in re harris in re lopez rodenhurst v. home loan servs ...€¦ · certificates, series 2005-2; ii...

1 MARK JOSEPH KENNEY (State Bar No. 87345) DAVID E. PINCH (State Bar No. 124851)

2 [email protected] SEVERSON & WERSON

3 A Professional Corporation One Embarcadero Center, Suite 2600

4 San Francisco, California 94111 Telephone: ( 415) 398-3344

5 Facsimile: ( 415) 956-0439

6 Attorneys for Defendant RECONTRUST COMPANY, N.A.;

7 MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF NEW YORK

8 MELLON FKA THE BANK OF NEW YORK AS TRUSTEE FOR THE BENEFIT OF THE

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CERTIFICATEHOLDERS CWMBS, INC. CHL MORTGAGE PASS-THROUGH TRUST 2005-2

10 MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-2;

II COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA CORPORATION

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SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CRUZ

15 KIMBERLY COX,

16 Plaintiff,

17 vs.

18 RECONTRUST COMPANY, N.A.; MORTGAGE ELECTRONIC

19 REGISTRATION SYSTEMS, INC.; BANK OF NEW YORK MELLON FKA THE BANK

20 OF NEW YORK AS TRUSTEE FOR THE BENEFIT OF THE

21 CERTIFICATEHOLDERS CWMBS, INC. CHL MORTGAGE PASS-THROUGH

22 TRUST 2005-2 MORTGAGE PASSTHROUGH CERTIFICATES, SERIES 2005-

23 2; COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA CORPORATION; all

24 persons known or unknown claiming any legal or equitable right, title, estate, lien or interest

25 in the property described in this Complaint adverse to COX's title or any could upon

26 COX's title thereto; and Does 1-100, inclusive,

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70000.081112375010.1

Defendants.

Case No. CVI74201

RECONTRUST COMPANY, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATEHOLDERS CWMBS, INC. CHL MORTGAGE PASS-THROUGH TRUST 2005-2 MORTGAGE PASSTHROUGH CERTIFICATES, SERIES 2005-2; COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA CORPORATION'S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER TO SECOND AMENDED COMPLAINT OF COX

**TELEPHONE APPEARANCE**

Date: October 22, 2012 Time: 8:30a.m. Dept.: 4

Action Filed: May 24, 2012 Trial Date: None Set

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER TO SAC

TABLE OF CONTENTS

2

3 I. INTRODUCTION .................. ~···········~····················· ............................................................. 1

4 II. STATEMENT OF FACTS .............. ~ ...................................................................................... 1

5 A. The Loan And Deed Of Trust ....................................................................................... 1

6 B. The Chapter 7 Bankruptcy ....................................................................... u .................... 2

7 III. GROUND TO SUSTAIN DEMURRER ............................................................................... 4

8 A. Legal Standard For A Demurrer ...................................................................... ! ......... 4

9 IV. PLAINTIFF'S ENTIRE COMPLAINT FAILS TO STATE FACTS SUFFICIENT

10 TO CONSTITUTE ANY CAUSE OF ACTION ................................................................... 4

11 A. Plaintiff Lacks Standing .................................................................................. · ............ 4

12 B. Plaintiff Is Judicially Estopped from Asserting Her Causes of Action .......... no~ ........ 6

13 C. The First Cause of Action for Failure to Establish Declaratory Relief is Insufficient to Constitute a Cause of Action .............................................................. 9

14 1. The Assertion that AWL Could Not Make a Loan is Without Merit ............ 9

15 D. Plaintiff's Second Cause of Action for Violation of Unfair Business

16 Practices Fails ........................................................................................... ~ ....................... 1 0

17 E. Plaintiff's Third Cause of Action for Quasi Contract is Contradictory ................... 11

18 F. Plaintiff's Fourth and Fifth Causes of Action for Slander of Title and Quiet Title Fail for Similar Reasons ............................................................................................. 11

19 v. CONCLUSION ..................................................................................................................... 13

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70000.081112375010.1 i MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

TABLE OF AUTHORITIES

2 Page(s)

3 FEDERAL CASES

4 Alicea v. GE Money Bank

5 (N.D. Cal. July 19, 2009) 2009 WL 2136969 ....................................................... ~ .................. 12

6 Bescos v. Fed Home Loan Mortg. Corp.

(C.D. Cal. July 22, 2011) 2011 WL 3157063 ... ! ........................... ~ ..................................... ~······ 8

7 Hamilton v. State Farm Fire & Cas. Co.

8 (9th Cir. 2001) 270 F.3d 778 ................................................................................................ 5, 7

9 Harris v. St. Louis Univ.

10 (M.D. Mo. 1990) 114 B.R. 647 .................................................... ~ .......................... :. ................... 6

In re Harris 11 (Bankr. S.D. Fla. 1983) 32 B.R. 125 ........................................................................................... 5

12 In re Lopez

13 (9th Cir. BAP 2002) 283 B.R. 22 .............................................................................................. ~ ... 5, 6

14 In re Medley (Bankr. M.D. Tenn. 1983) 29 B.R. 84 ... : ..................................................................................... 5

15 Rodenhurst v. Home Loan Servs., Inc.

16 (D. Minn. Sept. 21, 2010) 2010 WL 3749243 ............................................................................. 8

