Tuesday, August 30, 2016

Unlike Virginia, California recognizes the tort of Wrongful Foreclosure

JAN KALICKI et al., Plaintiffs and Appellants,
v.
E*TRADE BANK, Defendant and Respondent.
D066236
COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA
September 28, 2015
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Courtrule 8.1115(a); prohibits courts and parties from citing or relying on opinions not certified for publication or ordered publishedexcept as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 37-2013-00039651-CU-BC-NC)
APPEAL from a judgment of the Superior Court of San Diego County, Robert P. Dahlquist, Judge. Reversed and remanded with directions.
Ghods Law Firm, Lex Opus, Mohammed K. Ghods, Erick M. Schiffer and William A. Stahr for Plaintiffs and Appellants.
Parker Ibrahim & Berg, John M. Sorich and Jenny L. Merris for Defendant and Respondent.
        Jan Kalicki and Rosalind Jones Kalicki (together the Kalickis) appeal from an order sustaining the demurrer of E*Trade Bank (E*Trade) without leave to amend. The Kalickis contend the trial court erred because they pleaded legally
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sufficient claims for declaratory relief, quiet title, slander of title, fraud, wrongful foreclosure, trespass and violation of the Unfair Competition Law (UCL) set forth in West's annotated Business and Professions Code section 17200 et seq. We agree as to the claims for wrongful foreclosure, trespass and violation of the UCL and reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
        Because the challenged ruling arises in the context of a demurrer, we accept as true the material factual allegations of the second amended complaint. (Olszewski vScripps Health (2003) 30 Cal.4th 798, 806.) We also accept as true all matters properly subject to judicial notice (Blank vKirwan (1985) 39 Cal.3d 311, 318), but do not accept "contentions, deductions, or conclusions of fact or law." (Moore vRegents of University of California (1990) 51 Cal.3d 120, 125.) The operative second amended complaint alleges the following facts:
        The Kalickis own a home in San Marcos, California (the property). In August 1998, they obtained a residential loan in the amount of $375,000.00 (the loan) from Headlands Mortgage Company (Headlands) secured by a promissory note (the note) and deed of trust (the deed). The loan was then assigned to others, including JPMorgan Chase Bank, N.A. (Chase). E*Trade currently claims it is the assignee of the note and deed. At other times, however, E*Trade has denied owning the loan and claimed it had no information about the loan.
        In 2008, the property was wrongfully sold at a foreclosure sale, but the sale was later rescinded by the foreclosure trustee. In September 2009, the Kalickis
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filed a prior action on the loan entitled Kalicki et alvWashington Mutual Bank et al., San Diego County Superior Court Case No. 37-2009-00059032 (the prior action). They claim they are entitled to a declaration that any judicial action on the loan is barred by the applicable statute of limitations and California's one-action rule. Even assuming any rights on the loan currently exist, at the deposition of an E*Trade representative, E*Trade failed to produce any evidence showing it is the current owner or beneficiary of the loan. The Kalickis claim E*Trade is fraudulently holding itself out to be the owner of the loan.
        To the extent any rights on the loan currently exist, the Kalickis contend these rights are not held by E*Trade. They also claim they are entitled to a declaration quieting title to the property and are ready, willing and able to tender the amounts due under the loan to its rightful owner. In the alternative, if E*Trade should somehow prove it is the owner of the loan, they allege E*Trade is legally responsible for damages caused by the slander of Kalickis' title committed by E*Trade's agents, such as Chase, as well as other torts, such as wrongful foreclosure and trespass.
DISCUSSION
I. Standard of Review
        We review the complaint de novo (Cantu vResolution Trust Corp(1992) 4 Cal.App.4th 857, 879), with appellants bearing the burden of proving that the trial court erred in sustaining the demurrer (Kong vCity of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1038). We liberally construe
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a complaint "with a view to substantial justice between the parties." (Code Civ. Proc., § 452.) If the complaint states any possible legal theory, the trial court's order sustaining the demurrer must be reversed. (Palestini vGeneral Dynamics Corp(2002) 99 Cal.App.4th 80, 86.) Also, "if there is a reasonable possibility the defect in the complaint could be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend." (City of Atascadero vMerrill LynchPierceFenner & SmithInc(1998) 68 Cal.App.4th 445, 459.) Whether a plaintiff will be able to prove its allegations is not relevant. (Alcorn vAnbro EngineeringInc(1970) 2 Cal.3d 493, 496.)
