Filed 10/11/17 Henriksen v. Nationstar Mortgage LLC CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

After receiving a notice of default stating he was behind on his mortgage payments, Gary Henriksen (Plaintiff) filed a lawsuit for wrongful foreclosure and related claims. The defendants—banks and other entities[1]—demurred, and the trial court sustained the demurrers without leave to amend. We affirm in part and reverse in part.

BACKGROUND

According to the allegations of the operative first amended complaint (complaint), Plaintiff purchased real property located in Sonoma County (the Property) in 2003. To purchase the Property, he borrowed money from First Franklin Financial Corporation (First Franklin), secured by a recorded deed of trust (Deed of Trust) identifying First Franklin as the lender and beneficiary. The Deed of Trust, attached to Henriksen’s complaint, identifies the borrowers as Plaintiff, Harold M. Strahn Jr., and Amanda Strahn.[2] The Deed of Trust identifies the loan number as “0032574758/5,636.”

There were subsequent recorded assignments of the beneficial interest under the Deed of Trust. On November 18, 2013, Bank of America recorded an assignment of the beneficial interest under the Deed of Trust to Nationstar. On March 2, 2015, Bank of America, as “successor by merger to [First Franklin], . . . by [Nationstar] as attorney-in-fact,” recorded an assignment of the beneficial interest to “U.S. Bank National Association, as trustee, successor in interest to Bank of America, National Association, as trustee, successor by merger to LaSalle Bank National Association, as trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2006-FFI” (capitalizations altered). On the same day, U.S. Bank recorded a substitution of Veriprise for the original trustee, and Veriprise recorded a notice of default. Three months later, Veriprise recorded a notice of trustee’s sale.[3] There is no indication in the record that any such sale has taken place.

In 2005—prior to the recorded assignments described above—First Franklin executed a document titled, “Corporation Assignment of Deed of Trust.” (Capitalization altered.) This document, produced by Bank of America during discovery and attached to Plaintiff’s amended complaint, is a partially-completed form assigning First Franklin’s beneficial interest under a deed of trust to National City Bank of Midwest (National City Bank). The document identifies the deed of trust at issue as one recorded in Sonoma County and executed by “Gary Henriksen and Harold Strahn Jr,” and identifies the loan number as “(1044188999) 32574758 [67/04-4].” The document leaves blank lines in the form for identification of the deed of trust’s date; trustee; and recorded instrument number, book, and page. The form is dated, signed by two First Franklin officers, and notarized. It is not recorded.

Plaintiff’s complaint alleges that, by this 2005 document, First Franklin assigned its beneficial interest under the Deed of Trust to National City Bank, and therefore the purported subsequent assignments by entities other than National City Bank were ineffective and invalid. The complaint asserts causes of action against all Defendants for wrongful foreclosure, quiet title, declaratory relief, and violation of Business and Professions Code section 17200 et seq. (the Unfair Competition Law or UCL).

Defendants demurred. The trial court sustained the demurrers, finding the complaint’s exhibits contradict the allegations that Defendants lacked the authority to foreclose. In particular, the trial court rejected Plaintiff’s interpretation of the 2005 document: “nothing shows this to be a completed or recorded instrument and on its face it is incomplete and not recorded. It does not state it was recorded, it has no stamp showing it was recorded, it does not fully identify the actual deed of trust or instrument interest that it is transferring, its blank spaces for identifying information are empty and not filled out.” The trial court denied leave to amend and issued judgments in favor of Defendants.

DISCUSSION

“On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966–967 (Aubry).)

I. The 2005 Document

Plaintiff contends the trial court erred in sustaining the demurrer based on the 2005 document. We agree.

Our review of a demurrer ruling generally accepts as true the complaint’s factual allegations, but “f the allegations in the complaint conflict with the exhibits, we rely on and accept as true the contents of the exhibits. However, in doing so, if the exhibits are ambiguous and can be construed in the manner suggested by plaintiff, then we must accept the construction offered by plaintiff.” ([i]SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83.) Plaintiff’s complaint alleges First Fidelity assigned its beneficial interest in the Deed of Trust to National City Bank by executing the 2005 document. Our question is whether the 2005 document conflicts with this allegation because it is unambiguously an invalid or ineffective assignment.

