Filed 9/14/17 Peterson v. Capital One, N.A. CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

Plaintiff Ralph Peterson defaulted on his home mortgage. More than five years after his property was sold at a trustee’s sale, he sued some of the entities involved. The trial court sustained the demurrer of defendants Capital One, N.A. (Capital One) and T.D. Service Company (TD Service) to Peterson’s first amended complaint without leave to amend. On appeal, Peterson argues that the court erred, but we disagree and conclude that the demurrer was properly sustained based on the statute of limitations. Accordingly, we affirm.

I.
Factual and Procedural
Background

We derive the following facts from the complaint’s allegations. In January 2007, Peterson executed a residential mortgage, which consisted of a 30-year adjustable-rate promissory note for $1,950,000 secured by a Deed of Trust (DOT). The DOT designated Chevy Chase Bank, F.S.B. (Chevy Chase) as the lender and trustee and Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary. Chevy Chase was the original loan servicer, but Capital One acquired Chevy Chase in February 2009 and took over servicing of the loan. In June 2010, MERS conveyed its interest in the DOT to U.S. Bank National Association, as Trustee relating to Chevy Chase Funding LLC Mortgage Backed Certificates Series 2007-2 (US Bank).

Peterson fell behind in his payments, and in October 2009, TD Service recorded a notice of default. The following month, Chevy Chase recorded a substitution of TD Service as the new trustee.[1] TD Service recorded a Notice of Trustee’s Sale in March 2010, and the property was sold to US Bank in September 2010.

Nearly five years later, in July 2015, Peterson discovered through a third-party mortgage investigation and audit (the audit) that his loan had been “table-funded” by Chevy Chase Funding, LLC (CC Funding), an affiliate of Chevy Chase. The audit revealed that Chevy Chase bundled Peterson’s loan in a pool with other mortgages and sold it to CC Funding in early June 2007. Later that June, CC Funding sold the loan to the REMIC MBS Trust.

Peterson brought this suit in January 2016 and filed his first amended complaint, the operative complaint, four months later. This complaint asserted nine causes of action: (1) wrongful foreclosure; (2) fraud; (3) violation of Business and Professions Code section 17200 et sequitur; (4) unjust enrichment; (5) accounting; (6) quiet title; (7) invalidity of contracts; (8) cancellation of instruments; and (9) declaratory relief.

The complaint alleged that table-funding is a risk-management measure that has been outlawed in California. It alleged that the multiple transfers of the mortgage were illegitimate because the records of the Alameda County Recorder do not show any assignment of the DOT from the original beneficiary, Chevy Chase, to other entities. The complaint also alleged that Capital One lacked an ownership interest in the loan when it acquired Chevy Chase in 2009 because the audit showed that Chevy Chase had sold the loan to CC Funding two years earlier. Finally, the complaint alleged that the substitution of TD Service as trustee was fraudulent, which rendered void all of the foreclosure proceedings TD Service coordinated.

Capital One and TD Service demurred,[2] and the trial court sustained their demurrers without leave to amend on the basis that Peterson’s claims were untimely. The court ruled that the longest statute of limitations applicable to any claim was four years and that Peterson failed to allege a basis for tolling the statute of limitations or to explain how he could amend the complaint to cure the defect. The court later denied a motion for reconsideration because Peterson failed to offer any new or different facts.

II.
Discussion

A.The Applicable Legal Standards.

The rules governing our review of the trial court’s ruling are well settled. We review de novo an order sustaining a demurrer and exercise our independent judgment to determine whether the complaint “state[s] a cause of action on any available legal theory.” (Brown v. Deutsche Bank National Trust Co. (2016) 247 Cal.App.4th 275, 279.) We accept the truth of all well-pleaded allegations in the complaint but not that of “contentions, deductions or conclusions of fact or law.” (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)

When a trial court sustains a demurrer without leave to amend, we review whether the determination that “no amendment could cure the defect in the complaint” was an abuse of discretion. (Brown v. Deutsche Bank National Trust Co., supra, 247 Cal.App.4th at p. 279.) We reverse only if there is “a reasonable possibility that the plaintiff could cure the defect by amendment.” (Ibid.) Peterson bears the burden of showing a reasonable possibility of curing the defect. (See ibid.)

B.The Demurrer Was Properly Sustained Without Leave to Amend Because Peterson Fails to Show that He Could Cure the Statute of Limitations Bar.

Peterson argues that the trial court erred by sustaining the demurrer based on the statute of limitations. We disagree. [3]

Initially, Peterson argues that reversal is required because the trial court failed to offer any authority to support its ruling on the timeliness issue. Code of Civil Procedure section 472d states, “Whenever a demurrer in any action or proceeding is sustained, the court shall include in its decision or order a statement of the specific ground or grounds upon which the decision or order is based which may be by reference to appropriate pages and paragraphs of the demurrer.” Here, the court sufficiently stated its ground for sustaining the demurrer by pointing to the bar of the statute of limitations. This satisfied the statutory requirement. (See Mautner v. Peralta (1989) 215 Cal.App.3d 796, 801 [requirement satisfied with ruling that complaint failed to state facts sufficient to constitute a cause of action against defendants].)

