Paredes v. Trinity Financial Services CA2/5 ( 2022 )

Filed 9/15/22 Paredes v. Trinity Financial Services CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
LIDIA S. PAREDES, B314182
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. KC070387)
v.
TRINITY FINANCIAL SERVICES,
LLC,
Defendant and Respondent.
APPEAL from judgment of the Superior Court of
Los Angeles County, Peter A. Hernandez, Judge. Affirmed.
Tamer Law Corp. and Steven Michael Tamer, for Plaintiff
and Appellant.
AlvardoSmith, S. Christopher Yoo and Jacob M. Clark, for
Defendant and Respondent.
____________________________
Plaintiff and appellant Lidia S. Paredes appeals a
judgment of dismissal in favor of defendant and respondent
Trinity Financial Services, LLC (Trinity). The trial court entered
the judgment after sustaining Trinity’s demurrer to plaintiff’s
first amended complaint without leave to amend.
Paredes argues the trial court erroneously sustained
Trinity’s demurrer because her first amended complaint states a
cause of action under the California Homeowner Bill of Rights
(HBOR). She also argues the trial court abused its discretion by
denying her leave to amend her complaint. Alternatively,
Paredes asks this court to grant her leave to amend.
We hold the first amended complaint does not state a cause
of action and that the trial court did not abuse its discretion in
denying Paredes leave to amend. We also decline to grant
Paredes leave to amend because she has not shown a reasonable
possibility that she can cure the defects in her complaint.
BACKGROUND
A. Facts1
Paredes owned residential real property in La Puente. She
used the property as collateral for two loans she obtained from
1
These facts are derived from the face of the first amended
complaint and judicially noticed documents. Pursuant to
Trinity’s request, the trial court took judicial notice of ten
documents, including documents recorded in the Los Angeles
County Recorder’s Office. A trial court generally cannot take
judicial notice of the facts stated in deeds of trust or similar
recorded documents. (Poseidon Development, Inc. v. Woodland
Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117 (Poseidon).)
But the court may take judicial notice of the existence,
recordation, and legal effect of these documents. (Id. at pp. 1117–
2
First Franklin, a division of National City Bank of Indiana (First
Franklin). On December 29, 2005, she executed two promissory
notes to First Franklin, one for $368,000 and a second for
$92,000.
Each note was secured by a deed of trust recorded in the
county recorder’s office on January 5, 2006. The deeds of trust
state that Mortgage Electronic Registration System (MERS) is
the nominee of the lender and beneficiary of the security
instrument. The deeds of trust further state that Security Union
Title Insurance Company (Security Union) is the trustee.
In 2016, MERS caused to be recorded an assignment of
deed of trust. This document states that First Franklin assigns
its interest in the second deed of trust to Trinity. Trinity became
the mortgage servicer for the $92,000 loan.
“In early 2017,” Paredes “began suffering financial
difficulty due to lower income, and exhausted all of her economic
resources to keep up with her financial obligations.”
On August 23, 2017, Trinity recorded two documents. The
first was a substitution of trustee that states Special Default
Services, Inc. (SDSI) replaced Security Union as the trustee of
the second deed of trust securing the $92,000 promissory note.
The second was a notice of default on the second loan. The notice
stated that the balance due on the second loan was $106,721.86
as of August 21, 2017.
Paredes “immediately contacted” Trinity to advise the
company of her “financial difficulty and to request any available
1118; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th
256, 264–265, disapproved on other grounds by Yvanova v. New
Century Mortgage Corp. (2016) 62 Cal.4th 919, 939, fn. 13
(Yvanova).)
3
assistance in avoiding foreclosure.” Trinity “confirmed that the
company had options to avoid foreclosure that were available to”
Paredes. Paredes “submitted numerous documents” to Trinity.
On November 30, 2017, SDSI recorded a notice of trustee’s
sale. This notice stated that SDSI would hold a public auction of
plaintiff’s property.
Paredes then consulted with a non-profit association that
helped homeowners who faced nonjudicial foreclosure. On
December 18, 2017, with the assistance of the non-profit entity,
Paredes submitted a loan modification application to Trinity. At
the time Paredes submitted this application, her “financial
difficulty had ceased” and she “had the means to support a
modified payment schedule.”
On January 26, 2018, Trinity purchased Paredes’ property
at a public auction as the highest bidder. The recorded purchase
price was $201,974.27. Shortly thereafter, Trinity recorded a
trustee’s deed upon sale.
