Opinion
A140858
01-18-2017
MITESH K. PATEL, Plaintiff and Appellant, v. BANK OF NEW YORK MELLON, BANK OF AMERICA, N.A., RECONTRUST COMPANY, N.A., and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG13664685)
Mitesh Patel sued Defendants after he defaulted on a secured real estate loan and Defendants attempted to initiate foreclosure on the subject property. In his first amended complaint, Patel alleged that because the loan was securitized and sold years before the deed of trust was assigned to defendant Bank of New York Mellon and before defendant Recontrust Company, N.A., was substituted as trustee under the deed of trust, Defendants lacked the authority to foreclose. Defendants filed a demurrer and a request for judicial notice of recorded documents that they contended demonstrated Patel's claims to be without merit. The trial court took judicial notice of the requested documents and sustained the demurrer without leave to amend. We affirm.
I. BACKGROUND
In January of 2007, Appellant Mitesh Patel executed a deed of trust (DOT) in order to borrow $988,500 from America's Wholesale Lender (AWL) to purchase real property located at 40835 Lincoln Street in Fremont, California. The DOT named Patel as the "Borrower," AWL as the "Lender," CTC Real Estate Services as "Trustee," and Respondent Mortgage Electronic Registration Systems, Inc. (MERS) as beneficiary "acting solely as nominee for Lender and Lender's successors and assigns." The DOT was recorded in the Alameda County Recorder's Office on February 6, 2007. AWL subsequently sold its beneficial interest in the DOT to the "Alternative Loan Trust 2007-OH1, Mortgage Pass-Through Certificate Series 2007-OH1" (Trust), on or before May 30, 2007.
On January 13, 2012, MERS executed an assignment of the DOT to Respondent Bank of New York Mellon (BNYM), as "Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust, 2007-OH1, Mortgage Pass-Through Certificates, Series 2007-OH1." (Capitalization omitted.) The assignment was recorded in the Alameda County Recorder's Office on January 19, 2012.
On March 20, 2012, Respondent Bank of America, N.A., (BANA) executed a substitution of trustee under the DOT as attorney-in-fact for BNYM, replacing CTC with Respondent Recontrust Company, N.A. (Recontrust). The substitution was recorded in the Alameda County Recorder's Office on March 21, 2012.
At some point prior to March of 2012, Patel fell behind on his payment obligations and defaulted on his loan. On March 20, 2012, Recontrust executed a notice of default under the DOT, which was recorded with the Alameda County Recorder's Office on March 21, 2012. Recontrust recorded a notice of trustee's sale on September 10, 2012.
Patel filed suit against Defendants on January 24, 2013, asserting claims for breach of contract, breach of implied agreement, slander of title, violation of California's Unfair Competition Law (UCL), and violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Defendants demurred and the trial court sustained the demurrer with leave to amend. On June 14, 2013, Patel filed a First Amended Complaint asserting the same causes of action. Defendants filed a second demurrer and a request for judicial notice in support attaching the DOT, the assignment of the DOT, the notice of default, the notice of the trustee's sale, and the substitution of trustee. The trial court sustained the demurrer without leave to amend and granted the request for judicial notice. Patel timely appeals.
Although the July 19, 2013 request for judicial notice indicates that the substitution of trustee is attached as "Exhibit F," the substitution was unintentionally omitted from the record on appeal. On August 4, 2014, Defendants filed a motion to correct the record and/or requesting judicial notice of the substitution, which we granted.
II. DISCUSSION
A. Standard of Review
"We review de novo the trial court's order sustaining a demurrer." (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1468.) We accept as true all well-pleaded allegations in the complaint, and treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.) We will also consider facts and documents of which the trial court properly took judicial notice. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 751-52.)
We review the trial court's denial of leave to amend for abuse of discretion. (Vaca v. Wachovia Mortg. Corp. (2011) 198 Cal.App.4th 737, 743.) "When a demurrer 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. [Citations.]" ' " (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 992.) B. First Cause of Action —Breach of Contract
"[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." (Oasis W. Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Patel alleges breaches of both the DOT and the Pooling and Servicing Agreement (PSA) for the securitization of his loan.
i. Breach of the Deed of Trust
Patel alleges that because AWL sold its beneficial interest in the DOT to the Trust at some point on or before May 30, 2007, the assignment of the DOT to BNYM recorded on January 13, 2012 was invalid. Because of the alleged invalidity of this assignment, none of the Defendants were the "true" Trustee or Lender under the DOT and thus, in issuing a notice of default, Defendants breached the provision of the DOT requiring that the "Lender shall execute or cause Trustee to execute a written notice of the occurrence of an event of default" before exercising the power of sale. Similarly, Patel argues that Defendants violated the provision of the DOT allowing for substitution of the trustee because BNYM executed the substitution, but BNYM was never properly assigned AWL's interest.
