Moore v. ReconTrust Co. CA4/1

Filed 12/2/13 Moore v. ReconTrust Co. CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

BETSY E. MOORE, AS TRUSTEE, ETC., D062845

Plaintiff and Appellant,

v. (Super. Ct. No. 37-2011-00053009-
CU-BC-NC)
RECONTRUST COMPANY N.A. et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of San Diego County, Timothy

M. Casserly, Judge. Affirmed.

Leon E. Campbell for Plaintiff and Appellant.

Bryan Cave, Sean D. Muntz and David J. Joerger for Defendants and

Respondents.

Betsy E. Moore (Betsy Moore), trustee under the Betsy Elizabeth Moore Trust,

appeals a judgment dismissing her amended complaint against ReconTrust Company,

N.A. (ReconTrust) (erroneously sued as Reconstruct Company, RA) and Bank of
America, N.A. (successor by merger to BAC Home Loans Servicing, LP, erroneously

sued as BAC Home Loans Servicing, LP) (collectively defendants) after the trial court

sustained defendants' demurrer without leave to amend. Betsy Moore contends: (1) the

court erred in sustaining the demurrer because, she argues, the amended complaint states

a cause of action for a declaratory judgment; and (2) the court abused its discretion in

sustaining the demurrer without leave to amend. We disagree. The court did not err in

sustaining the unopposed demurrer without leave to amend because the requests for

declaratory judgment regarding the formation of the deed of trust are barred by the statute

of limitations and because the deed of trust is enforceable by its terms. Betsy Moore has

not met her burden of showing the defects in the complaint can be cured. Therefore, we

affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In reviewing an order sustaining a demurrer, "[w]e 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.]" (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Accordingly, we derive the

facts from the operative complaint and the judicially noticed material.

Kevin Charles Moore borrowed $640,000 and signed a deed of trust in August

2005 securing his repayment obligations with property in Escondido, California. The

deed of trust identified Chicago Title as the original trustee and Mortgage Electronic

Registration Systems, Inc. (MERS) as the beneficiary acting as the nominee for the

lender and the lender's successors and assigns.

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 MERS substituted ReconTrust as the new trustee. Thereafter, in January 2007,

ReconTrust recorded notice that Mr. Moore had defaulted on the loan. He was behind in

his payments by more than $10,000 and owed more than $690,000. Thus, the beneficiary

elected to sell the property to satisfy the loan obligations and scheduled a public sale.

The sale apparently did not occur because, several years later, ReconTrust recorded

another notice of trustee's sale indicating Mr. Moore now owed more than $850,000.

The Kevin Charles Moore Trust, allegedly a revocable living trust represented by

Betsy Moore as trustee, filed a complaint on March 30, 2011, against Countrywide Home

Loans, BAC Home Loans Servicing LP, ReconTrust, MERS and Bank of America

asserting causes of action for breach of contract, fraud, breach of covenant of good faith

and fair dealing and requesting "specific performance" to prevent a sale of the property

scheduled for April 2011. The defendants filed a demurrer to the original complaint.

Before the initial demurrer was heard, Betsy Moore, as the trustee of the Betsy

Elizabeth Moore Trust, filed an amended complaint under Code of Civil Procedure

section 472. (All statutory references are to the Code of Civil Procedure unless otherwise

specified.) The amended complaint asserted only one cause of action for declaratory

judgment against "[ReconTrust] Company, RA" and "BAC Home Loans Servicing, LP."

The amended complaint did not name either Mr. Moore or his trust as a plaintiff. Betsy

Moore alleged she is "the successor in title to the real property hereinafter described from

Kevin Charles Moore."

The amended complaint alleged Mr. Moore executed a deed of trust as a single

man and that, upon information and belief, Mr. Moore lacked sufficient mental capacity

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at the time of execution to know the nature and legal effect of the deed of trust and that

he did not read or write. Betsy Moore alleged a dispute exists between "plaintiff and

defendants" and sought a declaratory judgment declaring "the respective rights of the

parties under said deed of trust" based upon the following: "(A) Plaintiff contends that

said deed of trust is of no legal effect because of said mental incapacity of Kevin Charles

Moore at the time he executed the deed of trust[;] (B) Plaintiff contends that said deed of

trust is not enforceable since defendant BAC Home Loan[s] Servicing, LP was not

qualified to do business in California at the time of the execution of the said deed of trust,

or alternatively, is not qualified to enforce said deed of trust because it is no longer

qualified to do business in California[; and] (C) Plaintiff contends that said deed of trust

is subject to rescission based on intentional or negligent misrepresentation of material

facts, or concealment thereof, at the time Kevin Charles Moore executed said deed of

trust."

