PERLUSS, P. J.
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 She also alleged the loan agreement, on which she had made payments for several years before defaulting, should be rescinded or declared void because the promissory note was not signed by the lender and was not supported by any tangible consideration.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.
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.
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 to Indymac. 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.
On October 31, 2012 Evans, representing herself, sued First Capital and OneWest Bank, Indymac's successor in interest
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.
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.4th 1074, 1081.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Schifando, at p. 1081.)
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.)
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 by the securitization, has standing to pursue this claim,
Other than her legally inadequate allegations of fiduciary duty, Evans has not alleged any other basis for requiring a lender to disclose an intent to monetize a loan secured by a deed of trust. (See generally Civ. Code, § 1573 [constructive fraud occurs when law imposes duty to disclose and party with duty to disclose fails, with or without fraudulent intent, to disclose].) Although she refers generally in her appellate brief to an unspecified obligation under the California Uniform Commercial Code, Evans fails to cite any particular statutory provision in support of that contention in her appellate briefs; and the several sections she cites in her complaint do not support her position. Moreover, the deed of trust Evans signed expressly provided that First Capital could sell the note "or a partial interest in the Note (together with this Security Instrument . . . one or more times without prior notice to the Borrower." Thus, Evans was on notice that the note and deed of trust could be sold in whole or in part. She has also not alleged how the subsequent securitization and sale of the note were not covered by this notice or, even if they were not, how securitization adversely affected her in any way. The trial court did not err in concluding her complaint failed to state a claim for constructive fraud.
Evans contends the loan agreement secured by the first deed of trust was void, or at the very least voidable, due to a failure of consideration. (See Civ. Code, § 1698, subd. (b)(2)-(4) [a party to a contract may rescind and thereby extinguish the contract if there is a failure of consideration].) According to Evan's complaint, First Capital did not actually loan her any of its assets: "[T]he check that the bank issued is not money. The check merely transfers money and by transferring money the check merely [acts] like money. The money deposited in the bank[']s demand deposit account was Plaintiff's mortgage note. If the bank never fulfills the contract to loan money from its own assets, then the bank does not own the mortgage note and thus no consideration was given on the bank's behalf. The mortgage transactions that occurred were not loans of the bank's assets; they were merely an exchange of one species of currency for another. In this case, the bank sells the mortgage note for Federal Reserve Bank Notes or other assets while still owing the liability for the mortgage note sold and without the bank giving up any of its own Federal Reserve Bank Notes."
Evans's allegations reflect what has become known as the "vapor money theory," "the convoluted and nonsensical argument that a plaintiff does not owe the money advanced by the lender on [her] loan because the indebtedness was not funded by the lender with actual money" (Tonea v. Bank of America, N.A. (N.D. Ga. 2013) 6 F.Supp.3d 1331, 1344). It has been uniformly rejected in the federal and state courts. (See ibid. [citing cases]; Miner v. JPMorgan Chase Bank (N.D. Cal. 2013) 2013 U.S. Dist. LEXIS 36362, *7-*8 [the "vapor money" theory of relief has been rejected by courts nationwide as such claims have "no basis in law"].) The trial court did not err in similarly rejecting it as a basis for voiding the contract for lack of consideration.
Evans insists she is not pleading a vapor money theory. Rather, her allegation, however inartfully worded, is, by securitizing and then selling her loan, First Capital received payment from another source, transforming the nature of her debt and extinguishing her obligation to pay it. At the very least, she argues, the trial court should have overruled the demurrer and given her the opportunity to conduct discovery of the Bank defendants' financial statements to prove First Capital "twice benefitted" from her loan. Contrary to Evans's contention, the transfer of First Capital's interest in the loan did not affect, much less extinguish, Evans's own continuing obligation to perform in accordance with her agreement. (Jenkins v. JPMorgan Chase Bank, supra, 216 Cal.App.4th at p. 515 ["[a]s to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note"].) Thus, to the extent this is her intended theory of relief, this justification for her cause of action fares no better than her vapor money theory.
Similarly meritless is Evans's contention First Capital failed to sign the note and first deed of trust, thereby making the contract void, voidable or otherwise unenforceable for lack of mutual assent. In her complaint Evans admits she agreed to the loan, signed both the note and trust deed and operated in accordance with those agreements. As the signatory now resisting enforcement of the contract, she "`cannot escape liability unless [s]he affirmatively establishes that the signatures of all parties were contemplated as being a condition precedent to the validity of the contract.'" (Fagelbaum & Heller LLP v. Smylie (2009) 174 Cal.App.4th 1351, 1364-1365; accord, Angell v. Rowlands (1978) 85 Cal.App.3d 536, 540.) Evans has not alleged such an intended condition precedent, nor has she alleged she did not know she was signing a secured loan agreement. (See Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1200 [no mutual assent if party did not know what it was signing was actually a contract].) In fact, as to the latter point, her complaint is expressly to the contrary. The court did not err in concluding Evan's complaint failed to allege a lack of mutual assent.
Evans contends the trial court improperly cross-examined her at the hearing on the demurrer, undermining her arguments and demonstrating its bias in favor of the Bank defendants. The colloquy Evans characterizes as improper cross-examination, however, was an entirely appropriate effort by the trial court to understand her self-drafted complaint and, in particular, the bases for her claims.
Finally, citing language in Civil Code section 2920 distinguishing a mortgage from a deed of trust,
In sum, Evans has not alleged facts sufficient to state a cause of action for wrongful foreclosure or any other legally cognizable claim for relief nor has she explained how her first amended complaint could be amended to state a claim. (See Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081 ["plaintiff has the burden of proving an amendment would cure the defect"].) Accordingly, the trial court did not err in sustaining the Bank defendants' demurrer without leave to amend.
The judgment is affirmed. PHH Home Loans, LLC, doing business as First Capital, and OneWest Bank are to recover their costs on appeal.
WOODS, J. and ZELON, J., concurs.