Patel's argument cannot be squared with the terms of the various documents. Even if AWL's interest in the DOT was transferred on or before May of 2007 as Patel alleges, the DOT expressly makes MERS the "beneficiary" and the "nominee for Lender and Lender's successors and assigns," with the right to "exercise any or all of [the Lender's] interests," including the rights to assign the note and to foreclose and sell the property. (See Siliga v. Mortgage Elec. Registration Sys., Inc. (2013) 219 Cal.App.4th 75, 84 ["The authority to exercise all of the rights and interests of the lender necessarily includes the authority to assign the deed of trust"], disapproved on another ground in Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 939-940 & fn. 13 (Yvanova).) The DOT expressly states that "[t]he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower," with MERS retaining the power to act on behalf of the lender or the lender's assigns. (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 267 [purpose of the MERS system is to permit transfers between members without requiring recordation in public records], disapproved on another ground in Yvanova, supra, 62 Cal.4th at pp. 939-940 & fn. 13.) The January 13, 2012 assignment was executed not by AWL but by MERS, and Patel has not alleged any facts to establish or explain how this assignment was outside the authority expressly granted to MERS by the DOT. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1055 [rejecting wrongful foreclosure claim based on lack of " 'chain of assignments' " from original lender to subsequent lenders because MERS was the beneficiary of the deed of trust "[f]rom the outset"]; Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 813-814 [holding plaintiff bears the burden of proving assignment of a deed of trust invalid].)
Because the trial court properly took judicial notice of these documents, we will consider them as well. (See Scott, supra, 214 Cal.App.4th at pp. 751-752.)
In addition, the January 13, 2012 assignment is made from MERS to BNYM "as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2007-OH1 Mortgage Pass-Through Certificates, Series 2007-OH1." (Capitalization omitted.) Patel does not explain or allege how this assignment to BNYM as "Trustee" for the Trust is in any way inconsistent with the alleged sale of AWL's interest to that same Trust in 2007.
Finally, Patel has not established how Defendants breached the DOT when BANA as attorney-in-fact for BNYM replaced CTC with Recontrust as Trustee. As discussed above, the DOT expressly provides that the Lender may execute a substitution of trustee, and after MERS transferred its interest in the DOT (including the power to exercise all of the Lender's rights thereunder) to BNYM, BNYM did exactly that. Patel has not alleged or explained how this constituted a breach of the DOT, other than to repeat his challenge to the January 13, 2012 assignment that we have already discussed. Accordingly, Patel has failed to state a claim for breach of contract based on the DOT.
ii. Breach of the Pooling and Servicing Agreement
Patel also alleges that Defendants breached the PSA for the Trust because the transfer of Patel's loan to the Trust was not recorded until January 13, 2012, whereas the PSA required that loans be transferred within 90 days of the Trust's "closing date" of May 30, 2007. Patel's First Amended Complaint does not include the precise terms of the PSA that he contends were breached and does not allege that Patel is a party to that agreement. Although Patel does allege that he "is the third party beneficiary to the PSA," he does not allege any facts or provide any contractual language in support of that conclusion.
In support of his contention that he has standing to enforce the PSA, Patel cites Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, which held that a plaintiff had standing to bring a claim for wrongful foreclosure based on allegations that the plaintiff's loan was transferred after the closing date set out in the PSA, notwithstading the fact that the plaintiff was not a party to or a third party beneficiary of that agreement. (Id. at 1098; see Yvanova, supra, 62 Cal.4th at p. 939.) Glaski and Yvanova, however, both dealt with postsale wrongful foreclosure claims, as opposed to the type of preforeclosure suit that Patel brings here. (See Yvanova, supra, 62 Cal.4th at pp. 925, 939; Glaski v. Bank of America, supra, 218 Cal.App.4th at p. 1087.) And the Fourth District recently rejected Patel's argument in a post-Yvanova case partly on this ground. (See Saterbak v. JPMorgan Chase Bank, N.A., supra, 245 Cal.App.4th at pp. 814-815.)
