1

Filed 9/18/14 Estate of Johnson CA1/3 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

FIRST APPELLATE DISTRICT 

DIVISION THREE 

Estate of EDITH JOHNSON, Deceased. 

JOSIENA BROWN, Individually and as 

Administrator, etc., 

 Petitioner and Appellant, 

v. 

MTC FINANCIAL INC., 

 Objector and Respondent. 

 A134733 

 (City & County of San Francisco 

 Super. Ct. No. PES10293632) 

Estate of EDITH JOHNSON, Deceased. 

JOSIENA BROWN, Individually and as 

Administrator, etc., 

 Petitioner and Appellant, 

v. 

FINANCIAL FREEDOM SENIOR 

FUNDING CORPORATION et al., 

 Objectors and Respondents. 

 A135452 

 (City & County of San Francisco 

 Super. Ct. No. PES10293632) 
2

Estate of EDITH JOHNSON, Deceased. 

JOSIENA BROWN, Individually and as 

Administrator, etc., 

 Petitioner, 

v. 

FINANCIAL FREEDOM ACQUISITION, 

LLC et al., 

 Objectors and Respondents; 

RICHARD A. CANATELLA, 

 Objector and Appellant. 

 A136389 

 (City & County of San Francisco 

 Super. Ct. No. PES10293632) 

I. INTRODUCTION 

In this probate matter, appellant Josiena Brown, individually and as administrator 

of the estate of her mother, Edith Johnson, filed petitions alleging respondents MTC 

Financial Inc. (MTC), Financial Freedom Senior Funding Corporation (FFSFC), 

Financial Freedom Acquisition, LLC (FFA) and Mortgage Electronic Registration 

Systems, Inc. (MERS) engaged in racial discrimination in connection with their efforts to 

foreclose on real property owned by Johnson’s estate. The trial court sustained, without 

leave to amend, MTC’s demurrer to Brown’s second amended petition (SAP). The court 

later sustained, without leave to amend, the demurrers of the remaining respondents to 

Brown’s third amended petition (TAP). 

Brown filed two appeals, challenging the dismissal of her claims against MTC 

(No. A134733) and the dismissal of her claims against the other respondents 

(No. A135452). In addition, Brown’s attorney, Richard Canatella, appealed a trial court 

order imposing sanctions on him for making a false allegation in the TAP 

(No. A136389). We consolidated the three appeals for purposes of oral argument and 
3

decision.1

 We affirm the trial court’s dismissal of the SAP (as to MTC) and the TAP (as 

to the other respondents). We reverse the sanctions award against Canatella. 

II. BACKGROUND2

Brown is African-American. Her mother, Johnson, was also African-American. 

In 2005, Johnson entered a reverse mortgage secured by real property on Jamestown 

Avenue in San Francisco (the property). Pursuant to the applicable note and deed of 

trust, FFSFC advanced money to Johnson. The deed of trust provides that, upon 

Johnson’s death, all borrowed amounts would be due and payable. FFSFC initially held 

the beneficial interest in the deed of trust and later transferred the beneficial interest to 

MERS, as nominee for FFSFC. MERS later transferred the beneficial interest to FFA, 

which Brown describes as FFSFC’s “corporate foreclosure arm.” MTC was a trustee 

under the deed of trust. 

Johnson died on January 1, 2010. In early 2010, Brown, who was living at the 

Jamestown Avenue property, received repayment notices and demands from FFSFC, 

which stated the amount due under the reverse mortgage was nearly $300,000. During 

this time period, FFSFC also sent an inspector who inspected the property and obtained 

financial and other information from Brown and her daughter. In July 2010, FFSFC 

issued a notice of intent to foreclose. 

Also in July 2010, Brown was appointed administrator of Johnson’s estate. Brown 

sought to sell the property to avoid a foreclosure. In August 2010, Brown published 

notice of a private sale of the property, but she received no offers. 

On October 25, 2010, respondents recorded a notice of default. In January 2011, 

respondents recorded a notice of trustee’s sale, setting the foreclosure sale for February 

22, 2011. 

 1

 In No. A136389, appellant Canatella filed a request for judicial notice of the 

appendices filed in all three appeals. We deferred consideration of that request until our 

decision on the merits. In light of our consolidation of the three appeals, we deny the 

request for judicial notice as moot. 

2

 We take our summary of the underlying facts from Brown’s allegations in the 

SAP and the TAP. 
4

Brown sought and obtained temporary injunctive relief (from the superior court 

and from the federal district court, to which this action was removed in May 2011) 

preventing the foreclosure sale. After the federal court remanded the case, the trial court 

(Judge Quidachay) entered an order on September 20, 2011, denying Brown’s request for 

a preliminary injunction and dissolving any temporary restraining order or injunction in 

effect. 

