Gross v. Deutsche Bank National Trust Co. CA2/2

Filed 12/4/20 Gross v. Deutsche Bank National Trust Co. CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO
JOHN F. GROSS, B298005
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC628671)
v.
DEUTSCHE BANK
NATIONAL TRUST CO., as
Trustee, etc., et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Richard J. Burdge, Jr., Judge.
Michael Shemtoub for Plaintiff and Appellant.
MCGUIREWOODS and Leslie M. Werlin for Defendants
and Respondents.
________________________________________
Appellant John Gross purchased a home in 2007 with a
secured bank loan. His 2011 default resulted in foreclosure by
respondents Deutsche Bank National Trust Co., as Trustee for
Indymac INDA Mortgage Loan Trust 2007-AR5, and PHH
Mortgage Corporation, formerly known as Ocwen Loan Servicing.
Gross sued respondents for wrongful foreclosure after his
property was sold at public auction in 2016.
The trial court sustained respondents’ demurrers to Gross’s
fourth and fifth amended complaints without leave to amend and
dismissed his case. Gross contends that he unilaterally canceled
his obligation and had no duty to repay the purchase money loan;
however, the loan could not be rescinded under the federal Truth
in Lending Act (TILA, 15 U.S.C. § 1601 et seq.). Gross did not
tender the debt, and his claims are untimely in any event. We
affirm the judgment in favor of respondents.
FACTS AND PROCEDURAL HISTORY1
On July 5, 2007, Gross obtained a purchase money loan
(Loan) from Indymac Bank (Bank) for $855,000, secured by a
deed of trust (DOT) on property on Dorrington Avenue in West
Hollywood (the Property). Gross also obtained from Bank a home
1 The facts come from the pleadings, their exhibits and
recorded documents whose existence, contents and legal effect are
subject to judicial notice. (Yvanova v. New Century Mortgage
Corp. (2016) 62 Cal.4th 919, 924, fn. 1; Schep v. Capital One, N.A.
(2017) 12 Cal.App.5th 1331, 1338.) We take notice of facts or
admissions in early iterations of the pleadings if the plaintiff
suppresses them to avoid demurrer. (Cantu v. Resolution Trust
Corp. (1992) 4 Cal.App.4th 857, 877.)
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equity line of credit (HELOC). He identifies respondents as
Bank’s “successors.”
A Bank mortgage officer who facilitated the Loan, John
Heintschel, orally told Gross he could rescind the Loan and
HELOC. A “Notice of Right to Cancel” attached to the HELOC
states that Gross could cancel his account within three business
days, under TILA. Gross alleged that he did “not receive[] a
Right to Rescind addendum to his main purchase money loan.”
The cancellation form required Gross “to offer to return the
money or property.” If Bank failed to “take possession of the
money or property within 20 calendar days of your offer, you may
keep it without further obligation.”
Days after obtaining the Loan, Gross decided that its terms
were unsatisfactory. He sent Bank a letter on July 8, 2007. It
read, “I wish to cancel my Home Loan . . . and Home Equity Line
of Credit . . . as per the Notice of Right to Cancel attached. [¶]
Please contact me to advise of next steps.” He sent a second
letter on August 9, 2007, advising Bank “that I have cancelled
this loan as per the right to cancel Notice sent on July 8, 2007 . . .
[¶] I have not heard anything back.” Neither the July nor the
August 2007 letter contains an offer to return Bank’s money or
the Property.
Gross alleges that he canceled the Loan before making the
first payment but “was hamstrung for nearly 3 years based on
assertions of ‘legal is dealing with it.’ ” He made Loan payments
because Bank told him that failure to pay would damage his
credit rating.
In February 2011, Gross wrote Bank to say he was “upset”
it sent a delinquency notice threatening legal action; citing his
2007 cancellation letters, he informed Bank that he has “stopped
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making any further payments.” In 2013, Gross wrote to say he
canceled the Loan in 2007, and, “I contend that I no longer owe
any money on this loan.”
Respondents ignored Gross’s letters and foreclosed on the
Property. After Gross received notice under the DOT, a trustee’s
sale was conducted in June 2016. The property was sold at
public auction to DLI Properties (DLI).
Gross filed suit against respondents and DLI on July 28,
2016. He asserts claims for conversion, wrongful foreclosure, to
cancel the trustee’s deed upon sale; to quiet title to the Property;
promissory estoppel; and for a declaration that he rescinded the
Loan. After Gross made repeated attempts to state a cause of
action, the court sustained demurrers to his fourth and fifth
amended complaints without leave to amend and entered
judgment for respondents.2
DISCUSSION
1. Appeal and Review
Appeal lies from the judgment of dismissal after demurrers
are sustained without leave to amend. (Code Civ. Proc., §§ 581d,
904.1, subd. (a)(1); Serra Canyon Co. v. California Coastal Com.
