Company Engaged In Improper Debt Collection and Credit Furnishing Practices

Today the Bureau of Consumer Financial Protection (Bureau) announced a settlement with Security Group Inc., a South Carolina corporation, and its subsidiaries, Security Finance Corporation of Spartanburg and Professional Financial Services Corp.

As described in the consent order, the Bureau found that the Security Group entities violated the Consumer Financial Protection Act by making improper in-person and telephonic collection attempts on consumer installment loans and retail sales installment contracts. The Bureau found that these improper attempts included physically preventing consumers from leaving their homes and visiting and calling consumers’ places of work while knowing that those contacts could endanger the consumers’ employment. The Bureau also found that the Security Group entities violated the Fair Credit Reporting Act by regularly furnishing inaccurate and incomplete information about consumers to credit reporting agencies.

Under the terms of the consent order, Security Group and its subsidiaries are barred from certain collection practices, and must correct certain inaccurate information about consumers they furnished to credit reporting agencies, and pay a $5 million civil money penalty.

The consent order is available at: https://files.consumerfinance.gov/f/documents/bcfp_security-group-inc_consent-order_2018-06.pdf 

THE HILL-

A top U.S. bank regulator on Wednesday said his agency did not find widespread openings of unauthorized accounts at major U.S. banks in a review spurred by Wells Fargo’s fraudulent sales practices.

Comptroller of the Currency Joseph Otting told lawmakers Wednesday he found no “pervasive or systemic issues” at the largest U.S. banks after reviewing roughly 500 million savings, checking, credit and insurance accounts and policies.

Otting, a former bank executive, said the Office of the Comptroller of the Currency (OCC) found roughly 20,000 accounts with compliance issues out of the hundreds of millions analyzed. Of those problematic accounts, Otting said that less than half were unauthorized.

[THE HILL]

Dubin Law Offices are on a roll!

035010218 by DinSFLA on Scribd

CNN-

Wells Fargo isn’t the only bank where heavy sales pressure led employees to open fake accounts.

A federal review triggered by the Wells Fargo scandal found that “weaknesses” at other banks led employees to open accounts without proof of customer consent — just like Wells Fargo did — according to the Office of the Comptroller of the Currency.

The probe of more than 40 large and midsize banks concluded that the cause of those fake accounts included “short-term sales promotions without adequate risk controls,” deficient procedures and other isolated instances of “employee misconduct.”

[CNN]

National Mortgage Professional-

EVERY SUNDAY
3:00 PM HAWAII 
6:00 PM PACIFIC
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ConsumerFSBlog-

The Supreme Court of Wisconsin recently held that claim preclusion does not bar a mortgagee from proceeding with a foreclosure complaint despite a prior litigation which resulted in a dismissal with prejudice if the subsequent litigation is based upon a default and acceleration which occurred after the initial foreclosure proceeding.

A copy of the opinion in Federal National Mortgage Association v. Thompson is available at:  Link to Opinion.

Following a borrower’s default on his mortgage loan, the prior servicer of the loan initiated foreclosure proceedings based upon a default and acceleration alleged to have occurred in 2009.  The trial court in this initial foreclosure action determined that the prior servicer failed to demonstrate sufficient evidence that proper notice of default and intent to accelerate was provided to the borrower as required.  Consequently, the trial court dismissed the initial foreclosure complaint with prejudice.

After the dismissal of the initial foreclosure complaint, the new loan servicer for the loan provided a new notice of intent to accelerate to the borrower.  After the borrower failed to cure the default, the new servicer filed a second foreclosure complaint alleging that the borrower defaulted in 2009 and that proper notice of acceleration had been provided.

[CONSUMERFSBLOG]

ON CERTIFICATION FROM THE COURT OF APPEALS.

For the defendant-appellant, there were briefs and an oral argument by Christopher Stroebel and Stroebel Law, LLC, Madison.

For the plaintiff-respondent, there was a brief and an oral argument by Thomas C. Dill and BP Peterman Law Group, LLC, Brookfield.

SHIRLEY S. ABRAHAMSON, J.

¶1 This appeal comes before the court on certification by the court of appeals.^[1]Cory Thompson, the debtor defendant, appeals an order of the Dane County Circuit Court, Amy Smith, Judge, granting Federal National Mortgage Association a foreclosure judgment and a monetary judgment of $152,355.98, plus any amounts held in escrow, interest after August 16, 2012, and costs incurred by Federal National Mortgage Association.^[2]

¶2 The issue certified is as follows: Where a foreclosure action brought on a borrower’s default on a note has been dismissed, is the lender barred by claim preclusion from bringing a second foreclosure action on the borrower’s continuing default on the same note?

¶3 Essentially, we must answer the following question: When a foreclosure action brought on the borrower’s default on the note has been dismissed with prejudice,^[3]and the lender had not validly accelerated payment of the amount due under the note, does claim preclusion bar the lender from bringing a second foreclosure action based upon the borrower’s continuing default on the same note?

¶4 We conclude that when a lender does not validly accelerate payment of the amount due under the note and a foreclosure action brought on the borrower’s default on an installment payment under the note has been dismissed with prejudice, claim preclusion does not bar the lender from bringing a subsequent foreclosure action based upon the borrower’s continuing default on the same note.

¶5 For an earlier action to bar a subsequent action under the doctrine of claim preclusion, there must be, among other elements, “an identity of causes of action in the two suits[.]” N. States Power Co. v Bugher, 189 Wis. 2d 541, 551, 525 N.W.2d 723 (1995).

¶6 There is no identity of causes of action in the instant case and in the earlier lawsuit. The matters that were litigated or might have been litigated in the earlier lawsuit are not the same as those in the instant case. A different set of operative facts predicated upon separate and distinct defaults on the note is alleged in each lawsuit.

¶7 Upon dismissal of the first lawsuit, the parties continued the same contractual relationship with the same continuing obligations they had before the commencement of the first lawsuit. The borrower’s default resulting from the borrower’s failure to make an installment payment due after dismissal of the first lawsuit was not and could not have been litigated in the first lawsuit. Thus, the failure of the borrower to pay an installment after the termination of the first lawsuit created a new set of operative facts upon which the lender could base a subsequent foreclosure action.

¶8 After the first lawsuit, the lender gave new notice of intent to accelerate payment. The second lawsuit alleged a different date of default than was alleged in the first lawsuit. These constitute new facts giving rise to a new and subsequent default and a different transaction from that presented in the first foreclosure action.

¶9 Additionally, the parties raised and addressed the issues of whether the circuit court erred at trial by admitting a copy of the promissory note into evidence and whether Federal National Mortgage Association proved that it had possession of the original wet-ink promissory note.^[4]

¶10 We conclude that these additional issues are governed by our decision in Deutsche Bank National Trust Co. v. Wuensch, 2018 WI 35, ___ Wis. 2d ___, ___ N.W.2d ___.

¶11 Accordingly, we affirm the order of the circuit court.

I

¶12 The facts are undisputed for purposes of this review.

¶13 In November 2004, Cory Thompson executed a promissory note payable to America’s Wholesale Lender for $162,800.00, secured by a mortgage on real property. The note was endorsed in blank by America’s Wholesale Lender. The note contained an acceleration clause stating that the holder of the note may require Thompson to pay the full amount of unpaid principal plus interest immediately under the following conditions:

(1) Thompson must have defaulted by failing to make a monthly payment on the date that it was due;

(2) the holder of the note must have sent written notice to Thompson stating that it may accelerate the payments under the note if Thompson fails to cure the default by a given date; and

(3) the amount of time in which Thompson is afforded the opportunity to cure his default must not be less than 30 days after the date on which the notice is mailed or otherwise delivered to Thompson.

¶14 In November 2010, BAC Home Loans Servicing, LP, (formerly Countrywide Home Loans Servicing, LP) filed a lawsuit against Thompson. The complaint alleged that Thompson failed to make required payments on the note as of April 2009. In its complaint, BAC Home Loans purported to accelerate the debt, which made the principal balance of $153,202.53 immediately payable in full. BAC Home Loans sought a money judgment in the full amount owed under the note and sought to foreclose on the property securing the note.

¶15 At a court trial held on August 16, 2012, the circuit court determined that BAC Home Loans failed to present sufficient evidence to prevail in its foreclosure action and dismissed the lawsuit with prejudice. The circuit court reasoned that BAC Home Loans failed to present evidence of the original notice of intent to accelerate full payment and failed to present evidence that BAC Home Loans was in possession of the original wet-ink note (i.e., that BAC Home Loans was the holder of the note with the right to enforce the note).

¶16 In March 2014, Bank of America, N.A., (the entity servicing Thompson’s loan beginning in 2011), sent Thompson a notice of intent to accelerate payment of the note. The notice of intent to accelerate payment informed Thompson of the amount due to cure his default ($89,586.63), when payment was due (on or before May 4, 2014), and where to remit payment. Thompson did not cure his default on or before May 4, 2014.

¶17 In December 2014, Bank of America filed a complaint initiating the instant lawsuit. The complaint alleged that Thompson had failed to make payments on the note as of September 2009 and that because Bank of America had accelerated the debt, the principal balance of $152,355.98 was immediately payable in full.

¶18 Thompson moved to dismiss the December 2014 lawsuit, arguing that it was barred by the doctrine of claim preclusion.

¶19 The circuit court reasoned that the 2010 lawsuit and the instant 2014 lawsuit involved the same parties, the same note and mortgage, the same “essential” allegations of default, and the same remedy. According to the circuit court, the only difference between the 2010 and 2014 lawsuits was the different default period. The 2010 lawsuit was based on a default as of April 2009, and the 2014 lawsuit was based on a default as of September 2009.

¶20 The circuit court concluded that claim preclusion barred the portion of Bank of America’s default claim that was alleged to have occurred between April 2009 and August 16, 2012, the date of the trial in the 2010 lawsuit. The circuit court further concluded that any default claim alleged to have occurred after August 16, 2012, “remain[ed] viable.”

¶21 The circuit court explained that applying claim preclusion to any default alleged to have occurred after judgment was entered in the 2010 lawsuit would “be analogous to parties in a contract litigating to conclusion one contract violation, and then being forever barred from litigating subsequent contract violations. Surely, the policies behind claim or issue preclusion do not contemplate such a result.”

¶22 Accordingly, Bank of America amended its complaint to allege a date of default occurring after the trial in the 2010 lawsuit. The amended complaint alleged that Thompson had failed to make payments on the note as of September 2012 and that on acceleration of the debt due, Thompson owed a principal balance of $152,141.69.

¶23 A court trial was held on May 12, 2016. Prior to calling any witnesses, Federal National moved to admit into evidence a purported copy of the note. Counsel for Federal National presented the copy of the note, along with a document purporting to be the original wet-ink note. Thompson objected, stating that he was unable to tell whether the purported original wet-ink note was in fact the original wet-ink note or whether either document was identical to the original document that he signed in November 2004.

¶24 The circuit court visually compared the copy of the note with the document that Federal National’s counsel presented to the court as the original wet-ink note. The circuit court observed that the document presented by counsel as the original note appeared to be the original wet-ink note. The circuit court admitted the copy of the original wet-ink note based on the court’s visual comparison of the original and copy and because the circuit court viewed the copy as self-authenticating.

¶25 The circuit court granted Federal National a monetary judgment of $152,355.98——plus any amounts held in escrow, costs, and interest after August 16, 2012——along with a judgment of foreclosure to satisfy the monetary judgment. Thompson appealed.

¶26 The court of appeals certified the issue as follows: Where a foreclosure action brought on a borrower’s default on a note has been dismissed, is the lender barred by claim preclusion from bringing a second foreclosure action on the borrower’s continuing default on the same note?

II

¶27 We begin by setting forth the standard of review applicable to the certified issue.

¶28 The certified issue involves the application of the doctrine of claim preclusion to undisputed facts. “The question of whether claim preclusion applies under a given factual scenario is a question of law that this court reviews de novo.” N. States Power Co., 189 Wis. 2d at 551 (citing DePratt v. West Bend Mut. Ins. Co., 113 Wis. 2d 306, 310, 334 N.W.2d 883 (1983)).

III

¶29 We address whether the doctrine of claim preclusion applies to the undisputed facts in the instant action.

¶30 Under the doctrine of claim preclusion, “a final judgment is conclusive in all subsequent actions between the same parties [or their privies] as to all matters which were litigated or which might have been litigated in the former proceedings.” N. States Power Co., 189 Wis. 2d at 550 (brackets in original); Lindas v. Oday, 183 Wis. 2d 547, 558, 515 N.W.2d 458 (1994); DePratt, 113 Wis. 2d at 310. “Claim preclusion thus provides an effective and useful means to establish and fix the rights of individuals, to relieve parties of the cost and vexation of multiple lawsuits, to conserve judicial resources, to prevent inconsistent decisions, and to encourage reliance on adjudication.” Kruckenberg v. Harvey, 2005 WI 43, ¶20, 279 Wis. 2d 520, 694 N.W.2d 879.^[5]

¶31 Three elements must be present for an earlier action to bar a subsequent action: “(1) an identity between the parties or their privies in the prior and present suits; (2) an identity between the causes of action in the two suits; and, (3) a final judgment on the merits in a court of competent jurisdiction.” N. States Power Co., 189 Wis. 2d at 551; DePratt, 113 Wis. 2d at 311.

¶32 The parties do not dispute, and we agree, that only the second factor of claim preclusion, that is, identity between causes of action in the two lawsuits, is at issue in the present case.

¶33 In determining whether there is identity between causes of action for purposes of applying claim preclusion, Wisconsin courts apply the “transactional approach” as described in Restatement (Second) of Judgements. Kruckenberg, 279 Wis. 2d 520, ¶25; N. States Power Co., 189 Wis. 2d at 553-54; DePratt, 113 Wis. 2d at 311-12.

¶34 The Restatement explains that the transactional approach views a claim in factual terms and coterminous with the transaction, rather than in terms of legal theories:

The present trend is to see a claim in factual terms and to make it coterminous with the transaction regardless of the number of substantive theories, or variant forms of relief flowing from those theories, that may be available to the plaintiff; regardless of the number of primary rights that may have been invaded; and regardless of the variations in the evidence needed to support the theories or rights. The transaction is the basis of the litigative unit or entity which may not be split.

Restatement (Second) of Judgments § 24 cmt. a (1982); DePratt, 113 Wis. 2d at 311.

¶35 Section 24(2) of the Restatement (Second) of Judgments describes the “transactional approach” in terms of the facts as follows:

What factual grouping constitutes a “transaction”, and what groupings constitute a “series”, are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage.

Restatement (Second) of Judgments § 24(2) (1982); N. States Power Co., 189 Wis. 2d at 553-54.

¶36 “The transactional approach to claim preclusion reflects `the expectation that parties who are given the capacity to present their “entire controversies” shall in fact do so.'” Kruckenberg, 279 Wis. 2d 520, ¶27 (quoting the Restatement (Second) of Judgments § 24 cmt. a (1982)). In other words, “[t]he concept of a transaction connotes a common nucleus of operative facts.” Kruckenberg, 279 Wis. 2d 520, ¶26.

¶37 Whether a common nucleus of operative facts is involved in the two actions at issue is determined pragmatically by “look[ing] to see if the claim asserted in the second action should have been presented for decision in the earlier action, taking into account practical considerations relating mainly to trial convenience and fairness.” Kruckenberg, 279 Wis. 2d 520, ¶27 (quoting Robert C. Casad & Kevin M. Clermont, Res Judicata: A Handbook on its Theory, Doctrine, and Practice 66 (2001)).

¶38 The 2010 lawsuit and the instant case do not share “a common nucleus of operative facts.” Each lawsuit relates to a set of operative facts that occurred at a different time. In the 2010 lawsuit, the claim asserted was that Thompson had defaulted on the note as of April 2009. In the instant case, the amended complaint^[6] asserts that Thompson defaulted on the note as of September 2012 (i.e., after judgment was entered in the 2010 lawsuit).

¶39 Thompson’s brief assumes that an identity of claims exists between the 2010 lawsuit and the claims in the instant case because the same total amount, namely the entire balance on the note, was the remedy sought in both lawsuits. This assumption rests on another assumption, namely that an effective acceleration of payments occurred in the 2010 lawsuit. Thompson conceded at oral argument, however, that payment of the note was not effectively accelerated in the 2010 lawsuit.

¶40 Nevertheless, Thompson continues to assert that the instant case is barred by claim preclusion. In support of his claim preclusion argument, Thompson relies on Johnson v. Samson Construction Corp., 704 A.2d 866 (Me. 1997), and U.S. Bank National Ass’n v. Gullotta, 899 N.E.2d 987 (Ohio 2008).^[7]

¶41 In each of these cases, in ruling that the lender was forever barred from placing the entire balance of the note at issue once again in a second proceeding, the state supreme court assumed that full payment of the note had been validly accelerated and the entire balance of the note was the subject of the first lawsuit, which was dismissed with prejudice.

¶42 The Maine Supreme Court summarized its reasoning in Johnson that a lawsuit based on default of an accelerated debt barred a second lawsuit on the debt as follows:

The promissory note between Johnson and Samson required 240 equal monthly payments of principal and interest. However, the note’s acceleration clause provided that “[i]f any default be made in any payment under this Note, and if such default is not made good within thirty (30) days after written notice of same, the entire unpaid principal and accrued interest shall become immediately due and payable without further demand.” Johnson’s first cause of action alleged that Samson “defaulted on its obligations to the Plaintiff under the Note” and demanded payment of the entire unpaid principal balance. This suit was an action for the accelerated debt. Once Johnson triggered the acceleration clause of the note and the entire debt became due, the contract became indivisible. The obligations to pay each installment merged into one obligation to pay the entire balance on the note.

Johnson, 704 A.2d 866, ¶8.

¶43 The Ohio Supreme Court also relied on a purportedly valid acceleration of the balance due on default in reaching its decision that a subsequent lawsuit on the note was barred. It explained in Gullotta the distinction between the consequences for a second lawsuit of an initial action for recovery of an installment payment and of an initial action for recovery of the entire debt as follows:

The key here is that the whole note became due upon Gullotta’s breach, not just the installment he missed. There is a distinction between an action for recovery of installment payments under an installment note where the entire principal is accelerated, and an action to recover for nonpayment under an installment note where only the amount of the principal to date, and no future amount, is sought. The general rule that each missed payment in an installment loan gives rise to a separate cause of action does not hold true when there is an acceleration clause in the loan agreement[.]

Gullotta, 899 N.E.2d 987, ¶29.

¶44 Neither Thompson’s arguments nor these cases upon which Thompson relies are persuasive in deciding the instant case in Thompson’s favor. Why? Because in the instant case, unlike in the cases described above, no valid acceleration of the debt occurred in the 2010 lawsuit.

¶45 Generally, and in the instant case, there cannot be a valid acceleration of the debt without a default by the borrower. That is, the borrower’s default is a condition precedent to the lender’s right to accelerate the debt.

¶46 After a lawsuit based on the debtor’s failure to make one or more payments is dismissed with prejudice but payment of the note was not validly accelerated because it was never proved that the borrower was actually in default, the parties are simply placed back into the position they held before the commencement of the lawsuit, with the same continuing obligations. See, e.g., Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004); Afolabi v. Atlantic Mortg. & Invest. Corp., 849 N.E.2d 1170 (Ind. App. 2006).

