it was a proper party to
initiate the nonjudicial foreclosure action, and it appropriately appointed the
successor trustee and followed statutory procedures, no legal, evidentiary, or
procedural error is apparent on this record.
(Civ. Code, § 2924, subd. (a)(1).)
We grant Defendants' request for judicial
notice on appeal regarding documentation of the bank merger (part III.A,
FACTUAL
AND PROCEDURAL HISTORY
A. Financing Transaction; Lender's Transfer and
Subsequent Bank Merger
On May 11, 1988, Plaintiffs obtained a
$305,250 refinance mortgage loan from Gibraltar, for
their home on Via Segovia in La Jolla (the loan). The payment obligations under the promissory
note signed by Plaintiffs in favor of Gibraltar are
secured by a deed of trust recorded against the property.
In the
recorded deed of trust, Gibraltar or its designee were
authorized to foreclose on it if Plaintiffs failed to make their monthly
mortgage loan payments. There was no
requirement in the trust deed for the borrower to obtain private mortgage
insurance.
Because of Gibraltar's
financial problems, the RTC obtained all of its assets. The RTC later assigned this loan to Security
Pacific National Bank, and endorsed the promissory note package to it.
Security
Pacific was merged into the Bank in 1992.
As successor in interest, the Bank received all of the assets of
Security Pacific, by operation of law.
(12 U.S.C. § 215a(e).)
name="_ftnref1" title="">[1] This included the Security Pacific interest
in the note and its deed of trust. The
Bank now possesses the original note, as Plaintiffs admit in their pleading.
After the
1992 merger, Plaintiffs consistently made payments to the Bank. The terms of the loan had not required that
the Plaintiffs obtain private mortgage insurance. However, in 1997, Plaintiffs obtained an
optional Bank "Disaster Mortgage Protection" policy, and their
monthly premium payments under the "Disaster Mortgage Plan" were
added to their monthly mortgage payment.
Around 2003
to 2004, Plaintiffs failed to pay their property taxes, which was a breach of
the terms of the deed of trust.
Plaintiffs were disputing the validity of the assessed property taxes. The Bank paid the property taxes and
established an impound account, as permitted by the deed of trust.
Sometime
between 1991 and 2003, Mr. Le Beau conveyed his interest in the property to
Mrs. Le Beau via a quitclaim deed and interspousal transfer deed. In 2003, Mrs. Le Beau conveyed her interest
in the Property to Casa de Erin, LLC, a limited liability company of which she
is or was apparently the only owner.
B. Lawsuit and Preliminary Motions; First
Amended Complaint
In June
2007, Plaintiffs had financial difficulties and stopped making regular loan payments. They did not pay the disaster insurance
policy premiums. Due to the default, the
Bank canceled the optional policy in June 2007.
Many letters were exchanged between Plaintiffs and the Bank about the
various issues, and Plaintiffs sought a loan modification.
In October
2008, the Bank recorded a substitution of trustee for Northwest to replace
Security Pacific's trustee (Equitable or Security Allied). Plaintiffs executed a borrower signature
authorization that authorized the Bank to speak with Barry Diamond of Real
Estate Financial Network, LLC regarding the loan.
In November
2008, the Bank commenced nonjudicial foreclosure proceedings. At its direction, Northwest recorded a notice
of default. On December 8, 2008,
Plaintiffs sent a letter to Defendants arguing that approximately $13,000 in
mortgage payments made from May through September 2007 had not been properly
credited to their account, if the monthly payment amounts were calculated as
Plaintiffs thought they should be (the original $1,850 installments, as opposed
to an interest rate change permitted by the note, adjusting the monthly payment
amount to around $3,800). In February
2009, Northwest recorded a notice of trustee's sale at the Bank's direction.
In February
2009, Plaintiffs, in pro per, filed their lengthy complaint, alleging that the
Bank should not have set up an impound account, had not credited Plaintiffs all
of their payments, and had otherwise acted wrongfully. The complaint alleges that in 1992, the Bank
"acquired" Security Pacific, and the mortgage loan was
"allegedly" assigned to the Bank.
The exhibits to the complaint include a preliminary title report listing
the chain of title for the beneficial interest under the trust deed, from Gibraltar
to Security Pacific, to the Security Pacific trustees, and showing Northwest's
current capacity as trustee. Northwest
recorded the notice of default on October
30, 2008. Other exhibits
attached to the complaint showed the disputes over the property tax payments
made by the Bank and Plaintiffs' request for loan modification.
In March
2009, Plaintiffs obtained a preliminary injunction conditioned upon their
making monthly payments. They did so
until October 2010.
The Bank
and Northwest brought an initial summary judgment motion, but it was taken off
calendar when Plaintiffs were granted leave to amend the complaint. Plaintiffs filed a cross-motion for summary
judgment, which was also taken off calendar.
