Tag Archives: California Supreme Court

17200 recent ruling unfair business practice foreclosure

26 Oct

17200

 

Elements

*9 Plaintiff also fails to plead sufficient facts to support a UCL claim for “unlawful, unfair, or fraudulent business act or practice.” Cal. Bus. & Prof.Code § 17200. Because the framers of the UCL expressed the three categories of unfair competition in the disjunctive, “each prong of the UCL is a separate and distinct theory of liability,” each offering “an independent basis for relief.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir.2009). Furthermore, a claim under Section 17200 is “derivative of some other illegal conduct or fraud committed by a defendant, and [a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation.” See Benham v. Aurora Loan Servs., No. 09–2059, 2009 WL 2880232, at *4 (N.D.Cal. Sept.1, 2009). “A complaint based on an unfair business practice may be predicated on a single act; the statute does not require a pattern of unlawful conduct.” Brewer v. Indymac Bank, 609 F.Supp.2d 1104, 1122 (E.D.Cal.2009).

There is little question that the execution of documents in connection with a Deed of Trust constitutes a “business act or practice.” As for the nature of the conduct alleged, while the Complaint alludes to all three prongs of this statute generally, Plaintiff does not specify the theory on which she bases her claim, nor does she address the elements of any one of these theories. Compl. ¶ 41 (“[T]he instances mentioned in paragraphs 32–26[sic] above are unfair, deceptive, untrue acts, which are prohibited by California Business And Professions Code § 17200.”). Other courts have dismissed UCL claims on these grounds. See, e.g., Jensen, 702 F.Supp.2d at 1200 (dismissing plaintiff’s UCL claim because his UCL allegations “do not specify the basis for his claim, i.e., whether it is based on unlawful, unfair, or fraudulent practice”). However, in an effort to construe the factual allegations in a light most favorable to Plaintiff, this Court will consider the adequacy of the Complaint under each prong separately.

a. “Unlawful” Prong

The “unlawful” prong of the UCL requires a plaintiff to demonstrate that the defendant’s conduct violated some other law. Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir.2000). In effect, Section 17200 “borrows” violations of federal, state, or local law and makes them independently actionable. Id. To state a claim for relief under this theory, a plaintiff must “state, with reasonable particularity, the facts supporting the statutory elements of the violation.” Jensen, 702 F.Supp.2d at 1189.

Aside from the cause of action for breach of contract, Plaintiff alleges no violation of federal, state, or local law in her Complaint that could be actionable under Section 17200. Courts consistently conclude that a breach of contract is not itself an unlawful act for the purposes of the UCL. Puentes v. Wells Fargo Home Mortgage, Inc., 160 Cal.App.4th 638, 645, 72 Cal.Rptr.3d 903 (2008); Gibson v. World Sav. & Loan Ass’n, 103 Cal.App.4th 1291, 1302, 128 Cal.Rptr.2d 19 (2002) (“Contractual duties are voluntarily undertaken by the parties to the contract, not imposed by state or federal law.”). Only when the act constituting breach is unfair, unlawful, or fraudulent for some additional reason may that act also violate the UCL. Smith v. Wells Fargo Home Mortgage, Inc., 135 Cal.App.4th 1463, 1483, 38 Cal.Rptr.3d 653 (2005). Here, Plaintiff fails to demonstrate how the facts alleged to support breach are, apart from the breach, wrongful.

*10 Contractual considerations aside, to the extent that Plaintiff bases a theory of “unlawful” conduct on defendant Aurora’s lack of authority to substitute a trustee or CalWestern’s lack of authority to initiate foreclosure proceedings, her cause of action fails. California Civil Code Sections 2924 through 2924k, “[t]he comprehensive statutory framework established to govern nonjudicial foreclosure sales” are intended to be “exhaustive.” Moeller v. Lien, 25 Cal.App.4th 822, 834, 30 Cal.Rptr.2d 777 (1994). Section 2924(a)(1) provides that a “trustee, mortgagee, or beneficiary, or any of their authorized agents may initiate the foreclosure process.” Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1155, 121 Cal.Rptr.3d 819 (2011). Thus, even a breach of contract theory invalidating Cal–Western’s appointment as trustee does not also bar Cal–Western from initiating foreclosure as an agent of the trustee. Only the alleged breach, and not a violation of California law, could potentially render the Defendants’ conduct illegal.

Furthermore, California Civil Code Section 2934a(a)(1)(A) provides that “a trustee under a trust deed … may be substituted by … all of the beneficiaries under the trust deed, or their successors in interest.” Again, while Aurora’s attempt to appoint Cal–Western as the new trustee may have breached the terms of the Deed of Trust, it did comply with California law.7

Thus, to the extent Plaintiff predicates her UCL claim on a violation of another law, this cause of action fails.

b. “Unfair” Prong

The California Supreme Court has yet to establish a definitive test that may be used in consumer cases to determine whether a particular business act or practice is “unfair” for the purposes of the UCL. Drum v. San Fernando Valley Bar Ass’n, 182 Cal.App.4th 247, 253–54, 106 Cal.Rptr.3d 46 (2010) (citing Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 n. 12, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999)). As a result, three tests have developed among state and federal courts. See Vogan v. Wells Fargo Bank, N.A., No. 11–02098, 2011 WL 5826016, at *6 (E.D.Cal. Nov. 17, 2011); Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581, 593–97, 101 Cal.Rptr.3d 697 (2009) (detailing the split in authority in handling consumer UCL cases).

One test, which has garnered the most attention from the Ninth Circuit, limits unfair conduct to that which “offends an established public policy” and is “tethered to specific constitutional, statutory, or regulatory provisions.” Davis, 179 Cal.App.4th at 595, 101 Cal.Rptr.3d 697; Lozano v. AT & T Wireless Servs., 504 F.3d 718, 736 (9th Cir.2007) (holding that unfairness must be tied to a “legislatively declared” policy). The second test contemplates whether the alleged business practice is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” and requires the court to “weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Davis, 179 Cal.App.4th at 594–95, 101 Cal.Rptr.3d 697; McDonald, 543 F.3d at 506; Progressive West Ins. Co. v. Yolo County Sup.Ct., 135 Cal.App.4th 263, 285–87, 37 Cal.Rptr.3d 434 (2005). The third test, which borrows the definition of “unfair” from the Federal Trade Commission Act, requires that “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Davis, 179 Cal.App.4th at 597, 101 Cal.Rptr.3d 697.

*11 Plaintiff’s complaint does not, in any meaningful way, address the considerations presented by these tests. She fails to link her claim to a “legislatively declared” policy as required under the first test. Under the second and third tests, the Complaint fails because Plaintiff does not allege that Defendants’ conduct caused any injury, to the Plaintiff or others. Even under the second test, which a California Court of Appeal admits is “fact intensive and not conducive to resolution at the demurrer stage,” Plaintiff’s claim under this theory cannot proceed without allegations of its fundamental requirements. Progressive West, 135 Cal.App.4th at 287, 37 Cal.Rptr.3d 434.

Thus, to the extent that Plaintiff attempts to state a claim under the “unfair” prong of the UCL, this cause of action fails.

c. “Fraudulent” Prong

“Fraudulent acts are ones where members of the public are likely to be deceived.” Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151–52 (9th Cir.2008). In response to the new eligibility requirements for private actions under Section 17200 enacted through Proposition 64, a UCL claim under the “fraudulent prong” requires a plaintiff to have “actually relied” on the alleged misrepresentation to his detriment. In re Tobacco II Cases, 46 Cal.4th at 326, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009).

