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m NOSSAMAN

LLP

Facsimile

Attorneys at Law

915 L Street

Suite 1000 Sacramento, CA 95814

T 916.442_68881 F 916.442.0382 nossaman.com

Date:

1/7/11

Time:

Pages: _ [including cover page]

To:

Company:

Fax:

Timothy L. McCandless Esq.

Law Offices of Timothy L McCandless

(909) 382·9956 Phone:

(909) 890·9192

From: e-mail:

Robert S. McWhorter rmcwhorter@nossaman,com

Phone:

916.442.8888

Message:

RE: Martin v. U. S. Sank, sf a/.

Defendants' Reply in Support of Demurrer

ORIGINAL WILL BE SENT BY FIRST·CLASS MAIL

IF YOU DO NOT RECEIVE THE NUMBER OF PAGES INDICATED ABOVE, PLEASE CALL Dana Bardon @ 916.442.8888

ATTENTION: This message Is Intended only for the use of the Individual or antity 10 which It Is addressed and may contain information that is privileged, confidential, and exempt from disclosure under applicable law. If you are not the Intended recipient, you are hereby notified that any use, dissemination, distribution, or copying of this oommunlcatlon Is strictly prohibited. If you have reoelved this communication In error, please notify us immediately by telephone, and return this original message to us at the above address via the U.S. Postal Service. Thank you.

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DEFE,NDANTS u.s. BANK, DSL AND FCI'S REPLV IN SUPPORT OF DEMURRER TO FIRST AMENDED COMPLAINT

1 OFFICE OF THE GENERAL COUNSEL ERIC M. ALDERETE (CA Bar No. 199565) 2 eric.alderete@usbank.com

U.S. BANK, NATIONAL ASSOCIATION 3 3121 Michelson Drive, Suite 500

Irvine, CA 92612

4 Telephone: 949.798-6781 Facsimile: 949.798-4258

NOSSAMAN LLP

6 ROB~RT S. MCWHORTER (CA Bar No. 226186) rmcw~orter@nossaman.com

7 DA!!LL A. ZAVALA (CA Bar No. 253130) dzava a@nossaman.com

8 915 L Street, Ste. 1000

Sacr ' ento, California 95814 9 Telephone: 916.442.8888 Facsi:qlile: 916.442-0382

10 I

Attorneys for Defendants

11 U.S. :SANK NATIONAL ASSOCIATION, SUCC~SSOR m INTEREST TO THE FEDERAL

12 DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.;

13 DSL SlERVICES COMPANY; AND FCI LENDER SERVICES~ INC.

14

15 16 17 18

SUPERIOR COURT OF CALIFORNIA

IN AND FOR THE COUNTY OF STANISLAUS MODESTO CITY TOWERS

19 ANTHONY J. MARTIN~ Case No: 655297
20 Plaintiff, *BYFAX*
v. DEFENDANTS U.S. BANK NATIONAL
21 ASSOCIATION, SUCCESSOR IN
DO~YSAVmGSANDLOAN INTEREST TO THE FEDERAL DEPOSIT
22 ASSOCIATION, F.A.; DSL SERVICE INSURANCE CORPORATION AS
COMPANY; FCr LENDER SERVICES~ INC.; RECEIVER FOR DOWNEY SAVINGS
23 FEDERAL DEPOSIT IN'SURANCE AND LOAN ASSOCIATION~ F.A.; DSL
CORPORATION) RECEIVER OF DOWNEY SERVICE COMPANY, AND, FeI
24 SAVINGS AND LOAN ASSOCIATION, F.A.~ LENDER SERVICES, INC.'S REPLY IN
NEWPORT BEACH~ CALIFORNIA; U.S. BANK SUPPORT OF DEMURRER TO FIRST
25 NATIONAL ASSOCIATION, AS SUCCESSOR AMENDED COMPLAINT
IN INTEREST TO THE FEDERAL DEPOSIT Date: January 14, 2011
26 INSURANCE CORPORATION~ INCLUDING
ASSIGNORS OR SUCCESSORS IN INTEREST, Time: 8:30 a.m.
Dept; 21
27 and DOES I through 50, Inclusive Judge: The Han. William A. Mayhew
28 Defendants Action Filed: June 25, 2010 12010B_3.DOC

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DEFENDANTS V.S. BANK, DSL AND rcrs REPLY IN SUPPORT OF DEMURRER TO FIRST AMENDED COMPLAINT

1 I. INTRODUCTION

2 The silence in Plaintiff, Anthony 1. Martin's Opposition is deafening. In Defendants,l Demurrer

3 to the First Amended Complaint ("F AC"). Defendants claimed that the F AC is entirely barred by res