Plaintiffs
filed a first amended complaint (FAC) naming the Bank, Northwest and others as
defendants. It relies on the same
exhibits as attached to the original complaint.
Next, the court ruled upon a motion for judgment on the pleadings and a
set of demurrers, with the result that the numerous surviving causes of action
in the FAC allege quiet title, rescission for improper cancellation of the
mortgage insurance policy, unfair debt collection practices, unfair business
practices, breach of fiduciary duty, breaches of contract and the covenant of
good faith and fair dealing, intentional infliction of emotional distress,
elder abuse, and relief such as accounting, injunctive and declaratory
relief. Among other things, Plaintiffs
seek damages for the property's lost equity due to the stigma of foreclosure
(approximately $480,000)
name="_ftnref3" title="">[3]
The Bank
and Northwest answered the FAC.
C. Current Cross- Motions; Ruling
The Bank
and Northwest brought another joint summary judgment motion or, alternatively,
sought summary adjudication on the claims alleged in the FAC. They argued that judicial admissions were
made in the FAC that the Bank had succeeded to the assets of Security Pacific,
through "acquiring" Security Pacific by merger. They contended that Plaintiffs' discovery
responses were devoid of facts and showed that Plaintiffs would be unable to
prove the essential elements of the claim.
The Bank was in possession of the original note and was the undisputed
holder of the original lender's interest in the property. Additionally, Defendants argued that
Plaintiffs would be unable to prevail on their claims about improper debt
collection, unfair business practices, breaches of fiduciary duty or the
implied covenant, emotional distress, elder abuse, or negligence per se. Regarding Northwest, Defendants argued that
the complaint and the discovery responses failed to identify any charging
allegations against Northwest individually.
In support
of their motion, Defendants filed an attorney declaration attaching copies of
the discovery responses from Plaintiffs.
They also supplied declarations from (a) the Bank's assistant
vice-president Jacqueline Tobolski and (b) Northwest's chief operating officer
(COO), Michael Montgomery.
name="_ftnref5" title="">[5] Bank official Tobolski's declaration states
her occupation gives her custody and control over the Bank's files kept in the
regular course of its business. She
attached copies of the original Gibraltar note, the deed
of trust, the enrollment form for the "disaster mortgage insurance
program" in which Plaintiffs were enrolled, and the form of cancellation
of their enrollment when they did not make monthly payments. The Bank's files showed that when Plaintiffs
failed to pay their property taxes, the Bank established an impound account and
advanced those amounts. The loan history
showed that Plaintiffs made no loan payments between June 2007 and April
2009. Payments resumed after the March
2009 preliminary injunction was issued.
The Bank
substituted Northwest as the trustee under the deed of trust, and Tobolski's
declaration attaches a recorded copy.
Foreclosure proceedings were initiated, as shown in the declaration's
attached copy of the notice of default and notice of trustee's sale. A loan history of all payments made, amounts
advanced to pay property taxes and charges accrued on the Loan was provided
with the Bank's attorney's declaration.
Northwest
COO Montgomery's declaration states his occupation gives him custody and
control over Northwest's files that are kept in the regular course of its
business. He attached copies of the
substitution of Northwest as the trustee under the deed of trust, as well as
copies of the notice of default and notice of trustee's sale.
Also in
support of their motion, Defendants requested judicial notice of the recorded Gibraltar
trust deed, the interspousal grant deeds and the recorded foreclosure notices.
Plaintiffs
filed opposition, as well as their cross-motion for summary judgment. Plaintiffs raised evidentiary objections to
the declarations of Defendants' attorney, and those of the Bank and Northwest's
officials, generally contending that they contained hearsay and were
irrelevant. Supplemental oppositions and
replies were filed.
After
hearing argument on the fully briefed cross-motions, the trial court granted
summary judgment to the Bank and Northwest, and took judicial notice as
requested. The order addresses the
evidentiary objections brought by each side, and criticizes the separate
statement filed by Plaintiffs as confusing and written in an improper format. (Cal. Rules of Court, rule 3.1350(f),
(h).) The court set forth the history of
the transaction, finding among other things that the Bank was in possession of
the note, and its payment and impound of property tax payments had been
authorized under the terms of the deed of trust, regardless of the validity of
the assessed taxes, and it was entitled to proceed with the nonjudicial
foreclosure. There were no charging
allegations against Northwest, and Defendants were entitled to judgment as a
matter of law. Plaintiffs timely
appealed.
DISCUSSION
Plaintiffs
primarily contend the Bank had no authority to enforce the Gibraltar note or
deed of trust, since the Plaintiffs' search of recorded documents did not
disclose that any separate transfer, endorsement or conveyance of either
instrument had been executed and recorded, as between Security Pacific and the
Bank. Plaintiffs contend they had the
right to examine the Gibraltar note, before the Bank
could take action to substitute the trustee or file its notice of default. They claim the record does not support the
grant of summary judgment to the Bank and Northwest, because judicial notice of
recorded documents was insufficient to establish the truth of facts stated
within the documents.