The property was sold at a nonjudicial foreclosure sale on November 1, 2011, for 

$275,000.01. Brown had scheduled a probate auction sale for December 6, 2011, had 

received an offer of $228,000, and hoped to receive additional, higher bids. 

As we discuss below, in her petitions seeking to prevent (and now seeking redress 

for) respondents’ allegedly wrongful foreclosure sale, Brown alleges respondents 

conspired to, and did, discriminate against her on the basis of her race. Brown asserts the 

nonjudicial foreclosure sale and respondents’ related actions leading up to the foreclosure 

(outlined above) were in furtherance of the conspiracy. Brown contends respondents 

were motivated by racial animus and intentionally discriminated against her. 

As noted, the trial court sustained, without leave to amend, MTC’s demurrer to the 

SAP and the demurrers of the remaining respondents to the TAP.3

 

III. DISCUSSION 

A. The Demurrers 

1. Standard of Review 

In reviewing whether the trial court erred in sustaining respondents’ demurrers 

without leave to amend, we review the operative petition (the SAP for MTC; the TAP for 

the other respondents) de novo to determine whether it alleges facts sufficient to state a 

cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 

 3

 The court entered judgments of dismissal as to MTC and FFSFC. Although the 

court did not enter a separate judgment of dismissal as to FFA and MERS, the court’s 

order sustaining their demurrer without leave to amend also stated the case was dismissed 

with prejudice. It is appropriate to construe the trial court’s order as an appealable order 

dismissing the case as to FFA and MERS. (See Hudis v. Crawford (2005) 

125 Cal.App.4th 1586, 1590, fn. 4.) 
5

25 Cal.4th 412, 415.) “ ‘ “We treat the demurrer as admitting all material facts properly 

pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We 

also consider matters which may be judicially noticed.” [Citation.] Further, we give the 

complaint a reasonable interpretation, reading it as a whole and its parts in their context. 

[Citation.] When a demurrer is sustained, we determine whether the complaint states 

facts sufficient to constitute a cause of action. [Citation.] And when it is sustained 

without leave to amend, we decide whether there is a reasonable possibility that the 

defect can be cured by amendment: if it can be, the trial court has abused its discretion 

and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] 

The burden of proving such reasonable possibility is squarely on the plaintiff.’ ” (Zelig v. 

County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) 

2. Brown’s Federal Civil Rights Claims 

In the SAP and the TAP, Brown alleges respondents conspired to, and did, 

discriminate against her on the basis of her race in violation of federal civil rights and 

antidiscrimination laws, including title 42 United States Code sections4

 1981, 1982, 1985 

and 3604 (first through third causes of action in the SAP; first through fourth causes of 

action in the TAP).5

 Brown asserts the nonjudicial foreclosure sale and related actions 

taken by respondents were in furtherance of the conspiracy. As we will discuss, we 

conclude Brown’s allegations are insufficient to withstand a demurrer. 

Brown’s principal theory is that respondents, in taking steps toward foreclosure 

and in conducting the foreclosure sale, were motivated by racial animus and intentionally 

 4

 All undesignated section references are to title 42 of the United States Code. 

5

 Brown also asserts claims under California civil rights statutes (Civ. Code, §§ 43, 

51, 52.1, fourth cause of action in SAP; Civ. Code, § 52.1, fifth cause of action in TAP), 

as well as claims for interference with administrative duties and injunctive relief (fifth 

and sixth causes of action in SAP). In her opening appellate briefs, Brown makes no 

argument that the trial court’s dismissal of these causes of action was erroneous. She 

therefore has forfeited any such argument. (See Supervalu, Inc. v. Wexford Underwriting 

Managers, Inc. (2009) 175 Cal.App.4th 64, 84, fn. 5.) 
6

discriminated against her. Even under federal notice pleading standards,6

 “complaints 

based on civil rights statutes must include specific allegations of facts showing a 

violation of rights ‘instead of a litany of general conclusions that shock but have no 

meaning.’ ” (Waldron v. Rotzler (N.D.N.Y. 1994) 862 F.Supp. 763, 768 (Waldron); 

accord, Catsouras, supra, 181 Cal.App.4th at p. 891 [“mere conclusions” are insufficient 

to state a claim under federal Civil Rights Act; “ ‘[s]ome particularized facts’ ” are 

needed]; Bach, supra, 147 Cal.App.3d at p. 564 [same]; Akhavein v. Argent Mortgage 

Co. (N.D.Cal. Jul. 18, 2009, No. 5:09–cv–00634 RMW (RS)) 2009 U.S.Dist. LEXIS 

61796, pp. *15–17 (Akhavein).)7

 Accordingly, a plaintiff alleging intentional 

discrimination in violation of federal civil rights laws must “plead facts which establish 

that defendants’ actions were racially motivated and purposefully discriminatory.” 