¶47 In the instant case, when the 2010 lawsuit against Thompson was dismissed with prejudice, it had the legal effect of conclusively establishing that Thompson was not in default for having missed installment payments due on the note up until the date of trial in the 2010 lawsuit (i.e., August 16, 2012). Thus, because it was never proved in the 2010 lawsuit that Thompson was in default, the entire balance of the note was never validly accelerated. In such circumstances, the parties are placed back into the position they held before the commencement of the lawsuit. Thompson was obligated to continue making installment payments after the dismissal of the 2010 lawsuit, and claim preclusion does not prevent Federal National from suing Thompson for failing to make those payments.^[8]

¶48 Accordingly, we conclude that the instant lawsuit alleging a default as of September 2012 is not barred by the doctrine of claim preclusion.

¶49 In the instant case, the debt was not validly accelerated in the 2010 lawsuit. Claim preclusion should not bar the mortgagee from challenging a subsequent default payment solely because the mortgagee failed to prove in a prior action an earlier alleged default. Preventing a mortgagee from suing to collect a subsequent default even after the earlier claimed default could not be established would essentially insulate the mortgagor from future mortgage foreclosure actions on the note merely because the mortgagor prevailed in the first action.

¶50 The subject of the instant case is an alleged default in September 2012. In the prior lawsuit between the parties, the default was alleged to have occurred in April 2009. The instant lawsuit arises out of a different set of operative facts than those addressed in the prior lawsuit. The default alleged in the instant case could not have been litigated in the prior lawsuit. There is no identity of claims between the instant lawsuit and the prior lawsuit. Accordingly, we conclude that the instant lawsuit alleging a default as of September 2012 is not barred by the doctrine of claim preclusion.

IV

¶51 Before we end this opinion, we briefly address the following two additional issues the parties raised:

(1) whether the circuit court erred at trial by admitting a copy of the note into evidence; and

(2) whether Federal National proved that it had possession of the original wet-ink note.

¶52 These two issues are presented in and are governed by our decision in Deutsche Bank National Trust Co. v. Wuensch, 2018 WI 35, ___ Wis. 2d ___, ___ N.W.2d ___. With respect to these two issues, the facts of the instant case are substantially the same in all material respects to the facts presented in Deutsche Bank.

¶53 In Deutsche Bank, we concluded that a promissory note endorsed in blank constitutes self-authenticating commercial paper that may be enforced by the holder of the note. Deutsche Bank, ___ Wis. 2d ___, ¶¶23-24. We further concluded that the circuit court did not err by admitting into evidence a copy of the promissory note that was endorsed in blank, noting that the copy of the note was compared side-by-side to the original and that generally speaking, a duplicate of a document is admissible to the same extent as the original. Deutsche Bank, ___ Wis. 2d ___, ¶23.

¶54 We also concluded that because Deutsche Bank’s counsel physically possessed the original note on his client’s behalf at trial, Deutsche Bank proved that it had possession of the original promissory note and could bring the lawsuit. Deutsche Bank, ___ Wis. 2d ___, ¶24.

¶55 In the instant case, counsel presented the original wet-ink note to the circuit court along with a copy of the note. The circuit court in the instant case, sitting as the finder of fact, determined that the purported original appeared to be the original wet-ink note. Upon comparing the original wet-ink note to the copy of the note, the circuit court admitted the copy into evidence.

¶56 Consistent with our decision in Deutsche Bank, we conclude that Federal National proved that it possessed the original wet-ink note, that it could bring the lawsuit, and that the circuit court did not err in admitting a copy of the original wet-ink note at trial.

V

¶57 As to the certified issue, we conclude that when a lender does not validly accelerate payment of the amount due under the note and a foreclosure action brought on the borrower’s default on an installment payment under the note has been dismissed with prejudice, claim preclusion does not bar the lender from bringing a subsequent foreclosure action based upon the borrower’s continuing default on the same note.

¶58 As to the additional issues raised by the parties, we conclude that Federal National proved that it possessed the original wet-ink note, that it could bring the lawsuit, and that the circuit court did not err in admitting a copy of the original wet-ink note at trial.

By the Court.—The order of the circuit court is affirmed.

[1] Fed. Nat’l Mortg. Ass’n v. Thompson, No. 2016AP1496, unpublished certification (Wis. Ct. App. June 29, 2017).

[2] Federal National Mortgage Association replaced Bank of America as the plaintiff in the instant case in December 2015.

[3] For a summary of the facts and decision in the previous action in 2010, see BAC Home Loans Servicing LP v. Thompson, No. 2013AP210, unpublished slip op. (Wis. Ct. App. Dec. 19, 2013).

[4] When this court grants direct review upon certification, it acquires jurisdiction over all issues, not merely the issues certified or the issue for which the court accepts the certification. Wis. Const. art. VII, § 3(3); Wis. Stat. §§ 808.05(2), 809.61; State v. Stoehr, 134 Wis. 2d 66, 70, 396 N.W.2d 177 (1986).

[5] For further discussion of the public policies underlying the doctrine of claim preclusion, see Kruckenberg v. Harvey, 2005 WI 43, ¶¶19-22, 279 Wis. 2d 520, 694 N.W.2d 879, and accompanying footnotes.

[6] The operative allegations in the instant case are in the amended complaint filed by Bank of America on August 14, 2015.

[7] The certification memorandum filed by the court of appeals explains that state courts have taken varied approaches to the question of the application of the doctrine of claim preclusion to a subsequent foreclosure action after a prior foreclosure action is dismissed.

[8] We note that the 2010 lawsuit was dismissed with prejudice based on insufficient evidence. We do not address the application of claim preclusion to a situation in which the prior lawsuit was dismissed due to a defect in substantive enforceability of the note.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

H/T Dubin Law Offices

034978438 by DinSFLA on Scribd

Patch-

A group of related Colorado mortgage law firms indicted for charging phantom fees for almost 8,000 foreclosure clients will pay 2016 judgements more than $1 million after losing their case in the Colorado Court of Appeals.

Colorado Attorney General Cynthia Coffman pursued fraud charges against Robert J. Hopp & Associates and The Hopp Law Firm, their affiliated title companies, and Robert J. Hopp personally.

Investigators found the law firm was unlawfully billing its mortgage servicer clients between $200-$2,000 during foreclosures in violation of the Colorado Consumer Protection Act and the Colorado Fair Debt Collection Practices Act.

[PATCH]

Charlotte Observer-

A new lawsuit says Bank of America misled borrowers trying to hang onto their homes, pushing them into foreclosure while it enriched itself off a federal mortgage-modification program.

The suit, filed this month in federal court in Charlotte, is the latest to allege the Charlotte-based company abused homeowners seeking to reduce their mortgage payments through the Home Affordable Modification Program, or HAMP. The U.S. Treasury Department launched the program in 2009 following the financial crisis to help struggling homeowners avoid foreclosure.

Brought by 11 borrowers across the U.S., including one in North Carolina’s New Hanover County, the suit was initially filed last month in Mecklenburg County Superior Court before being moved to federal court. The suit says it involves individual borrowers after a federal judge in Massachusetts in 2013 denied a request to grant class-action certification for a case against Bank of America involving HAMP applicants from across the U.S.

[CHARLOTTE OBSERVER]

GINA M. GRAY et al., Plaintiffs and Appellants,
v.
LA SALLE BANK, N.A. et al., Defendants and Respondents.

NOT TO BE PUBLISHED IN 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.

BAMATTRE-MANOUKIAN, J.

In 2005, Gina M. Gray (Gray) and David A. Zamora (Zamora) purchased a San Jose residence located at 5850 Cannes Place (the Property). (Gray and Zamora are collectively referred to herein as Appellants.) Approximately one year later, Appellants obtained a $1 million loan from Washington Mutual Bank, FA (WaMu), memorialized by a note secured by a deed of trust encumbering the Property. In July 2013, the Property was sold through a nonjudicial foreclosure sale (or trustee’s sale) to Ling Jin and Yu Pan (collectively, Buyers). Appellants were evicted after contested unlawful detainer proceedings brought by Buyers in the superior court (Santa Clara County Superior Court No. 1-13-CV250564; the unlawful detainer action).

Appellants then initiated the current lawsuit in April 2014 for wrongful foreclosure and related claims. The defendants named in this action are Buyers and entities alleged to have been connected with Appellants’ note and deed of trust and/or involved in the trustee’s sale, namely, WaMu, La Salle Bank NA (La Salle) as trustee for WAMU 2006-AR19 Trust, JP Morgan Chase Bank, N. A. (Chase Bank), Chase Home Finance LLC (Chase Finance), and California Reconveyance Company (Cal. Reconveyance).^[1] (Hereafter, WaMu, La Salle, Chase Bank, and Chase Finance are collectively referred to as Lenders.) In July 2014, Appellants filed a first amended complaint. Lenders and Buyers filed separate demurrers to that pleading, which the court sustained with leave to amend.

Appellants filed a second amended complaint in October 2014 alleging eight causes of action. The essence of their claim is that the foreclosure sale was void because the parties who directed, initiated, and concluded that sale—Lenders and Cal. Reconveyance—were without legal authority to do so. Appellants alleged that record title shows that in April 2008, WaMu, as original beneficiary, had assigned its interest in the deed of trust to “La Salle Bank NA as trustee for WAMU 2006-AR19 Trust.” They alleged further that “WAMU 2006-AR19 Trust” was and is a nonexistent entity. And they averred that recorded documents show that neither WaMu nor “WAMU 2006-AR19 Trust” transferred the interest in the deed of trust to Lenders, and therefore Lenders’ actions in directing and concluding the foreclosure rendered the trustee’s sale void.

Buyers and Lenders challenged the legal sufficiency of the second amended complaint by separate demurrers.^[2] The court below sustained the demurrers to the second amended complaint without leave to amend, stating several, independent grounds for its ruling (discussed below). Separate judgments were thereafter entered in favor of Buyers, Lenders, and Cal. Reconveyance.

Appellants contend they alleged facts sufficient to constitute a cause of action as to each of their eight claims of the second amended complaint. They present three main contentions. First, they assert that the trial court erred in concluding that their claims were barred under principles of res judicata (as to Buyers) and collateral estoppel (as to Lenders). The trial court held that because Appellants were unsuccessful in their defense of Buyers’ unlawful detainer action and Appellants had had the opportunity there to fully and fairly litigate the merits of their title challenges, they were barred from relitigating those issues here. Second, Appellants contend that the court erred in sustaining the demurrer based upon the finding that they lacked standing to challenge the legality of the foreclosure due to claimed irregularities in recorded documents transferring interests in the note and deed of trust. They argue that under Yvanova v. New Century Mortgage Corp.(2016) 62 Cal.4th 919 (Yvanova), they had standing to bring a claim for wrongful foreclosure based upon their theory that the trustee’s sale was void. Third, Appellants contend that that the trial court erred in concluding that because they failed to allege they tendered the full amount of their indebtedness prior to foreclosure, they were barred from challenging the validity of the trustee’s sale.

We conclude that the trial court properly sustained Lenders’ demurrer to the first (fraud), second (negligent misrepresentation), and fifth (violation of Rosenthal Fair Debt Collection Practices Act) causes of action of the second amended complaint, and that it did not abuse its discretion in denying leave to amend as to these claims. But we find that the court erred in concluding that Appellants’ remaining claims were barred under former adjudication principles as a result of their prior unsuccessful defense of the unlawful detainer action. We hold further that the court erred in finding that Appellants lacked standing to challenge the foreclosure sale they claim was void. Under Yvanova, supra, 62 Cal.4th 919—a case decided after the trial court ruled on the demurrers in this case—such a challenge is maintainable by borrowers such as Appellants even though they were not parties to the recorded documents claimed by them to be void. And we conclude that, based upon the allegations of the second amended complaint which we assume for purposes of demurrer to be true, Appellants have alleged sufficient facts to support a claim of wrongful foreclosure based upon a void trustee’s sale. Under such circumstances, we hold that Appellants were not required to allege a tender of the indebtedness, and their allegation of the loss of the Property through foreclosure was sufficient to support the element of prejudice for a wrongful foreclosure claim. Lastly, we conclude that Appellants alleged sufficient facts that Lenders owed them a duty of care, and Appellants therefore stated a separate claim for negligence.

Based upon these conclusions, we conclude that the trial court correctly sustained the demurrer to the first, second, and fifth causes of action alleged against Lenders, and it did not abuse its discretion in denying leave to amend. We find, however, that the trial court erred in sustaining the demurrer to the second amended complaint as to the following causes of action: third (wrongful foreclosure), fourth (negligence), sixth (unfair competition), seventh (quiet title), and eighth (cancellation of instruments). We will therefore reverse the judgment and remand the case for further proceedings consistent with this opinion.

I. PROCEDURAL BACKGROUND

A. Second Amended Complaint

Appellants filed their initial complaint on April 4, 2014. On July 15, 2014, they filed a first amended complaint. Lenders and Buyers filed separate demurrers to the first amended complaint. The court sustained the demurrers with leave to amend.

On October 14, 2014, Appellants filed their second amended complaint. They alleged eight causes of action. All eight claims were asserted against Lenders and Cal. Reconveyance;^[3] only the seventh and eighth causes of action were asserted against Buyers. In their second amended complaint, Appellants alleged, among other things, the following facts, which are admitted for purposes of demurrer to be true (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214 (Committee on Children’s Television), superseded by statute as stated in Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227):

1. 2006 Note and Deed of Trust

Appellants claim an interest in the Property as a result of a grant deed recorded September 9, 2005. The Property was the personal residence of Appellant Gray and for a portion of the time the personal residence of Appellant Zamora. On October 27, 2006, Appellants executed an adjustable rate promissory note (Note) in the principal amount of $1 million with WaMu as the lender. The Note relates to a certain loan by WaMu that was made for personal, family or household purposes (Loan). The Note was secured by a deed of trust (Deed of Trust) on the Property in which Appellants were the trustors, WaMu was the beneficiary, and Cal. Reconveyance was the trustee.

2. 2008 Default Notice, Assignment, and Trustee Substitution

On March 10, 2008, Quality, “purportedly on behalf of [WaMu],” caused to be recorded a notice of default and election to sell (2008 Default Notice) under the Deed of Trust. Additionally, “[WaMu] purported to assign its rights under the Deed of Trust to La Salle Bank NA as Trustee for WAMU 2006-AR19,” in a document recorded on April 17, 2008 (the 2008 Assignment). At the time the 2008 Assignment was executed, WaMu “did not legally exist,” and “WAMU 2006-AR19” did not exist (and never existed); the 2008 Assignment was therefore void. And La Salle recorded a document on April 22, 2008, entitled “Substitution of Trustee” (2008 Trustee Substitution), in which La Salle substituted Quality as trustee under the Deed of Trust.

Shortly after receiving the 2008 Default Notice, “[Appellants] requested verification of the validity of the debt set forth in the notice,” and Quality responded by stating that it related to a debt owed to WaMu. On April 9, 2008, Quality submitted to Appellants a second debt validation notice in which it stated that the 2008 Default Notice related “to a debt purportedly owed to La Salle Bank NA as Trustee for WAMU 2006-AR19 (a nonexistent entity).”

3. Loan Workout Plan

On May 21, 2009, WaMu offered financial assistance to Appellants concerning their Loan, and a trial plan agreement was reached in which Appellants were required to make three monthly payments of $2,533.71 each.^[4] Appellants complied with the terms of the agreement but WaMu did not. Appellants made the payments on July 1, August 1, and September 1, 2009, but Chase either “disrupted the process and rescinded, or directed [WaMu] to rescind, the September 1, 2009 payment.” Had this not occurred, Appellants would have been provided a final loan workout plan to resolve their default under their Loan.

4. 2012 Default Notice, Trustee’s Sale Notices, and Trustee’s Sale

On August 10, 2012, Cal. Reconveyance, as trustee, on behalf of Chase Bank, recorded a notice of default and election to sell (2012 Default Notice) under the Deed of Trust, “even though [Chase Bank] did not have a beneficial or legal interest in the Note, Deed of Trust, or Loan or a secured interest in the Property.” Cal. Reconveyance “did not have the power or authority to initiate the foreclosure process.”

On November 13, 2012, Cal. Reconveyance, as trustee, recorded a notice of trustee’s sale (2012 Trustee’s Sale Notice) under the Deed of Trust. And on March 25, 2013, Cal. Reconveyance, as trustee, recorded a notice of trustee’s sale (2013 Trustee’s Sale Notice) under the Deed of Trust.

On July 24, 2013, Cal. Reconveyance, as trustee under the Deed of Trust, sold the Property at a trustee’s sale (i.e., a nonjudicial foreclosure) to Buyers.^[5] On July 31, 2013, Cal. Reconveyance, as Trustee, recorded a trustee’s deed upon sale (Trustee’s Deed) under the Deed of Trust. Buyers were “professional bidders at trustee’s sales of residential property in the greater San Francisco Bay Area,” and knew about “(1) the defective title issues . . . and (2) the void foreclosure sale.”

5. General Contentions

Appellants alleged in the second amended complaint that (1) the 2008 Assignment was void on its face; (2) the 2008 Assignment was without legal force or effect; (3) at the time the 2008 Assignment was made, the purported assignor, WaMu, did not exist; (4) the purported assignee under the 2008 Assignment, “WAMU 2006-AR19,” was a nonexistent entity; (5) WaMu did not transfer its interest in either the Note or the Deed of Trust to La Salle, Chase Bank, or Chase Finance; (6) La Salle did not transfer any interest in either the Note or the Deed of Trust to Chase Bank or Chase Finance; and (7) none of Lenders held any beneficial or legal interest in the Note, Deed of Trust, or Loan. Appellants alleged further that they had no obligation to tender the amount owing under the Loan to La Salle, Chase Bank, or Chase Finance because, inter alia, the 2008 Assignment was void and of no legal force or effect.

Additionally, Appellants alleged that 2012 Notice of Default, the 2012 Trustee’s Sale Notice, 2013 Trustee’s Sale Notice, the trustee’s sale, and the Trustee’s Deed did not conform with statutory requirements (Civ. Code, § 2924 et seq.).

In 2012, the United States Attorney General and 49 state attorneys general filed suit against Chase Bank and others relating to alleged “misuse and abuse of the foreclosure and nonjudicial foreclosure laws of various states.” A consent judgment was entered in April 2012 in a federal district court that imposed certain obligations upon Chase Bank. The actions of Chase Bank as alleged in Appellants’ second amended complaint violated the terms of the consent judgment.

6. Causes of Action

The first and second causes of action against Lenders were for fraud and negligent misrepresentation, respectively. Appellants alleged that Lenders misrepresented material information relating to the various recorded documents described above, and that Chase Bank and Chase Finance represented to them that “said defendants held a beneficial and/or legal interest in the Note, Deed of Trust, and Loan.”

In the third cause of action for wrongful foreclosure against Lenders, Appellants alleged that the 2008 Assignment was void, and therefore the 2008 Default Notice, 2008 Trustee Substitution, 2012 Default Notice, 2013 Trustee’s Sale Notice, and Trustee’s Deed were likewise void. Appellants alleged further that Chase Bank, Chase Finance, and Cal. Reconveyance did not have standing to foreclose on the Property because none of them was the lender under the Loan, the holder of the Note, or the holder of a beneficial interest in the Deed of Trust.

Appellants alleged in their fourth cause of action for negligence that Lenders owed Appellants a duty of care in the handling of the Loan, “which standard of due care is set forth, in part, in California Civil Code §§2924, et seq., including, but not limited to the initiation and processing of the nonjudicial foreclosure of the Deed of Trust and the obligation to only record accurate and truthful foreclosure documents.”

