Filed 6/30/15 Cooper v. Equifirst Corp. 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                                                NOT TO BE PUBLISHED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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.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
                                                          (Sacramento)
                                                                  ----



EDWARD COOPER,                                                                                 C070471

                   Plaintiff and Appellant,                                        (Super. Ct. No. 34-2011-
                                                                                   00104605-CU-OR-GDS)
         v.

EQUIFIRST CORPORATION et al.,

                   Defendants and Respondents.




         Plaintiff appeals from a judgment of dismissal on demurrer against his complaint
to recover for alleged fraud in the consummation of a residential loan and for wrongful
foreclosure. We affirm the judgment, concluding the statutes of limitations bar his claims
for damages, and his claims for wrongful foreclosure provide him no remedy.
                                                 ALLEGED FACTS
         In September 2007, plaintiff retained a broker in order to refinance the loan on his
home. The broker’s employee told plaintiff he could refinance again in three to six


                                                              1
months when his credit score improved, but for now, plaintiff would receive the best loan
he could get under his current financial circumstances.
       The employee misrepresented certain facts in the loan application. He overstated
plaintiff’s monthly income by more than $1,800; listed a Harley Davidson worth $23,000
as one of plaintiff’s assets (plaintiff has never owned a Harley Davidson); and overstated
the value of plaintiff’s home. Plaintiff did not read the loan application prior to its
submittal or for more than two years afterward.
       On September 19, 2007, plaintiff obtained a 30-year adjustable rate loan from
EquiFirst Corporation (EquiFirst). The loan was memorialized in a note and secured by a
deed of trust. The deed listed Mortgage Electronic Registration Systems, Inc. (MERS) as
the beneficiary acting as a nominee for EquiFirst.
       The deed of trust contained riders. A prepayment penalty rider stated plaintiff
would incur a penalty if he paid his loan in full within the first three years of the loan’s
term. A balloon payment rider stated the loan was payable in full on the maturity date.
Plaintiff signed the deed of trust and all of the riders.
       Over the next three years, the loan was assigned to various parties. By 2011, Bank
of New York Mellon Trust Company, National Association as Grantor Trustee of the
Protium Master Grantor Trust (BONY), owned the note. Statebridge Company, LLC
(Statebridge) serviced the loan..
       In May 2011, the trustee recorded a Notice of Default and Election to Sell against
the property.
                                      CASE HISTORY
       On June 8, 2011, nearly four years after executing the loan documents and
receiving the loan, plaintiff filed this action for fraud and wrongful foreclosure. His first
amended complaint, filed September 2, 2011, named as defendants the original lender,
EquiFirst; EquiFirst’s nominee, MERS; BONY, the current beneficiary; Statebridge, the
current loan servicer; and most other entities and individuals who had at one time

                                               2
procured or serviced the loan. Plaintiff alleged 10 causes of action: (1) deceit; (2) civil
conspiracy to defraud; (3) breach of fiduciary duty; (4) aiding and abetting breach of
fiduciary duty; (5) negligence; (6) violations of Business and Professions Code section
17200; (7) wrongful foreclosure in violation of Civil Code section 2923.5;1 (8) wrongful
foreclosure in violation of section 2924; (9) wrongful foreclosure in violation of section
2932.5; and (10) fraud.
       Subsequently, plaintiff ex parte obtained a temporary restraining order enjoining
any trustee sale and an order to show cause on his request for a preliminary injunction.
       EquiFirst filed a demurrer against the first amended complaint, as did BONY,
MERS, and Statebridge.2
       By minute order dated November 10, 2011, the trial court denied plaintiff’s
request for a preliminary injunction and vacated the temporary restraining order. The
court denied the preliminary injunction preventing a foreclosure sale because plaintiff
was not likely to prevail on the merits. Plaintiff contended the notice of default was
invalid because the issuer did not comply with section 2923.5’s requirement that the
parties first assess and explore alternatives to foreclosure. The court found on the weight
of the evidence that the defendants had complied with section 2923.5. Plaintiff’s
unlikelihood of succeeding on the merits outweighed the interim harm he would suffer if
the injunction were not granted.
       Also by minute orders dated November 10, 2011, the trial court ruled on both
demurrers. It sustained EquiFirst’s demurrer against the entire first amended complaint
without leave to amend. Of relevance here, the court found the applicable statutes of
limitations barred the first, third, fourth, fifth, and sixth causes of action, and that plaintiff



1      Undesignated section references are to the Civil Code.
2      The other defendants named in the complaint are not before us.

