Court Opinion

ID: 4690333
Source: CourtListenerOpinion
Date Created: 2021-05-26 18:03:35.991531+00
Date Added: 2024-06-11T08:04:59.510879
License: Public Domain

Filed 5/26/21 Stewart v. Ocwen Loan Servicing CA3
                                           NOT TO BE PUBLISHED
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 This opinion has not been certified for publication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
                                      THIRD APPELLATE DISTRICT
                                                         (Mono)
                                                            ----

 KATHLEEN LOUISE STEWART,                                                                      C088851

                    Plaintiff and Appellant,                                      (Super. Ct. No. CV170059)

           v.

 OCWEN LOAN SERVICING, LLC, et al.,

                    Defendants and Respondents.

         Plaintiff Kathleen Louise Stewart (“Stewart”) appeals from a judgment of
dismissal after an order sustaining the demurrer of defendant Ocwen Loan Servicing,
LLC, et al. (collectively, “defendants”) to her first amended complaint.
         In 2002 and 2007, Stewart obtained two loans in the amounts of $540,000 and
$487,500, secured by deeds of trust on two properties she owned in Mammoth Lakes,
California. When Stewart fell behind on her payments, defendants commenced
nonjudicial foreclosure proceedings. In 2011 and 2012, Stewart filed lawsuits against

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certain defendants alleging an assortment of claims related to the origination of the loans
and subsequent foreclosure activities. Both lawsuits ultimately were dismissed.
       In 2017, Stewart commenced this lawsuit against defendants. According to
Stewart, the issue “at the heart of [her] entire complaint” is that the loans on the
properties at issue here allegedly were “table funded” in violation of Business and
Professions Code section 10234,1 rendering the deeds of trust void and the subsequent
nonjudicial foreclosure proceedings unlawful. The trial court sustained a demurrer to
Stewart’s first amended complaint without leave to amend, rejecting the claims founded
upon the allegedly void deeds of trust.
       We will affirm the trial court’s judgment.
                      BACKGROUND FACTS AND PROCEDURE
       Factual allegations and judicially noticed facts
       Stewart is the owner of two properties in Mammoth Lakes, California: one
located on Alpine Circle (the “Alpine property”); the other on Mammoth Knolls Drive
(the “Knolls property”).
       In October 2002, Stewart obtained a loan in the amount of $540,000 secured by a
deed of trust encumbering the Knolls property. The deed of trust identified Finance
America, LLC, as the lender and Mortgage Electronic Registration Systems, Inc.
(“MERS”), as the beneficiary, as nominee for the lender.2
       In February 2007, Stewart obtained a loan in the amount of $487,500 secured by a
deed of trust encumbering the Alpine property. The deed of trust identified American
Brokers Conduit as the lender and MERS as the beneficiary, as nominee for the lender.
       Stewart fell behind on her payments for both loans.

1      Undesignated statutory references are to the Business and Professions Code.
2     In August 2006, Stewart obtained a $490,000 home equity line of credit (HELOC)
secured by a secondary deed of trust against the Knolls property.

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       The Knolls property
       In October 2010, a notice of default was recorded against the Knolls property.
Around the same time, MERS assigned its interest in the Knolls deed of trust to Wells
Fargo Bank, N.A. (“Wells Fargo”), as trustee for the registered holders of the Structured
Asset Securities Corporation, Amortizing Residential Collateral Trust, Mortgage Pass-
through Certificates, Series 2002-BC10. A notice of trustee’s sale was recorded on
February 18, 2011, and the Knolls property was sold at a trustee’s sale on December 27,
2011. A trustee’s deed upon sale conveying the Knolls property to Wells Fargo was
recorded in January 2012. However, approximately one year later, after a legal dispute,
the trustee’s deed upon sale and the underlying notice of default were rescinded,
conveying title back to Stewart. (Civ. Code, § 1058.5, subd. (b).)
       The Alpine property
       In December 2009, a notice of default was recorded against the Alpine property.
A notice of trustee’s sale was recorded in March 2010, purporting to set a trustee’s sale
date for April 2010. On April 5, 2010, Stewart filed for bankruptcy (case No. 10-28741).
Shortly thereafter, MERS assigned its interest in the Alpine deed of trust to Deutsche
Bank National Trust Company (“Deutsche Bank”), as indenture trustee for American
Home Mortgage Investment Trust 2007-1. The assignment was recorded in July 2010.
       In August 2010, Stewart received a bankruptcy discharge for certain debts and the
matter was closed the following month.3 In February 2011, a new notice of trustee’s sale
was recorded for the Alpine property. Within a month, Stewart filed a second bankruptcy
petition (case No. 11-25800), but her prior bankruptcy prevented her from obtaining
another discharge. The second case was closed in December 2011.