In addition, Patel has brought a claim for breach of contract, not wrongful foreclosure, and we do not read anything in Glaski or Yvanova as altering the longstanding rule that only parties or express third party beneficiaries to a contract may enforce its terms. (See Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1092; Luis v. Orcutt Town Water Co. (1962) 204 Cal.App.2d 433, 441 [plaintiff seeking to enforce contract as third party beneficiary "must plead a contract which was made expressly for his benefit and one in which it clearly appears that he was a beneficiary"].) Accordingly, we conclude that Patel has failed to state a claim for breach of the PSA, and thus the trial court did not err in sustaining Defendants' demurrer to his first cause of action. C. Second Cause of Action —Breach of Implied Agreement
Patel's second cause of action is for breach of "implied" agreements. Patel alleges that Defendants "invoked the power of sale without notice to Plaintiff" as required under the DOT, and violated the PSA by "failing to record the assignment of the DOT." On appeal, Patel argues that the trial court erred in sustaining Defendants' demurrer to this cause action for the same reasons it erred in sustaining their demurrer to the first cause of action for express breach of contract. Patel's claim for breach of "implied" agreement appears to be the same as his claim for breach of express agreement, and we find that the trial court did not err in sustaining Defendants' demurrer to this cause of action for the reasons given above. D. Third Cause of Action —Slander of Title
The elements of slander of title are (1) a publication, (2) which is without privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss. (Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1051.) Patel argues that he has alleged that Defendants lacked authority to foreclose on his home and knew they lacked that authority, and that the assignment of the DOT, the substitution of trustee, and the notice of default were false publications.
As discussed above, we do not agree that Patel has alleged that Defendants lacked the authority to foreclose or that there is anything "false" about the recorded documents at issue for the purposes of slander of title. In addition, because these documents are privileged under Civil Code section 47, Patel must allege malice in order for them to serve as the basis for liability. (See Civ. Code, § 2924, subd. (d) [the mailing, publication, and delivery of notices as required by this section "shall constitute privileged communications pursuant to [s]ection 47"]; Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 343.) Other than a conclusory allegation that Defendants "acted with malice and a reckless disregard for the truth" in recording these documents, Patel does not allege any facts that would support a finding of malice. (See Kachlon v. Markowitz, supra, 168 Cal.App.4th at p. 344.) Accordingly, his slander of title claim fails. E. Fourth Cause of Action —Unfair Competition
Patel argues on appeal that Defendants' recording of a "false" assignment of the DOT, notice of default, and substitution of trustee, and the Defendants' alleged robo-signing of these documents were "unfair" under the UCL.
The UCL prohibits any "unlawful, unfair or fraudulent business act or practice." (Bus. and Prof. Code, § 17200.) "Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent." (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647.) An unfair business practice is one that " 'offends an established public policy or . . . is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.' " (Ibid.)
Patel argues that the trial court erred in dismissing his UCL claim because Defendants knowingly recorded "false" documents, claimed a right to foreclose that they did not possess, and used "robo-signers" to execute the documents, in violation of the UCL's "unfair" prong. As discussed above, we do not agree that there was anything false about the three recorded documents at issue, or that Patel has demonstrated that the Defendants did not have the right to foreclose on the property. Patel has not alleged any factual support for his "robo-signing" allegation, other than his conclusory assertion that the signatories to the documents were "purporting to be officers of the trustee, but who were actually employees of BNYM." (See Cerecedes v. U.S. Bankcorp (C.D. Cal. Jul. 11, 2011 No. CV 11-219 CAS) 2011 WL 2711071, *5 [conclusory allegations of robo-signing not sufficient to state a claim under the UCL]; Sohal v. Federal Home Loan Mortg. Corp. (N.D. Cal. Aug. 30, 2011 No. C 11-01941 JSW) 2011 WL 3842195, *5-*10 [rejecting conclusory robo-signing allegations]; see also Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 820.) Accordingly, the trial court did err in sustaining Defendants' demurrer to the Fourth Cause of Action. F. Fifth Cause of Action-RICO
The elements of a RICO claim are " '(1) conduct, (2) of an enterprise, (3) through a pattern (4) of racketeering activity.' " (See People ex rel. Sepulveda v. Highland Fed. Savings & Loan (1993) 14 Cal.App.4th 1692, 1713.) Patel alleges that Defendants committed predicate acts of mail and wire fraud by "conceal[ing] the facts that the loans were securitized" and drafting fraudulent affadavits and documents connected with the foreclosure.
