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Rossberg v. Bank of America, N.A.

California Court of Appeals, Fourth District, Third Division

August 27, 2013

ALAN SHAUN ROSSBERG et al., Plaintiffs and Appellants,
v.
BANK OF AMERICA, N.A., et al., Defendants and Respondents.

Pub. & Mod. Order 9/26/13 (See End Of Opn.)

Appeal from a judgment of the Superior Court of Orange County, No. 30-2011-00462732 Gregory Munoz, Judge.

Robinson-Legal and Raymond G. Robinson for Plaintiffs and Appellants.

Bryan Cave, Sean D. Muntz and Thomas E. Nanney for Defendants and Respondents.

OPINION

ARONSON, J.

Plaintiffs and appellants Alan Shaun Rossberg (Shaun) and Brenda Rossberg (Brenda; collectively Rossbergs)[1] appeal from a judgment dismissing their complaint after the trial court sustained a demurrer by defendants and respondents Bank of America, N.A. (BofA) and U.S. Bank, National Association, as trustee for the certificate holders of Banc of America Funding Corporation Mortgage Pass-Through Certificates, Series 2007-C (U.S. Bank; collectively Defendants). The Rossbergs sued Defendants to prevent them from selling the Rossbergs’ home at a nonjudicial foreclosure sale after the Rossbergs defaulted on two loans secured by deeds of trust. The Rossbergs alleged several causes of action against Defendants based on BofA’s unperformed promises to modify the Rossbergs’ loans and Defendants failure to comply with the statutory requirements for conducting a nonjudicial foreclosure.

We affirm the trial court’s order sustaining Defendants’ demurrer to the first amended complaint because the Rossbergs failed to adequately allege the existence of an enforceable agreement to modify their loans or that Defendants failed to comply with the statutory requirements for conducting a nonjudicial foreclosure. We also affirm the trial court’s order denying leave to amend because the Rossbergs failed to specifically show how they could amend their pleading to state a cause of action. Finally, because we affirm the trial court’s judgment dismissing the Rossbergs’ action, we dismiss as moot the Rossbergs’ petition for writ of mandate to prevent Defendants from evicting them from their home during this appeal.

I

Facts and Procedural History[2]

In February 2007, the Rossbergs borrowed more than $600, 000 from BofA. They signed a promissory note (First Note) and gave BofA a deed of trust (First Deed of Trust) on their home in Irvine, California, to secure the loan. The First Deed of Trust named BofA as the beneficiary and PRLAP, Inc. as the trustee.

Two months later, BofA entered into a “Pooling and Servicing Agreement” with Banc of America Funding Corporation as depositor, Well Fargo Bank, N.A., as master servicer and securities administrator, and U.S. Bank as trustee. The Pooling and Servicing Agreement grouped together numerous mortgages to create mortgage backed securities, which were sold to investors who purchased certificates giving them an ownership interest. The Rossbergs alleged the First Note and First Deed of Trust “were part of the Pooling and Servicing Agreement... [and] were transferred to Defendant U.S. Bank as trustee.”

The Rossbergs borrowed an additional $58, 000 from BofA in August 2007. Again, they signed a promissory note (Second Note) and gave BofA a deed of trust on their home (Second Deed of Trust) as security for the loan. The Second Deed of Trust named BofA as the beneficiary and PRLAP, Inc. as the trustee. The Rossbergs do not allege whether the Second Note and Second Deed of Trust were part of the Pooling and Servicing Agreement.

In 2007, Shaun lost his job and then suffered a debilitating illness that prevented him from looking for new work for several months. After exhausting much of their savings and available credit, the Rossbergs fell behind in their loan payments. In early 2009, they began discussions with BofA to modify their loans. These discussions dragged on for more than two and one-half years as the Rossbergs engaged in countless oral and written communications with BofA. They repeatedly sent BofA numerous tax and other financial documents to support their loan modification requests.

