SMITH, J.
The National Credit Union Administration (NCUA) is a federal agency with authority to take over, operate, and liquidate insolvent credit unions. As liquidating agent of Telesis Community Credit Union, NCUA brought a judicial foreclosure action against Michael Douglas and related parties (defendants) over their alleged failure to make payments on a loan secured by a commercial property in Madera. Defendants filed a cross-complaint against NCUA and also against the loan servicer, C.U. Business Partners, LLC (CU), and the receiver, E.I.M. Group, Inc. (EIM). NCUA, CU and EIM (cross-defendants) filed a series of demurrers, leading to a series of orders sustaining the demurrers and granting leave to amend, until finally their demurrers to the third amended cross-complaint were sustained without leave to amend. All causes of action in the third amended cross-complaint were dismissed as to all cross-defendants. Defendants appeal. We affirm.
NCUA filed its complaint on October 3, 2012. The complaint alleged that in 2008, Michael and Lisa Douglas, as trustees of the Douglas Family Trust, borrowed $1,810,000 from Telesis Community Credit Union. The loan was secured by real property at 450 East Almond Avenue in the city of Madera. The loan agreement included an assignment of rents to the lender. The complaint alleged that Douglas breached the loan agreement by making no monthly payments from September 1, 2011, onward, by failing to turn over the assigned rents, and by transferring interests in the property to third parties.
According to the complaint, Telesis Community Credit Union was placed into involuntary liquidation by the California Department of Financial Institutions on May 31, 2012. NCUA became the liquidating agent under the Federal Credit Union Act. (12 U.S.C. § 1751 et seq.) As liquidating agent, NCUA succeeded to all of the credit union's rights and interests.
As defendants, the complaint named Michael Douglas and Lisa Douglas as individuals and as trustees of the Douglas Family Trust. It also named as defendants three individuals (and their numerous fictitious business names) to whom Douglas allegedly transferred interests in the property: Daryl Lynch, Andrew Juarez, and Elenilson Martinez.
The complaint alleged seven causes of action: (1) judicial foreclosure, based on the default on the loan agreement; (2) appointment of a receiver and specific performance of the loan agreement; (3) foreclosure on fixtures and personal property that had been pledged as additional security for the loan; (4) breach of personal guaranties given by Michael and Lisa Douglas for the loan; (5) accounting; (6) fraud, based on an alleged scheme by which Michael and Lisa Douglas arranged to convey interests in the real property to Lynch, Juarez, and Martinez, and then have Lynch, Juarez, and Martinez declare bankruptcy one after another for the purpose of imposing a series of stays on non-judicial foreclosure proceedings that had been instituted by Telesis Community Credit Union and continued by NCUA; and (7) civil conspiracy, based on the fraudulent scheme alleged in the sixth cause of action.
The complaint prayed for an award of the outstanding loan principal of $1,728,787.05 plus interest. It also prayed that a foreclosure sale be ordered, that a receiver be appointed, that general damages for the fraud and conspiracy be awarded, and for other relief.
On March 5, 2013, before defendants answered the complaint or filed a cross-complaint, the parties agreed to, and the court issued, a stipulated order for judicial foreclosure and sale of the Almond Avenue property. The parties agreed to the issuance of a decree for a judicial foreclosure sale, which was issued the same day. Under the stipulation, NCUA could elect either to conduct a judicial foreclosure sale pursuant to the decree or proceed under a notice of non-judicial foreclosure it had issued earlier.
The stipulation explained that, in effect, it "bifurcates the judicial foreclosure phase of the First Cause of Action of the Complaint from the remaining causes of action of the Complaint and from the deficiency balance claim of said First Cause of Action." The stipulation further stated:
Michael and Lisa Douglas answered the complaint and filed their original cross-complaint on March 21, 2013. In addition to NCUA, the cross-complaint named as cross-defendants CU (erroneously referred to as Business Partners, LLC) and EIM. Cross-defendants filed a demurrer to the cross-complaint and the Douglases filed a first amended cross-complaint before the demurrer was heard. Cross-defendants successfully demurred to the first amended cross-complaint and the second amended cross-complaint, with leave to amend granted each time.
The Douglases filed their third amended cross-complaint, the operative complaint now, on May 7, 2014. It alleged three causes of action: trespass, promissory estoppel, and quiet title.
In the trespass cause of action, the third amended cross-complaint alleged that on June 22, 2012, and again on August 28, 2012, NCUA, CU, and EIM each "forcibly entered and took possession of" the Almond Avenue property, which was being used as a mini-storage business. CU and EIM were alleged to have done this both as agents of NCUA and on their "own behalf and acting directly." Defendants allegedly suffered damages during a time when they were deprived of access to the property.