3      Stewart’s bankruptcy schedules failed to disclose any claims or potential claims
against defendants, and she stated her intention to reaffirm the secured debts.

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       In August 2014, with no sale having occurred, the 2009 notice of default for the
Alpine property was rescinded. In September 2015, a new notice of default was recorded
for the Alpine property. In June 2016, a new notice of trustee’s sale was recorded.
       Procedural history
       In 2011, Stewart filed a lawsuit against MERS, American Brokers Conduit,
Deutsche Bank, and others relating to the origination of the Alpine loan and the
subsequent nonjudicial foreclosure proceedings related to that property. In 2014, the trial
court dismissed that action with prejudice.
       In 2012, Stewart filed a lawsuit relating to the actions taken in 2011 and 2012 to
foreclose on the Knolls property. The named defendants included Wells Fargo, Western
Progressive, LLC, and Ocwen Loan Servicing, LLC, as the beneficiary, trustee, and loan
servicer under the Knolls deed of trust. Stewart’s third amended complaint, filed in or
about January of 2014, included causes of action for wrongful foreclosure, slander of
title, trespass, and intentional infliction of emotional distress. In July 2017, more than
five years after initiating the suit, Stewart voluntarily dismissed the action without
prejudice.
       At about the same time, Stewart filed the instant lawsuit against defendants (and
others) alleging improprieties in the execution and enforcement of the deeds of trust for
the Knolls and Alpine properties.4 The trial court sustained, with leave to amend, a

4      In addition to the defendants, Stewart sued certain other parties involved in the
origination and enforcement of the secondary deed of trust securing a $490,000 HELOC
against the Knolls property (the “HELOC defendants”). The HELOC defendants
separately demurred to Stewart’s first amended complaint and the trial court sustained
their demurrer without leave to amend and issued a separate judgment of dismissal.
Stewart appealed only the judgment of dismissal entered on November 21, 2018,
pertaining to the defendants; she did not appeal the judgment of dismissal entered on
November 9, 2018, pertaining to the HELOC defendants. Accordingly, we agree with
defendants that any issues related to the HELOC are beyond the scope of this appeal.
(Filbin v. Fitzgerald (2012) 211 Cal.App.4th 154, 173; Sole Energy Co. v. Petrominerals

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demurrer to Stewart’s original complaint on the ground she lacked standing because the
claims belonged to her bankruptcy estate.
       Stewart successfully reopened her 2010 bankruptcy case and filed amended
bankruptcy schedules listing contingent claims against defendants.
       In August 2018, Stewart filed a first amended complaint alleging six causes of
action: (1) violation of California’s Rosenthal Fair Debt Collection Practices Act (Civ.
Code, § 1788 et seq., the “Rosenthal Act”), (2) declaratory relief, (3) cancellation of
instruments, (4) slander of title, (5) trespass, and (6) wrongful foreclosure. All of the
claims were based, in whole or in part, on the contention that the Knolls and Alpine deeds
of trust were void as products of loans funded in violation of section 10234.
       Defendants demurred to the FAC. In response to the demurrer, Stewart filed a
request for judicial notice, but no opposition brief. The trial court sustained the demurrer
without leave to amend and entered a judgment of dismissal in favor of defendants.
Stewart appeals that judgment.
                                       DISCUSSION
       Stewart contends the trial court erred in sustaining the demurrer to her FAC
without leave to amend. She contends the FAC adequately states causes of action for
violations of the Rosenthal Act (and its federal counterpart), declaratory relief, trespass,
cancellation of instruments, slander of title, and wrongful foreclosure. We are not
persuaded.
       Our standard when reviewing a challenge to an order sustaining a demurrer is well
settled. We review the court’s order and determine de novo whether the complaint
alleges facts sufficient to state a cause of action. (Parthemore v. Col (2013) 221
Cal.App.4th 1372, 1378.) In doing so, we treat the demurrer as admitting all material

Corp. (2005) 128 Cal.App.4th 212, 239; Bosetti v. The United States Life Ins. Co. in City
of New York (2009) 175 Cal.App.4th 1208, 1224-1225.)