The fifth cause of action concerned a claim against Lenders for violations of the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.; Rosenthal Act). Appellants alleged that Lenders violated the Rosenthal Act, inter alia, by making false representations concerning the Note and Deed of Trust, and by falsely representing that payment demands and notices of default were made by or on behalf of the creditor/beneficiary.

Appellants alleged in the sixth cause of action that Lenders’ conduct constituted unfair competition under Business and Professions Code section 17203.

In the seventh cause of action for quiet title against Lenders and Buyers, Appellants alleged that Lenders claimed interests in the Property adverse to Appellants through a purported assignment by WaMu of the beneficial interest in the Property, and that Buyers claimed an adverse interest through the Trustee’s Deed.

Appellants alleged in the eighth cause of action against Lenders and Buyers for cancellation of instruments that the following documents were void: the 2008 Assignment, the 2008 Trustee Substitution, the 2012 Default Notice, the 2013 Trustee’s Sale Notice, and the Trustee’s Deed.

B. Demurrer to Second Amended Complaint

Lenders filed a demurrer to the second amended complaint. They asserted that each of the eight causes of action failed to state facts sufficient to constitute a cause of action (Code Civ. Proc., § 430.10, subd. (e).)^[6] Buyers filed a separate demurrer to the second amended complaint. They claimed that the seventh and eighth causes of action—the only claims asserted against them—failed to state facts sufficient to constitute a cause of action. After the matter was submitted, on January 14, 2015, the court issued a formal order sustaining Lenders’ and Buyers’ respective demurrers without leave to amend.

The majority of the order addressed Lenders’ demurrer. The court held that “[Appellants’] argument about `failed securitization’ was considered and rejected by the appellate division” of the superior court in connection with Appellants’ appeal the of the judgment in Buyers’ favor in the unlawful detainer action. The trial court held therefore that Appellants were collaterally estopped from raising the failed securitization issue in a separate action.

The trial court further sustained Lenders’ demurrer on the ground that “[Appellants] lack[ed] standing to challenge the process by which their loan was securitized as they were not parties to the securitization agreements. [Citations.]” It sustained Lenders’ demurrer to the first and second causes of action because Appellants had failed to plead fraud with the requisite specificity. Additionally, the court sustained Lenders’ demurrer to the first, second, third, fourth, seventh, and eighth causes of action on the basis that Appellants had failed to allege and prove that they tendered the full amount of the indebtedness, and that the absence of such tender “bars any claims `implicitly integrated’ with foreclosure. [Citation.]” (Quoting Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575 (Arnolds Management).) And it sustained the demurrer to the fifth cause of action because the conduct arising out of a foreclosure involving a residential mortgage is not subject to an action under the Rosenthal Act. Lastly, the court sustained Lenders’ demurrer to the sixth cause of action on the ground that, since Appellants had not alleged in its other claims conduct that was unlawful, unfair or fraudulent, they had not stated a cause of action for violation of Business and Professions Code section 17200.

In the last paragraph of the order, the court sustained without leave to amend Buyers’ demurrer to the seventh and eighth causes of action. In so ruling, the court incorporated its reasoning with respect to its ruling regarding Lenders’ demurrer.

Separate judgments dismissing the second amended complaint after sustaining the demurrers were entered in favor of Lenders and Buyers on February 5, 2015. Appellants filed a timely notice of appeal.

I. DISCUSSION

A. Demurrers and Standards of Review

A party against whom a complaint or cross-complaint has been filed may file a demurrer to the pleading on particular grounds specified by statute, including the ground that the challenged pleading fails to allege facts sufficient to constitute a cause of action. (§ 430.10, subd. (e).) A demurrer does not “test the truth of the plaintiff’s allegations or the accuracy with which he describes the defendant’s conduct. A demurrer tests only the legal sufficiency of the pleading.” (Committee on Children’s Television, supra, 35 Cal.3d at p. 213.) As such, “the facts alleged in the pleading are deemed to be true, however improbable they may be. [Citation.]” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604(Del E. Webb Corp.); see Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1057 (Chavez) [question of plaintiff’s ability to prove allegations not relevant on demurrer].)

We perform an independent review of a ruling on a demurrer and decide de novo whether the challenged pleading states facts sufficient to constitute a cause of action. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors(2010) 48 Cal.4th 32, 42; McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; see also Randi W. v. Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1075.)

On appeal, we will affirm a “trial court’s decision to sustain the demurrer [if it] was correct on any theory. [Citation.]” (Kennedy v. Baxter Healthcare Corp. (1996) 43 Cal.App.4th 799, 808, fn. omitted.) Thus, “we do not review the validity of the trial court’s reasoning but only the propriety of the ruling itself. [Citations.]” (Orange Unified School Dist. v. Rancho Santiago Community College Dist. (1997) 54 Cal.App.4th 750, 757.)

An appellate court reviews the denial of leave to amend after the sustaining of a demurrer under an abuse of discretion standard. (Schifando v. City of Los Angeles(2003) 31 Cal.4th 1074, 1081 (Schifando).) When a demurrer is sustained without leave to amend, the reviewing court must determine whether there is a reasonable probability that the complaint could have been amended to cure the defect; if so, it will conclude that the trial court abused its discretion by denying the plaintiff leave to amend. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 39; Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 719.) “`[W]here the nature of the plaintiff’s claim is clear, and under substantive law no liability exists, a court should deny leave to amend because no amendment could change the result.'” (Buchanan v. Maxfield Enterprises, Inc. (2005) 130 Cal.App.4th 418, 421.) The plaintiff bears the burden of establishing that it could have amended the complaint to cure the defect. (Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 320 (Campbell).)

B. Sustaining of Demurrer to Second Amended Complaint Was Error

1. Appellants’ Challenges to Foreclosure

Before addressing the merits of the appeal, we must identify the general nature of Appellants’ challenges to the foreclosure because the record is replete with confusing and inconsistent terminology used to describe those challenges.

In their first amended complaint, one of Appellants’ essential claims—which was not alleged in their second amended complaint—concerned a distinct challenge that the 2008 Assignment of the Deed of Trust to “La Salle Bank NA as Trustee for WAMU 2006-AR19,” which was purportedly made to a securitized investment loan trust, was defective and therefore void.^[7] Specifically, Appellants alleged that the purported assignee—”WAMU 2006-AR19″—was an entity that never existed, and if the purported assignee was intended to be “WaMu Mortgage Pass-Through Certificates Series 2006-AR19 Trust” (hereafter, WaMu Trust), the purported assignment was “of no legal force and effect and . . . not enforceable” because the assignment was made after the closing date for such trust deed transfers as specified in the WaMu Trust. Lenders, in their demurrer to the first amended complaint, referred to this argument as a “failed securitization” theory. Appellants resisted the use of this label below, contending that their position was that the foreclosure was invalid because the parties who initiated and concluded it had no legal authority to do so, and not because of “failed securitization.” The trial court seemingly adopted Lenders’ nomenclature, sustaining the demurrer to the first amended complaint with leave to amend because Appellants “lack[ed] standing to challenge the process by which their loan was securitized as they were not parties to the securitization agreements. [Citations.]”

As noted by Appellants in their opening brief, they did not include this so-called “failed securitization” theory—that the 2008 Assignment was invalid because it was made after the closing date trust for deed transfers as specified in the WaMu Trust—in their subsequent second amended complaint. This fact notwithstanding, Lenders again argued in their demurrer to the second amended complaint that Appellants were precluded from asserting their “failed securitization” challenge. In their opposition to the demurrer, Appellants emphasized that the claims in the second amended complaint were not based upon “a `failed securitization theory'” as argued by Lenders. Instead, Appellants asserted, their second amended complaint was based upon the theory that the foreclosure was “void because it was authorized by [Chase Bank], which ha[d] no interest of any nature in [Appellants’] loan, note, or deed of trust.” The trial court, in its order sustaining the demurrer to the second amended complaint without leave to amend, again seemingly adopted Lenders’ nomenclature. It held: “[Appellants’] argument about `failed securitization’ was considered and rejected by the appellate division [in a prior appeal of the judgment in the unlawful detainer action]. Thus, [Appellants] are precluded from raising this issue in their separate civil action.”^[8] The trial court concluded further—as it did in its order sustaining demurrer to the first amended complaint—that Appellants “lack[ed] standing to challenge the process by which their loan was securitized as they were not parties to the securitization agreements. [Citations.]”

We therefore perceive that two distinct theories were asserted by Appellants below in challenging the foreclosure: (1) the 2008 Assignment was void because it was made after the closing date for trust deed transfers as specified in the WaMu Trust (which theory was asserted in only the first amended complaint); and (2) the foreclosure was void because it was authorized by, and effectuated by, entities that were not authorized to do so (which theory was asserted in both the first amended complaint and in the second amended complaint). To avoid confusion, we will eschew use of the phrase “failed securitization theory” or the term “securitization” unless required to quote a party or a court. We will hereafter refer to Appellants’ first theory as the untimely WaMu Trust transfer theory, and the second theory as the unauthorized foreclosure theory.

2. No Former Adjudication of Claims or Issues

a. Introduction

Lenders argued below in their demurrer to the second amended complaint that Appellants’ claims were barred by the doctrine of collateral estoppel. They asserted that the claims based upon “securitization arguments” that were “identical to those [Appellants] raised in their appeal of the unlawful detainer judgment [involving Buyers] . . . [where Appellants] argued that the trustee’s sale was invalid due to purported title issues arising from `the 2008 assignment of the deed of trust and a pooling and servicing agreement relating to securitization of the note and deed of trust.'” Lenders contended that “[Appellants’] securitization theory [had been] actually litigated and necessarily decided in the unlawful detainer appeal” with the appellate division “reject[ing] this argument.” Similarly, Buyers asserted in their demurrer to the second amended complaint that Appellants’ quiet title and cancellation of instruments claims (seventh and eighth causes of action) alleged against Buyers were barred under the doctrine of res judicata because Appellants had unsuccessfully litigated their challenges to the validity of the foreclosure in their defense of the unlawful detainer action.

In their opposition to Lenders’ demurrer, Appellants argued that the second amended complaint was based upon the theory that “[Chase Bank] did not acquire[Appellants’] loan, note or deed of trust; and without an assignment to [Chase Bank] the trustee’s sale was void.” (Original italics; fns. omitted.) Appellants argued further that they never received a “full and fair trial on their defenses [to] title” in the unlawful detainer action, and therefore principles of former adjudication (res judicata and collateral estoppel) did not apply to bar their present claims.

The trial court concluded that because “[Appellants’] argument about `failed securitization’ was considered and rejected by the appellate division [of the superior court in the unlawful detainer action,] . . . [Appellants] are precluded from raising this issue in their separate civil action.” It thus held—citing two cases (see Lucido v. Superior Court (1990) 51 Cal.3d 335, 341 (Lucido) [describing collateral estoppel elements]; Malkoskie v. Option One Mortgage Corp. (2010) 188 Cal.App.4th 968, 974 (Malkoskie) [holding that stipulated judgment in unlawful detainer action against borrowers collaterally estopped them from asserting claims in subsequent suit challenging foreclosure sale])—that the doctrine of former adjudication applied to bar Appellants’ claims. In so holding, the trial court did not address the distinction Appellants raised in their opposition to the demurrer, namely, that their second amended complaint was not based upon a “failed securitization” theory but was based upon the theory that the trustee’s sale was void because of Chase Bank’s failure to acquire a beneficial interest in the note or deed of trust.

On appeal, Appellants reassert that the trial court erred in applying former adjudication principles as a result of the adverse judgment in the unlawful detainer action because they did not have “a full and fair adversarial hearing on their claims of defective title and wrongful foreclosure” in the prior suit. Lenders and Buyers contend that Appellants did, in fact, have a full and fair opportunity to litigate their challenges to the foreclosure sale in the unlawful detainer action and are thus barred from asserting claims based upon that theory in the instant case.^[9]

b. Res Judicata/Collateral Estoppel

We first identify legal principles concerning the doctrine of res judicata (including one aspect of that doctrine, collateral estoppel), noting that the Supreme Court has acknowledged some prior confusion in the use of terminology. (See DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 823-824 (DKN Holdings); see also Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 541, fn. 21.) The term “`res judicata’ [has frequently been used] as an umbrella term encompassing both claim preclusion and issue preclusion, which [the Supreme Court has] described as two separate `aspects’ of an overarching doctrine. [Citations.] Claim preclusion, the `”`primary aspect'”‘ of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. [Citations.] Issue preclusion, the `”`secondary aspect'”‘ historically called collateral estoppel, describes the bar on relitigating issues that were argued and decided in the first suit. [Citation.]” (DKN Holdings, supra, at pp. 823-824.) Because courts have alternatively referred to issue preclusion as “collateral estoppel” and “res judicata,” the Supreme Court, in its discussion in DKN Holdings, elected to use the terms “claim preclusion” and “issue preclusion.” (Id. at p. 824.)

There are distinct differences between claim preclusion and issue preclusion. “Claim preclusion `prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.’ [Citation.] Claim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. [Citations.] If claim preclusion is established, it operates to bar relitigation of the claim altogether.” (DKN Holdings, supra, 61 Cal.4th at p. 824.) Res judicata “is based upon the sound public policy of limiting litigation by preventing a party who has had one fair trial on an issue from again drawing it into controversy.” (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 811; see also § 1908.)

In contrast, “[i]ssue preclusion prohibits the relitigation of issues argued and decided in a previous case, even if the second suit raises different causes of action. [Citation.] Under issue preclusion, the prior judgment conclusively resolves an issue actually litigated and determined in the first action. [Citation.] . . . [¶] Issue preclusion differs from claim preclusion in two ways. First, issue preclusion does not bar entire causes of action. Instead, it prevents relitigation of previously decided issues. Second, unlike claim preclusion, issue preclusion can be raised by one who was not a party or privy in the first suit. [Citation.]” (DKN Holdings, supra,61 Cal.4th at pp. 824-825.) Issue preclusion, or collateral estoppel, “precludes relitigation of issues argued and decided in prior proceedings. [Citation.]” (Lucido, supra, 51 Cal.3d 335, 341, fn. omitted.)

Collateral estoppel (i.e., issue preclusion) will be applied only if five requirements are satisfied: “First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding. [Citations].” (Lucido, supra, 51 Cal.3d at p. 341; see also Hernandez v. City of Pomona (2009) 46 Cal.4th 501, 511 (Hernandez).)

In applying these principles of issue preclusion, “an issue was actually litigated in a prior proceeding if it was properly raised, submitted for determination, and determined in that proceeding. [Citation.] In considering whether these criteria have been met, courts look carefully at the entire record from the prior proceeding, including the pleadings, the evidence, the jury instructions, and any special findings or verdicts. [Citations.] `The “identical issue” requirement addresses whether “identical factual allegations” are at stake in the two proceedings, not whether the ultimate issues or dispositions are the same. [Citation.]’ [Citations.]” (Hernandez, supra, 46 Cal.4th at pp. 511-512.) The party asserting the bar of former adjudication has the burden of proving it. (Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 37 Cal.4th 921, 943.)

Moreover, our Supreme Court has expressed that a degree of flexibility must be employed by courts in the potential application of collateral estoppel. “Even assuming all the threshold requirements are satisfied, however, our analysis is not at an end. We have repeatedly looked to the public policies underlying the doctrine before concluding that collateral estoppel should be applied in a particular setting. [Citation.] . . . ([Citation]; see also Jackson v. City of Sacramento (1981) 117 Cal.App.3d 596, 603 [`collateral estoppel is not an inflexible, universally applicable principle; policy considerations may limit its use where the limitation on relitigation underpinnings of the doctrine are outweighed by other factors’].) Accordingly, the public policies underlying collateral estoppel—preservation of the integrity of the judicial system, promotion of judicial economy, and protection of litigants from harassment by vexatious litigation—strongly influence whether its application in a particular circumstance would be fair to the parties and constitute sound judicial policy. [Citation.]” (Lucido, supra, 51 Cal.3d at pp. 342-343.)

c. Prior Unlawful Detainer Action

Buyers filed the unlawful detainer action against Appellants on August 2, 2013. Appellants, as self-represented litigants, filed an answer in which they alleged a number of affirmative defenses. In their answer, Appellants challenged title to the Property, contending that they were the “current title holders because all acts to transfer title from them were void and conferred no rights on anyone else.” They alleged further in their answer that (1) the “[f]oreclosure and sale were not conducted in compliance with California Code of Civil Procedure [sic] [section] 2924 et seq[.]; [(2)] [f]oreclosure recordings were not in compliance with California Code of Civil Procedure [sic] [section] 2924 et seq. and were void; [(3)] [f]oreclosure was not conducted by a beneficiary under a deed of trust”; and (4) “the assignment of a Deed of Trust [was] void as a matter of law.”^[10]

Appellants filed a motion for summary judgment in the unlawful detainer action. They challenged Buyers’ right to proceed with eviction, arguing their title was not valid “because the only recorded assignment in the county appears to be void as a matter of law.” They argued, among other things, that the 2008 Assignment to WAMU 2006-AR19 was invalid because that entity did not exist, and at the time of the assignment, the purported assignor, WaMu, was not a legal entity. Appellants also challenged the legality of the following documents: (1) the 2012 Default Notice because it named Chase Bank, an entity that was not the beneficiary, (2) a Substitution of Trustee, recorded in August 2012 (2012 Trustee Substitution), which identified a different beneficiary (“WAMU Mortgage Pass-Through Certificates, Series 2006-AR19 Trust”); and (3) the 2008 Assignment because it purported to assign a deed of trust into a securitized trust of real estate mortgage investment conduits after the legally binding closing date of the trust. The trial court denied Appellants’ motion for summary judgment on September 13, 2013.^[11]

The unlawful detainer action proceeded to trial on September 13, 2013. Judgment was entered on that day in favor of Buyers against Appellants.^[12] Appellants appealed the judgment to the appellate division of the superior court (appellate division). In a 13-page opinion filed October 6, 2014, the appellate division affirmed the judgment.^[13]

There were two grounds upon which the appellate division based its affirmance of the unlawful detainer judgment. The first ground was a procedural one. The appellate division noted that in the appeal, Appellants had contended that “the court erroneously excluded mostly unidentified documentary evidence Gray offered at trial . . . [and that] this evidence, which they contend[ed] show[ed] defects in the chain of title based on asserted flaws in the securitization of the underlying note and deed of trust, undermine[d Buyers’] claim to duly perfected title to the [P]roperty and, hence, their authority to evict [A]ppellants.” The appellate division summarized in the introduction of its opinion that “the record contains no exhibits or offer of proof at trial as to the specific contents of the proffered documents. Thus, Gray has not sufficiently preserved the claim of error and has not provided an adequate record on appeal in order for us to review the claim.”^[14] And because Zamora did not appear at trial, the appellate division held that he had forfeited any right to appeal.

