Schep v. Capital One
B269724
| Cal. Ct. App. | Jun 26, 2017Background
- In 2007 Schep borrowed $910,000 secured by a deed of trust on a Beverly Hills property; Chevy Chase was named trustee and MERS beneficiary; Chevy Chase later merged into Capital One.
- By October 2009 Schep defaulted; T.D. Service was recorded as trustee and recorded a Notice of Default and later a Notice of Trustee’s Sale; Capital One purchased the property at the 2011 foreclosure sale and a Trustee’s Deed Upon Sale was recorded.
- Between the Notice of Default and Notice of Sale, a third party (Fitzgerald) recorded a “Substitution of Trustee and Full Reconveyance” (a “wild deed”) purporting to reconvey title to Schep.
- Schep sued Capital One and T.D. Service for slander of title based on recording the Notice of Default, Notice of Sale, and Trustee’s Deed Upon Sale; the trial court sustained Capital One’s demurrer without leave to amend and denied reconsideration.
- The Court of Appeal affirmed, holding the recorded foreclosure documents are privileged under Civil Code section 47 (as incorporated by Code of Civil Procedure section 2924) and Schep failed to plead malice to defeat the qualified privilege.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether recording a Notice of Default, Notice of Sale, and Trustee’s Deed Upon Sale can support slander of title | Schep: the recordings were false and not privileged (privilege does not extend to trustee’s deed upon sale) | Capital One: the recordings are privileged by §2924 as communications under §47, so cannot support slander of title absent malice | Court: recordings are privileged under §2924/§47; slander claim fails absent alleged malice |
| Whether §2924’s reference to §47 incorporates only the qualified privilege or the absolute litigation privilege | Schep: (implicitly) privilege insufficient here; contends trustee’s deed not covered | Capital One: §2924 brings §47 protections to foreclosure-related recordings | Court: did not resolve absolute vs qualified; assumed qualified privilege and found it applied because no malice pleaded |
| Whether Schep adequately alleged malice to defeat the qualified privilege | Schep: the wild deed put defendants on constructive notice, so their recordings were made without reasonable grounds | Capital One: judicially noticed chain of title gave reasonable grounds; no allegations of hatred/ill will or reckless disregard | Court: Schep failed to plead malice; judicially noticed documents show a reasonable belief in the foreclosure’s validity |
| Whether leave to amend or reconsideration should have been allowed | Schep: sought reconsideration and could amend to state claim | Capital One: defect is incurable given statutory privilege and facts | Court: denial of leave to amend and denial of reconsideration proper; no reasonable possibility amendment could cure the legal defect |
Key Cases Cited
- Centinela Freeman Emergency Medical Associates v. Health Net, 1 Cal.5th 994 (standards for reviewing demurrer and pleadings)
- Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919 (judicial notice of deeds, notices, trustee’s deed in foreclosure context)
- Kachlon v. Markowitz, 168 Cal.App.4th 316 (recognizing §2924’s privilege protects trustees performing statutory duties)
- Garretson v. Post, 156 Cal.App.4th 1508 (discussing scope of §47 privilege in foreclosure recordings)
- Sanborn v. Chronicle Pub. Co., 18 Cal.3d 406 (definition of malice for qualified privilege)
- Taus v. Loftus, 40 Cal.4th 683 (discussing actual malice and privileged communications)