Plaintiffs
presented their own expert declarations giving opinions about the arguable
inadequacy of the chain of title shown in the recorded documents, and contend
that Defendants should have produced controverting expert evidence, but did
not, and therefore triable issues of fact remain about the Bank's standing to
carry out nonjudicial foreclosure proceedings.
They additionally claim the trial court should not have found defective
and discounted their document entitled "Plaintiff's Opposition, Response
and Supporting Evidence to Defendants' Motion for Summary Judgment," and
therefore the court abused its discretion in overruling their evidentiary
objections about Defendants' documentation of the transfer of interests between
Gibraltar, Security Pacific and the Bank.
Further,
Plaintiffs contend the trial court should have granted their alternative
cross-motion for summary judgment, or it mistakenly ignored those
arguments. They claim they can show the
Bank wrongfully canceled their optional mortgage disaster insurance policy or
publicized their private finances, and these acts amounted to breaches of
contractual or fiduciary duties. (Civ.
Code, § 2954.6, subd. (a).) We will
discuss Plaintiffs' various procedural and evidentiary arguments and objections
as they are intertwined with the merits of the ruling and judgment.
I
Summary judgment rulings are
reviewed de novo. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767.) We also review de novo the interpretation
given to any statutes in the rulings. (
Community College Dist. (1981) 28 Cal.3d 692, 699.)
"Civil
Code section 2924, subdivision (a)(1) is part of a broad statutory system that
creates a largely ministerial process leading to a foreclosure sale that does
not require any court oversight." (
471.) "The purposes of this
comprehensive scheme are threefold:
(1) to provide the creditor/beneficiary with a quick, inexpensive
and efficient remedy against a defaulting debtor/trustor; (2) to protect the
debtor/trustor from wrongful loss of the property; and (3) to ensure that a
properly conducted sale is final between the parties and conclusive as to a
bona fide purchaser." (
822, 830.)
"In a
nonjudicial foreclosure, also known as a 'trustee's sale,' the trustee
exercises the power of sale given by the deed of trust." (Alliance
Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236.) "Nonjudicial foreclosure is less
expensive and more quickly concluded than judicial foreclosure, since there is
no oversight by a court, '[n]either appraisal nor judicial determination of
fair value is required,' and the debtor has no postsale right of
redemption." (Ibid.) Civil Code section
2924 governs the recording and mailing of a notice of default to begin the
nonjudicial foreclosure process, and outlines which entities can start this
process (beneficiary, trustee, mortgagee, etc.). (See Gomes
v. Gibraltar Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155
[no cause of action exists to require the holder of a promissory note or its
designee to prove it has authority to initiate a foreclosure proceeding].)
This appeal
hinges on whether these basic statutory policies were adequately protected
here, or whether Plaintiffs' technical objections to the procedures used have
any merit. Initially, we observe that
Plaintiffs, as in propria persona litigants, "are entitled to the same,
but no greater, rights than represented litigants and are presumed to know the
[procedural and court] rules." (
786, 795.) Mr. Le Beau is a "former
long-time attorney" who was previously licensed in California,
and both he and Mrs. Le Beau are representing themselves on appeal.
For any
appellant, "[a]ppellate briefs must provide argument and legal authority
for the positions taken. 'When an
appellant fails to raise a point, or asserts it but fails to support it with
reasoned argument and citations to authority, we treat the point as
waived. [Citations.]' " (Nelson
v. Avondale Homeowners Assn. (2009) 172 Cal.App.4th 857, 862.) "We are not bound to develop appellants'
argument for them. [Citation.] The absence of cogent legal argument or
citation to authority allows this court to treat the contention as waived." (In re
Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830.) Since there are no charging allegations nor
any specific arguments about any actionable conduct by Northwest, Plaintiffs
have arguably waived any such claims against Northwest.
Although
this court could legitimately affirm the summary judgment and underlying orders
as to both defendants on the basis that Plaintiffs have failed to present any
understandable, persuasive, or supported arguments on appeal, we are mindful
that important rights are at stake, and we have examined the record for
evidentiary and legal support for the summary judgment and discretionary orders
issued by the trial court.
name="_ftnref7" title="">[7]
II
ADEQUACY OF
DEFENDANTS' SHOWING ON SUMMARY JUDGMENT:
PROCEDURAL MATTERS
A. Arguments about Separate Statement Inadequacy
and Cross-Motions
Section
437c, subdivision (b)(3) requires an opposition to a motion for summary
judgment to include a separate statement "that responds to each of the
material facts contended by the moving party to be undisputed, indicating
whether the opposing party agrees or disagrees that those facts are
undisputed." Under the California
Rules of Court, rule 3.1350(f) and (h), the separate statement is supposed to
"unequivocally state whether the fact is 'disputed' or
'undisputed,' " and to describe in a certain format "the nature
of the dispute and describe the evidence that supports the position that the
fact is controverted" (with citation to exhibit, title, page, and line
numbers in the evidence submitted). (
In
Cal.App.4th 64, 74, the court identified the functions served by the required
separate statement in summary judgment proceedings: "It notifies the
parties which material facts are at issue, and it provides a convenient and
expeditious vehicle permitting the trial court to hone in on the truly disputed
facts." (Ibid.) A failure to comply with this requirement may
be sufficient grounds to grant the motion.
