Opinion
E065939
10-13-2017
MARCOS MELCHOR, Plaintiff and Appellant, v. ARCH BAY HOLDINGS LLC et al., Defendants and Respondents.
Marcos Melchor, in pro. per. for Plaintiff and Appellant. Wolfe & Wyman, Stuart B. Wolfe and David M. Chute for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1417516) OPINION APPEAL from the Superior Court of San Bernardino County. Keith D. Davis, Judge. Affirmed. Marcos Melchor, in pro. per. for Plaintiff and Appellant. Wolfe & Wyman, Stuart B. Wolfe and David M. Chute for Defendants and Respondents.
Plaintiff and appellant Marcos Melchor appeals the dismissal of his First Amended Complaint (FAC) based on defendants and respondents U.S. Bank National Association's sustained demurrer without leave to amend.
Not in its individual capacity, but solely as Trustee for the RMAC Pass-Through Trust, Series 2013-A (U.S. Bank) and Arch Bay Holdings, LLC (Arch Bay). --------
Melchor obtained a $650,000 loan to purchase the property located at 1560 Rancho Hills Drive in Chino Hills (Property). The loan was secured by a Deed of Trust (DOT) recorded on January 9, 2007, in favor of lender American Brokers Conduit (American). Melchor defaulted on his loan obligations and the Property was sold at a trustee's sale on October 17, 2012, to Arch Bay who had previously been assigned the DOT by American. U.S. Bank obtained the Property from Arch Bay. U.S. Bank filed an unlawful detainer action in San Bernardino County Superior Court case No. UDFS1401624 (UD) against Melchor pursuant to Code of Civil Procedure section 1161a. U.S. Bank was successful. Melchor then filed his FAC for the causes of action of quiet title; cancellation of instruments; slander of title; and intentional infliction of emotional distress all based on his claim that the original DOT was void. The trial court granted the demurrer on the grounds that the issues were already resolved in the UD case.
Melchor presents the following issues on appeal: (1) Did the trial court erroneously fail to address the determinative issue of financial fraud due to the inability of an unlicensed and unqualified business to conduct mortgage business in the State of California?; (2) Is the note and deed of trust (mortgage) void because American was an unlicensed and unauthorized entity to do loan business in California?; (3) Is there a deficiency of evidence to show standing to exercise rights under the subject deed of trust that was void due to the lack of capacity to contract by an unlicensed and unauthorized entity?; and (4) Can the quiet title action and its related causes of action be dismissed when American was not licensed, registered, nor qualified to do loan business in the State of California and is non-existent?
Melchor's arguments rely on the assumption that the DOT executed between him and American was void. Hence, the DOT could not be transferred to Arch Bay, who could not conduct a valid trustee's sale and could not transfer the Property to U.S. Bank. Melchor insists that U.S. Bank was unable to establish valid title in the UD case. These issues pertaining to title were fully addressed in the UD case, e.g. they were res judicata, which foreclosed the issues from being raised in the FAC. As such, the trial court here properly granted the demurrer.
FACTUAL AND PROCEDURAL HISTORY
A. COMPLAINT AND DISMISSAL
On November 24, 2014, Melchor filed his Complaint for Quiet Title (Complaint) naming American, referred to as "Sham Lender," Arch Bay and U.S. Bank. Melchor alleged that he was the owner of the Property by virtue of a deed from the former owners dated December 7, 2006, which was attached as an exhibit. Defendant sought to quiet title against American, Arch Bay and U.S. Bank. Melchor alleged that the DOT with American was not valid. Any money paid on the loan was due back to Melchor. Melchor sought to quiet title as of January 9, 2007, the date of the recording of the DOT.
On December 19, 2014, U.S. Bank and Arch Bay filed a demurrer to the Complaint. They alleged that Melchor sought to quiet title on the Property in which he had no interest. U.S. Bank alleged that a judgment was entered in its favor as Trustee granting it possession of the Property.
Melchor filed opposition to the demurrer insisting he had properly plead the cause of action of quiet title in the Complaint. U.S. Bank and Arch Bay filed a reply stating that Melchor had failed to address the deficiencies in the Complaint. The matter became moot as Melchor filed his FAC.
B FIRST AMENDED COMPLAINT
The FAC alleged causes of action of (1) quiet title; (2) cancellation of instruments; (3) slander of title; and (4) intentional infliction of emotional distress against American, Arch Bay, U.S. Bank and Mortgage Electronic Registration Systems, Inc. (MERS). MERS had been named an agent of American in the DOT.