Patel's RICO claim fails. Non-disclosures can form the basis of a fraud claim for RICO purposes only where the defendant owes an independent duty of disclosure. (See United States v. Benny (9th Cir. 1986) 786 F.2d 1410, 1418.) Patel has not alleged any such duty to disclose the securitization of Patel's loan, and in fact, as discussed above, the DOT expressly provides that "[t]he Note can be sold one or more times without prior notice to Borrower." With respect to the recorded documents concerning the foreclosure, Patel has not alleged that the documents themselves contain any misrepresentations, only that they are "fraudulent" in the sense that they were executed by parties without the power to do so. However, as discussed above, Patel has failed to fully allege and explain how this is so, given that the MERS executed the assignment and was expressly authorized by the DOT to do so, and given that BNYM was acting as trustee for the same trust to which Patel alleges the loan was sold in 2007.
Nor do Patel's "robo-signing" allegations suffice to state a claim for mail or wire fraud. Patel simply alleges that the documents at issue "were signed by robo-signers, purporting to be employees and officers of the trustee, but who were actually employees of BNYM." Patel does not identify any of these robo-signers by name, or allege any facts in support of his allegations regarding their employers. This fails to meet the requirement that fraud be pled with specificity. (See Heritage Pac. Fin., LLC v. Monroy (2013) 215 Cal.App.4th 972, 989 ["In California, fraud must be pled specifically; general and conclusory allegations do not suffice"]; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793 ["The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made"].)
In addition, Patel has failed to allege the element of reliance. Patel alleges that he would have been "alerted to issues of concern," "would have known that the actions of Defendants would have an adverse effect on the value of Plaintiff's home," and that Defendants' non-disclosure "induced Plaintiffs [sic] to enter into the loans [sic]." Patel does not explain how the non-disclosure of a securitization that took place in May of 2007 could have "induced" him to enter into his loan in January of 2007. In addition, as discussed above, the DOT expressly warned Patel that his note "can be sold one or more times without prior notice to Borrower." Under these circumstances, Patel has failed to plead the reliance necessary to establish fraud, and the trial court did not err in sustaining Defendants' demurer to his RICO claim. G. Leave to Amend
Patel does not provide any argument why the trial court erred in denying leave to amend, other than to assert that "any perceived defects in the First Amended Complaint can be cured by amendment." In addition, Yvanova does nothing to suggest that Patel could amend his complaint to bring a wrongful foreclosure claim given that no foreclosure sale has taken place. (See Yvanova, supra, 62 Cal.4th at p. 934.) Patel has not met his burden to demonstrate that amendment can cure the deficiencies discussed herein, and accordingly we will affirm the trial court's decision to deny leave to amend. (See Buller v. Sutter Health, supra, 160 Cal.App.4th at p. 992 ["To show abuse of discretion, plaintiff must show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action"].)
The parties have called our attention to several post-Yvanova authorities concerning wrongful foreclosure claims. (See Yhudai v. IMPAC Funding Corp. (2016) 1 Cal.App.5th 1252; Sciarratta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552; Mendoza v. JPMorgan Chase Bank, N.A., supra, 6 Cal.App.5th 802.) However, each of these cases involved post-sale claims for wrongful foreclosure. (See Sciarratta v. U.S. Bank National Assn., supra, 247 Cal.App.4th at p. 558; Yhudai v. IMPAC Funding Corp., supra, 1 Cal.App.5th at p. 1255; Mendoza v. JPMorgan Chase Bank, N.A., supra, 6 Cal.App.5th at p. 806.) In addition, these cases suggest that the type of post-closing date transfer that Patel alleges here is merely voidable and not void under New York law, meaning Patel would lack standing to challenge it. (See Mendoza v. JPMorgan Chase Bank, N.A., supra, 6 Cal.App.5th at pp. 811-817; Yhudai v. IMPAC Funding Corp., supra, 1 Cal.App.5th at pp. 1256-1260.)
III. DISPOSITION
The judgment is affirmed.
/s/_________
REARDON, J. We concur: /s/_________
RUVOLO, P. J. /s/_________
STREETER, J.