Sean Park v. Wells Fargo Bank, N.A.

SEAN PARK et al., Plaintiffs and Appellants, v. WELLS FARGO BANK, N.A. et al., Defendants and Respondents.

B264026

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

September 13, 2017

ORDER MODIFYING OPINION; PETITION FOR REHEARING DENIED; NO CHANGE IN JUDGMENT

The opinion filed September 13, 2017, and not certified for publication, is modified as follows:

1. On page 2, second full paragraph, line 2 of the first sentence, the word "probability" is changed to "possibility." As modified, the sentence reads:

We conclude the Parks have shown there is a reasonable possibility they can amend their complaint to cure the defects in the first amended complaint and to state causes of action for wrongful foreclosure, cancellation of instruments, and quiet title against Wells Fargo, and we direct the trial court to allow the Parks to file a motion for leave to amend to allege these causes of action.

2. On page 6, footnote 3, line 4, the name "Michael Park" should read: "Sean Michael Park."

3. On pages 30-31, the second sentence of the Disposition reads as follows:

The matter is remanded to the trial court with directions to vacate the order sustaining Wells Fargo's demurrer to the first amended complaint without leave to amend, and to enter a new order (1) allowing the Parks to file a motion for leave to amend their complaint pursuant to California Rules of Court, rule 3.1324, to add causes of action against Wells Fargo for wrongful foreclosure, cancellation, and quiet title based on the proposed allegations described in the Parks' reply brief, and (2) sustaining the demurrer by BNYM and Golden West without leave to amend.

The words "allowing the Parks" are changed to "sustaining the demurrer by Wells Fargo with leave for the Parks." As modified, the sentence reads:

The matter is remanded to the trial court with directions to vacate the order sustaining Wells Fargo's demurrer to the first amended complaint without leave to amend, and to enter a new order (1) sustaining the demurrer by Wells Fargo with leave for the Parks to file a motion for leave to amend their complaint pursuant to California Rules of Court, rule 3.1324, to add causes of action against Wells Fargo for wrongful foreclosure, cancellation, and quiet title based on the proposed allegationsdescribed in the Parks' reply brief, and (2) sustaining the demurrer by BNYM and Golden West without leave to amend.

This order does not change the judgment. Respondents' petition for rehearing is denied.

/s/_________

ZELON, Acting P. J.

/s/_________

SEGAL, J.

/s/_________

MENETREZ, J. *(Assigned)

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. SC121710)

APPEAL from a judgment of the Superior Court of Los Angeles County, Lawrence H. Cho, Judge. Reversed and remanded with directions.

George H. Bye; and Stephen F. Lopez for Plaintiffs and Appellants.

Sheppard, Mullin, Richter & Hampton, Edward D. Vogel and Karin Dougan Vogel for Defendants and Respondents.

____________________

INTRODUCTION

Sean and Michelle Park filed this action for wrongful initiation of foreclosure, fraud, negligence, unfair competition, and other causes of action against Wells Fargo Bank, N.A. also known as Wachovia Mortgage, FSB, formerly known as World Savings Bank FSB (Wells Fargo), Wells Fargo Bank Home Mortgage, Golden West Savings Association Service, Co. (Golden West), Bank of New York Mellon (BNYM) as trustee of World Savings Mortgage Pass-Through Certificates Series 31 Trust, and Cal-Western Reconveyance Corporation (Cal-Western), for their alleged involvement in the foreclosure on the Parks' property. The Parks appeal from a judgment of dismissal following the trial court's order sustaining the demurrer of Wells Fargo, BNYM, and Golden West to the Parks' first amended complaint without leave to amend.

We conclude the Parks have shown there is a reasonable probability they can amend their complaint to cure the defects in the first amended complaint and to state causes of action for wrongful foreclosure, cancellation of instruments, and quiet title against Wells Fargo, and we direct the trial court to allow the Parks to file a motion for leave to amend to allege these causes of action. We conclude, however, the Parks have not made such a showing for their causes of action against BNYM and Golden West. Therefore, we reverse the judgment in favor of Wells Fargo and affirm the judgment in favor of BNYM and Golden West.