Melchor alleged that he and his wife were the sole owners of the Property by virtue of a Grant Deed dated August 9, 2006, and recorded on September 7, 2006. Melchor obtained a loan from American on January 9, 2007. Melchor executed a promissory note in the amount of $650,000 and the DOT was signed in favor of American for the Property. The Trustee was Land America Lawyers. Under the terms of the agreement, American could appoint a new trustee. Only the trustee named in the DOT or named as a successor had the power to conduct a trustee sale.
Melchor alleged that American was not a bank and that it was a corporation organized and existing under the laws of the State of New York. In order to conduct business in California, American had to obtain a certificate of qualification from the State of California. Melchor alleged American never obtained such qualification and could not conduct business in California. American was not allowed to enter into contracts in California. Accordingly, the DOT and promissory note in favor of American signed by Melchor for property in California was null and void.
Melchor alleged that MERS also could not conduct business in California. It had lost its qualification in 2002. MERS assigned the DOT and promissory note to Arch Bay. MERS could not transfer the DOT and promissory note. MERS transfer was also improper under Civil Code section 1095.
Melchor alleged that the transfer of the DOT, the trustee's sale, trustee's deed on sale and the transfer to U.S. Bank and Arch Bay were all void. American and MERS could not conduct the trustee's sale. All of the documents recorded were fraudulent. Melchor alleged he could not have earlier discovered that American was not qualified to do business in California.
For the quiet title action, Melchor alleged that U.S. Bank did not own superior title because American could not validly transfer the Property to Arch Bay. The foreclosure and subsequent UD proceedings were improper. False documents were used in order to prevail in the UD proceedings. Melchor sought a temporary restraining order to keep U.S. Bank from selling the Property.
For the cancellation of instrument, Melchor was entitled to have all of the documents executed in this case deemed void including the DOT and the deed to U.S. Bank. For slander of title, Melchor alleged that the false documents were recorded against the Property and clouded title. Finally, Melchor alleged under intentional infliction of emotional distress that American, Arch Bay, MERS and U.S. Bank caused him severe emotional distress by "kick[ing] him out on the street" based on fraudulent documents and he was in fear of what further things they would do to him.
In his prayer for relief, Melchor sought title of the Property. In addition, he sought to have all of the documents pertaining to the trustee's sale and the UD declared null and void. He sought two million dollars in special damages and two million in general damages.
Melchor attached several exhibits to the FAC. The DOT for the Property listed American as the lender, a corporation organized under the laws of the State of New York. Melchor and his wife were listed as joint tenants. MERS was listed as a separate corporation working solely as a "nominee" for American. Land America Lawyers was listed as the Trustee. Melchor had been loaned $650,000.
Another exhibit was the assignment of DOT, which transferred the mortgage from American to Arch Bay that was filed on September 22, 2010. Regional Service Corporation was named the new trustee. Arch Bay was given the trustee's deed upon foreclosure. Arch Bay purchased the Property for $608,000 and $764,116.12 was owed on the mortgage.
C. DEMURRER TO FIRST AMENDED COMPLAINT
American, MERS, Arch Bay and U.S. Bank as Trustee, filed their demurrer to the FAC. They contended that Melchor was attempting to quiet title to the Property for which he had no interest. On November 10, 2014, judgment had been entered in favor of U.S. Bank as Trustee and it was granted possession of the Property. Further, Melchor was seeking to relitigate issues already determined in the UD. Melchor stopped paying on the loan obligation for the Property in 2010 and the Property was sold at a trustee's sale on October 17, 2012. On March 25, 2014, U.S. Bank filed the unlawful detainer complaint.
Defendants demurred on the ground that the FAC was uncertain. The "nonsensical allegations" were presented and rejected at the UD trial. Further, Melchor had no interest in the Property at the time the FAC was filed. Melchor had failed to tender the debt in order to bring the quiet title action. Moreover, Melchor had not shown that he suffered any damages from the recorded foreclosure notices justifying cancellation of the instruments. There was no slander of title or showing of emotional distress.
American, MERS, Arch Bay and U.S. Bank also brought a motion to strike portions of the FAC. They sought to strike the prayer for punitive damages and attorney fees. The allegations were not sufficiently plead to support the damages and were not supported as a matter of law.