II. Analysis
A. Declaratory Relief
        Declaratory relief is available to resolve an "actual controversy" about a party's rights and obligations under a deed or contract. (Code Civ. Proc., § 1060.) "Unlike coercive relief (such as damages, specific performance, or an injunction) in which a party is ordered by the court to do or to refrain from doing something, a declaratory judgment merely declares the legal relationship between the parties. Under the provisions of the [Declaratory Judgment] Act, a declaratory judgment action may be brought to establish rights once a conflict has arisen, or a party may request declaratory relief as a prophylactic measure before a breach occurs." (Mycogen CorpvMonsanto Co(2002) 28 Cal.4th 888, 898.) A demurrer is the proper manner in which to challenge a claim for declaratory relief. (General of America InsCovLilly (1968) 258 Cal.App.2d 465, 471.)
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        The Kalickis' declaratory relief claim alleges a dispute exists regarding whether E*Trade is the assignee of the note and deed, and thus whether E*Trade is entitled to pursue any judicial or nonjudicial remedies regarding the loan. The Kalickis claim they are entitled to a judicial determination (1) regarding the rights, duties and obligations of the parties with respect to the loan and (2) that any action on the loan is barred by California's one-action rule.
        The trial court concluded that Glaski vBank of America (2013) 218 Cal.App.4th 1079 (Glaski) does not compel overruling the demurrer and was persuaded that Jenkins vJPMorgan Chase BankN.A(2013) 216 Cal.App.4th 497 (Jenkins) applied. Following Jenkins, the trial court concluded the claim for declaratory relief and all other causes of action alleged by the Kalickis were fatally defective. Accordingly, the parties debate whether Glaski or Jenkins applies. Briefly, appellate courts are divided about whether a borrower has standing to challenge a foreclosure when the borrower is not the party aggrieved by the lender's improper assignment or securitization of a deed of trust. (Compare Jenkinssupra, at pp. 514-515 [borrower lacks standing to challenge lender's transfer of note because borrower is not aggrieved by the lender's subsequent ineffective assignment] with Glaskisupra, at pp. 1094-1096 [if assignment of note and deed of trust is void at inception, borrower has standing to assert wrongful foreclosure claim based on trustee's failure to adhere to statutory requirements for foreclosure sale].) The Supreme Court will be deciding whether, in an action for wrongful foreclosure on a deed of trust securing a home loan, a borrower has standing to
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challenge an assignment of the note and deed of trust on the basis of defects allegedly making the assignment void. (See Yvanova vNew Century Mortgage Corp(2014) 226 Cal.App.4th 495, review granted Aug. 27, 2014, S218973; Keshtgar vU.SBankN.A(2014) 226 Cal.App.4th 1201, review granted Oct. 1, 2014, S220012 [grant and hold for Yvanova ]; Mendoza vJPMorgan ChaseN.A(2014) 228 Cal.App.4th 1020, review granted Nov. 12, 2014, S220675 [same].) As we shall explain, the rule as stated in Jenkins is better reasoned.
        A comprehensive statutory framework exists for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. (Moeller vLien (1994) 25 Cal.App.4th 822, 830.) The nonjudicial foreclosure scheme authorizes the "trustee, mortgagee, or beneficiary, or any of their authorized agents" to record a notice of default and election to sell upon the trustor-debtors default on the secured debt. (Civ. Code, § 2924, subd. (a)(1), italics added.) Nothing in the nonjudicial foreclosure scheme precludes foreclosure when the foreclosing party does not possess the original promissory note. (Debrunner vDeutsche Bank National Trust Co(2012) 204 Cal.App.4th 433, 440.) Generally, "California courts have refused to delay the nonjudicial foreclosure process by allowing trustor-debtors to pursue preemptive judicial actions to challenge the right, power, and authority of a foreclosing 'beneficiary' or beneficiary's 'agent' to initiate and pursue foreclosure." (Jenkinssupra, 216 Cal.App.4th at p. 511.)