Under the Federal Rules of Civil Procedure 9(b), the “circumstances constituting fraud” or any other claim that “sounds in fraud” must be stated “with particularity.” Fed.R.Civ.P. 9(b); Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103–04 (9th Cir.2003). The Ninth Circuit has explained that this standard requires, at a minimum, that the claimant pleads evidentiary facts, such as time, place, persons, statements, and explanations of why the statements are misleading. See In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547–48 (9th Cir.1994) (en banc).

The Complaint does, with particularity, allege several instances that could plausibly constitute acts of fraud. Specifically, Plaintiff argues that MERS committed fraud under the UCL by causing Stacy Sandoz, who is neither Vice President as stated nor authorized to act on behalf of MERS in this capacity, to execute the Corporate Assignment. Compl. ¶¶ 19, 38, 43; Compl. Ex. 2. The Complaint makes identical allegations against Aurora regarding Vice President Michele Rice, as stated on the Substitution of Trustee. Compl. ¶¶ 26, 45; Compl. Ex. 6. The Plaintiff similarly maintains that First American’s use of the name “Derrick Sue” on the Notice of Default and Election to Sell was fraudulent conduct, owing to the fact that “no such person by that name exists or is employed by First American.” Compl. ¶¶ 22, 40; Compl. Ex. 5. The Complaint also claims that Cal–Western fraudulently represented Megan Cooper as having the authority to execute the Affidavit of Mailing Substitute Trustee, since no such person exists, is employed by Cal–Western, or signed said document. Compl. ¶¶ 27, 46; Compl. Ex. 6. Such detailed accounts may very well satisfy the particularity requirement under 9(b) because they appear to allege the who, what, when, and how of the alleged “deceptive business acts.” Compl. ¶ 36. But see Jensen, 702 F.Supp.2d at 1189 (granting defendant JP Morgan’s motion to dismiss plaintiff borrower’s UCL claim for failure “to specify what particular role JP Morgan played in the fraudulent scheme, when and where the scheme occurred, or details of the specific misrepresentations involved”).8

*12 Defendant argues that Plaintiff fails to state that the alleged fraudulent statements “were disseminated to the public [such that] reasonable consumers are likely to be deceived.” Mot. at 10 (quoting Sybersound, 517 F.3d at 1151–52). This argument, while accurate in pointing out Plaintiff’s failure to address the distinct features of a fraud-based UCL claim, is questionable considering the fact that all challenged documents were publicly recorded and notarized. While Plaintiff does not attempt to demonstrate that Defendants have likely deceived the public under the Sybersound test, recording documents with the county may be sufficient “dissemination to the public.”

More problematic, however, Plaintiff does not and likely cannot plead actual reliance on the Defendants’ alleged fraud. The Complaint does not indicate that Plaintiff ever believed in the alleged misrepresentations or that they caused her to take any action to her detriment. As discussed above with regard to UCL standing, Plaintiff fails to plead loss of money or property, let alone a causal correlation of a loss with the Defendants’ alleged fraud.

To the extent that Plaintiff attempts to state a claim under the “fraudulent” prong of the UCL, the cause of action fails.

For the foregoing reasons, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s UCL claim without prejudice to provide an opportunity to establish standing and more clearly articulate the basis for this cause of action.

 

Ford v. Lehman Bros. Bank, FSB, C 12-00842 CRB, 2012 WL 2343898 (N.D. Cal. June 20, 2012)

 

However, Plaintiff’s third UCL theory, Recontrust’s continual advertising of Plaintiff’s foreclosure after this Court’s preliminary injunction went into effect, is flawed because it is unclear what damage such conduct caused Plaintiff. While she alleges emotional damages, she does not allege any loss of money or property—either threatened or realized—as a result of Recontrust’s advertising. See Cal. Bus. & Prof.Code § 17204 (requiring a private litigant to have “suffered injury in fact and [ ] lost money or property as a result of the unfair competition” in order to bring a UCL claim); Cf. Sullivan v. Washington Mut. Bank, FA, C–09–2161 EMC, 2009 WL 3458300, at *4 (N.D.Cal. Oct.23, 2009) (finding standing where “foreclosure proceedings have been initiated which puts her interest in the property in jeopardy”). Accordingly, the Court will dismiss this UCL claim.

Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)

 

 

DEBRUNNER REDUX

 

January 2008, Debrunner and his co-investors filed a notice of default, presumably for Chiu’s inability to remain current on the second-position loan. Debrunner, supra, 204 Cal.App.4th at 436, 138 Cal.Rptr.3d 830. A trustee’s sale of the Los Altos property was scheduled for May 2008, but was delayed after Chiu’s business entity petitioned for Chapter 11 bankruptcy protection in June 2008. The bankruptcy court granted Debrunner’s and his co-investors’ motion for relief from the bankruptcy stay, allowing them to foreclose upon the property and obtain a trustee’s deed upon sale in March 2009. Id. But back in August 2008, before the sale was completed, Saxon—the servicer on the first-position loan—had also filed a notice of default, which was rescinded because of the bankruptcy proceedings. Deutsche Bank—the assignee of the first deed of trust—moved for relief from the bankruptcy stay in July 2009 in order to file a new notice of default, although its motion was taken off calendar after the bankruptcy case was closed in August 2009. Old Republic Default Management Services (Old Republic), the foreclosure trustee, then recorded a new notice of default on the Los Altos property in September 2009. In the accompanying Fair Debt Collection Practices Act Notice, Old Republic named Deutsche Bank as the creditor and Saxon as its ‘ “attorney-in-fact’ “ and informed the debtor that payment to stop the foreclosure could be made to Saxon. Id. On January 5, 2010, the same day the assignment from FV–1 to Deutsche Bank was recorded, a ‘ “Substitution of Trustee’ “ from Chicago Title Company to Old Republic was recorded. This document had been signed and notarized by Saxon on behalf of Deutsche Bank on September 2, 2008. Id. at 436–37, 138 Cal.Rptr.3d 830.

In November 2009, Debrunner brought an action against Deutsche Bank, Saxon and Old Republic to stop the foreclosure proceedings on the first deed of trust, contending the defendants had no right to foreclose because Deutsche Bank did not have physical possession of or ownership rights to the original promissory note executed by Chiu. Debrunner, supra, 204 Cal.App.4th at 437, 138 Cal.Rptr.3d 830. Deutsche Bank and Saxon demurred to the complaint, contending possession of the original note was not required under California’s non-judicial foreclosure statutes, Cal. Civ.Code §§ 2924 et seq. In opposition, Debrunner contended that “any assignment of the deed of trust was immaterial because a deed of trust ‘cannot be transferred independently’ of the promissory note, which must be ‘properly assigned’ and attached,” and that “ ‘[a] deed of trust standing alone is a nullity,’ and thus cannot provide authority for a lender to foreclose.” Id. The trial court sustained Deutsche Bank’s and Saxon’s demurrer without leave to amend, id. at 438, 138 Cal.Rptr.3d 830, and the Court of Appeal affirmed.

On appeal, Debrunner reiterated his argument that an assignment of the deed of trust was ineffective and a legal nullity unless the assignee also physically received the promissory note and endorsed it, and that the beneficiary of the deed of trust must physically possess the note to initiate foreclosure proceedings. Debrunner, supra, 204 Cal.App.4th at 439, 138 Cal.Rptr.3d 830. The court rejected this contention: “As the parties recognized, many federal courts have rejected this position, applying California law. All have noted that the procedures to be followed in a nonjudicial foreclosure are governed by sections 2924 through 2924k, which do not require that the note be in the possession of the party initiating the foreclosure. [Citations.] We likewise see nothing in the applicable statutes that precludes foreclosure when the foreclosing party does not possess the original promissory note. They set forth a ‘comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.’ [Citation.] Notably, section 2924, subdivision (a)(1), permits a notice of default to be filed by the ‘trustee, mortgagee, or beneficiary, or any of their authorized agents.’ The provision does not mandate physical possession of the underlying promissory note in order for this initiation of foreclosure to be valid.” Debrunner, supra, 204 Cal.App.4th at 440, 138 Cal.Rptr.3d 830.