American, MERS, Arch Bay and U.S. Bank made a request for judicial notice of the complaint for the UD case and the judgment in that case. The complaint was filed by US Bank pursuant to Code of Civil Procedure section 1161a. U.S. Bank alleged in the UD that Arch Bay purchased the Property at a trustee's sale. U.S. Bank purchased the Property from Arch Bay on December 29, 2012. Prior to the sale, Arch Bay served Melchor (and a tenant in the property) with a written notice to quit the Property. They sought possession of the Property and daily rental damages. The judgment on the UD case in the trial court ordered that U.S. Bank be given possession of the Property and damages not to exceed $10,000.
D. REMAINING FILINGS
Melchor filed opposition to the demurrer (Opposition). Melchor argued that he was in pro. per. and his pleadings should be read liberally. Melchor continued to allege that American could not enter into the DOT on January 9, 2007, and any subsequent transfers of the Property by American were void. The California Secretary of State did not have record of American being allowed to do business in California. It was not a bank organized under the laws of the United States. The DOT was void. The other allegations in the FAC were supported by American filing false documents. Attached to the opposition was a document that purported to be a search of "Public License Information" and "Business Search" for California that showed no listing for American Brokers Conduit.
American, MERS, U.S. Bank and Arch Bay filed a reply to the opposition. They again argued that Melchor lack standing to bring a quiet title action because U.S. Bank was adjudged in possession of the Property in the UD case. In addition, there was no tender of the debt or offer to pay the debt.
Melchor filed opposition to the motion to strike arguing that the UD case only involved possession of the Property. Moreover, the UD case was on appeal to the appellate division of the superior court. Further, Melchor did not have to prove damages at the initial stage of the proceeding. Moreover, if there were defects in the FAC, Melchor should be given an opportunity to amend.
Melchor filed opposition to the request for judicial notice. He argued that even if the court took judicial notice of the UD case, it could not consider it for the truth of the matter asserted, i.e. that U.S. Bank was the proper owner of the Property. Moreover, the matter was under appellate review. Melchor argued the documents had no relevance to the issues.
Melchor requested judicial notice of the status of the appeal of the UD case. Melchor also requested judicial notice of the DOT between him and American dated January 1, 2007. In addition, he sought judicial notice of articles of incorporation for American Brokers Conduit Corporation, which was filed on March 16, 2012. He also sought judicial notice of a certificate of no record of American Brokers Conduit Corporation as a California or foreign corporation from the California Secretary of State.
The hearing on the demurrer was continued until the outcome of the appeal on the UD case. Melchor sought admissions and production of documents by filing a motion to compel. American, MERS, Arch Bay and U.S. Bank objected to the motion to compel discovery based on lack of sufficient statutory notice, failing to meet and confer and there were no grounds to grant the motion.
E. RESOLUTION OF UD CASE
On January 5, 2016, Arch Bay and U.S. Bank requested that the trial court take judicial notice of the per curiam opinion in U.S. Bank N.A., as Trustee v. Marcos Melchor, case No. ACIAS1400064. Pursuant to the opinion, Melchor stopped paying on his real estate loan in 2010 or 2011. On October 18, 2012, a trustee's sale was held and Arch Bay purchased the Property. On December 29, 2012, Arch Bay transferred the Property to U.S. Bank. On March 25, 2014, U.S. Bank filed the UD case. Melchor filed a demurrer, which was overruled. On November 4, 2014, judgment was entered in the lower court in favor of U.S. Bank. Melchor filed the appeal.
The appellate division of San Bernardino County found that notice of the UD matter was properly served. The court additionally addressed U.S. Bank's standing to bring the UD case. The court first detailed the chain of ownership from American to finally U.S. Bank. It noted that Melchor was arguing the original DOT was void, and therefore no debt was due on the DOT, and the promissory note was void. Melchor argued that American was nonexistent in 2007 but could not explain where the money to buy the Property was obtained if it was nonexistent.
The appellate court noted that Melchor failed to provide any evidence that American was nonexistent in January 2012. Testimony presented by Melchor that American made no loans after 2007 was not dispositive as to whether American existed in January 2007. Moreover, there was no evidence that in 2010, when American transferred the Property to Arch Bay, that it lacked authority to manage its assets. There was no evidence presented in the trial court that American was not licensed as a mortgage broker in California in 2007.
