NARES, J. —
This is an action for wrongful foreclosure. The homeowner, Monica Sciarratta, alleges that as a result of a void assignment of her promissory note and deed of trust, the entity that conducted a nonjudicial foreclosure sale on her home had no interest in either the underlying debt or the subject property. In Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919 [199 Cal.Rptr.3d 66, 365 P.3d 845] (Yvanova), the California Supreme Court held that in a case such as this — where a homeowner alleges a nonjudicial foreclosure sale was wrongful because of a void assignment — the homeowner has standing to sue for wrongful foreclosure. (Id. at pp. 942-943.) However, Yvanova did not address "any of the substantive elements of the wrongful foreclosure tort" (id. at p. 924), and in particular did not address "prejudice ... as an element of wrongful foreclosure" (id. at p. 929, fn. 4).
This case presents the question of "prejudice" left open in Yvanova: Where a homeowner alleges foreclosure by one with no right to do so, do such allegations alone establish the requisite prejudice or harm necessary to state a cause of action for wrongful foreclosure? Or instead, to adequately plead prejudice, does the plaintiff-homeowner have to allege the wrongful foreclosure interfered with his or her ability to pay on the debt, or lead to a foreclosure that would not have otherwise occurred?
Although Yvanova did not address this precise issue, the policy considerations that drove the standing analysis in Yvanova compel a similar result here. As the Supreme Court stated in Yvanova, it would be an "`odd result' indeed" were a court to conclude a homeowner had no recourse where anyone, even a stranger to the debt, had declared a default and ordered a trustee's sale. (Yvanova, supra, 62 Cal.4th at p. 938.)
Accordingly, we conclude that a homeowner who has been foreclosed on by one with no right to do so — by those facts alone — sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure. When a non-debtholder forecloses, a homeowner is harmed by losing her home to an entity with no legal right to take it. Therefore, under those circumstances, the void assignment is the proximate cause of actual injury and all that is required to be alleged to satisfy the element of prejudice or harm in a wrongful foreclosure cause of action.
The opposite rule, urged by defendants in this case, would allow an entity to foreclose with impunity on homes that were worth less than the amount of the debt, even if there were no legal justification whatsoever for the foreclosure. The potential consequences of wrongfully evicting homeowners are too
On the issue of standing, the Supreme Court stated, "`[B]anks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank's deed of trust.'" (Yvanova, supra, 62 Cal.4th at p. 938.) Yvanova's holding on standing would be undermined unless the same considerations applied in determining what prejudice must be alleged to constitute a wrongful foreclosure cause of action. (Ibid.) Therefore, we reverse the judgment of dismissal entered after the trial court erroneously sustained a demurrer to Sciarratta's first amended complaint without leave to amend, and remand for further proceedings.
In reciting the facts on review of a demurrer, "`we accept as true the well-pleaded facts in [Sciarratta's first amended] complaint.'" (Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 571 [173 Cal.Rptr.3d 752, 327 P.3d 850].) "We may also consider matters that have been judicially noticed." (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42 [105 Cal.Rptr.3d 181, 224 P.3d 920].)
Because the facts in this case are convoluted, it is helpful to know before one starts where one will end. As explained in detail post, Deutsche Bank was the owner of Sciarratta's loan and beneficiary of the deed of trust according to the public record at the time of this foreclosure. But Deutsche Bank did not foreclose. Bank of America did.
In June 2005 Sciarratta obtained a $620,000 loan secured by real property in Riverside County, California (the property). She executed a promissory note secured by a deed of trust identifying the lender as Washington Mutual
On April 24, 2009, JPMorgan Chase Bank, N.A. (Chase), as successor in interest to WaMu, assigned the Sciarratta deed of trust and promissory notes to Deutsche Bank National Trust Company (Deutsche Bank), as trustee for Long Beach Mortgage Loan Trust 2006-6. This assignment was recorded on April 27, 2009, as document No. 2009-0205476.
By April 24, 2009, Sciarratta's loan was $15,362.99 in arrears. On April 27, 2009, CRC recorded a "Notice of Default and Election to Sell Under Deed of Trust" (Notice of Default). The Notice of Default stated in part: "To find out the amount you must pay, or to arrange for payment to stop the foreclosure ... contact: JPMorgan Chase Bank ... at [address], [telephone number]."