FACTUAL AND PROCEDURAL BACKGROUND¹

A. The Loan, Requests for Modification, and Foreclosure

In October 2007 the Parks refinanced the property at issue in this case with an $887,520 loan from World Savings Bank evidenced by a promissory note secured by a deed of trust encumbering their property. The deed of trust identified World Savings Bank, FSB, its successors and/or assignees as lender/beneficiary and Golden West as trustee. Pursuant to the deed of trust, the Parks "irrevocably grant[ed] and convey[ed] the Property to the Trustee, in trust for Lender, with a power of sale" if the Parks defaulted. The Parks also agreed the "Lender may at any time appoint a successor trustee."

The promissory note, titled "Adjustable Rate Mortgage Note," stated, "My initial monthly payment amount was selected by me from a range of initial payment amounts approved by Lender and may not be sufficient to pay the entire amount of interest accruing on the unpaid Principal balance." The note also provided, under "Deferred Interest; Additions to My Unpaid Principal," that "[f]rom time to time, my monthly payments may be insufficient to pay the total amount of monthly interest that is due. If this occurs, the amount of interest that is not paid each month, called 'Deferred Interest,' will be added to my Principal and will accrue interest at the same rate as the Principal."Notwithstanding these express disclaimers, the Parks alleged World Savings failed to disclose negative amortization would occur and misrepresented the Parks could refinance in six months without a prepayment penalty.

The Parks suffered a significant loss of income following the collapse of the real estate market. In March 2009 they approached Wachovia, World Savings Bank's successor-by-merger,² to inquire about a loan modification. Tiffany Duke, a supervisor from Wachovia's Loss Mitigation department, directed the Parks to stop making payments on their loan in order to qualify for a loan modification. Although initially hesitant to follow Duke's instructions, the Parks stopped making loan payments in approximately June 2009. On or about May 1, 2010, the bank denied the Parks a loan modification without explanation.

Wells Fargo, through its attorney-in-fact Cal-Western Reconveyance Corporation, executed a substitution of trustee with an "[e]ffective [d]ate" of July 22, 2010, which purported to substitute Cal-Western as the new trustee under the deed of trust. On July 23, 2010 Cal-Western issued a notice of default stating the Parks owed payments since July 2009 and attaching a declaration from Wells Fargo authorizing the notice of default. In October 2010 Cal-Western issued the first notice of trustee's sale, but postponed the sale shortly thereafter. In April 2012Cal-Western issued a second notice of trustee's sale, but that sale was also postponed. On November 19, 2013 Cal-Western recorded a third notice of trustee's sale. As of the filing of the first amended complaint, the loan modification process was still "continuing" while Wells Fargo simultaneously—and improperly—pursued foreclosure, a practice known as "dual-tracking."

The Parks also alleged their loan was securitized, or at least there was an attempt at securitization, prior to Wells Fargo's merger with Wachovia. As a result, according to the Parks, Wells Fargo did not have "any legal or corporate authority to collect on their loan, [or] service the loan," and similarly had no right to accept the Parks' loan payments or initiate foreclosure.

B. The Parks File This Action To Prevent Foreclosure

On November 27, 2013 the Parks filed this action. Their original complaint alleged 12 causes of action: (1) wrongful initiation of foreclosure, (2) fraud in the inducement, (3) fraud, (4) breach of the implied covenant of good faith and fair dealing, (5) negligence, (6) quasi-contract, (7) violation of California Business and Professions Code section 17200 et seq., (8) accounting, (9) breach of contract, (10) breach of the implied covenant of good faith and fair dealing, (11) negligence, and (12) intentional infliction of emotional distress. The Parks also filed an ex parte application for a temporary restraining order to stay the impending foreclosure sale. On December 11, 2013 the trial court granted the temporary restraining order and set a hearing on the Parks' application for preliminary injunction.

The defendants filed a motion to strike and demurred to all causes of action, asserting a number of arguments, including federal preemption, statute of limitations, statute of frauds, lack of duty of care, failure to allege tender, and lack of standing to challenge the alleged securitization of the loan. The defendants also opposed the Parks' request for a preliminary injunction.

On February 11, 2014 the trial court denied the request for a preliminary injunction seeking to enjoin the foreclosure sale and dissolved the temporary restraining order. The court found a money judgment would give the Parks adequate relief in the event the foreclosure was wrongful, given that "[t]he documents submitted to the Court indicate that the 4 unit rental property is an investment for the Plaintiffs." The court did not reach the issue of likelihood of success on...