The second ground for the appellate division’s affirmance was a substantive one. After rejecting with detailed reasoning Gray’s appellate claim because of the absence of a sufficient record, the appellate division prefaced its discussion of the merits of Gray’s claim: “Even if we were to reach the merits, and to the extent we can, we would still reject Gray’s claim of error.” (Footnote omitted.) The appellate division noted that—”as far as [it could] tell from th[e] record” Gray’s challenges to eviction presented at trial “related only to an alleged flaw in the securitization of the underlying obligation, which she contended precluded [Buyers] from obtaining duly perfected title through the foreclosure process. In other words, [Buyers’] allegedly defective title to property flowed directly and solely from the purported flawed securitization process, . . .” The appellate division, relying on a trio of cases subsequently disapproved by our Supreme Court,^[15] rejected Gray’s “theory of defective title based on alleged flawed securitization of the note and deed of trust before a foreclosure sale.” It concluded that, “even if Gray had preserved her claim and provided an adequate record, [it] would conclude that she lacked standing to challenge the 2008 assignment of the deed of trust as defective, and, further, suffered no prejudice from the assignment even if it was defective.”

d. Former Adjudication Principles Do Not Apply

It is clear that at least two of the collateral estoppel elements under Lucido—final decision on the merits and “the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding” (Lucido, supra,51 Cal.3d at p. 341)—are present here. And from the record, it appears the issues involved in the second amended complaint—the unauthorized foreclosure theory—were identical to those raised as Appellants’ defenses and challenge to title in the unlawful detainer action.^[16] Our focus is therefore upon the second and third elements of collateral estoppel identified in Lucido, namely whether the “issue must [was] actually litigated in the former proceeding [and was] necessarily decided in the former proceeding.” (Ibid.)

Important to our consideration here of whether Appellants’ unauthorized foreclosure theory was actually litigated and necessarily decided is the procedural context of the former proceeding: It was an unlawful detainer suit, one which “is summary in character[,] that [in which], ordinarily, only claims bearing directly upon the right of immediate possession are cognizable [citations,] and [in which] cross-complaints and affirmative defenses, legal or equitable, are permissible only insofar as they would, if successful, `preclude removal of the [occupant] from the premises.’ [Citations.]” (Vella v. Hudgins (1977) 20 Cal.3d 251, 255 (Vella).) Because of the summary character of an unlawful detainer proceeding, “a judgment in unlawful detainer usually has very limited res judicata effect and will not prevent one who is dispossessed from bringing a subsequent action to resolve questions of title [citations], or to adjudicate other legal and equitable claims between the parties [citations].” (Ibid.) In certain unlawful detainer suits—those brought under section 1161a, such as the one here—there is permitted “a narrow and sharply focused examination of title” in which the plaintiff-purchaser at a trustee’s sale “must show that he acquired the property at a regularly conducted sale and thereafter `duly perfected’ his [or her] title. [Citation.]” (Vella, supra, at p. 255.)

In discussing former adjudication in the context of unlawful detainer proceedings, the Supreme Court in Vella, supra, 20 Cal.3d 251 made a distinction between (1) “subsequent fraud or quiet title suits founded upon allegations of irregularity in a trustee’s sale”—where courts had held the later suits barred by the prior unlawful detainer judgment (id. at p. 256)—and (2) where “the claim sought to be asserted in the second action encompass[ed] activities not directly with the conduct of the sale, [where] applicability of the res judicata doctrine, either as a complete bar to further proceedings or as a source of collateral estoppel, [was] much less clear” (ibid.). In the latter instance, the Supreme Court observed, former adjudication is atypical because it is uncommon for the parties and the trial court to ignore the summary nature of the unlawful detainer procedure by fully litigating (without objection by the plaintiff) affirmative defenses, including ones “not ordinarily cognizable in unlawful detainer.” (Ibid.) Rather, “[t]he more usual case is accurately characterized by [the high court’s] statement in Cheney: `Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiff’s title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment.’ (Cheney v. Trauzettel[(1937)] 9 Cal.2d [158], 160.)” (Vella, supra, at p. 257.) In making its point, the Vella court cited Wood v. Herson (1974) 39 Cal.App.3d 737 (Wood) as an example of the atypical case where former adjudication was appropriately applied. (Vella, supra, at p. 256.) The Vella court agreed that the second action in Wood was properly found to be barred in that there had been “`full and fair’ litigation of [the] affirmative defense” (Vella, supra, at p. 256), because the unlawful detainer case had not proceeded in a summary fashion, but instead consumed seven days; the affirmative defense of fraud was fully litigated; “the scope of discovery . . . [was] `extensive’ and `complete . . .'[;] . . . the quality of the evidence [was] . . . `detailed . . .'[;] the general character of the action [was] . . . `[clearly] . . . not the customary unlawful detainer proceeding . . .’ [citation]; [and there was a] lengthy and comprehensive superior court record replete with precise findings of fact.” (Ibid.)

Against this backdrop, we conclude that the judgment entered in the unlawful detainer action here did not bar Appellants—either based upon issue preclusion as against Lenders or claim preclusion as against Buyers—from asserting their unauthorized foreclosure theory in the second amended complaint. Supporting respondents’ argument that the unauthorized foreclosure theory was “actually litigated” in the unlawful detainer action, it is plain that Appellants in fact asserted that challenge in both their answer and their motion for summary judgment. But Zamora did not appear at trial and therefore, as the appellate division held, judgment “was thus, in essence, entered by default” and he forfeited any appellate challenges thereto. He thus cannot be viewed as having “actually litigated” any issues in the unlawful detainer action. And although the record shows that Gray attempted at trial to put forth her unauthorized foreclosure theory, she was unable to actually present it at trial. As noted by the appellate division, (1) Gray was faced with Buyers’ relevance objection that was sustained by the trial court because “the documents and title issues arising from the purportedly flawed securitization and resulting defective assignment of the deed of trust were outside the scope of the unlawful detainer proceeding” (fn. omitted); and (2) Gray failed to present exhibits or an offer of proof at trial to support that challenge to preserve her claim on appeal. And, unlike the circumstances in Wood, supra, 39 Cal.App.3d 737, the record here does not disclose that there was extensive discovery, a lengthy trial, detailed evidence, or detailed factual findings by the trial court related to Appellants’ unauthorized foreclosure theory.^[17] There was therefore no “`full and fair’ litigation of [Appellants’] affirmative defense” (Vella, supra, 20 Cal.3d at p. 256) in the unlawful detainer action that barred their assertion of the unauthorized foreclosure theory in the present action. (See Barker v. Hull (1987) 191 Cal.App.3d 221, 226 (Barker) [issue not actually litigated to permit application of former adjudication if evidentiary presentation is restricted]; Taylor v. Hawkinson (1957) 47 Cal.2d 893, 896 [former adjudication requires that the issue have been actually litigated and determined in the first action].)

Lenders cite Seidell v. Anglo-California Trust Co. (1942) 55 Cal.App.2d 913 (Seidell) in support of their position that the trial court correctly found that Appellants were collaterally estopped from raising their unauthorized foreclosure theory. In Seidell, the former owners (Seidell) brought suit—the fourth related action—to set aside a trustee’s deed, alleging fraud and irregularities in the foreclosure sale. (Id. at p. 914.) But Seidell had filed two prior actions arising out of the foreclosure sale (ibid.), namely, an unsuccessful action against the party then holding the note and deed of trust (Tuxedo Land Company; Tuxedo) to enjoin the trustee’s sale (id. at p. 915.), and an unsuccessful postsale action against Tuxedo challenging the trustee’s deed because of fraud and irregularity in the foreclosure proceedings (id. at pp. 915-916.) After the trustee’s sale, the assignee (Harris) of the purchaser at foreclosure filed an unlawful detainer suit against Seidell, who answered and filed a cross-complaint that included the same allegations of fraud and irregularity in the foreclosure proceedings and sale that had been decided in the prior suit to set aside the trustee’s sale. (Id. at p. 916.) Although the trial court struck the cross-complaint, it allowed Seidell to include its allegations in their amended answer. (Ibid.) The matter was tried and resolved against Seidell and affirmed on appeal. (Ibid.)

In Seidell’s suit to set aside the trustee’s deed brought against Anglo-California Trust Company, the successor-in-interest to Harris (Seidell, supra, 55 Cal.App.2d at p. 915), the trial court concluded that the adverse judgment in the unlawful detainer case barred Seidell’s action. (Id. at p. 914.) A majority of the Court of Appeal agreed, rejecting Seidell’s contention that “because the [unlawful detainer] action was merely possessory in its nature and could not determine alleged defects of title,” they were not precluded from addressing claimed foreclosure irregularities and the invalidity of the trustee’s deed in their subsequent equitable action. (Id. at p. 917.) The appellate court emphasized that Seidell had in fact pleaded the foreclosure irregularities in the answer to the unlawful detainer complaint, “sought to prove them at the trial to defeat [Harris’s] right of possession . . . [and t]he court adopted elaborate findings upon those issues.” (Ibid.)

Seidell is plainly distinguishable. Here, while the record shows that Appellants attempted to assert their unauthorized foreclosure theory in the prior unlawful detainer action, they were prevented procedurally from litigating it by the trial court’s sustaining of Buyers’ objections to evidence pertaining to that theory. And, unlike in Seidell, there were no “elaborate findings” (Seidell, supra, 55 Cal.App.2d at p. 917)—or, indeed, any findings—by the trial court concerning the substance of Appellants’ unauthorized foreclosure theory.

Lenders’ reliance on Malkoskie, supra, 188 Cal.App.4th 968 is similarly misplaced. There, the former owners brought an action to quiet title and related claims in which they attempted to set aside the trustee’s sale after they had previously entered into a stipulated judgment in an unlawful detainer suit filed by the buyer (Wells Fargo Bank, N.A.; Wells Fargo) at the foreclosure sale. (Id. at pp. 970-971.) In their answer in the unlawful detainer case, the former owners had alleged affirmative defenses that “the foreclosure sale was invalid due to improper notice and [that there were] unspecified `irregularities in the sale.'” (Id. at p. 972.) But the parties at trial entered into a stipulated judgment in the buyer’s favor, and the former owners were thereafter evicted. (Ibid.) The appellate court concluded that the former owners’ complaint was barred under former adjudication principles by the stipulated judgment in the unlawful detainer case. (Id. at pp. 973.) It held that, because Wells Fargo had alleged that they had perfected legal title and that the foreclosure sale had been conducted in accordance with Civil Code section 2924, and the former owners had alleged that there were foreclosure irregularities and they did not receive proper notice, “[t]he conduct of the sale and the validity of the resulting transfer to Wells Fargo were . . . directly in issue in the unlawful detainer case.” (Malkoskie, supra, at p. 974.) The appellate court held that the former owners'”voluntary stipulation to a judgment that necessarily decided valid title passed to Wells Fargo entitling the bank to possess the property” precluded their later claim that no valid legal title passed to Wells Fargo. (Id. at p. 976.) Malkoskieis distinguishable, since here, Appellants did not enter into a stipulated judgment in the unlawful detainer action and their unauthorized foreclosure theory—asserted but never addressed on the merits by the trial court—was not disposed of implicitly through stipulation.

Lenders argue further that Appellants are collaterally estopped from asserting the unauthorized foreclosure theory in this action because they had a full and fair opportunity to litigate that theory in the unlawful detainer action. In addition to noting that Appellants alleged that theory in their answer, argued it in a summary judgment motion, and reasserted it at trial (by Gray only), Lenders emphasize that in the unlawful detainer appeal, “the [a]ppellate [d]ivision evaluated and rejectedtheir challenges to the foreclosure sale on the merits.” (Original emphasis.)

We do not agree. First, as noted above, while the record shows that Appellants attempted to litigate their unauthorized foreclosure theory in the unlawful detainer action, they were prevented from doing so by the trial court’s evidentiary ruling sustaining Buyers’ relevance objection because “the documents and title issues arising from the purportedly flawed securitization and resulting defective assignment of the deed of trust were outside the scope of the unlawful detainer proceeding.” (Fn. omitted.) There was thus no “`full and fair’ litigation” of Appellants’ unauthorized foreclosure theory. (Vella, supra, 20 Cal.3d at p. 256; see also Barker, supra, 191 Cal.App.3d at p. 226.) Second, the appellate division definitively concluded that Gray had failed to preserve her appellate argument concerning the exclusion of evidence supporting the unauthorized foreclosure theory and had not provided an adequate record for review of the claim. It concluded: “We accordingly reject the claim [because] Gray has failed to demonstrate reversible error on an adequate record.” From this discussion of the appellate division’s opinion, we conclude that the court did not decide the merits of Appellants’ unauthorized foreclosure theory.

Having decided the unlawful detainer appeal against Gray on this procedural basis, the appellate division proceeded in its opinion to “decide”—in equivocal and qualified terms^[18] —the merits of Gray’s claim of error. It concluded—relying on precedent subsequently disapproved in Yvanova, supra, 62 Cal.4th at page 939,footnote 13^[19] —that “even if Gray had preserved her claim and provided an adequate record, . . . she lacked standing to challenge the 2008 assignment of the deed of trust as defective, and, further, . . . she suffered no prejudice from the assignment even if it [were] defective.”

We view the appellate division’s discussion of the merits of Gray’s unauthorized foreclosure theory as dicta. Dictum in a judicial opinion may be in the form of judicial dictum or obiter dictum. Where the issue that is the subject of the appellate court’s pronouncement was “directly presented and argued by counsel” (People’s Lumber Co. v. Gillard (1907) 5 Cal.App. 435, 439), it is judicial dictum if it “is not essential to the decision.” (Black’s Law Dict. (10th ed. 2014), p. 549, col. 2.) Obiter dictum—where “obiter” is something stated “[i]ncidentally” or “in passing” (id. at p. 1240, col. 2)—is “[a] judicial comment made while delivering a judicial opinion, but one that is unnecessary to the decision in the case and therefore not precedential (although it may be considered persuasive).” (Ibid.) There is authority for the proposition that judicial dictum, unlike obiter dictum should be given some weight under most circumstances. (See State v. Fahringer (Ariz. Ct. App. 1983) 666 P.2d 514, 515 (Fahringer) [judicial dictum “should be followed in the absence of some cogent reason for departing therefrom”]; American Country Ins. Co. v. Cline (Ill. App. Ct. 1999) 722 N.E.2d 755, 762 [judicial dictum “generally entitled to weight and should be followed unless found to be erroneous”]; Seger v. Yorkshire Insurance Co., Ltd. (Tex. 2016) 503 S.W.3d 388, 399 [judicial dictum “`should be followed unless found to be erroneous'”].)

In this instance, the appellate division concluded unequivocally that Gray’s unauthorized foreclosure theory failed procedurally because she had not provided an adequate record to permit appellate review. The appellate division went on to “decide” the merits of Gray’s unauthorized foreclosure theory, but it did so equivocally. It stated that it was doing so “to the extent that [it could]” and “to the extent the record permit[ted],” and it acknowledged that its review was “constrained . . . because of the inadequacy of the record in that it d[id] not reveal what particular documents were offered but excluded at trial and the merits of the claim depend[ed] on the legal effect of the mostly unidentified documents.” We therefore conclude that the appellate division’s discussion of the merits of Gray’s unauthorized foreclosure theory was judicial dictum that was “not essential to the decision.” (Black’s Law Dict., supra, p. 549, col. 2.) As such, it cannot have preclusive effect upon Appellants’ claims in the instant action. (See Rest.2d Judgments, § 27, com. h., p. 561 [where judgment in former action is not dependent upon determination of particular issues, discussion of issues on judgment is dicta and “relitigation of those issues in a subsequent action . . . is not precluded”].) Moreover, there are “cogent reason[s]” (Fahringer, supra, 666 P.2d at p. 515) for not following this judicial dictum here, since the appellate division made it clear that it was rejecting Gray’s appellate argument on procedural grounds and its discussion of the merits of the unauthorized foreclosure theory was “constrained” and limited by the inadequate record before it.

Lenders contend, citing Bank of Italy Nat. Trust & Sav. Assn. v. Bentley (1933) 217 Cal. 644 (Bentley), that the appellate division’s discussion of the merits of Gray’s unauthorized foreclosure theory constituted an alternative basis for the court’s decision and was therefore not dicta. In Bentley, our high court explained: “It is well settled that where two independent reasons are given for a decision, neither one is to be considered mere dictum, since there is no more reason for calling one ground the real basis of the decision than the other. The ruling on both grounds is the judgment of the court and each is of equal validity. [Citations.]” (Id. at p. 650.)

As the appellate division admitted, its analysis of the merits of Gray’s claim was “constrained . . . [by] the inadequacy of the record.” Thus, with due respect to the appellate division, its discussion of the merits of Gray’s position was not “of equal validity” (Bentley, supra, 217 Cal. at p. 650) to its procedural basis for rejecting Gray’s appeal, i.e., Gray’s failure to “demonstrate reversible error on an adequate record.” Accordingly, there is, in this instance, a good “reason for calling one ground [the procedural holding] the real basis of the decision [as opposed to] the other [ground, i.e., discussion of the merits of Gray’s claim].” (Ibid.).

Lenders and Buyers had the burden of establishing the threshold requirements of collateral estoppel. (Lucido, supra, 51 Cal.3d at p. 341.) As our high court has cautioned, “[b]ecause `the law does not favor estoppels’ [citation], this burden is a heavy one.” (People v. Garcia (2006) 39 Cal.4th 1070, 1092; see also Eichler Homes, Inc. v. Anderson (1970) 9 Cal.App.3d 224, 234 [if precise question was not raised and determined in former suit, or if there is uncertainty on such question, collateral estoppel will not be applied].) Because there was no “`full and fair’ litigation” (Vella, supra, 20 Cal.3d at p. 256) of Appellants’ unauthorized foreclosure theory in the unlawful detainer action, and the opinion of the appellate division on this question was not a final determination on the merits, the claims arising out of such a theory alleged in Appellants’ second amended complaint were not barred under principles of res judicata or collateral estoppel.

3. Wrongful Foreclosure (Third Cause of Action)

a. Introduction

Having concluded that Appellants’ central claim underlying each cause of action of the second amended complaint—the unauthorized foreclosure theory—is not barred under former adjudication principles, we next address whether Appellants stated a viable claim for wrongful foreclosure. This analysis requires us to examine five matters, namely, whether Appellants (1) alleged sufficient facts that the foreclosure was wrongful, in the sense that it was initiated and concluded by a party with no authority to do so; (2) alleged sufficient facts that the Trustee’s Deed was void, as opposed to merely voidable; (3) had standing to challenge the validity of the foreclosure sale; (4) were required to plead prejudice or harm resulting from the foreclosure beyond loss of the property; and (5) were required to plead they had tendered the amount of the secured indebtedness as a condition of challenging the sale.

Before addressing each of these issues, we will discuss deeds of trust and nonjudicial foreclosure generally and describe the nature and elements of a wrongful foreclosure claim.

b. Deeds of Trust and Nonjudicial Foreclosure

Our Supreme Court has described the nature of deeds of trust and the nonjudicial foreclosure process as follows: “There are three parties in the typical deed of trust: the trustor (debtor), the beneficiary (lender), and the trustee. [Citation.] The trustee holds a power of sale. If the debtor defaults on the loan, the beneficiary may demand that the trustee conduct a nonjudicial foreclosure sale. [Citation.] . . . [¶] Civil Code sections 2924 through 2924k . . . govern nonjudicial foreclosure sales pursuant to a power of sale contained in a deed of trust. `The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser. [Citation.]’ [Citation.]” (Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813-814 (Biancalana); see also Moeller v. Lien (1994) 25 Cal.App.4th 822, 830 (Moeller.)