As an initial matter, no party cites authority identifying the requirements for a valid or effective assignment of beneficial interest under a deed of trust. With respect to the underlying deed of trust, “[t]he Civil Code does not provide a statutory form for a deed of trust, nor do the statutes set forth the provisions such an instrument must include to be effective,” although “a deed of trust must be in writing to be valid, as any conveyance of real property must fulfill the statute of frauds requirement.” (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 507–508 (Jenkins), disapproved of on other grounds by Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939 & fn. 13 (Yvanova).)

Moreover, as Plaintiff argues, there is ample authority that recordation is not a requirement. (See Haynes v. EMC Mortgage Corp. (2012) 205 Cal.App.4th 329, 336 [“where a deed of trust is involved, the trustee may initiate foreclosure irrespective of whether an assignment of the beneficial interest is recorded”]; Jenkins, supra, 216 Cal.App.4th at p. 518 [“because a deed of trust does not convey a power of sale directly to the beneficiary-creditor, it is immaterial whether an assignment of a promissory note was properly acknowledged and recorded when a deed of trust is used to secure a debt”].) Bank of America concedes this point and the remaining Defendants do not contest it. Thus, the lack of recordation does not impact the validity of the purported assignment.

Instead, the parties’ dispute focuses on whether the 2005 document contains enough identifying information about the Deed of Trust to constitute a valid or effective assignment. This argument appears to implicate the question of whether the assignment was sufficiently certain to constitute a valid contract. “To form a contract, an ‘offer must be sufficiently definite . . . that the performance promised is reasonably certain. [Citations.]’ [Citation.] The phrase ‘reasonably certain’ means the terms provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ [Citation.] This definition of the requirement of certainty has been described as involving two questions: ‘[F]irst, did the parties intend to contract and second, is there a reasonably certain basis for giving an appropriate remedy.’ [Citation.] [¶] ‘ “[W]hether a certain or undisputed state of facts establishes a contract is one of law for the court . . . . On the other hand, where the existence and not the validity or construction of a contract or the terms thereof is the point in issue, and the evidence is conflicting or admits of more than one inference, it is for the jury or other trier of the facts to determine whether the contract did in fact exist.’ ” (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141, disapproved on another ground in Reid v. Google, Inc. (2010) 50 Cal.4th 512, 524, 526.)

The 2005 document includes some identifying information associated with the Deed of Trust: an 8-digit loan number associated with the Deed of Trust, Plaintiff’s name and the name of one of the two other trustors, and the county in which the Deed of Trust was recorded. It lacks other such information: the Deed of Trust’s date; trustee; third trustor; and recorded instrument number, book, and page. In light of the presence of some identifying information associated with the Deed of Trust—in particular, an 8-digit loan number appearing on both documents—we cannot say as a matter of law that the document lacks a basis to determine the beneficial interest being assigned, and therefore is invalid and in conflict with the complaint’s allegations. We agree with Plaintiff that the trial court erred in sustaining the demurrers on this ground.

II. Alternative Grounds to Affirm Exist as to Three Claims

“The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken.’ ” (Aubry, supra, 2 Cal.4th at p. 967.) We conclude that, as to the wrongful foreclosure, quiet title, and declaratory relief causes of action, Plaintiff has failed to demonstrate the demurrer ruling should not be affirmed on alternate grounds.[4]

A. Wrongful Foreclosure

Defendants’ demurrers argued wrongful foreclosure actions may not be brought where, as here, no foreclosure sale has yet taken place. (See Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814 (Saterbak) [“California courts do not allow such preemptive suits [challenging the authority of the foreclosing party] because they ‘would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.’ ”].)

Plaintiff’s sole argument on this issue is that the California Supreme Court recently held such plaintiffs have standing to sue. The case he cites, however, does not so hold. Instead, our Supreme Court explicitly expressed no opinion on the issue: “As framed by the proceedings below, the concrete question in the present case is whether plaintiff should be permitted to amend her complaint to seek redress, in a wrongful foreclosure count, for the trustee’s sale that has already taken place. We do not address the distinct question of whether, or under what circumstances, a borrower may bring an action for injunctive or declaratory relief to prevent a foreclosure sale from going forward.” (Yvanova, supra, 62 Cal.4th at p. 934, italics added; see also Saterbak, supra, 245 Cal.App.4th at p. 815 [“Yvanova’s ruling is expressly limited to the post-foreclosure context.”].)