In July 2009 CRC recorded a "Notice of Trustee's Sale," stating the property would be sold at auction on August 18, 2009, and that the estimated unpaid balance and other charges was $729,234.93.
On November 9, 2009, Chase, as successor in interest to WaMu, recorded a document entitled "Assignment of Deed of Trust," purporting to assign the Sciarratta deed of trust and promissory notes to Bank of America, National Association (Bank of America), as successor by merger to LaSalle Bank NA as trustee for WaMu Mortgage Pass-Through Certificates Series 2005-AR19.
On the same day, November 9, 2009, CRC recorded a "Trustee's Deed upon Sale" on behalf of Bank of America as "the foreclosing beneficiary" of the deed of trust. Bank of America acquired the property in exchange for a credit bid.
On December 28, 2009, Chase, as successor in interest to WaMu, recorded a document entitled "Assignment of Deed of Trust," which states: "This assignment is being recorded to correct the assignee reflected on the assignment recorded April 27, 2009 as instrument No. 2009-0205476. [¶] For value received, the undersigned hereby grants, assigns, and transfers to Bank of America ... all beneficial interest under that certain Deed of Trust dated 06/17/2005, executed by Monica Sciarratta...."
On November 2, 2009 — the day before the scheduled trustee's sale — Sciarratta filed a 16-count complaint against Chase, Deutsche Bank, and CRC in United States District Court. The complaint states in part, "This is an action to quiet title against parties who have wrongfully foreclosed upon residential real property of the Plaintiff, but who in reality have no standing whatsoever to exercise any rights under the subject deed of trust that encumbers Plaintiff's realty."
The record provided by the parties does not inform us about any other aspects of this litigation except that in May 2012 the district court entered a judgment of dismissal with prejudice in favor of the defendants.
In February 2013 Sciarratta filed a state court complaint for (1) wrongful foreclosure, (2) quiet title, and (3) cancellation of instruments against U.S. Bank National Association as trustee successor in interest to Bank of America, Deutsche Bank, and CRC (collectively, Defendants).
Sciarratta's complaint alleges the foreclosure "is wrongful in that the trustee that held the sale was not the proper trustee at the time of the sale and therefore the sale of the Subject Property is void as a matter of law ... or in the alternative the party that held the sale and acquired the Subject Property by way of a supposed credit bid was not the holder of the Subject Note and was not the beneficiary of the Subject Deed of Trust and could not have
Defendants demurred to the complaint on the grounds (1) the action was barred by the res judicata effect of the district court judgment of dismissal in Sciarratta's previous action, and (2) Sciarratta had not alleged the essential element of prejudice. The court overruled this demurrer.
After certain defaults were set aside that are not relevant to any issues in this appeal, Defendants answered the complaint, and later Sciarratta dismissed Deutsche Bank without prejudice.
In May 2014 Defendants filed a motion for judgment on the pleadings, primarily asserting that Sciarratta's wrongful foreclosure claim fails as a matter of law because she did not and cannot allege prejudice. Defendants asserted, "Plaintiff alleges that the foreclosure sale was invalid because CRC foreclosed on behalf of Bank of America instead of Deutsche Bank, who Plaintiff argues was the correct beneficiary. Prejudice is an essential element of a wrongful foreclosure claim...."
Sciarratta opposed the motion for judgment on the pleadings on both procedural and substantive grounds. Procedurally, she argued the motion was barred by Code of Civil Procedure section 438, subdivision (g)(1), which provides that a motion for judgment on the pleadings may be made after a demurrer has previously been overruled, "provided that there has been a material change in applicable case law or statute since the ruling on the demurrer." Sciarratta asserted there had been no such material change in law, and therefore the judgment on the pleadings was improper because the court had previously overruled a demurrer brought on the same grounds. Substantively, Sciarratta argued prejudice is not an element of wrongful foreclosure where, as she had alleged, the foreclosure sale is void.
The court granted the motion for judgment on the pleadings, with leave to amend, on the grounds that "[p]laintiff must adequately allege the element of `prejudice.'"
