No.

F059476 IN THE COURT OF APPEAL FOR THE STATE OF FIFTH APPELLATE DISTRICT

caUR .~ _ FIFTHAPplL~~ ~PtAL . CALIFORNIA D ~ ~~?ISTRICT

rr

------------------------------.--------------------Appellants and Plaintiffs
v.

SEP

2 () 2010

WELLS FARGO HOME MORTGAGE, Il'lC.; WELLS FARGO BANK, NATIONAL ASSOCIATION, a.k.a. WELLS FARGO BANK, N.A.; FIRST AMERICAN LOANSTAR TRUSTEE SERVICES, FIRST AMERICAN CORPORATION AND DOES 1 TO 45 Respondents and Defendants Appeal From the Superior Court of the State of California, County of Kern CaseNo. S-15000-CV-267074 Honorable SIDNEY P. CHAPIN, Judge Department 4 Tele: (661) 868-7205

BRIEF OF RESPONDENT WELLS FARGO HOME MORTGAGE, DIVISION OF WELLS FARGO BANK, N.A.
[Served concurrently with Defendant's Motion to Augment and Exhibit thereto]

A

KUTAK ROCK LLP Jeffrey S. Gerardo, SBN 146508 Steven M. Dailey, SBN 163857 18201 Von Karman Avenue, Suite 1100 Irvine, California 92612

T: (949) 417-0999 Fax: (949) 417-5394
COURT OF APPEAL FIFTH APPELL,6,TE DISTRICT

[ffi~~~~~[E[ll

SEP 1 7 2010
BY__
---i~Io--· -j',

=~ ... ?AWpL·-\_L_~---rDCep~uh:tY

Attorneys for Defendant-Respondent, WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A. [erroneously sued and served as "WELLS FARGO HOME MORTGAGE, INC." and "WELLS FARGO BANK, NATIONAL ASSOCIATION

4851-2147 -0983.2

T ABLE OF CONTENTS INTRODUCTION STATErvlENT OF FACTS A. B. THE SUBJECT TRANSACTION THE DEMUCHAS' CONTENTIONS NO ALLEGATION OF TENDER OF ALL AMOUNTS DUE THE FORECLOSURE PROCEEDINGS AND THE DEMUCHAS' ATTEMPTS TO DELAY OR HALT THEM ALLEGATIONS THAT WELLS FARGO DID NOT "PRODUCE THE NOTE." 1 2 2 3 3 .4 5 5 7 9 WAS PROPERLY SUSTAINED 9

C.
D. E.

PROCEDURAL HISTORY STANDARD OF REVIEW ARGUM.ENT A. THE DEMURRER

B.

THE DEMURRER WAS PROPERLY SUSTAINED BECAUSE
1. 0

APPELLANTS FAILED TO ALLEGE TENDER OF ALL A.MOUNTS C. DEMURRER WAS PROPER BECAUSE CALIFORNIA LAW DOES NOT REQUIRE WELLS FARGO TO "PRODUCE THE NOTE" IN ORDER TO ENFORCE THE LOAN D. --- TIm DEMURRER WAS PROPERLY SUSTAINED ON THE DEMUCHAS' PURPORTED CLAIMS TO QUIET TITLE AND TO REMOVE CLOUD BECAUSE THOSE CLAIMS ARE BASED SOLEL Y ON THE ERRONEOUS LEGAL ARGUMENT THAT WELLS FARGO IS REQUIRED TO PRODUCE THE NOTE PRIOR TO INITIATION FORECLOSURE PROCEEDINGS E. DEMURRER WAS PROPERLY SUSTAINED ON THE CLAIM FOR FRAUD AND MISREPRESENTATION WHERE NO SPECIFIC FACTS WERE ALLEGED TO SHOW THAT ANY REPRESENTATION WAS FALSE, THAT ANY REPRESENTATION WAS MADE WITH KNOWLEDGE OF ITS FALSITY, OR THAT THE DEMUCHAS RELIED ON SUCH REPRESENTATION

16

21

23 23 24 25

l.
2. 3.

No False Representation No Knowledge of Falsity No Reliance

4851·2147 -0983.2

11

F.

TI-IE DEMURRER VV AS PROPER ON THE CLAIM FOR INFLICTION OF EMOTIONAL DISTRESS BECAUSE THE DEMUCHAS ALLEGED NO FACTS SHOWING OUTRAGEOUS CONDUCT AND NO FACTS SHOWING WELLS FARGO INTENTIONALLY CAUSED ANY EMOTIONAL DISTRESS 1. 2. No Outrageous Conduct.. No Facts Showing Wells Fargo Intended Emotional Distress

26 26 28

G.

DEMURRER WAS PROPER AS TO THE CLAIM FOR SLANDER OF CREDIT WHERE THE DEMUCHAS FAILED TO IDENTIFY THE ALLEGEDLY DEFAMATORY STATEMENT, FAILED TO ALLEGE THAT ANY STATEMENT ABOUT THEIR CREDIT WAS FALSE AND FAILED TO ALLEGE FACTS SHOWING ACTUAL MALICE 1. 2. 3. Failure to Allege Defamatory Statement Truth of the Statements Allegedly Forming Basis for Claim No Facts Showing Malice

29 29 30 30 31 33 34

H.

DElVIURRER WAS PROPER TO THE "COUNT" FOR PUNITIVE DAMAGES

CONCLUSION CERTIFICATE OF COMPLIANCE WITH RULE 14(C)(1)

4851-2147-0983.2

III

TABLE OF AUTHORITIES CASES
Abdallah v. United Say. Bank (1996) 43 Cal. App. 4th 1001,1109 Albertini v. Schaefer (1979)97 Cal. App. 3d 822 Alliance Mortg. Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1246 Arnold Mgmt. Corp. v. Eischen (1985) 158 Cal. App. 3d 575,579 Aspen Enterprises, Inc. v. Bodge (1995) 37 Cal. App. 4th 1811, 1818 Benham v. Aurora Loan Services (N.D.Cal. February 9, 2010) 2010 WL 532685 " Black v. Sullivan (1975) 48 Cal. App. 3d 557,562 Blank v. Kirwan, (1985) 39 Ca1.3d 311,318 Bowden v. Spiegel, Inc. (1950) 96 Cal. App. 2d 793,795 Brown v. Kelly Broadcasting Co. (1989) 48 Cal. 3d 711,723 Buckland v. Threshold Enterprises, LTD (2007) 155 Cal. App. 4th 798,807 Bundren v. Sup. Ct. (1983) 145 Cal. App. 3d 784, 790 Candelo v. NDex West, LLC (E.D. Cal. 2008) 2008 WL 5382259, at *4 Carlson v. Farm Land Inv. Co. (1917) 32 Cal. App. 538, 545 Cervantez v. J.C. Penney Co., (1979) 24 CaL 3d 579 Del E.Webb CGFp.-v.-Structunil_:MateI'ials Gorp. (1981}-EB Cal. -App. 3d 593, 604 Des Granges v. Crall (1915) 27 Cal. App. 313 Develop-Arnatic Engineering v. Republic Mortgage Co. (1970) 12 Cal. App. 3d 143, 149 Ephraim v. Metropolitan Trust Co of Ca. (1946) 28 Cal. 2d 824, 835 Farner v. Countrywide Home Loans (S.D. Cal. 2009) 2009 WL 189025, at *211 FPCI Re-Hab 01, etc. v. ERrG Investments, Ltd. (1989) 207 Cal. App. 3d 1018, 1022 Francis v. Dun & Bradstreet, Inc. (1992) 3 Cal. App. 4th 535, 540 Galbiso v. Orosi Public Utility, (2010) 182 Cal. App. 4th 652, 663, 107 Cal. Rptr 3d 26 Gold v. Los Angeles Democratic League (1975) 49 Cal. App. 3d 365, 373, fn. 3 Gonzalez v. First Franklin Loan Services (E.D.Cal. January 11, 2010) 2010 WL ~44862, *2 Grieves v. Sup. Ct. (1984) 15 Cal. App. 3d 159, 164 11 29 25 13 17 19 20 10 27 31 8, 16,25 26, 27 18 23

28
8 29 20 23 18 14 30 9 32 19 32

1

4851-2147-0983.2

IV

Guerrero v. Citi Residential 9269973, *8

Lending,

Inc. (E.D.