Plaintiff’s erroneous reliance on Yvanova is his sole contention on appeal in connection with this demurrer ground. Plaintiff has therefore forfeited any other arguments. (Cahill, supra, 194 Cal.App.4th at p. 956 [“ ‘ “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.” ’ ”].) We affirm the trial court’s orders sustaining the demurrers as to the wrongful foreclosure claim.

B. Quiet Title

Defendants argued below that Plaintiff’s quiet title cause of action failed for lack of tender. (See Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477 [mortgagor cannot “quiet title without discharging his debt”].) On appeal, Plaintiff’s sole response is to assert—without any citation to authority—that tender is not required for quiet title actions seeking to clear a cloud on the title. Plaintiff’s failure to cite authority for this proposition forfeits the argument. (Cahill, supra, 194 Cal.App.4th at p. 956.) We affirm the trial court’s orders sustaining the demurrers to the quiet title claim.

C. Declaratory Relief

The complaint seeks declaratory relief that the 2013 and 2015 assignments, the substitution of trustee, and/or the notice of default were in violation of law and the ongoing foreclosure proceedings are invalid. This claim simply duplicates the wrongful foreclosure cause of action. Where an “action for declaratory relief depends upon the other causes of action,” and the plaintiff “failed to state a claim sufficient to recover on any of [those other] causes of action,” the “claim for declaratory relief action must also fail as a matter of law.” (Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 607.)

D. Leave to Amend

“It is the plaintiff’s burden on appeal to show in what manner it would be possible to amend a complaint to change the legal effect of the pleading; we otherwise presume the pleading has stated its allegations as favorably as possible.” (Fuller v. First Franklin Financial Corporation (2013) 216 Cal.App.4th 955, 962.) Plaintiff does not contend the trial court abused its discretion in denying leave to amend, nor does he offer any explanation of how the wrongful foreclosure, quiet title, or declaratory relief claims could be amended to state a cause of action. We affirm the trial court’s denial of leave to amend these claims.

III. The UCL Claim

The Unfair Competition Law “ ‘prohibits, and provides civil remedies for, unfair competition, which it defines as “any unlawful, unfair or fraudulent business act or practice.” [Citation.] . . . . Although [the UCL] contains sweeping language as to what is considered a business practice, standing to sue under the statute, as defined by Business and Professions Code section 17204, is confined ‘ “to any ‘person who has suffered injury in fact and has lost money or property’ as a result of unfair competition.” ’ ” (Bower v. AT&T Mobility, LLC (2011) 196 Cal.App.4th 1545, 1553–1554 (Bower).) We conclude none of the alternative grounds argued in Defendants’ demurrers provides a basis to affirm the trial court’s orders on this claim.[5]

1. Injury In Fact

“[T]o have standing to bring a [UCL] cause of action, a plaintiff must ‘ . . . establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury.” (Bower, supra, 196 Cal.App.4th at p. 1554.) Bank of America’s demurrer argued Plaintiff lacks injury in fact because he has not yet lost money or property.

Plaintiff contends the foreclosure process is in progress, and points to authority that economic injury may be shown if the plaintiff “ha[s] a present or future property interest diminished.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 323, italics added (Kwikset Corp.).) A case with similar facts held such future injury sufficient for UCL purposes: “It is undisputed nonjudicial foreclosure proceedings have been initiated on [the plaintiff’s] home. If such proceedings are pursued to their completion, [the plaintiff’s] interest in her property will be extinguished. Thus, in light of the minimal pleading requirements with regard to the economic injury prong of Business and Professions Code section 17204, and the Kwikset Corp. court’s affirmation of an alleged diminishment of a future property interest as a sufficiently pled economic injury under the statute [citation], we conclude [the plaintiff’s] third cause of action satisfies the economic injury prong of Business and Professions Code section 17204.” (Jenkins, supra, 216 Cal.App.4th at p. 522.) We agree with this reasoning, particularly in light of authority that the economic injury required for UCL standing must be “ ‘ “ ‘actual or imminent, not “conjectural” or “hypothetical.” ’ ” ’ ” (Bower, supra, 196 Cal.App.4th at p. 1554, italics added.) Plaintiff adequately pled economic injury.