In August 2014 Sciarratta filed a first amended complaint for (1) wrongful foreclosure, (2) quiet title, and (3) cancellation of instruments. In addition to
Defendants demurred to the first amended complaint on the grounds, among others, that Sciarratta had failed to adequately allege the essential element of prejudice. Unlike their demurrer to Sciarratta's original complaint, in this demurrer Defendants did not argue the action was barred by res judicata.
The court asked Sciarratta's attorney, "[A]re there facts that can be pled that have not been pled now that would make me reconsider the no leave to amend?" After Sciarratta's attorney stated, "I don't think there are any new facts," the court sustained the demurrer without leave to amend and subsequently entered a judgment dismissing her first amended complaint with prejudice.
"On appeal from a judgment of dismissal entered after a demurrer has been sustained, this court reviews the complaint de novo to determine whether it states a cause of action. [Citation.] We assume the truth of all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law." (Folgelstrom v. Lamps Plus, Inc. (2011) 195 Cal.App.4th 986, 989 [125 Cal.Rptr.3d 260].) "`We may also consider matters that have been judicially noticed. [Citations.]' [Citation.] `"[W]hen the allegations of the complaint contradict or are inconsistent with such facts, we accept the latter and reject the former."'" (Tucker v. Pacific Bell Mobile Services (2012) 208 Cal.App.4th 201, 210 [145 Cal.Rptr.3d 340].)
"[O]nly the entity currently entitled to enforce a debt may foreclose on the mortgage or deed of trust securing that debt...." (Yvanova, supra, 62 Cal.4th at p. 928.) "It is no mere `procedural nicety,' from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so." (Id. at p. 938.)
Here, implicitly invoking these principles, Sciarratta alleges that the entity entitled to enforce the debt was Deutsche Bank, but the entity that foreclosed was Bank of America. Specifically, she alleges that in April 2009 Deutsche Bank became the owner of her promissory note and trust deed by assignment from Chase. Sciarratta alleges that the subsequent purported assignments of the note and trust deed by Chase to Bank of America in November 2009 and again in December 2009 were void because Chase had previously assigned the note and trust deed to Deutsche Bank. Thus, Sciarratta alleges Bank of America had no right to foreclose because it never became a beneficiary of her deed of trust.
Based on these allegations, which are supported by the judicially noticeable recorded documents, Sciarratta alleges the November 2009 nonjudicial foreclosure "was held by an entity [other] than the owner of the Subject Note and holder of the Subject Deed of [T]rust, [Bank of America], whom [sic] had no right to hold said sale or submit a credit bid thereon and as a result the sale is void and of no effect." In more colloquial terms, Sciarratta's appellate brief asserts, "There is no question that as of the date of the sale Bank of America had no right to hold a foreclosure sale of the Subject Property as the owner of the note and deed of trust was Deutsche [Bank] as of April 24, 2009."
Here, Sciarratta's first amended complaint alleges that in November 2009, when Chase purported to assign Sciarratta's promissory note and deed of trust to Bank of America, Chase had nothing to assign, having previously (in Apr. 2009) assigned the promissory notes and deed of trust to Deutsche Bank. The documents properly subject to judicial notice are consistent with these allegations. On April 27, 2009, Chase executed a document entitled "Assignment of Deed of Trust" where it "hereby grants assigns and transfers to Deutsche Bank ... all beneficial interest under that certain Deed of Trust ... executed by Monica Sciarratta ... [¶] [t]ogether with the note or notes
Thus, assuming Sciarratta's allegations are true, as we must on review of the demurrer, the assignment to Bank of America is void, and not merely voidable. (Yvanova, supra, 62 Cal.4th at p. 935; Glaski, supra, 218 Cal.App.4th at p. 1097 [assignment void, not voidable, where entity invoking the power of sale was not the holder of the deed of trust]; see Culhane v. Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282, 291 (Culhane) [a mortgage assignment is void, not merely voidable, where the assignor "had nothing to assign" or "no interest to assign"]; Wilson v. HSBC Mortgage Services, Inc. (1st Cir. 2014) 744 F.3d 1, 9 (Wilson).)
