Filed 9/30/15 Ilyin v. NDEx West CA3
                                           NOT TO BE PUBLISHED
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 This opinion has not been certified for publication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.




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                    (San Joaquin)
                                                            ----




ALEX K. ILYIN et al.,                                                                        C072170

                   Plaintiffs and Appellants,                                     (Super. Ct. No. 39-2011-
                                                                                  00268103-CU-OR-STK)
         v.

NDEX WEST, LLC,

                   Defendant and Respondent.



         Plaintiffs Alex and Samira Ilyin, who lost their home in foreclosure proceedings,
appeal the judgment of dismissal after the trial court sustained the demurrer without leave
to amend of defendant NDEx West, LLC (NDEx), the agent for Wells Fargo Bank, N.A.
(Wells Fargo) and the trustee under plaintiffs’ deed of trust. Plaintiffs’ complaint alleged
that for various reasons Wells Fargo had no legal interest in the deed of trust and could
not legally foreclose.
         Plaintiffs alleged several causes of action which sounded in fraud or required
fraudulent conduct. We shall conclude that the trial court correctly found that plaintiffs
lost their house to foreclosure because they did not make their payments, not because of


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any alleged insufficiency in Wells Fargo’s interest in the deed of trust. Consequently,
plaintiffs could not allege that their damages were caused by their reliance on NDEx’s
misrepresentations, defeating any claim of fraud. We shall however, allow plaintiffs to
amend their cause of action for wrongful foreclosure to allege that they were damaged
because NDEx refused to accept their timely tendered payment of all amounts necessary
to cure the default.
                   FACTUAL AND PROCEDURAL BACKGROUND
       Plaintiffs purchased a home in Tracy, California in 1993, borrowing $193,450 for
the purchase. Plaintiffs refinanced their home in 2001, and took out a separate line of
credit using the home as security. Plaintiffs refinanced their home again in 2002, and
took out another line of credit using the home as security. They refinanced again in 2003.
It is this 2003 loan that is the subject of this action. In 2004 plaintiffs obtained another
line of credit using their home as security. They obtained yet another line of credit using
their home as security in 2005.
       The 2003 loan was from Washington Mutual Bank, F.A., and was in the amount of
$229,000. In 2007, Washington Mutual assigned the mortgage to Wells Fargo. On
January 18, 2011, NDEx, acting as the agent for Wells Fargo (the beneficiary under the
deed of trust), recorded a notice of default and election to sell under the deed of trust. On
February 28, 2011, Wells Fargo recorded a substitution of trustee, substituting NDEx as
the trustee under plaintiffs’ deed of trust. On April 15, 2011, NDEx recorded a notice of
trustee’s sale, setting a sale date of May 12, 2011. A trustee’s deed upon sale was
recorded on August 24, 2011, conveying the property to REO A&D, LLC (REO).
       Plaintiffs filed this action against Wells Fargo and NDEx, stating causes of action
for fraud, constructive fraud, negligent misrepresentation, violation of the Fair Debt
Collection Practices Act (15 U.S.C. § 1692 et seq.; as to Wells Fargo only), violation of




                                              2
Business and Professions Code section 17200, wrongful foreclosure, and tortious
recordation of forged instruments.1
       The allegations that are the basis for plaintiffs’ claims are that: (1) Washington
Mutual divested itself of any interest in the note prior to the assignment to Wells Fargo
when it sold or acquiesced in possession of the note by the Federal National Mortgage
Association (FNMA), who funded or table funded the original note2 with the result that
Washington Mutual had no interest to transfer to Wells Fargo; and (2) the signature on
the assignment to Wells Fargo was “robo-sign[ed]” rendering the assignment void.
       Wells Fargo and NDEx demurred to the complaint. The trial court sustained the
demurrer. It determined that as to the causes of action for fraud, constructive fraud, and
negligent misrepresentation, plaintiffs could not allege that any misrepresentation as to
the true holder of the note caused plaintiffs harm. As to the causes of action for violation
of Business and Professions Code section 17200 and tortious recording of a forged
instrument, the trial court found that plaintiffs and defendants had agreed that those
claims would rise or fall with plaintiffs’ other claims. The court found that the wrongful
foreclosure claim failed for the same reason the fraud-based causes of action failed. The
court noted that failure to accept a timely tender may constitute a wrongful foreclosure,
and that the complaint alleged the plaintiffs “ ‘offered to tender the full amount due under
the Note’ ” but the offer was rejected. The court concluded that an offer of tender was
not sufficiently binding and capable of being accepted by Wells Fargo, thus plaintiffs did
not satisfy the tender pleading requirement. The court denied leave to amend because



1   Plaintiffs alleged a quiet title cause of action only against REO, the purchasers at the
sale. REO is not a party to this appeal.
2  “ ‘[T]able funding’ ” is a practice whereby a mortgage loan is funded at settlement by
an advance of loan funds, and the loan is contemporaneously assigned to the entity
advancing the funds. (Akopyan v. Wells Fargo Home Mortgage, Inc. (2013) 215
Cal.App.4th 120, 152.)