“The trustee starts the nonjudicial foreclosure process by recording a notice of default and election to sell. [Citation.] After a three-month waiting period, and at least 20 days before the scheduled sale, the trustee may publish, post, and record a notice of sale. [Citations.] If the sale is not postponed and the borrower does not exercise his or her rights of reinstatement or redemption, the property is sold at auction to the highest bidder. [Citations.] Generally speaking, the foreclosure sale extinguishes the borrower’s debt; the lender may recover no deficiency. [Citation.] [¶] The trustee of a deed of trust is not a true trustee with fiduciary obligations, but acts merely as an agent for the borrower-trustor and lender-beneficiary. [Citations.] While it is the trustee who formally initiates the nonjudicial foreclosure, by recording first a notice of default and then a notice of sale, the trustee may take these steps only at the direction of the person or entity that currently holds the note and the beneficial interest under the deed of trust—the original beneficiary or its assignee—or that entity’s agent. [Citations.]” (Yvanova, supra, 62 Cal.4th at p. 927, fn. omitted.)

“`As a general rule, the purchaser at a nonjudicial foreclosure sale receives title under a trustee’s deed free and clear of any right, title or interest of the trustor. [Citation.] A properly conducted nonjudicial foreclosure sale constitutes a final adjudication of the rights of the borrower and lender. [Citation.] Once the trustee’s sale is completed, the trustor has no further rights of redemption. [Citation.]’ [Citation.]” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1250, quoting Moeller, supra, 25 Cal.App.4th at p. 831.)

c. Wrongful Foreclosure Generally

Wrongful foreclosure is a common law tort claim taking the form of either “an equitable action to set aside a foreclosure sale, or an action for damages resulting from the sale, on the basis that the foreclosure was improper. [Citation.]” (Sciarratta v. U.S. Bank National Association (2016) 247 Cal.App.4th 552, 561 (Sciarratta).) The elements of such a claim—whether it is an equitable set-aside action or an action for damages—consist of the following: “(1) the defendants caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) the plaintiff suffered prejudice or harm; and (3) the plaintiff tendered the amount of the secured indebtedness or was excused from tendering. [Citation.]” (Chavez, supra, 219 Cal.App.4th at p. 1062; see also Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112, 104 (Lona).)

As to the first element of the claim, “[a] beneficiary or trustee under a deed of trust who conducts an illegal, fraudulent or willfully oppressive sale of property may be liable to the borrower for wrongful foreclosure. [Citations.]” (Yvanova, supra, 62 Cal.4th at p. 929.) One instance in which a foreclosure is deemed wrongful is where it was “initiated by one with no authority to do so.” (Ibid.) Our high court has explained that such a foreclosure is wrongful because “only the original beneficiary, its assignee or an agent of one of these has the authority to instruct the trustee to initiate and complete a nonjudicial foreclosure sale.” (Ibid.; see, e.g., Dimock v. Emerald Properties LLC (2000) 81 Cal.App.4th 868, 874-876 (Dimock)[because only current trustee is authorized to proceed with trustee’s sale, foreclosure was void where conducted by former trustee after successor trustee was substituted].) But “mere technical violations of the foreclosure process will not give rise to a tort claim; the foreclosure must have been entirely unauthorized on the facts of the case.” (Miles v. Deutsche Bank National Trust Company (2015) 236 Cal.App.4th 394, 409; see, e.g., Knapp v. Doherty (2004) 123 Cal.App.4th 76, 92-97 [slight irregularity in service of notice of sale, having no impact on sale price or otherwise causing injury to borrowers, did not invalidate foreclosure sale].)

d. Appellants Alleged a Viable Wrongful Foreclosure Claim

The essence of Appellants’ unauthorized foreclosure theory, as evidenced by their briefs, is that (1) recorded documents show that the true beneficiary of their deed of trust (i.e., either WaMu or WAMU 2006-AR-19) did not direct the initiation of foreclosure proceedings, and (2) the trustee of record (i.e., Quality) was not the trustee that provided the statutory notices and conducted the sale. Appellants summarized their argument in their opening brief: “[A]ppellants . . . pleaded [that] the trustee’s sale [was] void because it was: (1) based on an assignment of deed of trust void on its face; (2) not directed or initiated by the beneficiary under [A]ppellants’ deed of trust; and/or (3) conducted by a trustee who did not have authority or power to conduct the sale. Based on the record below, the holder of the beneficial interest on [A]ppellants’ loan only could have been Washington Mutual or `WAMU 2006-AR19.'” Further, Appellants argued, “California Reconveyance Company did not have the authority to initiate the foreclosure process, foreclose on the property, or issue the notice of default. It could have received no directive or authorization from Washington Mutual, the claimed beneficiary which no longer existed.” (Original italics, fn. omitted.)

Lenders respond that the allegations of the second amended complaint, coupled with the recorded documents of which judicial notice was taken, did not present a showing of a void assignment of Appellants’ debt; at most, there was a showing that the assignment was “voidable.” Respondents contend that “Appellants lack[ed] standing to challenge a voidable assignment or a foreclosure flowing from a voidable assignment. [Citation.]” Lenders urge that the records show—contrary to Appellants’ allegations in the second amended complaint—that WaMu was in fact in existence at the time of the 2008 Assignment of the deed of trust. They contend further that the 2008 Assignment identifying the trust deed’s assignee as “La Salle Bank NA as trustee for WAMU 2006-AR19″—instead of “WaMu Mortgage Pass-Through Certificates Series 2006-AR19 Trust”—was simply a “misidentification of the trust [which did] not establish that the [2008] Assignment was void.” (Emphasis omitted.) If, Lenders assert, “the use of the term `WAMU 2006-AR19′ as opposed to the [WaMu T]rust’s full name [could] even be considered an irregularity, it clearly [did] not render the [2008] Assignment void.”

As alleged in the second amended complaint and confirmed in the exhibit attached to the pleading, the Deed of Trust recorded November 13, 2006, plainly identified WaMu as the Beneficiary and Cal. Reconveyance as Trustee. Appellants alleged that on March 7, 2008, Quality, “purportedly on behalf of [WaMu],” caused to be recorded (with a recordation date of March 10, 2008) the 2008 Default Notice under the Deed of Trust. Shortly after receiving the 2008 Default Notice, in response to Appellants’ separate inquiries, Quality advised first that the default notice related to a debt owed to WaMu, and, later that it related to a debt owed to “La Salle Bank NA as Trustee for WAMU 2006-AR19.”

As further alleged and as shown in the 2008 Assignment of the Trust Deed recorded April 17, 2008 (with notarized execution on April 10, 2008), WaMu, as assignor, transferred its security in the Property to “La Salle Bank NA as Trustee for WAMU 2006-AR19,” as assignee. (Capitalization and bold omitted.) Appellants alleged that at the time of the 2008 Assignment, WaMu “did not legally exist,” and “WAMU 2006-AR19” did not exist (and never existed); the 2008 Assignment was therefore void.

It was alleged further in the second amended complaint—and confirmed in judicially noticed documents^[20] —that La Salle Bank NA as trustee for WAMU 2006-AR19, identified in the document as “the present Beneficiary” under the Deed of Trust, recorded the 2008 Trustee Substitution on April 22, 2008 (with notarized execution on March 13, 2008), substituting Quality as trustee under the Deed of Trust.

A Substitution of Trustee (the 2012 Trustee Substitution) was recorded August 10, 2012, by the “present Beneficiary” of the Deed of Trust, identified as “U.S. Bank National Association, as Trustee, successor in interest to Bank of America, National Association as Trustee as successor by merger to La Salle Bank NA as trustee for WaMu Pass-Through Certificates Series 2006-AR19 Trust by JP Morgan Chase Bank, National Association, as attorney-in-fact.”^[21] In the 2012 Trustee Substitution, Cal. Reconveyance was substituted as trustee under the Deed of Trust.

Appellants alleged further, and the recorded documents showed, that Cal. Reconveyance, as trustee under the Deed of Trust, recorded the 2012 Default Notice (on August 10, 2012), the 2012 Trustee’s Sale Notice (on November 13, 2012), and the 2013 Trustee’s Sale Notice (on March 25, 2013). Appellants alleged that on July 24, 2013, Cal. Reconveyance, as trustee under the Deed of Trust, sold the Property at a trustee’s sale to Buyers. And Appellants alleged that on July 31, 2013, Cal. Reconveyance, as trustee under the Deed of Trust, recorded the Trustee’s Deed.

The above allegations of the second amended complaint, coupled with the recorded documents properly considered as part of the pleadings, present several irregularities in the chain of title relative to the Deed of Trust. The second amended complaint thus stated a cause of action for wrongful foreclosure based upon allegations that the Trustee’s Deed was void because the foreclosure sale was not initiated or completed by the beneficiary and trustee of record under the Deed of Trust. These irregularities are:

(1) Summary: 2008 Notice of Default was void because not recorded by trustee of record.

The 2008 Notice of Default was recorded by the purported trustee, Quality, on March 10, 2008—a date prior to (a) the notarized execution of the 2008 Trustee Substitution in which the assignee of the Deed of Trust, WAMU 2006-AR19, named Quality as substituted trustee (March 13, 2008), and (b) the notarized execution of the 2008 Assignment transferring the beneficial interest in the Deed of Trust from WaMu to WAMU 2006-AR19 (April 10, 2008). Therefore, as alleged in the second amended complaint, the 2008 Notice of Default was ineffective and void because it was not made by Cal. Reconveyance, the then-trustee of record under the Deed of Trust. Only the current trustee under the deed of trust is authorized to commence foreclosure proceedings on behalf of the beneficiary. (See Pro Value Properties, Inc. v. Quality Loan Service Corp. (2009) 170 Cal.App.4th 579, 581-582 [foreclosure sale void where party purporting to act as trustee, where no substitution of trustee had been recorded, had recorded notice of default, notice of sale, and conducted trustee’s sale]; Dimock, supra, 81 Cal.App.4th at pp. 874-876[foreclosure was void where conducted by former trustee after successor trustee was substituted].) The voidness of the 2008 Default Notice notwithstanding, it was later rescinded by Quality, and it did not result in the ultimate foreclosure of the Property.

(2) Summary: 2008 Assignment was void because purported assignee (successor beneficiary) was nonexistent entity.

On the face of the pleadings, the 2008 Assignment of the Deed of Trust to WAMU 2006-AR19, as assignee, was ineffective and void, as the purported assignee was a nonexistent entity. (Diocese of San Joaquin v. Gunner (2016) 246 Cal.App.4th 254, 273 [“an attempted conveyance of real property to a nonexistent entity is void”]; see Civ. Code, § 2922 [mortgages and deeds of trust subject to the same requirements of formality as grant of real property].) There was nothing in the record to counter the allegation in the Second Amended Complaint that WAMU 2006-AR19 was an entity that did not exist at the time of the 2008 Assignment and, in fact, never existed.

(3) Summary: 2012 Trustee Substitution was void because not signed by beneficiary of record.

The party that executed and recorded the 2012 Trustee Substitution as the purported present beneficiary of the Deed of Trust, was a successor to La Salle as trustee for the “WaMu Mortgage Pass-Through Certificates Series 2006-AR19 Trust” (i.e., the WaMu Trust). The WaMu Trust does not appear in the chain of title as an assignee of the Deed of Trust. Since only the original beneficiary or its assignee at the time of the substitution is empowered to substitute the trustee under a deed of trust, on the face of the pleadings, the 2012 Trustee Substitution purporting to substitute Cal. Reconveyance as trustee was ineffective and void. (See Civ. Code, § 2934a [substitution of trustee accomplished by beneficiary or its successor-in-interest]; Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 232[substitution of trustee may be executed by beneficiary or its attorney-in-fact].)

(4) Summary: 2012 Notice of Default was void because trustee was not authorized to record it.

The 2012 Notice of Default was recorded by Cal. Reconveyance. At that time, the beneficiary of record was either WaMu (which no longer existed in 2012) or WAMU 2006-AR19 (an entity which never existed). Cal Reconveyance therefore had no authority to record the 2012 Notice of Default. Because the trustee may record a notice of default or notice of sale” only at the direction of the person or entity that currently holds the note and beneficial interest under the deed of trust” (Yvanova, supra, 62 Cal.4th at p. 927), the 2012 Notice of Default was void.^[22]

(5) Summary: 2012 and 2013 Trustee’s Sale Notices were void because trustee not authorized to record them.

The 2012 Trustee’s Sale Notice and the 2013 Trustee’s Sale Notice were recorded by Cal. Reconveyance. At the time the documents were recorded, the beneficiary of record was either WaMu (which no longer existed) or WAMU 2006-AR19 (an entity which never existed). Cal Reconveyance therefore had no authority to record either the 2012 Trustee’s Sale Notice or the 2013 Trustee’s Sale Notice. Because the trustee may record a notice of default or notice of sale” only at the direction of the person or entity that currently holds the note and beneficial interest under the deed of trust” (Yvanova, supra, 62 Cal.4th at p. 927), the 2012 and 2013 Trustee’s Sale Notices were void.

(6) Summary: Trustee’s Deed was void because trustee was not authorized to record it.

The Trustee’s Deed was recorded by Cal. Reconveyance in 2013. At that time, the beneficiary of record was either WaMu (which no longer existed in 2013) or WAMU 2006-AR19 (an entity which never existed). Cal Reconveyance therefore had no authority to record the Trustee’s Deed (see Yvanova, supra, 62 Cal.4th at p. 927), and it was therefore void.

(7) Trustee’s sale was void because not directed by beneficiary of record.

At the time of the purported sale of the property to Buyers, as reflected in the Trustee’s Deed, the record does not show that the WaMu Trust was the current beneficiary under the Deed of Trust. (The beneficiary of record was either WAMU 2006-AR19, or, because said entity was nonexistent, WaMu.) “[O]nly the current beneficiary may direct the trustee to undertake the nonjudicial foreclosure process.” (Yvanova, supra, 62 Cal.4th at pp. 927-928.) The trustee’s sale, conducted under the invalid 2012 Default Notice and invalid Trustee’s Sale Notices, was void.

Appellants alleged sufficient facts in the second amended complaint to support their claim that the trustee’s sale by which they were divested of title in the Property was void. We stress that our analysis is based upon the allegations of the second amended complaint and the relevant documents attached to that pleading and any others of which the trial court took judicial notice; we accept those allegations for purposes of demurrer as true, without expression of any opinion as to whether Appellants will ultimately be able to establish their claim. (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 [“question of plaintiff’s ability to prove [complaint’s] allegations, or the possible difficulty in making such proof does not concern the reviewing court”].)

Since a foreclosure initiated by a party with no authority to do so is wrongful, Appellants have satisfied the first element of a wrongful foreclosure claim. (Yvanova, supra, 62 Cal.4th at p. 929; see also Sciarratta, supra, 247 Cal.App.4th at pp. 556-557 [allegation that party claiming to be beneficiary directed foreclosure sale was not beneficiary of record supported claim that sale was void]; Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1368-1369[allegation that foreclosing parties were not current beneficiary and trustee under deed of trust satisfied wrongful foreclosure showing of lack of authority to conduct trustee’s sale].) We next address whether, given this conclusion, Appellants had standing to bring a wrongful foreclosure claim.

e. Standing

The trial court, in ruling on the demurrers, concluded that “[a]s a matter of law, [Appellants] lack[ed] standing to challenge the process by which their loan was securitized as they were not parties to the securitization agreements.” In support of this conclusion, the court cited Jenkins, supra, 216 Cal.App.4th 497. While this language suggests that the court’s ruling concerned Appellants’ untimely WaMuTrust transfer theory (i.e., a “failed securitization” theory), because Appellants did not include that theory in the second amended complaint, it is clear the court’s conclusion regarding standing concerned Appellants’ unauthorized foreclosure theory. As we explain, this was error under Yvanova, supra, 62 Cal.4th 919, a decision that postdated the trial court’s order.

In Jenkins, supra, 216 Cal.App.4th 497, the appellate court held that a borrower, as a third party to securitization or other transfers of a beneficial interest under a note and deed of trust, has no standing to enforce such agreements, and therefore cannot base an action for wrongful foreclosure upon the theory that the securitization or other assignments or transfers were invalid. (Id. at pp. 513-515.) The California Supreme Court in Yvanova disapproved of Jenkins and similar authorities on this point. (Yvanova, supra, 62 Cal.4th at p. 939, fn. 13.)

In Yvanova, the Court of Appeal had concluded that the borrower’s complaint had failed to state a cause of action for quiet title challenging a nonjudicial foreclosure based upon alleged improprieties in the assignment of her deed of trust, because, “as an unrelated third party to that assignment, she was unaffected by such deficiencies and had no standing to enforce the terms of the agreements allegedly violated.” (Yvanova, supra, 62 Cal.4th at p. 926.) The Supreme Court held this was error. Relying on, among other authorities, Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski), our high court held that a borrower has standing to sue to challenge an illegal foreclosure due to a void assignment. (Yvanova, supra, at pp. 929-938.)

In holding that the borrower had standing to sue, the Supreme Court made a distinction between an assignment that was merely voidable—for which a third party borrower had no standing to assert a challenge—and an assignment that was void. (Yvanova, supra, 62 Cal.4th at pp. 929-930.) In challenging a void assignment, the Supreme Court reasoned that the borrower was not asserting the rights of third parties under the assignment, but rather was “asserting her own interest in limiting foreclosure on her property to those with legal authority to order a foreclosure sale.” (Id. at p. 937.) The borrower’s standing, the court held, was based upon the loss of ownership of her home due to an allegedly illegal trustee’s sale that, but for the purported beneficiary’s actions in ordering the sale based upon the allegedly void assignment, would not have occurred. (Ibid.; see also Culhane v. Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282, 289-290.) The Supreme Court reasoned further that, contrary to the holding in Jenkins, supra, 216 Cal.App.4th 497, a borrower has a “cognizable interest in the identity of the party enforcing his or her debt. Though the borrower is not entitled to object to an assignment of the promissory note, he or she is obligated to pay the debt, or suffer loss of the security, only to a person or entity that has actually been assigned the debt. [Citation.] The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.” (Yvanova, supra, at pp. 937-938.)

Appellants have alleged in the second amended complaint facts supporting the conclusion that the foreclosure sale—conducted by parties who were not the beneficiary and trustee of record at the time—was void. Under Yvanova, supra, 62 Cal.4th 919, Appellants had standing to bring a wrongful foreclosure claim. (See Sciarratta, supra, 247 Cal.App.4th at pp. 563-565 [borrower alleging that true beneficiary was not party who directed foreclosure sale had standing to bring wrongful foreclosure claim].)

f. Prejudice

The trial court also ruled that the wrongful foreclosure claim was not viable because Appellants had “fail[ed] to allege how any procedural irregularities in the foreclosure process caused them to suffer prejudice. [Citation.]” This was an erroneous ruling.

Prior to the Supreme Court’s decision in Yvanova, supra, 62 Cal.4th 919, courts had concluded that a borrower generally could not set aside a foreclosure based upon sale irregularities absent a showing that the imperfection was prejudicial to the borrower’s interests. (See, e.g., Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 18 (Ram); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272 (Fontenot)^[23].) The high court in Yvanova did not decide whether a borrower, as an element of wrongful foreclosure, must show that he or she was prejudiced in the sense of showing that the true beneficiary would have refrained from foreclosing on the borrower’s property. (Yvanova, supra, 62 Cal.4th at pp. 938-939.) Rather, it found that the borrower alleging wrongful foreclosure resulting from a void assignment showed prejudice in the context of having standing to sue where he or she established “an invasion of his or her legally protected interests [citation]” by having lost his or her property through an illegal trustee’s sale. (Id. at p. 937.)