*5 Plaintiffs further contend the April 29, 2009 notice of default and September 18, 2009 notice of sale recorded by NDEx were invalid because no substitution of trustee was ever recorded naming NDEx as the trustee under the deed of trust. Not so. Pursuant to Plaintiffs’ motion, the Court has consulted the official Fresno County Recorder website (http://www.co.fresno.ca.us) and notes that on June 29, 2009 (two months after the notice of default but three months before the notice of sale), a substitution of trustee naming Deutsche Bank National Trust Company as grantor and NDEx as grantee appeared to have been recorded as document # 2009–00879966–00. To the extent Plaintiffs intend to suggest a preliminary injunction should issue because the notice of default recorded by NDEx was defective in that it listed NDEx as the trustee even though there was no recorded substitution of NDEx as a trustee at the time, the claim likewise fails. An identical argument was raised and rejected in Debrunner. Debrunner had alternatively contended the notice of default in that case was defective because it listed Old Republic as the trustee even though there was no recorded substitution of Old Republic as a trustee at the time the notice of default was recorded. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. The court disagreed, observing that “[California Civil Code] section 2934a provides for the situation in which a substitution of trustee is executed but is not recorded until after the notice of default is recorded.” Id. at 443–44, 138 Cal.Rptr.3d 830 (citing Cal. Civ.Code, § 2934a, subd. (b)).3 Plaintiffs have provided no argument or evidence to suggest a substitution of NDEx as trustee had not been executed at the time NDEx recorded the April 29, 2009 notice of default.

Even if there were a defect in NDEx’s commencement of the foreclosure proceedings, Plaintiffs have failed to allege prejudice. In Debrunner, the court concluded that a failure to show or assert prejudice resulting from an alleged defect in the foreclosure process was fatal to the plaintiff’s claims. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. “ ‘[A] plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate [that] the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests.’ [¶] … [¶] … [T]here was no allegation in the first amended complaint that plaintiff’s ability to contest or avert foreclosure was impaired. Even in his opposition to the demurrer and on appeal he has not identified the harm he suffered from any asserted violation of section 2934a, subdivision (b), again preferring to assume that he is entitled to judgment without any showing of prejudice.” Id. at 444, 138 Cal.Rptr.3d 830 (quoting Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 271, 129 Cal.Rptr.3d 467 (2011)). In this case, as in Debrunner, Plaintiffs have provided no argument or evidence of harm resulting from the failure to record a substitution of NDEx as trustee before NDEx filed its notice of default. Accordingly, the Court finds no basis for injunctive relief on this ground. A substitution would simply have replaced one trustee with another without modifying Plaintiffs’ obligations under the note or deed of trust. Under these circumstances, Plaintiffs would be hard pressed to show any conceivable prejudice, given Plaintiffs have offered no facts to suggest the substitution of NDEx (or the allegedly improper recording thereof) adversely affected their ability to pay their debt or cure their default.

 

Ghuman v. Wells Fargo Bank, N.A., 1:12-CV-00902-AWI, 2012 WL 2263276 (E.D. Cal. June 15, 2012)

 

 

ADD AGENT TO DESTROY DIVERSITY

 

Like Golden West, Defendant LSI is a citizen of California. The Wells Fargo Bank Defendants contend that LSI’s “citizenship should be ignored for purposes of diversity jurisdiction” on the grounds that LSI did nothing more than facilitate the recording of the Notice of Default on behalf of NDeX. Defs.’s Resp. to OSC at 4. The pleadings are not a model of clarity, and LSI’s precise role in connection with the claims alleged is not entirely clear. However, it appears that Plaintiffs are alleging, inter alia, that LSI, among others, failed to comply with California law in proceeding with the foreclosure in accordance with California Civil Code section 2923.5. See SAC at 2.

*5 Section 2923.5 provides a private right of action to postpone a foreclosure sale. Mabry v. Superior Court, 185 Cal.App.4th 208, 2141, 110 Cal.Rptr.3d 201 (2010). Under section 2923.5, “a mortgagee, trustee, beneficiary, or authorized agent” must follow certain procedures in the context of a foreclosure. Cal. Civ.Code § 2923.5. Plaintiffs allege that LSI acted as an agent for Wells Fargo and was involved in the preparation of forged and fraudulent foreclosure notices, including the Notice of Default, Substitution of Trustee and Notice of Trustee’s Sale. See Notice of Joinder for Inclusion of LSI Title Company, Dkt. 25. These allegations support the conclusion that Plaintiffs may have a potential claim against LSI under section 2923.5, and that LSI is not merely a nominal party as Wells Fargo Defendants now contend. See Cheng v. Wells Fargo Bank, N.A., No. SACV10–1764–JST (FFMx), 2010 WL 4923045, at *1 (C.D.Cal., Dec.2, 2010) (finding that LSI was not fraudulently joined in a mortgage fraud action removed from state court where plaintiffs alleged that LSI was acting as an agent for Wells Fargo in connection with the allegedly fraudulent foreclosure of their home). Thus, even if there was complete diversity at the time of removal, Plaintiffs’ subsequent joinder of LSI destroyed diversity jurisdiction and requires remand. See 28 U.S.C § 1447(e).

 

Boggs v. Wells Fargo Bank NA, C 11-2346 SBA, 2012 WL 2357428 (N.D. Cal. June 14, 2012)

 

NBA IS WEAKER THAN HOLA

 

Defendants cite to only one case holding that the NBA has preemptive effect over certain California laws relating to foreclosure. See Acosta v. Wells Fargo Bank, N.A., C 10–9910JF (PVT), 2010 WL 2077209 (N.D.Cal. May 21, 2010). In Acosta, Judge Fogel analogized the NBA to the Home Owners’ Loan Act (“HOLA”), which some courts have found to preempt state laws relating to federal savings banks. Id. at *8 (finding that the NBA preempted § 2923.5 because “several district courts within the Ninth Circuit have determined that the Home Owners’ Loan Act (“HOLA”), 12 U.S.C. § 1464–which contains the nearly identical language at 12 U.S.C. § 1464(b)(10)-preempts Section 2923.5”).

However, the analogy between the NBA and HOLA is flawed. Unlike the NBA, which contains only a conflict preemption clause, HOLA contains a broad field preemption clause. Specifically, 12 C.F.R. § 560.2(a) provides, in relevant part,

To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), [the Office of Thrift Supervision (“OTS”) ] hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) or § 560.102 of this part.

 

paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.

Parcray v. Shea Mortg. Inc., CV–F09–1942OWW/GSA, 2010 WL 1659369, at *7–8 (E.D.Cal. Apr.23, 2010) (quoting OTS, Final Rule, 61 Fed.Reg. 50951, 50966–50967 (Sept. 30, 1996) (emphasis added)). Thus, the savings clause comes into play only if the law at issue is not listed in the preemption section.

Such broad preemption language is absent from the NBA. In contrast to 12 C.F.R. § 502.2(b) of the OTS/HOLA regulations which broadly declares categories of state law that are preempted per se, 12 C.F.R. § 34.4(b) declares categories that are not preempted if they have an incidental effect on bank’s lending powers. Indeed, the Ninth Circuit has concluded that, while the OTS/HOLA regulations described above permit a court to consider the savings clause of § 560.2(c) only if the law at issue does not fall within the express preemption provisions of § 560.2(b), the OCC/NBA regulations “require[ ] the court to consider both the express preemption and savings clauses together” in the first instance. Aguayo v. U.S. Bank, 653 F.3d 912, 922 (9th Cir.2011) (emphasis added) (internal citations omitted).

