Court Opinion

ID: 2805149
Source: CourtListenerOpinion
Date Created: 2015-06-02 21:03:58.892752+00
Date Added: 2024-06-11T12:26:12.869765
License: Public Domain

Filed 6/2/15 Valencia v. Wells Fargo Bank CA2/2
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION TWO

NESTOR E. VALENCIA et al.,                                           B254999

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. BC517066)
         v.

WELLS FARGO BANK et al.,

         Defendants and Respondents.

         APPEAL from a judgment of the Superior Court of Los Angeles County.
Michael L. Stern, Judge. Affirmed.
         Law Offices of Robert K. Kent, Robert K. Kent; Law Offices of Steven Wolfson,
Steven Wolfson for Plaintiffs and Appellants.
         Kutak Rock, Jeffrey S. Gerardo, Steven M. Dailey, Antoinette P. Hewitt for
Defendant and Respondent Wells Fargo Bank.
         Wright Finlay & Zak, Jonathan D. Fink, Bradford E. Klein for Defendant and
Respondent First American Title Insurance Company.
                  ___________________________________________________
       Plaintiffs Nestor and Nilza Valencia sued their lender and the trustee who sold
their home at auction to a third party bidder after plaintiffs defaulted on their loan
obligation. The trial court dismissed plaintiffs’ lawsuit after sustaining demurrers
without leave to amend. We affirm.
                                          FACTS1
       Plaintiffs owned real property in Bell (the Property). In 2004, they executed a
promissory note for $266,250, secured by a deed of trust on the Property. At inception,
the beneficiary of the trust deed was Mortgage Electronic Registration Systems (MERS),
as nominee for the lender. In August 2012, MERS assigned all beneficial interest in the
trust deed to defendant Wells Fargo Bank (the Bank).
       Plaintiffs acknowledge that “in the event they defaulted on their loan obligation,
plaintiffs granted their lender the power to sell their property and recover any outstanding
balance owed.” Plaintiffs did, in fact, default on their loan obligation. On October 22,
2012, defendant First American Title Insurance Company (First American) recorded a
notice of default against the Property. Plaintiffs refer to First American as the Bank’s
“purported representative” and as “a stranger” to the loan who “lacked the requisite
authority” to sell the Property.
       On January 25, 2013, First American recorded a notice of trustee’s sale against the
Property. Soon after, plaintiffs applied for a loan modification, complying with every
request for documentation until the Bank told them no further documents were needed.
The sale scheduled for February 20, 2013, was postponed multiple times.
       On July 5, 2013, First American sold the Property at auction to third party
purchasers. Plaintiffs were not notified of the Bank’s decision on their request for a loan
modification. A trustee’s deed upon sale was recorded.

1      The facts are derived from plaintiffs’ first amended complaint (FAC), including its
exhibits, and from matters subject to judicial notice. (Code Civ. Proc., § 430.30, subd.
(a); Skov v. U.S. Bank National Assn. (2012) 207 Cal. App. 4th 690, 695.)

                                              2
       Plaintiffs accuse the Bank of “superficially reviewing” their request for a loan
modification and “going through the motions” to claim compliance with state law, after
assuring them that the sale would not go forward. Plaintiffs did not tender their debt to
the Bank. They still reside on the Property.
                               PROCEDURAL HISTORY
       Plaintiffs filed suit in August 2013. When defendants demurred to the complaint,
plaintiffs filed a FAC. Defendants demurred to the FAC and asked the trial court to take
judicial notice of recorded documents. The trial court sustained defendants’ demurrers to
the FAC without leave to amend. The lawsuit was dismissed and judgment was entered
for defendants on January 22, 2014. The appeal is timely.
                                       DISCUSSION
1. Ruling on Demurrer
       Appeal lies from the judgment of dismissal after demurrers are sustained without
leave to amend. (Code Civ. Proc., §§ 581d, 904.1, subd. (a)(1); Serra Canyon Co. v.
California Coastal Com. (2004) 120 Cal. App. 4th 663, 667; Tanen v. Southwest Airlines
Co. (2010) 187 Cal. App. 4th 1156, 1162.) We review de novo the ruling on the
demurrers, exercising our independent judgment to determine whether a cause of action
has been stated. (Desai v. Farmers Ins. Exchange (1996) 47 Cal. App. 4th 1110, 1115.)
We assume that properly pleaded material allegations are true. (Moore v. Regents of
University of California (1990) 51 Cal. 3d 120, 125.)
       Plaintiffs complain that the trial court did not specify the specific grounds for
sustaining the demurrers. (Code Civ. Proc., § 472d.) The court sustained the demurrers
“for the reasons stated in the moving papers.” Plaintiffs provided no reporter’s transcript
showing that they asked the trial court to state the basis for its decision, so the argument
is waived. (Brown v. State of California (1993) 21 Cal. App. 4th 1500, 1506.) While
stating specific grounds for sustaining demurrers may be helpful for purposes of
amendment to address the court’s concerns, failure to state reasons is harmless error on
appeal: review is de novo, so the trial court’s reasoning does not play a part in
determining whether plaintiffs have stated a claim. (Ibid.; Vallejos v. California