B. Procedural History
In June 2018, Paredes filed the complaint that initiated
this action. The trial court granted Trinity’s motion for judgment
on the pleadings challenging the complaint. Paredes then filed
her first amended complaint. Trinity again challenged Paredes’
operative complaint, this time by demurrer. After sustaining
Trinity’s demurrer without leave to amend, the court entered a
judgment of dismissal in Trinity’s favor. Paredes timely appealed
the judgment.
STANDARD OF REVIEW
We review the first amended complaint de novo to
determine whether it states facts sufficient to constitute a cause
4
of action. (Morris v. JPMorgan Chase Bank, N.A. (2022) 78
Cal.App.5th 279, 292 (Morris).) We review the trial court’s denial
of plaintiff’s request for leave to amend her complaint for abuse of
discretion. (Ibid.) “Under both standards, the plaintiff has the
burden of demonstrating trial court error.” (Id. at pp. 292–293.)
“In determining the merits of a demurrer, all material facts
pleaded in the complaint and those that arise by reasonable
implication, but not conclusions of fact or law, are deemed
admitted by the demurring party.” (Rodas v. Spiegel (2001) 87
Cal.App.4th 513, 517.) “We assume the truth of the properly
pleaded factual allegations, facts that reasonably can be inferred
from those expressly pleaded, and matters of which judicial
notice has been taken.” (Fremont Indemnity Co. v. Fremont
General Corp. (2007) 148 Cal.App.4th 97, 111.)
DISCUSSION
Trinity foreclosed on plaintiff’s property pursuant to the
statutes governing nonjudicial foreclosures. (See Civil Code
§ 2920 et seq.)2 The HBOR is a complex set of enactments
codified within the nonjudicial foreclosure statutory scheme.
(Morris, supra, 78 Cal.App.5th at p. 295.)
The HBOR is “focused specifically on residential mortgages
and passed as a legislative response to the ongoing mortgage
foreclosure crisis in 2012. (§§ 2920.5, 2923.4–2923.7, 2924,
2924.9–2924.12, 2924.15, 2924.17–2924.20; Stats. 2012, ch. 86,
§§ 2–23; Stats. 2012, ch. 87, §§ 2–23.)” (Morris, supra, 78
Cal.App.5th at p. 295.) It is “principally designed to ensure that
‘as part of the nonjudicial foreclosure process, borrowers are
2
Unless otherwise stated, all statutory references are to the
Civil Code.
5
considered for, and have a meaningful opportunity to obtain,
available loss mitigation options, if any, offered by or through the
borrower’s mortgage servicer, such as loan modifications or other
alternatives to foreclosure.’ [Citations.]” (Ibid.)
I. The First Amended Complaint Fails to State
Facts Sufficient to Constitute a Cause of Action
All of Paredes’ causes of action are based on Trinity’s
alleged violations of the HBOR. In her opening brief, Paredes
argues Trinity violated (1) section 2923.5, subdivision (a)(1) by
recording the notice of default before contacting Paredes in
person or by telephone; (2) section 2923.6, subdivision (b) by
failing to review her modified loan application; and (3) section
2923.7 by failing to assign a single point of contact to review her
application.
These claims do not completely align with Paredes’ first
amended complaint. Her second cause of action is for wrongful
foreclosure, a common law tort that may be based on a statutory
violation. (See Sciarratta v. U.S. Bank National Assn. (2016) 247
Cal.App.4th 552, 561.) This cause of action and Paredes’ fourth
cause of action are based on Trinity’s alleged violation of section
2923.5, subdivision (a). Paredes’ fifth cause of action is for
Trinity’s alleged violation of section 2923.7. Paredes does not
allege in her first amended complaint that Trinity violated
section 2923.6, subdivision (b), but she does allege the underlying
facts she discusses on appeal.
We review Paredes’ three theories of recovery irrespective
of the causes of action set forth in her first amended complaint.
“If the complaint states a cause of action under any theory,
regardless of the title under which the factual basis for relief is
stated, that aspect of the complaint is good against a demurrer.”
6
(Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th
26, 38.) We thus “ ‘must determine if the factual allegations of
the complaint are adequate to state a cause of action under any
legal theory.’ [Citation.]” (Ibid.)
The first amended complaint fails to state facts sufficient to
constitute a cause of action under all three of plaintiff’s theories.
This is because the HBOR expressly states the claims asserted by
Paredes only apply to first lien loans and deeds of trust.
