August 27, 2013
VICTORIA URENIA, an individual; SOLEDAD CORONA, an individual, Plaintiffs,
PUBLIC STORAGE, a real estate investment trust; CITY OF LOS ANGELES, a governmental entity;, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO EXPUNGE LIS PENDENS [Docket No. 9]
DEAN D. PREGERSON, District Judge.
Plaintiffs Victoria Urenia and Soledad Corona("Ms. Corona") (collectively "Plaintiffs") have sued Public Storage, City of Los Angeles, Bank of America ("BOA"), and Michael Anz on several grounds. (See generally Compl., Docket No. 1.) On June 1, 2013, Ms. Corona filed a lis pendens against real property located at 2200 Daly Street, Los Angeles, California 90031 (the "Property"). Presently before the Court is BOA's Motion to Expunge Lis Pendens and Request for Attorney Fees and Costs ("Motion"). (Docket No. 9).
Ms. Corona is the former Trustor of a Deed of Trust dated September 4, 2008, that encumbered the Property and included a power of sale clause that provided for the nonjudicial foreclosure of the Property. (Compl., ¶¶ 23-24; Request for Judicial Notice ("RJN") at Exh. A (Deed of Trust), Docket No. 10.) BOA asserted that Ms. Corona defaulted on her mortgage, and a Notice of Default was recorded against the Property on July 14, 2009. (Compl. ¶ 24, RJN, Ex. B.) A Notice of Sale of the Property was recorded on October 29, 2009, and the Property was sold on December 14, 2009. (RJN Ex. A.) Trustee's Deed Upon Sale was recorded on December 21, 2009. Id.
Ms. Corona sued in Los Angeles Superior Court for wrongful foreclosure and, after an appeal, BOA prevailed, eventually obtaining legal title and possession of the Property. (RJN, Exhs. E ("Trial Court Judgment"); F ("Appellate Decision"); G (Unlawful Detainer "UD" Judgment). On February 8, 2013, the Superior Court rejected Ms. Corona's post-judgment applications to quash that court's writ of possession in the UD action. Id. at Ex. H ("UD Court Order Affirming UD Judgment").
II. Legal Standard
"A lis pendens is a recorded document giving constructive notice that an action has been filed affecting title to or right to possession of the real property described in the notice." Kirkeby v. Superior Court of Orange Cnty. , 33 Cal.4th 642, 647 (2004). California law governs lis pendens matters. Schmidt v. Coldwell Banker Residential Brokerage, 5:13-CV-00986 EJD, 2013 WL 2085161, at *3 (N.D. Cal. May 14, 2013). "[A]ny party may apply to the court in which the action is pending to expunge a lis pendens." Id . (citing Cal. Civ. Proc. Code § 405.30.) "The court must grant a motion to expunge if it determines either (1) that the pleading on which the notice is based does not contain a real property claim, or (2) that the claimant has not established by a preponderance of the evidence the probable validity of the real property claim." Id . ( citing Cal. Civ. Proc. Code §§ 405.31, 405.32). "[T]he burden is on the party opposing the motion to show the existence of a real property claim." Kirkeby , 33 Cal.4th at 647.
As a threshold issue, Plaintiffs state BOA lacks standing. However, "any party may apply to the court in which the action is pending to expunge a lis pendens." Schmidt, 2013 WL 2085161, at *3 (citing Cal. Civ. Proc. Code § 405.30). Although non-parties must show they have an "interest in the real property, " BOA is a party, and that status is sufficient to confer standing. Cal. Civ. Proc. Code § 405.30 ("[A]ny party, or any nonparty with an interest in the real property affected thereby, may apply to the court in which the action is pending to expunge the notice.").
BOA states that the Complaint does not contain a real property claim, which is a requirement under Cal. Civ. Proc. Code § 405.31. Specifically, BOA states that Ms. Corona's Complaint is about personal property, not real property, because the Prayer for Relief in the Complaint does not seek "any relief that would affect title or possession of the property." (Docket No. 9-1 at 3:10-11.)