As the Ninth Circuit held in Aguayo v. U.S. Bank, “while the OTS [HOLA] and the OCC [NBA] regulations are similar in many ways, the OCC has explicitly avoided full field preemption in its rulemaking and has not been granted full field preemption by Congress.” 653 F.3d at 921–22 (internal citations omitted). “Because of this difference in field preemption, courts have been cautious in applying OTS analysis to OCC regulations.” Id. at 922 (internal citations omitted). HOLA’s strict field preemption analysis therefore bears little relation to the NBA’s more flexible conflict preemption analysis. See also Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997 (D.Ariz. Feb.9, 2012) (“[T]he [NBA] rule only preempts the types and features of state laws pertaining to making loans and taking deposits that are specifically listed in the regulation.”) (quoting OCC Interpretive Letter No. 1005, 2004 WL 3465750 (June 10, 2004) (emphasis added); citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“The [NBA] (and OCC regulations thereunder) does not ‘preempt the field’ of banking.”)).

The distinction between HOLA’s field preemption, on the one hand, and NBA’s mere conflict preemption, on the other, renders cases construing HOLA preemption inapposite to the question of whether NBA preemption applies. It is likely for this reason that almost no courts have addressed NBA preemption in the context of foreclosure litigation, despite the growing body of foreclosure cases circulating through the state and federal court systems.

*8 Aside from the one case Defendants cite which, in this Court’s view, erroneously applies the HOLA preemption analysis in the context of the NBA, Defendants provide no other authority for the proposition that Plaintiff’s state law claims, including § 2923.5, are preempted by the NBA. The few courts that have examined the NBA’s application to state foreclosure laws have concluded that “state laws regulating foreclosure are [ ] not preempted by NBA.” Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997, at *8 (D.Ariz. Feb.9, 2012). Gerber reached this conclusion after an extensive analysis of the NBA’s preemption provisions, and concluded that “there has never been a federal presence [ ] sufficient to displace the various types of state statutes governing foreclosure procedures. Indeed, foreclosure practices govern ‘acquisition and transfer of property,’ an area which the Supreme Court has already confirmed lies within states’ presumed powers to regulate.” See id. at *5 (quoting Watters, 550 U.S. at 11) (addressing NBA preemption and concluding that banks remain subject to state laws regarding, e.g., “acquisition and transfer of property”). Gerber also concluded that “foreclosure” was not among the NBA’s expressly preempted state laws in 12 C.F.R. § 34.4(a). Although the regulation listed “servicing,” the court found that “foreclosure” was not sufficiently related to “servicing” because “[t]he OCC went to the trouble of specificity concerning other phases of the loan’s existence (e.g., ‘processing,’ ‘origination’) but did not list ‘foreclosure,’ and it is therefore difficult to assume that it meant to include it within a ‘servicing’ catch-all.” Id. at *8. The court noted that such a reading would create the implausible result of “bring[ing] down … probably every state’s laws regarding foreclosure.” Id. See also Loder v. World Savings Bank, N.A., No. C11–00053 TEH, 2011 WL 1884733, at *7 (N.D.Cal. May 18, 2011) (expressing concern, in the context of a HOLA preemption argument, that “a broad interpretation of what it means to ‘service’ or ‘participate in’ a mortgage could operate to preempt most all California foreclosure statutes where the foreclosing entity is a national lender”).

The Court finds Gerber persuasive and adopts its reasoning with respect to Plaintiff’s state law claims asserted here, including under § 2923.5. As the Supreme Court has explained, the NBA leaves national banks “subject to the laws of the State,” and banks “are governed in their daily course of business far more by the laws of the State than of the nation.” Atherton v. FDIC, 519 U.S. 213, 222, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (quoting Nat’l Bank v. Commonwealth, 75 U.S. 353, 362 (1869)). The Supreme Court has also noted the states’ longstanding interest in regulating the foreclosure process, and has imposed a clear statement rule on any statutes that could potentially be construed to impinge on that interest. See BFP v. Resolution Trust Corp., 511 U.S. 531, 541–44, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (describing long history of state regulation of the foreclosure process and declining to read a provision of the Bankruptcy Code as disrupting “the ancient harmony that foreclosure law and fraudulent conveyance law … have heretofore enjoyed”).

*9 The OCC itself has confirmed that state foreclosure laws are not generally within the scope of NBA preemption. See Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg.1904–01, at 1912 & n. 59 (Jan. 23, 2004) (OCC final rule describing state foreclosure laws as generally among laws that “do not attempt to regulate the manner or content of national banks’ real estate lending, but that instead form the legal infrastructure that makes it practicable to exercise a permissible Federal power”).

If there were any doubt as to whether preemption under HOLA was equivalent to preemption under the NBA, the recent Dodd–Frank legislation lays such doubt to rest. The Dodd–Frank Act changed the above-described HOLA preemption analysis and mandates that HOLA preemption would now follow the more lenient NBA conflict preemption standard. See Settle v. World Sav. Bank, F.S.B., ED CV 11–00800 MMM, 2012 WL 1026103, at *13 (C.D.Cal. Jan.11, 2012) (“The Dodd–Frank Act provides that HOLA does not occupy the field in any area of state law and that preemption is governed by the standards applicable to national banks.”) (quoting Davis v. World Savings Bank, FSB, 806 F.Supp.2d 159, 166 n. 5 (D.D.C.2011); citing Pub.L. No. 111–203, 2010 HR 4173 § 1046 (“Any determination by a court or by the Director or any successor officer or agency regarding the relation of State law to a provision of this chapter or any regulation or order prescribed under this chapter shall be made in accordance with the laws and legal standards applicable to national banks regarding the preemption of State law…. Notwithstanding the authorities granted under sections 4 and 5, this Act does not occupy the field in any area of State law.”). Thus, not only is HOLA preemption inapplicable to NBA cases, it is no longer applicable at all to any post-Dodd-Frank transactions.

ii. No Conflict Preemption

Under NBA conflict preemption, Plaintiff’s § 2923.5 claim does not impose any constraints on banks’ lending or servicing powers. Rather, it “only incidentally affect[s] the exercise of national banks’ real estate lending powers” by requiring certain procedural hurdles before a bank may foreclose on real property and transfer said property to a new owner. See 12 C.F.R. § 34.4(b) (exempting from NBA preemption any state laws that incidentally affect banks and concern, inter alia, contracts, torts, rights to collect debts, or acquisition and transfer of real property); Mabry v. Superior Court, 185 Cal.App.4th 208, 231, 110 Cal.Rptr.3d 201 (2010) (finding that § 2923.5 does not create a right to loan modification and that failure to comply with its requirements can only result in a delay in foreclosure).