Thus, we turn to the substantive law governing the application of the statute of limitations. “ ‘Statute of limitations’ is the collective term applied to acts or parts of acts that prescribe the periods beyond which a plaintiff may not bring a cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806 (Fox).) A plaintiff must bring a claim within the limitations period after the cause of action accrued, which happens “ ‘when the cause of action is complete with all of its elements.’ ” (Ibid.) It is undisputed that the statute of limitations for each cause of action here is at most four years.[4] Neither party addresses the exact date each cause of action accrued, and we assume without deciding that the latest possible date that all the causes of action accrued was the sale of the property in September 2010, over five years before Peterson filed suit.

Peterson argues that he can amend his complaint to cure any defect by alleging facts establishing an exception to the normal running of the statute of limitations under either the discovery rule or the doctrine of equitable tolling. Neither of these exceptions, however, are available to him under the undisputed circumstances that are present here.

1. The discovery rule does not apply because Peterson fails to explain why he was unable to discover the harm earlier.

Peterson argues that that the statute of limitations was tolled until he learned from the audit in July 2015 of the extent of his harm. We disagree.

The discovery rule is an exception to the general rule of when a cause of action accrues. It postpones the accrual of a cause of action “until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox, supra, 35 Cal.4th at p. 807.) Under the discovery rule, “suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period.” (Ibid.) Reasonable suspicion of a single element of a cause of action is enough to defeat any tolling of the statute of limitations. Thus, the limitations period is not tolled merely because a plaintiff is not yet sure that every specific legal element of a particular cause of action is met. (Ibid.)

To get the benefit of the discovery rule, a plaintiff must allege facts in the complaint to support its application. More specifically, a plaintiff must plead facts to show “(1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.” (Fox, supra, 35 Cal.4th at p. 808, italics omitted.) Put more directly, a plaintiff must allege that he or she conducted a “reasonable investigation after becoming aware of an injury” and cannot passively sit on the problem. (Ibid.)

In his briefing, Peterson admits that although he suspected wrongdoing before 2015, he lacked definitive evidence supporting a factual basis for any cause of action until the 2015 audit. But, as Fox confirms, a plaintiff must conduct a reasonable investigation upon forming a general suspicion of some wrongdoing. (Fox, supra, 35 Cal.4th at p. 808.) Peterson may not have known the exact extent of his injury until the audit, but his suspicions obligated him to conduct a reasonable investigation or to explain why he could not have acted sooner. He has failed to do so, and he has therefore not demonstrated a reasonable possibility that he could amend his complaint to establish the applicability of the discovery rule.

2. The equitable tolling doctrine does not apply.

Peterson also asks us to apply equitable tolling based on his allegations that defendants “continu[e] to commit wrongful acts in furtherance of a conspiracy” to defraud him of his home. We decline to do so.

Equitable tolling is a judicially created doctrine that, where applicable, will “ ‘suspend or extend a statute of limitations as necessary to ensure fundamental practicality and fairness.’ ” (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 99 (McDonald).) The doctrine applies “ ‘[w]hen an injured person has several legal remedies and, reasonably and in good faith, pursues one.’ ” (Id. at p. 100.) For example, the McDonald plaintiff pursued an internal administrative remedy before filing an untimely lawsuit. The Court of Appeal ruled that the statute of limitations was tolled because the plaintiff diligently pursued one of many possible legal avenues before the limitations period ran out. (Id. at p. 114.)

Peterson relies on McDonald and asks us to apply the doctrine in a similar fashion. But he never, in either his complaint or briefing, claims that he pursued a legal remedy other than the current suit before the limitations period ran out. Without a good faith pursuit of alternate remedies before four years elapsed, the equitable tolling doctrine simply does not apply. (See Thomas v. Gilliland (2002) 95 Cal.App.4th 427, 434.)

Peterson also argues that courts have allowed equitable tolling in “extraordinary circumstances.” (Holland v. Florida (2010) 560 U.S. 631, 651 [ruling that “professional misconduct . . . could . . . amount to egregious behavior and create an extraordinary circumstance that warrants equitable tolling”].) But he fails to identify any such extraordinary circumstances that might apply here.

Lastly, Peterson relies on Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142 and Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623 to argue that the statute of limitations cannot be relied on as a defense if a plaintiff alleges reasonable reliance on a defendant’s misrepresentation. Peterson generally remarks that Capital One “is no stranger to mortgage fraud litigation.” But he never identifies any facts specifically suggesting that defendants were involved in any active fraud scheme in his own mortgage case. Therefore, he fails to demonstrate that he can amend the complaint to allege that he reasonably relied on a misrepresentation by defendants.

In sum, the trial court properly sustained the demurrer without leave to amend.

III.
Disposition

The judgment is affirmed.

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Humes, P.J.

We concur:

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Dondero, J.

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Banke, J.

Peterson v. Capital One, N.A. (A149977)