Filed 9/25/18 Ramirez v. Mortgage Electronic Registration Systems CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. Irma Poole Asberry, Judge. Affirmed.

Gabriel J. Ramirez and Alicia G. Ramirez, in pro. per., for Plaintiffs and Appellants.

Chuck & Tsoong, Stephen C. Chuck and Victoria J. Tsoong, for Defendants and Respondents.

In a second amended complaint, plaintiffs and appellants Gabriel Ramirez (Gabriel)[1] and Alicia Ramirez (Alicia) sued defendants and respondents Mortgage Electronic Registration Systems, Inc. (MERS), Clear Recon Corp. (Clear), and Select Portfolio Servicing Inc. (Select) for (1) breach of the implied covenant of good faith and fair dealing, (2) intentional misrepresentation; and (3) cancellation of a void instrument. MERS and Select (collectively, defendants) demurred to the second amended complaint. The trial court sustained the demurrer without leave to amend. Gabriel and Alicia (collectively, Homeowners) contend the trial court erred. We affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

A. SECOND AMENDED COMPLAINT

The facts in this subsection are taken from Homeowners’ second amended complaint (SAC) and the deed of trust attached to the SAC. Homeowners owned a home in Riverside (the property). In 2006, Homeowners borrowed $602,100 from Countrywide Bank, N.A. (Countrywide). The loan was secured by a deed of trust on the property. The deed of trust identified Countrywide as the “Lender.”

The deed of trust included the following clause: “ ‘MERS’ is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the beneficiary under this Security Instrument.”

A second clause in the deed of trust provided: “The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender’s successors and assigns) and the successors and assigns of MERS. This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower’s covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described property located in the County of Riverside . . . which currently has the address of [the property]. . . . [¶] . . . [¶] . . . Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender, including, but not limited to, releasing and canceling this Security Instrument.” (All caps & boldface omitted.)

MERS, Clear, and Select initiated foreclosure proceedings against the property. MERS, Clear, and Select do not have an interest in the deed of trust or the promissory note. MERS recorded a void assignment of the deed of trust. The assignment was void because MERS did not have an interest in the deed of trust that could be assigned.

Homeowners’ first cause of action was for breach of the implied covenant of good faith and fair dealing. Homeowners alleged, “the commencement of foreclosure proceedings upon the property lawfully belonging to [Homeowners] without the production of documents demonstrating the lawful rights for the foreclosure constitutes a breach of the covenant.” Homeowners further alleged that defendants breached the implied covenant in the deed of trust by colluding to record a void assignment of the deed of trust.

Homeowners’ second cause of action was for intentional misrepresentation. Homeowners alleged defendants recorded a void assignment of the deed of trust. Homeowners asserted Countrywide held the promissory note; MERS did not have the authority to transfer the promissory note; and therefore, the assignment of the deed of trust “had no force.”

Homeowners’ third cause of action was a request to set aside the void assignment of the deed of trust. Homeowners sought (1) a declaration that defendants have no interest in the property; (2) return of all money Homeowners sent to defendants; (3) repair of Homeowners’ credit record; and (4) costs.

B. DEMURRER

Defendants demurred to the SAC. Defendants asserted that by attaching the deed of trust to the SAC, Homeowners “unwittingly acknowledge Defendant MERS had authority under the Deed of Trust” to foreclose on the property because the deed of trust named MERS as nominee beneficiary.

As to the cause of action for breach of the implied covenant of good faith and fair dealing, defendants asserted that Homeowners failed to allege the existence of a contract between Homeowners and defendants. Alternatively, to the extent the contract is the deed of trust, then Homeowners have failed to allege that defendants did not comply with the terms of the deed of trust.

In regard to the second cause of action for intentional misrepresentation, defendants asserted that Homeowners failed to specifically identify the alleged misrepresentation. Additionally, defendants asserted the foreclosure proceedings were lawful. As to the third cause of action for cancellation of a void instrument, defendants contended that in order for the foreclosure proceedings to be halted by the trial court, the Homeowners must first tender the amount due on the loan. Defendants asserted that Homeowners failed to allege they tendered the amount due on the loan; and therefore, Homeowners could not maintain a cause of action for an irregularity in the foreclosure process.

C. OPPOSITION

Homeowners opposed the demurrer. For the breach of the implied covenant cause of action, Homeowners alleged “the commencement of foreclosure proceedings upon the property lawfully belonging to [Homeowners] without the production of documents demonstrating the lawful rights for the foreclosure constitutes a breach of the covenant.”