Cal. 2009)

2009

\VL 12 32 17 19 19, 20, 21 12, 13 10 15 9 15 30 19 23

Hilliard v. A.H. Robins Co. (1983) 148 Cal. App. 3d 374, 391 I.E. Assocs. v. Safeco Title Ins. Co., 39 Cal. 3dl281, 285 (1985) In Re First T.D. & Inv., Inc. (9th Cir. 2001) 253 F.3d 520,524 Inre Staff Mortgage Karlsen v. American Labra v. Cal-Western Lawrence Lesperance & Inv. Corp.,625 F.2d 281 (9th Cir. 1980) Say. & Loan (1971) 15 Cal. App. 3d 112 Reconveyance (N.D.Cal. March 11, 2010

Karlsen v. Gibralter Say. & Loan Assn. (1974) 15 Cal. App. 3d 112,117 v. Bank of America (1985) 163 Cal. App. 3d 431,436 v. North Amer. Aviation (1963) 217 Cal. App. 2d 336,341 Banker (N.D.Cai. May 26, 2009) 2009 WL

Leonard v. Bank of America Assn (1936) 34L, 344 Lomboy v. SCME Mortgage 1457738, *3 Manabat v. Sierra 2574161, *11 Pacific

Lundeen v. Ottis (1912) 164 Cal. 183, 187, Mort. Co., Inc. (E.D.Cal. 2010) 2010 WL

19 11 8 7 9 25 17 12 18 25 11, 16

MCA, Inc. v. Universal Diversified

Corp. (1972) 27 Cal. App. 3d 170, 177 134 Cal. App. 4th 388,

tv1cElroy v. Chase Manhattan
.- -..--~,--,-.-.-

394

_

,

_

Mort, Corp. (2005) __
--- -- ----

--'_

-"-

- ----------,--~~--.-"-~,

--_--------------

-.~.-.,-.---.-~-~-."--

Mead v. Sanwa Bank California Mirkin v. Wasserman

(1998) 61 Cal. App. 4th 561,564 (1986) 179 Cal. App. 3d 1027, 1035

Mercury Cas. Co. v. Sup. Ct.(Garcia)

(1993) 5 Cal. 4th 1082, 1088

Moeller v. Lien, 25 Cal. App, 4th 822, 834 (1994) Napue v. Gor-Mey West, Inc. (1985) 175 Cal. App. 3d 608, 621 Neal v. Juarez (S.D. Cal. 2007) 2007 WL 2140640, Nevin v. Gary (1909) 12 Cal. App. 1, 5 Nguyen v. Calhoun (2003) 105 Cal. App. 4th 428 Pavlovsky v. Board of Trade of San Francisco 110, 114 Putkkuri v. ReconTrust
I

at *8

(1959)

171 Cal. App. 2d

30, 31 32 18 10 23 31

PH II, Inc ..v. Sup. Ct. (1995) 33 Cal. App. 4th 1680, 1682-83 Co. (1.D. Cal. 2009) 2009 WL 32567, at *2 Morris Agency (1966) 244 Cal. App. 2d Raedkle v. Gibra1ter Say. & Lpan Assn. (1975) 10 Cal. 3d 665,671 Remus Films, Ltd. v. William 763, 768

Roemer v. Retail Credit Co. (1970) 3 Cal. App. 3d 368, 370

4851-2147-0983.2

v

Rogers v. Cal State Mort. Co., Inc. (E.D.Cal. 2010) 2010 WL 144861, *6 Ross v. Creel Printing & Pub. Co., Inc. (2002) 100 Cal. App. 4th 736, 744-745 San Diego Home Solutions, Inc. v. ReconTrust Co. (S.D. Cal. 2008) 2008 WL 5209972, at *2 SC M~~ufactured v. Liebert (2008) 162 Cal. App. 4th 68, 83, 76 Cal. Rptr
jQ /j

19 26 18 _
~,

Schonfeldt v. State of Calif. (1998) 61 Cal. App. 4th 1462, 1465 Spackman v. Good (1966) 245 Cal. App. 2d 518, 529-530 Stevens v. Kobayshi (1912) 20 Cal. App. 153, 154 Swanson v. EMC Mort. Corp. (E.D.Cal. 2009) 2009 WL 4884245, *5

_ 9,16 9 ; 28 29 19

Tina v. Countrywide Home Loans, Inc. (S.D. Cal. 2008) 2008 WL 4790906, at *8 ; 18 Twain Harte Homeowners Assn v. Patterson (1987) 193 Cal. App. 3d 184, 188 22 United States Cold Storage v. Great Western Savings & Loan Assn. (1985) 165 Cal. App. 3d 1214, 1222 16 Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal. App. 4th 1234, 1244, 65 Cal. Rptr 2d 25 7 Whitman v. Transtate Title Co. (1985) 165 Cal. App.3d 312,322-323 11 Wilhelm, supra,186Cal. 3d aLI331 24 Yurick v. Sup. Ct. (1989)209 Cal. App. 3d 1116, 1129 26 STATUTES [Civil Code] sections 2924-2924i 17 Cal. Civ. Code § 2924(a) 18 Cal. Cormn. Code sect. 9201(a) 21 Cal. U. Comm. Code sect. 9312 20 Cal. Unif. Comm. Code sects. 9201(a) and 9203(b) 21 Civ. Code § 1495 12 Civ. Code sect. 2924c, subd. (a)(l) 8 Civil Code section 2924 1, 16, 17,21 Code Civ. Proc. § 761.020(c ) Code of Civ. Proc. § 430.10(e) Code of Civ. Proc. § 430.30(a) 22 10 10 30

; OTHER AUTHORITIES
I

5 Witkin, Summary of Cal. Law (9th ed 1988) Torts, sect. 494, p. 583

4851-2147-0983.2

VI

California Real Estate, 3rd Ed., Miller & Star, 4 Cal. Real Est. sect. 10:40

20

4851-2147-0983.2

Vll

INTRODUCTION
This case is an effort to stave off foreclosure of a mortgage by debtors who failed to make payments when due on a mortgage a loan. A careful reading of the pleadings and other filings, however inartfully they were drafted, reflect that the DeMuchas are seeking to challenge a non-judicial foreclosure by Wells Fargo on the theory that Wells Fargo allegedly did not "produce the note" prior to initiating a non-judicial foreclosure. The requirements for conducting a non-judicial foreclosure are exhaustively contained in Civil Code section 2924, et seq., no requirement to "produce the note" during that process exists and, in fact, any requirement to do so would be inconsistent with the power of sale provision contained in a Deed of Trust. Appellants Mark and Cheryl DeMucha (the "DeMuchas") property in Bakersfield, California (the "Subject Property"). claim to own real sued,

The DeMuchas

seeking an ex parte temporary restraining order C"TRO") and preliminary injunction against non-judicial foreclosure proceedings on the Subject Property. The "central

defense" to non-judicial foreclosure presented by the DeMuchas was that defendants were not the holders of the original note and should have somehow produced that note during the non-judicial foreclosure process. This theory has been roundly discredited by every California Court that has considered it. Defendants below included Respondent Wells Fargo Home Mortgage, a Division of Wells Fargo Bank, N.A. (erroneously named as Wells Fargo Home Mortgage, Inc., and Wells Fargo Bank, National Association).
I

The trial court granted a TRO, which

expired when the DeMuchas failed to file the necessary bond. Wells Fargo then filed its I

4851-2147-0983.2

Demurrer to the DeMuchas' First Amended Complaint on grounds that the DeMuchas could not maintain their challenge to foreclosure because they could not allege tender of all amounts due under the loan, and that California law does not require the foreclosing party to "produce the note" before conducting anon-judicial also demurred to each of the DeMuchas' foreclosure. Wells Fargo

separate causes of action.

The trial court

sustained the demurer without leave to amend. This appeal followed. STATEMENT OF FACTS A. THE SUBJECT TRANSACTION. The DeMuchas 5813 Fernside purchased the real property California and improvements located at

Court, Bakersfield,

["the Subject Property"]

on or about

November 28, 2007.

For this purpose, the DeMuchas executed a Deed of Trust in the [First Amended

amount of $244,740.00 on the property in favor of CTX Mortgage.

Complaint, attached to Plaintiffs' Augmented Record ("FACPAR") at p. 2; Defendant's Motion to Augment the Record ("DAR"), 37-55]. The DeMuchas apparently made few, if any, payments on the loan, as they were in default in the amount of $10,807.41 a little over a year later. [DAR 57-60]. Plaintiffs admitted that they are experiencing "difficult financial times" and do not earn enough "to make ends meet." [DAR 15-16]. Wells

Fargo notified the DeMuchas in January of 2008 that the loan had been transferred to

Wells Fargo from CTX. [FACPAR at p. 3, par. 10]. On January 9, 2009, a Notice of
Default was recorded. [DAR 57-60]. The Notice of Default reflects that as of January 7, 2009, Plaintiffs were in defau~t in the amount of $10,807.41.

4851-2147-0983.2

2

B.