        In a nutshell, the Kalickis claim they require a judicial declaration as to the holder of their note in order to pay off the note and obtain clear title. Not so. A
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note is a negotiable instrument that can be transferred without notice to the borrower and upon such a transfer, the borrower's obligations under the note do not change. (Herrera vFederal National Mortgage Assn(2012) 205 Cal.App.4th 1495, 1507.) The Kalickis' deed specifically provides that the note may be transferred at any time without providing notice of the transfer to the Kalickis. The deed also provides that the loan servicer is authorized to collect monthly payments under the loan. The Kalickis conceded in the prior action and during oral argument that Chaseis the servicer of the loan. Accordingly, whether E*Trade presently holds their note is irrelevant to their obligations under the note and deed.
        Moreover, when an obligation secured by a deed of trust has been satisfied, the Kalickis, as the trustors, are entitled to a full reconveyance of the property. (Civ. Code, § 2941, subd. (b); Huckell vMatranga (1979) 99 Cal.App.3d 471, 476.) If the original promissory note has been lost, means exist to address this contingency. (See Huckell vMatrangasupra, at pp. 479-480.) Additionally, a procedure exists by which a borrower may obtain reconveyance of a deed of trust when the obligation secured by the deed of trust has been paid and the lender cannot be located or refuses to request the trustee to reconvey. (Civ. Code, § 2941.7.) Finally, a beneficiary or trustee, or assignee thereof, who violates the statute requiring execution and recordation of reconveyance of property covered by a deed of trust is liable to the trustor or mortgagor, or the owner of the land, or that person's grantees or heirs, for all damages which that person may sustain by reason of the violation. In addition, the violator must forfeit to that person a specified sum
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of money. (Civ. Code, § 2941, subd. (d).) Accordingly, that part of the declaratory relief claim seeking to know the holder of the note lacks merit as the Kalickis cannot show the existence of an actual, present controversy between themselves and E*Trade.
        The Kalickis also seek a declaration that E*Trade is barred by the operation of Code of Civil Procedure section 726 (section 726) from exercising any judicial remedies based on the prior action on the loan. The section 726 "one-action rule" provides there can only be one action for the recovery of debt or enforcement of a right secured by a mortgage on a real property or estate. The one-action rule protects debtors from multiple collection actions by providing a secured creditor can bring only one lawsuit to enforce its security interest and collect its debt. (Kinsmith Financial CorpvGilroy (2003) 105 Cal.App.4th 447, 453-454.) A trustee sale is not an action within the meaning of section 726. (See Bernhardt et al., Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2015) § 4.17, p. 4-12.)
        Here, the Kalickis filed the prior action, not the purported creditor. Because the prior action was not for the recovery of any debt or the enforcement of any right secured by the deed, the one-action rule does not apply. Thus, that part of the declaratory relief claim seeking a declaration that E*Trade is barred by the operation of section 726 from exercising any judicial remedies based on the prior action on the loan does not state an actual controversy for which declaratory relief
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is available. Because the Kalickis did not allege a valid claim for declaratory relief as a matter of law, the trial court properly sustained the demurrer.
B. Quiet Title
        The Kalickis alleged that E*Trade does not own the loan and they are entitled to a declaration quieting title to the property against all adverse claims of E*Trade. The Kalickis assert they are "ready, willing, and able to tender the amounts due under the Loan to its rightful [o]wner." This claim stands or falls with the declaratory relief claim as it is another means of obtaining a declaration regarding the true owner of the loan. (Caira vOffner (2005) 126 Cal.App.4th 12, 24 ["An action to quiet title is akin to an action for declaratory relief in that the plaintiff seeks a judgment declaring his rights in relation to a piece of property."].)
        Code of Civil Procedure section 761.020 sets forth the elements for a quiet title action. A quiet title action is equitable in nature. (Caira v.Offnersupra, 126 Cal.App.4th at p. 25.) Accordingly, it is well settled that a mortgagor cannot clear title without satisfying the debt. (Shimpones v.Stickney (1934) 219 Cal. 637, 649; Aguilar vBocci (1974) 39 Cal.App.3d 475, 478.) The tender requirement is "based upon the equitable principle that he who seeks equity must do equity. [A] court of equity will not aid a person in avoiding the payment of his or her debts." (Mix v.Sodd (1981) 126 Cal.App.3d 386, 390.)