(Waldron, supra, 862 F.Supp. at p. 768 [§ 1981 claim]; id. at p. 769 [§ 1982 claim].)8

 

The plaintiff must allege facts supporting the inference of a causal link between the 

defendant’s actions and the plaintiff’s race; conclusory allegations are not sufficient. 

(Grimes v. Fremont General Corp. (S.D.N.Y. 2011) 785 F.Supp.2d 269, 296 (Grimes) 

[§§ 1981, 1982]; see id. at pp. 289–290, 292, fn. 33 [stating that claim under provisions 

of federal Fair Housing Act (FHA), including §§ 3604, subd. (b) and 3605, subd. (a), was 

 6

 The court in Bach v. County of Butte (1983) 147 Cal.App.3d 554 at pages 560–

563 (Bach) applied federal law to determine whether a complaint states a cause of action 

under a provision of the federal Civil Rights Act (§ 1983), although acknowledging that 

prior courts had assumed that California pleading laws should apply. (Accord, Catsouras 

v. Department of California Highway Patrol (2010) 181 Cal.App.4th 856, 891 

(Catsouras) [following Bach].) We follow federal notice pleading requirements, 

although we do not believe the distinction is dispositive in this case. Whether state or 

federal law applies, the outcome in this action would be the same. 

7

 The California Rules of Court do not prohibit citation to unpublished federal 

cases, which may be cited as persuasive authority. (Nungaray v. Litton Loan Servicing, 

LP (2011) 200 Cal.App.4th 1499, 1501, fn. 2.) 

8

 Section 1981 prohibits racial discrimination in the making and enforcement of 

contracts. Section 1982 guarantees every United States citizen “the same right . . . as is 

enjoyed by white citizens . . . to inherit, purchase, lease, sell, hold, and convey real and 

personal property.” 
7

deficient where plaintiffs made only generalized allegations of discriminatory 

treatment].) 

Similarly, to state a section 1985 conspiracy claim, “the plaintiff must allege with 

specificity facts sufficient to show or raise a plausible inference of: [¶] (1) a conspiracy 

between two or more persons for the purpose of depriving any person or class of persons 

of equal protection of the laws, or of equal privileges and immunities under the law, and 

[¶] (2) an act by one of the conspirators in furtherance of the object of the conspiracy 

whereby another person was [¶] (a) injured, or [¶] (b) deprived of exercising any right or 

privilege of a citizen of the United States.” (Garg v. Albany Indus. Dev. Agency

(N.D.N.Y. 1995) 899 F.Supp. 961, 970 (Garg).) The plaintiff must also allege the 

“conspiracy was motivated by ‘some racial or perhaps otherwise class-based, invidious 

discriminatory animus.’ ” (Ibid.; Gorokhovsky v. City of New York (S.D.N.Y. May 19, 

2011, No. 10 Civ. 8848 (LBS)) 2011 U.S.Dist. LEXIS 54941, p. *39, aff’d in part and 

rev’d in part on another point in Gorokhovsky v. New York City Housing Authority (2d 

Cir. 2014) 552 Fed.Appx. 100.)9

 The allegations of conspiracy must be specific and 

nonconclusory. (Taylor v. Mitzel (1978) 82 Cal.App.3d 665, 673–675 (Taylor); Grimes, 

supra, 785 F.Supp.2d at p. 297.) 

The SAP and the TAP do not contain sufficient allegations suggesting respondents 

were involved in any intentional discrimination or conspiracy so as to be liable under 

federal civil rights laws. The SAP and the TAP just recount Johnson’s entry into the 

reverse mortgage transaction and the events leading to the nonjudicial foreclosure sale 

(beginning with a January 2010 repayment notice), and make the conclusory allegations 

that all respondents (1) were somehow motivated by a “racially discriminatory animus,” 

(2) intentionally discriminated against Brown, and (3) conspired to deprive Brown of her 

 9

 Section 1985, subdivision (3) provides for the recovery of damages “[i]f two or 

more persons . . . conspire . . . for the purpose of depriving, either directly or indirectly, 

any person or class of persons of the equal protection of the laws, or of equal privileges 

and immunities under the laws, . . . or for the purpose of preventing or hindering the 

constituted authorities of any State or Territory from giving or securing to all persons 

within such State or Territory the equal protection of the laws . . . .” 
8

inheritance because of her race. But there are no factual allegations to support a 

conclusion the respondents acted with racial animus. (See Akhavein, supra, 2009 

U.S.Dist. LEXIS 61796 at p. *17 [federal and California civil rights claims arising out of 

mortgage loan transaction failed where each claim offered “a conclusory allegation of 

discrimination, based on any number of criteria, with no factual substantiation to ground 

the accusation”]; Grimes, supra, 785 F.Supp.2d at pp. 296–297 [allegations of 

discrimination in mortgage lending were insufficiently specific to state causes of action 

under federal civil rights statutes].) Nor are there any facts as to which respondents 

conspired and how they did so. Instead, the conspiracy allegations are nonspecific and 

conclusory, and therefore are insufficient to state a cause of action for violation of section 