THE DElVIUCHAS' CONTENTIONS.
The DeMuchas alleged that Wells Fargo was not the holder of the original note as

the basis for their claim that Wells Fargo could not enforce that note against the Subject Property. [FACPAR at p. 3, par. 13]. The DeMuchas offered to pay "the individual or

entity that is the valid holder of the original note" but did not allege that they had tendered payment of any amounts due and did not or offer to pay the loan servicer, Wells Fargo, any amount. [FACPAR at pp. 3-4, par. 14]. The same allegation that Wells Fargo was not the holder of the original note appeared in the second count "to remove cloud." [FACP AR at p. 4, par. 16]. The remaining counts allege that Wells Fargo had no right to enforce the note "because [no defendant] ever legally obtained the transfer of the loan" so that statements that payments should be made, or that the DeMuchas were in default for failing to make payments, were false (claim for alleged fraud). Similar claims are

asserted as the basis for the claim for intentional infliction of emotional distress, slander of credit and punitive damages. [FACPAR at pp. 4-7]. C. NO ALLEGATION OF TENDER OF ALL AMOUNTS DUE. Although the DeMuchas argue on appeal that they alleged tender of all payments due (the "blatantly false claim that no tender was alleged"), the First Amended Complaint indicates that payments were not tendered when due. In paragraph 141, the DeMuchas offered to pay mortgage payments to the "valid holder of the original note." [FACPAR at p.4]. In paragraphs 16 and 18, the DeMuchas alleged that Wells Fargo is not entitled to

enforce the note because they failed to produce the original note. [FACP AR at pp. 3-4].
I

1

References are to the Verifidd First Amended Complaint. 3

4851-2147-0983.2

They alleged that it was false to assert that they were in default in paragraph 20, but not because of any alleged tender. [FACPAR at p. 6]. The fifth and sixth counts likewise

claim that Wells Fargo was falsely claiming the right to enforce payment obligations under the loan, but not because of tender of amounts due. [FACP AR at pp. 6-7]. The only allegation as to tender of payments - and the only allegation referenced in the opposition to the Demurrer below -- appears in paragraph 18 and states "plaintiff
[sic] has made mortgage payments to the Defendants."

[FACPAR at p. 5]. Plaintiffs do

not claim in their First Amended Complaint that they tendered all amounts owed. [Id.]. Instead, the DeMuchas admitted that they had "difficult financial times" after

Mrs. DeMucha lost her job, and that their income was "not enough to make ends meet," and "we are stuck with what we have" in terms of earning money. [DAR 16.] Moreover, Plaintiffs admit that a Preliminary Injunction was dissolved because Plaintiffs failed to post bond in the amount of $10,807.41. D. THE FORECLOSURE PROCEEDINGS ATTEMPTS TO DELAY OR HALT THEM. AND THE DEMUCHAS'

The DeMuchas filed an Ex Parte Application for a Temporary Restraining Order and sought preliminary injunctive relief to stop foreclosure proceedings. [DAR 7]. In

their application, the DeMuchas admitted that their "central defense" to payment of their obligations under the loan is that Wells Fargo was "not and never [was] the holder[] of the original note" so that it does "not have the right to enforce the note" under the Commercial Code. [DAR 8J. They further assert that their claims for quiet title and to remove cloud were "based iPon the operation of law mandating that an entity of

4851-2147-0983.2

4

individual who does not and never did hold the original note against a property has no right to enforce the note." [DAR 8]. They reiterated their allegation that Wells Fargo is prohibited by law from enforcing the note solely on grounds that it allegedly did not hold the original note. [DAR 9.]. E. ALLEGATIONS NOTE." THAT WELLS FARGO DID NOT "PRODUCE THE

The DeMuchas allege repeatedly that "Defendants" could not enforce the note (and thus mortgage) solely because they were not able to produce the original note. Paragraph 10 alleges that Defendants "have all failed and refuse to produce the original note," and that they cannot enforce that note because "they did not and do not hold the original note." [FACPAR at p.3]. In paragraph 13, the DeMuchas allege that

"Defendants" "are not and never were the holder of the original note" and therefore are ~~:wrQngflillydi:!iming title'lto the .. nbjectProperty S ~ [EACPAR~~aLp.JJ Paragraph 16

again alleges that "Defendants" cannot enforce the note "when they are not and never were holders of the original note." [FACPAR at p. 4]. PROCEDURAL HISTORY On or about April 28, 2009, the Demuchas filed their original Complaint.

[Register of Actions or Docket; DAR 1]. On or about Apri129, 2009, the DeMuchas filed an ex parte application seeking a temporary restraining order2 injunction prohibiting foreclosure on the Subject Property. and a preliminary "central

The DeMuchas'

defense" to the pending non-judicial foreclosure was that Wells Fargo was not the holder
2

As the DeMuchas acknowledge, the TRO was granted but expired when they failed to post bond. [DAR 62-63].
4851-2147-0983.2

5

of the original note, and thus purportedly was not entitled to conduct a non-judicial foreclosure. [DAR 7]. They requested that the trial court enjoin the defendants from

taking any actions regarding the Subject Property, including enforcing the promissory note, "unless and until they can show that they are the proper holder of the original note." [DAR 7]. They asserted that they were the "rightful owners" of the Subject Property because the defendants "do not and never did hold the original note," which they asserted was required by the California Commercial Code, §3301. [DAR 8]. In support of their request for injunctive relief, the DeMuchas admitted that they executed a Deed of Trust on the Subject Property and attached a copy of that deed. The deed showed that the DeMuchas borrowed $244,740.00 under a promissory note dated 11/20/2007. The DeMuchas claimed that they had requested defendants "to produce the

original note" but that the defendants did not produce it. [DAR 15]. The DeMuchas claim that they experienced financial hardship and that they were not earning "enough to make ends meet." [DAR 16]. Plaintiffs did not claim payment of proceeds due under the note. [DAR 7-16]. On June 15, 2010, the DeMuchas filed a First Amended Complaint. [Court

Register of Actions or Docket]. On July 15, 2010, Wells Fargo filed a Demurrer to and Motion to Strike portions of Plaintiffs' First Amended Complaint. [Clerk's Transcript

("CT") 1 and 17]. The Demurrer and Motion to Strike were calendared for hearing on September 14, 2010. [CT 1, 17]. On or about August 28, 2009, Plaintiffs filed briefs in Opposition to the Demurrer and Motion to Strike. [Plaintiff's Oppositions attached to [CT52]. On

PAR]. The hearing on the Demurrer was continued to September 28,2009.

4851·2147-0983.2

6

September 17, 2009, Wells Fargo filed replies in support of the Demurrer and Motion to Strike. [CT 35, 41]. At the September 28, 2009 hearing, the Court granted the Request for Judicial Notice and sustained the Demurrer as to each cause of action without leave to amend. [CT 54]. The Court held that the Motion to Strike was moot. [CT 54]. On October 7, 2009, the Court issued an Order of Dismissal and Judgment thereon. The Order indicates, The Court based its ruling [on] the Court's finding that Plaintiffs cannot allege and establish that they tendered all amounts due under the loan and based on its finding that, under established case and statutory authority, that a lender has no obligation to "oossess the note" nursuant to the non-judicial foreclosure process. [CT 57].
_. _.._ .J...

J

The DeMuchas appeal this Order of Dismissal and Judgment thereon. STANDARD OF REVIEW

In evaluating an order sustaining a Demurrer, this Court gives the pleading a
reasonable interpretation by reading is as a whole and all of its parts in their context. The Court assumes the truth "of all material facts which have been properly pleaded, of facts which may be inferred from those expressly pleaded, and of any material facts of which
I

judicial notice has been requested and may be taken.'; California (1998) 61 Cal.

[See Mead v. Sanwa Bank

Aipp.
I

I

4th 561, 564].

The Court ignores any erroneous or The Court does not, however,

confusing labels employed ~y the plaintiff.

See id.

"assume the truth of contentions, deductions or conclusions of law." [See Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal. App. 4th 1234, 1244, 65 Cal. Rptr 2d 25.] The pleading must be construed in a reasonable manner with allegations read in context.

4851-2147-0983.2

7

[See SC Manufactured

v. Liebert (2008) 162 Cal. App. 4th 68, 83, 76 Cal. Rptr 3d 73.]

The Court may also look to attached exhibits and accept their contents as true even if they contradict the complaint. [See id.] This Court is authorized to take judicial notice of publicly recorded documents including the Deed of Trust and the Notice of Default. [DAR 37-60]. We also note the McElroy's knew their tender of the Bill was not acceptable to Chase for several months before the foreclosure, during which time the law permitted them to reinstate the loan by bringing the delinquent payments current. (See Civ. Code sect. 2924c, subd. (a)(1) [loan can be reinstated until five business days before sale by paying delinquent payments together with expenses].) The complaint alleges the Bill was tendered on February 7, 2003. We take judicial notice of the "Notice of Default and Election to Sell under Deed of Trust" recorded on behalf of Chase in the Orange County official records on February 28, 2003, which shows only $7,238.24 was required to reinstate the loan and avoid foreclosure, the "Notice of Trustee's Sale" recorded on June 3, 2003 and the "Trustee's Deed Upon Sale" recorded on July 2, 2003. Thus, had the McElroys been able to cure the defective tender, they had ample o. opportunity to do so. {McElrCJYv. GhaseManhattan=Mort:=Corp.· E2(05)'o:~", 134 Cal. App. 4th 388,394.]

....._ "....

Moreover, in analyzing a Demurrer, a Court may take judicial notice of a party's prior statements or admissions made in earlier pleadings filed by the plaintiff.
Corp. v. Structural Materials [Del E. Webb

Corp. (1981) 123 Cal. App. 3d 593, 604.]

"Thus, a

pleading valid on its face may nevertheless

be subject to Demurrer when matters
[Ibid.]

judicially noticed by the court render the complaint meritless."