In Sciarratta, supra, 247 Cal.App.4th 552, the Fourth District Court of Appeal (Division One) addressed the element of prejudice in a borrower’s wrongful foreclosure suit that was based upon an alleged void assignment of her note and deed of trust. (Id. at p. 555.) The court framed the issue as follows: “Where a homeowner alleges foreclosure by one with no right to do so, do such allegations alone establish the requisite prejudice or harm necessary to state a cause of action for wrongful foreclosure? Or instead, to adequately plead prejudice, does the plaintiff-homeowner have to allege the wrongful foreclosure interfered with his or her ability to pay on the debt, or lead to a foreclosure that would not have otherwise occurred?” (Ibid.) The court concluded the borrower need not allege prejudice or harm other than the wrongful foreclosure itself. (Id. at p. 565.) Relying on Yvanova, supra, 62 Cal.4th at page 937, the Sciarratta court reasoned as follows: “A homeowner experiences prejudice or harm when an entity with no interest in the debt forecloses. When a non-debtholder forecloses, a homeowner is harmed because he or she has lost her home to an entity with no legal right to take it. If not for the void assignment, the incorrect entity would not have pursued a wrongful foreclosure. Therefore, the void assignment is the cause in fact of the homeowner’s injury and all he or she is required to allege on the element of prejudice. The critical issue is not the plaintiff’s ability to pay, but rather whether the defendant’s conduct resulted in the plaintiff’s harm; i.e., a foreclosure that was wrongful because it was initiated by a person or entity having no legal right to do so; i.e. holding void title.” (Sciarratta, supra, at pp. 565-566.)

The Sciarratta court noted that there were strong policy reasons for not requiring the borrower to show prejudice beyond the wrongful foreclosure itself. It reasoned that “[a] contrary rule would lead to a legally untenable situation—i.e., that anyone can foreclose on a homeowner because someone has the right to foreclose. `And since lenders can avoid the court system entirely through nonjudicial foreclosures, there would be no court oversight whatsoever.’ [Citation.] Moreover, giving homeowners—who have the most at stake and the most to lose—the ability to challenge improper loan assignments as being absolutely void will provide a proper incentive to lending institutions to employ due diligence to properly document assignments and confirm who currently holds a loan. `The consequences of wrongfully evicting someone from their home are too severe to be left unchecked.’ [Citation.]” (Sciarratta, supra, 247 Cal.App.4th at p. 566.) The appellate court therefore concluded that cases such as Fontenot, supra, 198 Cal.App.4th at page 272, that had required a plaintiff to show prejudice in the sense of establishing that he or she could have avoided foreclosure but for the defendants’ wrongful acts, were “inconsistent with the policies underlying the standing rule in Yvanova: `The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.’ [Citation.]” (Sciarratta, supra, at p. 567, quoting Yvanova, supra, 62 Cal.4th at p. 938.)

We find the Sciarratta court’s reasoning concerning the element of prejudice in a wrongful foreclosure action to be sound and consistent with our high court’s decision concerning standing in Yvanova, supra, 62 Cal.4th 919. We therefore follow the holding in Sciarratta and conclude that Appellants were not required to allege prejudice beyond the loss of their Property through the allegedly illegal foreclosure sale.

g. Tender

The trial court held that that Appellants’ claim for wrongful foreclosure was not viable on the additional ground that they had failed to “allege[] any offer to tender the full amount due or any facts supporting an exception to the tender rule.” This holding was also in error.

It is true that as a general rule a borrower seeking to set aside a trustee’s sale based upon irregularities in the sale must allege that he or she offered to pay the full amount of the secured indebtedness. (See, e.g., Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109; Arnolds Management, supra, 158 Cal.App.3d at p. 578; Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117.) But this tender requirement is subject to at least four exceptions. (See Lona, supra, 202 Cal.App.4th at pp. 112-113.) One such exception is where the borrower’s challenge to the foreclosure is based upon a void, rather than voidable, assignment. (Id. at p. 113.)

Thus, in Dimock, supra, 81 Cal.App.4th at page 873, the borrower claimed the foreclosure was void because the trustee who commenced and completed the sale had been substituted out by the beneficiary before the sale. The appellate court concluded that the borrower was not required to tender the amount owing under the secured note. (Id. at pp. 877-878.) Numerous other cases are in accord that pleading and proof of tender is not required where the plaintiff-borrower alleges that the foreclosure sale is void, rather than merely voidable. (See, e.g., Lester v. J.P. Morgan Chase Bank (N.D. Cal. 2013) 926 Fed.Supp.2d 1081, 1093; Sciarrata, supra, 247 Cal.App.4th at pp. 567-568; Chavez, supra, 219 Cal.App.4th at pp. 1062-1063; Glaski, supra, 218 Cal.App.4th at p. 1100; Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250, 1280-1281.)^[24]

Here, Appellants have alleged that the foreclosure sale was void because it was directed and conducted by parties who were not the beneficiary or trustee of record under the Deed of Trust. They were thus not required to allege a tender of the outstanding indebtedness. (Sciarrata, supra, 247 Cal.App.4th at pp. 567-568.)

h. Conclusion Re Wrongful Foreclosure Claim

Appellants were required to plead as the elements of their wrongful foreclosure claim that “(1) the defendants caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) the plaintiff suffered prejudice or harm; and (3) the plaintiff tendered the amount of the secured indebtedness or was excused from tendering. [Citation.]” (Chavez, supra, 219 Cal.App.4th at p. 1062.) Appellants established the first element in their pleading by alleging that Lenders promulgated a sale that was wrongful because it was “initiated by one with no authority to do so.” (Yvanova, supra, 62 Cal.4th at p. 929.) They had standing to sue because they alleged a trustee’s sale that was void. (Id. at pp. 930-938.) Appellants were not required to plead prejudice beyond the loss of their property through an illegal foreclosure sale. (Sciarratta, supra, 247 Cal.App.4th at pp. 565-567.) And because they alleged the foreclosure was based upon a void assignment, they were excused from tendering the amount of the outstanding secured indebtedness. (Id. at pp. 567-568; Glaski, supra, 218 Cal.App.4th at p. 1100.) Appellants therefore alleged facts sufficient to constitute a cause of action for wrongful foreclosure. Lenders’ demurrer to the third cause of action therefore should have been overruled.^[25]

4. Unfair Competition (Sixth Cause of Action)

Appellants alleged in the sixth cause of action that actions taken by Lenders that resulted in the void foreclosure sale constituted unfair competition within the meaning of Business and Professions Code section 17203, and Appellants lost their Property as a result of the “illegal and improper” trustee’s sale. Their claim was based upon prior allegations of the second amended complaint concerning the allegedly void foreclosure.

Lenders contended below that the unfair competition claim was subject to demurrer because Appellants lacked standing to assert it. Lenders asserted that Appellants had not alleged economic injury “because there [was] no indication that [Lenders] directly caused [Appellants] to default on their loan. [Appellants] admit they executed the Subject Loan and [Deed of Trust], and therefore were required to make loan payments regardless of [Lenders’] purported misconduct.” The trial court sustained the demurrer to this cause of action because it was “based on [Appellants’] prior claims in the [second amended complaint]” to which the court had sustained Borrowers’ demurrer.

The Unfair Competition Law (Bus. & Prof. Code, §§ 17200 et seq.; UCL) “prohibits unfair competition, including unlawful, unfair, and fraudulent business acts.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1143.) Such a claim involves a “`borrow[ing of]’ violations from other laws by making them independently actionable as unfair competitive practices.” (Ibid.) A plaintiff must show he or she has suffered actual injury in order to pursue a UCL action. (Bus. & Prof. Code, § 17204.) “A private plaintiff must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition.” (Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1590 (Peterson).)

Appellants’ UCL cause of action is founded upon the factual allegations underlying their wrongful foreclosure claim. Because we have concluded Appellants have alleged a valid claim for wrongful foreclosure against Lenders, we conclude the allegations are sufficient to state a UCL claim. Appellants have adequately pleaded a predicate wrongful act for purposes of a UCL claim. (See Susilo v. Wells Fargo Bank, N.A. (C.D. Cal. 2011) 796 F.Supp.2d 1177, 1196 [allegation “that defendants foreclosed on the Property unlawfully, without authority and through fraudulent misrepresentations” supported UCL claim].) Accordingly, we reject Lenders’ contention that Appellants failed to allege the requisite injury to support their legal standing to bring the UCL claim. They alleged the loss of their home though the alleged wrongful foreclosure, including the loss of their home. (See Sciarratta, supra, 247 Cal.App.4th at p. 567 [homeowner suffering wrongful foreclosure may sustain damages such as loss of the home and related damages, such as moving expenses, lost rental income, and damage to credit].)

Because Appellants adequately alleged one or more predicate acts, and resulting injury (Peterson, supra, 164 Cal.App.4th at p. 1590), they stated a cause of action under the UCL. (See Glaski, supra, 218 Cal.App.4th at p. 1101 [because borrower stated facts sufficient for wrongful foreclosure claim, he also stated viable UCL violation].) The demurrer to the sixth cause of action for violation of the UCL should have been overruled.

5. Quiet Title (Seventh Cause of Action)

Appellants alleged a seventh cause of action to quiet title as against all defendants. They alleged, based upon incorporation of previous allegations in which they dispute the validity of the Trustee’s Deed, that they are the true owners of the Property, and they wish to quiet title as against Lenders’ and Buyers’ adverse claims.

a. Quiet Title Claim Was Properly Alleged

Below, Lenders argued that the quiet title claim was not maintainable because (1) it was based upon Appellants’ theory that foreclosure was improper “because the Loan was supposedly improperly securitized,” and (2) Appellants had failed to allege tender of the full amount of the outstanding secured indebtedness.^[26] The trial court sustained the demurrer on the latter basis.

A quiet title cause of action generally has two elements: “[1] the plaintiff is the owner and in possession of the land and [2] the defendant claims an interest therein adverse to [the plaintiff].” (South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 740; see § 761.020.) Appellants properly pleaded these two elements.

As discussed, ante, Appellants alleged sufficient facts that the foreclosure sale was void because it was initiated and completed by parties (a purported beneficiary and a purported trustee) who had no authority to do so. In such a case, a borrower may maintain a quiet title action to regain ownership of the property because its transfer was based upon a void foreclosure sale. (Glaski, supra, 218 Cal.App.4th at p. 1101 [because borrower properly stated claim of wrongful foreclosure based upon void sale, it necessarily followed he stated viable claim for quiet title]; see also Sciarratta, supra, 247 Cal.App.4th at pp. 567-568.) Further, because the basis for Appellants’ claim was that the foreclosure sale was void, rather than voidable, they were not required to plead a tender of the outstanding indebtedness. (Sciarratta, supra, at pp. 567-568; Glaski, supra, at p. 1100.)

b. Buyers’ BFP and Conclusive Presumption Arguments

Buyers make two, essentially interrelated, additional arguments in support of their position that the seventh cause of action to quiet title—as well as the eighth cause of action for cancellation of instruments—is not maintainable against them. The underlying premise of Buyers’ arguments is that they were bona fide purchasers (BFPs) at the trustee’s sale and therefore, as to them, any challenge by Appellants to the conveyance of the Property through the foreclosure sale fails. Buyers contend that because they are BFPs who purchased the Property in good faith with no notice of any alleged irregularities, there is no basis for imputing notice of the alleged irregularities to them. Buyers argue further that Civil Code 2924 creates a conclusive presumption in their favor as BFPs that precludes Appellants’ challenge to Buyers’ title.

Under Civil Code section 2924,^[27] there is a conclusive presumption that the trustee has complied with statutory notice requirements where the trustee’s deed is delivered to a bona fide purchaser (BFP) and it contains a recital of such compliance. (See Melendrez, supra, 127 Cal.App.4th at p. 1250.) The presumption is a rebuttable one in the case of a buyer who is not a BFP. (Civ. Code, § 2924.) In any event, the presumption arises from the trustee’s delivery of the trustee’s deed to the buyer, not from the foreclosure sale itself. (Biancalana, supra, 56 Cal.4th at p. 814.)

There is no definition of a BFP in Civil Code section 2924. In the context of applying the presumptions under this statute, it has been held that a BFP “is one who pays value for the property without notice of any adverse interest or of any irregularity in the sale proceedings. [Citations.]” (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 442.) A panel of this court has previously explained: “Thus, the two elements of being a BFP are that the buyer (1) purchase the property in good faith for value, and (2) have no knowledge or notice of the asserted rights of another. [Citation.] The first element does not require that the buyer’s consideration be the fair market value of the property (or anything approaching it). [Citation.] . . . [¶] The second element required to establish BFP status is that the buyer have neither knowledge nor notice of the competing claim. [Citation.] The rationale for this requirement is that `[t]he recording laws were not enacted to protect those whose ignorance of the title is deliberate and intentional . . . Their purpose is to protect those who honestly believe they are acquiring a good title, and who invest some substantial sum in reliance on that belief.’ [Citation.]” (Melendrez, supra, 127 Cal.App.4th at pp. 1251-1252.)

Buyers’ contention that the action against them cannot be maintained because, as BFPs, they are entitled to the conclusive presumption of the trustee’s compliance with statutory notice requirements under Civil Code section 2924 fails for two reasons. We discuss them below.

First, the conclusive presumption under the statute is not an unlimited shield afforded to BFPs to any borrower challenges to nonjudicial foreclosure sales. The statutory presumptions under Civil Code section 2924 concern “the adequacy of notices related to a foreclosure sale.” (Bank of America, N.A. v. La Jolla Group II(2005) 129 Cal.App.4th 706, 713 (La Jolla Group II).)

Thus, in La Jolla Group II, supra, 129 Cal.App.4th at pages 709 to 710, the property was sold at trustee’s sale to the defendant notwithstanding that the trustor, after the loan went into default, cured the default and the beneficiary reinstated the loan (without notifying the trustee of such reinstatement). The beneficiary sued the defendant-purchaser to cancel the trustee’s deed, and the beneficiary prevailed through a summary adjudication motion. (Id. at p. 710.) The appellate court held, inter alia, that because the basis for the invalidity of the foreclosure sale was that, because the trustor cured the default, there was no contractual basis for exercising the power of sale under the trust deed (id. at pp.711-712), and “[t]here [was] no contention . . . that the foreclosure sale was not properly noticed” (id. at p.714), the defendant-purchaser was not afforded the presumptions under Civil Code section 2924. (La Jolla Group II, supra, at p. 714; see also Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1000 [where foreclosure challenge is not one involving claim of a failure to follow statutory procedures, conclusive presumption language of Civ. Code, § 2924 inapplicable].) The court reasoned: “No statute creates a presumption—conclusive or otherwise—for any purchaser—bona fide or otherwise—that any recitals in a trustee’s deed render effective a sale that had no contractual basis.” (La Jolla Group II, supra, at p. 714; see also Melendrez, supra, 127 Cal.App.4th at p. 1256, fn. 26 [Civil Code “Section 2924’s conclusive presumption language for BFP’s applies only to challenges to statutory compliance with respect to default and sales notices”].)

A leading authority in the field of California real property law has explained application of the Civil Code section 2924 presumptions as follows: “The recitals in the trustee’s deed are conclusive in favor of a bona fide purchaser unless the sale is void and not merely voidable. When the property is purchased at the foreclosure sale by a third person who is a bona fide purchaser . . ., the presumption of compliance with the notice requirements of the statute is conclusive. When there are notice defects and the deed contains the recitals that create the conclusive presumption, the sale is merely voidable. When the sale is merely voidable, it is conclusive in favor of a bona fide purchaser in order to protect the sanctity of titles to real property and, therefore, the trustor cannot have the sale set aside based on irregularities in the foreclosure sale process, except in the case of fraud. . . . [¶] On the other hand, where the sale is void the trustor can avoid the sale even where title is held by a bona fide purchaser. Even then, the issue is not resolved in favor of setting aside the sale unless the trustor carries its burden of proving that the sale was void, or that the sale was voidable and the person purchasing at the sale was not a bona fide purchaser.” (5 Miller & Starr, Cal. Real Estate (4th ed. 2017) § 13:255, pp. 13-1094 to 13-1095, original emphasis, fns. omitted.)

As we have discussed, ante, Appellants alleged a viable claim for wrongful foreclosure based upon it having been “initiated by one with no authority to do so.” (Yvanova, supra, 62 Cal.4th at p. 929.) They had standing to sue because they presented sufficient allegations that the trustee’s sale was void. (See id. at pp. 930-938.) And the basis for the second amended complaint was that Lenders had no authority to initiate and conclude the foreclosure sale, not that the purported trustee failed to comply with the particular notice requirements of the Civil Code. Accordingly, regardless of whether Buyers can ultimately establish they are BFPs, the presumptions of Civil Code section 2924 do not apply here. (See La Jolla Group II, supra, 129 Cal.App.4th at p. 714.)

Second, even if the statutory presumptions of Civil Code section 2924 were relevant to the claims against Buyers here—which they are not—this would not furnish grounds for sustaining the demurrer. The question of whether Buyers were BFPs is an issue of fact. (Melendrez, supra, 127 Cal.App.4th at p. 1254.) While Buyers argue that “there was substantial evidence supporting that [Buyers] are bona fide purchasers,” this contention is both unsupported and not germane to our review. Buyers have failed to include any record citations in violation of the applicable rules of appellate procedure. (See Cal. Rules of Court, rule 8.204(a)(1)(C) [every brief must “[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears”].) “When an [appellate] brief makes no reference to the pages of the record where a point can be found, an appellate court need not search through the record in an effort to discover the point purportedly made. [Citations.] We can simply deem the contention to lack foundation and, thus, to be forfeited. [Citations.]” (In re S.C.(2006) 138 Cal.App.4th 396, 406-407.) Furthermore, whether the evidence shows that Buyers were or were not BFPs is not an issue that can be decided here on demurrer. (See Richtek USA, Inc. v. uPI Semiconductor Corporation (2015) 242 Cal.App.4th 651, 659-660 [on demurrer, court may not resolve factual disputes].)

The demurrers of Lenders and Buyers to the seventh cause of action should have been overruled.

6. Cancellation of Instruments (Eighth Cause of Action)

Appellants alleged in the eighth cause of action as against all defendants that they were entitled to an order cancelling various instruments that were void, namely, the 2008 Assignment, the 2008 Trustee Substitution, the 2012 Default Notice, the 2013 Trustee’s Sale Notice, and the Trustee’s Deed. The grounds for the instruments being void were alleged previously in their pleading, allegations which Appellants incorporated by reference. Lenders contended below that their demurrer to this cause of action should be sustained without leave to amend because it was based “entirely upon [Appellants’] meritless `failed securitization’ theory.” The trial court sustained the demurrer on the ground that Appellants had failed to allege that they had tendered the amount of the outstanding indebtedness.

Civil Code section 3412 provides that “[a] written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” In order to prosecute successfully a claim for cancellation of an instrument, the plaintiff must plead and prove “`(1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position. [Citation.]’ [Citation.]” (Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193-1194.) For cancellation, the “plaintiff must allege, inter alia, facts showing actual invalidity of the apparently valid instrument or piece of evidence.” (Wolfe v. Lipsy (1985) 163 Cal.App.3d 633, 638,disapproved on other grounds in Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 35-36.)