                                                3
had failed to plead facts to justify tolling the statutes of limitations. The court also
sustained EquiFirst’s demurrer to the ninth cause of action, wrongful foreclosure in
violation of section 2932.5, because that statute did not apply to a deed of trust.
       The trial court sustained in part and overruled in part the demurrer filed by BONY,
MERS, and Statebridge. It sustained the demurrer as against all causes of action except
the sixth cause of action, violation of Business and Professions Code section 17200, and
the seventh cause of action, wrongful foreclosure in violation of section 2923.5. Plaintiff
adequately pleaded as his seventh cause of action a violation of section 2923.5, and that
act served as the predicate to plead a violation of Business and Professions Code section
17200 as his sixth cause of action.
       The court sustained BONY and MERS’s demurrer to the ninth cause of action,
again because the remedies provided by section 2932.5 do not apply to a deed of trust. It
also sustained the demurrer because plaintiff had failed to tender the indebtedness it
owed. The court ordered plaintiff to file a second amended complaint against BONY,
MERS, and Statebridge containing only the two remaining causes of action.
       On November 18, 2011, eight days after the trial court issued its minute order
vacating the order to show cause and the temporary restraining order, defendant’s house
was sold at a trustee’s foreclosure sale.
       The court issued its formal order vacating the order to show cause and the
temporary restraining order on December 1, 2011.
       Plaintiff filed a second amended complaint alleging again the sixth and seventh
causes of action, against which BONY, MERS, and Statebridge filed a demurrer.
Defendants’ demurrer to the seventh cause of action, violation of section 2923.5, asserted
the cause of action was moot because the home had already been sold, and there is no
remedy for a violation of section 2923.5 once the home is sold. Plaintiff conceded the
sale ordinarily renders a cause of action under section 2923.5 moot, but he argued the
sale occurred in violation of the temporary restraining order, which plaintiff contended

                                               4
was not vacated until the court issued its formal order on December 1, 2011, and, in turn,
in violation of section 2924g, which prohibits a trustee sale from occurring within seven
days after the expiration of a restraining order.
       The trial court determined the restraining order had not been valid against the
defendants because their counsel had not been properly notified of the ex parte hearing
where the order was obtained. The court also ruled that even if notice had been proper,
the restraining order was vacated as of the date of the court’s minute order, not its formal
order, and the sale had occurred on a timely basis. The court sustained the demurrer
against the seventh cause of action without leave to amend.
       Because the remaining sixth cause of action, a violation of Business and
Professions Code section 17200, was derivative of the seventh cause of action, which the
court had just dismissed, the court also sustained the demurrer against the sixth cause of
action without leave to amend.
       Plaintiff appeals from the resulting judgments of dismissal. He contends the trial
court erred in three respects:
       1.     Ruling his first, third, fourth, fifth, and sixth causes of action were barred
by the statutes of limitations;
       2.     Ruling tender was required to bring a wrongful foreclosure action under
section 2932.5 (ninth cause of action); and
       3.     Dismissing the seventh cause of action, wrongful foreclosure under section
2923.5, when he had alleged the trustee sale occurred in violation of a valid and existent
temporary restraining order.
                                       DISCUSSION
                                              I
                Statutes of Limitations and Accrual of the Causes of Action
       Plaintiff contends the trial court erred when it concluded the applicable statutes of
limitations barred most of his causes of action, and that he failed to plead sufficient facts