17 Vreugdenhill v. Navistar Int 'I Transp. Corp. 18 (8th Cir. 1991) 950 F.2d 524 ..................................... ~ ................................................................ ! ... 5

19 STATECASES

20 Abdallah v. United Sav. Bank

21 (1996) 43 Cal.App.4th 1101,51 Cal. Rptr. 2d 286, cert. denied, (1997) 519 U.S. 1081 ........ 6

Arnolds Mgmt. Corp. v. Eischen 22 (1984) 158 Cal.App.3d 575 ....................................................................................................... 13

23 Aubry v. Tri-City Hosp. Dist! 24 ( 1992) 2 Cal.4th 962 .................................................................................................................. 4

25 Calhoun v. Franchise Tax Bd

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(1978) 20 Cal.3d 881, 143 Cal.Rptr. 692, 574 P.2d 763, cert. denied, 439 U.S. 872 ... ~ ........... 6

Davaloo v. State Farm Ins. Co. (2005) 135 Cal.App.4th 409 ..................................................................................................... 4

70000.081112375010.1 ii MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

Dodd v. Citizens Bank of Costa Mesa

2 (1990) 222 Cal.App.3d 1624 .................................................................................................... 4

Falahati v. Kondo 3 (2005) 127 Cal.App.4th 823 ........... ~ .................................. _ ..... _ .................................................. 4

4 Fontenot v. Wells Fargo Bank 5 (20 11) 198 Cal.App.4th 256 ................................................................................................ 8, 10

6 Gomes v. Countrywide Home Loans Inc. (2011) 192 Cal.App.4th 1149 ................................................................................................... 10

7 Haley v. Dow Lewis Motors, Inc.

8 (1999) 72 Cal.App.4th 497, 85 Cal.Rptr.2d 352 ..................... ~ ................ ~ ....... ~ ......................... ~ 6

9 Holland v. Morse Diesel Int '1 Co.

10 (2001) 86 Cal.App.4tll 1443 ........................... ! .............. ~ .......... _ ............... _ .......... _ ...... ! ............. ~···· .. 4

11 Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134 ................................................................................................... -........... 11

12 Madrid v. Perot Sys. Corp.

13 (2005) 130 Cal.App.4th 440 ...... .-.......................................................... ;; ... .-................................. 11

14 Nguyen v. Calhoun

15 (2003) 105 Cal.App.4th 428 .... ~ ............................................................................... · ................. 12

16 Smith v. Busniewski (1952) 115 Cal.App.2d 124 .............. H ........................................................................ -............. -~ .. ••• 4

17 Tri-Continent Int'l Corp. v. Paris Sav. & Loan Ass'n

18 (1993) 12 Cal.App.4th 1354 .................................................................. .-.................................... 8

19 FEDERALSTATUTES

20 United States Code Title 11

§ 521(1) ....................................................... ~ .................... ~ ........ !""'""''''"''""'~'"''"·''''"'""''' 5 21

22 § 554., .• '"'""''''''""'''"'''"'"'''"'""'"'"'''''"'u''"'"'''""""''"'"'"''"''"""'"'""'"'"""~'' 3, 4, 5, 6

23 STATE STATUTES

24 California Business and Professions Code § 17200 ("UCL") .............................................................................................................. 1 0, 11

25 § 17203 ·····················~···································-·········································································· 11

26 § 17915 ...................................................................................................................................... 9

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70000.0811/2375010.1 iii MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

1 California Civil Code

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§ 47 ........................................................................................................... .: ............................... 11 § 2923.5 ....................... .-................................................................................. .-.~···············--·········· 2 § 2924 ....................• ~·····················~·····-···································-························._ .................... 10, 11

4 California Code of Civil Procedure § 430.10 ...................................................................................................................................... 4

5 § 430.30 ................................................................................................................................. ~ ... 4 § 430.50 ..... -................................... # ....... _.,. •••••••••• _.:•••: .......................................... 41••·~··························._·-··~···· 4

6 California Corporations Code

7 § 2203,,.,.,.,,,.,.,,,.,,,.,.,,,,,.., ........... u·oooo,o••••o•oo•••••••••o•oo•t·oo•••••ooooooooooooooo .. ••oooo••••••o.oooooooooooooooo:••••••••• IQ

8 OTHER AUTHORITIES

9 4 Miller & Starr, Cal. Real Estate § 10:212 (3d ed. 2003) ................................. ; .................... f ...... 12

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7oooo.0811/237SOio.r iv MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

I. INTRODUCTION

2 This is Plaintiff Kimberly Cox's third attempt to have this court determine that her

3 executed note and deed of trust against her property are void, a nullity and of no effect. She has

4 not repaid her loan of$544,000.00 that she admittedly borrowed. Recontrust Company, N.A.,

5 demurred to the original complaint. Prior to the hearing on that demurrer, Cox filed this First

6 Amended Complaint as a matter of right. Plaintiff now brings five causes of action:

7 (1) Declaratory Relief; (2) Violation of Unfair Business Practices Act; (3) Quasi-Contract;

8 (4) Slander of Title; and, (5) Quiet Title.