                                               3
Highway Patrol (1979) 89 Cal. App. 3d 781, 783 [we review the validity of the court’s
action in sustaining demurrers, not its reasoning].)
       a. Wrongful Foreclosure Claim
       Plaintiffs acknowledge that the state has “a comprehensive legislative scheme
designed to provide adequate protection to the borrower against forfeitures.” (Smith v.
Allen (1968) 68 Cal. 2d 93, 96.) They concede that a properly conducted nonjudicial
foreclosure sale is a final adjudication of the borrower’s rights, ends any right of
redemption, and precludes a challenge by the borrower of a sale to a bona fide purchaser.
(Biancalana v. T.D. Service Co. (2013) 56 Cal. 4th 807, 813-814; Moeller v. Lien (1994)
25 Cal. App. 4th 822, 831-832.)
       Plaintiffs allege that the Bank never gave First American authority to initiate
nonjudicial foreclosure proceedings against the Property. Plaintiffs claim that First
American was a stranger to the Property, and could not record a notice of default or
auction the Property. As a result, the sale was void.
       “Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a
foreclosure sale” and have title restored. (Lane v. Vitek Real Estate Industries Group
(E.D.Cal. 2010) 713 F. Supp. 2d 1092, 1097; Ram v. OneWest Bank, FSB (2015) 234
Cal. App. 4th 1, 10-11.) The elements of the claim are: (1) the trustee caused an illegal,
fraudulent or willfully oppressive sale of real property pursuant to a deed of trust; (2) the
plaintiff suffered prejudice or harm; and (3) the trustor tendered the amount of the
secured indebtedness or was excused from tendering. (Ram, at p. 11; West v. JPMorgan
Chase Bank, N.A. (2013) 214 Cal. App. 4th 780, 800.)
       The Legislature authorizes a “trustee, mortgagee, or beneficiary, or any of their
authorized agents” to initiate foreclosure with a notice of default. (Civ. Code, § 2924,
subd. (a)(1), italics added.) Even before First American became the substituted trustee, it
could issue a notice of default on behalf of the Bank, as an agent. There is no right under
Civil Code section 2924 to have a court determine whether the owner of a note “has
authorized its nominee to initiate the foreclosure process.” (Gomes v. Countrywide Home
Loans, Inc. (2011) 192 Cal. App. 4th 1149, 1154.)

                                              4
       With respect to plaintiffs’ claim that the sale was void because First American was
not the trustee, the trial court took judicial notice of a recorded document in which the
Bank appointed First American as trustee in October 2012, three months before First
American recorded a notice of sale and nine months before the Property was sold at
auction. A recorded substitution of trustee is “conclusive evidence of the authority of the
substituted trustee or his or her agents to act.” (Civ. Code, § 2934a, subd. (d); West v.
JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at p. 801.) The beneficiary under a
deed of trust may substitute trustees, if notice is given to interested parties. (Civ. Code,
§ 2934a, subd. (c).) An affidavit attached to the substitution of trustee form declares that
the required notice was given. First American had authority to act, first as the Bank’s
agent and then as trustee. The sale was not illegal.
       Critically, plaintiffs did not allege the third element of a wrongful foreclosure
claim, a tender of the indebtedness. An action to set aside a trustee’s sale must be
accompanied by an offer to pay the full amount of the secured debt: if the borrower
cannot pay the full debt, setting a sale aside for alleged irregularities is a futile act.
(Arnolds Management Corp. v. Eischen (1984) 158 Cal. App. 3d 575, 578-579.)
       Plaintiffs contend that they are excused from tendering the full amount of their
debt, reasoning that it would be inequitable to require payment of the debt because they
“seemingly qualified for a loan modification,” “were never advised by Wells Fargo that
they did not qualify,” “submitted all documents requested by Wells Fargo,” and never
heard that the Bank denied a modification. For the first time, plaintiffs now maintain that
they had liquid funds to pay the delinquency and bring the loan current.
       Tender of the debt may be excused if “specific circumstances make it inequitable
to enforce the debt against the party challenging the sale.” (Chavez v. Indymac Mortgage
Services (2013) 219 Cal. App. 4th 1052, 1062.) If plaintiffs had cash to pay the
delinquency, they had the ability to stop the sale of the Property. In an eleventh-hour
claim that respondents had no opportunity to rebut, plaintiffs assert that First American
gave no notice of the date and time for the auction. We disregard claims omitted from an
opening brief. (Reichardt v. Hoffman (1997) 52 Cal. App. 4th 754, 764.)