In ruling on a

Demurrer, a Court may take judicial notice of admissions made in declarations filed in support of a motion for preliminary injunction.
[Buckland v. Threshold Enterprises, LTD

(2007) 155 Cal. App. 4th 798, 807 (Demurrer to complaint examined "in light of'
I

declaration submitted in support of Motion for Preliminary Injunction.)]

4851-2147 ·0983.2

8

In that context, it is true that this Court reviews and makes a de novo determination. a Demurrer possibility of proving Public "[l]eave [See Liebert,

a Demurrer

ruling independently

162 Cal. App. 4th at 82.] In reviewing

granted without leave to amend, the Court must decide if there is a reasonable that the defects in that pleading such reasonable possibility can be cured by amendment, on the plaintiff." but the "burden [Galbiso v. Orosi Moreover,

is squarely

Utility, (2010)

182 Cal. App. 4th 652, 663, 107 Cal. Rptr 3d 26.J

to amend should be denied where the facts are not in dispute and the nature of law." [Lawrence v. Bank of

the claim is clear but no liability exists under substantive America (1985) 163 Cal. App. 3d 431,436 (emphasis Courts

added); Schonfeldt

v. State of Calif.

(1998) 61 Cal. App. 4th 1462, 1465.] plaintiff has alleged

should deny leave to amend where the sought in the original pleading.

facts which preclude

the relief

[A1ercury Cas. Co. v. Sup. Ct. (Garcia) (1986) 179 Cal. App. 3d 1027,1035.] Thus, for example, where Wells Fargo demurred on grounds that the DeMuchas to the trial court to that effect. First a

failed to allege tender of amounts due, the DeMuchas that they had tendered Additionally, Amended non-judicial all amounts premise

never represented

due and could file a truthful pleading of each must cause of action

the central Complaint foreclosure

of the DeMuchas' while

- that a lender

"produce

the note"

conducting

- has been repeatedly

found to be meritless by every California never met their burden to defeat the

court that has considered Demurrer,

it. Thus the Delvluchas

and the Court should affirm the judgment.

4851-2147-0983.2

9

ARGUMENT A. THE DEMURRER WAS PROPERLY SUSTAINED. The trial court proper!y sustained a Demurrer to the DeMuchas' claims based upon the argument that Wells Fargo had to produce the original note before it could enforce that note or initiate foreclosure proceedings. A general Demurrer may be taken to a

complaint where the pleading fails to state facts sufficient to constitute a cause of action. [Code of Civ. Proc. § 430.10(e).] A general Demurrer may be predicated on either the face of the pleading or matters outside the pleading that are judicially noticeable. [Code of Civ. Proc. §430.30(a); Blank v. Kirwan, (1985) 39 Cal.3d 311,318.] Here, the

DeMuchas failed to allege tender of all sums due, and premised all of their arguments upon their erroneous (as set forth below) legal conclusion that Wells Fargo had to "produce" the original note in order to enforce the note or proceed with non-judicial foreclosure. Therefore, Demurrer was proper, and the Court should affirm the judgment below. B. THE DEMURRER WAS PROPERLY SUSTAINED BECAUSE

APPELLA1'~TS FAILED TO ALLEGE TENDER OF ALL rudOUNTS.
Without an allegation pf tender, a complaint challenging a foreclosure does not state a cause of action. [Karl~en v. Gibralter Sav. & Loan Assn. (1974) 15 Cal. App. 3d 112, 117.] This rule applies because an action attacking a trustee sale is an action in equity. [Raedkle v. GibralterSav.
& Loan Assn. (1975) 10 Cal. 3d 665, 671.] A trustor

seeking to challenge a trustee's sale must therefore do equity before the court will exercise its equitable powers. [MCA, Inc. v. Universal Diversified Corp. (1972) 27 Cal.

4851-2147-0983.2

10

App. 3d 170, 177.J Therefore, as a condition precedent to any action challenging a foreclosure, a plaintiff must payor offer to pay the secured debt before an action is

commenced or in the complaint. 3d 312,322-323.]

[Whitman v. Transtate Title Co. (1985) 165 Cal. App.

The tender requirement applies to "any cause of action for irregularity [Abdallah v.

in the sale procedure," and must be made prior to initiating the lawsuit

United Sav. Bank (1996) 43 CaL App. 4th 1001, 1109 (affirming sustaining of Demurrer without leave to amend.j] In Nguyen v. Calhoun (2003) 105 Cal. App, 4th 428, an alleged purchaser or residential properties brought an action to quiet title against a lender. The plaintiff failed to establish that all amounts due under the loan had been paid. The plaintiff claimed that a lender representative told him that the foreclosure sale would be put on hold. The

Nguyen Court found that an alleged representation of the lender's employee to delay the trustee's sale was insufficient to overcome the tender requirement: The doctrine of tender has been correctly summarized in this fashion: The rules which govern tenders are strict and are strictly applied, and where the rules are prescribed by statute or rules of court, the tender must be in such a form as to comply therewith. 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. In other words, with respect to tender, "it is a debtor's responsibility to make an unambiguous tender of the entire amount due or else suffer the consequence that the tender is of no effect." (citations omitted; emphasis added.) [Nguyen, 227 Cal. App. 3d at 439-440.J
I

-----"-,~

.--

.-

The DeMuchas not only do not allege that they tendered all amounts due under the loan, but they admit that they have not tendered all amounts where they offer to pay someone

485 J -2147-09832

11

else the SLImsdue and plead their financial difficulties and their inability to make ends meet. Moreover, the DeMuchas' allegations clearly reflect a lack of ability to tender. An allegation of tender is inadequate where the pleaded facts reflect an inability to tender.
Karlsen
v.

American

Sav. & Loan (1971) IS Cal. App. 3d 112, the court stated "nothing

is alleged which even remotely suggests Karlsen would have the ability to comply with the 'reasonable terms' to be decreed by the court if he desired to comply." The court

stated "The basic rule is that an offer of performance is of no effect if the person making it is not able to perform."
[Id. at 1] 8 (citing Civ. Code § 1495).]

"Simply put, if the

offeror 'is without the money necessary to make the offer good and knows it' the tender is without legal force or effect." [Id. at 118 (citations omitted).] The Karlsen court found that "Appellant's specific allegations concerning the purported tender show that it was
[Id. at 118, 1'11.6 (citations omitted); see also

and continued to be legally ineffective."
Napue v. Gor-Mey

West, Inc. (1985) 175 Cal. App. 3d 608, 621 (stating "a tender of

payment is of no effect if the offeror does not have the present ability to make the tender good."); and Guerrero
v. Citi Residential Lending, Inc. (E.D. Cal. 2009) 2009 WL

9269973, *8 ("Defendants raise a valid point that if plaintiffs were unable to make their mortgage payments, 'what possible facts do they have to meet the requirement that they tender the net amounts advanced?"').] The DeMuchas' allegations reflect that the DeMuchas lack the ability to tender. Specifically, the DeMuchas admit that they are experiencing "difficult financial times" and do not earn enough "to make ends rneet." [DAR 15-16]. Moreover, the DeMuchas 12

4851-2147-0983.2

were granted a preliminary injunction conditioned amount of $10,807.40,

upon the posting of bond in the
111

the amount in default identified

the Notice of Default.

"However, Plaintiffs did not post the required bond, so the order was dissolved." [Opening Brief, p. 2.] On appeal, and in opposing the Demurrer below, the DeMuchas point only to the bare allegation that one of them made "mortgage payments", not any allegation of tender of all amounts due. Further, the DeMuchas never alleged that they could allege tender of amounts due had leave to amend been granted. The DeMuchas' failure to tender bars each of their causes of action because each cause of action is "implicitly integrated" with the foreclosure process.
[Karlsen at 121.]

In Arnold Mgmt. Corp. v. Eischen (1985) 158 Cal. App. 3d 575, 579, the plaintiff sought
to challenge foreclosure and sought damages based on causes of action for wrongful foreclosure, fraud and negligence. The Arnold court found that the plaintiff's failure to

tender barred each of these causes of action and sustained the defendant's Demurrer to each cause of action without leave to amend: "A cause of action 'implicitly integrated

with the irregular sale fails unless the trustor can allege and establish a valid tender." (citing Karlsen) Each of the DeMuchas' six causes of action are "implicitly integrated" with the non-judicial foreclosure process. [FACPAR, First Cause of Action for Quiet Title, p. 3,

par. 14 (" ... against the enforcement of the note and/or deed of trust. .. "), Second Cause
of Action to Remove Cloud, p. 4, par. 16

C ...

that the instrument through which the

Defendants claim title to and/or the right to enforce the note against 5813 Femside be declared invalid"), Third Cause of Action for Fraud & Misrepresentation, pp. 4-5, par. 18 13

4851-2147-0983.2

(referencing

statements made in Notice of Default), Fourth Cause of Action for

Intentional Infliction of Emotional (" ... Defendants ... have threatened to commence and have commenced non-judicial foreclosure proceedings against the Plaintiffs based upon false and fraudulent pretenses ... "), Fifth Cause of Action for Slander of Credit, p. 6, par. 20 (" ... maliciously published statements to third parties that Plaintiffs are in

default. . . ") and Sixth Cause of Action for Punitive Damages, p. 7, par. 25 ". . . wrongfully claiming title to and/or the right to enforce the note ... ")] As to each of these causes of action, the DeMuchas seek "restoration of title" and "[r]emoval of the

Defendant's cloud on Plaintiff's title to 5813 Femside."