(2004) 120 Cal.App.4th 663, 667.) We review pleadings de novo
to determine if a cause of action has been stated; we assume the
truth of properly pleaded material facts but not the truth of
contentions or conclusions of fact or law. (Committee for Green
Foothills v. Santa Clara County Bd. of Supervisors (2010) 48
Cal.4th 32, 42; Moore v. Regents of University of California (1990)
51 Cal.3d 120, 125.)
2DLI separately secured a dismissal of Gross’s claims. We
affirmed the dismissal order in Gross v. DLI Properties, LLC.
(May 29, 2020, B292319) [nonpub. opn].)
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2. Statute of Limitations
Gross obtained the Loan on July 5, 2007, and tried to
rescind it under TILA three days later. Bank rejected the
rescission and demanded that Gross pay his debt, which he did
until 2011. In 2013 he announced, “I no longer owe any money on
this loan.” He filed suit after respondents foreclosed in 2016.
Gross had to file suit “within one year from the date of the
occurrence of the [TILA] violation.” (15 U.S.C. § 1640(e).) He
gave notice of rescission on July 8, 2007. Bank’s failure to
respond within 20 days triggered the one-year limitations period
on Gross’s claim that he was damaged by Bank’s failure to accept
his rescission. (Tucker v. Beneficial Mortg. Co. (E.D.Va. 2006)
437 F.Supp.2d 584, 589–590.) Gross’s 2016 lawsuit was
untimely.
State law places a four-year limit on claims for breach of a
written contract, in this case, the Loan. (Code Civ. Proc., § 337,
subd. (a).) The same statute imposes a four-year limit on an
“action based upon the rescission of a contract in writing. The
time begins to run from the date upon which the facts that entitle
the aggrieved party to rescind occurred.” (Id., subd. (c).)
Gross’s claims accrued in 2007, when Bank rejected his
rescission and demanded monthly payments. Gross made Loan
payments for years. His correspondence over the years shows his
belief that Bank breached their contract by ignoring his 2007
rescission. Gross’s lawsuit filed in July 2016 exceeds the four-
year limitation period.
The statute of limitations for promissory estoppel based on
oral promises is two years. (Code Civ. Proc., § 339, subd. 1;
Newport Harbor Ventures, LLC v. Morris Cerullo World
Evangelism (2016) 6 Cal.App.5th 1207, 1224.) The alleged
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promise to honor a rescission was made by Bank employee
Heintschel in 2007. Gross’s claim accrued when Bank refused to
accept rescission; he was damaged by making payments to Bank
from 2007 to 2011 on a debt he claims he does not owe. In 2011,
Bank threatened legal action because the Loan was delinquent.
Gross’s 2016 promissory estoppel claim is untimely because he
knew nine years earlier that Bank did not intend to honor
Heintschel’s oral promise to rescind.
3. Gross’s Claims Lack a Legal Basis
Gross asserts that he is the rightful owner of the Property;
therefore, respondents had no right to foreclose and the trustee’s
deed of sale and the instruments leading up to the sale must be
canceled. Gross’s claim to ownership of the Property stems from
his purported rescission of the Loan in July 2007 which, in his
view, led to rescission of the DOT by operation of law.
We conclude that Gross could not rely on TILA to rescind
the Loan. Nor could he rely on an alleged oral promise from a
Bank loan officer that contradicted the Loan terms. Gross did
not tender his debt if he wished to rescind under state law. As a
result, there is no legal basis for Gross’s claims.
Gross relies on a rescission notice attached to his HELOC.
He invoked this notice in July 2007, days after obtaining the
Loan and the HELOC. The right to cancel the HELOC arises
under TILA, which Gross cites in his pleadings. “TILA’s
rescission remedy is meant to protect borrowers. It is not meant
to provide borrowers with a free house or other financial
windfall,” which is why rescission is conditioned “on the
borrower’s tender of the loan proceeds to the lender.” (Palmer v.
Ameribanq Mortg. Group, LLC (E.D.Pa. 2010) 2010 U.S.Dist.
LEXIS 107340, *62.)
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Gross’s pleadings acknowledge that he did “not receive[] a
Right to Rescind addendum to his main purchase money loan.”