9 However, Cox has not cured the basic defect in her complaint: she has previously been

1 0 adjudicated as lacking standing to file any cause of action with respect to any claims involving her

11 real estate loan by the United States Bankruptcy Judge for the Northern District of California.

12 This has not changed.

13 Cox has already tried to accomplish these same or similar allegations during her

14 bankruptcy filing as adversary proceeding, but was denied the right to bring suit because of a lack

15 of standing. The bankruptcy court held that having filed bankruptcy any pre-petition claims -

16 such as these - became property of the estate and only the Chapter 7 Trustee had standing to

17 prosecute. As will be shown below, Cox cannot escape this problem simply by filing in the state

18 court. She has no standing to file these causes of action and she is prohibited by the doctrine of

19 issue preclusion from litigating that finding here.

20 Even if the bankruptcy had never been filed none of Cox's causes of action state facts

21 sufficient to sustain a cause of action as they are invalid as a matter of both law and equity.

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23 A.

24

II. STATEMENT OF FACTS

The Loan And Deed Of Trust

On or about December 1 0, 2004, Plaintiff Kimberly Cox entered into the subject loan to

25 refinance her property. Pursuant to the note evidencing the loan, Plaintiff promised to pay

26 $544,000.00 to the lender, American's Wholesale Lender. (SAC~ 25, Exs. 1 and 2.) By signing

27 the note, Plaintiff agreed that, "I understand that Lender may transfer this Note. Lender or anyone

28 who takes this Note by transfer and who is entitled to receive payment under this Note is caJled

70000.08JJ/23750JO.J 1 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

1 the "Note Holder." (SAC ~25, Ex. 1.)

2 In order to secure the note, Plaintiff took out a Deed of Trust against the real property

3 commonly known as 131 Sutphen St., Santa Cruz, CA 95060-1939 ("Property"). (SAC., Ex. 2.)

4 Plaintiff signed the Deed of Trust of her own accord. (/d.) The Deed of Trust was recorded on

5 December 21,2004. (/d.) Pursuant to the deed of trust, the beneficiary under the Deed of Trust

6 was Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for lender America's

7 Wholesale Lender and its successors and assigns. (I d.) Pursuant to the Deed of Trust, CTC Real

8 Estate Services was the original trustee. (I d.) The Deed of Trust specifically granted MERS, as

9 nominee for lender and its successor and assigns, the right to foreclose and sell the Property. (/d.)

10 On November 13,2009, MERS, as Nominee for America's Wholesale Lender, executed a

11 Substitution of Trustee and Assignment of Deed of Trust. (SAC, Ex. 9.) This document substi-

12 tuted defendant Recontrust Company as the new trustee on the Deed of Trust. The document also

13 assigned the Deed of Trust to defendant The Bank ofNew York Mellon. (ld) The Substitution of

14 Trustee and Assignment of Deed of Trust was recorded on December 7, 2009. (ld)

15 Plaintiff had defaulted on her loan obligation and on November 13, 2009, and concurrent

16 with the execution of the Substitution of Trustee and Assignment of Deed of Trust, Recontrust

17 Company recorded a Notice of Default. The Notice of Default contained the Notice of Default

18 Declaration pursuant to California Civil Code§ 2923.5 and all the documents were recorded on

19 November 24, 2009. (SAC, Ex. 7 and 13.)

20 On April 12, 2012, a Notice of Trustee's sale was issued by Recontrust Company. The

21 foreclosure sale was to occur on May 7, 2012. The Notice of Trustee's Sale was recorded on

22 April16, 2012. (SAC, ~10.)

23 B.

24

The Chapter 7 Bankruptcy

On November 12, 20 I 0, Plaintiff filed for Chapter 7 Bankruptcy in this Court, Case

25 No. 5: I O-bk-6I7I6. Plaintiffs schedules list the Property as owned in "Fee Simple" on her

26 Schedule A (SAC, Ex. 3, RJN Ex. A); instead she listed the debt as unsecured in Schedule F and

27 did not list any lawsuit or related claims as an asset of her estate in Schedule B. (I d.) The

28 schedules do not list this lawsuit as an asset. (I d.) The trustee has filed a no asset report and no

70000.081112375010.1 2 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

notice of assets was filed. (First Amended Complaint, Ex. 8, RJN Ex. B.) No proof of claims

2 have been filed.

3 On April 12, 20 II, Cox filed an adversary action in the Bankruptcy Court as Adversary

4 No. 11-05106 against Mortgage Electronic Registration Systems, Inc., the Bank ofNew York

5 Mellon fka The Bank ofNew York as Trustee for the Benefit of the Certificateholders CWMBS,

6 Inc. CHL Mortgage Pass-through Trust 2005-2 Mortgage Pass-through Certificates Series,

7 America's Wholesale Lender, Countrywide Home Loans Servicing, LP, BAC Home Loans

8 Servicing, L.P. (the "Adversary"). Under the Adversary, Cox sought to determine (1) the

9 Validity, Extent, Interest and Secured Status of Lien; (2) to disaiiow debt and cancel security

10 instrument; (3) for declaratory relief; and (4) quiet title. {RJN, Ex. C Adversary Complaint.)