(§ 437c, subd. (b)(3).)
"[W]here evidence is not referenced, is hidden in voluminous
papers, and is not called to the attention of the court at all, a summary
judgment should not be reversed on grounds the court should have considered
such evidence. Appellate courts need not
address theories that were not advanced in the trial court." (San
Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308,
316.)
Plaintiffs
are correct in stating that the primary inquiry must be whether the moving
party has made an adequate showing of entitlement to summary judgment, before
the adequacy of an opposing separate statement can be deemed dispositive. (Whitehead
v. Habig (2008) 163 Cal.App.4th 896, 900-903.) Here, the minute order and the formal order,
comprising a total of 10 pages, include analysis of the three major
declarations produced by Defendants, but then criticize Plaintiffs' separate
statement, with respect to its confusing treatment of the supporting evidence
cited in the Defendants' separate statement.
The court said Plaintiffs had produced only "generalized and
non-specific objections [that] leave defendants and the Court to speculate
exactly what plaintiffs may be objecting to and why, and make it virtually
impossible to address such objections."
The court next overruled the evidentiary objections brought by
Defendants, but stated it had "only considered relevant and admissible
evidence and matters that are proper for judicial notice."
In their
separate statement, Plaintiffs merely attacked the Defendants' stated
undisputed material facts and supporting evidence as "irrelevant,"
"misleading" or factually inaccurate, and then gave their own
versions, but in a cursory and conclusory way.
They assert the Bank was not the true beneficiary of the Gibraltar
loan and Northwest was not the assignee of the Gibraltar
trustee, but they provide no support for those claims other than citing to
their own pleadings, opinions and declarations.
To the
extent the Plaintiffs contend they were entitled to a continuance to repair
their defective separate statement, the trial court did not have such a duty on
its own motion, and Plaintiffs failed to show they requested such a continuance
or that it would have been productive.
"Under Code of Civil Procedure section 437c, a party opposing
summary judgment does not have an automatic right for a second chance to
prepare a responsive separate statement or present evidence. Instead, the party must demonstrate a reason
for the trial court to exercise its discretion." (Oldcastle
Precast, Inc. v. Lumbermens Mutual Casualty Co. (2009) 170 Cal.App.4th 554,
576.) In light of the purpose of the
separate statement, and the disjointed nature of this one, the analysis through
which the court reached its ruling cannot be shown to be an abuse of discretion. The court exhaustively analyzed the evidence
and facts, and made a reasonably based finding that Plaintiffs had failed to
set forth specific facts showing that triable issues of material fact existed
as to their causes of action. The
defects in the separate statement were not treated as dispositive, on the
entire record.
Moreover,
since these two sets of motions addressed the same issue about the Bank's
authority to conduct nonjudicial foreclosure proceedings, the trial court was
not required to further or specifically address the merits of Plaintiffs' own
summary judgment, when it issued a decision that the motion brought by the
Defendants was meritorious. There is
absolutely no indication in this record that the trial court in any way failed
to grasp and resolve all of the issues properly brought before it in these
motion proceedings.
B. Expert Evidence
The trial
court's evidentiary rulings are reviewed under a standard of abuse of
discretion. (Carnes v. Superior Court (2005) 126 Cal.App.4th 688, 694;
32 Cal.App.4th 786, 795.)
According
to Plaintiffs, it was fatal to the Defendants' motion that they had not deposed
Plaintiffs' offered experts, regarding both liability and damages. Likewise, Plaintiffs complain that the
Defendants failed to produce their own experts.
However, at the summary judgment motion stage of the proceedings, it was
appropriate for the parties to address preliminary legal issues, based on the
discovery undertaken thus far, without the need for expert opinion. Plaintiffs fail to grasp that merely because
they were able to obtain expert declarations interpreting the law in their
favor, expert opinion is not dispositive insofar as it presents conclusions of
law. (Summers v. A.L. Gilbert Co. (1999)
69 Cal.App.4th 1155, 1178; McGonnell v.
Kaiser Gypsum Co. (2002) 98 Cal.App.4th 1098, 1106.)
