DEMISON v. U.S. BANK NATIONAL ASSOCIATION No. F062022.
NEKTOE DEMISON et al., Plaintiffs and Appellants, v. U.S. BANK NATIONAL ASSOCIATION, as Trustee, etc., Defendants and Respondents.
Court of Appeals of California, Fifth District.
Filed May 15, 2012.
S. Edward Slabach, for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Nektoe and Danielle Demison (appellants) filed a complaint to quiet title naming as defendants U.S. Bank National Association, as Trustee for the C-Bass Mortgage Loan Asset-Backed Certificates, Series 2006-CB8; C-Bass Mortgage Loan Asset-Backed Certificates, Series 2006-CB8, a Trust; Old Republic Default Management Services, A Division of Old Republic National Title Insurance Company; and Does 1 through 500, inclusive (collectively respondents), after appellants defaulted on their real estate loan and nonjudicial foreclosure proceedings were executed. The complaint alleged that respondent Old Republic Default Management Services had no legal authority to initiate foreclosure proceedings. Respondent U.S. Bank National Association demurred to the complaint, claiming the complaint failed to state facts sufficient to rebut the validity of the non-judicial foreclosure sale and failed to plead that appellants tendered the total amount of the indebtedness at the time of the foreclosure. The trial court granted the demurrer, without leave to amend, and the instant appeal followed. We conclude the trial court did not abuse its discretion in sustaining the demurrer without leave to amend and affirm.
FACTUAL AND PROCEDURAL HISTORY
On July 18, 2006, Ownit Mortgage Solutions, Inc. (Lender), loaned appellants $316,000 to finance the purchase of real property.
On February 11, 2009, LandAmerica, One Stop, Inc., acting as an agent for MERS, filed a notice of default and election to sell under deed of trust in the Kern County Recorder's Office. According to the notice of default, appellants owed $9,974.31, as of February 10, 2009. On May 26, 2009, Old Republic Default Management Services, a Division of Old Republic National Title Insurance Company, as Trustee (Trustee), recorded a notice of trustee's sale notifying appellants that the property would be sold at a public sale unless they took action to protect the property. On February 23, 2010, Trustee recorded a trustee's deed upon sale granting to U.S. Bank National Association, as Trustee for the C-Bass Mortgage Loan Asset-Backed Certificates, Series 2006-CB8, title to the property.
On March 15, 2010, appellants filed a complaint to quiet title claiming that Trustee "did not have the right, power, or authority to conduct such sale, and any actions taken by it in that regard are void." The complaint provides: "Pursuant to the terms of the Note and the Deed of Trust, the Lender (or its successors or assigns) is the only party to the NOTE that can declare it in default. The NOTE has not been declared in default by the Lender, the only secured party. The Deed of Trust states that it secures `to Lender: (1) the repayment of the Loan ....' The Lender is OWNIT MORTGAGE SOLUTIONS, INC., NOT anyone else. There is no other secured party. The notice of default which served as the basis for such sale stated that Plaintiffs were in default of obligations owed to a company called Mortgage Electronic Registration Systems, Inc. — a company that is not a Defendant herein, and a company to whom Plaintiffs owed no obligations to at all and thus could not have been in default."
Respondent U.S. Bank National Association, as Trustee for the C-Bass Mortgage Loan Asset-Backed Certificates, Series 2006-CB8, demurred to the complaint claiming appellants' complaint failed to allege facts sufficient to rebut the presumption of a valid sale and failed to allege a tender of the total amount of indebtedness owed at the time of foreclosure. Appellants, relying on two out-of-state cases, Landmark Nat'l Bank v. Kesler (2009)
"`On appeal from an order of dismissal after an order sustaining a demurrer, our standard of review is de novo, i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law. [Citation.]'" (Los Altos El Granada Investors v. City of Capitola (2006)
Appellants claim that the demurrer should not have been sustained without leave to amend since they pled the elements of a quiet title claim, as set forth in Code of Civil Procedure section 761.020 (except for a technical remedy that could be easily remedied), to wit: a description of the property, title of the plaintiff and the basis for that title, the adverse claims to the plaintiff's title, the date as of which the determination is sought, and a prayer for the determination of plaintiff's title against the adverse claims.