"The majority of [California] courts have concluded that a claim that seeks an interest in real property merely for the purpose of securing a money damage judgment does not support the recording of a lis pendens." Campbell v. Superior Court , 132 Cal.App.4th 904, 912 (2005). However, the Complaint's final cause of action is to "set aside foreclosure sale, " and it specifically requests that the "sale should be set aside." (Compl. ¶¶ 237-42.) Thus, even if this Court were to side with the majority of California courts, Plaintiffs do not seek only money damages; they seek to affect title. BOA's reply brief faults Ms. Corona for not specifically including setting aside the foreclosure in the Prayer for Relief section of the Complaint. (Docket No. 16 at 1:2-5.) Because "public policy favor[s] the resolution of disputes on their merits, " BOA makes too much of too little. In re Eisen , 31 F.3d 1447, 1454 (9th Cir. 1994).
BOA also states that even if Plaintiffs seek a remedy that affects title, she cannot succeed on any of her claims. The Court agrees. Plaintiffs state that the claim for "foreclosure to be set aside" should succeed because BOA never "followed the HUD guidelines outlined in the Deed of Trust." Docket No. At 5:26-28. Ms. Corona's Deed of Trust contained the following language:
Regulations of HUD Secretary. In many circumstances regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclosure if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.
(Compl. ¶ 24.) Plaintiffs' reliance on HUD guidelines is unavailing.
While HUD regulations may prevent a foreclosure before it occurs, after a foreclosure happens a plaintiff may not use those regulations to "bring a private right of action against the lenders." Pfeifer v. Countrywide Home Loans, Inc. , 211 Cal.App.4th 1250, 1269 (2012), review denied (Feb. 20, 2013) (analyzing a Deed of Trust containing the same language block quoted above); Weatherford v. Nevada Rural Hous. Auth., 3:10-CV-729-RCJ-RAM, 2013 WL 2179292 (D. Nev. May 17, 2013) (citing to "several circuits that have... have found that there is no private right of action to enforce HUD regulations"). The distinction between offense and defense is paramount for HUD violations: "HUD regulations... may be used defensively as an affirmative defense to a judicial foreclosure action, " but they "may not be invoked by the mortgagor as a sword in an offensive cause of action against the mortgagee." Pfeifer , 211 Cal.App.4th at 1268-70.
Additionally, "[a] full tender must be made to set aside a foreclosure sale, based on equitable principles." Stebley v. Litton Loan Servicing, LLP , 202 Cal.App.4th 522, 526 (2011). Although under Pfeiffer, the full tender requirement does not apply to certain pre-foreclosure contexts involving Civil Code § 2923.5, § 2923.5 "does not provide for... setting aside a foreclosure sale." Id . Courts are reluctant to apply Pfeiffer outside the § 2923.5 context. See Talaie v. Wells Fargo Bank, N.A., No. CV 12-04959 DMG AGRX, 2013 WL 3316157, at *3 (C.D. Cal. June 27, 2013).
BOA also states that the claimant cannot prove the probable validity of her real property claim, because any such claim is precluded on res judicata grounds. Because "the Full Faith and Credit Act, 28 U.S.C. § 1738, requires us to give the same preclusive effect to a state-court judgment as another court of that State would give, " this Court must "look to California law to determine the effect of the judgment against International Church entered by the Superior Court of Los Angeles County." Int'l Evangelical Church of Soldiers of the Cross of Christ v. Church of Soldiers of the Cross of Christ of State of Cal. , 54 F.3d 587, 590 (9th Cir. 1995).
Plaintiffs state that under the California Supreme Court's decision in Keidatz v. Albany , 39 Cal. 2d 826 (1952) res judicata is inapplicable: "If... new or additional facts are alleged that cure the defects in the original pleading, it is settled that the former judgment is not a bar to the subsequent action whether or not plaintiff had an opportunity to amend his complaint" (emphasis added). However, Plaintiffs' new allegations are related to BOA's "failure to follow HUD regulations." (Docket No. 13 at 8: 14-15.) For the reasons discussed, these allegations will not cure any defect, because Plaintiffs cannot use HUD regulations offensively.
Additionally, Plaintiff's request for an undertaking is unwarranted. Because Plaintiffs have not "established by a preponderance of the evidence the probable validity of the real property claim, " this Court is not permitted to "order an undertaking to be given as a condition of expunging." Cal. Civ. Proc. Code § 405.30
Finally, BOA requests an award of attorney fees. The Court DENIES the request.
For the reasons stated herein, the Motion is GRANTED, except that the Court DENIES attorney fees.
IT IS SO ORDERED.