The Rossbergs alleged BofA employees told them on several occasions that they had been granted a loan modification. In July 2009, Esmerna, an employee in the loan modification processing department, told Brenda the Rossbergs had been granted a loan modification that would reduce their interest rate from 7.65 percent to 6.54 percent and would add $58, 000 to the loan balance. In December 2010, Yazmin, another BofA loan modification employee, told Brenda the Rossbergs had been granted a loan modification that would (1) fix their variable interest rate at 7.65 percent for the term of the loan; (2) establish an impound account; and (3) require a $130, 000 balloon payment at the end of the loan. Several other employees confirmed the Rossbergs had been granted these loan modifications.[3] All of these employees promised the Rossbergs would receive documents to confirm and implement these loan modifications, but the Rossbergs never received those documents and BofA never implemented either loan modification. The Rossbergs did not allege what, if any payments, they made during their loan modification negotiations with BofA.

On September 22, 2009, as the Rossbergs continued their efforts to negotiate a loan modification, BofA executed a Substitution of Trustee designating Cal Western Reconveyance Corporation (Cal-Western) as the new trustee on the First Deed of Trust. BofA did not have a notary public acknowledge the Substitution of Trustee until November 11, 2009, and it did not record the document until November 18, 2009.

Three days after BofA executed the Substitution of Trustee, and nearly two months before BofA recorded that document, Cal-Western executed a Notice of Default as “either the original trustee, the duly appointed substituted trustee, or acting as agent for the trustee or beneficiary” under the First Deed of Trust. The Notice of Default informed the Rossbergs they were nine months behind on their loan and the beneficiary had elected to start the nonjudicial foreclosure process on their property. Cal-Western recorded the Notice of Default on September 28, 2009, three days after executing it.

In June 2010, Cal-Western recorded a Notice of Trustee’s Sale (Notice of Sale) under the First Deed of Trust. The Notice of Sale originally set July 14, 2010, as the sale date, but the date for the sale was rescheduled several times. Attached to the Notice of Sale was a declaration executed by BAC Home Loans Servicing, LP (BAC) that stated BAC obtained an exemption from certain statutory time limits for giving notice of the sale, but the declaration does not explain BAC’s relationship to the First Deed of Trust or the Rossbergs’ loan.

In January 2011, Cal-Western, as Bank of America’s attorney in fact, executed and recorded an “Assignment of Deed of Trust” that transferred all beneficial interest in the First Deed of Trust and First Note to “U.S. Bank, National Association, as Trustee for the Certificateholders of Banc of America Funding Corporation, Mortgage Pass-Through Certificates, Series 2007-C.”

The Rossbergs filed this action in April 2011 to block the foreclosure sale. After the trial court sustained a demurrer to the original complaint, the Rossbergs filed a first amended complaint. The first amended complaint named BofA, U.S. Bank, and Cal Western as defendants and alleged the following causes of action: (1) violation of Civil Code section 2923.5;[4] (2) violation of section 2924 et seq.; (3) fraud; (4) violation of Business and Professions Code section 17200; (5) breach of contract; (6) declaratory relief; and (7) quiet title.[5] The numerous exhibits the Rossbergs attached to the first amended complaint included the First Deed of Trust, portions of the Pooling and Servicing Agreement, the Substitution of Trustee, the Notice of Default, the Notice of Sale, and the Assignment of Deed of Trust.