The appellate court also found that MERS was authorized to transfer the DOT on behalf of American, and rejected that there was any issue as to the proper assignment of the DOT. It further found that the change of trustees was also proper. The appellate court also found that Melchor was not denied due process because he was able to raise his claims that the trustee's sale was improper and that the underlying DOT was invalid in the trial court. Finally, the appellate court found the unlawful detainer action was supported by substantial evidence.
Melchor filed a petition for rehearing, which was denied on January 14, 2016. Remittitur issued on the UD on January 26, 2016.
On February 24, 2016, Melchor filed a request for judicial notice seeking the trial court to take judicial notice of a California Supreme Court decision, an amicus brief filed by the Attorney General of California and a Court of Appeal case pertaining to assignments of deeds of trust.
F. HEARING ON DEMURRER
The demurrer, motion to strike, motion to compel discovery, and the requests for judicial notice were heard on February 24, 2016. The trial court initially stated it had reviewed the request for judicial notice filed on that day by Melchor. The trial court found it was untimely and the documents were not subject to judicial notice. The trial court stated its tentative ruling. It found, "the final decision of the appellate division with regard to the appeal, which was taken from an unlawful detainer judgment, makes clear that the sorts of issues that are being raised in opposition to the demur have already been heard and determined by the appellate division." The trial court noted that U.S. Bank had been declared the lawful owner and possessor of the Property in the UD case. There was no basis for a quiet title action. The trial court also noted that there was a valid argument that Melchor did not tender the debt payment.
As for the remaining causes of action—cancellation of instrument, slander of title and intentional infliction of emotional distress—the appellate court in the UD action properly found that the DOT was valid and that U.S. Bank had valid possession of the Property. These claims failed. The trial court stated that there was no reason to rule on the motion to compel discovery.
Melchor argued that the DOT was void and that American was not a corporation in 2007. There was no valid loan. The trial court noted that the matter had been resolved in the UD case and the appellate case.
The requests for judicial notice of the UD complaint, judgment and the appellate decision were granted. The trial court sustained the demurrer without leave to amend. A judgment of dismissal was entered on March 7, 2016. Melchor's motion for reconsideration was denied on March 25, 2016. Melchor filed his notice of appeal on April 26, 2016.
DISCUSSION
A. STANDARD OF REVIEW
"We review an order sustaining a demurrer de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law." (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 994.) " ' "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.' " (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
B. ANALYSIS
"Generally, when a debt is secured by a deed of trust containing a power of sale, and a default has occurred, the creditor-beneficiary may seek recourse to the real property security through a judicial or a nonjudicial foreclosure. When the creditor-beneficiary chooses to pursue a nonjudicial foreclosure, the delivery of a notice of default is the first statutory step in that type of foreclosure. [Citation.] Subsequent steps in nonjudicial foreclosures include recording and delivering a notice of trustee's sale, holding the foreclosure sale, and issuing a trustee's deed upon sale to the successful bidder. [Citations.] After the trustee's deed has been recorded, the purchaser is entitled to bring an unlawful detainer action against the borrower-trustor or his or her successor to obtain possession of the property." (Salazar v. Thomas (2015) 236 Cal.App.4th 467, 480.)
" 'Under section 1161a, Code of Civil Procedure, a purchaser who has acquired the title at such trustee's sale must prove that the property was sold in accordance with section 2924 of the Civil Code under a power of sale and that title under the sale has been duly perfected. Under such unlawful detainer statutes title to the extent required by section 1161a not only may but must be tried.' " (Malkoskie v. Option One Mortg. Corp. (2010) 188 Cal.App.4th 968, 974 (Malkoskie).)
Here, Melchor's first cause of action was for quiet title. A complaint for quiet title must describe the property that is the subject of the action, and state the basis for the plaintiff's claim to title and the adverse claims to the plaintiff's title against which a determination is sought. (Deutsche Bank Nat. Trust Co. v. McGurk (2012) 206 Cal.App.4th 201, 210.) Here, Melchor's claim to title was that the DOT entered into between Melchor and American was void because American was not a valid corporation in 2012 and it could not conduct business in California.