The Loan did not have a right to rescind addendum because
TILA’s rescission rights do not apply to residential purchase
money loans like the one that Gross attempted to cancel. (15
U.S.C. §§ 1602(x), 1635(e)(1).) There is no statutory right of
rescission “where the loan at issue involves the creation of a first
lien to finance the acquisition of a dwelling in which the customer
resides or expects to reside.” (Betancourt v. Countrywide Home
Loans, Inc. (D.Colo. 2004) 344 F. Supp.2d 1253, 1260; Manabat v.
Sierra Pac. Mortg. Co. (E.D.Ca. 2010) 2010 U.S.Dist. LEXIS
70377 *11–*12 [TILA exempts residential mortgage
transactions].) We cannot reasonably construe the Loan as
incorporating the TILA cancellation notice attached to the
HELOC.
Gross relies on a 2007 conversation with a Bank employee
who allegedly said that the right to rescind addendum applied to
both the Loan and the HELOC. Gross’s pleadings admit that a
cancellation clause is not part of his Loan. His efforts to change
the written Loan contract by citing an oral representation is
barred by the parol evidence rule.
Parol evidence may explain ambiguities in a contract, if the
terms are reasonably susceptible of that meaning; it cannot be
used to contradict the contract or add new terms. “[T]he terms
contained in an integrated written agreement may not be
contradicted by prior or contemporaneous [oral] agreements.
[This] necessarily bars consideration of extrinsic evidence of prior
or contemporaneous negotiations or agreements at variance with
the written agreement. ‘[A]s a matter of substantive law such
evidence cannot serve to create or alter the obligations under the
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instrument.’ ” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th
336, 344; Civ. Code, § 1625; Code Civ. Proc., § 1856, subd. (a).)
The Loan does not offer a three-day right to rescind; we cannot
rewrite the Loan to add new terms based on an oral promise at
variance with the written contract.
Gross did not set forth a claim under state rescission law
because he did not tender the debt. A tender is an offer to pay
the creditor the full amount due. (Gaffney v. Downey Sav. &
Loan Ass’n (1988) 200 Cal.App.3d 1154, 1165.) “ ‘The tenderer
must do and offer everything that is necessary on his part to
complete the transaction, and must fairly make known his
purpose without ambiguity, and the act of tender must be such
that it needs only acceptance by the one to whom it is made to
complete the transaction.’ ” (Ibid.) Gross’s letters to Bank did
not offer the full amount due. He does not allege that he ever
tendered the debt or the Property in lieu of the debt.
Gross’s belief that he owns the Property free of liens—
without repaying the money he borrowed—is untenable. “A
person who borrows money from a bank to purchase or refinance
a home has a reasonable expectation that the bank will fund the
loan. The bank has a reasonable expectation that monthly
mortgage payments will be made. Here, appellant’s reasonable
expectations were met. The bank’s were not. Nonpayment of the
mortgage for approximately eight years while the borrower
remains in possession is an egregious abuse.” (Gillies v.
JPMorgan Chase Bank, N.A. (2017) 7 Cal.App.5th 907, 909.)
4. Declaratory Relief
Gross’s request for declaratory relief is based on his failed
claim that he rescinded the Loan. Requests for declaratory relief
derivative of other failed claims do not survive demurrer. (Smyth
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v. Berman (2019) 31 Cal.App.5th 183, 191–192; Ball v.
FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800.) As
we have discussed, Gross’s claims to the Property do not survive
scrutiny. The pleading does not present an “actual controversy
relating to the legal rights and duties of the respective parties”
regarding the Property. (Code Civ. Proc., § 1060.)
5. Request to Amend
Gross requests the right to amend on appeal. (Code Civ.
Proc., § 472c, subd. (a); City of Stockton v. Superior Court (2007)
42 Cal.4th 730, 746.) The burden of demonstrating a reasonable
possibility that defects can be cured “is squarely on the plaintiff.”
(Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Centinela Freeman
Emergency Medical Associates v. Health Net of California, Inc.
(2016) 1 Cal.5th 994, 1010.)
Gross did not carry his burden by spelling out in detail in
his brief how an amendment could cure a defect or change the
legal effect of the pleading. (Goodman v. Kennedy (1976) 18
Cal.3d 335, 349–350; Hendy v. Losse (1991) 54 Cal.3d 723, 743.)
Instead, he repeats the allegations in his current pleading and
writes, “All of the elements of each cause of action have been
properly pled.” The trial court did not abuse its discretion by
sustaining respondents’ demurrers without leave to amend.
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DISPOSITION
The judgment is affirmed. Respondents are entitled to
recover their costs on appeal from appellant Gross.
NOT TO BE PUBLISHED.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
HOFFSTADT, J.
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