Other cases are in accord and confirm that Plaintiff’s state common law claims are similarly outside the scope of NBA preemption. See, e.g., Lucia v. Wells Fargo Bank, N.A., 798 F.Supp.2d 1059, 1065–66 (N.D.Cal.2011) (White, J.) (finding that UCL, state contract, and Rosenthal Act claims arising out of failed modifications of home mortgage loans under HAMP were not preempted because the “theories upon which the claims are based do not necessarily impinge upon the bank’s obligations under the NBA” because they are “state laws of general application”); Sutclife v. Wells Fargo Bank, N.A., C–11–06595 JCS, 2012 WL 1622665, at *23 (N.D.Cal. May 9, 2012) (same); see also Gutierrez v. Wells Fargo & Co., C07–05923 WHA, 2010 WL 1233885 (N.D.Cal. Mar.26, 2010) (finding that UCL claims based on banks’ alleged deceptive business practices related to fees and other servicing conduct are not preempted when they do not challenge “a bank’s right to establish a fee,” but rather challenge, e.g., “a bank’s right to deceive or unfairly induce customers into paying them”) (citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“State laws of general application, which merely require all businesses (including national banks) to refrain from fraudulent, unfair, or illegal behavior, do not necessarily impair a bank’s ability to exercise its [federally-authorized] powers.”)).3

*10 Indeed, as noted above, if the Court accepted Defendant’s arguments, it would be questionable whether any of California’s (or other states’) foreclosure laws could avoid preemption. Yet federal law provides no legal framework for foreclosure. Mabry, 185 Cal.App.4th at 231, 110 Cal.Rptr.3d 201. Thus, Defendant essentially asks the Court to eviscerate decades of state foreclosure regulation. The Court finds no authority to do so.

 

 

Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)

 

INTERESTING ATTORNEY FRAUD ALLEGATION IN 5.1M TIBURON SHORT SALE AFTER F/C  SUIT IN MARIN

 

Plaintiffs allege that on January 12, 2012, the day the short sale was to close, Michael Zhao, Buyer Defendants’ real estate agent, informed SPS that defendants were attempting to defraud plaintiffs. Id. at ¶ 34. The FAC alleges that Zhao told SPS that defendants prepared two sets of purported short sale documents. Id. One set, which was given to SPS for its review, provided that no proceeds from the sale would be directed to the Attorney Defendants or would be used to satisfy any junior liens on the property. Id. at ¶ 35. The second set of documents, which reflected a higher purchase price than the documents presented to SPS, provided that some proceeds would go to the Attorney Defendants as well as other junior lien holders. Id. Plaintiffs allege that defendants intended the second set of documents to be recorded as the actual transaction. Id.

Select Portfolio Servicing v. Valentino, C 12-0334 SI, 2012 WL 2343754 (N.D. Cal. June 20, 2012)

California’s antideficiency rules latest holding

29 Jun

 

Bank of America v Mitchell (2012)

The Editor’s Take: Watching our courts attempt to steer California’s antideficiency rules through the treacherous currents of multiple security contexts is always somewhat painful. Code of Civil Procedure §580d, enacted in 1939, prohibits recovery of a deficiency judgment after a nonjudicial sale, which seems straightforward enough at the start. But 24 years later, the California Supreme Court held that this prohibition did not apply to a creditor suing on its junior note after having been sold out in a senior foreclosure sale (the “sold-out junior exception”). Roseleaf Corp. v Chierighino (1963) 59 C2d 35, 41, 27 CR 873. But then, 30 years after that, a court of appeal held that this sold-out junior exception did not apply to a creditor who held both the senior and junior notes. Simon v Superior Court (1992) 4 CA4th 63, 71, 5 CR2d 428. So from then on, we had a “being your own junior” exception to the “sold-out junior” exception.

A decade after that came two more exceptions to the exception to the exception: The court in Ostayan v Serrano Reconveyance Co. (2000) 77 CA4th 1411, 1422, 92 CR2d 577, , allowed a two-note-holding creditor to foreclose on its junior deed of trust and sell the property subject to its own senior encumbrance (although that is not a §580d issue). More importantly, National Enters., Inc. v Woods (2001) 94 CA4th 1217, 115 CR2d 37, allowed the holder of two notes to judicially foreclose on the first one and to sell the second note to a third party, who then was held able to sue on it as a sold-out junior. This was technically not a §580d issue, since the senior foreclosure was not by power of sale, but the reasoning made it look like we were going to have a “third party transferee” or “unbundling the package” exception to the “being your own junior” exception of Simon. It began to look like Simon would be eaten away with exceptions, especially when the original lender made a timely divestment of one of its notes.

But instead, we now learn from Mitchell that the Simon doctrine will be applied against a third party transferee who took the junior paper from the common lender after that lender had trustee sold the property under its senior deed of trust. Both National Enters. and Mitchell involved a transfer of the junior loan after a sale under the senior security, differing only with regard to whether the senior foreclosure was judicial or nonjudicial, which distinction should perhaps matter more to the selling senior than to the nonselling junior.

So many factors potentially affect the outcomes in these situations that it is really impossible to make any confident predictions. How much does it matter whether the two loans were made at the same or different times? Whether they were for related or entirely different purposes? Whether one of them was transferred (and before or after the other was foreclosed)? Whether the transferred loan was the senior or junior? Whether the one foreclosed was the senior or junior? Whether the foreclosure was judicial or nonjudicial? I can point out these distinctions, but that doesn’t mean I can forecast their effect on the outcome of the next case that comes up. —Roger Bernhardt

 

204 Cal.App.4th 1199 (2012)

139 Cal. Rptr. 3d 562

BANK OF AMERICA, N.A., Plaintiff and Appellant,
v.
MICHAEL MITCHELL, Defendant and Respondent.

No. B233924.

Court of Appeals of California, Second District, Division Four.

April 10, 2012.

1202*1202 The Dreyfuss Firm and Bruce Dannemeyer for Plaintiff and Appellant.

Law Offices of Ulric E. J. Usher, Ulric E. J. Usher and Richard Kavonian for Defendant and Respondent.

OPINION

SUZUKAWA, J.—

Appellant Bank of America’s (Bank) predecessor in interest loaned respondent Michael Mitchell (Mitchell) $315,000 to purchase a home, secured by two notes and first and second deeds of trust. When Mitchell defaulted on the loan, the lender foreclosed and sold the property. The lender then assigned the second deed of trust to the Bank, which initiated the present action to recover the indebtedness evidenced by the note. Mitchell demurred, and the court sustained the demurrer without leave to amend, concluding that the Bank’s action was barred by California’s antideficiency law. The Bank appeals from the judgment of dismissal and from the subsequent award of prevailing party attorney fees to Mitchell. We affirm.

STATEMENT OF THE CASE

The Bank filed the present action on September 16, 2010, and it filed the operative first amended complaint (complaint), asserting causes of action for 1203*1203 breach of contract, open book account, and money lent, on December 2, 2010. The complaint alleges that Mitchell obtained a loan from GreenPoint Mortgage Funding, Inc. (GreenPoint), on or about September 14, 2006. The loan was evidenced by a note secured by a deed of trust recorded against real property located at 45245 Kingtree Avenue, Lancaster, California (the property). The security for the loan was eliminated by a senior foreclosure sale in 2009. Because Mitchell defaulted on payments owing on the loan, the complaint alleged that he breached the terms of the contract, resulting in damage to the Bank in the principal sum of $63,000, plus interest at the note rate of 11.625 percent from March 1, 2010, through the date of judgment.

Mitchell demurred. Concurrently with his demurrer, he sought judicial notice of several documents, including two deeds of trust, a notice of trustee’s sale, and a trustee’s deed upon sale. On the basis of these documents, he contended that on September 14, 2006, GreenPoint made him two loans to purchase the property, with a note and deed of trust for each loan recorded against the property. The first note and deed of trust were for $252,000, and the second note and deed of trust were for $63,000. Both deeds of trust were recorded on September 21, 2006. Mitchell defaulted on the notes sometime in 2008. A notice of default was recorded, and the property was sold at trustee sale for $53,955.01 on November 6, 2009. More than a year later, on November 18, 2010, GreenPoint assigned the second deed of trust to Bank of America, which subsequently filed the present action to recover on the second note and deed of trust. Mitchell contended that the action was barred by California’s antideficiency legislation, which bars a deficiency judgment following nonjudicial foreclosure of real property.