On the
issues actually framed by the pleadings, the moving and the opposing papers, it
was not informative to the court that Plaintiffs' legal expert (Attorney Ludlow
Keeney) thought that defendants did not have "the requisite
documents" to commence foreclosure against Plaintiffs' residence. Other evidence demonstrated that the Bank
possessed the note and related security interest, by way of a bank merger and
other history. Contrary to Plaintiffs' theory,
expert testimony on the effect of a bank merger was not necessary, because
conclusions of law could properly be drawn from the established, undisputed
facts. Nor was it relevant to the
liability issues whether Plaintiffs' property had declined in value, as their
other expert opined. As we next discuss,
the Bank demonstrated in its filings that it had the authority to appoint the
substitute trustee and to pursue nonjudicial foreclosure proceedings.
III
ADEQUACY OF
DEFENDANTS' SHOWING ON SUMMARY JUDGMENT: SUBSTANTIVE MATTERS
A. Merger and Assignment Issues; Judicial Notice
on Appeal
Under the
National Bank Consolidation and Merger Act (12 U.S.C. 215 et seq.), the
comptroller of the currency may be requested to approve a merger agreement
reached between a national banking association or a state bank, and a national
bank located within the same state. If
such a merger agreement is approved, the charter of the receiving association
controls, and the receiving association is responsible for the liabilities of
the bank or association that was merged into the receiving association. (12 U.S.C. § 215a(a)(4).) The receiving association (here, the Bank)
"shall be deemed to be the same corporation as each bank or banking
association participating in the merger.
All rights, franchises, and interests of the individual merging banks or
banking associations in and to every type
of property (real, personal, and mixed) and choses in action shall be
transferred to and vested in the receiving association by virtue of such merger
without any deed or other transfer.
The receiving association, upon the merger and without any order or
other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises, and interests . . . , and all
other rights and interests . . . , in the same manner and
to the same extent as such rights, franchises, and interests were held or
enjoyed by any one of the merging banks or banking associations at the time of
the merger . . . ."
(12 U.S.C. § 215a(e); italics added.)
Along these
lines, the Bank and Northwest have requested that this court take judicial
notice of the official certificate of merger issued by the comptroller of the
currency in 1992, showing that the Bank took over the business of Security
Pacific. (Evid. Code, §§ 452, subd.
(h); 459.) This request has been
deferred to this merits panel.
Plaintiffs oppose the request as hearsay, and claim it was untimely and
not presented to the trial court.
In
explanation of its current request, the Bank states that no such motion was
made to the trial court because of the judicial admissions made in the verified
complaint, alleging that the Bank had "acquired" Security Pacific and
therefore the Gibraltar loan was assigned to the
Bank. However, since Plaintiffs continue
to claim the Bank cannot enforce the note or deed of trust without a separate
transfer, endorsement or conveyance of either instrument, the Bank now requests
judicial notice of the fact of merger, as not reasonably subject to dispute. (Evid. Code, §§ 452, subd. (h); 459.)
For
purposes of determining diversity jurisdiction, a federal court took judicial
notice of a defendant bank's principal office location, as it was documented by
the office of the comptroller of the currency, administrator of national
banks. (Fortucci v. RBS Citizens, N.A. (D. Mass. 2011) 784 F.Supp.2d 85,
88; see also Fed. Rules Evid., rule 201; Royalty
Network, Inc. v. Dishant.com, LLC (S.D.N.Y.2009) 638 F.Supp.2d 410, 421 fn.
7 [taking judicial notice of principal place of business based on Securities
and Exchange Commission filings].
It is well
established that judicial notice of an official document does not include the
establishment of the truth of statements of fact recited within that
document. (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265
the legal effect of the document's language, when that effect is clear and not
reasonably subject to dispute. (
1106, 1117-1118 (Poseidon).) "When a
court is asked to take judicial notice of a document, the propriety of the
court's action depends upon the nature of the facts of which the court takes
notice from the document." (
A court may
take judicial notice of "the fact of a document's recordation, the date
the document was recorded and executed, the parties to the transaction
reflected in a recorded document, and the document's legally operative
language, assuming there is no genuine dispute regarding the document's
authenticity. From this, the court may
deduce and rely upon the legal effect of the recorded document, when that
effect is clear from its face." (
265.)
Even though
these Plaintiffs continue to dispute the consequences or effect of the 1992
bank merger, the fact that it occurred is not reasonably subject to
dispute. There is no evident prejudice
from taking judicial notice on appeal, and we grant the request. We will continue to examine the legal effect
of the merger or acquisition, however, since that key issue was presented to
the trial court without the benefit of this document.
B. Requirements for Authentication of Documents
The FAC
makes a judicial admission that the Bank "acquired" and is the
successor in interest to Security Pacific, and the Bank was able to show that
it possesses the original note.
