Schep v. Capital One, N.A.
Schep v. Capital One, N.A.
Opinion of the Court
*1333Are a trustee's acts in recording a notice of default, a notice of sale, and a trustee's deed upon sale in the course of a nonjudicial foreclosure privileged under Civil Code section 47 ?
*1334FACTS AND PROCEDURAL BACKGROUND
I. Factual Background
A. Original loan and deed of trust
In April 2007, Raymond A. Schep (plaintiff) borrowed $910,000 from a mortgage company secured by a deed of trust to a home in Beverly Hills (the property). The deed of trust designated Chevy Chase Bank, F.S.B. (Chevy Chase) the trustee and Mortgage Electronic Registration Systems, Inc. (MERS) the beneficiary. In July 2009, Chevy Chase merged with defendant Capital One, N.A. (Capital One), and Capital One became the new trustee to the deed of trust.
B. Arrears and foreclosure
By October 2009, plaintiff was $29,206.66 behind on his loan payments. In the fall of 2009, MERS named defendant T.D. Service Company (T.D. Service) as the new trustee on the deed of trust, and T.D. Service recorded a "Notice of Default and Election to Sell Under Deed of Trust" (Notice of Default). In April 2010, T.D. Service recorded a Notice of Trustee's Sale. In January 2011, Capital One purchased the property at the foreclosure auction, and T.D. Service recorded the Trustee's Deed Upon Sale.
C. Wild deed
In February 2010, after the Notice of Default was recorded and before the Notice of Trustee's Sale was recorded, Timothy Fitzgerald (Fitzgerald) of US Banc Trustee TTE, recorded a "Substitution of Trustee and Full Reconveyance." In this document, Fitzgerald inaccurately represented that he was the "Original Beneficiary" of the April 2007 deed of trust and purported to "substitute [himself] as the new Trustee" and to "reconvey, without warranty," the deed of trust to plaintiff.
II. Procedural Background
In the operative second amended complaint (SAC), plaintiff sued Capital One and T.D. Service for slander of title.
*411Plaintiff based his claim on the "filing ... of the Notice of Default, of the Notice of Auction Sale, and of the Trustee's Deed Upon Sale." Capital One demurred, arguing that the filing of *1335the three documents underlying the claim was privileged and thus could not form the basis for a slander of title claim; plaintiff opposed the motion.
The trial court sustained the demurrer without leave to amend. The court cited two reasons: (1) the slander of title claim was based entirely on the recording of documents in nonjudicial foreclosure proceedings that are privileged communications; and (2) plaintiff lacked standing to bring the claim because he had no titular or possessory interest in the property.
Plaintiff filed a motion for reconsideration. The trial court denied the motion because it failed to raise new facts or law that would compel reconsideration.
After the court entered judgment, plaintiff filed a timely notice of appeal.
DISCUSSION
I. Demurrer
In reviewing a trial court's order sustaining a demurrer without leave to amend, we must ask (1) whether the demurrer was properly sustained, and (2) whether leave to amend was properly denied. The first question requires us to " ' "determine whether the complaint states facts sufficient to constitute a cause of action." ' " ( Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016)
*1336A. Was the demurrer properly sustained?
To state a claim for slander of title, a plaintiff must allege "(1) a publication, (2) which is without privilege or justification," (3) which is false, and (4) which "causes direct and immediate pecuniary loss." ( Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009)
*412Plaintiff failed to state a cause of action for slander of title because all of the documents underlying his claim are privileged.
The recording of a notice of sale and notice of default are privileged. Section 2924, subdivision (d)(1), provides that "[t]he mailing, publication, and delivery of notices as required" by section 2924 "constitute privileged communications pursuant to Section 47." (§ 2924, subd. (d)(1).) Section 2924 mandates the recording of both a notice of default (id. , subd. (a)(1)), and a notice of sale (id. , subd. (a)(3)). Indeed, plaintiff conceded in his SAC that the recording of both of these documents was privileged.