With exceptions that do not apply here, former section
2924.15, subdivision (a) provides that sections 2923.5, 2923.6,
and 2923.7 “shall apply only to a first lien mortgages or deeds of
trust” that meet certain criteria.3
Section 2923.5, subdivision (a)(1)(B) provides that a
mortgage servicer may not record a notice of default until it
“complies with paragraph (1) of subdivision (a) of Section
2924.18.” Section 2924.18, subdivision (a)(1), in turn, states that
if a borrower submits a “complete application for a first lien
modification” at least five days before a foreclosure sale, the
mortgage servicer has certain obligations. When read together,
the two statutes only apply to a mortgage servicer’s obligations
relating to a first lien.
3
Trinity’s alleged wrongdoing occurred in 2017 and perhaps
the beginning of 2018. This quote is from former section 2924.15,
subdivision (a), which was in effect in 2017 and 2018. (Stats.
2012, ch. 87, § 18.) The language of this provision has been since
modified in a non-substantive way. (Stats. 2020, ch. 37, § 11.)
After reviewing the relevant portions of the HBOR that were in
effect in 2017 (Stats. 2012, ch. 87, §§ 4, 6–7, 9, 21) and the
amendments to them in 2018 (Stats. 2012, ch. 87, §§ 8, 19; Stats.
2018, ch. 404, §§ 4, 7, 19, 23) and 2020 (Stats. 2020, ch. 37, § 11),
we conclude none of the amendments change our analysis.
7
Likewise, section 2923.6, subdivision (g) provides: “In
order to minimize the risk of borrowers submitting multiple
applications for first lien loan modifications for the purpose of
delay, the mortgage servicer shall not be obligated to evaluate
applications from borrowers who have been evaluated . . . unless
there has been a material change in the borrower’s financial
circumstances since the date of the borrower’s previous
application and that change is documented by the borrower and
submitted to the mortgage servicer.” (Italics added.) Section
2923.6, subdivision (j) further provides: “This section shall apply
only to mortgages or deeds of trust described in Section 2924.15.”
As explained, section 2924.15, subdivision (a) states section
2923.6 only applies to first lien mortgages and deeds of trust.
“ ‘First lien’ means the most senior mortgage or deed of
trust on the property that is the subject of the notice of default or
notice of sale.” (§ 2920.5, subd. (d).)
Here, the deed of trust on the $92,000 loan is attached to
the first amended complaint. The document states on the top of
the first page that the deed of trust is a “Secondary Lien.” On the
bottom of each page runs a footer stating: “CALIFORNIA DEED
OF TRUST—Single Family—Secondary Lien.”
Paredes also attached to her first amended complaint a
California Declaration of Compliance recorded by Trinity at the
same time it recorded its notice of default. This declaration was
executed pursuant to section 2923.55, subdivision (c), which
provides that a mortgage servicer is required to contact a
“borrower,” as defined by statute, prior to recording a notice of
default. The definition of “borrower” does not include a person
who borrowed money secured by a second lien. (See § 2920.5,
subds. (b) [“ ‘Foreclosure prevention alternative’ means a first
8
lien loan modification or another available loss mitigation
option”] & (c)(1) [borrower means any mortgagor or trustor who is
potentially eligible for any “foreclosure prevention alternative
program”].)
The California Declaration of Compliance recorded by
Trinity and attached to the first amended complaint states: “No
contact was made with the Borrower pursuant to Civil Code
§ 2923.55 because the above-referenced loan is not secured by a
first lien mortgage or deed of trust that secures a loan described
in Civil Code § 2924.15 (a).” (Italics added.)
It is therefore clear from the face of the exhibits attached to
the first amended complaint that Trinity foreclosed on a second
deed of trust. The body of the first amended complaint does not
allege anything to the contrary.
Conspicuously absent from the first amended complaint is
any mention of the $368,000 loan and the deed of trust securing
it. Paredes does not deny the existence of this loan and deed of
trust.
The judicially noticed documents filed in the county
recorder’s office also indicate that Trinity foreclosed on a second
lien. The deeds of trust securing the $368,000 loan and $92,000
loan were recorded as document numbers 06 0020212 and 06
0020213, respectively, at 8:00 a.m. on January 5, 2006. The
lender thus first recorded the deed of trust for the $368,000 loan,
and then immediately thereafter recorded the deed of trust for
the $92,000 loan. While the deed of trust securing the $92,000
loan states it is a “Secondary Lien,” no similar language is found
on the deed of trust securing the $368,000 loan.
In sum, Paredes claims on appeal the first amended
complaint states causes of action based on violations of sections
9
2923.5, 2923.6, and 2923.7. But Parades’ operative complaint
fails to state facts sufficient to support any of these claims
because Trinity did not foreclose on a first lien.
