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Robert Herrera et al v. Ahmsi Default Services

May 15, 2012

ROBERT HERRERA ET AL., PLAINTIFFS AND APPELLANTS,
v.
AHMSI DEFAULT SERVICES, INC., DEFENDANT AND RESPONDENT.



(Super. Ct. No. SC20090193)

The opinion of the court was delivered by: Murray , J.

Herrera v. AHMSI Default Services

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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COPY

Plaintiffs Robert Herrera and Gail Herrera (the Herreras) purchased real property in South Lake Tahoe, California, at a foreclosure sale related to a second deed of trust recorded on April 4, 2007. Thereafter, U.S. Bank National Association, as Trustee for the Certificate Holders of Asset Backed Securities Corporation Home Equity Loan Trust Series OOMC 2006-HE5 (U.S. Bank), purchased the same property at a second foreclosure sale related to a first deed of trust recorded on April 17, 2006. Believing this latter foreclosure to be unlawful, the Herreras filed a lawsuit against AHMSI Default Services, Inc. (AHMSI), U.S. Bank, and other defendants connected to the foreclosure.

In the operative complaint, the Herreras alleged four causes of action: (1) to set aside the foreclosure sale at which U.S. Bank purchased the property, (2) to cancel the trustee's deed conveying the property to U.S. Bank, (3) to quiet title to the property, and (4) to recover for unjust enrichment. The first three causes of action are alleged against AHMSI.

AHMSI demurred to the operative complaint and attacked all four causes of action. The trial court sustained the demurrer with prejudice and dismissed the entire case. The Herreras appealed.

On appeal, the Herreras principally argue that the trial court erred in taking judicial notice of recorded documents that AHMSI submitted in connection with the demurrer. Whatever the merit of this argument, we need not address it. As we explain, a final judgment reached in a related unlawful detainer action filed by U.S. Bank has conclusively resolved issues against the Herreras and eviscerated their first three causes of action. After issue preclusion is applied, what remains of the first three causes of action fails to advance any viable claim. Accordingly, we affirm the dismissal of the first three causes of action. However, we reverse the trial court's dismissal of the fourth cause of action. AHMSI had no standing to demur to the fourth cause of action because it was alleged only against U.S. Bank.

BACKGROUND

I. The Operative Complaint

The operative complaint names as defendants T.D. Service Company, aka Beneficiary Foreclosure Services, LLC (T.D. Service Company), AHMSI, U.S. Bank, and Does 1 through 50, inclusive.

According to the operative complaint, the Herreras acquired a "run-down, distressed property" at 725 Los Angeles Street in South Lake Tahoe pursuant to a "Trustee's Deed Upon Sale filed approximately April 29, 2009." The Herreras believed the price they paid for the property reflected its then-existing value.*fn1

Subsequently, "[o]n or about July[] 2009," the Herreras received a Notice of Trustee's Sale concerning the property they had purchased. The notice was served by T.D. Service Company and the alleged trustee was AHMSI.

The operative complaint alleges that AHMSI "arranged" and conducted an "improper and illegal" trustee's sale of the Herreras' property on August 27, 2009. At the trustee's sale, the property was sold to U.S. Bank.

As an explanation as to why the property the Herreras acquired was subsequently foreclosed upon, the operative complaint alleges on information and belief that "the previous owners" of the property "may have taken out a mortgage on the property with an unnamed entity and secured this mortgage with a deed of trust." The Herreras alleged they "had no knowledge that the previous [home]owner[s] may have taken out [this] additional mortgage . . . until after the[y] purchased the property." If this additional mortgage loan was taken out by the previous owners, "all of the assignments of interests" in this mortgage loan were not recorded, and, moreover, an "unnamed entity" "bundled" this mortgage loan with other mortgage loans to create a "mortgage[-]backed security" investment that was sold to third parties, making it "impossible to determine" who owns any particular mortgage loan in the bundle.

A. First Cause of Action -- Set Aside Trustee's Sale

The first cause of action, to "Set Aside [The] Trustee's Sale" that occurred in August 2009, alleges that "no defendant caused to be published [or] posted the proper notices of the intent to sell the subject property." Moreover, the purchaser, U.S. Bank, has "no provable interest" in the property. "[W]hatever promissory note that may have existed as supporting the Trustee's sale no longer exists, thus the Trustee's sale is void ab initio." Finally, "[o]n information and belief[,] the sale was improperly held and the trustee's deed was wrongfully executed, delivered and recorded in that no entity had sufficient interest in the property to hold a trustee's sale and no entity had sufficient interest [or] paid consideration for the property. [The Herreras] have been wrongfully deprived of the legal title by forfeture [sic]."

B. Second Cause of Action -- Cancel Trustee's Deed

The second cause of action, to "Cancel [The] Trustee's Deed" transferring the property to U.S. Bank, incorporates the previous allegations and further avers that AHMSI, or "an entity claiming through AHMSI, Defendant, U.S. Bank . . . , claims a[n] estate or interest in the subject property adverse to that of [the Herreras]. Defendant's [sic] claims are without any right; Defendants have no estate, right, title, or interest in the real property."