In the cause of action for promissory estoppel, the third amended complaint alleged that in August 2011, Barak Bolner and Mike Burns told defendants they were "working on solving problems with a loan including reducing the interest rate and any other modification(s) for the loan on the property" on Almond Avenue. Bolner and Burns were alleged to be representatives of CU, through whom CU was acting on its own behalf, as well as on behalf of NCUA. "In order to accomplish" these loan modifications, Bolner and Burns "demanded" payment of $62,860.72 on two unrelated loans as well as payment of $30,000 on the loan on the Almond Avenue property. NCUA "promised that if such payment was made, a loan modification of a reduced interest on the subject property . . . would be made." Defendants allegedly made the payments, raising the money by borrowing against other properties at a high interest rate. CU and NCUA then allegedly failed to make any modifications to the loan agreement.
The cause of action for quiet title alleged that defendants were entitled to a judgment quieting title in their favor with respect to the Almond Avenue property. The reasons why they would be entitled to quiet title when they did not claim they had paid off the loan are not made clear, but this portion of the third amended cross-complaint mentions the alleged broken promise in the second cause of action and asserts that amount NCUA claims is due is "in dispute."
There is a heading for a fourth cause of action, but this is actually only a prayer for declaratory relief based on the other causes of action. The third amended cross-complaint also prays for damages.
NCUA, CU, and EIM each filed demurrers to the third amended cross-complaint. (EIM did not file its own points and authorities in support of its demurrer, instead joining in CU's brief.) Each demurrer brief argued that defendants failed to plead sufficient facts to make out any of the three causes of action. The briefs also argued that the cause of action for quiet title was inconsistent with the stipulation for a foreclosure sale and should therefore be barred by the doctrine of judicial estoppel.
The largest portion of each demurrer brief, however, was devoted to a discussion of claim procedure requirements in the Federal Credit Union Act for persons who wish to make claims against NCUA when it is acting as the liquidating agent for a defunct credit union. These requirements are found in United States Code title 12, section 1787(b). Cross-defendants argued the third amended cross-complaint failed adequately to allege compliance with or excuse from these requirements.
When acting as a liquidating agent, NCUA has authority to determine claims against a closed credit union. (12 U.S.C. § 1787(b)(3)(A).) NCUA is required to "publish a notice to the credit union's creditors to present their claims . . . by a date specified in the notice," the date to be not less than 90 days after publication. The notice must be republished one month and two months after the first publication. (12 U.S.C. § 1787(b)(3)(B).) At the same time, NCUA must mail notice to "any creditor shown on the credit union's books." (12 U.S.C. § 1787(b)(3)(C).)
If a claimant fails to file a claim within the period specified in the published notice, then the claim "shall be disallowed and such disallowance shall be final." (12 U.S.C. § 1787(b)(5)(C)(i).) The requirement of disallowance for late filing does not apply, however, if "the claimant did not receive notice of the appointment of the liquidating agent in time to file" the claim before the end of the period specified in the notice, and the "claim is filed in time to permit payment" of it. (12 U.S.C. § 1787(b)(5)(C)(ii).)
In the third amended cross-complaint, defendants included allegations related to the statutory claim procedures. The third amended cross-complaint alleged that on August 14, 2013, NCUA sent a letter to defendants' counsel stating that notice to creditors had been published in the Los Angeles Times, and inviting defendants "to submit a claim for consideration on whether to extend the Claims Waiver Date." The third amended cross-complaint asserted that "publication in the Los Angeles Times is not adequate notice to a resident in San Mateo County." (It does not, however, allege that any defendant resides in San Mateo County or in any other particular place.) It also alleged that on January 29, 2014, defendants submitted a claim to NCUA in response to the letter. The third amended cross-complaint asserted generally, on information and belief, that NCUA "did not follow the guidelines for providing Notice to creditors and any such attempted notice by them, if any, was not adequate."
In its written order sustaining the demurrers to the third amended cross-complaint without leave to amend, the trial court placed emphasis on the claim statute. The court stated that defendants were required to plead facts that would show their compliance with the statute. The third amended cross-complaint failed to do this because it did not state that defendants submitted a claim within 90 days after notification. In describing this failure, the trial court did not focus on any date specified in a published notice. Instead, it indicated that defendants received actual notice that NCUA had become liquidating agent for Telesis Community Credit Union when NCUA filed the original complaint on October 22, 2012, and defendants received actual notice that they should submit a claim from NCUA's letter of August 14, 2013. Yet, according to the third amended cross-complaint, defendants did not submit their claim until January 29, 2014, more than 90 days later than either of those notice dates.
