Court Opinion

ID: 2791837
Source: CourtListenerOpinion
Date Created: 2015-04-07 20:04:29.449011+00
Date Added: 2024-06-11T12:10:25.235532
License: Public Domain

Filed 4/7/15 Nole v. Bank of New York Mellon 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                                           NOT TO BE PUBLISHED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 This opinion has not been certified for publication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
                                                        (Placer)
                                                            ----

STEVEN D. NOLE,                                                                              C075104

                   Plaintiff and Appellant,                                    (Super. Ct. No. SCV0032749)

         v.

BANK OF NEW YORK MELLON et al.,

                   Defendants and Respondents.

         This appeal is from a judgment after the trial court sustained the demurrer without
leave to amend of defendants Bank of New York Mellon (formerly Bank of New York),
ReconTrust Company, N.A. (ReconTrust), Bank of America N.A. (Bank of America) and
Mortgage Electronic Registration Systems, Inc. (MERS).
         In the trial court, plaintiff Steven D. Nole sued defendants for the following five
causes of action: (1) cancellation of instruments; (2) violation of the unfair competition
law; (3) declaratory relief regarding ownership rights and the validity of the foreclosure
process; (4) wrongful foreclosure; and (5) quiet title.

                                                             1
       On appeal, Nole abandons all but the wrongful foreclosure cause of action and
proposes to add two new causes of action -- fraud and negligence -- both of which are
based on factual loan modification activities never alleged in the complaint. As to the
wrongful foreclosure cause of action, Nole abandons his old theory of liability and argues
two new theories on appeal.
       We affirm the judgment. As to the wrongful foreclosure cause of action, Nole
cannot demonstrate prejudice. As to the fraud and negligence causes of action, they are
not proper bases for amendment because they are based on new facts which give rise to a
wholly distinct and different legal obligation against defendants.
                  FACTUAL AND PROCEDURAL BACKGROUND
       In 2005, Nole obtained a loan of $286,000 from Countrywide Home Loans
secured by a deed of trust to his real property on Peridot Street in Roseville. The deed of
trust named Nole as the borrower, Countywide as the lender, ReconTrust as the trustee,
and MERS as the beneficiary.
       From 2005 until February 2011, Nole paid his mortgage on time.
       In April 2011, MERS executed a deed of trust reflecting the assignment of its
beneficial interest in the trust to Bank of New York. Bank of America recorded this
assignment in May 2011.
       In October 2011, ReconTrust issued a notice of default when the loan was more
than $27,000 in arrears.
       In February 2012, ReconTrust issued a notice of trustee’s sale.
       In July 2012, the property was sold to a third party, and the unpaid debt at the time
of the sale was over $313,000.
       In March 2013, Nole filed the instant complaint against Bank of New York Mellon
ReconTrust, Bank of America, and MERS. There were five causes of action:
(1) cancellation of instruments; (2) violation of the unfair competition law;
(3) declaratory relief regarding ownership rights and the validity of the foreclosure

                                             2
process; (4) wrongful foreclosure; and (5) quiet title. These causes of action were
premised on the theory that MERS’s assignment of its beneficial interest in the deed of
trust was invalid for three reasons: (1) MERS did not have an ownership interest in the
note to convey to Bank of New York Mellon; (2) MERS failed to disclose its principal
when assigning its interest in the property to Bank of New York Mellon; and (3) the
people who signed the assignment of deed of trust and corporation assignment of deed of
trust were “ ‘robo-signers’ ” who lacked personal knowledge of the transaction and
corporate authority to sign.
       In May 2013, defendants filed a demurrer to the complaint. Nole opposed the
demurrer solely based on allegations that MERS and ReconTrust were not qualified to do
business in California and that one of the people who signed loan documents on behalf of
MERS and Bank of America was an employee only of ReconTrust.
       On August 15, 2013, following a hearing, the court sustained the demurrer without
leave to amend and entered judgment in favor of defendants. The court sustained the
demurrer on three independent grounds: (1) “[e]ach of [Nole]’s causes of action fails
because [he] fails to allege tender”; (2) “[e]ach of [Nole]’s claims stems from the
assertion that defendant MERS did not hold an ownership interest in the promissory note
as a matter of law,” but Nole “provides no valid support for this contention, which is
contradicted by documents of which the court may take judicial notice, as well as
applicable law”; and (3) “documents of which the court may take judicial notice
demonstrate that [ReconTrust] was authorized to initiate foreclosure proceedings due to
[Nole]’s default of his obligation to make mortgage payments under the applicable deed
of trust.”
       Nole did not request reconsideration of the order sustaining the demurrer without
leave to amend.
       On October 1, 2013, Nole filed a motion requesting leave to file an amended
complaint. The amended complaint alleged causes of action for cancellation of