The first amended complaint also purports to set forth
causes of action for violations of sections 2934a and 2924.11 and
Business and Professions Code section 17200. Paredes does not,
however, make any arguments in her brief regarding these
causes of action. She therefore forfeits any claim of error. (Singh
v. Lipworth (2014) 227 Cal.App.4th 813, 817.)
II. Paredes Did Not Meet Her Burden of Showing
the Trial Court Abused its Discretion by
Denying Her Leave to Amend
When a demurrer to a complaint is sustained without leave
to amend, the trial court must grant the plaintiff leave to amend
if there is a “reasonable possibility that the defect can be cured by
amendment.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The
“burden of proving such reasonable possibility is squarely on the
plaintiff.” (Ibid.) To meet her burden the plaintiff “must show in
what manner the complaint could be amended and how the
amendment would change the legal effect of the complaint, i.e.,
state a cause of action.” (Buller v. Sutter Health (2008) 160
Cal.App.4th 981, 992.)
Paredes argues the trial court “incorrectly” sustained
Trinity’s demurrer “without leave to amend.” In her opposition to
Trinity’s demurrer, Paredes discussed Trinity’s alleged violation
of section 2923.6, a claim she did not clearly make in her first
amended complaint. Paredes did not, however, explain how, if at
all, she would amend her complaint to state a viable section
2923.6 cause of action.
10
At the conclusion of her opposition to Trinity’s demurrer,
Paredes stated: “[I]f the Court finds that one or more of
Plaintiff’s causes of action have not been properly pled, Plaintiff
respectfully requests leave of court to amend her Complaint.”
But again Paredes did not explain to the trial court how the first
4
amended complaint could be amended to cure its defects.
Accordingly, at the time the trial court sustained Trinity’s
demurrer, it did not abuse its discretion.
III. We Decline to Grant Paredes Leave to Amend
Because She Has Not Shown There is a
Reasonable Possibility That She Can Cure the
Defects in Her Complaint
Paredes requests this court to grant her leave to amend.
“A request for leave to amend may be made for the first time on
appeal.” (Jensen v. The Home Depot, Inc. (2018) 24 Cal.App.5th
92, 97.)
In her opening brief, Paredes does not provide a coherent
explanation of how her first amended complaint can be amended
to cure its defects. Paredes does not substantively discuss the
first loan and first deed of trust. Instead, she merely makes the
following conclusory statement: “Appellant has alleged that the
loan in question was a first loan mortgage and therefore eligible
for the protections of the HBOR. Respondent claims the loan was
a junior loan.”
4
The parties did not provide a reporter’s transcript of the
argument at the hearing. Paredes does not claim on appeal that
she made an oral request for leave to amend in the trial court.
11
Paredes did not allege in her first amended complaint the
$92,000 loan was a “first loan mortgage.” Moreover, Paredes
cannot amend her complaint to make such an allegation.
Our assumption about the truth of facts alleged in the
complaint has its limits. Courts “will not close their eyes to
situations where a complaint contains allegations of fact
inconsistent with attached documents, or allegations contrary to
facts which are judicially noticed.” (Del E. Webb Corp. v.
Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) If the
plaintiff alleges facts contracted by exhibits attached to the
complaint, the facts stated in the exhibits will be given
precedence. (Moran v. Prime Healthcare Management, Inc.
(2016) 3 Cal.App.5th 1131, 1145–1146; Barnett v. Fireman’s Fund
Ins. Co. (2001) 90 Cal.App.4th 500, 505.) The plaintiff is also
barred from alleging facts contradicted by judicially noticed
recorded documents. (See Jenkins v. JPMorgan Chase Bank,
N.A. (2013) 216 Cal.App.4th 497, 536, disapproved on other
grounds by Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; accord
Poseidon, supra, 152 Cal.App.4th at pp. 1117–1118.)
The deeds of trust and other recorded documents attached
to Paredes’ first amended complaint and Trinity’s request for
judicial notice plainly show that Trinity foreclosed on a second
lien, not a first lien. Paredes has not and cannot show a
reasonable possibility that she can amend her complaint to
circumvent this fatal defect.
12
DISPOSITION
The judgment is affirmed. Respondent Trinity Financial
Services, LLC is awarded its costs on appeal.
NOT TO BE PUBLISHED.
TAMZARIAN, J. *
We concur:
RUBIN, P. J.
MOOR, J.
*
Judge of the Los Angeles County Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
13