Filed 10/22/13 Grimm v. Capital One CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

RAY GRIMM, JR. et al., D063079

Plaintiffs and Appellants,

v. (Super. Ct. No. 37-2012-00098599-

CU-OR-CTL)

CAPITAL ONE, N.A.,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, Ronald S.

Prager, Judge. Affirmed.

Law Offices of Ronald H. Freshman and Ronald H. Freshman for Plaintiffs and

Appellants.

Doll Amir & Eley and Hunter R. Eley, William H. Edmonson for Defendant and

Respondent Capital One, N.A.

The Dreyfuss Firm and Lawrence J. Dreyfuss for Defendants and Respondents

T.D. Service Company. Plaintiffs and appellants Ray Grimm and Daran Grimm, husband and wife, sued

defendant and respondent Capital One, N.A. (Capital One) and other entities, alleging the

following causes of action: (1) "[d]efective deeds of trust"; (2) "wrongful loan

modification agreement"; (3) "defective substitutions of trustee, assignments of deeds of

trust, notices of default and notices of trustee sale"; (4) slander of title; (5) quiet title; and

(6) violation of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.).

The court sustained Capital One's demurrer to the complaint without leave to amend.1

Asserting that Mortgage Electronic Registration Systems, Inc. (MERS) has not

initiated foreclosure, the Grimms contend they stated facts sufficient to support each

cause of action in their complaint and, in any event, the court abused its discretion in

denying them leave to amend. We affirm the judgment.2

1 T.D. Service Company (T.D. Service) has asked us to dismiss the Grimms' appeal as to it under California Rules of Court, rule 8.104, noting the Grimms' notice of appeal failed to mention the court's judgment in its favor. The Grimms concede the point in their reply brief, explaining this appeal is from the order sustaining Capital One's demurrer to their complaint with prejudice, not an appeal from the judgment obtained in favor of T.D. Service. Accordingly, on appeal, we do not address T.D. Service's contentions, and deny its motion for judicial notice of its papers filed to support its separate demurrer and the court's judgment in its favor.

2 The Grimms failed to designate the final judgment of dismissal of their complaint against Capital One as part of the appellate record; therefore, Capital One urges us to dismiss this appeal, which is taken from the court's minute order. The existence of an appealable judgment or order is a jurisdictional prerequisite to an appeal. (Jennings v. Marralle (1994) 8 Cal.4th 121, 126.) We agree with those courts that deem an order sustaining a demurrer without leave to amend to incorporate a judgment of dismissal. (Beazell v. Schrader (1963) 59 Cal.2d 577, 579-580.) Here, the trial court's order reveals a clear intention to make a final ruling. (See Randle v. City and County of San Francisco (1986) 186 Cal.App.3d 449, 454.) The order fully resolved all issues between the parties. In the interest of justice and to prevent delay, we exercise our discretion to deem the trial 2

FACTUAL AND PROCEDURAL BACKGROUND

The facts are taken from the Grimms' complaint; we accept as true the properly

pleaded material allegations and facts that may properly be judicially noticed. (Olszewski

v. Scripps Health (2003) 30 Cal.4th 798, 806; Debrunner v. Deutsche Bank National

Trust Co. (2012) 204 Cal.App.4th 433, 435.) The Grimms attached to their complaint

copies of deeds of trust, substitutions of trustee, a mortgage loan modification agreement,

notices of default, notices of trustee's sale, notices of rescission, and assignments of the

deed of trust, and incorporated these documents in the complaint by reference.3

The Grimms financed the purchase of their Rancho Santa Fe residence with a

promissory note for $2,255,000 and a deed of trust, which was recorded in April 2005.

The deed of trust identifies the lender as Chevy Chase Bank, F.S.B. (Chevy Chase). 4

MERS is listed as the beneficiary. In April 2008, plaintiffs and Chevy Chase entered into

a mortgage loan modification agreement that MERS signed.

court's minute order sustaining the demurrer as a judgment of dismissal, and will treat the Grimms' notice of appeal as applying to the judgment. (See, e.g., Beazell, at pp. 579-580; Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1098.)

3 The Grimms state in a footnote in the complaint: "All documents referenced herein are 'PURPORTED' documents and instruments, the legitimacy of which the Grimms neither admit nor deny until adequate forensic examinations can be undertaken during the course of this litigation. Aside from the content, there are numerous questionable writings, modifications and markings on the copies of documents obtained from the San Diego County Recorder's Office which brings into question whether or not any of these documents were copes [sic] of the originals allegedly signed. The Grimms therefore do not admit to the validity or actual existence of any of these documents or instruments." (Some capitalization omitted.)

