Schep v. Capital One ( 2017 )

Filed 6/26/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
RAYMOND A. SCHEP, B269724
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC533555)
v.
CAPITAL ONE, N.A.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County. Maureen Duffy-Lewis, Judge. Affirmed.
George E. Omoko for Plaintiff and Appellant.
Doll Amir Eley, Hunter R. Eley and Amy I. Borland for
Defendant and Respondent.
******
Are a trustee’s acts in recording a notice of default, a notice
of sale, and a trustee’s deed upon sale in the course of a
nonjudicial foreclosure privileged under Civil Code section 47?1
We conclude that they are and that a plaintiff does not state a
cause of action for slander of title based on the recording of those
documents. Accordingly, we affirm the trial court’s order
sustaining a demurrer to plaintiff’s slander of title claim without
leave to amend.
FACTS AND PROCEDURAL BACKGROUND
I. Factual Background
A. Original loan and deed of trust
In April 2007, Raymond A. Schep (plaintiff) borrowed
$910,000 from a mortgage company secured by a deed of trust to
a home in Beverly Hills (the property). The deed of trust
designated Chevy Chase Bank, F.S.B. (Chevy Chase) the trustee
and Mortgage Electronic Registration Systems, Inc. (MERS) the
beneficiary. In July 2009, Chevy Chase merged with defendant
Capital One, N.A. (Capital One), and Capital One became the
new trustee to the deed of trust.
B. Arrears and foreclosure
By October 2009, plaintiff was $29,206.66 behind on his
loan payments. In the fall of 2009, MERS named defendant T.D.
Service Company (T.D. Service) as the new trustee on the deed of
trust, and T.D. Service recorded a “Notice of Default and Election
to Sell Under Deed of Trust” (Notice of Default). In April 2010,
T.D. Service recorded a Notice of Trustee’s Sale. In January
2011, Capital One purchased the property at the foreclosure
auction, and T.D. Service recorded the Trustee’s Deed Upon Sale.
1 All further statutory references are to the Civil Code unless
otherwise indicated.
2
C. Wild deed
In February 2010, after the Notice of Default was recorded
and before the Notice of Trustee’s Sale was recorded, Timothy
Fitzgerald (Fitzgerald) of US Banc Trustee TTE, recorded a
“Substitution of Trustee and Full Reconveyance.” In this
document, Fitzgerald inaccurately represented that he was the
“Original Beneficiary” of the April 2007 deed of trust and
purported to “substitute [himself] as the new Trustee” and to
“reconvey, without warranty,” the deed of trust to plaintiff.
II. Procedural Background
In the operative second amended complaint (SAC), plaintiff
sued Capital One and T.D. Service for slander of title.2 Plaintiff
based his claim on the “filing . . . of the Notice of Default, of the
Notice of Auction Sale, and of the Trustee’s Deed Upon Sale.”
Capital One demurred, arguing that the filing of the three
documents underlying the claim was privileged and thus could
not form the basis for a slander of title claim; plaintiff opposed
the motion.
The trial court sustained the demurrer without leave to
amend. The court cited two reasons: (1) the slander of title claim
was based entirely on the recording of documents in nonjudicial
foreclosure proceedings that are privileged communications; and
(2) plaintiff lacked standing to bring the claim because he had no
2 Plaintiff also sued T.D. Service for breach of contractual
duties owed under the original deed of trust. The court later
sustained a demurrer to that claim and to a slander of title claim
against T.D. Service. That dismissal order is the subject of a
separate appeal. (See Schep v. T.D. Service Company (B276066,
app. pending).)
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titular or possessory interest in the property.
Plaintiff filed a motion for reconsideration. The trial court
denied the motion because it failed to raise new facts or law that
would compel reconsideration.
After the court entered judgment, plaintiff filed a timely
notice of appeal.
DISCUSSION
I. Demurrer
In reviewing a trial court’s order sustaining a demurrer
without leave to amend, we must ask (1) whether the demurrer
was properly sustained, and (2) whether leave to amend was
properly denied. The first question requires us to “‘“determine
whether the complaint states facts sufficient to constitute a cause
of action.”’” (Centinela Freeman Emergency Medical Associates v.
Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) In so
doing, we independently “‘examine the complaint . . . to
determine whether it alleges facts sufficient to state a cause of
action.’” (Lee v. Hanley (2015) 61 Cal. 4th 1225, 1230.) We accept
as true “all material facts properly pled” in the operative
complaint. (Winn v. Pioneer Medical Group, Inc. (2016)
63 Cal. 4th 148, 152 (Winn); accord, Blank v. Kirwan (1985)
39 Cal. 3d 311, 318 (Blank).) We also accept as true all materials
properly “subject to judicial notice,” and disregard any allegations
in the operative complaint that those judicially noticed facts
contradict or negate. (Evans v. City of Berkeley (2006) 38 Cal. 4th
1, 20 (Evans) [“a demurrer assumes the truth of the complaint’s
properly pleaded allegations, but not of mere contentions or
assertions contradicted by judicially noticeable facts”]; Stanton v.
Dumke (1966) 64 Cal. 2d 199, 201-202 [same].) The second
question “requires us to decide whether ‘“‘there is a reasonable
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possibility that the defect [in the operative complaint] can be
cured by amendment.’”’” (McClain v. Sav-On Drugs (2017)
9 Cal.App.5th 684, 695, review granted June 14, 2017, S241471.)
A. Was the demurrer properly sustained?
To state a claim for slander of title, a plaintiff must allege
“(1) a publication, (2) which is without privilege or justification,”
(3) which is false, and (4) which “causes direct and immediate
pecuniary loss.” (Manhattan Loft, LLC v. Mercury Liquors, Inc.
(2009) 173 Cal. App. 4th 1040, 1050-1051; La Jolla Group II
v. Bruce (2012) 211 Cal. App. 4th 461, 472.)
Plaintiff failed to state a cause of action for slander of title
because all of the documents underlying his claim are privileged.
The recording of a notice of sale and notice of default are
privileged. Section 2924, subdivision (d)(1), provides that “[t]he
mailing, publication, and delivery of notices as required” by
section 2924 “constitute privileged communications pursuant to
Section 47.” (§ 2924, subd. (d)(1).) Section 2924 mandates the
recording of both a notice of default (id., subd. (a)(1)), and a notice
of sale (id., subd. (a)(3)). Indeed, plaintiff conceded in his SAC
that the recording of both of these documents was privileged.
The recording of a trustee’s deed upon sale is also
privileged. Section 2924, subdivision (d)(2) complements and
broadens subdivision (d)(1) by providing that “[p]erformance of
the procedures set forth in this article” also “constitute privileged
communications pursuant to Section 47.” (§ 2924, subd. (d)(2).)
Section 2924 is part of the article dealing with “Mortgages in
General,” and two other sections within that article—sections
2924.12 and 2924.19—specifically contemplate that a trustee’s
deed upon sale will be recorded as the capstone of the process of
nonjudicial foreclosure. (See §§ 2924.12, subds. (a)(1), (b)
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& 2924.19, subds. (a)(1), (b).) Our Legislature’s purpose in
declaring these procedures privileged was “to give trustees some
measure of protection from tort liability arising out of the
performance of their statutory duties.” (Kachlon v. Markowitz
(2008) 168 Cal. App. 4th 316, 340 (Kachlon).) That purpose is
fulfilled only if all of the procedural steps attendant to a
nonjudicial foreclosure are privileged, from the recording of the
notice of default and notice of sale through the recording of the
trustee’s deed upon sale following the foreclosure sale. (Accord,
Ward v. Pickett (N.D.Cal. 2013, No. C-13-01735 DMR)
2013 U.S.Dist. Lexis 144129 [recording a trustee’s deed upon sale
is authorized by statute and therefore privileged under §§ 47 and
2924].)
Plaintiff points to the allegation in his SAC that the
privilege does not extend to the recording of a trustee’s deed upon
sale. However, this allegation is a legal conclusion that we are to
ignore. (Winn, supra, 63 Cal.4th at p. 152 [on demurrer, courts
may disregard “logical inferences, contentions, or conclusions of
fact or law” pled in the operative complaint].)
Of course, section 47 creates two privileges: (1) an absolute
privilege, commonly called the litigation privilege, that applies
irrespective of the speaker’s motive (§ 47, subd. (b)); and (2) a
qualified privilege that “applies only to communications made
without malice” (id., subd. (c)). (Hagberg v. California Federal
Bank (2004) 32 Cal. 4th 350, 360.) Section 2924, subdivision (d),
refers only to “Section 47” without specifying which of the two
privileges applies. The courts have split on this question.
(Compare Kachlon, supra, 168 Cal.App.4th at pp. 335-341
[section 2924 incorporates § 47’s qualified privilege] with
Garretson v. Post (2007) 156 Cal. App. 4th 1508, 1517 [section
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2924 incorporates § 47’s absolute privilege].) We need not take a
position on this issue because the publication of documents at
issue in this case are privileged even under section 47’s narrower
qualified privilege.