As discussed in our analysis of the demurrer to the wrongful foreclosure claim, ante, Appellants have alleged facts supporting the invalidity of the apparently valid instruments utilized in the foreclosure. They therefore stated a viable claim for cancellation of instruments. (Glaski, supra, 218 Cal.App.4th at p. 1101 [because borrower properly stated claim of wrongful foreclosure based upon void sale, he stated viable claim for cancellation of instruments]; see also Sciarratta, supra, 247 Cal.App.4th at pp. 567-568.) Further, although pleading and proof of tender is generally required in an action to cancel a written instrument, “tender is not required to cancel a written instrument that is void and not merely voidable. [Citations.]” (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 819 (Saterbak); see also (Sciarratta, supra, at p. 568; Glaski, supra, at p. 1100.)

Lastly, we have discussed Buyers’ BFP and Civil Code section 2924 arguments in connection with our analysis of the quiet title cause of action, ante. For the reasons we have stated, these arguments fail in Buyers’ challenge to the claim for cancellation of instruments.

The demurrers of Lenders and Buyers to the eighth cause of action should have been overruled.

7. Negligence (Fourth Cause of Action)

Appellants alleged a fourth cause of action for negligence against Lenders. They claimed that Lenders breached a duty of care owed to Appellants in connection with Lenders’ recordation of documents and foreclosure activity concerning the Property.

Lenders’ principal argument below—one they have reasserted on appeal—is that no claim was stated because “when a party acts within the scope of its role as a lender and engages in arms length transactions with borrowers, it owes no duty [of care] upon which a negligence claim can be based.”^[28] In sustaining Lenders’ demurrer, the trial court held that the negligence claim failed because (1) Appellants had failed to tender the amount of the indebtedness, and (2) financial institutions do not owe borrowers a duty of care where the bank’s role “does not exceed the scope of its conventional role as a mere lender of money.” The court cited Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096 (Nymark) in support of the latter proposition.^[29]

A complaint for negligence requires allegations of the elements of (1) the defendant’s owing a duty of care, (2) a breach of that duty, and (3) that breach of duty being the proximate cause of the plaintiff’s resulting injury. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 292 (Nally).) The primary question in this case is whether Lenders owed a duty of care to Appellants.

“A duty of care may arise through statute or by contract. Alternatively, a duty may be premised upon the general character of the activity in which the defendant engaged, the relationship between the parties or even the interdependent nature of human society. [Citation.] Whether a duty is owed is simply a shorthand way of phrasing what is `”the essential question—whether the plaintiff’s interests are entitled to legal protection against the defendant’s conduct.”‘ [Citations.]” (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 803.) Whether a duty of care exists is a question of law. (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397.)

Our starting point is to identify Lenders’ allegedly negligent conduct as stated by Appellants in the second amended complaint, because we must limit our analysis “to the specific action the plaintiff claims the [defendant] had a duty to undertake in the particular case.” (Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269, 280.) Appellants alleged that Lenders “did not [1] originate the Loan; . . . [2] perform the services of a Lender to [Appellants]; [or] . . . [3] act as a traditional lender with respect to [Appellants’] loan from [WaMu].” They alleged further that Lenders owed them a duty of care with respect to handling the loan, including initiating and completing the trustee’s sale, to ensure that only accurate and truthful documents were recorded. Appellants alleged that Lenders breached that duty by (1) making false statements about the Note and Deed of Trust; (2) recording a Trustee’s Deed that was “inaccurate and knowingly false”; and (3) proceeding with foreclosure knowing that (a) WAMU 2006-AR-19 was a nonexistent entity, (b) WaMu had not transferred or assigned the Note or Deed of Trust to La Salle, and (c) Chase Bank did not hold a beneficial interest in the Note or Deed of Trust. And they alleged that as a proximate result of Lenders’ breach of this duty of care, Appellants were damaged through the loss of their home through foreclosure.

In the absence of special circumstances, “a loan transaction is at arm’s length and there is no fiduciary relationship between the borrower and lender. [Citations.]” (Oaks Management Corp. v. Superior Court (2006) 145 Cal.App.4th 453, 466.) An oft-recited principle—one upon which Lenders rely in this appeal—is that “as a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” (Nymark, supra, 231 Cal.App.3d at p. 1096.)

The appellate court in Nymark addressed whether a loan applicant who sought to refinance an existing home loan could sue his lender for its negligent appraisal that allegedly failed to disclose numerous property defects. (Nymark, supra, 231 Cal.App.3d at pp. 1092-1093.) Concluding that the bank’s appraisal represented acts taken “in its conventional role as a lender of money to ascertain the sufficiency of the collateral as security for the loan,” the court held the lender owed no duty of care to the borrower. (Id. at p. 1097.) In arriving at this no-duty conclusion, the Nymark court applied the six-factor balancing test for determining duty that the California Supreme Court identified in Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja). (Nymark, supra, at pp. 1098-1100.) Those nonexclusive factors are “[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him [or her], [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the defendant’s conduct, and [6] the policy of preventing future harm.” (Biakanja, supra, at p. 650; see Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 581 [reconfirming continued applicability of Biakanja factors in determining existence or absence of duty].)

As a panel of this court recently observed, Nymark‘s “general rule” of no duty where the financial institution “does not exceed the scope of its conventional role as a mere lender of money” (Nymark, supra, 231 Cal.App.3d at p. 1096) finds its roots in Connor v. Great Western Sav. & Loan Ass’n (1968) 69 Cal.2d 850 (Connor). (See Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1180 (Daniels).) Quite the opposite of the circumstances in Nymark, the financial institution in Connor was a lender that acted outside of the traditional lender role by taking an active part in the development project in which it was the construction lender by having “the right to exercise extensive control of the enterprise . . . [and by] receiv[ing] not only interest on its construction loans, but also substantial fees for making them, a 20 percent capital gain for `warehousing’ the land, and protection from loss of profits in the event individual home buyers sought permanent financing elsewhere.” (Connor, supra, at p. 864.) Noting that the absence of privity of contract between the institution and the plaintiffs did not preclude a finding of duty because “`such duty may arise out of a voluntarily assumed relationship if public policy dictates the existence of such a duty'” (id. at p. 865), the Supreme Court in Connor went on to find the existence of a duty after applying and weighing the six Biakanja factors. (Connor, supra, at pp. 865-868.)

But “[e]ven when the lender is acting as a conventional lender, the no-duty rule is only a general rule. [Citation.]” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 901 (Jolley).) Relying on several federal decisions of district courts in California, the court in Jolley explained that a financial institution may be held to owe a duty of care even when its actions are within the conventional role of a lender where, upon applying and balancing the Biakanja factors, a finding of a legal duty is appropriate. (Jolley, supra, at pp. 901-902.)

Thus, several courts have applied the Biakanja factors to permit plaintiff-borrowers to sue financial institutions for negligence based upon the institutions’ conduct during preforeclosure loan modification negotiations. (See, e.g., Robinson v. Bank of America (N.D.Cal. May 29, 2012 No. 12-CV-00494-RMW) 2012 U.S.Dist. Lexis 74212; Garcia v. Ocwen Loan Servicing, LLC (N.D.Cal. May 6, 2010 No. C-10-0290) 2010 U.S.Dist. Lexis 45375; Daniels, supra, 246 Cal.App.4th 1150; Alvarez v. BAC Home Loan Servicing, L.P. (2014) 228 Cal.App.4th 941 (Alvarez).); Jolley, supra, 213 Cal.App.4th 872.) The courts have reached this conclusion, notwithstanding the credible argument that loan modifications are well within the conventional moneylending role of financial institutions. (See Daniels, supra, at p. 1181.) To be sure, other courts have rejected borrower-plaintiffs’ lender-negligence liability theories in the mortgage loan modification context. (See, e.g., Casault v. Federal Nat. Mortg. Ass’n (C.D.Cal. 2012) 915 F.Supp.2d 1113, 1130; Lueras v. BAC Home Loans Servicing, L.P. (2013) 221 Cal.App.4th 49, 67 [“a loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution’s conventional role as a lender of money”]; Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 208 [lender that allegedly misadvised borrower to miss loan payment to qualify for loan modification owed no duty, the breach of which would give rise to recovery of emotional distress damages based upon negligence].)

The case before us differs from most of the cases addressing whether a financial institution owed a duty of care to the plaintiff. Unlike the typical case where there is either a lender-borrower relationship or some other business relationship between the plaintiff and the lending institution, here, according to Appellants’ allegations, there was no relationship between the parties because Lenders allegedly had no beneficial interest in the Loan, Note, or Deed of Trust, and thus had no authority to take the actions in initiating and completing the foreclosure. We note further that the parties have cited no reported cases which have addressed (in cases not involving loan modifications) whether a lender owes a duty to the plaintiff-borrower suing for wrongful foreclosure, thereby permitting a separate claim for negligence.^[30]

It appears that, were Lenders to have had a beneficial interest in the Note and Deed of Trust at the time they took the alleged actions to initiate and complete the foreclosure, such actions would have been within “the scope of [their] conventional role as [] mere lender[s] of money.” (Nymark, supra, 231 Cal.App.3d at p. 1096.) But, as noted, Appellants alleged that Lenders had no such beneficial interest and therefore no authority to act. Thus, in one sense, Lenders’ unauthorized actions were outside the scope of their conventional role as moneylenders since they (according to the allegations in the second amended complaint) were strangers to the security that was the basis for the foreclosure proceedings. But even assuming, arguendo, that Lenders’ alleged conduct was within the scope of their role as lenders, that does not end our inquiry. “`Nymark does not support the sweeping conclusion that a lender never owes a duty of care to a borrower. Rather, the Nymark court explained that the question of whether a lender owes such a duty requires “the balancing of the [`Biakanja factors.’] . . . .”‘ [Citation.]” (Jolley, supra, 213 Cal.App.4th at p. 901.)

Applying the first Biakanja factor—”the extent to which the transaction was intended to affect the plaintiff” (Biakanja, supra, 49 Cal.2d at p. 650)—Lenders’ initiation and conclusion of the trustee’s sale were unquestionably acts that were intended to affect Appellants since, if consummated, they would result in their being dispossessed of their home. Although such foreclosure activity would affect Lenders as well, “that does not mean it was not intended to affect [A]ppellants.” (Daniels, supra, 246 Cal.App.4th at p. 1182 [concluding that loan modification was intended to affect both borrowers and lender].)

The second Biakanja factor—”the foreseeability of harm to [Appellants]” (Biakanja, supra, 49 Cal.2d at p. 650)—also supports their position. It was highly foreseeable that Appellants would be harmed, through the loss of their Property, by Lenders’ activities of recording allegedly inaccurate and erroneous documents and in assuming the position, without legal authority, as the parties entitled to foreclose on the beneficiary’s security interest. (See Alvarez, supra, 228 Cal.App.4th at p. 948 [“it was entirely foreseeable that failing to timely and carefully process the loan modification applications could result in significant harm to the applicants”].)

Appellants’ position also finds support in applying the third Biakanja factor—”the degree of certainty that the plaintiff suffered injury.” (Biakanja, supra, 49 Cal.2d at p. 650.) Appellants alleged that they lost their home through the trustee’s sale as a direct result of Lenders’ actions in recording false and incorrect documents and in completing the foreclosure without legal authority to do so. We must accept these allegations for purposes of demurrer regardless of whether Appellants will ultimately be able to prove them. (Chavez, supra, 219 Cal.App.4th at p. 1057; Del E. Webb Corp., supra, 123 Cal.App.3d at p. 604.) If the injury here is defined as the loss of their Property, there is certainty that Appellants suffered injury. (See Sciarratta, supra, 247 Cal.App.4th at pp. 565-566: “A homeowner experiences prejudice or harm when an entity with no interest in the debt forecloses. When a nondebtholder forecloses, a homeowner is harmed because he or she has lost her home to an entity with no legal right to take it.”)

Further, the fourth Biakanja factor—”the closeness of the connection between the defendant’s conduct and the injury suffered” (Biakanja, supra, 49 Cal.2d at p. 650)—supports a finding of duty. This determination is closely aligned with whether a wrongful foreclosure plaintiff claiming a void trustee’s sale is required to show prejudice beyond the loss of his or her home through the foreclosure. It would be indeed anomalous to hold that where there is an allegedly void trustee’s sale, a wrongful foreclosure claim may be based upon a prejudice showing of the loss of the plaintiff’s home, while in the context of a negligence claim, the plaintiff would be required to make a greater showing of harm. (See Sciarratta, supra, 247 Cal.App.4th at p. 566 [“void assignment is the cause in fact of the homeowner’s injury and all he or she is required to allege on the element of prejudice”].)

The fifth Biakanja factor—”the moral blame attached to the defendant’s conduct” (Biakanja, supra, 49 Cal.2d at p. 650)—favors a finding of duty. While no moral blame can be associated with a lender, upon the trustor’s default, exercising its contractual and statutory rights to direct the trustee to foreclose on the lender’s security interest, initiation and completion of a trustee’s sale by a stranger to the trust deed holding no security interest—according to Appellants’ allegations in the second amended complaint, which we accept as true for purposes of demurrer—is undoubtedly blameworthy.

Lastly, “the policy of preventing future harm” (Biakanja, supra, 49 Cal.2d at p. 650) is also a factor that supports the imposition of a duty here. Related to the fifth Biakanja factor, because of the blameworthy nature of an entity with no security interest interjecting itself as the purported beneficiary by directing a foreclosure, public policy favors imposing a duty upon a foreclosing lender to take care that it is in fact authorized to direct the trustee to initiate and complete foreclosure proceedings. Borrowing from Sciarratta‘s reasoning that a “strong policy” favored a lesser showing of prejudice by the borrower (Sciarratta, supra, 247 Cal.App.4th at p. 566), a finding of no policy favoring the prevention of unauthorized foreclosures “would lead to a legally untenable situation—i.e., that anyone can foreclose on a homeowner because someone has the right to foreclose. `And since lenders can avoid the court system entirely through nonjudicial foreclosures, there would be no court oversight whatsoever.’ [Citation.] Morevover, giving homeowners—who have the most at stake and the most to lose—the ability to challenge improper loan assignments as being absolutely void will provide a proper incentive to lending institutions to employ due diligence to properly document assignments and confirm who currently holds a loan. `The consequences of wrongfully evicting someone from their [sic] home are too severe to be left unchecked.’ [Citation.]” (Ibid.)

Therefore, based upon a consideration of the six Biakanja factors as applicable to the facts alleged in the second amended complaint here, we conclude that Lenders owed Appellants a duty of care. Having found that Appellants satisfied this element, we conclude that they have alleged a claim for negligence. Indeed, Lenders do not argue that, assuming a finding of duty, one or more of the remaining elements of the claim—i.e., breach of duty, and such breach being the proximate cause of the plaintiff’s injury (Nally, supra, 47 Cal.3d at p. 292)—were not alleged.^[31] Accordingly, the court erred in sustaining the demurrer to the fourth cause of action for negligence.

8. Violation of Rosenthal Act (Fifth Cause of Action)

Appellants alleged in the fifth cause of action that the Loan was entered into primarily for personal, family and household purposes. They alleged that Lenders committed willful and knowing violations of the Rosenthal Act by making false representations concerning the Note and Deed of Trust, communicating with Appellants in a name or capacity other than the actual creditor/Loan beneficiary, and falsely represented that written demands for payment and notices of default were made by or on behalf of the creditor/Loan beneficiary. Appellants alleged further that they sustained damage as a direct result of those violations of the Rosenthal Act.

Lenders asserted below—and renew the argument on appeal—that Appellants, as a matter of law, did not state a claim under the Rosenthal Act because the act of foreclosure under a deed of trust is outside the scope of the law. The trial court agreed, and sustained the demurrer on that basis.

It is plain “`that foreclosing on a deed of trust does not invoke the statutory protections of the [Rosenthal Act].’ [Citation.] `[F]oreclosure pursuant to a deed of trust does not constitute debt collection under the [Rosenthal Act].’ [Citations.]” (Sipe v. Countrywide Bank (E.D.Cal.2010) 690 F.Supp.2d 1141, 1151; see also Saldate v. Wilshire Credit Corp. (E.D. Cal. 2010) 711 F.Supp.2d 1126, 1132 [“`non-judicial foreclosure is not a debt collector’s act under California Civil Code section 1788.2(c)'”]; Castaneda v. Saxon Mortg. Servs., Inc. (E.D.Cal.2009) 687 F.Supp.2d 1191, 1197 [same]; Izenberg v. ETS Servs., LLC (C.D.Cal.2008) 589 F.Supp.2d 1193, 1199 [same].)

The conduct of which Appellants complain clearly concerns Lenders’ alleged acts of initiating and completing foreclosure proceedings under the Deed of Trust. As such, the alleged actions were not subject to a claim under the Rosenthal Act. The trial court properly sustained the demurrer to the fifth cause of action of the second amended complaint.

9. Fraud (First Cause of Action)

In the first cause of action for fraud, Appellants alleged that Lenders misrepresented material information relating to the various recorded documents—the 2008 Default Notice, the 2008 Assignment, the 2008 Trustee Substitution, the 2012 Default Notice, the 2013 Trustee’s Sale Notice, and the Trustee’s Deed. They alleged that Lenders failed to review or determine whether the documents “were accurate and complete based upon competent and reliable evidence.” Lenders had actual knowledge of the falsity of the information contained in the recorded documents, specifically, that WaMu no longer existed in 2008, WAMU 2006-AR19 was a nonexistent entity, and WaMu never transferred or assigned the Note or Deed of Trust to Lenders (or any of them). Appellants alleged further that Lenders represented to them that Lenders “held a beneficial and/or legal interest in the Note, Deed of Trust, and Loan.” Appellants also alleged that Lenders concealed from Appellants and the general public the true fact that WaMu did not transfer/assign the Note or Deed of Trust to La Salle, Chase Bank, Chase Finance, or any other existing legal entity. Lenders’ purpose in using the recorded documents was to initiate foreclosure proceedings that ultimately resulted in the trustee’s sale of the Property, and they intended to defraud Appellants and the public by recording the documents. Appellants alleged that they detrimentally relied upon Lenders’ misrepresentations regarding the recorded documents in that Appellants were unable to determine the party or parties actually holding the beneficial interest in the Note or Deed of Trust and were unable to negotiate effectively to modify the Loan or cure any default, and Appellants were damaged as a proximate result of Lenders’ conduct.

Lenders asserted below that fraud must be alleged with particularity, and that Appellants’ fraud claim failed to meet those particularity requirements. The trial court sustained the demurrer because, inter alia, Appellants had failed to plead fraud with the requisite specificity.

Appellants contend in their opening brief that the court erred in sustaining the demurrer. They argue summarily that they “pleaded specific facts supporting their claims for fraud and misrepresentation, which facts are deemed true at this procedural stage of the proceedings.” (Footnote omitted.) This argument is inadequate; we need not address a conclusory presentation in an appellate brief containing no supporting discussion, citations to the record, or legal citations. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 (Benach)[conclusory presentation in brief without argument or application of pertinent law was inadequate and unsupported contentions would be deemed waived]; Dills v. Redwoods Associates, Ltd. (1994) 28 Cal.App.4th 888, 890, fn. 1 [appellate court has no obligation to “develop the appellants’ arguments for them”].) But even disregarding Appellants’ waiver and addressing the merits of their position, we conclude there was no error.