11 These are relatively the same causes of action here. (Jd)

12 The bankruptcy court denied the claims and dismissed the action (RJN, Ex. D) with

13 prejudice, holding:

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The claims for relief were not listed on the Debtors' bankruptcy schedules. While the trustee has filed a no-asset report- the Chapter 7 trustee has filed a no-asset report, these claims are not as a result of the filing of that no-asset report, deemed to be abandoned to the Debtor. I agree with the Defendants' analysis of Bankruptcy Code Section 554 which is abandonment. Property not listed on the schedules is never administered and thus never abandoned. Since these claims arise from pre-petition events, Mr. Tim (sic), they are pre-petition claims which are property of the bankruptcy estate. Only the Chapter 7 trustee has standing to assert claims which are property of the bankruptcy estate. I also note for the record that the Court declined to sign the abandonment order submitted by the Debtor/the Plaintiff.

So the extent that these claims haven't been abandoned, only the Chapter 7 trustee has the authority to assert these claims, so on that ground, your client doesn't have standing if these claims haven't been abandoned.

24 (R.JN Ex. E, certified transcript of hearing on motion to dismiss, page 4, line 25 to page 5, line 20).

25 To bring this into perspective, the claims that the Court found to belong strictly to the

26 Chapter 7 Trustee were from a complaint styled as "Complaint to Determine the Validity, Extent,

27 Interest, and Secured Status of Alleged Lien and Associated Debt; to Disallow Claims as Secured

28 and Cancel Security Instrument; for Declaratory Relief; for Injunctive Relief to Stop Foreclosure;

70000.0811/2375010.1 3 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

and, to Quiet Title." (See RJN, Ex. C "Adversary Complaint,).

2 III. GROUND TO SUSTAIN DEMURRER

3 A. Legal Standard For A Demurrer

4 Code of Civil Procedure ("C.C.P.") §§ 430.30(a) and 430.50(a) authorize a response to a

5 complaint by demurrer. (See C.C.P. §§ 430.30(a) and 430.50(a).) C.C.P. § 430.30(a) supports the

6 sustaining of a demurrer when the grounds for the objection appears on the face of the complaint.

7 (See C.C.P. § 430.30(a).) The grounds for the objection include the failure of the complaint to

8 state facts sufficient to constitute a cause of action. (See C.C.P. § 430.10(e), (f).)

9 For the purposes of testing the sufficiency of the pleadings, the demurrer must admit the

10 truth of all material facts properly pleaded but not the truth of "contentions, deductions or

11 conclusions of law." (See Aubry v. Tri-Cily Hosp. Dist. (1992) 2 Ca1.4th 962, 967.) Conclusory

12 averments and conclusions of law do not constitute a statement of fact upon which relief may be

13 granted. (See Davaloo v. State Farm Ins. Co. (2005) 135 Cal.App.4th 409, 415; Smith v.

14 Busniewski (1952) 115 Cal.App.2d 124.) Allegations referring generally to "defendants" do not

15 state a claim. (See Falahati v. Kondo (2005) 127 Cal.App.4th 823, 829.)

16 Furthermore, "facts appearing in exhibits attached to the complaint will also be accepted as

17 true and, if contrary to the allegations in the pleading, will be given precedence." (Dodd v.

18 Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627; Holland v. Morse Diesel Int 'I

19 Co. (2001) 86 Cal.App.4th 1443, 1447 ("If facts appearing in the exhibits contradict those alleged,

20 the facts in the exhibits take precedence.").)

21 IV. PLAINTIFF'S ENTIRE COMPLAINT FAILS TO STATE FACTS SUFFICIENT

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23 A.

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TO CONSTITUTE ANY CAUSE OF ACTION

Plaintiff Lacks Standing

Plaintiff's complaint is barred in its entirety by the doctrine of judicial estoppel or claims

25 preclusion. In this case, the Bankruptcy Court has already determined that Cox waived the right to

26 bring this action. The claims (which were never scheduled) belong exclusively to the estate

27 through the Chapter 7 trustee. Section 554(d) of Title 11 of the United States Code provides that

28


1 Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case

2 remains property of the estate.

3 Plaintiff filed her Chapter 7 Case on November 12, 2010. Plaintiff has failed to properly

4 schedule this action as an asset in her Bankruptcy Schedules. (RJN, Ex. C page 5, lines 6-16.)

5 Plaintiff did exempt this action. As the Bankruptcy Court determined, Cox's claims arose out of

6 pre-petition loans and are property of the estate. Property of the estate that is not abandoned or

7 administered in the case remains property of the estate. (11 U.S.C. § 554(d).) The Chapter 7

8 trustee has not abandoned or administered the asset and Cox's motion to force abandorunent was

9 denied. With respect to actions that are property of the estate, the Chapter 7 trustee is the real

I 0 party in interest and Cox lacks standing to pursue the claims on her own behalf. (In re Lopez (9th

11 Cir. BAP 2002) 283 B.R. 22, 28.) More importantly, the United States Bankruptcy Court through

12 the Honorable Charles Novack has already found this to be true. Ms. Cox has no standing to

13 litigate these claims.