        Here, the Kalickis know who to pay to clear their debt—the loan servicer. The trial court properly sustained the demurrer to the quiet title claim because the Kalickis provided no justification for failing to cure their default before invoking
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the court's equitable jurisdiction to quiet title. Should the Kalickis discharge their debt, they may seek leave of court to amend their complaint to allege a quiet title claim.
C. Slander of Title
        The Kalickis allege that if E*Trade should prove it is the owner of the loan, then E*Trade is legally responsible for the slander of their title by its agents for recording a number of false documents which disparaged their title. E*Trade asserts the trial court properly sustained its demurrer because this claim is (1) time-barred, (2) the documents were removed from title before the underlying action was filed, and (3) the recording of the documents was privileged. We agree with the latter argument.
        To state a cause of action 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 LoftLLC vMercury LiquorsInc(2009) 173 Cal.App.4th 1040, 1051.) The "mailing, publication, and delivery of notices" required as part of the nonjudicial foreclosure process is protected by the qualified privilege set forth in Civil Code section 47, subdivision (c)(1). (Civ. Code, § 2924, subd. (d)(1).) To overcome this privilege, a plaintiff must allege facts showing the recording was done with malice, motivated by hatred or ill will, or without reasonable grounds for belief in the truth of the publication. (Kachlon vMarkowitz (2008) 168 Cal.App.4th 316, 336.) While a privilege is generally pleaded as an affirmative defense in the answer, where the
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complaint discloses the existence of a qualified privilege, it must allege malice to state a cause of action. (Cameron vWernick (1967) 251 Cal.App.2d 890, 894-895.) "Mere allegations of malice are not sufficient [citations]; actual facts must be alleged, unless they are apparent from the statement itself." (Tschirky vSuperior Court (1981) 124 Cal.App.3d 534, 538-539.)
        The Kalickis based their slander of title claim on the preparation and recording of an allegedly false notice of default, notice of sale, trustee's deed upon sale and assignment of deed. Assuming E*Trade was involved in the recording process, the Kalickis have not alleged any facts to overcome the privilege. Accordingly, their slander of title claim fails.
        Finally, counsel for the Kalickis represented during oral argument that the slander of title claim was based on E*Trade's allegedly false declaration that it owned the loan. This allegation is not contained in the complaint and we deem the statement to be an offer as to how the complaint could be amended to state a valid claim for slander of title. (Cansino vBank of America (2014) 224 Cal.App.4th 1462, 1468 [appellant bears the burden of showing there is a reasonable possibility pleading defects may be cured by amendment and may meet this burden on appeal].)
        To be actionable, the disparaging statement must be relied upon by a third party. (Appel vBurman (1984) 159 Cal.App.3d 1209, 1214.) Counsel's statements did not show a third party relied on the declaration claiming ownership of the loan. In any event, even assuming the falsity of the declaration and third party reliance,
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the declaration created no new encumbrance on the property as the Kalickis' own allegations show they owe someone under the note and deed. This is not a situation where multiple parties claim ownership of the loan. The fact E*Trade, rather than another entity owns the loan does not cast doubt on the Kalickis interest in the property. (See Jenkinssupra, 216 Cal.App.4th at p. 515.) Accordingly, the Kalickis have failed to show how the complaint might be amended to state a valid claim for slander of title.
D. Fraud
        "The essential allegations of a cause of action for deceit are representation, falsity, knowledge of falsity, intent to deceive, and reliance and resulting damage (causation)." (Hamilton vGreenwich Investors XXVILLC (2011) 195 Cal.App.4th 1602, 1614.) Fraud must be pled with particularity, meaning pleading facts showing how, when, where, to whom, and by what means the representations were tendered. (Ibid.) Where a fraud claim is made against a corporate employer, the plaintiff must also 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. (Ibid.) Every element of a fraud cause of action must be specifically pleaded. (Service by MedallionIncvClorox Co(1996) 44 Cal.App.4th 1807, 1816.) The purpose of the specificity requirement is to (1) give defendant sufficient notice of the charges and (2) permit a court to weed out meritless fraud claims. (West vJPMorgan Chase BankN.A(2013) 214 Cal.App.4th 780, 793.)