[FACPAR, Prayer, p. 7, pars. 1

and 2.] Each of the causes of action are "implicitly integrated" with the non-judicial foreclosure process and each is therefore barred because of the DeMuchas failure to tender. The DeMuchas attempt to avoid this overwhelming body of case law by arguing that their suit was filed prior to the foreclosure sale, and that this distinction renders allegations of tender unnecessary. proposition. The DeMuchas fail to cite any authority for this

Moreover, the purpose of the tender rule would apply with equal force and "This rule, traditionally applied to

effect whether or not a trustee's sale has occurred.

trustors, is based upon the equitable maxim that a court of equity will not order a useless act performed." [FPCI Re-Hab 01, etc. v. E&G Investments, Ltd. (1989) 207 Cal. App.

3d 1018, 1022.] "Equity will not interpose its remedial power in the accomplishment of what seemingly would be nothing but an idly and expensively futile act, nor will it purposely speculate in a field where there has been no proof as to what beneficial purpose

4851-2147-0983.2

14

may be subserved through its intervention." 341, 344.]

[Leonard v. Bank of America

Ass 'n (1936)

Even if there had been a procedural irregularity (which there was not),

without an allegation of tender, the DeMuchas cannot establish that they would have been able to perform their obligations under the loan agreement in the absence of any claimed irregularity. Even a valid claim for wrongful foreclosure would not "wipe away" the

DeMuchas' obligation to make payments on their mortgage loan. The DeMuchas' claim challenging foreclosure, whether based on a claimed

obligation to "produce the note" or on some other theory, is barred by their failure to tender. In Labra v. Cal-Western
Reconveyance

(N.D.Cal. March 11, 2010), the Court

found that the plaintiffs' failure to tender barred a wrongful foreclosure action based on very similar allegations: [The plaintiffs] assert thatMERS had no authority to appoint Cal-Western asthesubstittltetrustee~···that:'_·MER:S·aid·nothave-thepower·of·saleand therefore the assignment to Aurora as the nominee did not transfer the power of sale to Aurora (which authorizedCalWestern to conduct the sale); . . . that MERS did not own the note, and therefore the transfer to Aurora did not assign the benefits of the note ... The Court finds that the [motion to dismiss] must be GRANTED as to the cause of action. . . That is, plaintiffs cannot state a claim for "wrongful foreclosure" because they have not alleged an ability to tender the loan proceeds. A defaulted borrower is required to allege tender of the amount of [the lender's] secured indebtedness in order to maintain any cause of action for irregularity. (citations omitted.) [Id. at *9.] Finally, the DeMuchas argue that the Court below should not have looked at Mr. DeMucha's sworn testimony presented in conjunction with their request for

injunctive relief. This argument is-incorrect.

As discussed above, a Court may properly

485\-2147-0983.2

15

analyze a plaintiffs' contentions made in connection with apreviousl y-filed Motion for Preliminary Injunction. The Court properly looks to exhibits provided by the plaintiff
[Liebert,

and even A

"concessions made by plaintiff's counsel."

162 Cal. App. 4th 68, 87.]

declaration made under penalty of perjury by a plaintiff that was provided to the court by that same plaintiff surely falls well within what the trial court and this court may consider on a Demurrer.
[Buckland, supra,

(2007) 155 Cal. App. 4th 798, 807.] tender of the entire

It is a debtor's

responsibility to make an unambiguous

amount due or else suffer the consequence that the tender is of no effect." (citations omitted; emphasis added.) [Nguyen, established 105 CaL App. 4th 428,439-440.] "The law is long as a

that a trustor or his successor must tender the obligation in full

prerequisite to challenge the foreclosure sale." (emphasis added) [United States Cold
Storage v. Great Western Savings & Loan Assn. (1985) 165 Cal. App. 3d 1214, 1222]

C.

DEMURRER WAS PROPER BECAUSE CALIFORNIA LAW DOES NOT REQUIRE WELLS FARGO TO "PRODUCE THE NOTE" IN ORDER TO ENFORCE THE LOAN. Each of the Delvluchas' claims are based on their erroneous premise that WELLS

F ARGO

was required to "possess the note" or "produce the note" prior to initiating

non-judicial foreclosure. This claim depends on their erroneous conclusion that Article 3 of the Uniform Commercia] Code, which governs negotiable interests, applies and overrules the provisions of the California Civil Code (§ 2924 et seq.) that govern
I

non-judicial foreclosure. As the DeMuchas admitted below, it is this argument that Wells

4851-2l47-0983.2

16

Fargo had to "produce the note" that was their "central defense" against non-judicial foreclosure. [DAR 8].

The person or entity initiating a non-judicial foreclosure need not physically possess the promissory note, nor need the trustee ascertain who does possess the note before proceeding with the foreclosure. This mistaken idea is derived from Article 3 of The Uniform

the Uniform Commercial Code, which governs negotiable instruments. Commercial property.

Code applies to the sale of goods and not transactions involving real [Aspen Enterprises, Inc. v. Badge (1995) 37 Cal. App. 4th 1811, 1818 The Uniform Commercial Code

(addressing transactions involving mixed collateral.)]

does not govern nonjudicial foreclosure under deeds of trust. The rules that do govern non-judicial foreclosure of a deed of trust are set forth in the California Civil Code at section 2924, et seq. [See, e.g., Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994) ("The comprehensive nonjudicial Assocs.
v.

statutory framework established to govern (citation omitted); I.E.

foreclosure sales is intended to be exhaustive.")

Safeco Title Ins. Co., 39 Cal. 3d 281, 285 (1985) ("The statutory provisions

regulating the nonjudicial foreclosure of deeds of trust are contained in [Civil Code] sections 2924-2924i. These provisions cover every aspect of exercise of the power of

sale contained in a deed of trust.").] Sections 2924 through 2924(1) of the California Civil Code do not require the person initiating foreclosure to have physical possession of the promissory note which the deed of trust secures. These sections also do not require the trustee to inquire about who
I

physically possesses the note. Instead, Civil Code section 2924(a)(1) provides that "[t]he 17

4851-2147-0983.2

trustee, mortgagee, nonj udicial Demurrer

or beneficiary, process

or any of their authorized by recording and servicing

agents" may commence a notice of default.

the The

foreclosure

was proper where Wells Fargo was never required non-judicial foreclosure proceedings,

to "produce

the note" prior affirm the

to initiating judgment.

and the Court

should

Possession Putkkuri 2924(a)(1)

of the original

note is not a prerequisite

to foreclosure.

[See, e.g., to section

v. ReconTrust

Co. (S.D. Cal. 2009) 2009 WL 32567, at *2 ("Pursuant

of the California

Civil Code, the trustee of a Deed of Trust has the right to CAL. CIY. CODE § 2924(a). foreclosure."); Production of the original

initiate the foreclosure

process.

note is not required to proceed with a non-judicial LLC (E.D. Cal. 2008) statutory framework

Candela v, NDex West, exists under the

2008 WL 5382259,. at *4 ("No requirement the original note to initiate non-judicial

to produce

foreclosure.");

San Diego Home Solutions, Inc. v. Recon'Trust at *2 ("California party initiating

Co. (S.D. Cal. 2008) (2008) WL 5209972, of the

law does not require that the original note be in the possession foreclosure."); Tina v. Countrywide

non-judicial

Home Loans, Inc. (S.D, the requirements the original at *8 (an it is Home

Cal. 2008) 2008 WL 4790906, for nonjudicial foreclosures

at *8 ("Cal. Civ. Code § 2924 outlines and does not include

in California,
I

providing

note prior to the sale."); Neal v. Juarez (S.D. Cal. 2007) 2007 WL 2140640, "allegation insufficient Loans that the trustee did not have the original proceeding

note or had not received Farner v. Countrywide

to render the foreclosure

invalid.";

(S,D. Cal. 2009) 2009 WL 189025, at *211 [TJhere does not appear under California law that the original note be produced

to be any

requirement

in order to render the

4851-2147 -0983.2

18

foreclosure proceedings valid."); Swanson v. ENIC Mort. Corp. (E.D.Cal. 2009) 2009 WL 4884245, *5 ("Weiss is correct that Ms. Swanson's 'produce the note' claim lacks legal merit."); Gonzalez v. First Franklin Loan Services (E.D.Cal. January 11, 2010) 2010 WL 144862, *2 ("Plaintiff's attempt to manufacture a claim based on 'possession of the note' fails."; Rogers v. Cal State Mort. Co., Inc. (E.D.Cai. 2010) 2010 WL 144861, *6 ("Mr. and Mrs. Rogers' implied 'produce the note' theory is meritless."); Benham v. Aurora
Loan Services SCME

(N.D.Cai. February 9, 2010) 2010 WL 532685, citing, and Lomboy
Banker

v.

Mortgage

(N.D.Cai.

May 26,

2009)

2009

WL

1457738,

*3

("Contemporary case law addressing this issue is clear: 'Under Civil Code section 2924, no party needs to physically possess the promissory note. "'; Manabat
v.