The court also ruled that defendants failed to allege they had complied with administrative remedies as required by 12 United States Code section 1787(b). The court was not more specific, but this ruling appears to refer to 12 United States Code section 1787(b)(6). There, the statute provides that a claimant may request administrative review or file suit in a federal district court within 60 days of the end of the notice period stated in a published notice to creditors or within 60 days of a notice of disallowance of a claim, whichever comes first. (12 U.S.C. § 1787(b)(6)(A).) If the claimant fails to do one of these things within that time limit, "the claim shall be deemed to be disallowed (other than any portion of such claim which was allowed by the liquidating agent) as of the end of such period, such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim." (12 U.S.C. § 1787(b)(6)(B).)
The court further stated that because of defendants' failures described above, the court lacked jurisdiction over the third amended cross-complaint. It cited 12 United States Code section 1787(b)(13)(D). That provision states that, except as provided in 12 United States Code section 1787(b), no court has jurisdiction over claims against a closed credit union or against NCUA acting as a closed credit union's liquidating agent.
The court ruled that defendants failed in their effort to plead causes of action against CU and EIM that would be independent of the case against NCUA and therefore not subject to the requirements of the claim statute. The allegations in the third amended cross-complaint that CU and EIM acted on their own behalf were "mere legal conclusions" insufficient to allege liability of CU and EIM independent of their status as agents of NCUA.
Defendants' failure to allege compliance with the claims statute barred their entire action, but the court set forth additional reasons why defendants had failed adequately to allege causes of action for promissory estoppel and quiet title. The allegations intended to support the promissory estoppel claim actually would tend to establish an oral contract if true, not a promissory estoppel claim. But a contract between a claimant and the NCUA would be statutorily required to be in writing, the court ruled. (12 U.S.C. § 1787(p)(2).) Further, the "details of any promise are missing," so the cause of action is "uncertain and ambiguous."
The court stated that the quiet title cause of action was barred by the parties' stipulation, filed as a court order on March 5, 2013, in which defendants agreed not to challenge NCUA's right to foreclose. The court also found the quiet title cause of action inadequate because there was no allegation that defendants' loan obligation had been brought current.
Cross-defendants argue that the order sustaining the demurrers and dismissing the third amended cross-complaint is not appealable because NCUA's complaint remains to be litigated. Ordinarily, as we will explain, this would be correct with respect to NCUA, but for CU and EIM, which are not parties to the litigation on the complaint, the dismissal of the third amended cross-complaint resolves all issues and thus is appealable. Because the issues for NCUA and the other cross-defendants are analytically identical, however, there would be no point and some waste of judicial resources in deferring our ruling on the appeal as to NCUA alone until the judgment on the original complaint might be appealed from. Therefore, we will entertain the merits of the appeal as to all parties.
"If the dismissal or striking out of a pleading has the effect of finally determining the issues relating to the pleader's rights or liabilities, the order is a final judgment as to him or her" and therefore is appealable. (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 113, p. 176.) An appeal will be dismissed as premature, however, if it is from an order dismissing a cross-complaint while the original complaint between the same parties remains pending. (Sjoberg v. Hastorf (1948) 33 Cal.2d 116, 118.)
So what if the complaint and cross-complaint are not between the same parties? Specifically, what if, as here, the dismissal of a cross-complaint leaves the issues in the original complaint still to be resolved between the plaintiff and defendant, but resolves all the issues between the cross-complainant and cross-defendants who were not parties to the original complaint?
In this situation, we apply the principle that a court can enter a judgment that a party is not liable, and this judgment is final as to that party, while the action continues between other parties. The judgment as to that party is then appealable by an opposing party. (Rocca v. Steinmetz (1922) 189 Cal. 426, 428-429 [dismissal of complaint against one tort defendant was appealable final judgment while case proceeded against codefendant].)
The result is that the dismissal of the third amended cross-complaint is a final judgment in favor of CU and EIM, which did not join NCUA in suing defendants and as to which nothing remains to be litigated in this case. Defendants' appeal can proceed as to them. As between NCUA and defendants, however, NCUA's complaint is still to be litigated, so normally we would hold there is no final judgment and the appeal as to the remaining party should be dismissed.
