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Perlas v. GMAC Mortgage

August 11, 2010


(Contra Costa County Super. Ct. No. C08-02513) Judith S. Craddick, Judge.

The opinion of the court was delivered by: Simons, Acting P.J.


Plaintiffs Mercedes Perlas and Len Villacorta (appellants) appeal the dismissal of their action against defendants GMAC Mortgage, LLC (GMAC), and ETS Services, LLC (ETS)*fn2 (collectively, respondents). Appellants borrowed money from GMAC, a commercial mortgage lender. Following their failure to make the required loan payments, the underlying security was foreclosed upon. In the published portion of this decision, we reject appellants' claim that they could rely upon GMAC's knowingly false determination that they qualified for the loans as a determination by GMAC that they could afford the loans. In the unpublished portion, we reject appellants' other contentions.


Appellants own real property located on Drakes Circle in Discovery Bay (the Property). GMAC is a mortgage lender. Prior to November 27, 2007, appellants sought to refinance the Property by obtaining a loan from GMAC "and/or one or more of the Doe defendants" in the principal amount of $417,000 (the Loan). In connection with the Loan, GMAC provided a note setting forth a fixed interest rate of 6.375 percent and monthly payments of $2,601.54 (the Note). Respondents also provided appellants a truth-in-lending disclosure statement showing monthly payments of $2,601.54 for a 360-month term at a fixed rate of 6.393 percent. At the time appellants applied for the Loan, they provided information regarding their actual gross income "to one or more of the Doe defendants." One of the documents tendered at closing was a "purported" application for the Loan (Application), which appellants had neither prepared nor reviewed. The Application stated appellants' "total income" was $9,466 per month, which was substantially greater than the actual income information appellants provided to GMAC. This material change in appellants' income information was not disclosed to them prior to December 21, 2007, and appellants were never requested to confirm the accuracy of the information contained in the Application. At closing, appellants signed the preprinted Application and other documents without being given an opportunity to read or review them.

Along with the other documents regarding the Loan, GMAC prepared and tendered to appellants a deed of trust (Deed). The Deed identifies GMAC as " 'Lender.' " The Deed identifies unnamed defendant Mortgage Electronic Registration Systems, Inc. (MERS),*fn4 as a "separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the beneficiary under this [Deed]." The Deed identifies ETS as "trustee" of the Deed. Unbeknownst to appellants, the Deed included substantial language which constituted an addendum to the Note. Moreover, the beneficial interest in the Deed is separate from the Note, and appellants were not advised that such bifurcation is contrary to California law and without legal force or effect.

On or about December 21, 2007, appellants executed documents prepared by GMAC for a home equity line of credit (Credit Line), which was also intended to refinance the Property. The entire amount of the Credit Line, $114,000, was advanced as part of the refinance of the Property. However, the Credit Line application was neither prepared nor reviewed by appellants, and bears a preprinted date of November 27, 2007 on the applicant's signature line. On December 27, 2007, a deed of trust and assignment of rents was recorded to secure the Credit Line (Credit Line Deed).*fn5

At no time did appellants' income permit them to make the payments called for in the Loan documents. On June 9, 2008, ETS recorded a notice of default and election to sell under the deed of trust (notice of default). ETS signed the notice of default "as agent for beneficiary." On September 19, 2008, ETS recorded a notice of trustee's sale.

On October 2, 2008, appellants filed their original complaint against respondents. On January 16, 2009, appellants filed the FAC against respondents and unnamed defendants alleging: slander of title (first cause of action), fraud (misrepresentation) (second cause of action), fraud (concealment) (third cause of action), conspiracy to commit fraud (fourth cause of action), to void contract (fifth cause of action), to void and cancel deed of trust (sixth cause of action), breach of fiduciary duty (seventh cause of action), violation of Business and Professions Code section 17200 et seq. (eighth cause of action), intentional infliction of emotional distress (ninth cause of action), declaratory relief (10th cause of action), injunctive relief (11th cause of action), violation of Civil Code section 2923.5 (12th cause of action), and restitution (unjust enrichment) (13th cause of action).*fn6

On February 20, 2009, respondents demurred to the first through sixth and eighth through 13th causes of action of the FAC on the grounds they failed to state a cause of action and were uncertain and ambiguous. Respondents also moved to strike various portions of the FAC. Respondents requested that the court take judicial notice of the June 9, 2008 notice of default, the notice of trustee's sale recorded on September 19, 2008, and a copy of Civil Code section 2923.5. Appellants opposed the motion to strike and demurrer, asserting the FAC stated the alleged causes of action, and, if not, requesting the opportunity to amend.

None of the parties attended the hearing on the demurrer and motion to strike. In sustaining the demurrer to the FAC without leave to amend, the court ruled that the slander of title cause of action failed because the Deed specifically identifies ETS as the trustee under the Deed, and the remaining causes of action failed to state facts sufficient to state a cause of action. The court granted respondents' request for judicial notice and ruled the motion to strike was moot.


I. Standard of Review

"When reviewing a judgment dismissing a complaint after the granting of a demurrer without leave to amend, courts must assume the truth of the complaint's properly pleaded or implied factual allegations. [Citation.] Courts must also consider judicially noticed matters. [Citation.] In addition, we give the complaint a reasonable interpretation, and read it in context. [Citation.] If the trial court has sustained the demurer, we determine whether the complaint states facts sufficient to state a cause of action. If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. [Citation.] If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. [Citation.] The plaintiff has the burden of proving that an amendment would cure the defect. [Citation.]" (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)

II. Appellants Have Not Waived Their Claims of Error*fn7

Preliminarily, we reject respondents' assertion that by failing to object to the trial court's tentative ruling denying leave to amend, appellants waived their right to claim the court abused its discretion in sustaining the demurrer without leave to amend. Code of Civil Procedure section 472c, subdivision (a) provides: "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 to appeal even though no request to amend such pleading was made." Therefore, appellants are entitled by statute to argue that leave to amend should have been granted, despite their failure to attempt amendment in the trial court. (Kolani v. Gluska (1998) 64 Cal.App.4th 402, 411.)

We also reject respondents' assertion that appellants may not, for the first time on appeal, raise new theories of relief to defeat the demurrer. As Witkin explains, "The rule against raising a new theory for the first time on appeal applies to an appeal after a trial. The rule is grounded on principles of waiver and estoppel, and is a matter of judicial economy and fairness to opposing parties. At the pleading stage, these considerations are not applicable. Thus, on an appeal from a judgment on demurrer, the court will examine the pleaded facts to see if they make out a claim for relief under any theory. [Citations.]" (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 414, p. 473.)

III. Numerous Causes of Action Are Deemed Abandoned*fn8

Respondents correctly note that appellants fail to mention or discuss the following causes of action to which the demurrer was sustained without leave to amend: the first cause of action for slander of title, the fourth cause of action for conspiracy to commit fraud, the fifth cause of action to void contract, the seventh cause of action for breach of fiduciary duty, the eighth cause of action for violation of Business and Professions Code section 17200 et seq., the ninth cause of action for intentional infliction of emotional distress, the 10th cause of action for declaratory relief, the 11th cause of action for injunctive relief, and the 13th cause of action for restitution.

An appellant's failure to challenge an issue in its opening brief constitutes a waiver or abandonment of the issue on appeal. This rule has been applied even when, as here, the appellant is challenging the sustaining of a demurrer without leave to amend. (Gordon v. Law Offices of Aguirre & Meyer (1999) 70 Cal.App.4th 972, 980, fn. 10; Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 241.)

IV. Appellants Cannot Amend to State a Cause of Action for Fraudulent Misrepresentation ...

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