1985, subdivision (3). (Taylor, supra, 82 Cal.App.3d at pp. 673–675; Grimes, supra, 785 

F.Supp.2d at pp. 297–298; Garg, supra, 899 F.Supp. at p. 970.) Finally, the SAP and the 

TAP assert generally that the respondents treat non-African-American successors-ininterest more favorably than they did Brown, but without alleging any specific facts 

supporting these assertions. (See Grimes, supra, 785 F.Supp.2d at p. 292, fn. 33 

[plaintiffs alleging discriminatory lending failed to plead that “any specific similarlysituated non-African American applicant received a better loan”]; id. at p. 296 [plaintiff 

failed to provide examples showing defendants “targeted” discriminatory lending 

activities against minorities].) 

A defendant’s effort to collect amounts owed to it, without more, does not 

establish or support a plausible inference of intentional discrimination. In Carpenters 

Health and Welfare Fund of Philadelphia v. Kia Enterprises Inc. (E.D.Pa. Jul. 16, 2009, 

No. 09–116) 2009 U.S.Dist. LEXIS 61320, at page *2 (Carpenters), the plaintiffs (a 

labor union and affiliated union funds, pension plans and individuals) sued the defendant 

(Kia), an African-American-owned business, to collect payments allegedly owed to 

plaintiffs under a collective bargaining agreement (CBA). Kia filed a counterclaim, 

alleging that, in seeking to collect the payments, the plaintiffs discriminated against Kia 

in violation of section 1981. (Id. at pp. *2–3.) The court held Kia’s allegations that the 

union had a longstanding pattern and practice of discriminating against minorities and 
9

minority-owned businesses, as well as allegations that the plaintiffs’ actions were 

intentional and motivated by racial animus and a desire to exclude minorities and 

minority-owned businesses from the construction industry, were legal conclusions that 

were not entitled to be assumed to be true. (Id. at pp. *8–9; see Zelig v. County of Los 

Angeles, supra, 27 Cal.4th at p. 1126 [on demurrer, court does not assume truth of 

“contentions, deductions or conclusions of fact or law”].) As to the counterclaim’s 

specific factual allegations about actions the plaintiffs took to collect the payments from 

Kia (including taking steps to make a claim against Kia’s performance bond, and 

demanding to audit Kia’s books and records), the Carpenters court stated: “These 

actions are entirely consistent with a lawful attempt by the plaintiffs to collect unpaid 

CBA obligations that they are owed. By themselves, these allegations are ‘not only 

compatible with, but more likely explained by,’ lawful behavior and therefore cannot 

‘plausibly suggest’ actionable wrongdoing.” (Carpenters, supra, 2009 U.S.Dist. LEXIS 

61320 at p. *9.) Finally, Kia’s allegation, on information and belief, that the plaintiffs 

did not make similar efforts to collect unpaid CBA obligations from non-minority-owned 

businesses, in the absence of more specific allegations identifying particular instances of 

disparate treatment, were legal conclusions that could not be taken as true. (Ibid.) 

Similarly, here, the actions respondents took to foreclose on the property after 

Johnson’s death do not plausibly suggest intentional discrimination, because those 

actions are compatible with, and more likely explained by, lawful conduct, i.e., efforts to 

collect the amounts secured by the deed of trust entered into by Johnson. (Carpenters, 

supra, 2009 U.S.Dist. LEXIS 61320 at p. *9.) The fact Brown sought to sell the property 

at a probate auction (as an alternative to foreclosure) does not show respondents’ efforts 

to foreclose were improper and does not support an inference that respondents engaged in 

intentional discrimination. We thus reject Brown’s argument that “ ‘no other reason than 

race’ ” explains respondents’ efforts to foreclose. Finally, Brown’s general allegations 

that respondents would not or do not make similar efforts to collect from non-AfricanAmerican successors-in-interest, without more specific allegations identifying particular 
10

instances of disparate treatment, are legal conclusions that cannot be taken as true. (Id. at 

p. *10.) 

In her reply briefs, Brown cites Swierkiewicz v. Sorema N. A. (2002) 534 U.S. 506, 

at pages 508, 510–513 (Swierkiewicz), in which the United States Supreme Court held 

that, under rule 8(a) of the Federal Rules of Civil Procedure, a plaintiff in an employment 

discrimination case need not allege at the pleading stage all facts necessary to establish a 

“prima facie case” of discrimination under the burden-shifting framework established in 

McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792. The prima facie case is “an 

evidentiary standard, not a pleading requirement.” (Swierkiewicz, supra, 534 U.S. at 

p. 510; see Lindsey v. Yates (6th Cir. 2007) 498 F.3d 434, 439–440 [Swierkiewicz applies 

to housing discrimination claims]; see also Barber v. Rancho Mortgage & Investment 