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        Here, the Kalickis alleged that on June 21, 2012, E*Trade's managing agent, Benton, falsely represented to them that E*Trade was the owner of the loan. They further allege E*Trade was aware of the falsity of its statement and made the misrepresentation with the intent to defraud or with reckless disregard for the truth. At a deposition on July 30, 2013, E*Trade was requested to, but failed to produce any documents establishing it is the current owner and beneficiary of the loan, and despite repeated requests for evidence of ownership, E*Trade continues to assert its ownership without justification.
        The Kalickis have alleged facts showing how, when, where and to whom the alleged false representation was made. Although the Kalickis did not allege by what means the representations were tendered, E*Trade resolved this issue by requesting judicial notice of a copy of Benton's June 21, 2012 declaration, showing she made the representation in writing.
        E*Trade asserts fraud is not sufficiently pled as there are no factual allegations demonstrating Benton made any statement with the intent to defraud the Kalickis, the Kalickis detrimentally relied on these specific statements or the detriment suffered. We agree.
        Although the Kalickis alleged Benton made the representation intending to defraud them, they alleged no facts supporting this conclusion. The Kalickis' allegation that Benton acted with reckless disregard for the truth is insufficient to state the required intent to defraud. (CompareSmall vFritz CompaniesInc(2003) 30 Cal.4th 167, 173-174 [negligent misrepresentation does not require intent
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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].)
        The Kalickis' allegations of reliance and how this reliance caused their damages are also deficient. Merely asserting reliance is insufficient; rather, the plaintiff must allege the specifics of the reliance on the misrepresentation to state a bona fide claim of actual reliance. (Cadlo vOwens-IllinoisInc(2004) 125 Cal.App.4th 513, 519.) Additionally, damages must be distinctly alleged and a causal connection with the reliance on the representations must be shown. (Moncada vWest Coast Quartz Corp(2013) 221 Cal.App.4th 768, 800.) Here, the Kalickis alleged that in reliance on E*Trade's claim of ownership, they contacted E*Trade for loan payoff information and loan status and were forced to communicate with and comply with demands made by Chase and E*Trade, such as providing proof of insurance. The Kalickis failed to explain how these alleged acts of reliance caused their alleged damages. Thus, the trial court properly sustained the demurrer to the fraud cause of action.
        We are unable to conclude that the trial court abused its discretion in sustaining the demurrer to the fraud cause of action without giving the Kalickis another opportunity to amend this claim. Additionally, the Kalickis have failed to show how the complaint might be amended to state a valid fraud cause of action. Accordingly, they failed to show the trial court abused its discretion in denying leave to amend this claim.
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E. Wrongful Foreclosure
        To maintain a wrongful foreclosure claim, a plaintiff "must allege 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." (Chavez vIndymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062.)
        As an alternative claim, the Kalickis allege, to the extent E*Trade establishes it is the actual owner of the loan, E*Trade is legally responsible for the misconduct against them committed by E*Trade's agents. Namely, E*Trade's agents wrongfully foreclosed on their home without a valid notice of default or notice of sale having been properly issued, served or recorded, during a period when an applicable bankruptcy stay was in effect and promises had been made to them that their home would not be foreclosed upon. The foreclosure trustee later rescinded the notice of default and the trustee's deed upon sale. These acts allegedly disrupted the Kalickis' lives and agricultural operations on the property, destroyed their peace of mind, and caused them to suffer annoyance, emotional distress, and mental anguish, as well as other economic and noneconomic damages. The Kalickis also alleged they are ready, willing and able to tender the amounts due under the loan to its rightful owner. These allegations are sufficient to state a valid claim for wrongful foreclosure.