Plaintiffs contend that they could nevertheless put the Bank to the
proof of showing such possession and entitlement to foreclose, before it could
properly substitute the trustee and file the notice of default. Plaintiffs point to a 2009 preliminary title
report, an exhibit to the FAC, as showing that the beneficial interest under
the trust deed was assigned to Security Pacific in 1991, and the Bank did not
show up in the chain of title as then reported.
Plaintiffs thus argue that the recorded documents presented by
Defendants, about the recording of the notice of default and sale, are
undermined and invalid, and the same type of specific assignment and
endorsement apparently made between Gibraltar and
Security Pacific should have been repeated here.
Plaintiffs
also claim that Ms. Tobolski, the Bank assistant vice-president, does not
qualify as a custodian of records, and that there are apparently other such
custodians employed at the Bank, and she admitted this at her deposition. Plaintiffs thus complain that her declaration
does not expressly declare that the Bank was the current beneficiary and
Northwest was the substituted trustee for the Gibraltar
asset, such that her declaration fails to comply with the requirements of the
business records hearsay exception.
(Evid. Code, § 1271.)
Plaintiffs
rely on Herrera v. Deutsche Bank National
Trust Co. (2011) 196 Cal.App.4th 1366 (Herrera)
to argue that judicial notice of the truth of named facts within recorded
documents, such as status as a beneficiary, is not appropriate. (Id. at
p. 1375.) In Herrera, the appellate court ruled the trial court could not take
judicial notice of the legal effect of an assignment of a particular deed of
trust, because the record failed to show that such assignment was made by a
person having the authority to do so, within the chain of title. (Ibid.;
Fontenot, supra, 198 Cal.App.4th 256, 267.)
In Herrera the record did not
show there was any effort to satisfy the requirements of the business records
exception. (Herrera, supra, at p. 1376; Evid. Code, § 1271.)
As
explained in 1 Witkin, California Evidence (5th ed. 2012) Hearsay, section 238,
page 1101, the business records exception to hearsay rules uses as a theory of
admissibility that either an "entrant" of the record, or an
"informant," had knowledge of the facts from personal
observation. Evidence Code section 1271
allows evidence of "a writing made as a record of the act, condition, or
event" to be admissible "to prove the act, condition, or event"
under certain circumstances. As relevant
here, the Defendants' declarations (from the Bank assistant vice-president and
the Northwest COO) demonstrate that the writing was made in the "regular
course of a business"; "at or near the time of the act, condition, or
event"; and these qualified witnesses testified to "its identity and
the mode of its preparation"; and "the sources of information and
method and time of preparation were such as to indicate its
trustworthiness." (Evid Code,
§ 1271, subds. (a)-(d); 1 Witkin, Cal.
Evidence, supra, Hearsay, § 228, p.
1090.) The Bank's declarations show that
the assets were transferred according to federal authorities. (12 U.S.C. § 215a(e).) No specific citation to the business records
exception was required. (See
301, 322.) The defects in proof that
were evident in Herrera, supra, 196
Cal.App.4th 1366 are not present here.
C. Gravamen of FAC; Prejudice
Plaintiffs
admit they incurred a legal obligation arising out of their promissory note and
related deed of trust. The deed of trust
allows the lender or successor to invoke the power of sale, if Plaintiffs fall
into default. To contest the process,
Plaintiffs' discovery responses relied on their own FAC and exhibits and other
pleadings, and mainly referred Defendants back to their own set of
documents. Plaintiffs essentially claim
this financial institution cannot commence a nonjudicial foreclosure action in
its name, without first providing the debtor with proof of current title
status, such as through endorsement.
They also seem to argue that it is possible that some of the Security
Pacific assets went elsewhere than to this Bank, after the merger.
The merger
method of transfer that occurred here is comparable to the method of assignment
of assets. Assignability of assets is
the general rule, and it would be Plaintiffs' burden to show that some
exception to the rule applies in this case.
(See Essex Ins. Co. v. Five Star
Dye House, Inc. (2006) 38 Cal.4th 1252, 1259-1263.) When a party asserts a foreclosure right
under an assigned instrument, the courts have declined to require the party to
separately demonstrate the validity of the assignment in this nonjudicial
foreclosure context. (
Under Civil Code section 2936, an assignment of an underlying debt
operates to transfer the security for the debt.
(See Cockerell v. Title Insurance
and Trust Company (1954) 42 Cal.2d 284, 291.) Civil Code section 2924, subdivision (a)(1)
allows the nonjudicial foreclosure process to be carried out by a beneficiary,
mortgagee, trustee or agent.