14 Abandonment pursuant to § 554( c) requires that the property to be abandoned is properly

15 scheduled under§ 521(1). (Vreugdenhil/ v. Navistar Int'/ Transp. Corp. (8th Cir. 1991) 950 F.2d

16 524, 526 (unless formally scheduled, property is not abandoned at the close of the estate, even if

17 the trustee knew of the existence of the property when the case was closed); In re Harris (Bankr.

18 S.D. Fla. 1983) 32 B.R. 125, 127 (property not scheduled was not deemed abandoned and

19 remained property of the estate); In re Medley (Bankr. M.D. Tenn. 1983) 29 B.R. 84, 86-87 (an

20 unscheduled asset was not deemed abandoned and trustee could reopen case to administer the

21 asset to creditors). Plaintiff never scheduled this asset of the estate. (See RJN, Ex. A, Schedule B

22 No. 21 "X None".)

23 Plaintiff is not saved by the entry of her discharge or by the filing of this action in state

24 court.rather in Bankruptcy Court. The Plaintifrs claims should be dismissed because she is

25 estopped from pursuing the instant claims because she failed to list this purported action as assets

26 in her bankruptcy schedules. (Hamilton v. State Farm Fire & Cas. Co. (9th Cir. 2001) 270 F.3d

27 778, 783.) When Cox filed for bankruptcy, she neither listed the claims asserted in her Complaint

28 as assets of her estate nor exempted this action or the Property in her bankruptcy schedules. (RJN,


1 Ex. B.; Harris v. St. Louis Univ. (M.D. Mo. 1990) 1.14 B.R. 647, 648 (holding that a Chapter 7

2 debtor may assert a pre-petition cause of action only if the Chapter 7 Trustee has abandoned it).)

3 The Bankruptcy Code provides three means for a Chapter 7 Trustee to abandon the

4 property of the estate. First, the Trustee may formally abandon the property after noticed motion.

5 (11 U.S.C. § 554(a).) Second, the Trustee may, under some circumstances, be ordered by the

6 Bankruptcy Court to abandon the property. (11 U.S.C. § 554(b).) Third, the Trustee may abandon

7 the property by operation of law, provided it has been "scheduled" and "not otherwise

8 administered at the time of the closing of the case." (11 U.S.C. § 554(c).) Here, Plaintiff has

9 neither alleged nor demonstrated that the Trustee has abandoned the property. Plaintiff therefore

1 0 lacks standing to pursue this action because the Trustee remains the real party in interest and this

11 action should be dismissed. (In re Lopez, 283 B.R. at 28; Haley v. Dow Lewis Motors, Inc. (1999)

12 72 Cal.App.4th 497, 511, 85 Cal.Rptr.2d 352.)

13 The bankruptcy court's judgment has preclusive res judicata effect as to whether Cox or

14 the Chapter 7 trustee has standing to assert the causes of action raised in this complaint. When·a

15 federal judgment is involved, the federal rule concerning finality of a judgment on appeal for

16 purposes of res judicata differs from the state rule. Under the federal rule, a judgment or order,

17 once rendered, is final for purposes of res judicata until it is reversed on appeal, or modified or set

18 aside in the court of rendition. (Calhoun v. Franchise Tax Bd. ( 1978) 20 Cal. 3d 881, 887, 143

19 Cal.Rptr. 692, 574 P.2d 763, cert. denied, 439 U.S. 872; Abdallah v. United Sav. Bank (1996) 43

20 Cal.App.4th II 0 I, Ill 0, 51 Cal. Rptr. 2d 286, cert. denied, 519 U.S. 1 081 ( 1997) (plaintiffs'

21 cause of action untenable in state court action in light of earlier action that had been dismissed

22 with prejudice in federal district court; although appeal from that judgment was pending, judgment

23 is final for res judicata purposes until reversed and doctrine of res judicata precludes litigation of

24 any claim that could have been raised in federal action.).)

25 B.

26

Plaintiff Is Judicially Estopped from Asserting Her Causes of Action

Cox is judicially estopped from asse~ing these causes of action. In the underlying

27 bankruptcy case, Plaintiffs bankruptcy schedules filed on February 10, 2011, did not list the

28 causes of action asserted in this Complaint as a Personal Property asset in Schedule B. (RJN,


Ex. A.) Relying upon the schedules, the Chapter 7 trustee issued a Report ofNo Distribution on

2 September 12, 201 I. (RJN, Ex. D.) The Court entered a discharge in favor of Plaintiff on

3 October 12,201 I. (RJN, Ex. E.) "In the bankruptcy context, a party is judicially estopped from

4 asserting causes of action not raised in a reorganization plan or otherwise mentioned in the

5 debtor's schedules or disclosure statements.'' (Hamilton, 270 F.3d at 783.)

6 In Hamilton, the Court of Appeals for the Ninth Circuit judicially estopped a plaintiff from

7 pursuing claims post-discharge because (1) the debtor clearly asserted inconsistent positions as she

8 failed to list her claims against State Farm as assets on her bankruptcy schedules, and later sued

9 State Farm on the same claims; (2) the bankruptcy court accepted the debtor's prior assertions in

10 that the bankruptcy court granted the debtor a discharge; and (3) Hamilton obtained an unfair

11 advantage by obtaining all the benefits of her Chapter 7 bankruptcy without complying with her

12 affirmative duty to disclose all assets. (ld. at 784-85.)