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instruments, violation of the unfair competition law, wrongful foreclosure, and quiet title.
The sole basis for the motion to amend was “to make the causes of action and claims
more exact and straightforward and in alignment with the recently published case of
Glaski vs. Bank of America National Association, et al (2013) California Appellate
Court, Fifth Division, [sic] . . . .”1 In the declaration of Nole’s counsel supporting the
motion, counsel stated, “The Glaski case provides new case theories and arguments that
support [Nole]’s case herein.” “[Nole] seeks leave to amend his complaint in
conformance with the Glaski case.” It also included an unsigned declaration of Nole that
stated he “began seeking a loan modification with Bank of America in 2011” and “[t]he
person [with whom he spoke] told [him] that [he] had to miss 3 months of payments
before anything could be done.” Then, he had to submit and resubmit documents to start
the loan modification process. In late July 2012, Nole “verified with [his] representative
with Bank of America that all [his] documentation was in order and no foreclosure sale
was pending.” When he returned from vacation two weeks later he “learned that Bank of
America had proceeded to foreclose on [his] home, even though [he] had been assured
that [his] loan modification application was being processed and that no foreclosure sale
was pending.”

1       In Glaski v. Bank of America (2013) 218 Cal. App. 4th 1079, the court held that the
plaintiff stated a cause of action for wrongful foreclosure under the theory that the entity
invoking the power of sale was not the holder of the deed of trust. The problem was an
ill-fated glitch in the securitization of the loan and a violation of New York law. Simply
put, the plaintiff’s loan was not transferred into the securitized trust before it closed, and
therefore, the transfers were ineffective. (Glaski, at p. 1082.) The court wrote,
“Transfers that violate the terms of the trust instrument are void under New York trust
law, and borrowers have standing to challenge void assignments of their loans even
though they are not a party to, or a third party beneficiary of, the assignment agreement.”
(Id. at p. 1083.)

                                              4
       On October 21, 2013, following a hearing, the court denied the motion requesting
leave to file the amended complaint because the court lacked jurisdiction to entertain it,
as it had already sustained the demurrer without leave to amend.
       Nole filed a timely notice of appeal.
                                       DISCUSSION
                                               I
                                    Standard Of Review
       A demurrer may be sustained without leave to amend where the facts are not in
dispute and the nature of the plaintiff’s claim is clear but, under substantive law, no
liability exists. (Seidler v. Municipal Court (1993) 12 Cal. App. 4th 1229, 1233.) On
appeal from a judgment of dismissal after an order sustaining a demurrer without leave to
amend, we examine the complaint 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) 25 Cal. 4th 412, 415.) We give the complaint a reasonable interpretation and treat
the demurrer as admitting all material facts properly pleaded, but we do not assume the
truth of contentions, deductions, or conclusions of law. (Aubry v. Tri-City Hospital Dist.
(1992) 2 Cal. 4th 962, 966-967.) It is the plaintiff’s burden to show either that the
demurrer was sustained erroneously or that the trial court’s denial of leave to amend was
an abuse of discretion. (Keyes v. Bowen (2010) 189 Cal. App. 4th 647, 655.)
                                               II
                 The Trial Court Did Not Abuse Its Discretion In Denying
               Nole Leave To Amend Regarding The Wrongful Foreclosure
                    Cause Of Action Because Nole Was Not Prejudiced
       The wrongful foreclosure cause of action in the complaint was based on three
theories: (1) MERS lacked an ownership interest in the note to convey to Bank of New
York Mellon; (2) MERS failed to disclose its principal when it assigned its beneficial