Corp. (1994) 26 Cal.App.4th 1819, 1833 [discussing prima facie case for discrimination 

in sale or rental of housing under § 1982].) But the United States Supreme Court has also 

held that, under rule 8(a) of the Federal Rules of Civil Procedure, to survive a motion to 

dismiss, a discrimination complaint “must contain sufficient factual matter, accepted as 

true, to ‘state a claim for relief that is plausible on its face.’ ”10 (Ashcroft v. Iqbal (2009) 

556 U.S. 662, 678; see Carpenters, supra, 2009 U.S.Dist. LEXIS 61320 at pp. *7–8.) 

Accordingly, as we have noted above, a plaintiff claiming intentional discrimination must 

allege facts supporting the inference of a causal link between the defendant’s actions and 

the plaintiff’s race; conclusory allegations are not sufficient. (Grimes, supra, 785 

F.Supp.2d at p. 296.) The SAP and the TAP do not meet this standard. 

In addition to alleging intentional discrimination, Brown argues briefly that she 

has stated a claim for disparate impact discrimination under provisions of the federal 

FHA (§ 3601 et seq.).11 We disagree. To prevail on a disparate impact theory, a plaintiff 

 10 Brown thus is incorrect in suggesting (in her reply briefs) that she only needed 

to assert respondents’ actions were racially motivated. Instead, as Brown acknowledges, 

factual allegations, rather than mere conclusions, are required. 

11 Brown cites section 3604, subdivision (b), which provides that “it shall be 

unlawful [¶] . . . [¶] . . . [t]o discriminate against any person in the terms, conditions, or 
11

must show a facially neutral housing practice or policy has a disproportionate adverse 

effect on members of a protected class. (See Sisemore v. Master Financial, Inc. (2007) 

151 Cal.App.4th 1386, 1420–1421 (Sisemore); Cabrera v. Alvarez (N.D.Cal. 2013) 977 

F.Supp.2d 969, 976.) For example, in Sisemore, the plaintiffs stated a viable disparate 

impact claim by alleging a mortgage lender’s policy of refusing to lend to family home 

day care operators had a disproportionate adverse effect on protected classes (women and 

families with children). (Sisemore, supra, 151 Cal.App.4th at pp. 1420–1421.) Here, in 

contrast, Brown has not identified a facially neutral practice or policy employed by 

respondents. Instead, she just describes the respondents’ specific decisions affecting the 

property at issue in this case; Brown refers to the “facially neutral decisions” to enter the 

reverse mortgage transaction with Johnson and later to foreclose pursuant to the deed of 

trust. As to the impact on a protected class, Brown suggests the respondents’ decisions in 

her case had a negative impact on her as an African-American and on the neighborhood 

where the property is located (by removing an African-American family from the 

neighborhood). But Brown has not alleged facts showing comparable treatment of 

similarly situated members of the protected class, or facts supporting an inference that 

respondents’ conduct has had a disproportionately adverse impact on members of the 

protected class. (See Cabrera v. Alvarez, supra, 977 F.Supp.2d at p. 976.) 

For the foregoing reasons, we conclude the trial court correctly sustained, without 

leave to amend, respondents’ demurrers to Brown’s federal civil rights causes of action, 

including her claims under sections 1981, 1982, 1985, and the FHA (§ 3601 et seq.) (the 

 

privileges of sale or rental of a dwelling, or in the provision of services or facilities in 

connection therewith, because of race . . . .” Brown also quotes from section 3605, 

subdivision (a), which provides that “[i]t shall be unlawful for any person or other entity 

whose business includes engaging in residential real estate-related transactions to 

discriminate against any person . . . in the terms or conditions of such a transaction, 

because of race . . . .” A “ ‘residential real estate-related transaction’ ” means “(1) [t]he 

making or purchasing of loans or providing other financial assistance—[¶] (A) for 

purchasing, constructing, improving, repairing, or maintaining a dwelling; or [¶] 

(B) secured by residential real estate[] [or] (2) [¶] [t]he selling, brokering, or appraising 

of residential real property.” (§ 3605, subd. (b).) 
12

first through third causes of action in the SAP, and the first through fourth causes of 

action in the TAP).12 Because we conclude Brown’s federal civil rights claims are 

conclusory and insufficiently specific, we need not address respondents’ arguments that 

these claims fail for other reasons. 

3. Wrongful Foreclosure 

Brown suggests she has stated, or could amend to state, a cause of action for 

wrongful foreclosure based on respondents’ failure to comply with regulations 

promulgated by the United States Department of Housing and Urban Development 

(HUD) that apply to reverse mortgage lenders. In particular, Brown contends 

respondents did not comply with title 24 Code of Federal Regulations part 206.125(b), 

which requires a mortgagee to obtain an appraisal of the property “no later than 15 days 

before a foreclosure sale.” We conclude respondents’ alleged violation of HUD 

regulations provides no basis for Brown to assert a cause of action for wrongful 

foreclosure. 

In Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250 at pages 

1255, 1277–1278 (Pfeifer), cited by Brown, our colleagues in Division Two of this court 

concluded that, where the applicable deed of trust incorporated HUD regulatory 

requirements, the lenders had to comply with the regulations before commencing a 

nonjudicial foreclosure. But the relief available to the borrowers is limited. The Pfeifer

court stated it agreed “with those courts that refuse to permit any private right of action 

for failure to comply with the HUD regulations and the Pfeifers cannot seek damages 

based on their wrongful foreclosure action.” (Id. at pp. 1255, 1269–1270, 1282 & fn. 17.) 

The Pfeifer court also agreed with “courts distinguishing an offensive action from a 

defensive action”; the Pfeifers therefore could seek to enjoin the lenders from proceeding 

 12 Brown, who has now amended her petition three times, presents no argument as 

to how she could further amend her federal civil rights claims to state a cause of action. 

(See Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1491 [plaintiff has 

appellate burden to specify how she could amend to state cause of action].) 
13

with a nonjudicial foreclosure sale (and could seek associated declaratory relief) based on 

the lenders’ failure to comply with HUD servicing requirements. (Id. at pp. 1255, 1281.) 

Pfeifer does not assist Brown. Here, the nonjudicial foreclosure sale has occurred. 

Accordingly, even assuming the deed of trust in the present case incorporates the HUD 

regulations that Brown contends respondents violated (a question we need not address), 

Brown cannot rely on the regulations as the basis for a “defensive” action to prevent 

respondents from proceeding with a nonjudicial foreclosure sale. (See Pfeifer, supra, 

211 Cal.App.4th at pp. 1255, 1281.) And, Brown cannot bring an “offensive action” 

seeking damages based on respondents’ alleged noncompliance with the regulations. 

(Id. at pp. 1255, 1269–1270, 1282 & fn. 17.) Although Brown does not contend she can 

seek damages, she suggests that, under Pfeifer, she can rely on the HUD regulations as a 

basis for seeking “equitable relief,” such as imposing a “ ‘constructive trust’ ” on, or 

requiring the respondents to “ ‘disgorg[e],’ ” the proceeds of the foreclosure sale. We 

disagree. As noted, the Pfeifer court held a borrower has no right to bring any 

“offensive” action to enforce HUD regulations, and the court only authorized borrowers 

to rely on the regulations “defensive[ly],” to prevent a foreclosure sale and to obtain 

associated declaratory relief. (Id. at pp. 1255, 1269–1270, 1277–1278, 1281, 1282 & 

fn. 17.) We decline to extend Pfeifer to permit a borrower to rely on HUD regulations to 

seek monetary relief based on a completed nonjudicial foreclosure sale. 

B. Sanctions 

1. Background 

After demurring to the TAP, FFA and MERS filed a motion under Code of Civil 

Procedure section 128.7, seeking sanctions against Brown’s counsel, Richard Canatella, 

for filing the TAP. FFA and MERS argued the TAP lacked legal and factual support and 

included false factual allegations, including an allegation (which we discuss in more 

detail below) that FFA and MERS had failed to obtain a pre-foreclosure appraisal of the 

property as required by HUD regulations. FFA and MERS sought an award of $11,631 

in attorney fees incurred in responding to the TAP and in making the sanctions motion. 
14

In his brief opposing the sanctions motion, Canatella argued FFA’s and MERS’s 

motion was itself frivolous and sanctionable. 

At the May 15, 2012 hearing on FFA’s and MERS’s sanctions motion, the trial 

court stated its “leaning” was to deny the motion, because, although the court had by then 

sustained the demurrers to the TAP without leave to amend, the court was not persuaded 

the TAP was “totally meritless” so as to justify sanctions. Counsel for FFA and MERS 

responded by focusing on the contention that the TAP (signed by Canatella on January 6, 

2012) included a specific false factual allegation, i.e., the allegation that respondents had 

not obtained the appraisal required by HUD. Counsel for FFA and MERS stated that, 

although he had served Canatella with the sanctions motion papers (which included a 

copy of an appraisal) on February 27, 2012, Canatella did not withdraw the offending 

allegation; instead, he had argued orally at the March 27, 2012 hearing on the demurrers 

that he had not received an appraisal. 

The appraisal report submitted by FFA and MERS is dated October 24, 2011, i.e., 

seven days before the November 1, 2011 foreclosure sale. 

On June 13, 2012, the court entered an order sanctioning Canatella under Code of 

Civil Procedure section 128.7. The court concluded the allegation in the TAP about the 

lack of an appraisal was false, and Canatella failed to withdraw the allegation after 

receiving a copy of the appraisal, but instead, at the March 27, 2012 demurrer hearing, 

“reiterated the false allegation that ‘we never received an appraise value in this case.’ ” 

The court ordered Canatella and his law firm to pay, as a sanction, $7,290 in attorney fees 

to FFA. The court did not address Canatella’s argument that counsel for FFA and MERS 

should be sanctioned. 