C. Third Cause of Action -- Quiet Title

The third cause of action, to "Quiet Title" to the property, incorporates the previous allegations and further avers "[o]n information and belief . . . that no named defendant [or] DOE defendant owns or possesses an original, verifiable, promissory note or deed of trust pertaining to the subject property; that no defendant has standing to foreclose upon [the Herreras'] property; that all rights, title and interest asserted by any defendants, if any existed, were sublimated into a non-functional 'security' interest . . . . Thus no entity has legal standing to oppose this complaint."

D. Fourth Cause of Action -- Unjust Enrichment

The fourth cause of action, for unjust enrichment against U.S. Bank, incorporates the previous allegations and further avers that the Herreras "have paid for and done all of the deferred maintenance upon the subject property prior to and during this litigation. Without their efforts the property would be uninhabitable and be the subject of fines and other legal action by the county as a public nuisance. [The Herreras] have paid all back taxes and had the property insured against loss. All at [the Herreras'] expense and detriment. [¶] . . . Should [the Herreras] not prevail in the [sic] and should [U.S. Bank] obtain the ownership and possession of the subject property, [U.S. Bank] will obtain the benefit of all of [the Herreras'] expenses [and] efforts in maintaining the property, paying taxes and insurance upon the property. Such acceptance and retention of the above[-]referenced benefit constitutes unjust enrichment."

II. AHMSI'S Demurrer

AHMSI (and only AHMSI) demurred to the operative complaint. In connection therewith, AHMSI requested judicial notice of several recorded documents.*fn2

The documents showed two deeds of trust attached to the property. The first deed of trust was recorded on April 17, 2006. The second deed of trust was recorded on April 4, 2007. As contended by AHMSI, the records demonstrated that the Herreras purchased the property at the foreclosure sale on the second deed of trust, taking the property subject to the first deed of trust. AHMSI argued that "simple resort to the public records . . . would have revealed" the existence of the first deed of trust, which was senior. It was this first deed of trust that was foreclosed upon in August 2009 pursuant to which U.S. Bank acquired the property.

AHMSI demurred to the first two causes of action (to set aside the trustee's sale and cancel the trustee's deed) on several grounds. AHMSI argued that the operative complaint was conclusory and failed to allege any facts showing that the August 2009 foreclosure sale was unlawful. In addition, AHMSI argued that because the Herreras failed to allege that they cured the default in the senior indebtedness, their interest in the property had been "extinguished" at the August 2009 foreclosure sale. Lastly, even if the August 2009 foreclosure sale was somehow improper, the Herreras failed to allege tender of the senior obligation. Consequently, the first two causes of action were defective.

As to the third cause of action to quiet title, AHMSI argued that the operative complaint failed to comply with Code of Civil Procedure section 760.020, which requires a verified complaint. As to the fourth cause of action, AHMSI argued that "Plaintiffs have not alleged how it is Defendant has been unjustly enriched in this matter." Finally, AHMSI sought dismissal of the operative complaint on the ground that the Herreras failed to join an indispensable party to the action; namely, U.S. Bank, the current owner of the property.

The Herreras filed a written opposition to the demurrer and the court held a hearing on the demurrer on July 9, 2010, at which no party appeared.

The court issued a written tentative decision in advance of the hearing date. In its tentative decision, the court took judicial notice of the documents AHMSI submitted over the Herreras' nonspecific hearsay objection, credited the bulk of AHMSI's arguments, and sustained the demurrer as to all causes of action without leave to amend. Absent objection, the tentative decision became the final order of the court. Judgment was then entered dismissing the case in its entirety*fn3 and this appeal followed.

DISCUSSION

"On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. [Citations.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) The burden of proving a reasonable possibility of amendment is on the plaintiff (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126), and the burden can be met for the first time on appeal (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1041-1042).

On appeal, the Herreras devote substantial briefing to mounting a heated and unnecessarily distracting attack on the "foreclosure industry." Their chief legal contention is that the trial court erred when it took judicial notice of the recorded documents that AHMSI submitted and then used the contents of those records -- the veracity of which they dispute -- in ruling against them. Disputing "virtually everything" about the documents, the Herreras contend that AHMSI failed to properly authenticate the documents and that the contents of the documents are hearsay.

AHMSI contends that the trial court properly took judicial notice of the submitted documents and properly sustained the demurrer on all stated grounds.

In addition, for the first time, AHMSI argues that by virtue of a final judgment reached in a related unlawful detainer action brought by U.S. Bank under Code of Civil Procedure section 1161a*fn4 (section 1161a), the Herreras are now collaterally estopped from relitigating, in this case, the issue of title to the property. The documents relating to the unlawful detainer action and the associated judgment are ...


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