For the purposes of section 47’s qualified privilege, “malice”
means that the defendant (1) “‘was motivated by hatred or ill will
towards the plaintiff,’” or (2) “‘lacked reasonable grounds for [its]
belief in the truth of the publication and therefore acted in
reckless disregard of the plaintiff’s rights.’” (Sanborn
v. Chronicle Pub. Co. (1976) 18 Cal. 3d 406, 413; Taus v. Loftus
(2007) 40 Cal. 4th 683, 721; § 48a, subd. (d)(4) [defining “actual
malice” as “hatred or ill will toward the plaintiff”].)
Plaintiff has not alleged that either Capital One or T.D.
Service acted with malice in recording any of the three
nonjudicial foreclosure documents underlying his slander of title
claim. He has not alleged that either entity acted with hatred or
ill will toward him. Nor has plaintiff explicitly alleged that they
lacked reasonable grounds for believing in the truth of the
documents they recorded. Instead, plaintiff alleges that Capital
One and T.D. Service were deemed to be constructively aware of
his competing claim to title due to his recording of the wild deed.
However, the existence of the wild deed did not defeat the
reasonableness of Capital One’s or T.D. Service’s belief in the
legitimacy of the nonjudicial foreclosure proceedings they were
pursuing. We may judicially notice the 2007 deed of trust and
subsequent recordings naming T.D. Service as trustee, even if the
trial court did not so notice them. (Evid. Code, §§ 452, subd. (c)
[judicial notice of “[o]fficial acts” permitted], 459 [judicial notice
by appellate courts permitted]; Yvanova v. New Century
Mortgage Corp. (2016) 62 Cal. 4th 919, 924 & fn. 1 (Yvanova)
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[noting propriety of taking judicial notice of deed of trust,
assignment of deed of trust, notice of default, notice of sale, and
trustee’s deed upon sale].) These documents establish an
unbroken chain of title that make reasonable T.D. Service’s belief
in the legitimacy of the nonjudicial foreclosure proceedings and
Capital One’s belief in the legitimacy of the sale that concluded
those proceedings.
Plaintiff asserts that it is inappropriate for us to give
judicially noticed documents greater weight than the allegations
in his operative complaint. Doing so, he complains, amounts to
the resolution of evidentiary questions, which is impermissible on
demurrer. Plaintiff is incorrect. He is wrong on the law because,
as noted above, courts may—and, indeed, must—disregard
allegations that are contrary to judicially noticed facts and
documents. (See Evans, supra, 38 Cal.4th at p. 20.) More to the
point, he is wrong on the facts because our conclusion that
judicially noticed documents provided T.D. Service and Capital
One a reasonable basis to believe in the viability of the
nonjudicial foreclosure proceedings (and the truth of the
documents they recorded as part of those proceedings) is not a
conclusion that their belief is accurate (or that plaintiff’s wild
deed is invalid).
For these reasons, the demurrer was properly sustained.3
B. Was leave to amend properly denied?
There is also no “reasonable possibility [that] an
amendment . . . would cure the complaint’s legal defect.”
(Yvanova, supra, 62 Cal.4th at p. 924; accord, Blank, supra,
3 Because we resolve the demurrer on this basis, we have no
occasion to decide whether plaintiff also lacked standing to
prosecute a slander of title claim.
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39 Cal.3d at p. 318.) That is because the documents forming the
basis for plaintiff’s slander of title claim are at least conditionally
privileged and the judicially noticed chain of title preceding the
recording of those documents definitively establishes the absence
of malice. Plaintiff offers no argument on appeal as to how he
could amend the complaint to cure this fatal defect in his slander
of title claim.
II. Motion for reconsideration
Plaintiff also argues that the trial court erred in denying
his motion for reconsideration under Code of Civil Procedure
section 1008, subdivision (a). We review a court’s ruling on a
motion for reconsideration for an abuse of discretion. (New York
Times Co. v. Superior Court (2005) 135 Cal. App. 4th 206, 212-
213.) Plaintiff’s motion did not raise new factual allegations or
demonstrate any change in circumstances or law that would call
into question the court’s ruling on demurrer. (Code Civ. Proc,
§ 1008, subd. (a) [requiring moving party show new or different
facts, circumstances, or law and an explanation for not producing
the new information at the original hearing]; accord, Yolo County
Dept. of Child Support Services v. Myers (2016) 248 Cal. App. 4th
42, 50.) There was no abuse of discretion.
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DISPOSITION
The judgment is affirmed. Capital One is entitled to its
costs on appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J.*
GOODMAN
* Retired judge of the Los Angeles Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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