The trial court granted Mitchell’s request for judicial notice and sustained the demurrer without leave to amend on January 27, 2011, concluding that the Bank’s breach of contract and common counts claims seek recovery of the balance owed on the obligation secured by the second deed of trust and, thus, are barred by the antideficiency statutes as a matter of law. On April 7, 2011, the court awarded Mitchell prevailing party attorney fees of $8,400 and costs of $534.72.

Judgment for Mitchell was entered on July 8, 2011. The Bank appealed from the award of attorney fees on June 17, 2011, and from the judgment on August 8, 2011. We ordered the two appeals consolidated on October 13, 2011.

STANDARD OF REVIEW

“A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the sustaining of a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of 1204*1204 action or discloses a complete defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189]Cryolife, Inc. v. Superior Court (2003) 110 Cal.App.4th 1145, 1152 [2 Cal.Rptr.3d 396].) 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. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [6 Cal.Rptr.3d 457, 79 P.3d 569].) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.)” (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 205 [129 Cal.Rptr.3d 433].)

“If we determine the facts as pleaded do not state a cause of action, we then consider whether the court abused its discretion in denying leave to amend the complaint. (McClain v. Octagon Plaza, LLC [(2008)] 159 Cal.App.4th [784,] 791-792 [71 Cal.Rptr.3d 885].) It is an abuse of discretion for the trial court to sustain a demurrer without leave to amend if the plaintiff demonstrates a reasonable possibility that the defect can be cured by amendment. (Schifando v. City of Los Angeles[,supra,] 31 Cal.4th [at p.] 1081. . . .)” (Estate of Dito (2011) 198 Cal.App.4th 791, 800-801 [130 Cal.Rptr.3d 279].)

Attorney fee awards normally are reviewed for abuse of discretion. In the present case, however, the Bank contends that the trial court lacked the authority as a matter of law to award attorney fees in any amount. Accordingly, our review is de novo. (Connerly v. Sate Personnel Bd. (2006) 37 Cal.4th 1169, 1175 [39 Cal.Rptr.3d 788, 129 P.3d 1].)

DISCUSSION

I. The Trial Court Properly Sustained the Demurrer Without Leave to Amend

A. Code of Civil Procedure Section 580d

(1) “`In California, as in most states, a creditor’s right to enforce a debt secured by a mortgage or deed of trust on real property is restricted by statute. Under California law, “the creditor must rely upon his security before enforcing the debt. (Code Civ. Proc., §§ 580a, 725a, 726.) If the security is insufficient, his right to a judgment against the debtor for the deficiency may be limited or barred . . . .” [Citation.]’ [Citation.]” (In re Marriage of Oropallo (1998) 68 Cal.App.4th 997, 1003 [80 Cal.Rptr.2d 669].)

Code of Civil Procedure section 580d (section 580d) prohibits a creditor from seeking a judgment for a deficiency on all notes “secured by a deed of 1205*1205 trust or mortgage upon real property . . . in any case in which the real property . . . has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.”[1] The effect of section 580d is that “`the beneficiary of a deed of trust executed after 1939 cannot hold the debtor for a deficiency unless he uses the remedy of judicial foreclosure. . . .'” (Simon v. Superior Court (1992) 4 Cal.App.4th 63, 71 [5 Cal.Rptr.2d 428] (Simon).)

(2) In Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35 [27 Cal.Rptr. 873, 378 P.2d 97] (Roseleaf), the California Supreme Court held that where two deeds of trust are held against a single property and the senior creditor nonjudicially forecloses on the property, section 580d does not prohibit the holder of the junior lienor “whose security has been rendered valueless by a senior sale” from recovering a deficiency judgment. (59 Cal.2d at p. 39.) There, defendant Chierighino purchased a hotel from plaintiff Roseleaf Corporation. The consideration for the hotel included three notes, each secured by a second trust deed on parcels owned by Chierighino. After the sale of the hotel, the third parties who held the first trust deeds on the three parcels nonjudicially foreclosed on them, rendering Roseleaf’s second trust deeds valueless. Roseleaf then brought an action to recover the full amount unpaid on the three notes secured by the second trust deeds. (Id. at p. 38.)

The trial court entered judgment for Roseleaf. Chierighino appealed, contending that Roseleaf’s action was barred by section 580d, but the Supreme Court disagreed and affirmed. It explained that the purpose of section 580d was to “put judicial enforcement [of powers of sale] on a parity with private enforcement.” (Roseleaf, supra, 59 Cal.2d at p. 43.) That purpose, the court said, would not be served by applying section 580d against a nonselling junior lienor: “Even without the section the junior has fewer rights after a senior private sale than after a senior judicial sale. He may redeem from a senior judicial sale (Code Civ. Proc., § 701), or he may obtain a deficiency judgment. [Citations.] After a senior private sale, the junior has no right to redeem. This disparity of rights would be aggravated were he also denied a right to a deficiency judgment by section 580d. There is no purpose in denying the junior his single remedy after a senior private sale while leaving 1206*1206 him with two alternative remedies after a senior judicial sale. The junior’s right to recover should not be controlled by the whim of the senior, and there is no reason to extend the language of section 580d to reach that result.” (59 Cal.2d at p. 44.)

In Simon, supra, 4 Cal.App.4th 63, the court held that the rule articulated in Roseleafdid not apply to protect a junior lienor who also held the senior lien. There, Bank of America (Lender) lent the Simons $1,575,000, for which the Simons gave it two separate promissory notes. Each note was secured by a separate deed of trust naming the Bank as beneficiary and describing the same real property (the property). Subsequently, the Simons defaulted on the senior note and the Lender foreclosed. The Lender purchased the property at the nonjudicial foreclosure sale and then filed an action to recover the unpaid balance of the junior note. (Id. at p. 66.)

(3) After detailing the history of the antideficiency legislation and the governing case law, the court held that section 580d barred the Lender’s deficiency causes of action. It noted that in Roseleaf, the Supreme Court explained that the purpose of section 580d was to create parity between judicial and nonjudicial enforcement. Such parity would not be served “if [the Lender] here is permitted to make successive loans secured by a senior and junior deed of trust on the same property; utilize its power of sale to foreclose the senior lien, thereby eliminating the Simons’ right to redeem; and having so terminated that right of redemption, obtain a deficiency judgment against the Simons on the junior obligation whose security [the Lender], thus, made the choice to eliminate.” (Simon, supra, 4 Cal.App.4th at p. 77.) The court continued: “Unlike a true third party sold-out junior, [the Lender’s] right to recover as a junior lienor which is also the purchasing senior lienor is obviously not controlled by the `whim of the senior.’ We will not sanction the creation of multiple trust deeds on the same property, securing loans represented by successive promissory notes from the same debtor, as a means of circumventing the provisions of section 580d. [Fn. omitted.] The elevation of the form of such a contrived procedure over its easily perceived substance would deal a mortal blow to the antideficiency legislation of this state. Assuming, arguendo, legitimate reasons do exist to divide a loan to a debtor into multiple notes thus secured, section 580d must nonetheless be viewed as controlling where, as here, the senior and junior lenders and lienors are identical and those liens are placed on the same real property. Otherwise, creditors would be free to structure their loans to a single debtor, and the security therefor, so as to obtain on default the secured property on a trustee’s sale under a senior deed of trust; thereby eliminate the debtor’s right of redemption thereto; and thereafter effect an excessive recovery by obtaining a deficiency judgment against that debtor on an obligation secured by a junior lien the creditor chose to eliminate.” (Id. at pp. 77-78.)