4 judicata and/or collateral estoppel, given that a prior pending action against Downey Savings and FCl

5 involving the same subject matter and same causes of action had been dismissed with prejudice in

6 federal court One month earlier. Despite the fact that Defendants' opening brief devotes six (6) pages to 7 this issue, Plaintiff does not even mention this argument at all in his Opposition. Not once, In fact,

8 Plaintiff's recitation of the procedural background of this case does not even mention the fact that

9 Plaintiff filed a complaint on July 9, 2009 (the "Prior Action Complaint") against Downey Savings and 10 FC! in Stanislaus County Superior Court. Case No. 643135 (the "Prior Action"), that the Prior Action 11 Complaint was removed to federal court, or that the Prior Action Complaint was dismissed with

12 prejudice on May 10, 2010. Plaintiffs failure to address this dispositive issue is not a mere oversight. 13 He failed to address it because he had no basis on which to oppose Defendants' Demurrer on that

14 ground. This Court should DOt permit Plaintiffto relitigate claims that have already been adjudicated 15 against him. Accordingly, this Court should sustain Defendants' Demurrer to the F AC on this basis 16 alone.

17 Instead of addressing the primary issue raised in the Demurrer, Plaintiff raises meritless

18 arguments in an attempt to support each cause of action in the FAC. For the reasons set forth below, 19 none of these arguments prevent this Court from entering an order sustaining Defendants' demurrer.

20 II. 21

LEGAL ANALYSIS

A.

The FAC Should Be Dismissed Because Plaintiff Did Not Tender Payment.

22 Even if this Court does not sustain Defendants' Demurrer based on the doctrines of res judicata

23 or collateral estoppel, this Court should sustain Defendants' Demurrer because the F AC fails to allege 24 that Plaintiff tendered the full amount of the debt, which is a prerequisite to his claims. All of the causes

25 26 27 28

1 "Defendants" collectively refer to U.S. Bank National Association, Successor in Interest to the Federal Deposit Insurance Corporation as Receiver for Downey Savings and Loan Association, F.A. ("V.S. Bank"). DSL Services Company ("DSL"), and FCr Lender Services, Inc. ("Fe!')

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I of action in the FAC seek a "declaration of rights and duties of the parties, specifically that the 2 foreclosure of Plaintiff's residence was wrongful." (FAC, p. 30:14-15.)

3 In his Opposition, Plaintiff argues that he has no obligation to tender because the "demurrer stage

4 is not a forum" for addressing this issue and because the foreclosure sale was purportedly "fraudulent."

5 (Plaintiff s Opposition to Demurrer C~Opp.j')~ p. 10:23-26.) Plaintiff does not cite any authority for this 6 novel legal proposition. As Plaintiff admits in his Opposition, the function of a demurrer is to test the

7 legal sufficiency of a complaint by raising questions of law. (Opp., p. 10:7-8; see also Aragon-Haas v.

8 Family Security Ins. Services, 231 Cal.App.3d 232,238-239 (1991).) The failure to tender is a quest jon 9 of law and is a condition precedent to bringing this action. Rescission of a contract requires that the

10 plaintiff tender the benefit of the contract. Civ. Code § 1691. A foreclosure sale cannot be set aside 11 absent payment of all the indebtedness, because any irregularities in the sale would necessarily be 12 harmless to the borrower. Mabry v, Superior Court, 185 Cal. App. 4th 208,225 (2010). The tender

13 requirement bars not only a direct action to set aside the foreclosure sale, but also bars any cause of

14 action "implicitly integrated" 'With the alleged irregular foreclosure sale. Arnolds Management Corp. v.

15 Eischen, 158 Cal. App, 3d 575,578 (1984).

16 Here, the F AC does not allege that Plaintiff unconditionally tendered the full amount of the debt

17 owed. The Opposition does not deny this fact. Without Plaintiff tendering the full amount of the debt 18 owed to redeem the Property or rescind the loan agreement, the Court should sustain Defendants'

19 demurrer to the entire F AC, without leave to amend.

20

B.

The First, Second, Third, Fourth, Sixth, and Seventb Causes of Action Fail.

21 As set forth in Defendants' Opening Memorandum, the First, Second, Third, Fourth, Sixth, and

22 Seventh Causes of Action, that seek to set aside the valid trustee's sale, to quiet title in the Property, and 23 for declaratory relief, fail because (i) Plaintiff failed to tender the amount owed, (ii) U'S. Bank stands in 24 the shoes of the Federal Deposit Insurance Corporation, as receiver for Downey Savings ("FDIC-R")~ 25 and (iii) they are time barred.

26 In his Opposition, Plaintiff glosses over these points. He first argues that Downey Savings

27 became a "defunct corporation" and that it had "no capacity" to conduct foreclosure sales. (Opp.,

28 p. 4:22-25,) This argument lacks merit.