The Rossbergs alleged the nonjudicial foreclosure sale could not proceed because (1) BofA failed to satisfy its statutory duty to contact the Rossbergs to assess their financial situation and explore options for avoiding foreclosure before it recorded the Notice of Default; (2) the Notice of Default is void because Cal-Western recorded the Notice before it was designated as trustee under the First Deed of Trust; (3) Cal-Western lacked authority to take any action as trustee under the First Deed of Trust because the Substitution of Trustee designating Cal-Western as trustee is a forgery; and (4) it is unclear who held the First Note and First Deed of Trust when the Notice of Default and Notice of Sale were recorded because the Servicing and Pool Agreement transferred the First Note and First Deed of Trust to U.S. Bank in April 2007, but the Assignment of Deed of Trust purported to make that same transfer in January 2011. The Rossbergs also alleged BofA committed fraud when it promised to grant them a loan modification but failed to implement the promised loan modification.[6]

BofA and U.S. Bank demurred to the first amended complaint on the ground each cause of action failed to allege sufficient facts to state a claim against either defendant. The trial court sustained the demurrer on every cause of action without leave to amend and entered a judgment of dismissal. The Rossbergs timely appealed.

Shortly after the trial court dismissed the Rossbergs’ action, Cal-Western proceeded with the nonjudicial foreclosure and conducted the public sale because the Rossbergs failed to seek a stay of enforcement regarding the trial court’s judgment. U.S. Bank purchased the property at the sale for a credit bid and then filed an unlawful detainer action to obtain possession.

In September 2012, the Rossbergs filed a petition for writ of mandate to prevent “BofA” from selling the property to a third party or proceeding with the unlawful detainer action during this appeal. We issued an order (1) treating the Rossbergs’ petition as a petition for writ of supersedeas; (2) consolidating the Rossbergs’ appeal from the judgment and their writ petition; and (3) inviting an informal response from BofA. BofA did not file a response and no further action was taken on the petition.

In July 2013, U.S. Bank obtained a judgment of possession against the Rossbergs in the unlawful detainer action after the Rossbergs failed to appear for trial.

II

Discussion

A. Standard of Review and the Rossbergs’ Burden on Appeal

When the trial court sustains a demurrer, we review the complaint de novo to determine whether it alleges facts stating a cause of action on any possible legal theory. (Koszdin v. State Comp. Ins. Fund (2010) 186 Cal.App.4th 480, 487 (Koszdin).) “‘“We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.”’ [Citations.]” (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.) “Further, ‘we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’ [Citations.]” (Melton v. Boustred (2010) 183 Cal.App.4th 521, 528.) We also “consider matters that must or may be judicially noticed.”[7] (Hoffman, at p. 400.)

Nonetheless, “[t]he plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action. [Citation.] We will affirm if there is any ground on which the demurrer can properly be sustained, whether or not the trial court relied on proper grounds or the defendant asserted a proper ground in the trial court proceedings. [Citation.]” (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031 (Martin); Sui v. Price (2011) 196 Cal.App.4th 933, 938 (Sui).)

“When a demurrer is sustained without leave to amend, we also must decide whether there is a reasonable possibility that the defect can be cured by amendment.” (Koszdin, supra, 186 Cal.App.4th at p. 487.) “The plaintiff bears the burden of proving there is a reasonable possibility of amendment. [Citation.]... [¶] To satisfy that burden on appeal, a plaintiff ‘must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.’ [Citation.] The assertion of an abstract right to amend does not satisfy this burden. [Citation.] The plaintiff must clearly and specifically set forth the ‘applicable substantive law’ [citation] and the legal basis for amendment, i.e., the elements of the cause of action and authority for it. Further, the plaintiff must set forth factual allegations that sufficiently state all required elements of that cause of action. [Citations.] Allegations must be factual and specific, not vague or conclusionary. [Citation.]” (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43-44 (Rakestraw).)

B. Legal Background Regarding Deeds of Trust and Nonjudicial Foreclosures

“The financing or refinancing of real property in California is generally accomplished by the use of a deed of trust.” (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 507 (Jenkins).) “A deed of trust... conveys title to real property from the trustor-debtor to a third party trustee to secure the payment of a debt owed to the beneficiary-creditor under a promissory note. [Citations.] The customary provisions of a valid deed of trust include a power of sale clause, which empowers the beneficiary-creditor to [foreclose] on ...


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