Defendants' arguments to the contrary are not persuasive. Citing U. S. Hertz Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68 [116 Cal.Rptr. 44], Defendants contend the recording of an assignment to Deutsche Bank "does not actually transfer an interest in property; it merely serves as notice that a transfer has occurred." However, U. S. Hertz is materially distinguishable because it involves a notice of substitution of trustee, not an assignment of the deed of trust and promissory notes. It is in the context of a notice substituting a trustee that the court states "such documents ... grant no interest in real property. Their main objective is notice...." (Id. at p. 85.)
Defendants also contend the "[c]orrective [a]ssignment" recorded in December 2009 "demonstrated that beneficial interest had been assigned to Bank of America, not Deutsche Bank." However, Defendants cite no authority suggesting that as a matter of law, the "[c]orrective [a]ssignment" recorded in
Defendants also argue that the "[c]orrective [a]ssignment" shows that "[a]t most" Chase "made procedural errors on the documents regarding the identity of the beneficiary, and that Chase later corrected these errors." However, this is an appeal from a judgment of dismissal after a demurrer was sustained, where we are required to assume the truth of the facts plaintiff has alleged. Defendants cannot hijack Sciarratta's first amended complaint, delete allegations not to their liking, insert other contrary allegations such as this one about a mere "procedural error[]," and contend the resulting pleading they have cobbled together fails to state a cause of action. Sciarratta alleges that at the time of the nonjudicial foreclosure sale, Deutsche Bank was the assignee and Bank of America was not. The judicially noticeable documents do not contradict these allegations.
Defendants also contend that Sciarratta's complaint admits that Deutsche Bank was not the assignee and never held a beneficial interest in the deed of trust. However, the allegation Defendants highlight is not contained in Sciarratta's cause of action for wrongful foreclosure, but rather in her cause of action to quiet title. In any event, an allegation that Deutsche Bank never held a legal or equitable interest in the property is not necessarily inconsistent with an allegation that Bank of America also did not.
In sum, we hold that Sciarratta has alleged the nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party, Bank of America, purportedly took a beneficial interest in the deed of trust was void. Therefore, under Yvanova, Sciarratta has standing to assert such a claim.
Sciarratta contends prejudice or harm, beyond the allegedly wrongful foreclosure itself, should not be required to be alleged in order to state a cause of action for wrongful foreclosure where, as here, it is alleged the foreclosing beneficiary's interest is void. We agree.
There are also strong policy reasons favoring this approach. A contrary rule would lead to a legally untenable situation — i.e., that anyone can foreclose on a homeowner because someone has the right to foreclose. "And since lenders can avoid the court system entirely through nonjudicial foreclosures, there would be no court oversight whatsoever." (Miles, supra, 236 Cal.App.4th at p. 410.) Moreover, giving homeowners — who have the most at stake and the most to lose — the ability to challenge improper loan assignments as being absolutely void will provide a proper incentive to lending institutions to employ due diligence to properly document assignments and confirm who currently holds a loan. "The consequences of wrongfully evicting someone from their home are too severe to be left unchecked." (Ibid.)
Cases cited by Defendants that reach a contrary result did not have the benefit of the Supreme Court's decision in Yvanova and as a result incorrectly and exclusively focus on the plaintiff's ability to have avoided any foreclosure. For example, in Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 [129 Cal.Rptr.3d 467] (Fontenot), disapproved on other grounds (standing) in Yvanova, supra, 62 Cal.4th at page 939, footnote 13, the court found that the plaintiff had failed to demonstrate prejudice resulting from an allegedly improper transfer of her debt because the plaintiff conceded she was in default, did not allege the transfer interfered with her ability to pay her debt, and did not allege the original lender would have refrained from foreclosure. (Fontenot, supra, at p. 272.)
Similarly, in Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495 [141 Cal.Rptr.3d 326] (Herrera), disapproved on other grounds (standing) in Yvanova, supra, 62 Cal.4th at page 939, footnote 13, the court found that the plaintiffs could not demonstrate prejudice where they had defaulted on their loan and could not cure the default. (Herrera, supra, 205 Cal.App.4th at p. 1508.)