13 The facts here parallel the Hamilton case and support judicial estoppel. Plaintiff filed her

14 Chapter 7 Petition on November 12,2010. She did not list her pre-petition claims against

15 Defendants as assets in her bankruptcy schedules. Relying on those schedules, the Chapter 7

16 Trustee issued a Report ofNo Distribution, and the Plaintiff received her discharge from the

17 Bankruptcy Court. Cox attempted to bring these claims in her Adversary but was denied because

18 they were unabandoned assets belonging to the trustee. Now Cox asserts an inconsistent position.

19 She failed to properly schedule the claims against Defendants as an asset of her bankruptcy estate,

20 received the benefit of the Trustee's Report and a Discharge and now is pursuing the claims

21 against Defendant post-petition and post-discharge. For the same reason set forth in Hamilton,

22 Plaintiff is judicially estopped from pursuing claims she did not disclose to her creditors in her

23 bankruptcy schedules and the Complaint should be dismissed.

24 In addition, Cox is trying to profit by at least $544,000 by having her debt deemed

25 cancelled which retaining her property free and clear after being discharged and having eliminated

26 all unsecured debts.

27 Plaintiff also lacks standing to challenge whether the Trust could in fact accept an

28 assignment of the loan, as she does at ~36 of her SAC. Under California law, a plaintiff"cannot


1 assert a claim for a breach of contract against one who is not a party to the contract." (Tri-

2 Continent Int 'I Corp. v. Paris Sav. & Loan Ass 'n (1993) 12 Cal.App.4th 1354, 1359.) This is

3 precisely why, even if the securitization was somehow improper, the "overwhelming authority

4 does not support a cause of action based upon improper securitization." (Rodenhurst v. Home

5 Loan Servs., Inc. (D. Minn. Sept. 21, 201 0) 2010 WL 3749243, at *4 ("Plaintiffs do not have

6 standing to bring their challenge regarding the securitization of the mortgage" because "Plaintiffs

7 are not a party to the Pooling and Servicing Agreement.").)

8 In Bescos v. Federal Home Loan Mortgage Corp. (C.D. Cal. July 22, 2011) 2011 WL

9 3157063, the plaintiff claimed that the assignee to the pooling agreement securitizing the loan

10 violated the agreement, and thus it had no authority to foreclose on his property. (!d. at *6.) The

11 Court granted a motion to dismiss reasoning that "Plaintiff has no standing to challenge the

12 validity of the securitization of the loan as he is not an investor of the loan trust." (/d.)

13 Cox seems to challenge the authority of the Defendants, as assignees 1, to enforce the

14 obligation under the note and deed of trust-as did the plaintiff in Bescos. Cox has not established

15 herself as an investor in the trust and has no standing to challenge the document because she

16 cannot establish any prejudice to her.

17 Even if Cox were correct in her assertion that Bank of New York could not have purchased

18 her loan under the trust, Cox has failed to show any prejudice to her. The Court of Appeals in

19 Fontenot v. Wells Fargo Bank (2011) 198 Cal.App.4th 256 clarified the requirement that plaintiffs

20 must show prejudice to challenge the authority to enforce the obligations under a deed of trust

21 securing a promissory note. Just as Cox does here, the plaintiff in Fontenot challenged the

22 assignment of the interest in the deed of trust and note; however, the Court held that the plaintiff

23 could not show prejudice. The Court explained:

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Even if MERS lacked authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by MERS's purported assignment.... 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

1 Note U.S. Bank, the current assignee, is not a party to this lawsuit.


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creditor for another, without changing her obligations under the note .... IfMERS 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.

4 (Id at 272.)

5 Accordingly, because Cox has not suffered any prejudice-i.e. she owes a balance to some

6 creditor-she has no basis or standing to proceed with this breach of contract action.

7 c. 8

9

The First Cause of Action for Failure to Establish Declaratory Relief is Insufficient to Constitute a Cause of Action.

1. The Assertion that AWL Could Not Make a Loan is Without Merit

10 Plaintiffs first allegation is that "the Note was made to a non-existent entity." (SAC ~41.)

11 The Note lists the initial Lender as "America's Wholesale Lender" ("AWL"). (FAC, Ex. 1.)

12 Plaintiff alleges that AWL did not exist when the loan was granted and therefore could not have

13 entered into the contract. (SAC, ~~16, 41, Exs. 1, 2.) Plaintiff asserts that it was not a corporation

14 under New York law until December 16,2008. (SAC, Ex. 6.)

15 At the time the loans were made, AWL was a registered fictitious business name of

16 Countrywide Home Loans. A certified copy of that fictitious business name as filed with the

17 County Clerk for the County of Santa Cruz shows that AWL was the fictitious business name of

18 Countrywide Home Loans, a New York Corporation. (RJN, Ex. F certified copy.)

19 California law requires that if a corporation is registered but is doing business under a

20 fictitious business name, then the corporation must file a fictitious business name statement in its

21 principal place of business. (Cal. Bus. & Prof. Code§ 17915.) AWL was therefore authorized to

22 do business in 2004 when the loan was executed-it was a fictitious name for Countrywide Home

23 Loans, Inc. AWL was the registered fictitious business name of Countrywide Home Loans, a

24 New York Corporation, and there is no conflict or misrepresentation that sometime later another

25 corporation chose that name in the State ofNew York as its business name. AWL was

26 Countrywide Home Loans at the time the subject loan was made.

27 Furthermore, even if AWL was not licensed to do business in California, it would not

28 invalidate the loan. Plaintiff has pled that America's Wholesale Lender is a licensed New York


Corporation. (SAC, ~16.) The penalty for failure of a foreign corporation to register in California

2 is that it consents to personal jurisdiction in the state and that it may not bring suit in the state?

