Evans v. Onewest Bank N.A.

GILDA EVANS, Plaintiff and Appellant, v. ONEWEST BANK N.A., et al., Defendants and Respondents.

B250847

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

January 21, 2015

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. LC098810)

APPEAL from a judgment of the Superior Court of Los Angeles County, Russell Steven Kussman, Judge. Affirmed.

Gilda Evans, in pro. per., for Plaintiff and Appellant.

Dykema Gossett, J. Kevin Snyder and James M. Golden for Defendant and Respondent, OneWest Bank, N.A.

Severson & Werson, Jan T. Chilton and Michael G. Cross for Defendant and Respondent, PHH Home Loans, LLC.

____________________ After Gilda Evans defaulted on a home loan secured by a deed of trust on her property and following a notice of foreclosure, her house was sold in a trustee's sale. Representing herself, Evans sued her lender and loan service provider for constructive fraud, claiming they failed to disclose at the inception of the loan agreement their intent to securitize and sell her loan. She also alleged the loan agreement, on which she had made payments for several years before defaulting, should be rescinded or declared void because the promissory note was not signed by the lender and was not supported by any tangible consideration. After taking judicial notice of the loan agreement and deed of trust, the trial court sustained without leave to amend the demurrer by the lender and loan service provider to the first amended complaint, finding the pleading failed to state, and could not be amended to state, a legally cognizable claim. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Loans, Evans's Default and the Trustee's Sale

On March 8, 2007 Evans obtained a home loan in the principal amount of $843,000 from PHH Home Loans, LLC, doing business as First Capital Mortgage. The loan was secured by Evan's home, real property located at 4801 Corbin Avenue in Tarzana. To effect the loan agreement, Evans signed a promissory note and a deed of trust (the first deed of trust), both of which were promptly recorded with the Los Angeles County Recorder's Office.¹ Neither the promissory note nor the deed of trust was signed by First Capital.

On March 14, 2007 First Capital assigned "all beneficial interest" in the first deed of trust to Mortgage Electronic Registration Systems, Inc. (MERS); the assignment was recorded with the County Recorder on April 9, 2007. First Capital transferred to Indymac Bank, FSB the right to service the loan beginning May 1, 2007 and notified Evans of the assignment. Thereafter, Evans began making payments on her loan toIndymac. In May 2007 Evans also obtained from Indymac a home equity line of credit in the amount of $150,000, secured by a second deed of trust on the property.

According to Evans, for more than four years she made monthly payments on both loans to Indymac. Sometime in the middle of 2011 Evans defaulted on both loans. On April 16, 2012 MERS transferred its interest in its first deed of trust to U.S. Bank National Association (U.S. Bank), as trustee for the LXS2007-12N Trust. In May 2012 U.S. Bank initiated nonjudicial foreclosure proceedings pursuant to Civil Code section 2924 et seq. Notices of default and election to sell were issued and recorded, followed by a notice of trustee's sale. The property was sold on August 24, 2012 for $845,300 to Martingale Investments, LLC, the successful bidder at the trustee's sale.

2. Evans's Superior Court Complaint

On October 31, 2012 Evans, representing herself, sued First Capital and OneWest Bank, Indymac's successor in interest² (collectively, the Bank defendants), in Los Angeles Superior Court.³ In her operative first amended complaint Evans asserted causes of action for constructive fraud and "fraud on fraud" and sought rescission of the loan and security agreements, an order declaring her loan and security agreements void at their inception for failure of consideration and lack of mutual assent and an order quieting title to the real property in her name.⁴ In support of her claims Evans alleged the Bankdefendants had failed to disclose their intent to securitize her loan and then sell the mortgage-backed securities to third party investors.⁵ In addition, she alleged the loan agreements failed for lack of consideration because the Bank defendants "d[id] not lend their actual assets" to her. Rather, she alleged, using tricks of accounting, First Capital deposited Evans's note, which "act[ed] like money" on the bank's financial statements and which was used "by the bank as an asset from which to issue a check," but, "in actuality, the check did not represent any actual transfer of Federal Reserve Bank Notes" to her. Moreover, according to her complaint, because the Bank defendants had failed to sign the note, there was no "meeting of the minds" between her and either of the Bank defendants. After discovering the Bank defendants' purportedly fraudulent business practices, on September 23, 2011, long after her default, Evans sent a notice of rescission cancelling the notes and security agreements and demanding restitution for all past payments she had made. Her demand for rescission and restitution was rejected. In addition to an order of rescission, restitution and quieting title to the property in her name, Evans's first amended complaint also sought, in the alternative, compensatory and punitive damages.

2. The Bank Defendants' Demurrer to the First Amended Complaint

On December 21, 2012 First Capital demurred to the first amended complaint, asserting Evans failed to allege facts sufficient to state a cause of action. On February 5, 2013 OneWest filed a joinder to First Capital's demurrer.⁶ Both First Capital and OneWest requested judicial notice of several documents evidencing the March 8, 2007 secured loan.⁷ Following a hearing, the trial court sustained the Bank defendants' demurrer without leave to amend "[f]or the reasons stated in the moving papers . . . ."

DISCUSSION

1. Standard of Review

A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the superior court's ruling on a demurrer and determine de novo whether the pleading alleges facts sufficient to state a cause of action or discloses a complete defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20; Schifando v. City of Los Angeles (2003) 31 Cal.4th1074, 1081.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Schifando, at p. 1081.)

2. The Trial Court Did Not Err in Sustaining the Bank Defendants' Demurrer

On appeal Evans has abandoned her damage claims and focuses exclusively on her claims for rescission of the loan and security agreements that gave First Capital and its assignees the power to sell her house in the event of default. At the threshold, the first amended complaint, together with the recorded documents subject to judicial notice, establish the real property was sold at a trustee's sale, thereby extinguishing the liens created by the first and second deeds of trust. (See Civ. Code, § 2910 ["sale of any property on which there is a lien, in satisfaction of the claim secured thereby . . . extinguishes the lien thereon"]; Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 606 [deed of trust extinguished after foreclosure sale]; Streiff v. Darlington (1937) 9 Cal.2d 42, 45 [same].) Thus, although Evans insists she seeks rescission and need not allege a wrongful foreclosure claim, the only way she can obtain the relief she requests—to unwind the sale—is to set aside the sale of her property. To this end, Evans's complaint must plead facts sufficient to allege the trustee under a deed of trust with a power of sale caused an illegal, fraudulent or willfully oppressive sale of real property resulting in a wrongful foreclosure. (Multani v. Witkin & Neal (2013) 215 Cal.App.4th 1428, 1449; Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1063.)⁸

a. Evans failed to allege facts showing the loan agreement was obtained through constructive fraud

Evans attempts to plead a wrongful foreclosure and illegal sale in part by alleging First Capital obtained the first deed of trust through constructive fraud. "'"Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship." [Citation.] [¶] "[A]s a general principle constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary's motives or the principal's decision, which is known (or should be known) to the fiduciary, may constitute constructive fraud . . . ."'" (Mark Tanner Construction, Inc. v. HUB Internat. Ins. Services, Inc. (2014) 224 Cal.App.4th 574, 588; accord, Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 562.)

Evans alleges First Capital failed to disclose to her its intent to securitize her loan; had it done so, she insists, she would not have entered into the loan agreement. Even assuming Evans, who was arguably not aggrieved...