For the misrepresentation cause of action, Homeowners asserted, “Documents were served to [Homeowners] and not providing any true beneficiary and/or Trustee [sic].” For the cause of action to set aside a void instrument, Homeowners contended, “[T]here is nobody in existence with any legal right, justification or excuse to attempt to use or enforce the document (Assignment of Deed of Trust).”

Attached to Homeowners’ response was an assignment of the deed of trust reflecting that, in April 2012, MERS assigned all beneficial interest under the deed of trust to the Certificateholders of CWALT, Inc., Alternative Loan Trust 2006-J7, Mortgage Pass-through certificates, series 2006-J7 (Certificateholders Trust). The Bank of New York Mellon (Mellon) was trustee of the Certificateholders Trust. Also attached to the response was a notice of default recorded against the property by Clear, as trustee, with Mellon/Certificateholders Trust listed as the beneficiary. The notice of default reflects that, as of May 26, 2015, Homeowners were behind $34,432.31 on their loan payments.

D. HEARING

The trial court held a hearing on defendants’ demurrer. The trial court said its tentative decision was to sustain the demurrer without leave to amend. The trial court explained that the SAC was “with minor exception, virtually the same document as the first amended complaint.”

Homeowners requested leave to amend to allege “a bunch of discrepancies on the loan.” Additionally, Homeowners argued that defendants failed to provide “authentic evidence of ownership rights to repayment of [the] loan.” Defendants asserted Homeowners’ comments did not address the problems with the SAC. Homeowners responded, “We just want to get a modified loan, just a modification. That’s all we’ve been requesting. They don’t want to work with us. They are giving us the same modification.”

The trial court said, “Thank you. . . . Your responsive documents, your opposition, you did not offer me and provide me with any evidence that there is some ability on your part to cure the defects that were raised in the demurrer to the [SAC].” The trial court sustained the demurrer without leave to amend.

DISCUSSION

A. STANDARD OF REVIEW

“ ‘We review de novo the trial court’s order sustaining a demurrer.’ [Citation.] In doing so, this court’s only task is to determine whether the complaint states a cause of action. [Citation.] We accept as true all well-pleaded allegations in the operative complaint, and we will reverse the trial court’s order of dismissal if the factual allegations state a cause of action on any available legal theory.” (Brown v. Deutsche Bank National Trust Company (2016) 247 Cal.App.4th 275, 279.)

B. CANCELLATION OF A VOID INSTRUMENT

Homeowners’ third cause of action was for cancellation of a void instrument, in particular the assignment of deed of trust.

“A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” (Civ. Code, § 3412.)

Homeowners assert the assignment of the deed of trust is void because MERS did not have authority to transfer the deed of trust. The 2006 deed of trust attached to the SAC reflects, “The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender’s successors and assigns).” The 2012 assignment of deed of trust reflects MERS transferred its beneficial interest in the deed of trust to Mellon/Certificateholders Trust.[2]

Because MERS was named as the beneficiary of the 2006 deed of trust, it had authority to transfer the beneficial interest to Mellon/Certificateholders Trust in 2012. In other words, the assignment appears to be valid. As a result, Homeowners have not sufficiently alleged a cause of action for cancellation of the assignment. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1054-1055 [no claim for wrongful foreclosure where MERS assigned beneficial interest to the Bank of New York].)

Homeowners assert the assignment of the deed of trust is not the equivalent of transferring the promissory note. Homeowners contend none of the foreclosing entities are listed on their promissory note.

Typically, the owner of a promissory note is the beneficiary of the associated deed of trust. (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1003.) “ ‘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.’ ” (Ibid.) “ ‘ “[T]here is no stated requirement in California’s non-judicial foreclosure scheme that requires a beneficial interest in the [promissory n]ote to foreclose. Rather, the statute broadly allows a trustee, mortgagee, beneficiary, or any of their agents to initiate non-judicial foreclosure. Accordingly, the statute does not require a beneficial interest in both the Note and the Deed of Trust to commence a non-judicial foreclosure sale.” ’ ” (Id. at p. 1004.) Stated differently, an interest in the promissory note is not a requirement for initiating foreclosure proceedings.