                                               5
interest to Bank of New York Mellon, making the assignment void; and (3) the people
who signed the foreclosure documents on MERS’s behalf were “ ‘robo-signers.’ ”
       On appeal, Nole changes his theories of liability for wrongful foreclosure to the
following two theories: (1) MERS lacked the power to transfer the loan, declare the
default, and authorize the foreclosure because there was “no plain or conspicuous
language” in the deed of trust “telling Nole that MERS has the power to foreclose, or the
power to transfer his loan”;2 and (2) MERS transferred its beneficial interest to Bank of
New York Mellon as trustee for certificate holders of a trust that may have closed before
the transfer was made, and thus, the transfer “could well have been void,” which finds
support in Glaski.3 He claims the court abused its discretion in not allowing him leave to
amend his complaint to allege these theories of liability because they are “based on
undisputed facts” in the deed of trust.

2      Under this theory, the alleged ambiguity about MERS’s role infected the entire
chain of title, such that no entity was empowered to take any action when Nole stopped
paying back his loan.
3       Several courts, including ours, both before and after Glaski have reached the
opposite conclusion. (E.g., Mendoza v. JPMorgan Bank, N.A. (2014) 228 Cal. App. 4th
1020, review granted Nov. 12, 2014, S220675; Keshtgar v. U.S. Bank, N.A. (2014) 226
Cal. App. 4th 1201, review granted Oct. 1, 2014, S220012; Siliga v. Mortgage Electronic
Registration Systems, Inc. (2013) 219 Cal. App. 4th 75; Herrera v. Federal National
Mortgage Assn. (2012) 205 Cal. App. 4th 1495; Jenkins v. JPMorgan Chase Bank, N.A.
(2013) 216 Cal. App. 4th 497; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal. App. 4th
256.) Federal courts have likewise largely rejected Glaski as unpersuasive. (See Kan v.
Guild Mortgage Co. (2014) 230 Cal. App. 4th 736, 744 [collecting cases].) In particular,
the Second Circuit Court of Appeals has rejected Glaski’s analysis, holding that under
New York law an improper transfer to an investment trust is voidable, not void, and thus
a third party plaintiff has no standing to challenge such a transfer. (Rajamin v. Deutsche
Bank National Trust Co. (2d Cir. 2014) 757 F.3d 79, 90.) Our court has rejected Glaski’s
holding in Mendoza.

                                             6
       The court did not abuse its discretion in denying Nole leave to amend his
complaint with respect to the wrongful foreclosure cause of action because Nole could
not have been prejudiced.
       In Dick v. American Home Mortgage Servicing, Inc. (E.D.Cal., Sept. 18, 2013,
No. 2:13-00201 WBS CKD) 2013 U.S. Dist. Lexis 133755 (Dick), the court did not
attempt to distinguish or explain Glaski because it found the wrongful foreclosure claim
failed for lack of prejudice. The court explained: “California courts find a lack of
prejudice when a borrower is in default and cannot show that the allegedly improper
assignment interfered with the borrower’s ability to pay or that the original lender would
not have foreclosed under the circumstances. See Siliga v. Mortgage Electronic
Registration Systems, Inc. (2013) 219 Cal. App. 4th 75 . . . (‘The assignment of the deed
of trust and the note did not change [plaintiffs’] obligations under the note, and there is
no reason to believe that . . . the original lender would have refrained from foreclosure in
these circumstances.’); Herrera v. Federal National Mortgage Association (2012)
205 Cal. App. 4th 1485, 1508 . . . (finding no prejudice from assignment of loan where
borrowers defaulted on the loan and failed to tender and cure default); Fontenot [v. Wells
Fargo Bank, N.A.(2011)] 198 Cal. App. 4th [256,] 272 (finding no prejudice where
borrower was in default and did not allege that transfer of note interfered with borrower’s
ability to pay).
       “Plaintiffs acknowledge they were in default of their loan. [Citation.] They do not
allege that the allegedly improper transfer interfered with their ability to pay their note, or
that the original lender would have refrained from foreclosure under the circumstances.
The allegedly improper ‘assignment merely substituted one creditor for another, without
changing [plaintiffs’] obligations under the note.’ Fontenot, [supra,] 198 Cal.App.4th at
[p.] 272. Plaintiffs do not allege they could have met these obligations, and thus any
defects in the foreclosure were not prejudicial to plaintiffs. Accordingly, the court will

