Gutierrez v. SN Servicing Corporation CA1/2
A162401
| Cal. Ct. App. | May 6, 2022Background:
- In 2005 Gutierrez obtained a revolving line of credit from Fremont Bank secured by a deed of trust; SN Servicing was the loan servicer and Zieve, Brodnax & Steele, LLC (ZBS) the trustee.
- In 2006 plaintiffs executed a modification and a second deed of trust was recorded; plaintiffs allege the second instrument paid off the first but the first deed was not reconveyed and continued to accrue fees.
- Plaintiffs sued Fremont Bank, later adding SN Servicing and ZBS; their second amended complaint alleged breach of contract (Fremont and SN), a Civil Code §2941 claim (Fremont), and quiet title (all defendants).
- SN Servicing and ZBS demurred to the second amended complaint; the trial court sustained the demurrer without leave to amend as to those defendants and dismissed the claims against them.
- The court held plaintiffs failed to plead a contract with SN Servicing (so no breach) and failed to allege that SN or ZBS asserted any adverse title interest or that the deed was extinguished, so quiet title against them failed.
- Plaintiffs appealed; the Court of Appeal affirmed the dismissal as to SN Servicing and ZBS and found no abuse of discretion in denying leave to amend.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract (against SN Servicing) | Gutierrez: paragraph 20 of the deed requires lender to reconvey; SN as servicer/agent had a role and thus is liable for failing to reconvey | SN: no contract or agreement with SN Servicing alleged; servicer is not automatically a contracting party to the reconveyance obligation | Demurrer sustained; complaint fails to plead existence of any contract or breach by SN; denial of leave to amend affirmed |
| Quiet title (against SN Servicing and ZBS) | Gutierrez: deed of trust was extinguished by payoff, so title should be quieted against all defendants, including servicer and trustee | SN/ZBS: plaintiffs did not allege SN or ZBS has any adverse claim to title; any claim should target the beneficiary; extinguishment not pleaded | Demurrer sustained; plaintiffs failed to plead adverse claims by SN/ZBS or that the deed was extinguished; denial of leave to amend affirmed |
Key Cases Cited
- Blank v. Kirwan, 39 Cal.3d 311 (Cal. 1985) (standard of review for demurrer; treat well-pleaded facts as admitted).
- Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (Cal. 2011) (elements required for breach of contract claim).
- Fleet v. Bank of America N.A., 229 Cal.App.4th 1403 (Cal. Ct. App.) (servicer not liable on lender's contract where agreement alleged only with lender).
- Chacker v. JPMorgan Chase Bank, N.A., 27 Cal.App.5th 351 (Cal. Ct. App.) (servicer/assignee may stand in shoes of lender after transfer; distinguished here because no transfer alleged).
- Monreal v. GMAC Mortg., LLC, 948 F.Supp.2d 1069 (C.D. Cal.) (quiet title against servicer/trustee dismissed; beneficiary is proper target for title challenges).
- Shimpones v. Stickney, 219 Cal. 637 (Cal. 1934) (tender rule relevant to quiet title actions seeking to remove a security interest).