The trial court sustained Defendants' demurrer to Sciarratta's cause of action for quiet title on the grounds that "payment of the debt owed (tender) is a necessary element for a quiet title cause of action." The court sustained the demurrer to Sciarratta's cause of action for cancellation of instruments on the grounds that action "is dependent on the [first] and [second] causes of action."
In her opening brief, Sciarratta addresses the issues in this case only as they relate to her cause of action for wrongful foreclosure, not quiet title or cancellation of instruments. There is no separate heading in her brief asserting the court erred in sustaining the demurrer to her causes of action for quiet title or cancellation of instruments.
Ordinarily, therefore, any contentions regarding the correctness of the trial court's ruling sustaining the demurrer to these two other causes of action would be abandoned. (Ram v. OneWest Bank FSB (2015) 234 Cal.App.4th 1, p. 21, fn. 2 [183 Cal.Rptr.3d 638] [where demurrer sustained without leave to amend, appellant's failure to raise arguments in connection with one of several causes of action is deemed abandonment of that cause of action].)
However, in addressing the tender issue in the context of wrongful foreclosure, Sciarratta argued tender is not required because Bank of America's purported assignment is void and not merely voidable. In her opening brief, Sciarratta cited, among other authorities, Glaski, supra, 218 Cal.App.4th at page 1100, which, as noted ante, also applies the rule excusing tender in void transactions to causes of action for quiet title and cancellation of instruments.
Therefore, Sciarratta addressed the determinative legal issue, and cited authority for its application to quiet title and cancellation of instruments, albeit in the context of wrongful foreclosure. As a result, Defendants were on notice that Sciarratta was arguing she was excused from alleging tender, and that she was relying on Glaski, supra, 218 Cal.App.4th 1079 for that proposition. Indeed, Defendants argued the tender issue in their respondents' brief.
Because the issue of tender was fully examined by both Sciarratta and Defendants, there is no sound reason to apply the ordinary rule of forfeiture for Sciarratta's failure to separately address the trial court's rulings on these two causes of action. Accordingly, the judgment of dismissal of those two causes of action must also be reversed.
The judgment is reversed and the matter is remanded for further proceedings. Monica Sciarratta shall recover her costs on appeal.
Huffman, Acting P. J., and O'Rourke, J., concurred.
However, Defendants did not raise this waiver issue in their respondent's brief, and after considering the parties' supplemental briefs on this issue, we conclude Defendants have forfeited the waiver issue by failing to assert it and no good cause to relieve Defendants of that forfeiture has been shown. (See American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453 [13 Cal.Rptr.2d 432].)
However, in her brief, Sciarratta has elected to not address this alternative theory in any meaningful way, limiting her discussion of this point to a single paragraph containing no citation to the record and scant analysis. Instead, she focuses on the theory, discussed in the text ante, that WaMu assigned her promissory note and trust deed to Deutsche Bank, but Bank of America foreclosed.
For example, Sciarratta's briefs state: (1) "The public record leaves no doubt that the entity that held the sale was not the holder of the note or beneficiary of the deed of trust" (italics added); (2) "This is a case where the public record leaves no doubt that the foreclosure sale was held by an entity that was not the holder of the note or beneficiary of the deed of trust at issue" (italics added); (3) "There is no question that as of the date of the sale Bank of America had no right to hold a foreclosure sale of the Subject Property as the owner of the note and deed of trust was Deutsche [Bank] as of April 24, 2009" (italics added); (4) "[T]here is no question that as of the date of the sale the true holder of the note was Deutsche [Bank]" (italics added); (5) "[A]t the time of the sale the holder of the note and beneficiary of the deed of trust was Deutsche [Bank]."
Similarly, in the trial court Sciarratta's lawyer stated, "The facts are very clear and very simple. Deutsche Bank was the owner of this loan according to the public record at the time of this sale. And Deutsche Bank did not hold this sale. There was no dispute about that. Bank of America did."
Given these unequivocal assertions and Sciarratta's failure to develop the inconsistent alternative theory in her brief, we do not address whether the first amended complaints states a viable cause of action on an alternative theory that the "wrong" trustee initiated foreclosure. (See Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc./Obayashi Corp. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [4 Cal.Rptr.3d 655] [declining to address an alternative theory not developed in the party's appellate brief].)