                                              5
showing his causes of action accrued later than the day he executed the loan documents.
He asserts he pleaded sufficient facts demonstrating he had no reason to discover his
causes of action until at least April 2010. Alternatively, he asserts he was not subject to
the usual degree of diligence to discover his claims because he pleaded he had a fiduciary
relationship with his lender, EquiFirst, which arose because EquiFirst and plaintiff’s
broker were allegedly in an agency relationship. We disagree with plaintiff’s arguments.
       “Generally speaking, a cause of action accrues at ‘the time when the cause of
action is complete with all of its elements.’ [Citations.] An important exception to the
general rule of accrual is the ‘discovery rule,’ which postpones accrual of a cause of
action until the plaintiff discovers, or has reason to discover, the cause of action.
[Citations.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806-807 (Fox).)
       “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a]
plaintiff whose complaint shows on its face that his claim would be barred without the
benefit of the discovery rule must specifically plead facts to show (1) the time and
manner of discovery and (2) the inability to have made earlier discovery despite
reasonable diligence.’ [Citation.] In assessing the sufficiency of the allegations of
delayed discovery, the court places the burden on the plaintiff to ‘show diligence’;
‘conclusory allegations will not withstand demurrer.’ [Citation.]” (Fox, supra, 35
Cal.4th at p. 808, original italics.)
       Plaintiff’s first amended complaint shows on its face that most of his causes of
action would be time-barred without the benefit of the discovery rule. The first, third,
fourth, fifth, and sixth causes of action are based on alleged misrepresentations that
occurred during loan negotiations. Those negotiations were consummated with execution
of the loan documents on September 19, 2007. Claims for deceit, fraud, and breach of
fiduciary duties are subject to a three-year statute of limitations. (Code Civ. Proc., § 338,
subd. (d).) The negligence claim is subject to a two-year statute of limitations. (Code of
Civ. Proc., § 335.1.) Unless the discovery rule applied and delayed accrual of his causes

                                              6
of action, plaintiff was obligated under the statutes of limitations to file his complaint no
later than September 19, 2010. Plaintiff filed his original complaint on June 8, 2011.
       We conclude the discovery rule did not delay accrual of plaintiff’s causes of action
and postpone the running of the limitations periods because plaintiff did not plead facts
showing he would not have discovered the alleged misrepresentations despite reasonable
diligence. To the contrary, he pleaded facts showing he would have discovered the
alleged misrepresentations had he exercised reasonable diligence. Plaintiff alleged he did
not discover the misrepresentations in the loan application about his assets “until he
reviewed his loan documents for purpose of filing for bankruptcy protection in April
2010.” By this statement, plaintiff admits he could have discovered the
misrepresentations had he read his loan documents at the time he executed them. He
therefore would have been able to file his suit within the limitation periods.
       Whatever the term “reasonable diligence” may mean, it at least means in this
circumstance an obligation on plaintiff to read his loan documents when he signs them.
“Reliance on an alleged misrepresentation is not reasonable when plaintiff could have
ascertained the truth through the exercise of reasonable diligence. [Citation.] Reasonable
diligence requires the reading of a contract before signing it.” (Rowland v. PaineWebber
Inc. (1992) 4 Cal.App.4th 279, 286; see Meyer v. Ameriquest Mortgage Co. (9th Cir.
2003) 342 F.3d 899, 902 [in the exercise of reasonable diligence, plaintiffs should have
discovered violations of the federal Truth in Lending Act in their loan documents the day
they signed them].)
       Plaintiff’s additional factual allegations are also insufficient. He alleged he did
not discover until March 2011 defendants’ misstatement of his income, their alleged
failure to disclose the balloon payment and the prepayment penalty, and their alleged
failure to disclose fees paid to his broker. Plaintiff does not explain why he was unable to
discover those alleged misrepresentations upon the exercise of due diligence. Such
conclusory allegations do not withstand demurrer. (Fox, supra, 35 Cal.4th at p. 808.)

                                              7
       Plaintiff alleges he could not have discovered untilo March 2011 the defendants’
alleged fraud and deceit regarding his ability to refinance the loan because the limitation
was not apparent from the loan documents. The documents, however, do not prohibit
him from refinancing the loan. Rather, they impose a penalty should he do so within the
first three years of the loan, and that condition of the loan was explicitly spelled out in the
loan documents. Had plaintiff read the documents upon signing them, he would have
understood this condition.
       Plaintiff argues that due to his loan’s complexity, he would not have been able to
understand the documents had he read them. We disagree. The alleged
misrepresentations of which he complains are explicitly contained in the loan documents
in easily understandable language. Plaintiff does not contend he is unable to read or
understand English, that the misrepresentations of which he complains were not
disclosed, or that they were fraudulently concealed. They were there for him to read and
understand.
       Plaintiff contends he was excused from reading the loan documents under the rule
of Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773 (Wyatt). That case affirmed an
award of damages to a borrower against his loan broker and the broker’s affiliated
corporations for misrepresentations in breach of a fiduciary duty and under a theory of
civil conspiracy, even though the debtor did not read the loan documents and he filed his
complaint after the statute of limitations had allegedly run. The court ruled the plaintiff’s
claims were not time-barred because he successfully alleged and proved an ongoing civil
conspiracy of fraud in violation of a fiduciary duty. A statute of limitations does not
begin to run on a civil conspiracy until the “ ‘last overt act’ ” pursuant to the conspiracy
has been completed. (Id. at pp. 786-787.)
       Wyatt, however, did not address what effect the borrower’s failure to read the loan
documents had on the accrual of his claims. It did not need to address that issue because
the borrower in that case had a fiduciary relationship with the broker and could rely upon