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facts properly pleaded, but do not assume the truth of contentions, deductions, or
conclusions of law. (Ibid.) We also consider matters which may be judicially noticed.
(Paulsen v. Local No. 856 of Internat. Brotherhood of Teamsters (2011) 193 Cal.App.4th
823, 826.) We give the complaint a reasonable interpretation, reading it as a whole and
its parts in their context. (Ibid.) The burden is on the appellant to demonstrate the trial
court erred in sustaining the demurrer or abused its discretion in denying leave to amend.
(Coutin v. Lucas (1990) 220 Cal.App.3d 1016, 1020.)
       As noted, all of Stewart’s claims are based, in whole or in part, on her contention
that the Knolls and Alpine deeds of trust are void as products of illegal “table-funded”
loans. “ ‘Table funding occurs when a transaction is consummated with the debt
obligation initially payable by its terms to one person, but another person provides the
funds for the transaction at consummation and receives an immediate assignment of the
note, loan contract, or other evidence of the debt obligation. [Citation.]’ ” (Compass
Bank v. Petersen (C.D.Cal. 2012) 886 F.Supp.2d 1186, 1191, fn. 5.) “In a table-funded
loan, the originator closes the loan in its own name, but is acting as an intermediary for
the true lender, which assumes the financial risk of the transaction.” (Easter v. Am. West
Fin. (9th Cir. 2004) 381 F.3d 948, 955; see Akopyan v. Wells Fargo Home Mortgage, Inc.
(2013) 215 Cal.App.4th 120, 152-153.)
       In her FAC, Stewart alleges that the Knolls and Alpine loans were unlawfully
funded through an undisclosed table-funding scheme. For the Knolls loan, she alleges
that Finance America, LLC, was represented to be the lender when, in fact, the loan was
funded by Wells Fargo Ventures, LLC. For the Alpine loan, she alleges that American
Brokers Conduit was represented to be the lender when, in fact, the loan was funded by
American Home Mortgage Ventures, LLC.
       Stewart alleges that it is illegal under section 10234 for a broker to record a deed
of trust on a table-funded residential loan, and that a deed of trust recorded in violation of
section 10234 is void. Stewart alleges the Knolls and Alpine loans were table funded,

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and therefore the deeds of trust associated with those properties are void and
unenforceable. She alleges that defendants nevertheless have falsely claimed the deeds
of trust are valid and taken steps to enforce them. As a result, she argues the FAC has
stated valid causes of action against defendants for violating the Rosenthal Act, slander of
title, wrongful foreclosure, and cancellation of instruments.
       Defendants respond that the trial court correctly sustained the demurrer because
(1) Stewart has no standing in that her claims remain part of her bankruptcy estate,
(2) section 10234 does not apply, does not provide a private right of action, and would
not, in any event, invalidate the deeds of trust, and (3) Stewart’s claims are barred by the
statute of limitations. We agree that the trial court properly sustained the demurrer
because Stewart has not stated and cannot state a cause of action based on the alleged
violations of section 10234, and because her claims are barred by the statute of
limitations.
       By its terms, section 10234 requires a real estate broker who negotiates a
residential mortgage loan to record before any funds are disbursed, a trust deed naming
the lender (or its nominee) as the beneficiary. (§ 10234, subds. (a) & (d).)5 A violation
of section 10234 occurs when a deed of trust is recorded naming the broker as beneficiary
if the broker was not the lender.
       Here, Stewart alleges the lenders identified in the deeds of trust were brokers, not
lenders, because they used “imported funds.” However, the brokers were not named as

5      Section 10234, subdivision (a) provides: “Except as provided in subdivision (d),
every real estate licensee who negotiates a loan secured by a trust deed on real property
shall cause the trust deed to be recorded, naming as beneficiary the lender or his or her
nominee (who shall not be the licensee or the licensee’s nominee), with the county
recorder of the county in which the real property is located prior to the time that any
funds are disbursed, except when the lender has given written authorization for prior
release.” Subdivision (d) creates an exception for loans secured by commercial property
when certain conditions are met. (§ 10234, subd. (d).)