                                                5
       As a rule, a sale may be postponed for up to one year without a new notice of sale.
(Civ. Code, § 2924g, subd. (c)(2).) Even if notice was inadequate, it does not invalidate
an otherwise valid sale. (Civ. Code, § 2924, subd. (a)(5).) The opening brief suggests
that plaintiffs knew about the auction before it took place. Plaintiffs’ failure to pay the
delinquency prior to the auction is not a reason to nullify a sale to a third party.
       b. Violation of Civil Code Section 2924.18
       Plaintiffs rely on provisions in the Homeowners’ Bill of Rights (HBOR), which
took effect January 1, 2013. The Notice of Default and Election to Sell Under Deed of
Trust, attached to plaintiffs’ FAC, was recorded on October 22, 2012. Though the
foreclosure process on the Property began before HBOR took effect, plaintiffs allege that
certain wrongful acts—specifically, dual tracking of a loan modification and the
foreclosure sale—occurred while HBOR was in effect.
       Plaintiffs allege that the foreclosure sale should have been enjoined because they
had a pending loan modification application under HBOR. They rely on Civil Code
section 2924.18, which applies to small-volume depository institutions. (Id., subd. (b)
[banks that foreclose on fewer than 175 properties].) Plaintiffs have not alleged that
Wells Fargo falls within the size limitation imposed by statute, nor could they, because
the Bank is simply too large. (Major v. Wells Fargo Bank, N.A. (S.D.Cal. 2014) 2014
U.S.Dist. LEXIS 114977, at p. *6 [“Wells Fargo . . . given its size, has 175 or more
foreclosures in a reporting period”].)
       Plaintiffs assert that the Bank must prove that it is exempt from Civil Code section
2924.18, owing to its size. Plaintiffs are mistaken: it is their duty to allege that each
element of the statute is met. In any event, the case law holds that the statute does not
apply to Wells Fargo as a matter of law.
       A similar statute applies to large banks, Civil Code section 2923.6, which states
that if a borrower “submits a complete application” for a modification, the lender shall
not record a notice of default, a notice of sale, or conduct a trustee’s sale while the
application is pending. (Id., subd. (c).) An application is “‘complete’” when the
borrower has supplied all documents required by the lender. (Id., subd. (h).) The FAC

                                               6
alleges that plaintiffs fully complied with each and every request, until the Bank’s
representatives said that no further documents were needed.
       Even if plaintiffs meant to allege a claim under Civil Code section 2923.6, it still
fails. The statute “outlines legislative policy encouraging loan modifications where
reasonable. [It] does not impose a duty upon Wells Fargo to negotiate or provide a loan
modification, nor does it provide a claim for relief. [Citation.] Accordingly, [plaintiff]
cannot seek relief by alleging a violation of § 2923.6” (Stowers v. Wells Fargo Bank,
N.A. (N.D.Cal. 2014) 2014 U.S. Dist. LEXIS 41712, at p. *13; Runaj v. Wells Fargo
Bank (S.D.Cal. 2009) 667 F. Supp. 2d 1199, 1207; Pantoja v. Countrywide Home Loans,
Inc. (N.D.Cal. 2009) 640 F. Supp. 2d 1177, 1188.) The Bank does not owe plaintiffs any
duty under this permissive statute to offer a loan modification or workout plan. (Civ.
Code, § 2923.6, subd. (b); Runaj, at pp. 1207-1208; Mabry v. Superior Court (2010) 185
Cal. App. 4th 208, 222.)
       c. Cancellation of Instruments
       Plaintiffs allege that the notice of default and the trustee’s deed upon sale are void
and should be cancelled. As previously discussed, First American had authority to record
the notice of default as the Bank’s agent or nominee, and it had authority to conduct the
trustee’s sale as the substituted trustee. The instruments are not void.
       d. Unfair Competition Law
       Plaintiffs allege that the Bank and First American violated the Unfair Competition
Law by committing an unlawful practice in violating Civil Code sections 2924, 2932.5,
and 2924.18, and Penal Code sections relating to the filing of false documents. Civil
Code section 2932.5 relates to a mortgagee’s power of sale following an assignment. The
statute does not apply to deeds of trust. (Jenkins v. JPMorgan Chase Bank, N.A. (2013)
216 Cal. App. 4th 497, 518; Herrera v. Federal National Mortgage Assn. (2012) 205
Cal. App. 4th 1495, 1509-1510; Haynes v. EMC Mortgage Corp. (2012) 205 Cal. App. 4th
329, 332-337.) Civil Code section 2924 broadly authorizes a trustee, mortgage,
beneficiary “or any of their authorized agents” to initiate foreclosure, giving First
American the right to initiate foreclosure and conduct a foreclosure sale as the Bank’s