In Malkoskie, supra, 188 Cal.App.4th 968, the plaintiffs brought an action for quiet title and related claims, including cancellation of trustee's deed, seeking to set aside the nonjudicial foreclosure sale and their subsequent eviction. (Id. at p. 970.) Plaintiffs had stipulated to entry of judgment on the unlawful detainer action but then filed their quiet title suit. (Id. at p. 972.) The appellate court first noted that the California Supreme Court in Vella v. Hudgins (1977) 20 Cal.3d 251, 256, held that " 'subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee's sale are barred by the prior unlawful detainer judgment.' " (Malkoskie, supra, at p. 973.) The appellate court noted that the foreclosing bank had filed its unlawful detainer action against plaintiffs pursuant to section 1161a. It had alleged specific facts that it had perfected title and the foreclosure proceedings were proper. (Malkoskie, at p. 974.) The court concluded, "Because the complaint was brought under section 1161a, it was proper for limited issues pertaining to the validity of title obtained by [the bank] in the sale to be raised and conclusively resolved." (Ibid.)
The Malkoskie court concluded that since the plaintiffs had stipulated to entry of judgment on the unlawful detainer, which "conclusively determined the specific factual contentions embraced by the complaint, namely that [the bank] had obtained valid record title pursuant to a nonjudicial foreclosure sale that had been duly conducted pursuant to statute." (Malkoskie, supra, 188 Cal.App.4th at p. 975.) Further, there was nothing in the judgment reserving issues for determination in another proceeding. (Ibid.)
In Orcilla v. Big Sur, Inc., supra, 244 Cal.App.4th 982, the borrowers defaulted on a loan and the property was sold at a trustee's sale. The purchaser brought an unlawful detainer action against the borrowers and obtained a judgment. Borrowers brought action against the creditor, trustee, mortgage registry operator and the purchaser of the borrower's home at a nonjudicial foreclosure sale for, among other claims, wrongful foreclosure, fraud and quiet title. The trial court sustained the demurrer with leave to amend on these claims. (Id. at p. 990-994.) The appellate division of the superior court found that the borrower's action to quiet title was barred due to the unlawful detainer action. The Court of Appeal found an exception to the rule that a judgment in unlawful detainer usually has very limited res judicata effect when it is based on Code of Civil Procedure section 1161a because title was at issue in the proceeding. The borrowers' action for quiet title was barred by the prior unlawful detainer judgment. (Orcilla, at pp. 1010-1011.)
Here, the UD was filed pursuant to Code of Civil Procedure section 1161a based on U.S. Bank obtaining title to the Property after a nonjudicial foreclosure sale. U.S. Bank alleged that it was the owner of the Property. Arch Bay had purchased the Property at a trustee's sale conducted in accordance with Civil Code section 2924. The trial court entered judgment in the UD case finding that possession was adjudged in favor of U.S. Bank. The appellate division affirmed the finding, holding that Melchor had failed to establish that the DOT was invalid, that assignment of the DOT was invalid because of fraud or that the trustee's sale was improperly conducted.
Melchor had clearly raised these issues of the fraudulent DOT and the assignment of the DOT in the UD case. Oral and documentary evidence was presented. Although the record of the trial court proceedings is not before this court, the appellate division provided a detailed analysis of the issues in its opinion and resolved the issues. It rejected that Melchor's due process rights had been violated because he was "allowed to raise attacks on the underlying deed of trust." (Fn. omitted.) The issues raised in the FAC had been resolved against Melchor in the UD case. (Wood v. Herson (1974) 39 Cal.App.3d 737, 746-747 [when claim is litigated in the unlawful detainer action the doctrine of collateral estoppel applies in a subsequent proceeding raising the same claim or an issue common to different causes of action]; but see Vella v. Hudgins, supra, 20 Cal.3d at p. 258 ["In the absence of a record establishing that the claim was asserted and that the legal and factual issues therein were fully litigated, we conclude that the question of fraudulent acquisition of title was not foreclosed by the adverse judgment in the earlier summary proceeding"].)
Like in Malkoskie and Orcilla the validity of the trustee's sale and the validity of the DOT were resolved in the UD case. As such, the FAC on the quiet title cause of action was properly sustained in the demurrer. Moreover, Melchor's remaining claims of slander of title, cancellation of instruments and intentional infliction of emotional distress all relied upon the DOT being invalid. As such, these claims were already resolved in the UD case and the trial court properly determined they were already resolved against Melchor.
Melchor contends on appeal that he could amend the FAC to raise a claim that the trustee's sale was invalid because of improper assignment of the DOT. An appellate court must reverse a judgment sustaining a demurrer if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) However, this claim again presumes that the DOT was fraudulent. The issue as to whether the DOT was fraudulent has been resolved. The FAC could not be amended to raise a valid claim.
DISPOSITION
The judgment is affirmed. As the prevailing parties, Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
J. We concur: RAMIREZ
P. J. FIELDS
J.