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the beneficiaries in the deeds of trust. Instead, the deeds of trust named MERS as
beneficiary, as nominee for the lenders and any successors and assigns. California courts
have upheld the power of MERS, as nominee beneficiary, to assign its interest under a
deed of trust. (See Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th
1495, 1501-1506, and cases cited therein, disapproved on other grounds in Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal.4th 919, 934-935, 939, fn. 13.) Stewart did
not address this issue in her appellate brief.
       But even if we accept that section 10234 required the deeds of trust to identify the
lenders that funded the loans, Stewart does not dispute that she is indebted to the lenders
identified in the deeds of trust under the promissory notes. Stewart has not explained
how these seemingly inconsistent allegations can be reconciled—how Finance America,
LLC, and American Brokers Conduit can be the lenders for purposes of the notes but not
for purposes of the deeds of trust. This is fatal to her claims. (Manti v. Gunari (1970) 5
Cal.App.3d 442, 449 [while inconsistent theories of recovery are permitted, a pleader
“cannot blow hot and cold as to the facts”]; see Vallejo Development Co. v. Beck
Development Co. (1994) 24 Cal.App.4th 929, 946 [court may disregard inconsistent
allegations].)
       Beyond this, and more fundamentally, Stewart has not cited any authority, and the
court is not aware of any, to support her claim that a violation of section 10234 renders
the deed of trust void as an illegal contract. The language of the statute does not suggest
that violations of the statute will invalidate a deed of trust or provide any remedy to the
borrower whatsoever. The context of the statute, located in a part of the Business and
Professions Code governing real estate licensing, suggests the statute is regulatory in
nature. (§ 10234; see also §§ 10176, 10177; Milner v. Fox (1980) 102 Cal.App.3d 567
[review of suspension of broker’s license for violating section 10231].) And the
legislative history of the statute supports this view. (See Assem. Com. on Banking &
Financing, Bill Analysis on Assem. Bill No. 1203 (1997-1998 Reg. Sess.) Jan. 12, 1998.)

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       Federal courts in California addressing this issue repeatedly have concluded that
table funding a loan in violation of section 10234 does not void the deed of trust. (See,
e.g., Arzamendi v. Wells Fargo Bank, N.A. (E.D.Cal. Mar. 8, 2018, No. 1:17-cv-01485-
LJO-SKO) 2018 WL 1210978, at *4; Grieves v. MTC Financial Inc. (N.D.Cal. July 25,
2017, No. 17-CV-01981-LHK) 2017 WL 3142179, at *12, fn. 1; Marquez v. Select
Portfolio Servicing, Inc. (N.D.Cal. Mar. 16, 2017, No. 16-cv-03012-EMC) 2017
WL 1019820, at *3, affd. (9th Cir. 2018) 738 Fed.Appx. 439; Palmer v. MTC Financial,
Inc. (E.D.Cal. May 26, 2017, No. 1:17-cv-00043-DAD-SKO) 2017 WL 2311680, at *4;
Forbes v. Bank of America, N.A. (C.D.Cal. Mar. 14, 2017, No. CV 16-5471-R) 2017 WL
6043082, at *2; see also Mohanna v. Bank of America, N.A. (N.D.Cal. May 2, 2016, No.
16-cv-01033-HSG) 2016 WL 1729996, at *5.) Although these decisions are not binding
on us, we find them persuasive. (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41,
64, fn. 4 [we may cite and rely on unpublished federal decisions as persuasive authority];
Aguirre v. Amscan Holdings, Inc. (2015) 234 Cal.App.4th 1290, 1298, fn. 5 [same].)
       Because section 10234 provides no authority for voiding the deeds of trust based
on the alleged table funding, all of Stewart’s claims founded on the deeds of trust being
void fail as a matter of law, including Stewart’s causes of action for violations of the
Rosenthal Act (or its federal equivalent), cancellation of instruments, and wrongful
foreclosure, and the core part of her cause of action for slander of title.6
       In addition to the allegedly void deeds of trust, Stewart’s slander of title cause of
action also appears to be based on irregularities in the instruments recorded in connection
with the 2010 nonjudicial foreclosure proceedings under the Knolls deed of trust. But

6       We reject Stewart’s argument that the trial court lacked the power to conclude the
allegations of the FAC were insufficient to state a cause of action after reaching a
contrary conclusion in response to a prior, separate demurrer. The trial court’s ruling on
defendants’ demurrer was not a reconsideration of its ruling on the prior demurrer. Thus,
the trial court was not bound by its prior ruling, and neither are we.