                                              8
his expertise, and because the broker continued to service the loan and thus was an
ongoing participant in the civil conspiracy whose last overt act occurred after the filing of
the complaint. “It is axiomatic that language in a judicial opinion is to be understood in
accordance with the facts and issues before the court. An opinion is not authority for
propositions not considered. [Citations.]” (Chevron U.S.A., Inc. v. Workers' Comp.
Appeals Bd. (1999) 19 Cal.4th 1182, 1195.) Wyatt does not apply here.
       Alternatively, plaintiff asserts he was entitled to a more lenient standard of
discovery of the facts because he alleged his lender owed him a fiduciary duty as a result
of an agency relationship that allegedly existed between the lender, EquiFirst, and
plaintiff’s broker. Plaintiff raised this argument at the trial court, but the court did not
address it.
       In cases where a fiduciary duty exists, the same degree of diligence in discovering
misrepresentation is not required. (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412,
440.) In such cases, the plaintiff “is only required to establish facts sufficient to show
that he made an actual discovery of hitherto unknown information within [the limitations
period] before the filing of the action in order to satisfy the duty of diligence and to
thereby come within the limitations period. [Citation.]” (Electronic Equipment Express,
Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 855.)
       Even if plaintiff has alleged his broker was EquiFirst’s agent, those allegations do
not allege EquiFirst had a fiduciary duty to plaintiff. Merely asserting EquiFirst owed
him a fiduciary duty is insufficient for two reasons. First, the “relationship between a
lending institution and its borrower-client is not fiduciary in nature. [Citation.]”
(Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1093, fn. 1
(Nymark).) “No fiduciary duty exists between a borrower and lender in an arm’s length
transaction. [Citations.]” (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th
182, 206.) As we stated in Nymark, “[a] commercial lender is entitled to pursue its own
economic interests in a loan transaction. [Citation.] This right is inconsistent with the

                                               9
obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate
its interests to act on behalf of and for the benefit of another. [Citation.]” (Nymark,
supra, 231 Cal.App.3d at p. 1092, fn. 1.)
       Second, the allegations of a fiduciary duty fail because conclusory allegations do
not establish a cause of action’s accrual was delayed. (Fox, supra, 35 Cal.4th at p. 808.)
At best, plaintiff’s allegations show his broker acted as a dual agent and thus bore
fiduciary duties to plaintiff and EquiFirst. However, such a dual agency did not create a
fiduciary relationship between the broker’s two principals.
       An agent has a fiduciary duty to its principal, or principals, as the case may be, but
plaintiff has cited no authority establishing a principal of a dual agent owes a fiduciary
duty to the dual agent’s other principal, and we have found none. A principal may be
liable for his agent’s fraud against the agent’s other principal, but that liability would not
arise under a theory of breach of a fiduciary duty. (See Feckenscher v. Gamble (1938) 12
Cal.2d 482, 497-498 [principal liable for damages suffered by dual agent’s other principal
on account of agent’s false and fraudulent representations to other principal].)
       Because plaintiff cannot allege EquiFirst owed him a fiduciary duty, he is not
entitled to the discovery rule’s exception for causes of action against fiduciaries.
Accordingly, his first, third, fourth, fifth, and sixth causes of action are time-barred, as he
pleaded facts showing he would have discovered the alleged misrepresentations at the
time he executed the loan documents had he exercised reasonable diligence.
                                              II
     Application of Section 2932.5 and Tender as a Prerequisite to Bring a Wrongful
                                     Foreclosure Action
       The ninth cause of action accused EquiFirst, BONY, and MERS of wrongful
disclosure under section 2932.5. That statute authorizes an assignee to exercise a power
of sale included in a mortgage only if the assignment is duly acknowledged and recorded.
Plaintiff alleged no valid assignment of the deed of trust was ever recorded.