Defendants filed a demurrer to the amended complaint. Defendants argued the

amended complaint does not state a cause of action for declaratory judgment because: (1)

the agreement is enforceable despite claimed illiteracy or incapacity; (2) the agreement is

enforceable because the deed of trust provides for the right of successor entities to

foreclose; and (3) any claim for rescission based upon misrepresentation is barred by the

statute of limitations and does not state a claim. Defendants also argued plaintiff lacks

standing to challenge the pending foreclosure sale because she did not tender the amount

owing on the loan. Defendants asked the court to deny leave to amend.

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 Counsel for Betsy Moore chose not to oppose the demurrer believing the amended

complaint sufficiently stated a cause of action for declaratory relief. Instead, after

reviewing an adverse tentative ruling, counsel attempted to file a second amended

complaint in which he corrected only the spelling of party names. Plaintiff's counsel

submitted the second amended complaint to the clerk's office on the morning of the

demurrer hearing. He did not appear at the hearing because he believed the hearing

should be taken off calendar.

The hearing went forward and the trial court sustained the unopposed demurrer

without leave to amend. The clerk of the court returned the second amended complaint

unfiled because leave of court was necessary.

Betsy Moore's counsel moved to vacate the order sustaining the demurrer and

sought leave to file a second amended complaint under section 473. In a declaration,

Betsy Moore's counsel argued that he thought section 472 provided a right to amend a

complaint once as a matter of course before an answer or demurrer is filed and another

opportunity to amend again after a demurrer is filed, but before trial of the issue of law.

Defendants opposed the motion to vacate arguing that counsel had not demonstrated

excusable neglect under section 473 because section 472 allows only one opportunity to

amend a complaint as a matter of right before leave of court is necessary. The court

denied the motion to vacate and entered a judgment of dismissal with prejudice.

Betsy Moore moved for new trial. Because the hearing on the motion for new trial

was set more than 60 days after service of notice of entry of judgment, the court had no

power to grant a new trial under section 660.

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 DISCUSSION

I

Standard of Review

"On appeal from a judgment after a demurrer is sustained without leave to amend,

we review the trial court's ruling de novo, exercising our independent judgment on

whether the complaint states [facts sufficient to constitute] a cause of action." (Lincoln

Property Co., N.C., Inc. v. Travelers Indemnity Co. (2006) 137 Cal.App.4th 905, 911.)

" ' "[W]e may affirm a trial court judgment on any basis presented by the record whether

or not relied upon by the trial court." ' " (Maystruk v. Infinity Ins. Co. (2009) 175

Cal.App.4th 881, 887.)

We will reverse an order denying leave to amend for abuse of discretion only if

there is a reasonable possibility that the pleading can be cured by amendment. (Campbell

v. Regents of University of California (2005) 35 Cal.4th 311, 320.) " 'The burden of

proving such reasonable possibility is squarely on the plaintiff.' " (Maxton v. Western

States Metals (2012) 203 Cal.App.4th 81, 95 (Maxton).)

II

The Amended Complaint Does Not State a Cause of Action for Declaratory Relief

Declaratory relief is available to "[a]ny person interested under a written

instrument . . . who desires a declaration of his or her rights or duties with respect to

another, or in respect to, in, over or upon property . . . in cases of actual controversy

relating to the legal rights and duties of the respective parties . . . ." (§ 1060; Maguire v.

Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 728 ["[a] complaint for declaratory relief is

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legally sufficient if it sets forth facts showing the existence of an actual controversy

relating to the legal rights and duties of the respective parties under a written instrument

and requests that these rights and duties be adjudged by the court"] (Maguire).)