Respondent claims that the demurrer was properly sustained in light of the legal effect of the deed of trust, the notice of default, the notice of trustee's sale, the trustee's deed upon sale, and in light of appellants' failure to tender their unpaid balance.
The deed of trust expressly granted MERS, a beneficiary and nominee of the lender, the power to foreclose on the property in the event of appellants' default. There is nothing in the record to indicate the sale was not executed in accordance with the controlling documents. (See Gomes, supra, 192 Cal.App.4th at p. 1149.)
Appellants challenge the validity of the sale claiming that Ownit (Lender) is still the owner and holder of the note secured by the deed of trust. Since the promissory note was never transferred or assigned and foreclosure under the power of sale in a deed of trust is enforcement of the note, only Lender, or a transferee, had the right to initiate foreclosure proceedings.
The question of whether the assignment of a deed of trust is legally effective without actual transfer of the corresponding promissory note was recently addressed by the Sixth District Court of Appeal in the case of Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433 (Debrunner).
In Debrunner, plaintiff and appellant, Debrunner, along with his co-investors (collectively Investors) extended a $675,000 loan in March 2006 to Barbara Chiu and Shimin Xu, secured by a second deed of trust on a home. Chiu executed a promissory note and second deed of trust in favor of Investors. At that time Chiu was already a trustor on the first deed of trust on the property, having borrowed $975,000 from Quick Loan Funding, Inc. (Quick Loan), in June 2004. The trustee on that deed of trust was Chicago Title Company. The following month Quick Loan assigned the deed of trust, and Chiu's promissory note, to Option One Mortgage Corporation (Option One). Option One shortly thereafter assigned the deed of trust and the note to FV-1, Inc. On September 2, 2008, FV-1 assigned the deed of trust to Deutsche Bank, with respondent Saxon Mortgage Services, Inc. (Saxon) acting as "Attorney in Fact." The deed of trust was recorded on January 5, 2010. (Debrunner, supra, 204 Cal.App.4th at p. 436.)
In January 2008, Investors filed a notice of default. They scheduled a trustee's sale for the following month. Foreclosure was delayed due to the bankruptcy filing by Chiu's business entity. Following the bankruptcy court's granting of relief from the stay, Investors foreclosed and obtained a trustee's deed upon sale for the property. In August 2008, however, well before the sale was completed, Saxon, servicer on the first-position loan, filed a notice of default on the property. Notice was rescinded due to the bankruptcy proceedings. In July 2009, Deutsche Bank moved for relief from the bankruptcy stay in order to file a new notice of default. That motion was taken off calendar when the bankruptcy matter was closed in August 2009. On September 15, 2009, the foreclosure trustee, Old Republic Default Management Services (Old Republic), recorded a new notice of default on the property. In the accompanying Fair Debt Collections Practices Act notice, Old Republic named Deutsche Bank as the creditor and Saxon as its "attorney-in-fact," and informed the debtor that payment to stop the foreclosure could be made to Saxon. On January 5, 2010, the county recorded a "Substitution of Trustee" from Chicago Title Company to Old Republic. This document had been signed and notarized by Saxon, on behalf of Deutsche Bank, on September 2, 2008. (Debrunner, supra, 204 Cal.App.4th at pp. 436-437.)
Debrunner commenced an action in November 2009 to stop the impending foreclosure by Deutche Bank, claiming Deutsche Bank had no right to foreclose because Deutsche Bank did not have physical possession of, or ownership rights to, the original promissory note. Debrunner sought to quiet title to the property and remove the first deed of trust in favor of Quick Loan. (Debrunner, supra, 204 Cal.App.4th at p. 437.)
Deutsche Bank and Saxon demurred claiming that possession of the original note was not required under the applicable statutes, Civil Code section 2924 et. seq.
The Sixth District Court of Appeal rejected Debrunner's challenge to the sustaining of respondent's demurrer without prejudice reasoning as follows:
MERS had a beneficial interest in the deed of trust. The fact that MERS did not have a beneficial interest in the note is not determinative.
Moreover, appellants cannot state a cause of action for quiet title because they did not tender the amount of the secured indebtedness or adequately state an excuse from tendering. (Lona v. Citibank, N.A. (2011)
Judgment is affirmed. The parties to bear their own costs.
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