Canatella filed a motion to vacate the sanctions award and for a new trial, which 

the trial court denied on August 16, 2012. Canatella filed a notice of appeal, stating he 

was appealing (1) the order awarding sanctions, (2) the court’s failure to impose 

sanctions on counsel for FFA and MERS, and (3) the order denying his motion to vacate 

and for a new trial. 
15

2. Analysis 

Code of Civil Procedure section 128.7, subdivision (b) provides in part that, “[b]y 

presenting to the court, whether by signing, filing, submitting, or later advocating, a 

pleading, petition, written notice of motion, or other similar paper, an attorney . . . is 

certifying that to the best of the person’s knowledge, information, and belief, formed after 

an inquiry reasonable under the circumstances, all of the following conditions are met: 

[¶] . . . [¶] (3) The allegations and other factual contentions have evidentiary support or, 

if specifically so identified, are likely to have evidentiary support after a reasonable 

opportunity for further investigation or discovery.” (Italics added.) Code of Civil 

Procedure section 128.7, subdivision (c) authorizes sanctions for violations of Code of 

Civil Procedure section 128.7, subdivision (b). We review a trial court’s award of 

sanctions under Code of Civil Procedure section 128.7 for abuse of discretion. (Burkle v. 

Burkle (2006) 144 Cal.App.4th 387, 399.) 

We conclude the trial court abused its discretion in awarding sanctions. The 

appraisal produced by FFA and MERS did not show the disputed factual allegation in the 

TAP about the appraisal was false or lacked evidentiary support. 

The TAP’s allegations about a pre-foreclosure appraisal refer to HUD regulations 

and related materials specifying a reverse mortgage lender must conduct an appraisal no 

later than 15 days before a foreclosure sale. Title 24 Code of Federal Regulations part 

206.125(b) specifies: “(b) Appraisal. The mortgagee shall obtain an appraisal of the 

property no later than 30 days after the mortgagor is notified that the mortgage is due and 

payable, or no later than 30 days after the mortgagee becomes aware of the mortgagor’s 

death, or upon the mortgagor’s request in connection with a pending sale. The property 

shall be appraised no later than 15 days before a foreclosure sale. . . .” (Italics added.) 

A set of frequently asked questions (FAQs) prepared by HUD (which FFA and MERS 

submitted to the trial court in connection with the sanctions motion) notes this 

requirement. Question 24 of the FAQs states: “24. When is a mortgagee required to 

obtain appraisals? New 1/22/2009 [¶] Regulations at [24 Code of Federal Regulations 

part] 206.125(b) state the mortgagee shall obtain an appraisal of the property no later than 
16

30 days after the mortgagor is notified that the mortgage is due and payable, or no later 

than 30 days after the mortgagee becomes aware of the mortgagor’s death, or upon the 

mortgagor’s request in connection with a pending sale. The property shall be appraised 

no later than 15 days before a foreclosure sale.” (Italics added.) 

Canatella argues he reasonably concluded and alleged that respondents had not 

complied with this regulatory requirement. We agree. The relevant paragraphs of the 

TAP refer to the above regulation and FAQ answer, but incorrectly paraphrase them as 

requiring an appraisal “within” 15 days of a foreclosure sale.13 Paragraph 7 of the TAP 

states: “Petitioner is informed and believes and alleges that the sale was conducted 

without an appraisal made within 15 days of November 1, 2011. See Department of 

Housing and Urban Development (HUD) HECM Servicing FAQ’s no. 24.” (Some 

bolding omitted.) Paragraph 39 of the TAP repeats this allegation and cites the same 

FAQ response. Finally, paragraph 46 of the TAP states: “Petitioner is informed and 

believes and alleges that respondents knew they were in violation of HUD regulations for 

selling the property at a foreclosure sale without an appraisal made within 15 days of the 

November 1 sale as required under [24 C.F.R. part] 206.125(b), . . .”14 

Fairly construed, the above paragraphs of the TAP (although poorly worded) 

allege that respondents did not comply with the cited HUD regulatory requirements 

governing when an appraisal must occur. As noted, the applicable regulation requires an 

appraisal no later than 15 days before a foreclosure sale. (24 C.F.R. § 206.125(b); see 

Dept. of Housing & Urban Development, HECM Servicing Frequently Asked Questions 

(FAQs), revised 11/16/2011, No. 24.) FFA’s and MERS’s submission to the trial court of 

an appraisal conducted on or about October 24, 2011 (just seven days before the 

November 1, 2011 foreclosure sale) did not establish the allegations in the above 

 13 In his reply brief on appeal, Canatella notes the TAP should have used the 

phrase “no[] later than,” instead of the word “within.” 