C. INTENTIONAL MISREPRESENTATION

Homeowners’ second cause of action was for intentional misrepresentation. “The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)

Homeowners allege the misrepresentation consisted of documents not reflecting the correct beneficiary, in particular, a void assignment. As explained ante, the 2006 deed of trust, attached to the SAC, reflects, “The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender’s successors and assigns).” The 2012 assignment of deed of trust reflects MERS transferred its beneficial interest in the deed of trust to Mellon. Mellon is listed as the beneficiary on the notice of default.

Given that MERS was named as the beneficiary of the 2006 deed of trust, it had authority to transfer the beneficial interest to Mellon in 2012. Therefore, Homeowners have not sufficiently alleged a misrepresentation. (See Intengan v. BAC Home Loans Servicing LP, supra, 214 Cal.App.4th at pp. 1055-1056 [no claim for wrongful foreclosure where MERS assigned interest to the Bank of New York].) Because a misrepresentation has not been adequately pled, the cause of action for intentional misrepresentation fails.

Homeowners contend they adequately pled a cause of action for intentional misrepresentation because defendants did not provide evidence contradicting Homeowners’ allegations. “ ‘[T]he sole function of a demurrer is to test the sufficiency of the challenged pleading. It cannot, properly, be addressed to or based upon evidence or other extrinsic matters.’ ” (Childs v. State of California (1983) 144 Cal.App.3d 155, 163.) “However, a complaint may be read as if it included matters judicially noticed.” (Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 590.)

In examining the trial court’s sustaining of the demurrer, we are concerned with Homeowners’ SAC and any judicially noticed documents. The issue is whether Homeowners adequately pled a cause of action. Thus, we are not concerned with defendants’ evidence at this stage of the proceedings.

D. BREACH OF THE IMPLIED COVENANT

Homeowners’ first cause of action is for breach of the implied covenant of good faith and fair dealing.

The elements of a cause of action for breach of contract and for breach of the implied covenant of good faith and fair dealing are similar. “The essential elements of a breach of contract claim are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.’ ” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.) While the third element of a breach of contract cause of action is the defendant’s actual breach, a breach of the implied covenant of good faith and fair dealing cause of action requires proof the defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract. The implied covenant is supplemental to the express contractual covenants. (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032.) It imposes upon each contracting party the duty to do everything the contract presupposes he or she will do to accomplish its purpose but cannot be used to create obligations not contemplated by the contract. (Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1093-1094.)

Homeowners contend defendants breached the deed of trust by initiating foreclosure proceedings without a valid assignment of the deed of trust. As set forth ante, MERS was the beneficiary of the 2006 deed of trust. Therefore, MERS could assign its beneficial interest to Mellon. Mellon is listed as the beneficiary on the notice of default. The SAC fails to allege an improper assignment. Therefore, a violation of the deed of trust/contract has not been sufficiently pled. The trial court did not err by sustaining the demurrer to the breach of implied covenant cause of action.

E. JURY TRIAL

Homeowners contend the sustaining of the demurrer deprived them of their right to a jury trial. Generally, when a trial court sustains a demurrer, the court has determined that the factual allegations are not sufficient to state a cause of action under any legal theory, assuming all alleged facts to be true. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Therefore, there would be no factfinding role for the jury. Because there is no role for a jury due to Homeowners’ failure to state a cause of action, Homeowners were not deprived of their right to a jury trial.

F. AMENDMENT

“ ‘Where the complaint is defective, “[i]n the furtherance of justice great liberality should be exercised in permitting a plaintiff to amend his complaint, and it ordinarily constitutes an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable possibility that the defect can be cured by amendment. [Citations.]” ’ [Citations.] This abuse of discretion is reviewable on appeal ‘even in the absence of a request for leave to amend’ [citation], and even if the plaintiff does not claim on appeal that the trial court abused its discretion in sustaining a demurrer without leave to amend.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 970-971.)

At the trial court, Homeowners requested leave to file a third amended complaint wherein they would allege “a bunch of discrepancies on the loan.” It is unclear how discrepancies with the promissory note would affect foreclosure proceedings, which are based upon the deed of trust. As explained ante, the deed of trust is the relevant document for foreclosure proceedings. (Orcilla v. Big Sur, Inc., supra, 244 Cal.App.4th at p. 1004.) Accordingly, the proposed amendments will not cure the defects in the SAC. Therefore, the trial court did not err by denying leave to amend.

DISPOSITION

The judgment is affirmed. Respondents are awarded their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

MILLER

J.

We concur:

RAMIREZ

P. J.

SLOUGH

J.