                                              7
grant the moving defendants’ motion to dismiss plaintiffs’ claim for wrongful
foreclosure.” (Dick, supra, 2013 U.S. Dist. Lexis 133755 at pp. *8-*9.)
       We agree with Dick that whether a plaintiff homeowner’s challenge is to defects
arising in the foreclosure proceedings or during the securitization process, he must
demonstrate prejudice. In Fontenot, supra, 198 Cal. App. 4th 256, the court explained:
“Even if MERS lacked authority to transfer the note, it is difficult to conceive how
plaintiff was prejudiced by MERS’s purported assignment, and there is no allegation to
this effect. Because a promissory note is a negotiable instrument, a borrower must
anticipate it can and might be transferred to another creditor. As to plaintiff, an
assignment merely substituted one creditor for another, without changing her obligations
under the note. Plaintiff effectively concedes she was in default, and she does not allege
that the transfer to HSBC interfered in any manner with her payment of the note . . . , nor
that the original lender would have refrained from foreclosure under the circumstances
presented. If MERS indeed lacked authority to make the assignment, the true victim was
not plaintiff but the original lender, which would have suffered the unauthorized loss of a
$1 million promissory note.” (Id. at p. 272.)
       Nole’s cause of action for wrongful foreclosure is akin to those in Dick. The
undisputed evidence showed Nole had defaulted on the loan, and he asserted no factual
allegations that the asserted improprieties alleged in this cause of action negatively
affected his ability to pay or prevented him from curing his defaults. Nole remained
liable for his indebtedness and we can discern nothing in the complaint demonstrating
that the alleged wrongful foreclosure prejudiced him.
                                             III
          Nole Is Not Permitted To Amend His Complaint To State Facts Giving
      Rise To Wholly Distinct And Different Legal Obligations Against Defendants
       For the first time, Nole contends he should be allowed to amend his complaint to
allege causes of action for fraud and negligence, “both based on the mishandling of his

                                                8
loan modification application.” We disagree, because in this proposed amendment, Nole
is attempting “to state facts which give rise to a wholly distinct and different legal
obligation against . . . defendant[s].” (Klopstock v. Superior Court (1941) 17 Cal. 2d 13,
20.) We explain.
       “ ‘The power to permit amendments is interpreted very liberally as long as the
plaintiff does not attempt ‘to state facts which give rise to a wholly distinct and different
legal obligation against the defendant.’ (Klopstock v. Superior Court[,supra,] 17 Cal.2d
[at pp.] 19-20.) ‘Great liberality is indulged in matters of amendment to the end that
lawsuits may be determined upon their merits.’ [Citation.] ‘A change of theory as to the
basis of recovery or as to the measure of damages is not a change of cause of action or
the substitution of a new and different action for the original.’ ” (Herrera v. Superior
Court (1984) 158 Cal. App. 3d 255, 259.) In Herrera, the appellate court allowed the
amendment of the complaint because “the causes of action in the amended complaint
were different legal theories arising from the same basic facts.” (Ibid., italics added.)
       Here, the facts are wholly different. Nole’s complaint never mentioned that he
pursued loan modification or alleged facts supporting causes of action based on loan
modification activities. His opposition to defendants’ demurrer also did not mention any
facts relating to loan modification. Nor did the belated amended complaint allege causes
of action for fraud or negligence. The sole basis for the motion to amend was “to make
the causes of action and claims more exact and straightforward and in alignment with
Glaski. It then, however, included an unsigned declaration of Nole that stated he “began
seeking a loan modification with Bank of America in February 2011” and “[t]he person
[with whom he spoke] told [him] that [he] had to miss 3 months of payments before
anything could be done.” Then, he had to submit and resubmit documents to start the
loan modification process. In late July 2012, Nole “verified with [his] representative
with Bank of America that all [his] documentation was in order and no foreclosure sale
was pending.” When he returned from vacation two weeks later he “learned that Bank of