                                              3
after three complaints, plaintiffs had not shown how they could successfully amend the
complaint.
       Well Fargo and NDEx demurred separately. Accordingly, separate orders
sustaining the demurrers and separate judgments were entered in favor of each defendant.
NDEx’s judgment was filed on July 11, 2012. Wells Fargo’s judgment was filed on
September 28, 2012. Plaintiffs filed their notice of appeal only against the judgment
dated July 11, 2012 -- the NDEx judgment.
       Thereafter, plaintiffs, by letter, requested this court add Wells Fargo to the caption
because it was “inadvertently removed from the caption.” We denied the request,
prompting a motion for reconsideration, which was also denied. The judgment in favor
of Wells Fargo was never appealed, thus it is not a party to this appeal and the cause of
action alleged only against Wells Fargo (fourth cause of action, violation of Fair Debt
Collection Practices Act) is not at issue.
                                       DISCUSSION
                                             I
                                    Standard of Review
       We decide de novo whether the complaint contains sufficient facts to state a cause
of action. (Bower v. AT&T Mobility, LLC (2011) 196 Cal.App.4th 1545, 1552.) We
assume the truth of all facts properly pleaded, but do not assume the truth of contentions,
deductions or conclusions of law. (Ibid.) We also consider judicially noticed matters.
(Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) If the trial court sustained the demurrer
without leave to amend, the plaintiff has the burden of proving an amendment would cure
the defect. (Ibid.) If we find there is a reasonable possibility an amendment could cure
the defect, we must reverse the trial court. (Ibid.)




                                              4
                                             II
                                          Causation
       Every element of a cause of action for fraud must be alleged factually and
specifically, and the policy of liberal construction of pleadings will not be invoked to
sustain a materially defective pleading. (5 Witkin, Cal. Procedure (5th ed. 2008)
Pleading, § 711, p. 127.) The elements of a cause of action for fraud (the first cause of
action) are: “ ‘(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.’ [Citation.]” (Lazar v.
Superior Court (1996) 12 Cal.4th 631, 638.) The elements of negligent
misrepresentation (the third cause of action) are the same, except for the element of
knowledge, which for negligent misrepresentation is that the representation was made
without reasonable ground for believing it to be true. (West v. JPMorgan Chase Bank,
N.A. (2013) 214 Cal.App.4th 780, 792.) Constructive fraud (the second cause of action)
is a species of fraud that involves a breach of a fiduciary duty that results in damage to
another even though the conduct is not otherwise fraudulent. (Assilzadeh v. California
Federal Bank (2000) 82 Cal.App.4th 399, 415.) As such, it also requires that the claimed
fraudulent act resulted in damage.
       Plaintiffs argue they adequately pleaded damages by alleging they lost their home
and the underlying equity, and that such result was because of defendants
misrepresenting their ownership in the note and deed of trust. Their specific allegations
were that they “were induced by . . . Wells Fargo to accept the transfers, substitutions and
assignments of legal interests in the Subject Property as genuine,” that “[a]s a direct and
proximate result of the wrongful conduct of Defendants . . . Plaintiffs have been injured
in an amount presently unknown,” and that “[a]s a result of the fraudulent conduct . . .
alleged, Plaintiffs were duped and have suffered onerous foreclosure proceedings, a
trustee sale of their home, and a subsequent sale of that home to yet another party.”