It has been held, however, that even if the litigation is ongoing as to a party, a judgment is appealable as to that party if the issues affecting that party are inextricably intertwined with those affecting another party as to whom a dismissal resolves all issues. (Miller v. Silver (1986) 181 Cal.App.3d 652, 658 [judgment against two cross-defendants appealable by both even though litigation on original complaint still pending against one].) This case fits into that category. Except for the effect of agency principles on defendants' obligation to comply with the claim statute with respect to CU and EIM (discussed below), the issues in this appeal are the same for all the cross-defendants. It would be wasteful and serve no purpose to refuse to rule on the appeal as to NCUA when we will already be deciding the same issues as to CU and EIM.
The standard of review is well-established:
Defendants argue that their pleading was adequate on the issue of their compliance with the claims statute because they alleged that NCUA did not provide adequate published notice. From this, they say, it would follow that the filing deadline did not apply, the claim could not be deemed disallowed for lateness, and the requirement to pursue administrative remedies was not triggered.
Cross-defendants argue the court was correct to rely on the actual notice defendants admit they received via NCUA's letter of August 14, 2013, and on defendants' failure to file a claim within 90 days of receiving the letter. Cross-defendants also say the third amended cross-complaint effectively conceded that published notice had taken place in the Los Angeles Times more than 90 days before defendants submitted their claim on January 29, 2014.
In our view, defendants' concession that they submitted a claim more than 90 days after receiving actual notice does not amount to a concession that they failed to comply with the claim statute. The claim statute does not establish a deadline with reference to actual notice, or even necessarily with reference to a period of 90 days. Instead, it states that NCUA must publish a notice to claimants, the notice must include a deadline for filing claims, and the deadline must be at least 90 days from the date of publication. The third amended cross-complaint reveals that cross-defendants claimed they published notice in the Los Angeles Times, but it does not indicate when this notice was published or what date it stated for the claims cutoff. It may be unlikely that if notice was published sometime prior to August 2013, the deadline would still have been in the future in January 2014, when defendants say they filed their claim, but we cannot say defendants' pleadings admit this.
Nevertheless, we agree with the trial court that defendants were obliged to include allegations which, if true, would show defendants complied with or were excused from complying with the claims statute. Further, we agree with the trial court's ultimate conclusion that defendants failed to make the necessary allegations.
It was not enough to allege the legal conclusion that any notice published by defendants was inadequate. To plead either compliance with or excuse from the claims statute, defendants would at least have had to allege that if a notice was published with a claim-filing deadline and they missed that deadline, then they did not become aware of the notice until it was too late to file timely. Absent a factual allegation that an adequate notice was never published (for instance, an allegation that defendants read the notice and it contained no deadline, or they read the Los Angeles Times for the date on which the notice was claimed to be published and it was not there), this is the only way the claim could be shown not to be subject to mandatory final disallowance for late filing under the statute. Not receiving notice in time to file before the published deadline is the key to avoiding the consequences spelled out in the claims statute. The pertinent provision reads:
Yet non-receipt of notice is precisely what defendants did not plead.
When defendants were granted leave to amend after the demurrers to the second amended cross-complaint were sustained, defendants had their fourth opportunity to produce sufficient pleadings. The second amended cross-complaint alleged that any notice NCUA might have provided was inadequate and did not comply with the law. It also said defendants submitted a claim on January 29, 2014. The third amended cross-complaint added the account of the letter from NCUA mentioning the notice in the Los Angeles Times, and averred that a notice in that newspaper would be inadequate for a resident of San Mateo County. But it did not add that if there was published notice, defendants did not receive it in time to file a timely claim. NCUA's briefing on the demurrer to the second amended cross-complaint discussed the statute and asserted that NCUA published notice on May 31, 2012, with a claim filing deadline of September 10, 2012. In light of that discussion, we can see no reason for the omission from the third amended cross-complaint of an allegation that defendants did not receive notice in time to file, unless the allegation could not truthfully be made.
In their opening brief on appeal, defendants appear to argue that they were not required to file a claim because notice of the need to file a claim was not served on them. The statute does not refer to service of notice, however, and only requires notice by mail to creditors on the credit union's books. Defendants never alleged they were creditors on the credit union's books and presumably could not do so because they were the credit union's debtors, not its creditors. The only notice the statute requires for other claimants is published notice.