2. Fraudulent Act

Defendants’ demurrers argued Plaintiff failed to sufficiently allege a fraudulent act.[6] Plaintiff argues on appeal that recorded assignments claiming an invalid interest in another’s property constitute fraudulent acts under the UCL. We agree. The complaint, reasonably construed, alleges Defendants executed, received, and/or initiated foreclosure proceedings based upon assignments that were invalid because the interest being assigned had previously been assigned to a separate entity. As we have concluded above, the 2005 document is ambiguous and, for purposes of this demurrer, must be construed according to Plaintiff’s interpretation. This is sufficient to allege a fraudulent act.[7]

Bank of America also argues Plaintiff failed to allege the public is likely to be deceived. We disagree. The assignments were publicly recorded and allegedly purported to transfer an interest that the transferring party did not own. This is sufficient. (See Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 645 [“The term ‘fraudulent’ as used in [Business and Professions Code] section 17200 ‘does not refer to the common law tort of fraud but only requires a showing members of the public “ ‘are likely to be deceived.’ ” ’ ”].)

3. Causation

The UCL “requires that a plaintiff’s economic injury come ‘as a result of’ the unfair competition . . . . ‘The phrase “as a result of” in its plain and ordinary sense means “caused by” and requires a showing of a causal connection.’ ” (Kwikset, supra, 51 Cal.4th at p. 326.) Defendants’ demurrers argued the cause of any economic injury was Plaintiff’s failure to make payments on his mortgage and cure his default. On appeal, Bank of America relies on Jenkins, supra, which held: “As Jenkins’s home was subject to nonjudicial foreclosure because of Jenkins’s default on her loan, which occurred before Defendants’ alleged wrongful acts, Jenkins cannot assert the impending foreclosure of her home (i.e., her alleged economic injury) was caused by Defendants’ wrongful actions.” (Jenkins, supra, 216 Cal.App.4th at p. 523.)

Plaintiff cites Yvanova for the proposition that an improperly foreclosing entity injures a defaulting borrower. In Yvanova, our Supreme Court rejected an argument that a defaulting borrower was not prejudiced by any defect in the assignment of the deed of trust’s beneficial interest because the actual beneficiary could have foreclosed: “The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security. [¶] . . . [¶] The logic of defendants’ no-prejudice argument implies that anyone, even a stranger to the debt, could declare a default and order a trustee’s sale—and the borrower would be left with no recourse because, after all, he or she owed the debt to someone, though not to the foreclosing entity. This would be an ‘odd result’ indeed.” (Yvanova, supra, 62 Cal.4th at p. 938.) Thus, where “the borrower has lost ownership to the home in an allegedly illegal trustee’s sale” and “the bank or other entity that ordered the foreclosure would not have done so absent the allegedly void assignment,” then “ ‘[t]he identified harm—the foreclosure—can be traced directly to [the foreclosing entity’s] exercise of the authority purportedly delegated by the assignment.’ ” (Id. at p. 937.) Although this discussion took place in the context of considering whether a defaulting homeowner has standing to challenge a void assignment of a deed of trust, the reasoning applies equally to the causation question raised here. Plaintiff’s alleged injury—the imminent future foreclosure of his home by an entity not authorized to foreclose—can be “traced directly” to the purportedly invalid assignments. We conclude Plaintiff’s default does not preclude his allegation that the invalid assignments caused his injury.[8]

DISPOSITION

The judgments are reversed. The trial court’s orders on the defendants’ demurrers are reversed to the extent they sustained the demurrers to the plaintiff’s cause of action under Business and Professions Code section 17200 et seq.; the orders are otherwise affirmed. Each party shall bear its own costs on appeal.

SIMONS, J.

We concur.

JONES, P.J.

BRUINIERS, J.

(A148298)