The recording of a trustee's deed upon sale is also privileged. Section 2924, subdivision (d)(2) complements and broadens subdivision (d)(1) by providing that "[p]erformance of the procedures set forth in this article" also "constitute privileged communications pursuant to Section 47." (§ 2924, subd. (d)(2).) Section 2924 is part of the article dealing with "Mortgages in General," and two other sections within that article-sections 2924.12 and 2924.19-specifically contemplate and anticipate that a trustee's deed upon sale will be recorded as the capstone of the process of nonjudicial foreclosure. (See §§ 2924.12, subds. (a)(1), (b) & 2924.19, subds. (a)(1), (b).) That these statutes do not expressly mandate that a trustee's deed upon sale be recorded is of no consequence because recording of that deed will occur as a practical matter in every case and, more to the point, the recording of that deed is one of the "procedures set forth in th[e] article." Our Legislature's purpose in declaring these procedures privileged was "to give trustees some measure of protection from tort liability arising out of the performance of their statutory duties." ( Kachlon v. Markowitz (2008)
*413Plaintiff points to the allegation in his SAC that the privilege does not extend to the recording of a trustee's deed upon sale. However, this allegation is a legal conclusion that we are to ignore. ( Winn , supra , 63 Cal.4th at p. 152,
*1337Of course, section 47 creates two privileges: (1) an absolute privilege, commonly called the litigation privilege, that applies irrespective of the speaker's motive ( § 47, subd. (b) ); and (2) a qualified privilege that "applies only to communications made without malice" (id. , subd. (c)). ( Hagberg v. California Federal Bank (2004)
For the purposes of section 47's qualified privilege, "malice" means that the defendant (1) " 'was motivated by hatred or ill will towards the plaintiff,' " or (2) " 'lacked reasonable grounds for [its] belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.' " ( Sanborn v. Chronicle Pub. Co. (1976)
Plaintiff has not alleged that either Capital One or T.D. Service acted with malice in recording any of the three nonjudicial foreclosure documents underlying his slander of title claim. He has not alleged that either entity acted with hatred or ill will toward him. Nor has plaintiff explicitly alleged that they lacked reasonable grounds for believing in the truth of the documents they recorded. Instead, plaintiff alleges that Capital One and T.D. Service were deemed to be constructively aware of his competing claim to title due to his recording of the wild deed. However, the existence of the wild deed did not defeat the reasonableness of Capital One's or T.D. Service's belief in the legitimacy of the nonjudicial foreclosure proceedings they were pursuing. We may judicially notice the 2007 deed of trust and subsequent recordings naming T.D. Service as trustee, even if the trial court did not so notice them. ( Evid. Code, §§ 452, subd. (c) [judicial notice of "[o]fficial acts" permitted], 459 [judicial notice by appellate courts permitted]; Yvanova v. New Century Mortgage Corp. (2016)
*1338Plaintiff asserts that it is inappropriate for us to give judicially noticed documents greater weight than the allegations in his operative complaint. Doing so, he complains, amounts to the resolution of *414evidentiary questions, which is impermissible on demurrer. Plaintiff is incorrect. He is wrong on the law because, as noted above, courts may-and, indeed, must-disregard allegations that are contrary to judicially noticed facts and documents. (See Evans , supra , 38 Cal.4th at p. 20,
For these reasons, the demurrer was properly sustained.
B. Was leave to amend properly denied?
There is also no "reasonable possibility [that] an amendment ... would cure the complaint's legal defect." ( Yvanova , supra , 62 Cal.4th at p. 924,
II. Motion for reconsideration
Plaintiff also argues that the trial court erred in denying his motion for reconsideration under Code of Civil Procedure section 1008, subdivision (a). We review a court's ruling on a motion for reconsideration for an abuse of discretion. ( New York Times Co. v. Superior Court (2005)
*1339DISPOSITION
The judgment is affirmed. Capital One is entitled to its costs on appeal.
We concur:
ASHMANN-GERST, Acting P.J.
GOODMAN, J.
All further statutory references are to the Civil Code unless otherwise indicated.
Plaintiff also sued T.D. Service for breach of contractual duties owed under the original deed of trust. The court later sustained a demurrer to that claim and to a slander of title claim against T.D. Service. That dismissal order is the subject of a separate appeal. (See Schep v. T.D. Service Company (B276066, app. pending).)
Because we resolve the demurrer on this basis, we have no occasion to decide whether plaintiff also lacked standing to prosecute a slander of title claim.
Retired judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Reference
- Full Case Name
- Raymond A. SCHEP, and v. CAPITAL ONE, N.A., and
- Cited By
- 39 cases
- Status
- Published