                                              10
       The trial court sustained the defendants’ demurrers to this cause of action on two
grounds: section 2932.5 applies only to mortgages, not deeds of trust; and plaintiff could
not recover for irregularity in the sale proceeding without alleging he first tendered the
debt he owed.
       Plaintiff attacks only the trial court’s second ground. However, the first ground is
dispositive. “It has been established since 1908 that this statutory requirement that an
assignment of the beneficial interest in a debt secured by real property must be recorded
in order for the assignee to exercise the power of sale applies only to a mortgage and not
to a deed of trust. . . . [¶] . . . [¶] The rule that section 2932.5 does not apply to deeds of
trust is part of the law of real property in California.” (Calvo v. HSBC Bank USA, N.A.
(2011) 199 Cal.App.4th 118, 122, 123.) We affirm the court’s sustaining of the demurrer
against the ninth cause of action on this basis.
                                              III
                  Claim for Wrongful Foreclosure under Section 2923.5
       Section 2923.5 in general requires a lender, before filing a notice of default, to
contact the buyer, assess his financial situation, and explore his options for avoiding
foreclosure. (§ 2923.5, subd. (a).) In his seventh cause of action, plaintiff alleged BONY
and MERS violated this statute. However, plaintiff concedes, and the trial court held,
that under the rule of Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 214 (Mabry),
the remedy for noncompliance with section 2923.5 is postponement of the foreclosure
sale. Once a foreclosure sale has occurred, as is the case here, a borrower has no
remedies under section 2923.5.
       Plaintiff asks us to create an exception to the Mabry rule and hold he may state a
cause of action under section 2923.5 even after the trustee sale has occurred if the sale
occurred in violation of a court order. He asserts the sale of his residence occurred in
violation of the temporary restraining order, which, he alleges, was not vacated until after
the trustee sale when the court filed its formal order denying the order to show cause. He

                                              11
offers no authority for his proposed holding. Rather, he claims we must reach his
conclusion to prevent lenders from avoiding compliance with section 2923.5 by
foreclosing and then invoking the Mabry rule. We cannot interpret the statute as plaintiff
desires.
        “Civil Code section 2923.5 does not provide for damages, or for setting aside a
foreclosure sale, nor could it do so without running afoul of federal law, that is, the Home
Owner’s Loan Act (12 U.S.C. § 1641 et seq.; HOLA), and implementing regulations (12
C.F.R. § 560.2(b) (2011)). (See generally Harris v. Wachovia Mortgage, FSB (2010) 185
Cal.App.4th 1018, 1024-1026 [broad preemptive effect of HOLA regulations]; Silvas v.
E*Trade Mortgage Corp. (9th Cir. 2008) 514 F.3d 1001, 1004-1006.) The statute was
‘carefully drafted to avoid bumping into federal law’ regulating home loans. (Mabry,
supra, 185 Cal.App.4th at p. 226.) As a result, the sole available remedy is ‘more time’
before a foreclosure sale occurs. (Ibid.) After the sale, the statute provides no relief.
(Mabry, supra, at pp. 235-236; Hamilton v. Greenwich Investors XXVI, LLC (2011) 195
Cal.App.4th 1602, 1615-1617; Phat Ngoc Nguyen v. Wells Fargo Bank, N.A. (N.D.Cal.
2010) 749 F.Supp.2d 1022, 1033, 1035-1036.) Further, the statute does not – and legally
could not – require the lender to modify the loan. (Mabry, supra, 185 Cal.App.4th at p.
214.)
        “Plaintiffs do not discuss preemption. Therefore, we accept the view, stated in
Mabry and other cases, that . . . section 2923.5 does not provide relief after a sale takes
place.” (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526, original
italics, fn. omitted.)
        Because plaintiff’s sale has occurred, he cannot obtain any relief under section
2923.5. We thus do not discuss his claims for relief under section 2923.5 on the basis the
sale allegedly occurred in violation of a court order.




                                             12
                                    DISPOSITION
      The judgment is affirmed. Costs on appeal are awarded to defendants EquiFirst,
BONY, MERS, and Statebridge. (Cal. Rules of Court, rule 8.278(a).)




                                                    NICHOLSON            , J.



We concur:



     BLEASE               , Acting P. J.



     MAURO                , J.




                                           13