1207*1207 B. Simon and Roseleaf Bar a Deficiency Judgment in the Present Case

(4) Simon is dispositive of the present case. Here, Mitchell executed two promissory notes, for $252,000 and $63,000, secured by the first and second deeds of trust in the property. As in Simon, the first and second deeds of trust were held by a single lender, GreenPoint. GreenPoint, as beneficiary under the first deed of trust, chose to exercise its power of sale by holding a nonjudicial foreclosure sale. GreenPoint thus was not a “sold-out junior” lienor and would not have been permitted to obtain a deficiency judgment against Mitchell under the rule articulated in Simon. The result is no different because GreenPoint, after the trustee sale, assigned the second deed of trust to the Bank. “An assignment transfers the interest of the assignor to the assignee. Thereafter, `”[t]he assignee `stands in the shoes’ of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.”‘ [Citation.]” (Manson, Iver & York v. Black (2009) 176 Cal.App.4th 36, 49 [97 Cal.Rptr.3d 522].) Accordingly, because GreenPoint could not have obtained a deficiency judgment against Mitchell, the Bank also is precluded from doing so.

The Bank urges that Simon is distinguishable because in that case, the lender ultimately purchased the property for a credit bid at its own foreclosure sale, whereas in this case, the property was sold to a third party. The Bank thus contends that “[u]nder Simon if (a) both loans are held by the same lender and (b) that lender acquires the property at the foreclosure sale, the risk of manipulation by the lender is too great, so no deficiency is allowed. But if either is missing, the risk of manipulation is reduced, and a deficiency should be allowed.” Like the trial court, we reject the contention that the lender must have acquired the property at the foreclosure sale forSimon to apply. Although Simon noted the lender’s purchase at the foreclosure sale, that purchase was not material to its holding. Instead, the court’s focus was on the lender’s dual position as holder of the first and second deeds of trust, and its consequent ability to protect its own interest. (Simon, supra, 4 Cal.App.4th at p. 72 [“[The Lender] was not a third party sold-out junior lienholder as was the case inRoseleaf. As the holder of both the first and second liens, [the Lender] was fully able to protect its secured position. It was not required to protect its junior lien from its own foreclosure of the senior lien by the investment of additional funds. Its position of dual lienholder eliminated any possibility that [the Lender], after foreclosure and sale of the liened property under its first lien, might end up with no interest in the secured property, the principal rationale of the court’s decision in Roseleaf.“].)

The Bank further contends that the present case is distinguishable from Simonbecause the presence of a third party purchaser at the foreclosure sale 1208*1208prevented the kind of “manipulation” possible in Simon. According to the Bank, “[w]hen the foreclosure sale results in acquisition by a third party, who competed with the foreclosing lender and all other bidders at the public auction, a low-ball bid is impossible. If the foreclosing lender bids below market, it will be outbid; it will not acquire the property. The lender cannot manipulate the price. The presence of third party bids demonstrates the market is at work to achieve a fair price. Third party bids provide the functional equivalent of a right of redemption. By outbidding the lender, the third party prevents the lender from manipulating the process.” We disagree. Whatever the merits of the Bank’s argument as a matter of policy, it has no support in the statute, and the Bank suggests none. Indeed, nothing in the antideficiency legislation suggests that the presence of a third party bidder at a foreclosure sale excepts the sale from the legislation and permits the lender to seek a deficiency judgment.[2]

For all the foregoing reasons, section 580d bars the deficiency judgment the Bank seeks in the present case and, thus, the trial court properly sustained the demurrer. Because the Bank suggests no way in which the legal defects identified could be cured by amendment, the demurrer was properly sustained without leave to amend.

II. The Trial Court Properly Awarded Mitchell Attorney Fees

A. Relevant Facts

Following the trial court’s order sustaining Mitchell’s demurrer without leave to amend, Mitchell filed a motion for attorney fees pursuant to Civil Code section 1717. Two days later, on February 10, 2011, the Bank filed a request for dismissal with prejudice. It then filed opposition to the motion for attorney fees, contending that there could be no prevailing party within the meaning of Civil Code section 1717 because it had voluntarily dismissed its action.[3]

On March 8, 2011, the trial court vacated the dismissal and granted Mitchell’s motion for attorney fees. It explained that because it had sustained a demurrer to the Bank’s complaint without leave to amend, the Bank did not have a right pursuant to Code of Civil Procedure section 581 to voluntarily dismiss the action, and the dismissal had been entered in error. It awarded Mitchell attorney fees of $8,400 and costs of $534.72.

1209*1209 B. Analysis

The Bank contends that the trial court lacked authority to award Mitchell attorney fees. It urges that under Code of Civil Procedure section 581, it had an absolute right to dismiss its case voluntarily, so long as it did so with prejudice. Because it did so, there was no prevailing party pursuant to Civil Code section 1717, subdivision (b)(2), and thus the trial court lacked authority to award Mitchell contractual attorney fees.

(5) The Bank is correct that under Civil Code section 1717, a defendant in a contract action is not deemed a prevailing party where the plaintiff voluntarily dismisses the action. (Id., subd. (b)(2) [“Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”].) Therefore, if the Bank’s dismissal was valid, the Bank is correct that the trial court erred in awarding attorney fees. The trial court determined, however, that the Bank’s dismissal was not valid, the issue to which we now turn.

(6) Pursuant to Code of Civil Procedure section 581, a plaintiff may voluntarily dismiss an action, “with or without prejudice,” at any time before the “actual commencement of trial.” (§ 581, subds. (b)(1), (c).) Further, a plaintiff may voluntarily dismiss an action with prejudice “at any time before the submission of the cause.” (Estate of Somers (1947) 82 Cal.App.2d 757, 759 [187 P.2d 433].) Upon the proper exercise of the right of voluntary dismissal, a trial court “`would thereafter lack jurisdiction to enter further orders in the dismissed action.’ (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 784 [176 Cal.Rptr. 104, 632 P.2d 217].) `Alternatively stated, voluntary dismissal of an entire action deprives the court of both subject matter and personal jurisdiction in that case, except for the limited purpose of awarding costs and . . . attorney fees. [Citations.]’ (Gogri v. Jack in the Box, Inc.(2008) 166 Cal.App.4th 255, 261 [82 Cal.Rptr.3d 629].)” (Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp. (2009) 174 Cal.App.4th 67, 76 [94 Cal.Rptr.3d 468].)

A plaintiff’s right to voluntarily dismiss an action before commencement of trial is not absolute, however. (Lewis C. Nelson & Sons, Inc. v. Lynx Iron Corp., supra, 174 Cal.App.4th at pp. 76-77Zapanta v. Universal Care, Inc. (2003) 107 Cal.App.4th 1167, 1171 [132 Cal.Rptr.2d 842].) “Code of Civil Procedure section 581 recognizes exceptions to the right; other limitations have evolved through the courts’ construction of the term `commencement of trial.’ These exceptions generally arise where the action has proceeded to a determinative adjudication, or to a decision that is tantamount to an adjudication.” (Harris v. Billings (1993) 16 Cal.App.4th 1396, 1402 [20 Cal.Rptr.2d 718].)