                                              7
nominee and later as substitute trustee. (Jenkins, at p. 513.) As noted, Civil Code section
2924.18 does not apply to the Bank, as a large-volume servicer. The Penal Code does not
apply because the Bank had the right to appoint First American to record documents
relating to the foreclosure.
2. Leave To Amend
       Plaintiffs contend that the trial court abused its discretion by denying leave to
amend. Leave to amend is “open on appeal”; however, there must be a reasonable
possibility that an amendment would cure any defects. (Code Civ. Proc., § 472c, subd.
(a); Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1081; Aubry v. Tri-City
Hospital Dist. (1992) 2 Cal. 4th 962, 967.) “The burden of proving such reasonable
possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39 Cal. 3d 311, 318.)
The papers must spell out how an amendment can cure a defect or change the legal effect
of the pleading. Leave to amend should not be granted if it would be an exercise in
futility. (Long v. Century Indemnity Co. (2008) 163 Cal. App. 4th 1460, 1467-1468.)
       a. Violation of a Postponement Agreement
       Plaintiffs assert that they “clearly allege[] that the agreement to postpone was
violated.” They do not describe the terms of a mutual agreement to postpone the trustee’s
sale. This court has held that an agreement by a lender to forbear from exercising the
right of foreclosure under a deed of trust comes within the statute of frauds and must be
in writing: a gratuitous oral promise not to foreclose is “unenforceable.” (Karlsen v.
American Sav. & Loan Assn. (1971) 15 Cal. App. 3d 112, 120-121; Raedeke v. Gibraltar
Sav. & Loan Assn. (1974) 10 Cal. 3d 665, 673.)
       Plaintiffs’ reliance on an alleged oral promise to postpone the foreclosure sale—
and their effort to obtain a loan modification—cannot be the basis for setting aside the
sale. In Nguyen v. Calhoun (2003) 105 Cal. App. 4th 428, the plaintiffs claimed “that the
foreclosure was conducted in violation of an oral promise to postpone the sale.” (Id. at p.
444.) However, the court “conclude[d] that the foreclosure sale may not be set aside
based on the lender’s alleged breach of an oral agreement to postpone the trustee’s sale.”
(Id. at p. 445.) The Bank’s alleged promise to postpone and plaintiffs’ efforts to secure a

                                              8
loan modification are outside the confines of the statutory proceeding, and cannot form
the basis of an equitable order to invalidate the foreclosure sale after the trustee has
delivered the deed to the purchaser. (Cf. Residential Capital v. Cal-Western
Reconveyance Corp. (2003) 108 Cal. App. 4th 807, 811, 823-824 [foreclosure sale could
be set aside when a trustee mistakenly sells property after the borrower and lender agreed
to a repayment plan, which cured the default and reinstated the loan].)
       Plaintiffs only show that the Bank unilaterally postponed the sale while examining
their request for a loan modification. They do not claim that they paid the Bank any
consideration to remain on the Property for years—rent-free and mortgage-free.
Plaintiffs do not propose to show that the Bank promised them a modification, then
reneged on the promise.
       To the extent that plaintiffs are trying to allege that the Bank failed to comply with
the requirements of Civil Code section 2924g for postponing a trustee’s sale, the claim
fails because plaintiffs fail to allege a tender of the indebtedness, as is necessary when
attempting to set aside a foreclosure due to irregularities in notice or procedure. (West v.
JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at pp. 801-802.)
       b. Negligence
       Plaintiffs seek to amend to allege a cause of action for negligence, theorizing that
the Bank’s handling of their application for a loan modification fell below the standard of
reasonable care. A lender does not owe a borrower a common law duty “to offer,
consider, or approve” a loan modification. (Lueras v. BAC Home Loans Servicing, LP
(2013) 221 Cal. App. 4th 49, 67.) However, the lender may not make material
misrepresentations about the status of a loan modification application or about the time,
date or status of a foreclosure sale. (Id. at p. 68.) Nor may a lender fail to process an
application in a timely manner or lose documents when handling a modification request.
(Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal. App. 4th 941, 951.)
       Plaintiffs do not offer any specific facts showing negligence. The Bank had no
duty to approve their application or modify their loan. Plaintiffs do not show that the
Bank made material misrepresentations about the status of their application, misled them