                                               5
       As the trial court noted, the problem was not that the plaintiffs did not allege
damages, but that they could not allege that their reliance on the defendants’
representation of ownership of the note and deed of trust caused their damages. It was
insufficient for plaintiffs to generally allege misrepresentations on the part of the
defendants, reliance, and resulting damage. Plaintiffs were required to allege with
specificity how their reliance on the misrepresentation caused them to lose their house in
foreclosure. “To recover for fraud, the plaintiff must prove ‘ “detriment proximately
caused” by the defendant’s tortious conduct. [Citation.] Deception without resulting loss
is not actionable fraud. [Citation.] “Whatever form it takes, the injury or damage must
not only be distinctly alleged but its causal connection with the reliance on the
representations must be shown.” ’ [Citations.]” (Goehring v. Chapman University (2004)
121 Cal.App.4th 353, 364 (Goehring).)
       In Goehring Chapman University induced Goehring to enroll in its law school
through certain misrepresentations concerning its accreditation. (Goehring , supra, 121
Cal.App.4th at pp. 363-364.) Before Goehring could graduate, he was dismissed because
of his academic record. The court denied Goehring’s fraud claim because his damages
resulted from his academic dismissal, rather than from his reliance on Chapman’s
misrepresentations. (Id. at pp. 364-365.)
       This case is similar. Assuming, as we must on demurrer, that Wells Fargo was not
the lawful holder of the note and deed of trust, plaintiffs nonetheless concede they were
in default on their loan. They necessarily would have been subject to foreclosure
proceedings regardless of who was the rightful owner of the note and deed of trust. As
stated in Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 272, where the
plaintiff made a similar claim that the note and deed of trust had been invalidly assigned:
“As to plaintiff, an assignment merely substituted one creditor for another, without
changing her obligations under the note. Plaintiff effectively concedes she was in
default, and she does not allege that the transfer to HSBC interfered in any manner with

                                              6
her payment of the note [citation], nor that the original lender would have refrained from
foreclosure under the circumstances presented. If MERS indeed lacked authority to make
the assignment, the true victim was not plaintiff but the original lender, which would
have suffered the unauthorized loss of a $1 million promissory note.”3
       Accordingly, the trial court correctly sustained the demurrer as to plaintiffs’ first,
second, and third causes of action (fraud, constructive fraud, & negligent
misrepresentation) because plaintiffs cannot show their damages resulted from the
misrepresentations of defendants.
       Since the fifth and seventh causes of action (for unfair business practices &
tortious recording of a forged instrument, respectively) were dependent on plaintiffs’
other claims, the trial court correctly sustained the demurrer to the fifth and seventh
causes of action as well. A violation of Business and Professions Code section 17200
(unfair business practices--the fifth cause of action), like a fraud cause of action, requires
that the harm suffered be caused by the fraudulent misrepresentation. (Lorenzo v.
Qualcomm Inc. (S.D. Cal. 2009) 603 F.Supp.2d 1291, 1303.) A private person has
standing to assert a violation of California’s Unfair Competition Law “ ‘only if he or she
(1) “has suffered injury in fact,” and (2) “has lost money or property as a result of the
unfair competition.” ’ [Citation.] The second prong of this standing test ‘imposes a
causation requirement. The phrase “as a result of” in its plain and ordinary sense means
“caused by” and requires a showing of a causal connection or reliance on the alleged
misrepresentation.’ ” (Lorenzo v. Qualcomm Inc., at p. 1303.)




3  Because we resolve plaintiffs’ claims by concluding they have failed to allege how
any defects in the assignment of the note and/or deed of trust resulted in their harm, we
do not determine whether they have standing to challenge the assignment on the basis of
such defects. This issue is currently pending before the Supreme Court. (Yvanova v.
New Century Mortgage Corp. (2014) 226 Cal.App.4th 495, review granted Aug. 27,
2014, S218973.)

                                              7
       Plaintiffs’ claim for tortious recordation of a forged instrument (the seventh cause
of action) fails for the same reason. This cause of action is apparently one created by
plaintiffs. They base the cause of action on a violation of Penal Code section 115.4
Where a criminal statue is enacted for the protection of a particular class of persons,
violation of the statute may give rise to civil liability if the plaintiff is a member of the
particular class. (Haft v. Lone Palm Hotel (1970) 3 Cal.3d 756, 763.) However, “[i]t is
necessary to find that the conduct prohibited by the legislative provision is the actual
cause of the injury suffered by the plaintiff.” (Rest. 2d Torts, § 874A, com. j, p. 312.)
This attempt to state a cause of action fails both because the violation of the provision
was not the cause of plaintiffs’ injury, as discussed, and because they were not a member
of a particular class of persons for whom the statute was enacted. Rather, the purpose of
the statute was to “preserve the integrity and reliability of public documents.” (People v.
Gangemi (1993) 13 Cal.App.4th 1790, 1796.)
       Plaintiffs’ sixth cause of action for wrongful foreclosure as pleaded fails for a
similar reason. Plaintiffs alleged that the alleged robo-signing resulted in an invalid
transfer from Washington Mutual to Wells Fargo. They allege that the defendants had no
“standing to foreclose” on the property. Their claim fails because they cannot allege that
the foreclosure was prejudicial. To state a claim for wrongful foreclosure, plaintiffs must
allege that the imperfection in the foreclosure process was prejudicial to their interests.
(Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 272.) Unless plaintiffs
can allege that the improper assignment interfered with their ability to pay, or that the




4   Penal Code section 115 provides in part: “Every person who knowingly procures or
offers any false or forged instrument to be filed, registered, or recorded in any public
office within this state, which instrument, if genuine, might be filed, registered, or
recorded under any law of this state or of the United States, is guilty of a felony.”