3 (Cal. Corp. Code§ 2203.) Neither provision has any effect on this lawsuit.

4 Finally, Cox has previously admitted to having received at least the amount necessary to

5 satisfy her prior deed of trust on the property in her First Amended Complaint because her prior

6 Deed of Trust was reconveyed after it was paid off by this-now contested-loan. (See FAC,

7 Ex. 31 "Deed of Reconveyance".) Cox wants the benefit of her agreement without any burden.

8 Cox alleges that MERS could not validly transfer the Note and Deed of Trust. First, the

9 issue has been decided by the State of California that MERS is authorized to act on behalf of the

10 beneficiary if so stated in the Deed of Trust. (Gomes v. Countrywide Home Loans Inc. (2011) 192

11 Cal.App.4th 1149) (Gomes agreed in the deed of trust that MERS was authorized to initiate a

12 foreclosure proceeding).)

13 Even if there was a legal basis for an action to determine whether MERS has authority to

14 initiate a foreclosure proceeding, the deed of trust-which Cox has attached to her Complaint

IS establishes as a factual matter that hers claims lack merit. As stated in the deed of trust, Cox

16 agreed by executing that document that MERS has the authority to initiate a foreclosure.

17 In addition, Cox's claim that Recontrust could not record a notice of default without first

18 having recorded a substitution of trustee is an incorrect legal conclusion. Only an agent of the

19 beneficiary need record the Notice of Default. Civil Code section 2924, subdivision (a)(l ), which

20 states that a trustee, mortgagee, or beneficiary, or an agent of any of them, may initiate

21 foreclosure, does not include a requirement that an agent demonstrate authorization by its

22 principal. (Fontenot, 198 Cal.App.4th at 268-69.)

23 D.

24

Plaintiff's Second Cause of Action for Violation of Unfair Business Practices Fails.

Plaintiff's second cause of action for violation of California's Business and Professions

25 Code§ 17200 ("UCL") identifies a California Penal Code under mortgage fraud as the applicable

26 statute. As shown above, the recordings made by Recontrust were in compliance with law and

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2 A monetary penalty may also be assessed.


therefore this alleged violation is without merit.

2 Moreover, recording a notice of default or sale is a privileged act which will support no

3 tort claim other than malicious prosecution. California Civil Code section 2924(d)(l) provides

4 that "[t]he mailing, publication, and delivery of notices as required by this section" "constitute

5 privileged communications pursuant to Section 47." Notice of default and sale are required by

6 section 2924(a)(l) and (3); hence, giving those notices is privileged conduct under Civil Code

7 section 47. In addition, damages are not recoverable under the UCL and Cox has not sought any

8 kind of injunctive relief. 3

9 Because no independent factual allegations are made that can sustain any wrongful actions

1 0 this cause of action should be dismissed.

11 E.

12

Plaintiff's Third Cause of Action for Quasi Contract is Contradictory

Cox claims that Bank of America, N .A., and Countrywide Home Loans were "servicers"

13 and as such could not accept payments on behalfofthe Lender. (SAC, ~61.) But this is nonsense.

14 That is the role of a servicer. Moreover, Cox's claim that Bank of America, N.A., and

15 Countrywide Home Loans could not be servicers because AWL never existed has already been

16 refuted above.

17 F.

18

Plaintiff's Fourth and Fifth Causes of Action for Slander of Title and Quiet Title Fail for Similar Reasons.

19 Cox requests that this Court clear title to her property without any basis for alleging why

20 this Court should nullify the lien on the Property. As Cox has failed to allege any reason why the

21 encumbrance is not proper, this cause of action must fail.

22 Cox seems to be claiming that title should be cleared due to the fact that she claims that the

23 original instruments are void-even though she got the money necessary to pay off her existing

24 lien. For the reasons cited above this is simply not true. No other basis is given for the Quiet Title

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26 3 See Cal. Bus. & Prof. Code,§ 17203; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 27 Cal.4th 1134, 1144 ("[a] UCL action is equitable in nature; damages cannot be recovered");

Madrid v. Perot Sys. Corp. (2005) 130 Cal.App.4th 440, 452. 28


action and the Cause of Action must fail.

2 Furthermore, Cox lacks standing to challenge the foreclosure sale because she has not

3 tendered the undisputed obligation in full. Tender of the amount owed is a condition precedent to

4 any claim of wrongful foreclosure or any challenge to the regularity or the validity of a foreclosure

5 sale. The tender rule is strictly applied. (See Nguyen v. Calhoun (2003) 105 Cal.App.4th 428,

6 439.)