                                              9
about the date of the foreclosure sale, or lost their documents (See also Rossberg v. Bank
of America, N.A. (2013) 219 Cal. App. 4th 1481, 1500 [borrowers’ conclusory allegations
that they would have obtained a replacement loan does not state a cause of action].)
Instead, plaintiffs offer generalities about the harm of losing their home.
       Contracting for a loan that exceeds one’s means poses a risk of losing in
foreclosure the home that serves as security for the loan. Plaintiffs defaulted on their
loan. Once they learned that the Bank was proceeding with a foreclosure sale, they could
have reinstated the loan by paying the deficiency. They did not do so. They did not seek
bankruptcy protection. Plaintiffs cannot claim harm after the Bank foreclosed on the
security for their debt. There is no moral blame attached to the Bank’s conduct because
the Bank did not cause plaintiffs’ inability to repay their loan and resulting default.
(Lueras v. BAC Home Loans Servicing, LP, supra, 221 Cal.App.4th at p. 67.)
       c. Fraud
       Plaintiffs seek to assert a claim of fraud. They contend that the Bank had them
submit documents for a loan modification; postponed the foreclosure sale several times;
did not tell plaintiffs that they would not qualify for a modification; and failed to tell
plaintiffs that their application was denied. This led plaintiffs to believe that they did not
have to take any action.
       Appellants have not put forward sufficient facts to constitute a cause of action for
fraud, the elements of which are (1) a material misrepresentation; (2) knowledge of its
falsity; (3) intent to induce reliance; and (4) justifiable detrimental reliance. (Beckwith v.
Dahl (2012) 205 Cal. App. 4th 1039, 1060.) They must allege facts showing how, when,
where and to whom misrepresentations were made, to show every element of fraud.
(Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 73.) With a corporate defendant,
appellants must allege the names of the persons who made misrepresentations, what they
said, and their authority to speak for the corporation. (Lazar v. Superior Court (1996) 12
Cal. 4th 631, 645.)
       There is no factual support for the notion that the unidentified person(s) plaintiffs
spoke to had executive authority to postpone sales on behalf of the Bank. Plaintiffs offer

                                              10
ambiguity when definiteness is required. Merely submitting loan modification
paperwork to a bank is not justifiable detrimental reliance. (Lueras v. BAC Home Loan
Servicing, LP, supra, 221 Cal.App.4th at p. 79.)
       d. Promissory Estoppel
       Under the promissory estoppel doctrine, a promise is made to induce action or
forbearance on the part of the promisee, causing detrimental reliance by the promisee.
(Platt Pacific, Inc. v. Andelson (1993) 6 Cal. 4th 307, 320-321.) To be binding, the
promise “‘must be clear and unambiguous.’” (Cotta v. City and County of San Francisco
(2007) 157 Cal. App. 4th 1550, 1566; CalFarm Ins. Co. v. Krusiewicz (2005) 131
Cal. App. 4th 273, 284.) Estoppel is disfavored, so it is incumbent on the person asserting
it to leave nothing to surmise. (Landberg v. Landberg (1972) 24 Cal. App. 3d 742, 758-
759.) The doctrine is simply “‘inapplicable where no clear promise is made.’” (Lange v.
TIG Ins. Co. (1998) 68 Cal. App. 4th 1179, 1185.)
       Plaintiffs have not shown a clear and unambiguous promise meant to induce
reliance. Preliminary negotiations or discussions between borrower and lender cannot
form the basis for an estoppel: they are not sufficiently precise. (Laks v. Coast Fed. Sav.
& Loan Assn. (1976) 60 Cal. App. 3d 885, 891.) The Bank did not promise to modify
plaintiffs’ loan and had no obligation to alter its contract with plaintiffs. Telling a
borrower that a loan modification application is under review and no sale was scheduled
is not an actionable promise. (Granadino v. Wells Fargo Bank, N.A. (2015) 2015
Cal.App. LEXIS 361, at pp. *7-8.)
                                       DISPOSITION
       The judgment is affirmed.
       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                                            BOREN, P.J.
We concur:

       ASHMANN-GERST, J.                    HOFFSTADT, J.

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