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        E*Trade contends the Kalickis' wrongful foreclosure claim fails as a matter of law because the foreclosure sale was rescinded; thus, the Kalickis are in the same position as they were prior to the recordation of the trustee's deed upon sale and they are attempting to remedy an alleged wrong that has already been remedied and any wrongful foreclosure sale is not yet ripe and premature. In support of this assertion, E*Trade cites Schell vSouthern CalEdison Co(1988) 204 Cal.App.3d 1039, 1047; Spencer vCrocker First NatBank (1948) 86 Cal.App.2d 397, 402-403; Industrial Indemnity CovMazon (1984) 158 Cal.App.3d 862, 866. While these cases generally address the ripeness of claims, they do not address the situation alleged by the Kalickis. E*Trade cited no authority convincing us that the Kalickis' alternative claim for wrongful foreclosure is improperly pled. Accordingly, the trial court erred in sustaining the demurrer to this claim.
F. Trespass
        Trespass is the unauthorized entry onto the land of another. (Civic Western CorpvZila IndustriesInc(1977) 66 Cal.App.3d 1, 16.) The elements are: (1) the plaintiff's lawful possession or right of possession of the property; (2) the defendant's wrongful act of trespass on the property; and (3) damage to the plaintiff proximately caused by the defendant. (5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 631, p. 65.)
        As an alternative claim, the Kalickis allege, to the extent E*Trade establishes it is the actual owner of the loan, E*Trade is legally responsible for the misconduct against them committed by its agents, that E*Trade, through its agents,
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trespassed onto and within the boundaries of their home and purported to take over the home in violation of the law and their rights, which caused them damage.
        E*Trade argues the Kalickis failed to allege that any employee or agent of E*Trade trespassed onto the property. Not so. The Kalickis alleged that E*Trade, through its agents, committed the trespass. E*Trade also contends the Kalickis failed to set forth any facts demonstrating how the entry on the property, postforeclosure, proximately caused them any damages, that they were in fact evicted from the property or that they sustained any injury personally or to the property as a result of the alleged trespass. E*Trade, however, failed to present any authority to support their contention that such facts must be specifically alleged to state a valid claim for trespass and we reject this unsupported assertion. Whether the Kalickis can prevail on this cause of action cannot be resolved on demurrer.
G. Unfair Competition
        The Kalickis' seventh cause of action alleged a violation of the UCL. They generally alleged that all of E*Trade's actions were fraudulent, unlawful, or unfair within the meaning of the UCL. The Kalickis claimed that should the trial court determine that E*Trade does not own the loan, E*Trade should be enjoined from asserting such a position in the future. Alternatively, should E*Trade be found to own the loan, it should be enjoined from initiating foreclosure proceedings or recording any notices regarding the property.
        E*Trade demurred to the Kalickis' claim for unfair competition on the ground the Kalickis lacked standing to pursue such a claim as they failed to allege
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facts as to the money or property they allegedly lost as a result of the purported violation. A private person has standing to sue for a violation of the UCL if the person "has suffered injury in fact and has lost money or property as a result of the unfair competition." (Bus. & Prof. Code, § 17204.) Here, the Kalickis alleged they were damaged by E*Trade's alleged violation of the UCL. At the pleading stage, nothing more is required. (Kwikset CorpvSuperior Court (2011) 51 Cal.4th 310, 327.)
        Assuming the Kalickis can properly plead standing, E*Trade next asserts they still failed to set forth any facts establishing E*Trade violated the unfair competition law. To state a claim for a violation of the UCL, a plaintiff must allege the defendant committed a business act or practice that is "fraudulent, unlawful, or unfair." (Levine vBlue Shield of California (2010) 189 Cal.App.4th 1117, 1136.) Here, the Kalickis' UCL claim is based upon the underlying claims asserted in the balance of their complaint. The Kalickis' right to recover on these underlying claims cannot be resolved on demurrer; accordingly, we cannot find their derivative UCL claim fails as a matter of law. (Price vStarbucks Corp(2011) 192 Cal.App.4th 1136, 1147.)
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DISPOSITION
        The judgment of dismissal is reversed. The trial court is directed to vacate its order sustaining E*Trade's demurrer to the Kalickis' second amended complaint without leave to amend and to enter a new order (1) sustaining the demurrer to the declaratory relief, slander of title and fraud causes of action without leave to amend; (2) sustaining the demurrer to the quiet title cause of action without prejudice to a future motion seeking leave of court to amend their complaint to add this claim; (3) overruling the balance of the demurrer; and (4) ordering E*Trade to answer the second amended complaint. The Kalickis are entitled to recover their costs of appeal.