7 As Miller & Starr explain,

8 [a] challenge to the validity of the trustee's sale is an attempt to have the sale set aside and to have the title restored. The action is in

9 equity, and a trustor seeking to set the sale aside is required to do equity before the court will exercise its equitable powers.

1 0 Therefore, as a condition precedent to an action by the trustor to set aside the trustee's sale . . . the trustor must pay, or offer to pay, the

11 secured debt . . . . Without an allegation of such a tender in the complaint that attacks the validity of the sale, the complaint does not

12 state a cause of action.

13 (4 Miller & Starr, Cal. Real Estate§ 10:212, pp.686-87 (3d ed. 2003) (fns. omitted).)

14 "A valid and viable tender of payment of the indebtedness owing is essential to an action

15 to cancel a voidable sale under a deed of trust." "[A ]n action to set aside the sale, unaccompanied

16 by an offer to redeem, would not state cause of action which a court of equity would recognize."

17 The rationale behind the tender offer rule is that if the plaintiff could not have redeemed the

18 property had the sale procedures been proper, then any irregularities did no harm to the plaintiff.

19 Here Cox has not alleged that she is willing or able to tender the money owed. Therefore, she

20 lacks standing to challenge the foreclosure sale.

21 This mandate holds true whether the foreclosure has been completed or is in process.

22 "When a debtor is in default of a home mortgage loan, and a foreclosure is either pending or has

23 taken place, the debtor must allege a credible tender of the amount of the secured debt to maintain

24 any cause of action for wrongful foreclosure." (Alicea v. GE Money Bank (N.D. Cal. July 19,

25 2009) 2009 WL 2136969, at *3 ("Plaintiffs contend, without citing any supporting authority, that

26 the tender rule applies only where the foreclosure sale already has taken place-not before. Such

27 an argument elevates form over substance.... Plaintiffs have not alleged their willingness to

28 tender or their ability to do so. Unless and until they properly allege a willingness to tender,


1 Plaintiffs cannot seek rescission of the loan or Deed of Trust.").) The tender requirement applies

2 to any claim "implicitly integrated" with the foreclosure sale-not merely claims that challenge

3 the sale, but also those that seek damages related to the sale. (Arnolds Mgmt. Corp. v. Eischen

4 (1984) 158 Cal.App.3d 575, 579.)

5 Here Cox seeks damages for breach of contract for wrongful foreclosure upon how her

6 loan was sold to a third-party lender (First Cause of Action), damages for Unfair Business

7 Practices (Second Cause of Action), for Quasi Contract (Third Cause of Action) and damages for

8 Slander of Title and Quiet Title based upon the same allegations of wrongful foreclosure (Third

9 Cause of Action). Thus, all of her claims require that she make an unambiguous tender of the loan

1 0 balance. Because she has not alleged that she is both willing and able to tender the amounts due,

11 all of her claims fail.

12 v. CONCLUSION

13 Based on the foregoing, Cox's Complaint fails to state facts sufficient to constitute any of

14 her causes of action against Defendants. Therefore, Defendants respectfully request that the Court

15 ·sustain their Demurrer in its entirety without leave to amend.

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17 DATED: September 18, 2012

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SEVERSON & WERSON A Professional Corporation

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David E. Pinch Attorneys for Defendant RECONTRUST COMPANY, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATEHOLDERS CWMBS, INC. CHL MORTGAGE PASS-THROUGH TRUST 2005-2 MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-2; COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA CORPORATION

70000.081J/237SOIO.l 13 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER

1 PROOF OF SERVICE

2 At the time of service, I was over 18 years of age and not a party to this action. I am employed in the County of San Francisco, State of California. My business address is One

3 Embarcadero Center, Suite 2600, San Francisco, CA 94111.

4 On September 18,2012, I served true copies of the following document(s):

5 RECONTRUST COMPANY, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF NEW YORK MELLON FKA THE BANK OF NEW

6 YORK AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATEHOLDERS CWMBS, INC. CHL MORTGAGE PASS-THROUGH TRUST 2005-2 MORTGAGE

7 PASS-THROUGH CERTIFICATES, SERIES 2005-2; COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA CORPORATION'S MEMORANDUM OF

8 POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER TO SECOND AMENDED COMPLAINT OF COX

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on the interested parties in this action as follows:

Ronald H. Freshinan Law Offices of Ronald H. Freshman 45050 Casas de Mariposa ~ndian Wells, CA 9221 0

13 rhone: 858.756.8288 rax: 206.424.0744

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Attorney for Plaintiff,

Kimberly Cox

BY MAIL: I enclosed the document(s) in a sealed envelope or package addressed to the 16 persons at the addresses listed above and placed the envelope for collection and mailing, following

our ordinary business practices. I am readily familiar with Severson & Werson•s practice for 17 collecting and processing correspondence for mailing. On the same day that the correspondence is

placed for collection and mailing, it is deposited in the ordinary course of business with the United 18 States Postal Service, in a sealed envelope with postage fully prepaid.

19 I declare under penalty of perjury under the laws of the State of California that the

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foregoing is true and correct.

Executed on September 18, 2012, at San Francisco, California.

70000.081112375010.] CVI74201

in re harris in re lopez rodenhurst v. home loan servs ...€¦ · certificates, series 2005-2; ii...

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