1210*1210 (7) The Supreme Court found such a “determinative adjudication” in Goldtree v. Spreckels (1902) 135 Cal. 666 [67 P. 1091] (Goldtree). There, the defendant’s demurrer to each of the plaintiff’s causes of action was sustained without leave to amend as to the first two. The plaintiff then filed a written request to dismiss the entire case, and the court clerk entered an order of dismissal. The trial court vacated the dismissal, and the plaintiff appealed. (Id. at pp. 667-668.) The Supreme Court affirmed: “In our opinion the subdivision of the section 581 of the Code of Civil Procedure in question cannot be restricted in its meaning to trials of the merits after answer, for there may be such a trial on a general demurrer to the complaint as will effectually dispose of the case where the plaintiff has properly alleged all the facts which constitute his cause of action. If the demurrer is sustained, he stands on his pleading and submits to judgment on the demurrer, and, if not satisfied, has his remedy by appeal. In such a case, we think, there would be a trial within the meaning of the code, and the judgment would cut off the right of dismissal, unless it was first set aside or leave given to amend. [¶] The clerk had no authority, therefore, to enter the dismissal, and being void the court rightly set it aside.” (Id. at pp. 672-673.)

(8) The Supreme Court reached a similar result in Wells v. Marina City Properties, Inc., supra, 29 Cal.3d 781 (Wells). There, the trial court sustained the defendant’s demurrer with leave to amend. The plaintiff failed to amend within the time provided, but instead sought to voluntarily dismiss the action without prejudice. The Supreme Court held that the voluntary dismissal was improperly entered: “[O]nce a general demurrer is sustained with leave to amend and plaintiff does not so amend within the time authorized by the court or otherwise extended by stipulation or appropriate order, he can no longer voluntarily dismiss his action pursuant to section 581, subdivision 1, even if the trial court has yet to enter a judgment of dismissal on the sustained demurrer.” (Id. at p. 789.)

In the present case, the trial court sustained defendant’s demurrer without leave to amend on January 27, 2011. Although the trial court had not yet entered a judgment of dismissal when the Bank filed a request for voluntary dismissal on February 10, 2011, as in Goldtree and Wells, the trial court had already made a determinative adjudication on the legal merits of the Bank’s claim. Accordingly, as in those cases, the Bank no longer had the right to voluntarily dismiss under Code of Civil Procedure section 581.

The Bank contends that the present case is distinguishable from Goldtree and Wellsbecause here it sought to dismiss with prejudice, while in those cases the attempted dismissal was without prejudice. We do not agree. The 1211*1211 court rejected a similar contention in Vanderkous v. Conley (2010) 188 Cal.App.4th 111 [115 Cal.Rptr.3d 249] (Vanderkous). There, the plaintiff and the defendant formerly had lived together on a multilot parcel owned by the plaintiff. An arbitration award entered after their relationship ended directed the parties to cooperate in a lot line adjustment that would result in the home and a garage on a single lot to be owned by the defendant, with the remainder of the parcel to be owned by the plaintiff. The plaintiff was also to have access and utility easements over the garage area for the benefit of his parcel. The easements were executed by the defendant and recorded, but the garage and surrounding property were never transferred because the plaintiff never recorded either the lot line adjustment or the grant deed to the defendant for the garage and setback area. When the plaintiff subsequently sought to record a subdivision map, the title company that was to record the map refused to do so because the grants of easement by the defendant created a cloud on the plaintiff’s title. The plaintiff thus filed a complaint for declaratory relief and to quiet title. (Id. at pp. 114-115.)

Following a trial, the court filed a statement of decision that ordered the defendant to execute a quitclaim deed in favor of the plaintiff, and ordered the plaintiff to compensate the defendant in an amount equal to the full market value of the garage area. If the parties could not agree on the amount the plaintiff was to pay the defendant, each party was ordered to submit an appraisal for the court’s final determination. The defendant submitted an appraisal that valued the garage area at $410,000, and the plaintiff submitted an appraisal that valued the property at $75,000, but also requested a continuance and an evidentiary hearing on the value of the property. The day before the evidentiary hearing, the plaintiff filed a request for dismissal with prejudice with the clerk. The trial court ruled that the plaintiff’s attempt to dismiss was void ab initio and ordered the plaintiff to pay the defendant $199,246 plus attorney fees and costs. (Vanderkous, supra, 188 Cal.App.4th at p. 116.)

(9) The plaintiff appealed, contending that the trial court lacked jurisdiction to set aside his voluntary dismissal of his action and to award attorney fees. (Vanderkous, supra, 188 Cal.App.4th at p. 117.) The court disagreed and affirmed the judgment. It explained: “Section 581, subdivision (d) provides that a complaint may be dismissed with prejudice when the plaintiff abandons it before the final submission of the case.Here, the court’s statement of decision following the three-day court trial, states `[t]he matter was deemed submitted on March 10, 2008, following receipt of closing briefs from both sides.’ The statement of decision resolved Vanderkous’s quiet title cause of action and his claim for declaratory relief, and ordered him to compensate Conley for the fair market value of property she was required to quitclaim to 1212*1212 him. [¶] … [¶] Because Vanderkous has not convinced us that he had an absolute right to dismiss his complaint, we also reject his argument that the trial court lacked jurisdiction to set aside his attempted dismissal. [Citations.] A contrary rule would enable Vanderkous to avoid compliance with the court’s decision and would undermine the trial court’s authority to provide for the orderly conduct of proceedings before it and compel obedience to its judgments, orders, and process. (See § 128, subd. (a).)” (Vanderkous, supra, at pp. 117-118; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2011) ¶ 11:28, p. 11-16 (rev. # 1, 2011) [“[O]nce the case is finally submitted for decision, there is no further right to dismiss with prejudice. At that point, plaintiffs cannot avoid an adverse ruling by abandoning the case.”].)

The present case is analogous. As in Vanderkous, the Bank sought to dismiss afterthe court made a dispositive ruling against it, not before. To allow the Bank to dismiss at that late stage would permit procedural gamesmanship inconsistent with the trial court’s authority to provide for the orderly conduct of proceedings before it.

We do not agree with the Bank that its right to dismiss is supported by this division’s decision in Marina Glencoe, L.P. v. Neue Sentimental Film AG (2008) 168 Cal.App.4th 874 [85 Cal.Rptr.3d 800] (Marina Glencoe). There, after the plaintiff presented its evidence on the single bifurcated issue of alter ego liability, the defendant moved for judgment. The court heard argument on the motion but did not rule; the following day, before a ruling on the pending motion, the plaintiff voluntarily dismissed the action with prejudice. The defendant moved for prevailing party attorney fees, and the court denied the motion, concluding that the defendant was not entitled to such fees under Civil Code section 1717. The defendant appealed. We affirmed, noting that because the plaintiff voluntarily dismissed with prejudice, “[i]ts intent was to end the litigation, not to manipulate the judicial process to avoid its inevitable end. This was entirely proper.” (168 Cal.App.4th at p. 878.)

The present case is distinguishable from Marina Glencoe. In Marina Glencoe, the plaintiff dismissed its action before the trial court ruled on a dispositive motion, and thus judgment in the defendant’s favor was not inevitable. In the present case, in contrast, the trial court had already sustained Mitchell’s demurrer without leave to amend, and thus judgment against the Bank had already “ripened to the point of inevitability.” (Marina Glencoe, supra, 168 Cal.App.4th at p. 878.) Accordingly, unlike in Marina Glencoe, the Bank no longer had the right to voluntarily dismiss its action, either with or without prejudice.

1213*1213 DISPOSITION

We affirm the judgment of dismissal and award of attorney fees. Mitchell shall recover his appellate costs.

Willhite, Acting P. J., and Manella, J., concurred.

[1] The full text of section 580d is as follows: “No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.

“This section does not apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or which is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).”

[2] Although not relevant to our analysis, we note that the property’s foreclosure sale purchase price of $53,955.01 does not convincingly demonstrate, as the Bank asserts, that the presence of a third party bidder made a “low-ball bid . . . impossible.”

[3] In its opposition, the Bank represented to the court as follows: “The litigation is over. There will be no appeal.”

 

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