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these additional allegations do not save the cause of action, for two reasons. First, the
statute of limitations for slander of title is three years. (Code Civ. Proc., § 338,
subd. (g).) Stewart did not file this suit until July 2017, thus any claims based on
instruments recorded in 2010 are time-barred. Slander of title based on the alleged table
funding also would be time-barred because Stewart’s prior lawsuits demonstrate she had
constructive notice of the alleged table funding issue no later than 2012.7
       Second, to state a claim for slander of title, a plaintiff must allege “ ‘(1) a
publication, (2) which is without privilege or justification,’ (3) which is false, and
(4) which ‘causes direct and immediate pecuniary loss.’ ” (Schep v. Capital One, N.A.
(2017) 12 Cal.App.5th 1331, 1336.) Stewart cannot allege slander of title based on the
instruments recorded in connection with the 2010 nonjudicial foreclosure proceedings
because those instruments are privileged communications under Civil Code section 2924,
subdivision (d). (Ibid.) Although courts are split as to whether this statute creates an
absolute or qualified privilege, given our conclusion regarding section 10234, we
conclude the publications at issue would be protected even under the narrower qualified
privilege.8 (Id. at p. 1337.) Thus, this cause of action fails as a matter of law.

7       At oral argument, counsel for Stewart argued for the first time that the statutes of
limitations on these claims were tolled by the filing of Stewart’s 2012 lawsuit, which was
dismissed “without prejudice” in 2017. In short, Stewart contends that the statute of
limitations is tolled when a complaint is filed so that a plaintiff may dismiss the
complaint and refile the same action long after the limitations period has expired. That is
not the law. Indeed, if this “proposition had any validity, plaintiffs could start and stop
an action at will, without regard for the expense, delay, and frustration such conduct
would impose on the court and the defendants.” (Thomas v. Gilliland (2002) 95
Cal.App.4th 427, 433.)
8      To overcome the qualified privilege, a plaintiff must show the publication either
was (1) motivated by hatred or ill will towards the plaintiff, or (2) that the defendant
lacked reasonable grounds for belief in the truth of the publication and acted in reckless
disregard of the plaintiff’s rights. (Schep v. Capital One, N.A., supra, 12 Cal.App.5th at
pp. 1337-1338; Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 335-336.) Stewart

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       The trespass and wrongful foreclosure causes of action are also time-barred. Both
claims relate to conduct alleged to have occurred in 2011 or 2012. Stewart did not file
this action until 2017, several years after the applicable statute of limitations lapsed.
(Code Civ. Proc., §§ 338, subds. (a) & (b), 343; Engstrom v. Kallins (1996) 49
Cal.App.4th 773, 777, 782, fn. 8; Walters v. Boosinger (2016) 2 Cal.App.5th 421, 428-
429, 433.)
       Stewart argues that the demurrer to her declaratory relief cause of action should
have been overruled because she is entitled to a declaration of rights even if it is adverse.
As a general rule, it is true that a complaint for declaratory relief is legally sufficient if it
sets forth facts showing the existence of an actual controversy relating to the legal rights
and duties of the parties. (Wilson & Wilson v. City Council of Redwood City (2011) 191
Cal.App.4th 1559, 1582.) However, claims for declaratory relief may be determined on
demurrer where the alleged controversy is not justiciable or where the complaint shows a
judicial declaration is not “ ‘necessary or proper’ ” under the circumstances. (DeLaura v.
Beckett (2006) 137 Cal.App.4th 542, 545; see Allen v. City of Sacramento, supra, 234
Cal.App.4th at pp. 53-54 [demurrer is proper when the plaintiff has not stated sufficient
facts to support a statutory claim and the declaratory relief claim is derivative of the
statutory claim]; see also Wilson v. Civil Service Com. (1964) 224 Cal.App.2d 340, 344
[upholding adverse declaration made in form of judgment sustaining demurrer].)
       Further, even when a complaint adequately alleges the existence of an actual,
present controversy subject to declaratory relief, judgments sustaining demurrers will be
upheld where the issue is purely one of law and the reviewing court agrees with the trial
court’s resolution of the matter. (Taxpayers for Improving Public Safety v.
Schwarzenegger (2009) 172 Cal.App.4th 749, 769.) In such cases, the reviewing court’s

has not alleged the recordings were motivated by hatred or ill will, and any contention
that the defendants acted in reckless disregard of her rights is based on the alleged
invalidity of the deeds of trust—an argument that we have rejected.

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opinion will constitute the declaration of rights and duties concerning the matter in
controversy. (Ibid.)
       The controversy at issue here—whether a violation of section 10234 voids the
subject deeds of trust—is a question of law, which we have resolved adversely to
Stewart. Accordingly, Stewart is not entitled to relief on appeal.
                                      DISPOSITION
       The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1), (2).)

                                                        KRAUSE                , J.

We concur:

      BLEASE                , Acting P. J.

      ROBIE                 , J.

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