Because
nonjudicial foreclosure sales methods are statutorily prescribed, they are
presumed to have been conducted regularly, and "the burden of proof rests
with the party attempting to rebut this presumption." (Fontenot,
supra, 198 Cal.App.4th 256, 270,
citing Melendrez v. D & I Investment,
Inc. (2005) 127 Cal.App.4th 1238, 1258 [burden on party challenging the
trustee's sale to prove there was irregularity].) For a plaintiff to contend the notices of
default and sale were invalid because the Bank lacked authority to conduct the
sale, the plaintiff must plead and prove facts demonstrating the nature of the
impropriety, or creating triable issues about it. (Fontenot,
supra, at pp. 270-272.)
In
claim that the burden should rest on the party that asserts a right under an
assigned instrument, to demonstrate that fact of assignment. The presumption of regularity in nonjudicial
foreclosure does not rely upon such separate proof. Similarly, when a deed of trust is assigned,
the transaction should be examined for whether the lender's agent was duly
acting on behalf of the principal, or lender.
The plaintiff cannot merely challenge the lender's nominee as facially
lacking the capacity to pursue assignment rights. To demonstrate that a nonjudicial foreclosure
sale or notice is invalid because of an entity's lack of authority to
foreclose, a plaintiff must allege and show that the current entity/lender
never received any valid assignment of the debt in any manner. (Id.
at pp. 271-272.)
These
Plaintiffs' speculative theories are similar to those already rejected in cases
such as Gomes, supra, 192 Cal.App.4th 1149, 1155, and Fontenot, supra, 198
Cal.App.4th 256, 270. Such cases recognize
that a lender's rights to foreclose and appoint agents arise out of the
obligations reflected in the promissory note and related deed of trust, even if
they were transferred. In
unaware of the identity of the note's current beneficial owner, and thus he did
not know whether a certain entity, MERS0 (as nominee for the lender and
lender's successors and assigns) was given authority to initiate the
foreclosure, by the current owner of the note.
(Id. at pp. 1152-1157.) The court determined that the successor had
authority to act, and further, that the plaintiff's deed of trust (attached to
his complaint), showed he had agreed, when executing that document, that MERS
had the authority to initiate a foreclosure.
The court explained, "the deed of trust contains no suggestion that
the lender or its successors and assigns must provide Gomes with assurances
that MERS is authorized to proceed with a foreclosure at the time it is
initiated." (Id. at p. 1157.) Accordingly,
the plaintiff could not now contest the ability of MERS to foreclose and sell
the property.
These
Plaintiffs seem to rely on Gomes,
that they personally never agreed in executing the trust deed that anyone other
than the assignees of Gibraltar could foreclose on the
security. However, simply because there
was such an express agreement in Gomes
(that the entity of MERS could conduct a foreclosure) does not mean that it is
always required. Instead, there are
other legal ways in which the security interest in the property can pass from
one entity to another, including merger, and the Bank made a sufficient showing
of how this occurred, and about its duly recorded substitution of Northwest as
the trustee. There is no need for expert
testimony to establish the relevant points of law, despite Plaintiffs'
arguments to the contrary. (12 U.S.C
§ 215a(e); see Bayer v. Barrett
(1932) 127 Cal.App. 305, 311-312; see Premier
Bank v. Diagle (La. App. 1992) 599 So.2d 503, 505; see also
Com.Pl. 1961) 192 N.E.2d 518; appeal dismissed 183 N.E.2d 234 [holding that a
transfer by mutual savings bank of its assets and liabilities to a national
bank under purchase agreement, with the consent of the comptroller of the
currency, was in compliance with the statutory powers of both banks].)
Nor does
the California Commercial Code necessarily preclude the merger method of
transfer that occurred here. In
Co. (2012) 204 Cal.App.4th 433, 444 (
plaintiff's similar claim of defective foreclosure, that was based on alleged
defects in the chain of assignments and the absence of "lawful
ownership" of the note. In part,
that plaintiff relied on Uniform Commercial Code (UCC) provisions pertaining to
negotiable instruments, as these Plaintiffs do.
(Cal. U. Com. Code, § 3203, subd. (a).) However, the statutory framework of Civil
Code sections 2924 et seq. for governing nonjudicial foreclosure sales is not
displaced by UCC provisions found in California Uniform Commercial Code section
3301 et seq. (Debrunner, supra, at pp. 440-441.)
Civil Code section 2924 allows a trustee, mortgagee, beneficiary, or
agent to initiate nonjudicial foreclosure, and it does not separately or
additionally indicate physical possession of the underlying promissory note is
required. (Debrunner, supra, at pp. 440-441.)
there was no prejudice shown, because that plaintiff had failed to allege he
was unable to contest or avert foreclosure, due to any such technical
issues. (Id. at pp. 443-444.)
Likewise,
these Plaintiffs did not show how or why the Bank had acted without authority,
or failed to meet necessary disclosures, nor that they were entitled to but
were prevented from asserting any defenses to enforcement of the
obligation. To recover on a theory of
wrongful foreclosure, a plaintiff "has generally been required to
demonstrate [that] the alleged imperfection in the foreclosure process was
prejudicial to the plaintiff's interests."