Once the court determines an "actual controversy" exists (Maguire, supra, 23

Cal.2d at p. 728), the trial court has discretion under section 1061 to refuse to make a

declaration of rights and duties "including a determination of any question of

construction or validity arising under a written instrument or contract, 'where its

declaration or determination is not necessary or proper at the time under all the

circumstances.' " (Maguire, at p. 730.) The decision to refuse to entertain a complaint

for declaratory relief is reviewed on appeal for abuse of discretion. (Orloff v.

Metropolitan Trust Co. (1941) 17 Cal.2d 484, 485.)

A

We note at the outset that neither party explains how Betsy Moore or the Betsy

Elizabeth Moore Trust, as "successor in title to the real property," has an interest in or

rights under the deed of trust executed by Kevin Charles Moore. However, given our

decision herein, there is no reasonable possibility an amendment could cure the defects in

the amended complaint. (Campbell v. Regents of University of California, supra, 35

Cal.4th at p. 320; Fladeboe v. American Isuzu Motors Inc., (2007) 150 Cal.App.4th 42,

55-56 [dismissal of declaratory relief action proper when plaintiffs cannot prevail on the

merits even if standing can be established].)

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 B

Betsy Moore requests declaratory judgment contending that the deed of trust has

no legal effect because Mr. Moore had a "mental incapacity" at the time he executed the

deed of trust. However, the amended complaint does not allege that Mr. Moore was

entirely without understanding when he executed the deed of trust, which is what is

required under Civil Code section 38 to render a contract void and unenforceable. (More

v. Calkins (1890) 85 Cal. 177, 190 [a complaint alleging mental incapacity of a grantor

must allege the plaintiff was " 'entirely without understanding' " to be void].) Here, Betsy

Moore alleged that Mr. Moore "lacked sufficient mental capacity to know the nature and

legal effect of said deed of trust. At that time Kevin [Charles] Moore could not read or

write." (Italics added.) Read as a whole, the amended complaint asserts that Mr. Moore

did not sufficiently understand the deed of trust either because he could not read or write

or because he was of unsound mind. (Zelig v. County of Los Angeles (2002) 27 Cal.4th

1112, 1126 [" '[W]e give the complaint a reasonable interpretation, reading it as a whole

and its parts in their context.' "].) This interpretation is supported by Betsy Moore's

opening brief wherein she claims the complaint could be amended to allege undue

influence because "one mortgagor did not know how to read or write."

Illiteracy is not a basis to declare a contract void. Illiterate adults are expected to

be prudent in business transactions. (Alfaro v. Community Housing Improvement System

& Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1393 ["it would be prudent for an

illiterate first-time homebuyer to get the help of a trusted person in reading and

translating the documents seemingly essential to becoming a homeowner"].)

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 Nor is a contract void if a party is of unsound mind. Civil Code section 39

provides that a contract with "a person of unsound mind, but not entirely without

understanding, made before the incapacity of the person has been judicially determined,

is subject to rescission . . . ." Thus, the contract at issue here may be voidable by

rescission, but it is not void.

Based on the facts alleged in this case, declaratory relief cannot be granted

because an action for rescission is barred by the statute of limitations. If declaratory

relief is sought based upon a written obligation and the time to commence an action for

relief under that obligation is barred by the statute, the right to declaratory relief is also

barred. (Maguire, supra, 23 Cal.2d at p. 734.) Under section 337, an action upon any

contract, obligation or liability founded upon an instrument in writing must be brought

within four years. For rescission of a written contract, "[t]he time begins to run from the

date upon which the facts that entitle the aggrieved party to rescind occurred." (§ 337,

subd. 3.)

In this case, Mr. Moore, who allegedly cannot write, executed the deed of trust in

2005 by signing the deed of trust and two riders and initialing each page of each

document in legible penmanship. The first notice of default and election to sell under the

deed of trust was sent in January 2007. This action was not commenced until the end of

March 2011—more than six years after execution of the deed of trust and more than four

years after the first notice of default and election to sell. As such, Betsy Moore's cause of

action for declaratory relief based upon a claim of illiteracy or unsound mind is barred by

the statute of limitations.

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 Similarly, the third claim for declaratory relief seeking a declaration that the deed

of trust is subject to rescission based upon "intentional or negligent misrepresentation of

material facts, or concealment thereof, at the time Kevin Charles Moore executed said

deed of trust" is barred by the statute of limitations under section 337. Any claim of

misrepresentation or concealment of material facts occurring at the inception of the

agreement is barred. Betsy Moore has not alleged delay in discovery of the alleged

misrepresentation that would toll the statute. Nor has she asserted a legal or factual basis

for amendment on this issue. As such, the claim for rescission based upon

misrepresentation is barred.