                                               8
true beneficiary of the deed of trust would not have foreclosed under the circumstances,
the cause of action fails for lack of prejudice.5
                                              III
                                            Tender
       Citing this court’s opinion in Stebley v. Litton Loan Servicing, LLP (2011) 202
Cal.App.4th 522, 526 (Stebley), the trial court found that plaintiffs had not satisfied the
tender pleading requirement because the complaint alleged plaintiffs merely made an
offer of tender, rather than an actual tender. We held in Stebley that the complaint had
merely alleged offers to tender, and that “[a] full tender must be made to set aside a
foreclosure sale, based on equitable principles.” (Ibid.)
       Plaintiffs argue an allegation of an offer of tender is sufficient, citing an
unreported federal district court case (Permito v. Wells Fargo Bank, N.A., (N.D.Cal., Apr.
20, 2012, No. C-12-00545 YGR) 2012 WL 1380322) which in turn cited Abdallah v.
United Savings Bank (1996) 43 Cal.App.4th 1101, 1109. Contrary to plaintiffs’ claim,
Abdallah stated: “appellants are required to allege tender of the amount of [the]
indebtedness in order to maintain any cause of action for irregularity in the sale
procedure . . . .”
       The controlling statute, Civil Code section 2924c requires the debtor to “pay to the
beneficiary or the mortgagee or their successors in interest” the entire amount shown on
the notice of default plus reasonable costs and expenses incurred in enforcing the deed of
trust in order to cure the default. (Italics added.) A tender is an offer itself. It is “[a]
valid and sufficient offer of performance; specif[ically], an unconditional offer of money


5  Because we resolve plaintiffs’ claims that Wells Fargo, and by extension NDEx, had
no beneficial interest in the deed of trust on the theory that such fact, if true, was not the
cause of plaintiffs’ damages, we need not consider NDEx’s argument that plaintiffs had
no standing to challenge validity of the assignment of the deed of trust. This issue is
currently on appeal before the Supreme Court. (Yvanova v. New Century Mortgage
Corp., supra, 226 Cal.App.4th 495, review granted August 27, 2014, S218973.)

                                               9
or performance to satisfy a debt or obligation . . . .” (Black’s Law Dict. (10th ed. 2014)
p. 1696, col 2.) Thus, when plaintiffs allege an offer to tender, they are actually alleging
an offer to offer.
        We agree with Stebley that the complaint must allege an actual tender of payment,
not merely an offer to tender.
        The question of tender is of no consequence to our resolution of plaintiffs’ fraud-
based causes of action (fraud, constructive fraud, & negligent misrepresentation) as well
as the claims for violation of Business and Professions Code section 17200 and tortious
recordation of a forged instrument.
        The cause of action for wrongful foreclosure is different. The basis of plaintiffs’
wrongful foreclosure cause of action is the alleged invalid transfer of the deed of trust
because of the “robo-signers,” which plaintiffs claim resulted in Wells Fargo having no
authority to foreclose. This claim fails because, as we have explained, plaintiffs cannot
demonstrate how this was prejudicial to their interests. (Fontenot v. Wells Fargo Bank,
N.A., supra, 198 Cal.App.4th at p. 272.)
        However, plaintiffs also alleged that they “did offer tender timely following notice
of the trustee sale . . . [and] Defendants . . . declined to accept the tender . . . .” Failure to
accept a timely tender may constitute a wrongful foreclosure, and a plaintiff may bring an
action for damages. (Munger v. Moore (1970) 11 Cal.App.3d 1.) “[A] trustee or
mortgagee may be liable to the trustor or mortgagor for damages sustained where there
has been an illegal, fraudulent or wilfully oppressive sale of property under a power of
sale contained in a mortgage or deed of trust.” (Id. at p. 7.) Munger v. Moore held that
the plaintiff was entitled to tender the amount due to cure any default and to sue for
damages for the illegal sale that resulted from the failure to accept the timely tender. (Id.
at p. 8.)
        We will remand to allow plaintiffs to amend their complaint to properly allege
they tendered payment in support of a single cause of action for wrongful foreclosure on