                                              9
America had proceeded to foreclose on [his] home, even though [he] had been assured
that [his] loan modification application was being processed and that no foreclosure sale
was pending.”
       Using these different facts, Nole now contends for the first time that he should be
allowed to amend his complaint to alleged causes of action for fraud and negligence. He
is barred from doing so because in this amendment, Nole is attempting to state facts
which give rise to a wholly distinct and different legal obligation against defendants.
       Notwithstanding Klopstock and Herrera, Nole contends that a case from our court,
Connerly v. State of California (2014) 229 Cal. App. 4th 457 (Connerly) compels a
different result. We are not persuaded. In Connerly, this court held that where the
plaintiff Connerly “ha[d] not strayed from his central factual claim,” he was allowed to
“propose new facts or theories to show the complaint can be amended to state a cause of
action, thereby showing the trial court ‘abused its discretion’ ([Code Civ. Proc.,]§ 472c,
subd. (a)) in not granting leave to amend.”4 (Connerly, at p. 460.) Connerly’s change of
legal theory on appeal was that the process of selecting commissioners for the California
Citizens Redistricting Commission violated the federal equal protection clause.
(Connerly, at p. 461-462) His complaint in the trial court had alleged that “the method of
selecting members of the Commission violated Proposition 209 (Cal. Const., art. I, § 31),
in that it gave improper preferences based on race, ethnicity, and gender.” (Connerly, at
p. 461.) His amended complaint also in the trial court had added “that the ‘Applicant
Review Panel’ also improperly consider[ed] race, ethnicity, and gender.” (Connerly, at
p. 462.) In allowing Connerly leave to amend his complaint to allege the violation of the

4      Code of Civil Procedure 472c, subdivision (a) reads as follows: “When any court
makes an order sustaining a demurrer without leave to amend the question as to whether
or not such court abused its discretion in making such an order is open on appeal even
though no request to amend such pleading was made.”

                                            10
federal equal protection clause that he proposed for the first time on appeal, this court
explained that where “Connerly ha[d] not strayed from his central factual claim that the
composition of the Commission was infected by invidious discrimination[,] [t]here [wa]s
no reason to deviate from the well-established rule that section 472c allows a plaintiff to
propose new theories on appeal from the sustaining of a demurrer without leave to
amend.” (Connerly, at p. 464.) “[A] mere change in legal theory does not change the
nature of the factual dispute.” (Connerly, at pp. 463-464.) Here, however, Nole is trying
to amend his complaint for the first time on appeal to allege causes of action for fraud
and negligence based on facts related to loan modification activities. These facts were
never alleged in the complaint and these facts were never part of his earlier central factual
claim that was based on alleged defects in the assignment of the deed of trust. In effect,
Nole is asking us to transform his lawsuit into something entirely new. Connerly does
not compel us to allow him to do that.
                                      DISPOSITION
       The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1) & (2).)

                                                        ROBIE                  , J.

We concur:

      NICHOLSON             , Acting P. J.

      MURRAY                , J.

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