Betsy Moore argues in the appellant's reply brief that the statute of limitations

should not bar her claim because she seeks monetary "offsets" in the form of attorney

fees and that her claims could lead to compensatory or punitive damages. However, the

amended complaint does not plead that Betsy Moore is entitled to offsets. Nor was this

issue raised or discussed in the opening brief. As such, the issue is waived. (Tan v.

California Fed. Sav. & Loan Assn. (1983) 140 Cal.App.3d 800, 811 [issues not raised in

an appellant's brief are deemed waived or abandoned].)

Finally, the trial court did not err in sustaining the demurrer without leave to

amend with respect to the request for declaratory relief regarding the enforceability of the

deed of trust based upon the corporate status of BAC Home Loans Servicing, LP.

The deed of trust stated: "Borrower understands and agrees that MERS holds only

legal title to the interests granted by Borrower in this Security Instrument, but, if

necessary to comply with law or custom, MERS (as nominee for Lender and Lender's

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successors and assigns) has the right: to exercise any or all of those interests, including,

but not limited to, the right to foreclose and sell the Property; and to take any action

required of Lender including, but not limited to, releasing and canceling this Security

Instrument." Additionally, the deed of trust provided that the note and the security

instrument could be sold without prior notice to the borrower and that such a sale might

result in a change of the loan servicer. MERS substituted ReconTrust as the trustee in

place of the original lender.

Therefore, regardless of the corporate status of BAC Home Loans Servicing, LP or

its successor, ReconTrust, as the trustee substituted by MERS, was authorized to initiate

the foreclosure proceedings. (Civ. Code, § 2924, subd. (a).) "The authority to exercise

all of the rights and interests of the lender necessarily includes the authority to assign the

deed of trust." (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219

Cal.App.4th 75, 84.) There is no statutory cause of action for declaratory relief or

wrongful initiation of foreclosure based upon Civil Code section 2924 et seq. (Robinson

v. Countrywide Home Loans, Inc. (2011) 199 Cal.App.4th 42, 46.) Betsy Moore failed to

allege facts showing prejudice as a result of any lack of authority of the parties

participating in the foreclosure process. The assignment of the deed of trust did not

change Mr. Moore's obligations under the note or the fact that ReconTrust was authorized

to initiate foreclosure proceedings. As such, Betsy Moore cannot complain about any

alleged lack of authority with regard to BAC Home Loan Servicing LP. (Siliga, at p. 85.)

The trial court was within its discretion to refuse to make a declaration of rights under the

circumstances and to sustain the demurrer without leave to amend. (Maguire, supra, 23

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Cal.2d at p. 730 [§ 1061 gives the trial court "discretion to refuse to make a binding

declaration of rights and duties, including a determination of any question of . . . validity

arising under a written instrument . . . 'where its declaration or determination is not

necessary or proper at the time under all the circumstances' "].)

III

There Is No Basis to Grant Leave to Amend

Betsy Moore has not met her burden of establishing that she can amend her

complaint to cure the defects in the complaint. She asserts in her opening brief only that

"the complaint can be revised to state one or more conventional causes of action in which

facts are alleged to meet the requirements of a conventional cause of action. For

example, undue influence can be specifically alleged, including the fact that one

mortgagor did not know how to read or write."

A plaintiff must show in what manner she can amend her complaint and how the

amendment will change the legal effect of the pleading. " 'The assertion of an abstract

right to amend does not satisfy this burden.' [Citation.] The plaintiff must clearly and

specifically state 'the legal basis for amendment, i.e., the elements of the cause of action,'

as well as the 'factual allegations that sufficiently state all required elements of that cause

of action.' " (Maxton v. Western States Metals, supra, 203 Cal.App.4th at p. 95.) Betsy

Moore did not meet this burden.

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 DISPOSITION

The judgment is affirmed. Respondents are awarded their costs on appeal.

MCINTYRE, J.

WE CONCUR:

HUFFMAN, Acting P. J.

HALLER, J.

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