        MCINTYRE, J.
WE CONCUR:
HALLER, Acting P. J.
O'ROURKE, J.

Monday, August 29, 2016

Florida's 4thDCA sticks foreclosure investor with $330K in government liens

JAMES OBER, Appellant,
v.
TOWN OF LAUDERDALE-BY-THE-SEA,
Florida Municipality, Appellee.
No. 4D14-4597
DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT
August 24, 2016
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Thomas M. Lynch, IV, Judge; L.T. Case No. 14-006782 (05).
Manuel Farach of McGlinchey Stafford, Fort Lauderdale, for appellant.
Susan L. Trevarthen, Laura K. Wendell, and Eric P. Hockman of Weiss Serota Helfman Cole & Bierman, P.L., Coral Gables, for appellee.
Heather K. Judd and Jordan R. Wolfgram, St. Petersburg, for Amicus Curiae City of St. Petersburg.
Alexander L. Palenzuela of Law Offices of Alexander L. Palenzuela, P.A., Miami, for Amicus Curiae City of Coral Gables.
FORST, J.
        This case involves the application of Florida's lis pendens statute, section 48.23, Florida Statutes, to liens placed on property between a final judgment of foreclosure and the judicial sale. We agree with the Appellee, Town of Lauderdale-by-the-Sea ("the Town"), and hold that liens placed on property during this time window are not discharged by section 48.23. We affirm without discussion with respect to any other challenges to the trial court's entry of summary judgment.
Background
        On November 26, 2007, a non-party bank recorded a lis pendens on the subject property as part of a foreclosure proceeding against a non-
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party homeowner. On September 22, 2008, the bank obtained a final judgment of foreclosure. Beginning on July 13, 2009, and continuing through October 27, 2011, the Town recorded a total of seven liens on the property related to various code violations.1 These liens all stemmed from violations occurring after the final judgment was entered.
        On September 27, 2012, the property was sold at a foreclosure sale to the Appellant, James Ober ("the Property Owner"). Shortly thereafter, the clerk issued the certificate of title. Beginning on February 26, 2013, the Town imposed three more liens on the property.
        The Property Owner filed suit to quiet title, attempting to strike the liens against his property. The Town counterclaimed to foreclose the liens. Both parties moved for summary judgment. The trial court granted the Town's motion (and denied the Property Owner's motion) and entered a final judgment of foreclosure on the ten liens. This appeal followed.
Analysis
        The issue in this case is the interpretation of a statute, which we review de novo. Brown vCity of Vero Beach, 64 So. 3d 172, 174 (Fla. 2011). The statute at issue here states, in relevant part:
[T]he recording of . . . lis pendens . . . constitutes a bar to the enforcement against the property described in the notice of all interests and liens . . . unrecorded at the time of recording the notice unless the holder of any such unrecorded interest or lien intervenes in such proceedings within 30 days after the recording of the notice. If the holder of any such unrecorded interest or lien does not intervene in the proceedings and if such proceedings are prosecuted to a judicial sale of the property described in the notice, the property shall be forever discharged from all such unrecorded interests and liens. . . .
§ 48.23(1)(d), Fla. Stat. This statute "not only bars enforcement of an accrued cause of action, but may also prevent the accrual of a cause of action when the final element necessary for its creation occurs beyond the time period established by the statute." Adhin vFirst Horizon Home Loans, 44 So. 3d 1245, 1253 (Fla. 5th DCA 2010).
        By its terms, section 48.23(1)(d) does not provide an end date for the lis
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pendens. In order to avoid the absurd result of a lis pendens precluding any lien from ever being placed on the property into perpetuity, see Maddox vState, 923 So. 2d 442, 448 (Fla. 2006) (avoiding absurd results), the parties both urge this Court to apply an implied end date to the lis pendens. The Town argues that the lis pendens applies only to liens existing or accruing prior to the date of final judgment, whereas the Property Owner argues that the lis pendens continues to the date of the judicial sale, which in this case was over four years later.