4 Capital One is successor by merger to Chevy Chase. 3 In February 2010, a "notice of default and election to sell under deed of trust" was

recorded; it indicated the Grimms owed $113,332.23 on their home loan. In March 2010,

MERS recorded a substitution of trustee, naming T.D. Service as replacement trustee.

Notices of trustee's sale were recorded in August 2010 and November 2010. In

December 2010, a notice of rescission of the notice of default was recorded.

In November 2011, an assignment of deed of trust was recorded, transferring all

beneficial interest under the March 2005 deed of trust to Capital One. That same month,

another notice of default was recorded, indicating the Grimms owed $130,613.79 on their

home loan.

In December 2011 and March 2012, substitutions of trustee were recorded,

naming T.D. Service as replacement trustee. In January 2012, a notice of rescission of

the second notice of default was recorded. Weeks later, yet another notice of default was

recorded; it indicated the Grimms owed $193,255.12.

In June 2012, the Grimms filed a verified complaint against T.D. Service, Capital

One, North Island Financial Credit Union and Doe defendants, alleging six causes of

action: "defective deeds of trust"; "wrongful loan modification agreement"; "defective

substitutions of trustee, assignments of deeds of trust, notices of default and notices of

trustee sale"; slander of title; quiet title, and violation of the UCL. In it, the Grimms

sought the following relief: (1) an award of damages against defendants in an amount to

be shown at trial; (2) a judicial declaration of the rights and duties of the parties;

specifically, that the attempt to foreclose on the subject property was wrongful; (3) an

order cancelling the deeds of trust, the other instruments attached to the complaint, and

4 "any other recorded documents clouding the Grimms' title"; (4) a declaration that the

Grimms are the true and rightful sole owners of the subject property; (5) a temporary

restraining order and preliminary and permanent injunction prohibiting defendants and

their agents from transferring any interest in the subject property and proceeding with any

foreclosure or any collection action against the Grimms; (6) civil penalties pursuant to

statute, restitution, injunctive relief and costs of suit according to proof, and (7) any other

equitable relief.

In the "Introduction" to their complaint, the Grimms allege the defendants engaged

in fraud and securitization of home loans; they incorporate by reference in all their

causes of action the following allegations: "As will be shown herein, not only are

Defendants' actions fraudulent, but represent criminal violations of California Mortgage

Fraud Statutes including, but not thereby limited to, [] Penal Code section 532[f,

subdivision ](a)(4), and an affront to long-standing property and recording laws; such

reliance on fabricated and forged documents also undermines the integrity of the judicial

system. Defendants, their agents, officers, employees, and affiliated or associated parties,

have engaged in, and continue to engage in, a pattern of unlawful, fraudulent or unfair

practices causing victims of their actions, including the Grimms, to lose or be in jeopardy

of losing their homes through illegal foreclosure. This honorable court should be

disturbed and appalled at the increasing reports, rampant widespread and irresponsible

practices of document fraud and forgery by 'foreclosure mills' and 'robo-signers' utilized

by defendants in foreclosures. These actions have not only been alleged for years but

have now been brought to light by admissions from defendants themselves in numerous

5 depositions and tacit admissions in statements concerning postponing foreclosures due to

questionable or fraudulent documents which shall be directly identified in this action and

affidavits as presented in other courts throughout the country. Not only did Wall Street

bundle toxic loans into 'mortgage backed securities' through a process called

'securitization,' so did certain defendants identified in this instant action. These 'securities

were sold to investors in the form of certificates or mortgage bonds, whereby the

investors became the 'certificateholders' or 'bondholders' of securities that were fed these

toxic assets described as 'loans' or mortgages' when in truth, these 'loans' or mortgages'

were actually securities transaction in disguise." (Italics added; some capitalization

omitted.)

The Grimms also assert in the complaint that " 'true sales' never took place due to

the failure to follow the legal requirements for the transfer of non-negotiable instruments

and thereby [defendants did not acquire] any legal, equitable, and pecuniary interest in

the Grimms' notes and [deeds] of trust. As a result, thereof, [defendants, who] purport to

be the Grimms' creditors, actually have no secured or unsecured right, title, or interest in

the Grimms' notes and deeds of trust; and therefore no right to collect mortgage

payments, demand mortgage payments, or report derogatory information against the

Grimms to the credit reporting agencies." (Some capitalization omitted.)