Sierra Pacific

Mort. Co., Inc. (E.D.Cai. 2010) 2010 WL 2574161, *11 ("Ms. Manabat's challenge to

produce an original note is unsupported. comply with the statutory scheme.)

The complaint alleges no facts of failure to

Plaintiffs rely only on In re Staff Mortgage
J.. .1.
I

& lnv. Corp., 625 F.2d 281 (9th Cir.

1980) in SUDDort f their claim that nossession of the note is required before initiation of o
L

the non-judicial foreclosure process. because it was superseded by istatute:

First, Staff Mortgage

is no longer good authority

Twenty years ago, in a case with facts very similar to those here, we held that such security int~rests could not be perfected under California law without actual possession of the security instruments. (In re Staff Mortgage & Inv. Corp.) 625 F.2d 281, 283 (9th Cir. 1980) ("Staff Mortgage") (citing Cal. Comrn. Code sect. 9304(1». More than a decade later, the California legislature created an exception to this rule by enacting California Business and Professions Code sect. 10233.2, which, under limited circumstances, permits perfection without possession of the security instruments. [In Re First TD. & Inv., Inc. (9th Cir. 2001) 253 F.3d 520, 524.]

4851-2147 -0983.2

19

The DeMuchas claim that "Business & Profession Code section 10233.2 merely created an exception to this rule in the case of real estate brokers who sell a note and then service the note ... " [Opening Brief, p. 7.] To the contrary, as a result of the enactment of

section 10233.2, physical possession of the note is not required event to perfect a pledge: Until July 1,2001, a security interest was perfected by taking possession of the instrument, it was not sufficient merely to record the assignment to perfect the security interest and a security interest cannot be perfected unless possession of the note is transferred to the pledge or the creditor. After July 1, 2001, a security interest in a negotiable interest may be perfected by filing. [California Real Estate, 3rd Ed., Miller & Star, 4 Cal. Real Est. sect. 10:40, citing Cal. U. Comm. Code sect. 9312 and In Re Staff Mortgage.] According to Miller & Star, physical possession of a pledged notes is no longer necessary under the Commercial Code. Second, Staff Mortgage addressed whether a pledge of "collateral packages of notes" used to secure yet another loan was perfected pursuant to the Uniform

Commercial Code and not an assignment of a note and deed of trust, i.e., an interest in real property. [Staff Mortgage, 625 F.S2d at 282] ("To secure its loan, Staff would

pledge one or more promissory notes secured by trust deeds which it had in its inventory.") A pledge involves a pledge of collateralized notes and deed of trust and any assignment of the underlying notes and deeds of trust.

does not involve

[Develop-Amatic Engineering v. Republic Mortgage Co. (1970) 12 Cal. App. 3d 143, 149.] Unlike an assignee, a pledgee receives the benefits of a note and trust deed but does not assume the obligations of performance imposed on the beneficiary-assignee.
[Black v. Sullivan (1975) 48 Cal. App. 3d 557,562.]

4851-2147-0983.2

20

Third, a pledge, unperfected or otherwise, remains, however, enforceable against the debtor. [Cal. Unif. Comm. Code sects. 9201(a) and 9203(b).] In fact, in Staff

Mortgage, the Court held that the bankruptcy trustee took the collateral underlying the pledge free and clear of any creditor's claims. [Staff Mortgage, 625 F.2d at 283 ("[T]hus the trustee in bankruptcy took the collateral free and clear of the plaintiff's claims.")] The Staff Mortgage Court did not hold that the deeds of trust were, themselves, unenforceable underlying non-perfected as to the underlying borrowers. worthless
If it had, it would have rendered the

collateral

and of no value to the bankruptcy

trustee.

A

pledge remains enforceable against the debtor:

"Except as otherwise

provided in this code, a security interest is effective according to its terms between the parties, against purchasers of the collateral, and against creditors." [Cal. Comm. Code

sect. 9201(a), eff. July 1, 2001.] In summary, Staff Mortgage is no longer good la.\y,js applicable only to pledges and not assignments of deeds of trust and, in any event, does not hold that a perfected pledge is unenforceable as against the debtor. Staff Mortgage is inapposite and does not "overlay" any additional requirements for conducting a

non-judicial foreclosure pursuant to Civil Code section 2924, et seq.

D.

PURPORTED CLAIMS3 TO QUIET TITLE AND TO REMOVE CLOUD

THE DEMURRER WAS PROPERLY SUSTAINED ON THE DEMUCHAS'

BECAUSE THOSE CLAI~IS ARE BASED SOLEL Y ON THE ERRONEOUS LEGAL ARGUMENT THAT WELLS FARGO IS REQUIRED TO PRODUCE THE NOTE PRIOR TO INITIATION FORECLOSURE PROCEEDINGS.

As the DeMuchas admit that the elements of these two causes of action are the same other than the requirement for pleading facts showing that a particular instrument is not valid, Wells Fargo will address these claims as one argument.
3
4851-2147-0983.2

21

Code of Civil Procedure section 761. 020(b) requires a plaintiff allege "a basis of [the Plaintiff's] title." In order to state a quiet title cause of action, a plaintiff must cite facts establishing that he or she has superior title to the real property in dispute. [Twain Harte Homeowners Ass'n v. Patterson (1987) 193 Cal. App. 3d 184,188.] a lender is not required foreclosure. As discussed above, a non-judicial completely and

to "possess the note" before conducting foreclosure process is governed

The non-judicial

exhaustively by the procedures set forth in Civil Code sections 2924-29241. Since the DeMuchas do not allege superior title for any grounds except the erroneous legal conclusion that Wells Fargo is required to "produce the note," their basis for superior title fails completely. Further, the complaint must allege the "adverse claims to the title." [Code Civ.

Proc.§ 761.020(c ).] Although the DeMuchas named multiple defendants, they didnot identify adverse claims or even identify the role of the many defendants. On appeal, they argue that they identified the adverse claims in paragraphs 9-14 of the pleading, but those paragraphs allege merely thatj''Wells Fargo Home Mortgage" claimed to be the transferee of the mortgage without identifying the interest allegedly claimed by any of the other identified entities. [FACPAR at pp. 2-4]. Finally, with regard to their effort to remove the alleged cloud on title, the DeMuchas argue that they alleged that the defendants' claims through an admittedly valid mortgage were alleged. They do not, however, argue that that mortgage itself - or the note that they seek to prevent Wells Fargo from enforcing were invalid.

Paragraphs 9-13 of the First Amended Complaint fail entirely to include any allegation

4851-2147-0983.2

22

that either the mortgage or the note were invalid, so that their claim to remove cloud fails under their own authority. [Ephraim v. Metropolitan Trust Co of Ca. (1946) 28 Cal. 2d

824, 835.] The Demurrer was properly sustained, and the Court should affirm. E. DEMURRER WAS PROPERLY SUSTAINED ON THE CLAIM FOR FRAUD Al'l"DMISREPRESENTATiON WHERE NO SPECIFIC FACTS WERE ALLEGED TO SHOW THAT ANY REPRESENTATION WAS FALSE, THAT ANY REPRESENTATION WAS MADE WITH KNOWLEDGE OF ITS FALSITY, OR THAT THE DEMUCHAS RELIED ON SUCH REPRESENTATION.
1.

No False Representation.

To state a cause of action for fraud, a plaintiff must allege specific facts indicating that any representation was false. The element of falsity is essential and a complaint that fails to plead it is fatally defective. [Lundeen v. Ottis (1912) 164 Cal. 183, 187.] To

plead falsity, a plaintiff must state the representation and state the true facts so that the _l~g?cl_: conclusiOllQtf;;tl~ity willInevitably he. drawnfromjhe.recitalin the representation the complaint.of..
ref,

made, followed by the averment of contrasting truth.

Remus

Films, Ltd. v. William Morris Agency statement that such representations
. I

(1966) 244 Cal. App. 2d 763, 768.] The simple

were false and fraudulent, in the absence of any

statement of what the real fads were, is a simple conclusion of law, and no issue of fact could be made upon it. [Carlson v. Farm Land Inv. Co. (1917) 32 Cal. App. 538, 545.] The DeMuchas alleged that "defendants" made three representations:
I

A) in a

letter dated January 4, 2008, that the loan was transferred from Ctx Mortgage Company, LLC to Wells Fargo, B) inl a Notice of Default executed on January 7, 2009, that Plaintiffs were in default under their loan, and C), in a Declaration of Compliance dated

4851-2147-0983.2

23

January 6, 2009, that Wells Fargo had complied with the requirements under Civil Code section 2923.5. [FACPAR passim]. They failed to allege any specific facts indicating

that, in fact, the loan was not transferred from CTX to Wells Fargo, that the loan was not in default or that Wells Fargo had not contacted or attempted to contact Plaintiffs before recording the Notice of Default. In fact, Plaintiffs imply that they are in default based on Plaintiff Mark DeMucha's financial times." With no allegation that any of the three alleged representations were false, the DeMuchas' claim for fraud failed as a matter of law. The Demurrer was proper, and the Court should affirm. 2. No Knowledge of Falsity. admission that the DeMuchas were experiencing "difficult

As discussed above, "every element of the cause of action for fraud must be alleged in full, factually and specifically."
[Wilhelm, supra, 186 Cal. App. 3d at 1331.]