(Fontenot,
supra, 127 Cal.App.4th at p. 1258
[need to show substantial evidence of any "prejudicial" procedural
irregularity].) Plaintiffs do not
contend that a second entity is seeking or will seek to foreclose on the same
deed of trust at issue here. Beyond
general assertions of harm, there is no evidence that Plaintiffs have been or
will be unfairly disadvantaged if the Bank, through Northwest, is permitted to
pursue this nonjudicial foreclosure.
It makes no
difference that Plaintiffs claim their expert testimony would show that
Defendants' actions in pursuing the foreclosure caused the property to diminish
in value, making damages appropriate.
Without a showing of liability, there can be no damage recovery. (See Debrunner,
supra, 204 Cal.App.4th at p.
443.) Plaintiffs have failed to raise
triable issues of material fact about the Bank's authority to pursue these
foreclosure proceedings.
D. Remaining Causes of Action on Insurance
Policy and Privacy Issues
In their
third cause of action, Plaintiffs claim it was "insurance fraud" when
the Bank canceled the optional insurance policy that they had purchased from
it, upon the failure of Plaintiffs to pay the premiums. This insurance was a policy for mortgage
disaster protection. For support on this
theory of recovery, Plaintiffs rely on the provisions of Civil Code section
2954.6, subdivision (a), which incorporate the
definitions set forth in Insurance Code section 12640.02, subdivision
(a). According to that Insurance Code
subdivision, " '[m]ortgage guaranty insurance' "
means: "Insurance against financial
loss by reason of nonpayment of principal, interest, and other sums agreed to
be paid under the terms of any note or bond or other evidence of indebtedness
secured by a mortgage, deed of trust, or other instrument constituting a first
lien or charge on real estate, provided the improvement on the real estate is a
residential building . . . .' " (Ins. Code, § 12640.02, subd. (a)(1).)
Thus, under
Civil Code section 2954.6, subdivision (a), "If private mortgage insurance
or mortgage guaranty insurance, as defined in subdivision (a) of Section
12640.02 of the Insurance Code, is
required as a condition of a loan secured by a deed of trust or mortgage on
real property, the lender or person making or arranging the loan shall
notify the borrower whether or not the borrower has the right to cancel the
insurance. If the borrower has the right
to cancel, then the lender or person making or arranging the loan shall notify
the borrower in writing of [certain identifying loan or insurance information
necessary to permit the borrower to communicate with the insurer/lender
concerning the insurance, etc.]."
(Italics added.) But here, the
longtime "Disaster Mortgage" insurance policy was not shown to be
required by the terms of the loan, the promissory note or the trust deed held
by the Bank. Plaintiffs can make no
showing of any remaining triable issues of fact on whether it was a violation
of such statutory protections for the Bank to cancel, for nonpayment of
premiums, their optional "Disaster Mortgage" insurance, or some other
kind of hazard insurance that they allegedly had.
Finally,
Plaintiffs' briefs on appeal argue some kind of breach of financial privacy
claim, based upon communications by the Bank with third parties. The record is unclear which cause of action
was intended to pursue such a theory, if any.
In any case, Plaintiffs signed a borrower authorization for the Bank to
speak with a representative of Real Property Financial Network, LLC, regarding
their loan. Plaintiffs have not shown
triable issues remain about any such arguable, but unpled, breach of privacy
claims.
On the
other claims appearing in the FAC, we can only conclude they have been waived
through Plaintiffs' failure to pursue them on appeal. (See fn. 2, ante.) The trial court
correctly resolved all the essential legal questions presented by the
cross-motions. The summary judgment in
favor of the Bank and Northwest is affirmed.
DISPOSITION
Judicial
notice is granted as to the merger certificate recorded in the federal office
of the comptroller of currency, and the summary judgment is affirmed. Costs on appeal to Respondents.
HUFFMAN, J.
WE CONCUR:
BENKE,
Acting P. J.
McINTYRE,
J.
name="_ftn1" title="">[1] Title 12 United States Code section 215a is part of the
National Bank Consolidation and Merger Act (12 U.S.C. § 215 et seq.),
under which the comptroller of the currency may be requested to approve a
merger agreement. We address the merger
issues in more detail in part III.A., post,
including Defendants' request on appeal for judicial notice of the merger
certificate.
name="_ftn2" title="">[2] In their reply brief, Plaintiffs make representations that
the transfers to the family company, Casa de Erin, were done for estate
planning purposes and then rescinded, so that Plaintiffs are the true
owners. It is not disputed that
Plaintiffs represent themselves and claim the property for themselves,
regardless of the status of this family company, and we need not resolve that
dispute about standing to sue with regard to the quiet title cause of action,
as other issues are dispositive on all of the claims.