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1 It cannot be disputed that the FDIC-R was appointed as receiver for Downey Savings, a federally 2 charted savings and loan association (not a "corporation") and that U.S. Bank acquired certain assets and 3 liabilities of Downey Savings from the FDIC-R~ including Plaintiff's loan. (FAC, ~ 20! Ex. G, pp. 10-

4 15.) Specifically, U.S. Bank assumed "all of [the FDIC-R~s] right, title, and interest ... in and to all of 5 the assets" of Downey Savings, including the Note and the Deed of Trust relating to Plaintiff. (PAC,

6 Ex. G, § 3.1.) An assignee steps into the shoes of the assignor. Boyajian v, New Falls Corp., 564 F. 3d 7 1088~ 1091 (9th Cir. 2009). U.S. Bank succeeded to the interests of, and stepped into the shoes of, the 8 FDIC-R, as receiver for Downey Savings. Thus, U.S. Bank had the right to foreclose on the property at

9 issue.

10 In a woeful effort to avoid this point, Plaintiff wrongfully contests the right of the FDIC·R to sell

11 the assets to U.S. Bank, claiming that under 12 U.S.C. § 1464(d)(2)(C) and California Code of Civil

12 Procedure section 568, only the FDIC-R could "initiate a Trustee's sale." (Opp., pp. 6:27-7:28.) This 13 argument is completely frivolous. Certainly, section 568 does not apply. The FDIC-R is governed by 14 federal law, not state law. 12 U.S.C. § 1464(d)(2)(C) is not an applicable statute. It does not govern, or 15 even pertain to, the FDIC-R's powers and authorities to act as receiver over a financial institution. The 16 FDIC-R's power to act as receiver is governed by 12 U.S.C. § 1821, which specifically authorizes the

17 FDIC-R to sell assets to third parties based on its sole discretion. 12 U.S. C. § 1821(d)(13)(E).

18 Plaintiff next argues that Civil Code sections 2923.5 and 2923.6 do not require tender of the

19 amount owed and, therefore, the demurer to the First, Second, Third, Fourth, Sixth, and Seventh Causes 20 of Action in the FAC should be denied. (Opp., pp. 11 :1-27.) This argument does not withstand

21 scrutiny. Sections 2923.5 and 2923.6 do not mention the tender requirement or relate to setting aside a 22 foreclosure sale after it has occurred. Notwithstanding these sections) the tender requirement applies.

23 Mabry, 185 CaL App. 4th at 225,

24 Here, a Trustee's Deed was recorded on May 22, 2009 - almost two years ago. (Opp. p. 4:32,)

25 Thus, Plaintiff must tender the amount due as a precondition to bringing suit.

26 Section 2923.5 and 2923.6 merely provide that a lender communicate with a homeowner prior to

27 foreclosure; they do not specify the content of this communication. Mabry, 185 Cal. App. 4th at 224. 28 In Mabry, the court noted that, at best, section 2923.5 only created a pre-sale remedy and that the only

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1 remedy is a postponement of the foreclosure sale, Given that the trustee's sale has occurred, section

2 2923.5 no longer applies. Moreover, section 2923.6 "merely expresses the hope that lenders will offer 3 loan modifications on certain terms.". Id. at 222-223. It does not operate substantively. Id.

4 Finally Plaintiff argues that U.S. Bank failed to comply with California Commercial Code

5 section 3301. (Opp., p. 6:2-24.) This argument is misplaced because section 3301 does not apply to real 6 estate foreclosures. The Commercial Code only governs foreclosure on personal property. Com. Code 7 § 9101 et seq.; Florio 1/. Lau, 68 Cal. App. 4th 637~ 642 (1998), Civil Code section 2924 et seq. governs 8 non-judicial real property foreclosures, "The comprehensive statutory framework established to govern 9 nonjudicial foreclosure sales is intended to be exhaustive." Moeller v. Lien, 25 Cal. App. 4th 822, 834

10 (1994). There is no requirement under section 2924 that a foreclosing beneficiary "show" that it 11 possesses the original promissory note prior to commencing a non-judicial foreclosure. See, e.g., 12 Castaneda v, Saxon Mortgage Servs., Inc., 687 F. Supp. 2d 1191, 1201 (E.D. Cal. 2009) ("under

13 California law, there is no requirement for the production of the original note to initiate a non-judicial 14 foreclosure"); Nool v. Homeq Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) ("non-judicial

15 foreclosures can be commenced without producing the original promissory note"). Therefore, Plaintiff 16 cannot assert a claim based upon U.S. Bank's alleged failure to comply with an inapplicable

17 Commercial Code provisions.

18 Accordingly, Plaintiff's arguments lack merit and this Court should sustain Defendants'

19 demurrer to the First, Second, Third. Fourth, Sixth, and Seventh Causes of Action of the FAC.