There are five elements necessary for pleading and proof of fraud: “`(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’ [Citations.]” (Lazar v. Superior Court(1996) 12 Cal.4th 631, 638 (Lazar).) Fraud must be pleaded with specificity; “general and conclusory allegations do not suffice. [Citations.]” (Id. at p. 645; see also Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement compels a plaintiff to plead facts which “`”`”show how, when, where, to whom, and by what means the representations were tendered.”‘”‘ [Citation.]” (Lazar, supra, at p. 645.) And where the defendant is a corporation, the plaintiff must “`allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.'” (Scott v. JPMorgan Chase Bank, N.A.(2013) 214 Cal.App.4th 743, 764 (Scott), quoting Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) The reliance element of fraud is satisfied “when the misrepresentation or nondisclosure was an immediate cause of the plaintiff’s conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction.” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239 (Alliance Mortgage); see also CACI No. 1907 (2018 ed.)

The allegations of the second amended complaint did not satisfy the particularity requirements for a fraud claim. Appellants alleged generally that Lenders, collectively, “misrepresented material information relating to the recorded documents,” without describing “`”`”how, when, where, to whom, and by what means the representations were tendered.”‘”‘ [Citation.]” (Lazar, supra, 12 Cal.4th at p. 645.) No specific statements made by Lenders (or by any of them) are alleged, and Appellants fail to identify by name or position any persons having allegedly made the false representations on behalf of any of these entities. (See Scott, supra, 214 Cal.App.4th at p. 764.)

Moreover, Appellants failed to allege sufficient facts of their reliance upon any alleged misrepresentations in the sense of stating in what manner, Lenders’ alleged misrepresentations were “an immediate cause of [Appellants’] conduct which altered [their] legal relations.” (Alliance Mortgage, supra, 10 Cal.4th at p. 1239.) Appellants alleged conclusorily that they had “relied to their detriment on the misrepresentations,” that they had been unable to determine the true holder of the beneficial interest in the Note or Deed of Trust, and they had been unable to negotiate effectively to modify the Loan or cure any default. These allegations were insufficient in identifying precisely what action or actions Appellants took or refrained from taking in reliance upon Lenders’ alleged misrepresentations. (See Glaski, supra, 218 Cal.App.4th at pp. 1091-1092 [demurrer sustained without leave to amend due to plaintiff’s failure to allege specific actions taken in reliance upon fraudulent representations].)

The trial court did not err in sustaining the demurrer to the first cause of action for fraud.

10. Negligent Misrepresentation (Second Cause of Action)

Appellants alleged in the second cause of action for negligent misrepresentation that Lenders negligently misrepresented material information relating to the same recorded documents described in the fraud cause of action, and they failed to conduct a review or ascertain whether the documents “were accurate and complete based upon competent and reliable evidence.” They alleged that Lenders knew or should have known that the recorded documents were not accurate or complete. The allegations were otherwise similar to those contained in the fraud cause of action. The trial court sustained Lenders’ demurrer to this claim for the same reasons it sustained the demurrer to the fraud cause of action, one of which being the failure to plead the claim with specificity.^[32]

“[A] claim for negligent misrepresentation requires the plaintiff to prove each of the following: `(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’ [Citation.]” (California Public Employees’ Retirement System v. Moody’s Investors Service, Inc. (2014) 226 Cal.App.4th 643, 661.) The claim is a “species of the tort of deceit [citation; it], does not require intent to defraud but only the assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true. [Citation.]” (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1255.) As is true with fraud, negligent misrepresentation must be pleaded with particularity. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231; see also Small v. Fritz Cos. (2003) 30 Cal.4th 167. 184 [plaintiff asserting shareholder action based on negligent misrepresentation inducing retention of stock was required to plead claim with specificity].)

As discussed above, the second amended complaint failed to allege facts with specificity to support a claim of fraud insofar as the pleading was inadequate as to the alleged misrepresentations, the identity of the person or persons making them, when and how they were made, and the authority of the person(s) making them. (Lazar, supra, 12 Cal.4th at p. 645; Scott, supra, 214 Cal.App.4th at p. 764.) Appellants also failed to allege with particularity the element of reliance required for fraud. (Alliance Mortgage, supra, 10 Cal.4th at p. 1239.) For the same reasons, Appellants failed to state facts sufficient to constitute a cause of action for negligent misrepresentation.

The trial court properly sustained Lenders’ demurrer to the second cause of action for negligent misrepresentation.

11. Denial of Leave to Amend

We have concluded that the demurrer of Lenders to the first, second, and fifth causes of action was properly sustained by the trial court. We now address the propriety of the court’s denial of leave to amend.

We note that Appellants’ prior, superseded first amended complaint also included claims for fraud, negligent misrepresentation, and violations of the Rosenthal Act. The allegations in the first amended complaint concerning the fraud and negligent misrepresentation claims were, in most respects, identical to, and in other respects, very similar to, the allegations found in the second amended complaint. And the allegations in the first amended complaint concerning the Rosenthal Act were identical to those in the second amended complaint.

As was the case with Lenders’ demurrer to the second amended complaint, Lenders argued in their demurrer to the prior, first amended complaint that Appellants had failed to allege fraud with particularity. The trial court sustained the demurrer to the fraud and negligent misrepresentation claims in the first amended complaint, inter alia, on the ground that Appellants had failed to plead the elements of the claims with specificity. Likewise, Lenders’ demurrer to the Rosenthal Act claim alleged in the first amended complaint was based upon the same position taken in the demurrer to the second amended complaint: that, as a matter of law, foreclosure under a deed of trust does not give rise to a claim under the Rosenthal Act. And the trial court concluded in both instances that Appellants had failed to state a cause of action.

There is nothing in the record to disclose in what manner Appellants might have been able to allege additional facts to maintain a viable cause of action for either fraud or negligent misrepresentation. And the fact that the allegations in the second amended complaint concerning the Rosenthal Act claim were identical to those in their first amended complaint—which the trial court found deficient—is strongly suggestive that Appellants could present no additional available facts to allege concerning that claim. Moreover, Appellants did not identify below any additional facts that they claimed they could allege in an amended pleading, were the court to sustain the demurrer.

Appellants bear the burden of showing that they could have amended the second amended complaint to cure the defect rendering it demurrable. (Campbell, supra,35 Cal.4th at p. 320.) Appellants failed to meet that burden. Accordingly, we find that the trial court did not abuse its discretion in denying leave to amend as to the first, second, and fifth causes of action. (Schifando, supra, 31 Cal.4th at p. 1081.)

C. Challenge to Demurrer Order Re First Amended Complaint Waived

Appellants opening brief is replete with record references to the first amended complaint. However, Appellants’ second amended complaint superseded this prior pleading.

As noted above (see pt. II.B.1., ante), Appellants alleged their untimely WaMu Trust transfer theory—sometimes confusingly referred to in the record as the “failed securitization theory”—in their first amended complaint. The court rejected this theory in sustaining Lenders’ demurrer to that pleading, and Appellants’ second amended complaint did not contain allegations concerning it; rather, Appellants relied on their unauthorized foreclosure theory in the second amended complaint.

Appellants present in their opening brief scattered references to claimed error by the trial court in rejecting their claim of “failed securitization.” And they argue in a footnote—without record citation—that “[a]lthough [they] did not argue the failed securitization theory at the hearing [on Appellants’ motion for new trial], they preserved their rights on appeal pending the outcome of the Yvanova case.” While Appellants assert that they have preserved an appellate challenge on the question, there are two problems that prevent its consideration.

First, although Appellants make a few references to their untimely WaMu Trust transfer theory, and make a number of citations to the record concerning their first amended complaint, they make no direct argument on the point in their appellate briefs. Their failure to present a specific argument concerning a potential claim that the court erred in rejecting this theory in its ruling on demurrer to the first amended complaint renders the argument abandoned. (Tiernan, supra, 33 Cal.3d at p. 216, fn. 4.)

Second, “[i]t is well established the election to amend a complaint after a demurrer thereto has been sustained `waives any error in the ruling sustaining the demurrer.'” (Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 866.) As has been otherwise stated, “when a party does not leave his pleading where the order sustaining the demurrer has left it, he [or she] waives any error on the part of the trial court in sustaining the demurrer. . . . When he [or she] amended [the] complaint . . . he [or she] in effect admitted that the demurrer was good and that [the] complaint was insufficient.” (Sheehy v. Roman Catholic Archbishop (1942) 49 Cal.App.2d 537, 540-541; see also Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966, fn. 2.) Therefore, by filing the second amended complaint, Appellants waived their claim that the court erred in rejecting their untimely WaMu Trust transfer theory.^[33]

Because Appellants have waived the appellate challenge by filing the second amended complaint and have in any event abandoned it by failing to present sufficient argument, we will not address any claim that the court erred in sustaining the demurrer to the first amended complaint.^[34]

III. DISPOSITION

The judgment is reversed. The case is remanded to the trial court with instructions to vacate its prior order sustaining without leave to amend the separate demurrers of Lenders and Buyers to the second amended complaint, and to enter a new order (a) sustaining without leave to amend Lenders’ demurrer to the first, second, and fifth causes of action, (b) overruling Lenders’ demurrer to the third, fourth, sixth, seventh, and eighth causes of action, and (c) overruling Buyers’ demurrer to the seventh and eighth causes of action. Appellants, Lenders, and Buyers shall each bear their own costs on appeal.

ELIA, ACTING P.J. and MIHARA, J., concurs.

[1] Quality Loan Service Corp. (Quality) was also named as a defendant in both the first amended complaint and the second amended complaint, and those pleadings contain certain allegations pertaining to that entity. The record, however, does not disclose that Quality appeared in the case, was joined in the demurrer proceedings, or identified as being one of the defendants in whose favor judgment was entered.

[2] Cal. Reconveyance was also named in Lenders’ demurrer. Appellants sued Cal. Reconveyance “only in its capacity as trustee and for the sake of completeness of [Appellants’] claims” and sought no monetary recovery against it. Accordingly, we will refer to the demurring parties as being Lenders and will identify the appellate arguments made (other than those by Buyers) as being those of Lenders.

[3] See footnote 1, ante.

[4] Although Appellants alleged elsewhere in the second amended complaint that WaMu, as of March 6, 2008, “did not legally exist,” they do not explain how WaMu could have entered into an agreement with them over 14 months later.

[5] The foreclosure at issue in this case was a trustee’s sale conducted pursuant to a power of sale provided for in the Deed of Trust, often referred to as a nonjudicial foreclosure. We are not concerned with a judicial foreclosure, and we will refer interchangeably to the foreclosure here as a trustee’s sale, a nonjudicial foreclosure, or simply a foreclosure.

[6] All further statutory references are to the Code of Civil Procedure unless otherwise stated.

[7] “A securitized investment trust is created by pooling the loans into a trust and selling to investors the right to receive the mortgage interest and principal payments. [Citation.] Terms of the trusts and the rights and obligations of the parties are set forth in a pooling and service agreement.” (Yhudai v. Impac Funding Corporation (2016) 1 Cal.App.5th 1252, 1254, fn. 2 (Yhudai).)

[8] This question of issue preclusion decided by the trial court is discussed in detail, post.

[9] Buyers did not initially file a respondents’ brief to address the issues raised in Appellants’ opening brief because Buyers contended that Appellants had failed to perfect their challenge to the judgment entered in Buyers’ favor. Appellants filed a motion to clarify Buyers’ status to confirm that they were parties to the appeal and to establish a briefing schedule for the filing of Buyers’ respondents’ brief and Appellants’ reply brief. This motion, opposed by Buyers, was granted by this court on February 7, 2018. Buyers thereafter file their brief and Appellants filed a reply, which briefs have been considered by this court along with the briefs previously filed by Appellants and respondent Lenders.

[10] Appellants’ references in their answer were apparently to Civil Code section 2924 et seq.

[11] After judgment was entered in favor of Buyers, Gray filed a motion for reconsideration of the denial of her motion for summary judgment, which the trial court denied. The record before us does not disclose the grounds for the trial court’s denial of the summary judgment motion. Nor does the record show the basis for Gray’s reconsideration motion or the trial court’s reasons for denying that motion.

[12] It is reflected in the opinion of the appellate division of the superior court, discussed post, that the judgment was also entered against Melodye Valdez, who “apparently became a lessee and occupant of the [P]roperty” on June 1, 2012, approximately one year before the foreclosure. The appellate division also noted that neither Zamora nor Valdez appeared at trial. The interests of Valdez, who was not a party to the present action, are not relevant to this appeal.

[13] Our recital of the procedural matters, facts adduced, and arguments presented at the trial of the unlawful detainer action are taken entirely from the appellate division’s opinion. Although the appellate division had the benefit of a trial transcript from the unlawful detainer trial, no such transcript is part of this appellate record.

[14] The appellate division concluded: “Gray’s entire claim of error rests on her contention that the trial court erroneously excluded documentary evidence she offered to dispute [Buyers’] claim of duly perfected title, based on the mistaken belief that title was not in issue. Yet, we are in no position to either review this claim of error or assess prejudice because the documentary evidence offered but excluded at trial is not part of the record on appeal. We accordingly reject the claim, concluding that Gray has failed to demonstrate reversible error on an adequate record.” (Original italics.)

[15] See Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 216 Cal.App.4th 75; Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 (Jenkins); Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495. The Supreme Court indicated its disapproval of these three cases in Yvanova, supra, 62 Cal.4th at page 939, footnote. 13.

[16] It is also apparent that the untimely WaMu Trust transfer theory, alleged in the first amended complaint here, was also raised by Appellants in the unlawful detainer action.

[17] The record merely discloses that there was a trial of indeterminate length that commenced and concluded on September 13, 2013, and there was a Judicial Council form judgment entered the same day. There were no specific findings made by the trial court in the unlawful detainer judgment.

[18] At the outset of its discussion of the merits of Gray’s claim, the appellate division stated: “Even if we were to reach the merits, and to the extent we can, we would still reject Gray’s claim of error.” (Footnote omitted, italics added.) And in the footnote at the end of this sentence, the appellate division qualified: “We alternatively reach the merits to the extent the record permits. . . . But we are still constrained in reviewing her claim because of the inadequacy of the record in that it does not reveal what particular documents were offered but excluded at trial and the merits of the claim depend on the legal effect of the mostly unidentified documents.” (Italics added.)

[19] See footnote 15, ante.

[20] Although Appellants referenced the 2008 Trustee Substitution as having been attached to the second amended complaint as an exhibit, they in fact attached the wrong document. The 2008 Trustee Substitution was, however, attached as an exhibit to Lenders’ request for judicial notice in support of demurrer, which request was granted by the trial court.

[21] Although this fact was not alleged in the second amended complaint, the 2012 Trustee Substitution was made part of the record for the hearing on demurrer through Lenders’ request for judicial notice, granted by the court.

[22] Appellants also urged in their opening brief that Cal. Reconveyance was the incorrect party to have initiated foreclosure proceedings in 2012, stating: “If a trustee’s sale even was [sic] possible, it only could have been conducted by Quality Home Loans. . . . Quality Home Loans did not conduct the sale.” During oral argument, Appellants’ counsel appears to have abandoned this position, instead contending that Cal. Reconveyance was the trustee of record in 2012 because the 2008 Trustee Substitution, under which Quality was purportedly substituted as trustee, was invalid.

[23] The Supreme Court disapproved of Fontenot, supra, 198 Cal.App.4th 256, to the extent it held that a borrower has no standing to challenge a foreclosure based upon a void assignment. (See Yvanova, supra, 62 Cal.4th at p. 939, fn. 13.)

[24] The Supreme Court expressly did not decide whether the borrower challenging a foreclosure sale as void must allege tender. (Yvanova, supra, 62 Cal.4th at p. 929, fn. 4.)

[25] Because “the facts alleged in the pleading are deemed to be true” (Del E. Webb Corp., supra, 123 Cal.App.3d at p. 604), and it is irrelevant whether the plaintiff will be able to prove the allegations of the complaint (Chavez, supra, 219 Cal.App.4th at p. 1057), we hold only that Appellants have stated a viable wrongful foreclosure claim, and we express no opinion as to whether they will ultimately be able to establish the foreclosure was based upon a void assignment.

[26] In their demurrer to the second amended complaint, Buyers also asserted, among other arguments, that the quiet title claim failed because Appellants had not alleged a tender of the indebtedness.

[27] Civil Code section 2924 reads in relevant part: “A recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.”

[28] Lenders also asserted below—an argument they do not make on appeal, and which they have therefore abandoned (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4 (Tiernan))—that no claim for negligence was stated because “[n]egligence claims cannot arise from contractual relationships because the contracts themselves establish the respective duties of the parties, and a breach of those duties gives rise to contract damages.”

[29] Of course, since we have concluded, ante, that Appellants were not required to allege a tender of the indebtedness in connection with their wrongful foreclosure claim, the court’s first ground for sustaining the demurrer to the negligence claim was improper.

[30] There have been several wrongful foreclosure cases not involving loan modifications which have included negligence claims; the courts in those cases, however, did not squarely address whether such claim was maintainable on the basis of a duty owed to the plaintiff by the financial institution. (See, e.g., Ram, supra, 234 Cal.App.4th at p. 8 [decided, inter alia, on basis of no standing to sue because alleged conduct at most voidable, not void]; Fontenot, supra, 198 Cal.App.4th at p. 261 [single cause of action for “`Wrongful Foreclosure [Negligence per Se]'”; decided on basis of plaintiff’s failure to plead assignment was invalid or allege prejudice], disapproved by Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; Malkoskie, supra, 188 Cal.App.4th at p. 972 [decided on former adjudication principles]; Arnolds Management, supra, 158 Cal.App.3d at p. 578 [decided on ground of plaintiff’s failure to allege unconditional tender].)

[31] We acknowledge that Lenders would, of course, argue that—assuming the existence of duty—there was no breach of duty, because there was no irregularity in the trustee’s sale or in the recorded documents related to the foreclosure. But because we have concluded, ante, that Appellants have alleged sufficient facts supporting the claim that the trustee’s sale was void, we need not address the issue further here.

[32] As discussed, ante, Appellants waived their position concerning the ruling on the negligent misrepresentation claim by failing to present anything more than the most conclusory of arguments. (Benach, supra, 149 Cal.App.4th at p. 852.) We conclude nonetheless that, even considering the matter on the merits, the court did not err in sustaining the demurrer to the second cause of action.

[33] Lenders argued in this appeal that Appellants could not challenge the court’s ruling on the demurrer to the first amended complaint because they had elected to amend the complaint. Appellants did not respond to this argument in their reply brief.

[34] Even were the argument preserved for appeal, it appears to lack merit. The trial court concluded that Appellants lacked standing to present the untimely WaMu Trust transfer theory, because they were not parties to the securitization agreements. While the Supreme Court in Yvanova held that a borrower had standing to challenge a foreclosure that was void, rather than merely voidable, it did not address whether a the post-closing transfer of a deed of trust into a securitized trust is void or voidable. (Yvanova, supra, 62 Cal.4th at p. 931.) The weight of authority is that a borrower has no standing to challenge a foreclosure based on a post-closing transfer of the subject trust deed into a securitized trust which is governed by New York law (which we understand to be the case with the securitized trust here, i.e., the WaMu Trust), because the transaction is merely voidable, not void. (See, e.g., Rajamin v. Deutsche Bank Nat’l Trust Co. (2d Cir. 2014) 757 F.3d 79, 88-89; Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 810-817; Yhudai, supra, 1 Cal.App.5th at p. 1259; Saterbak, supra, 245 Cal.App.4th at p. 815.)

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