14 In their sanctions motion, FFA and MERS contended the allegations in 

paragraphs 7 and 46 of the TAP lacked evidentiary support. In its order awarding 

sanctions, the trial court cited only the allegation in paragraph 7 of the TAP. 
17

paragraphs of the TAP were false or lacked evidentiary support. (See Code Civ. Proc., 

§ 128.7, subd. (b)(3).) Canatella therefore did not violate Code of Civil Procedure 

section 128.7 by including the disputed allegations in the TAP, or by “later advocating” 

those allegations at the March 27, 2012 hearing. (See Code Civ. Proc., § 128.7, 

subd. (b).) 

To the extent Canatella went further at the March 27, 2012 hearing, such as by 

stating he had never received an appraisal (although FFA and MERS had by then served 

him with the sanctions motion papers, which included a copy of the October 24, 2011 

appraisal), his oral statements provide no independent basis for sanctions under Code of 

Civil Procedure section 128.7. (See Trans-Action Commercial Investors, Ltd. v. 

Firmaterr, Inc. (1997) 60 Cal.App.4th 352, 368–369 [Code Civ. Proc., § 128.7 did not 

authorize sanctions for oral misconduct].) Moreover, a sanctions motion under Code of 

Civil Procedure section 128.7 must “describe the specific conduct alleged to violate 

[Code of Civil Procedure section 128.7, subdivision (b)].” (Code Civ. Proc., § 128.7, 

subd. (c)(1).) FFA’s and MERS’s sanctions motion (which was signed on February 22, 

2012 and served on February 27, 2012) could not have, and did not, describe Canatella’s 

oral statements at the March 27, 2012 hearing and allege that those statements violated 

Code of Civil Procedure section 128.7, subdivision (b). 

For the foregoing reasons, we reverse the trial court’s June 13, 2012 order 

awarding sanctions against Canatella.15 We dismiss as moot the portion of Canatella’s 

appeal challenging the court’s August 16, 2012 order denying Canatella’s motion for a 

new trial and to vacate the sanctions award. 

Finally, Canatella asks that we direct the trial court, on remand, to address his 

request for sanctions against counsel for FFA and MERS. We decline Canatella’s 

 15 FFA and MERS filed a motion in this court seeking sanctions against Canatella 

and his law firm on the ground Canatella’s appeal of the trial court’s sanctions award is 

frivolous. We deferred consideration of the motion to the decision of the appeal on the 

merits. Because we have concluded Canatella’s appeal has merit, we deny FFA’s and 

MERS’s motion for appellate sanctions. 
18

request. In his trial court brief in opposition to the sanctions motion filed by FFA and 

MERS, Canatella argued the motion was frivolous and sanctionable under Code of Civil 

Procedure section 128.7, subdivision (h). That subdivision provides: “A motion for 

sanctions brought by a party or a party’s attorney primarily for an improper purpose, such 

as to harass or to cause unnecessary delay or needless increase in the cost of litigation, 

shall itself be subject to a motion for sanctions. It is the intent of the Legislature that 

courts shall vigorously use its sanctions authority to deter that improper conduct or 

comparable conduct by others similarly situated.” (Code Civ. Proc., § 128.7, subd. (h), 

italics added.) Code of Civil Procedure section 128.7, subdivision (c)(1) specifies the 

manner by which a motion for sanctions pursuant to section 128.7 may be filed. (See 

Day v. Collingwood (2006) 144 Cal.App.4th 1116, 1130.) Such a motion must be “made 

separately from other motions or requests,” and must be served 21 days before it is filed 

with the court. (Code Civ. Proc., § 128.7, subd. (c)(1).) Canatella did not make a 

separate motion for sanctions, and did not serve his request for sanctions 21 days before 

filing it. Instead, he just included a request for sanctions in his opposition to the 

sanctions motion filed by FFA and MERS. The trial court did not err by failing to rule 

on, or by implicitly denying, this request. 

IV. DISPOSITION 

In No. A134733, the judgment of dismissal in favor of MTC is affirmed. MTC 

shall recover its costs on appeal. 

In No. A135452, the judgment of dismissal in favor of FFSFC is affirmed. FFSFC 

shall recover its costs on appeal. 

Also in No. A135452, the order dismissing the action as to FFA and MERS is 

affirmed. FFA and MERS shall recover their costs on appeal. 

In No. A136389, the trial court’s June 13, 2012 order imposing sanctions against 

Canatella is reversed. Canatella’s appeal of the court’s August 16, 2012 order denying 

Canatella’s motion for a new trial and to vacate the sanctions award is dismissed as moot. 

The motion of FFA and MERS for an award of appellate sanctions is denied. The parties 

shall bear their own costs on appeal. 
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 _________________________ 

 McGuiness, P.J. 

We concur: 

_________________________ 

Siggins, J. 

_________________________ 

Jenkins, J.