Knowledge of falsity or "scienter" is ordinarily considered an essential element of fraud.
[Ibid. ("Here, the complaint fails to plead with specificity a factual basis for how Cohen

"knew" the representations she communicated to Goodman on behalf of Leedy were false.")] The DeMuchas allege no facts indicating that the unidentified individual who

sent the January 4, 2008 letter, Mr. Duong (who executed the Notice of Default) or Ms. Picket (who executed the Declaration of Compliance) knew that the statements contained in the documents were false at the time the documents were executed. Instead, the DeMuchas argue that they alleged such know ledge in paragraph 18 (defendants "falsely and fraudulently claim to hold title to and/or the right to enforce the

4851-2147-0983.2

24

note" and defendants "knew that the statements were false and fraudulent and that the truth was that the Defendants had no legal right to receive payments, defendants conclusions; "knew that the statements were false"). .... " and are mere

These statements

there is no factual basis alleged showing how the persons making the

allegedly false statements knew that they were false. The Demurrer was proper, and the Court should affirm. 3. No Reliance.

To assert a cause of action for actual reliance, a plaintiff must allege facts indicating that he or she actually relied on the misrepresentation.
[Mirkin v. Wasserman

(1993) 5 Cal. 4th 1082, 1088; Alliance Mortg. Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1246.] In order to plead and prove "actual reliance," a plaintiff must establish a complete causal relationship between the alleged misrepresentations and the harm claimed to have resulted therefrom.
[Buckland,

155 Cal. App. 4th 798.]

Facts must be alleged from

which it can be inferred that the alleged representation "was an immediate cause of his conduct which alters his legal relations" and without such representation, "he would not, in all reasonable probability, have entered into the contract or other transaction."
v. Gary

[Nevin

(1909) 12 Cal. App. IJ,5.]

The DeMuchas allege ho facts indicating that they actually relied on the January 4, 2008 letter, the January 7,2009 Notice of Default, or the January 6,2009 Declaration of Compliance with Civil Code section 2923.5. On appeal, they argue that reliance was

alleged in paragraph 18, but the only alleged reliance was the unspecified claim that a plaintiff made some mortgage payment to one or more defendant OIl

a mortgage that the

4851-2147-09832

2S

DeMuchas admitted executing. The complaint failed to allege reliance as a matter of law, the Demurrer was proper, and the Court should affirm.

F.

THE DEMURRER WAS PROPER ON THE CLAIM FOR INFLICTION OF EMOTIONAL DISTRESS BECAUSE THE DEMUCHAS ALLEGED NO FACTS SHOWING OUTRAGEOUS CONDUCT AND NO FACTS
SHOvViNG 1. WELLS FARGO INTENTIONALLY CAUSED ANY

EMOTIONAL DISTRESS. No Outrageous Conduct.

To state a cause of action for intentional infliction of emotional distress, a plaintiff must state facts indicating outrageous conduct. The defendant's conduct must be so Merely &

outrageous that it exceeds "all bounds usually tolerated by a decent society." rude or insulting behavior is not sufficiently "outrageous."
Pub. Co., Inc. (2002) 100 Cal. App. 4th 736,744-745.]

[Ross v. Creel Printing

Additionally, a debt collector is entitled to a qualified privilege.

In a society

dependent upon the extension of credit, creditors must be given some freedom in demanding payment. economic interests. Creditors are thus afforded a "qualified privilege" to protect their
[Id. at 748.

Even demanding payment of a debt in a rude and

insolent manner does not "exceed the bounds of decency" so as to be outrageous.
rn

LDUn rert

d

v.

uup.

C'''.L

/ 1 no.,"\ L-l. i.,1 :10.J)

1 I! C l-+J

\._-aL App
0

1

A~_

. .JU 10'+,

""'...1

""70

Ii

rt

I :1v.j
Il

rv

1

"r'"f"'1

1 ne

_

requirements
_. - •.

L.

01

c

t1

ne nne
_ _ _1

are rigorous, and difficult to satisfy." 1129.]

[Yurick v. Sup. Ct. (1989) 209 Cal. App. 3d 1116,

When one accepts credit, the debtor impliedly consents for the creditor to take reasonable steps to pursue payment even though it may result in actual, though not

4851-2147-0983.2

26

actionable, invasion of privacy. In the debtor situation the right of a debtor to privacy is subject to the right of a creditor to take reasonable steps to collect the debt. In this area of the developing law, the business community must be given some latitude to pursue reasonable methods of collecting debts even though such methods often might result in some inconvenience or embarrassment to the debtor. Debtors cannot

object to some inconvenience in connection with their creditor's efforts to collect a debt. It has been held that the debtors' sensibilities are protected only from oppressive, outrageous conduct. [Bundren, 145 Cal. App. 3d at 789-790, citing, Bowden v. Spiegel, Inc. (1950) 96 Cal. App. 2d 793,795.]. The DeMuchas failed to allege any "outrageous conduct" which would be

inconsistent with standard debt collection practices. They claimed in their First Amended Complaint that "Defendants" have "falsely asserted that Plaintiffs are in default in paying the loan." Appellant Mark DeMucha, however, strongly implied that he had not made all of his mortgage payments because he was experiencing "difficult financial times" and did not earn enough "to make ends meet." [DAR 15-16]. In any event, the DeMuchas have not alleged any conduct which would be inconsistent with standard debt collection practices and would exceed "ill bounds usually tolerated by a decent society." In an effort to rebut this argument, the DeMuchas argue on appeal that they alleged outrageous conduct and so outrageous"

Ih using

the conclusory phrase "intentional, unreasonable of the preceding factual

in paragraph 21 and incorporation

allegations, namely their contention that Wells Fargo was wrong in seeking to enforce the note when it failed to produce the original note. They offer no facts that were pleaded, or

4851-2147-0983.2

27

could have been pleaded, to show actual outrageous conduct by any defendant, much less by Wells Fargo. The DeMuchas also argue that the privilege raised below was a defense, and not an element, of their claim so that it should not affect a complaint on Demurrer. They rely upon Cervantez
v. L'C. Penney Co., (1979) 24 Cal. 3d 579, which was a case involving

false arrest and malicious prosecution after an arrest. That case did include a claim for intentional infliction of emotional distress, and in addressing it, the California Supreme Court noted that a defendant's conduct must appear to be unprivileged "whether treated as an element of the prima facie case or as a matter of defense."
[Id. at 593]. The Court

went on to note that the plaintiff in that case presented actual evidence that would support such a finding (that the conduct was not privileged). That case has no application to

these facts, .where even taking as true the actual factual allegations of the complaint, only privileged conduct appears. The Demurrer was proper, and the Court should affirm. 2. No Facts Showing Wells Fargo Intended Emotional Distress.

To state a cause of action for intentional infliction of emotional distress, a plaintiff must allege facts demonstratirg
plaintiff [Spackman

that the defendant acted for the purpose of causing the

emotional distress or that defendant was reckless in causing such result.
v. Good (1966) 245 Cal. App. 2d 518, 529-530.]
I

The DeMuchas failed to

plead any facts indicating that Wells Fargo intended to cause them any emotional distress as opposed to intending to simply collect on a debt in default.

4851 -2 147-0983.2

28

The DeMuchas fail even to address this lack in their opening brief. As such, they have conceded that their claim for infliction of emotional distress fails as a matter of law. Demurrer was proper, and the Court should affirm. G. DEMURRER WAS PROPER AS TO THE CLAIM FOR SLANDER OF CREDIT Vvh~RE THE DErvlUCHAS FAiLED TO iDENTiFY THE ALLEGEDLY DEFAMATORY STATEMENT, FAILED TO ALLEGE THAT ANY STATEMENT ABOUT THEIR CREDIT WAS FALSE AND FAILED TO ALLEGE FACTS SHO~NING ACTUAL MALICE. 1. Failure to Allege Defamatory Statement.

When pleading the publication of a false and defamatory matter, the exact words should be pleading or the publication attached as an exhibit to the Complaint.
[Des

Granges v. Crall (1915) 27 Cal. App. 313 (complaint should set out statement verbatim); Stevens v. Kobayshi (1912) 20 Cal. App. 153, 154.] As he Court in Albertini v. Schaefer

(1979) 97 Cal. App. 3d 822, stated: "The rule is of long standing that to authorized a recovery in such action the plaintiff must prove the utterance of the words set forth in his complaint, or enough of them to show that the defendant charged him with the particular offense constituting the slander." [Jd. at 102.] The DeMuchas' conclusions that WELLS FARGO published statements "that Plaintiffs are in default in paying the loan" are insufficient; they were required to allege the words used in any allegedly defamatory
I

publication.

On appeal, the DeMuchas rely upon the quoted statements in Paragraph 18, themselves advising them of the transfer of the These

which are the letter to the qeMuchas

concededly valid mortgage to Wells Fargo and the recorded Notice of Default.

statements are insufficient to support their claim, and the Demurrer was properly granted.

