12 Cal. App. 5th 1331
Cal. Ct. App. 5th2017Background
- In 2007 Schep borrowed $910,000 secured by a deed of trust on a Beverly Hills home; MERS was beneficiary and Chevy Chase was trustee (later Capital One via merger).
- Schep fell into arrears in 2009; 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 filings, Schep recorded a “wild deed” (a substitution and reconveyance) purporting to reconvey the deed of trust to him, which misidentified the recorder as original beneficiary.
- 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; Capital One demurred.
- The trial court sustained the demurrer without leave to amend (also denied Schep’s reconsideration motion); Schep appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether recording foreclosure-related documents can support slander of title because they are privileged | Schep: recording those documents (including the Trustee's Deed Upon Sale) is not privileged and thus actionable | Capital One: statutes make recording notices and performing foreclosure procedures privileged under Civ. Code § 47 and § 2924 | Court: recordings (notice of default, notice of sale, trustee’s deed) are privileged; slander claim fails |
| Whether the privilege is defeated by a competing recorded “wild deed” | Schep: his wild deed put defendants on constructive notice so recordings were reckless/without reasonable grounds | Defendants: the judicially noticeable chain of title and statutory process gave reasonable grounds; no malice alleged | Court: the wild deed did not establish malice or lack of reasonable grounds; privilege stands |
| Whether the privilege is absolute or qualified under § 47 as incorporated by § 2924 | Schep: argued privilege does not extend to trustee’s deed upon sale (or that privilege doesn't apply) | Defendants: § 2924 incorporates § 47 protections for foreclosure procedures | Court: did not decide absolute vs qualified, but held documents privileged even under the narrower qualified privilege |
| Whether leave to amend should have been granted | Schep: could amend to plead around privilege or allege malice | Defendants: no reasonable possibility amendment could cure the defect because privilege and lack of malice are established | Court: denial of leave to amend proper; no plausible amendment to overcome statutory privilege |
Key Cases Cited
- Centinela Freeman Emergency Medical Associates v. Health Net of California, 1 Cal.5th 994 (discussion of demurrer review standards)
- Winn v. Pioneer Medical Group, Inc., 63 Cal.4th 148 (acceptance and limits of pleadings on demurrer)
- Blank v. Kirwan, 39 Cal.3d 311 (pleading standards on demurrer)
- Kachlon v. Markowitz, 168 Cal.App.4th 316 (purpose and scope of § 2924 privilege in nonjudicial foreclosure context)
- Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919 (judicial notice of foreclosure-related documents; amendment/defect standards)
- Sanborn v. Chronicle Pub. Co., 18 Cal.3d 406 (definition of malice for qualified privilege)
- Taus v. Loftus, 40 Cal.4th 683 (actual malice standards for § 47 privilege)