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20

c.

Plaintiff Completely Ignores the Remaining Substantive Arguments Raised in the Demurrer to the Fourth, Fifth, Sixth, Seventh, and Eighth Causes of Action

21

22 As to the Fourth, Fifth." Sixth, Seventh, and Eighth Causes of Action in the PAC, Plaintiff does

23 not address any of the substantive arguments raised in the opening Memorandum. Instead, he argues 24 that the face of Defendants' demurrer is to Plaintiff's Complaint, rather than to the FAC. That is not

25 true. Defendants' Demurrer is entitled "DEFENDANTS[']. .. DEMURRER TO FIRST AMENDED 26 COMPLAINT." Plaintiff then claims that he is purportedly unable to address the objections to the PAC

27 because of typographical errors in the numbering, despite the fact that the name of each cause of action 28 is listed in the Demurrer. Plaintiffs argument is nonsense and should be disregarded. That is putting

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u.s. BANK NATIONAL ASSOCIATION, SUCCESSOR m ThlTEREST TO THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RBCENER FOR DOWNEY SA VlNGS AND LOAN ASSOCIATIONI F.A.; DSL SERVICES COMPANY; AND FCI LENDER SERVICES, INC.

1 fonn over substance. Defendants demurred to each of cause of action, identified by name, on the same 2 grounds, namely that the First Amended Complaint does not state facts sufficient to constitute a valid 3 cause of action under Code of Civil Procedure section 430.10(e).jt In fact, paragraph 2 of the Demurrer 4 states: ""Defendants generally demur to the entire action on the ground the First Amended Complaint 5 does not state facts sufficient to constitute a valid cause of action. Code Civ. Proc. § 430.1 O( e)." The

6 Demurrer addresses each of the causes of action alleged in the F AC, which are addressed in detail in the 7 accompanying Memorandum. The special demurrer based on uncertainty under Code of Civil

8 Procedure section 430.10(f) applies to the entire First Amended Complaint. Plaintiff does not address 9 these legal arguments because he cannot do so, as the F AC lacks any legal merit.

10 III. CONCLUSION

11 For the reasons set forth above, this Court should sustain Defendants' Demurrer to the PAC, in

12 its entirety, without leave to amend.

13
Dated: January 7 t 2011
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1

ATTORNEYS FOR PLAINTIFF ANTHONY J. MARTIN

PROOF OF SERVICE

2

The undersigned declares:

I am employed in the County of Sacramento, State ofCalifomia. I am over the age of 18 and am not a party to the within action; my business address is c/o Nossaman LLP, 915 L Street, Suite 1000, Sacramento, California 95814.

On this date, I served the following:

DEFENDANTS U.S. BANK NATIONAL ASSOCIATION, SUCCESSOR IN INTEREST TO THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.; DSL SERVICE COMPANY, AND, FeI LENDER SERVICES, INC.'S REPLY IN SUPPORT OF DEMURRER TO COMPLAINT

3 4

5

6 7

8

on parties to the within action by placing ( ) the original (X) a true copy thereof enclosed in a sealed envelope, addressed as shown below.

9 10 11 12

IMOTHY L. MCCANDLESS, ESQ.

W OFFICES OF TIMOTHY L. MCCANDLESS 881 BUSINESS CENTER DRIVE, SUITE 9A

AN BERNARDINO, CA 92408

ACSIMILE: (909) 382-9956

13 (X) 14

(By U.S. Mail) On the same date, at my said place of business, said correspondence was sealed and placed for collection and mailing following the usual business practice of my said employer. I am readily familiar with my said employer's business practice for collection and processing of correspondence for mailing with the United States Postal Service, and, pursuant to that practice, the correspondence would be deposited with the United States Postal Service, with postage thereon fully prepaid, on the same date at Sacramento, California.

(By Facsimile) I served a true and correct copy by facsimile pursuant to C.C.P. lOI3(e), to the number(s) listed on the attached sheet. Said transmission was reported complete and without error. A transmission report was properly issued by the transmitting facsimile machine, which report states the time and date of sending and the telephone number of the sending facsimile machine. A copy of that transmission report is attached to the original of this proof of service.

Executed on January 7, 2011.

(STATE) I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

15 16

(X)

17

18 19 20

21

(X)

22 23 24 25 26 27 28

Dana Mae Bardon

ll0108_3.DOC

DEFENDANTS U.S. BANK, DSL AND FCI'S REPLY rN SUPPORT OF DEMURRER TO FIRST AMENDED COMPLAlNT

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