4851-2147-0983.2

29

2.

Truth of the Statements

Allegedly Forming Basis for Claim.

"Truth of the statements made is a complete defense against civil liability for defamation, regardless of bad faith or malicious purpose. [5 Witkin, Summary of Cal.

Law (9th ed 1988) Torts, sect. 494, p. 583.] "A credit report, even one that causes harm, is not defamatory if it is true." [Francis v. Dun & Bradstreet, Inc. (1992) 3 Cal. App. 4th 535, 540.] As discussed above, appellant Mark DeMucha implies that they have failed to remain current on their mortgage. [DAR 15-16]. The conclusory allegation that any

effort to foreclose the note after failing to produce it was false is inadequate in light of their own admission that they didn't earn "enough to make ends meet" when they thought such an admission would help them. Demurrer was proper, and the Court should affirm. 3. No Facts Showing Malice.

Where a statement is made under circumstances grvmg nse to the defense of privilege, the plaintiff, to state a cause of action for slander, must plead the facts
!

indicating actual malice. [Pavlovsky v. Board of Trade of San Francisco (1959) 171 Cal. App. 2d 110, 114; Lesperance v. North Amer. Aviation (1963) 217 Cal. App. 2d 336, 341.] Under Civil Code secti10n47(c), a publication is privileged [i]n a communication,
without malice, to a person interested therein, (1) by one who is also interested, or (2) by

one who stands such relation Jo the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3)( who is requested by the person interested to give the information.

4851-2147 -0983.2

30

This L nrivileze extends to mercantile agencies that collect and distribute credit
co

information for profit.
Pavlovsky,

[Roemer v. Retail Credit Co. (1970) 3 Cal. App. 3d 368, 370;

171 Cal. App. 2d 110,113-114.

For the purposes of [Civil Code] section [47(c)] , malice has been defined as 'a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person.'
If [Civil Code section [47(c)] applies to the occasion on which a

communication is made and it was made without malice, it is privileged and cannot constitute a defamation under California law." [Brown v. Kelly Broadcasting 48 Cal. 3d 711,723.]. Mere negligence
111

Co. (1989)

making a sufficient inquiry into the facts on which the

statement was based does not relinquish the privilege. [Roemer, supra, 3 Cal. App. 3d at 371.J malice. "Mere inadvertence or forgetfulness, or careless blundering, is no evidence of
[Ibid.]

Plaintiffs fail to plead any facts indicating that Wells Fargo acted with
aIillOY

any "willingness to vex,

or injure" the DeMuchas. The DeMuchas argue on appeal

only that they conclusorily alleged malice in paragraph 23 ("the false statements were maliciously published ... "). Such conc1usory allegations fail entirely to meet their The Demurrer was proper, and the Court

burden of pleading facts showing malice. should affirm. H. DEMURRER DAMAGES. WAS PROPER

TO

THE

"COUNT"

FOR

PUNITIVE

Punitive damages a remedies available to a party who can plead and provide the facts and circumstances set forth in Civil Code section 3294. "Punitive damages are

4851-2147-0983.2

31

merel y incident to a cause of action, and can never constitute the basis thereof." [Gold v. Los Angeles Democratic League (1975) 49 Cal. App. 3d 365, 373, fn. 3; Hilliard v. A.H. Robins Co. (1983) 148 Cal. App. 3d 374,391; Grieves v. Sup. Ct. (1984) 157 Cal. App. 3d 159, 164.] The DeMuchas concede that punitive damages are not a separate cause of action but argue instead that their supposed "Sixth Cause of Action" contains "necessary elements" to request such damages and should be deemed something other than what the DeMuchas chose to call it. However, even if they were treated as factual allegations attached to some cause of action that did not fail on its own merit, the DeMuchas allegations would be subject to the motion to strike filed below for failure to state specific facts indicating fraud, malice or oppression, or ratification of such acts by any officer, director or managing agent of the corporate Wells Fargo. Further, the DeMuchas failed to allege any independent duty from their failed argument that Wells Fargo had to "produce the note" in order to enforce it. Punitive damages should be challenged by a motion to strike.
I

[Grieves, supra,

157 Cal. App. 3d at 163-16f; PH II, Inc. v. Sup. Ct. (1995) 33 Cal. App. 4th 1680, 1682-83.] As discussed in Ithe attendant Motion to Strike, Plaintiffs cannot recover

punitive damages because A) Plaintiffs fail to state specific facts indicating "fraud, malice or oppression," B) Pllntiffs fail to state specific facts indicating that an officer,

director or managing agent of Wells Fargo authorized or ratified any acts of "fraud, malice or oppression," and C) Plaintiffs cannot recover punitive damages because they fail to allege any duty existing independent

4851-2147-0983.2

32

CONCLUSION
WHEREFORE, because the DeMuchas failed to allege tender of all amounts due and because there is no requirement under California Civil Code section 2924, et seq. that Wells Fargo produce the note before enforcing it, the Court should hold that the general Demurrer was properly sustained. The Demurrer is also proper on each count based upon the DeMuchas' failure to make the necessary and required factual allegations to support their purported claims to preclude foreclosure under whatever creative legal theory they denominate them.

Respectfully submitted,

Dated: September / ~, 2010

KUTAK ROCK LLP

Jeffrey S. Gerardo, Esq. Steven M. Dailey, Esq. Attorneys for Respondent/Defendant WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK N.A.

{&-£2

4851-2147-0983.2

33

CERTIFICATE OF COMPLIANCE WITH RULE 14(C)(l)
I, the undersigned, Antoinette P. Hewitt, declare that: I am a partner in the law firm of Kutak Rock LLP, which represents Defendant-Respondent, .WELLS FARGO HOME MORTGAGE, A DIVISION OF

WELLS FARGO BANK, N.A. in this case. This certificate of compliance is submitted in accordance with rule 14(c)( 1) of the California Rules of Court. This Respondent's

Brief was produced with a computer and is proportionally spaced in 13 point times roman typeface. The brief contains 9,244 words. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
/

Executed on September 1(;,2010

at Irvine, California.

4851-2147

-0983.2

34

COURT OF APPEAL FIFTH APPELLATE DISTRICT

~~lLfE[D)

No. F059476

SEP 2 0 2010

IN THE COURT OF APPEAL FOR THE STATE OF CArLTIIFffO~RtJ';NffIAA------;:;----:Deputy FIFTH APPELLATE DISTRICT MARK 1. DEMUCHA AND CHERYL M. DEMUCHA Appellants and Plaintiffs

v.
WELLS FARGO HOME MORTGAGE, INC.; WELLS FARGO BANK, NATIONAL ASSOCIATION, a.k.a. WELLS FARGO BANK, N.A.; FIRST AMERICAN LOANSTAR TRUSTEE SERVICES, FIRST AMERICAN CORPORATION AND DOES 1 TO 45 Respondents and Defendants Appeal From the Superior Court of the State of California, County of Kern Case No. S-15000-CV-267074 Honorable SIDNEYP. CHAPIN, Judge Department 4 Tele: (661) 868-7205

AMENDED PROOF OF SERVICE
KUTAK ROCK LLP Jeffrey S. Gerardo, SBN 146508 Steven M. Dailey, SBN 163857 18201 Von Karman Avenue, Suite 1100 Irvine, California 92612 T: (949) 417-0999 Fax: (949) 417-5394 Attorneys for Defendant-Respondent, WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A. [erroneously sued and served as "WELLS FARGO HOME MORTGAGE, INC." and "WELLS FARGO BANK,

NATIONAL ASSOCIATION

4823-0240-3335.1

PROOF OF SERVICE Demucha v. Wells Fargo California Court of Appeal, Fifth Appellate District, Case No.: F059476 [on appeal from Kern County Superior Court, Case No. S-15000-CV-267074] I am a citizen of the United States and employed in Orange County, California. I am over the age of eighteen years and not a party to the within-entitled action. My business address is Suite 110Q, 18201 Von Karman Avenue, Irvine, California 92612-1077. On September 17,2010, I served a copy of the within document(s): lBRIEF OF RESPONDENT WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A. (BY MAIL, 1013a, 2015.5 C.C.P.) I deposited such envelope in the mail at Irvine, California. The envelope was mailed with postage thereon fully prepaid. I am readily familiar with the firm's practice for collection and processing correspondence for mailing. Under that practice, this(these) document(s) will be deposited with the U.S. Postal Service on this date with postage thereon fully prepaid at Irvine, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. SEE ATTACHED SERVICE LIST (STATE) I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on September 17, 2010, at Irvine, California.

4823-0240-3335.1

ATTACHED SERVICE LIST Demucha v. Wells Fargo California Court of Appeal, Fifth Appellate District, Case No.: F059476 [on appeal from Kern County Superior Court, Case No. S-15000-CV-267074] Michael D. Finley, Esq.
L/O Michael D. Finley

25375 Orchard Village Rd., Ste. 106 Valencia CA 91355-3000

Attorney for Plaintiffs and Appellants Mark J. DeMucha Cheryl M. DeMucha lCopy

4823-0240-3335.1

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