Defendants also argue that even if they failed to submit adequate pleadings regarding the claims statute to support their causes of action against NCUA, there is no bar to the same causes of action against CU and EIM, because the third amended cross-complaint avers that those entities engaged in actionable conduct not only as agents of NCUA but also independently and on their own behalf. We agree with the trial court's view that this was a mere legal conclusion, the allegation of which need not be taken as true for demurrer purposes. The third amended cross-complaint contains no factual allegations supporting the notion that CU and EIM took any actions but those that were pursuant to their roles as a loan servicer and a receiver for Telesis Community Credit Union and NCUA. Defendants could not amend their cross-complaint to cure this problem, for the necessary allegations are barely conceivable. The causes of action alleged are trespass, promissory estoppel, and quiet title. How could a loan servicer and a receiver invade the property in an attempted non-judicial foreclosure, break a promise to reduce the interest rate, and place a cloud on the title, all on their own behalf rather than on that of the lender?
The above discussion would suffice to affirm the dismissal of the third amended cross-complaint in its entirety, but, like the trial court, we find independent reasons for sustaining the demurrers to the causes of action for promissory estoppel and quiet title We turn to these next.
We agree with the trial court's conclusion that defendants failed adequately to allege a promissory estoppel cause of action because the facts recited in the third amended cross-complaint would, if true, establish a breach of an oral contract. Defendants have not sought leave to amend to allege breach of contract (presumably because of the obvious untenability of a claim that a mortgage loan has been modified orally), so the claim was properly dismissed without leave to amend.
In Fontenot v. Wells Fargo Bank (2011) 198 Cal.App.4th 256 (Fontenot), overruled on other grounds by Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 939, fn. 13, the plaintiff borrower attempted to plead promissory estoppel by alleging in her complaint that the bank promised not to foreclose and she in return promised to resume making payments. (Fontenot, supra, at p. 275.) The Court of Appeal held that this claim was subject to demurrer because a promissory estoppel cause of action lies only when a party has reasonably and detrimentally relied on a counterparty's promise even though the party provided no consideration in return for the promise. The doctrine of promissory estoppel fills an equitable gap that exists when there is no contract but the promisee reasonably relied on the promise and was injured. But if there was a bargained exchange, then the elements of a contract are present and the doctrine of promissory estoppel does not apply. "Accordingly, a plaintiff cannot state a claim for promissory estoppel when the promise was given in return for proper consideration. The claim instead must be pleaded as one for breach of the bargained-for contract." (Ibid.)
In this case, the third amended cross-complaint alleged a bargained exchange: reduced interest for payments. The situation is on all fours with Fontenot and the promissory estoppel cause of action was subject to demurrer.
In other circumstances it would be appropriate to grant leave to amend to recast the cause of action as a breach of an oral contract. Defendants have not requested leave to do this, however, and it is not difficult to guess the reason. Mortgage loan agreements ordinarily cannot be modified orally.
Defendants attempt to distinguish Fontenot by pointing out that in that case, the agreement between the borrower and lender not to foreclose in return for resumption of payments was in writing, while in this case there was no written agreement to reduce the interest rate in return for payments. This distinction is irrelevant to the point at issue. Allegations including the elements of a contract, oral or written, are incompatible with a claim for promissory estoppel.
We agree with the trial court's holding that defendants' quiet title claim is barred by the stipulation they entered into on March 5, 2013. The stipulation is a judicial admission that defendants have no right to hold title to the property free from NCUA's claim upon it.
The following discussion of judicial admissions is apt:
The parties' stipulation here is not framed in terms of factual allegations, but certain facts are necessarily implied by it. In stipulating to the judicial foreclosure sale of the property, agreeing to remove the judicial foreclosure issue from the complaint, and conceding they could not contest the foreclosure, defendants acknowledged that they did not hold title to the property free of NCUA's claim. It follows that defendants no longer had any power to contradict this admission by suing cross-defendants for quiet title.
We also agree with the trial court's view that the quiet title cause of action is inadequately pleaded because it does not allege that defendants discharged the loan or tendered payment to discharge it. It has long been held that a mortgagor cannot obtain an order of quiet title without paying or tendering payment of the debt. (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526; Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477-478.) There are exceptions to this rule (see, e.g., Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1100-1101), but defendants do not rely on any of these exceptions. They merely contend that the amount of the outstanding debt is in dispute. They cite no authority for the notion that they are excused from tendering any amount if they acknowledge there is an outstanding debt but dispute the amount.
As we have mentioned, the third amended cross-complaint contains what it describes as a fourth cause of action for declaratory relief. As the declaratory relief requested pertains only to the other three causes of action, however, and all these were correctly dismissed, we need not add any further discussion of declaratory relief.
The judgment is affirmed. All respondents are awarded costs on appeal.
FRANSON, Acting P.J. and PEÑA, J., concurs.