        In attempting to discern which of these dates was intended by the legislature to be the operative "shut off" date, we read the statute "in the context in which it is found and in conjunction with related statutory provisions." Maddox, 923 So. 2d at 448. One of the related provisions is section 48.23(1)(a), which states that "[a]n action in any of the state or federal courts in this state operates as a lis pendens . . . only if a notice of lis pendens is recorded." The plain meaning of this provision indicates that the action itself is the actual lis pendens, which takes effect if and when a notice is filed. The lis pendens therefore logically must terminate along with the action. The "action" in this case was the foreclosure action initiated by the non-party bank, which terminated thirty days after the court's issuance of a final judgment.2
        Although it does not appear to have been a litigated issue, this conclusion has been reached by this Court and other District Courts of Appeal in the past. See U.SBank Nat'l Ass'n vQuadomain CondoAss'n, 103 So. 3d 977, 979-80 (Fla. 4th DCA 2012) ("[T]he court presiding over the action which created the lis pendens has exclusive jurisdiction to adjudicate any encumbrance or interest in the subject property from the date thelis pendens is recorded to the date it enters final judgment" (emphasis added)); Seligman vNAmMortgCo., 781 So. 2d 1159, 1196 (Fla. 4th DCA 2001) ("[T]he court in the dissolution proceeding had jurisdiction over the property until final judgment . . . ." (emphasis added)); Hotel Eur.,IncvAouate, 766 So. 2d 1149, 1151 (Fla. 3d DCA 2000) ("Because a Final Judgment has been entered, the instant case is no longer pending and thus the Notice of Lis Pendens is no longer valid"); Marchand vDe Soto MorgCo., 149 So. 2d 357, 359 (Fla. 2d DCA 1963) ("[T]he
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doctrine of lis pendens is the jurisdiction, power or control which courts acquire of property involved in a suit pending the continuance of the action and until final judgment therein" (emphasis added)). The Florida Supreme Court has also used the "until final judgment" phrase when describing the scope of a lis pendens. De Pass vChitty, 105 So. 148, 149 (Fla. 1925). We find these authorities both controlling and persuasive, and hold that a lis pendens bars liens only through final judgment, and does not affect the validity of liens after that date, even if they are before the actual sale of the property.
        We do note, however, that this case appears to reveal a misstatement of the law in Form 1.996(a) of the Florida Rules of Civil Procedure. That rule provides an example foreclosure judgment, and includes a provision stating: "On filing the certificate of sale, defendant(s) and all persons claiming under or against defendant(s) since the filing of the notice of lis pendens shall be foreclosed." Fla. R. Civ. P. Form 1.996(a). This language suggests that all liens from the filing of the lis pendens until the certificate of sale is filed are discharged. Although we recognize the conflict between the form and our holding in this case, to hold otherwise would be to create conflict between this decision and both the legislative intent and prior case law. But the form has been, and could again, be modified "to bring it into conformity with current statutory provisions and requirements . . . and better conform to prevailing practices in the courts." In re Amendments to the Florida Rules of Civil Procedure-Form 1.996 (Final Judgment of Foreclosure), 51 So. 3d 1140, 1140 (Fla. 2010). Such an amendment may be appropriate here.
Conclusion
        The lis pendens statute serves to discharge liens that exist or arise prior to the final judgment of foreclosure unless the appropriate steps are taken to protect those interests. However, it does not affect liens that accrue after that date. The ten liens that were involved in the case before us were all recorded and based on conduct which occurred after the date of the first final judgment. The trial court therefore did not err in entering summary judgment in favor of the Town foreclosing those liens.
        Affirmed.
GROSS and KLINGENSMITH, JJ., concur.
* * *
        Not final until disposition of timely filed motion for rehearing.
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Footnotes:
        1. The Town also recorded one lien before the final judgment was issued, but concedes that this lien was discharged.

        2. When no appeal is taken, an action terminates when the time for appeal expires. S. Title Research CovKing, 186 So. 2d 539, 544-45 (Fla. 4th DCA 1966). That time is 30 days after rendition of the order. Fla. R. App. P. 9.110(b). Here, no appeal from the final judgment in the original action was taken. There is also no question in this case that the liens at issue accrued after this 30-day period, making the precise distinction between the date of the final judgment and the date of the termination of the action irrelevant under the facts before us.