                                                10
the ground defendant refused to accept a timely tender that was sufficient pursuant to
statute to cure the default.
                                            IV
                                      Leave to Amend
       Having determined that the trial court appropriately sustained the demurrer, we
must determine whether the plaintiffs can amend the complaint to state a cause of action.
(Total Call Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166.) If it is
reasonably possible the pleading can be cured by amendment, we must find the trial court
abused its discretion in not granting leave to amend. (Grinzi v. San Diego Hospice Corp.
(2004) 120 Cal.App.4th 72, 78.)
       “Plaintiff must show in what manner he can amend his complaint and how that
amendment will change the legal effect of his pleading.” Cooper v. Leslie Salt Co. (1969)
70 Cal.2d 627, 636.) The trial court found that plaintiffs had not shown how they could
amend or how the amendment would change the legal effect of the pleading. It is true
that no amendment would change the legal effect of the pleading as to the issue of any
harm to plaintiffs being caused by their own default on the loan, rather than by any
irregularity in the assignment of the note or deed of trust.
       However, if supported by the facts, it is reasonably possible that plaintiffs can
amend the wrongful termination cause of action to state a claim solely on the ground that
they timely tendered payment of all amounts due to cure the default pursuant to statute,
and that defendant NDEx refused the tender.
       NDEx’s arguments that Wells Fargo was an indispensible party and that NDEx’s
actions were privileged do not change our determination that plaintiffs should be allowed
an opportunity to amend to plead a wrongful foreclosure cause of action for denial of a
timely adequate tender. An indispensable party is one who must be joined as a party to
the action because his or her rights will necessarily be affected by the judgment.
(Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 667.) Wells Fargo


                                             11
was joined as a party to the underlying action, and a judgment was rendered in its favor.
Indispensability is an issue in the trial court. However, if the party was joined below, but
is not a party to the appeal, indispensability is no longer relevant. The indispensible party
doctrine is not applicable here.
       NDEx also argues that it is protected by the qualified common-interest privilege of
Civil Code section 47, subdivision (c)(1). Civil Code section 2924, subdivision (d)
provides in pertinent part: “All of the following shall constitute privileged
communications pursuant to Section 47: [¶] (1) The mailing, publication, and delivery
of notices as required by this section. [¶] (2) Performance of the procedures set forth in
this article.” The privilege afforded under Civil Code section 2924 is the qualified
common interest privilege of Civil Code section 47, subdivision (c), and applies to “the
statutorily required mailing, publication, and delivery of notices in nonjudicial
foreclosure, and the performance of statutory nonjudicial foreclosure procedures . . . .”
(Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 333.) One of the statutory
procedures to be performed by the trustee is the sale of the property. (Civ. Code, §
2924h.) The common interest privilege does not apply if the defendant acted with actual
malice, i.e., motivated by hatred or ill will, or in reckless disregard of the plaintiff’s
rights. (Kachlon v. Markowitz, supra, at p. 336.) The privilege applies to all torts except
malicious prosecution. (Ibid.)
       In this case, plaintiffs alleged that unspecified “[d]efendants” declined to accept
their timely offer of tender. The only allegation that might constitute a malice allegation
pertaining to the sale of the property after rejection of a timely tender, is the allegation
that plaintiffs suffered damages “[a]s a proximate result of the negligent, willful and/or
reckless actions of these Defendants . . . .” Nevertheless, it is reasonably possible that
plaintiffs could amend the complaint to state that in rejecting plaintiffs’ timely tender,
NDEx lacked reasonable grounds to believe plaintiffs had not cured the default, acting in
reckless disregard of plaintiffs’ rights.

                                               12
       To be clear, plaintiffs’ amended complaint may allege only a single cause of
action against NDEx for wrongful foreclosure, based solely on the allegation that
plaintiffs timely tendered payment of all amounts required by statute to cure the default
and reinstate the mortgage, that defendants refused the tender, and that in selling the
property NDEx had no reasonable grounds to believe plaintiffs had not cured the default,
acting in reckless disregard of plaintiffs’ rights.
                                        DISPOSITION
       The judgment is reversed with directions to the superior court to vacate its order
sustaining the demurrer to counts one, two, three, five, six, and seven of the second
amended complaint without leave to amend, and to enter a new order sustaining the
demurrer without leave to amend as to counts one, two, three, five, and seven, and
sustaining the demurrer to the sixth cause of action with leave to amend consistent with
the views expressed in this opinion. The parties shall bear their own costs on appeal.



                                              /s/
                                            Blease, J.


We concur:


         /s/
       Raye, P. J.


         /s/
       Duarte, J.




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