The Grimms allege they were "willfully and deliberately induced into signing both

notes and deeds of trust which were not intended as such, but as collateral for the sales of

securities. Under the terms of pooling and servicing agreements, the Grimms' purported

6 mortgage obligations have been paid in full, therefore there is no 'default.' " (Some

capitalization omitted.)

Capital One demurred to the complaint on grounds it did not state facts sufficient

to constitute any of the several causes of action. In their opposition to Capital One's

demurrer, the Grimms asserted, "[t]here are no defects in [their] [c]omplaint or alleged

causes of [a]ction." At various points, the Grimms added, "Defendant fails to meet the

legal standards to sustain its [d]emurrer in this section." The Grimms also stated they

"are not challenging [Capital One's] compliance with the foreclosure law per se, but

claiming there was no proper assignment or demonstrated ownership of the purported

'loan.' "

The trial court sustained the demurrer without leave to amend. Regarding the

causes of action for defective deeds of trust and other instruments, the court concluded a

deed is not rendered unenforceable solely because the lender is designated as both trustee

and lender. Further, it ruled the Grimms failed to allege fraud with the requisite

specificity. The court sustained the demurrer on the cause of action for wrongful loan

modification agreement on grounds the Grimms failed to show that Civil Code,5 section

2923.6, which deals with loan modification plans, created a duty on Capital One's part.

Moreover, the Grimms did not plead with sufficient specificity their claim that the loan

agreement was modified after the parties signed but before the agreement was recorded.

It found the Grimms did not specify the time, place, and contents of Capital One's

5 All statutory references are to the Civil Code unless otherwise stated. 7 purported false representations; therefore, it sustained the demurrer regarding the slander

of title cause of action. It sustained the demurrer regarding the quiet title cause of action,

finding the Grimms did not tender the necessary amount due under the deed of trust, and

they did not show they were exempt from the requirement to tender. Finally, the court

found that the Grimms did not specify an independent unlawful business activity that

Capital One purportedly violated; therefore, it sustained the demurrer on the UCL cause

of action.

DISCUSSION

I. Standard of Review

The applicable appellate review standards are settled: " 'A demurrer tests the

sufficiency of a complaint as a matter of law.' [Citation.] In reviewing the propriety of

the sustaining of a demurrer, the 'court gives the complaint a reasonable interpretation,

and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The

court does not, however, assume the truth of contentions, deductions or conclusions of

law. [Citation.] The judgment must be affirmed "if any one of the several grounds of

demurrer is well taken. [Citations.]" [Citation.] However, it is error for a trial court to

sustain a demurrer when the plaintiff has stated a cause of action under any possible legal

theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to

amend if the plaintiff shows there is a reasonable possibility any defect identified by the

defendant can be cured by amendment.' " (Dey v. Continental Cent. Credit (2008) 170

Cal.App.4th 721, 725-726.) Plaintiffs bear the burden of proving a reasonable possibility

any defects can be cured by amendment. (Zelig v. County of Los Angeles (2002) 27

8 Cal.4th 1112, 1126.) The reviewing court independently examines the complaint under

this standard. (McCall v. PacificCare of California, Inc. (2001) 25 Cal.4th 412, 415;

Dey, at p. 726.)

II. Causes of Action for Defective Deeds of Trust and Other Instruments

" 'Where written documents are the foundation of an action and are attached to the

complaint and incorporated therein by reference, they become a part of the complaint and

may be considered on demurrer.' " (Qualcomm, Inc. v. Certain Underwriters At Lloyd's,

London (2008) 161 Cal.App.4th 184, 191.) We conclude the Grimms' purported causes

of action for defective deeds of trust and other instruments fail to state facts sufficient to

constitute a cause of action. Our conclusion mainly turns on the recitals in the deed of

trust executed by the Grimms, which give precedence to any contrary factual allegations.

(Performance Plastering v. Richmond American Homes of California (2007) 153

Cal.App.4th 659, 665; Dodd v. Citizen's Bank of Costa Mesa (1990) 222 Cal.App.3d

1624, 1627.)

The gravamen of the first cause of action is fraud.6 The Grimms twice assert in

bold print in the section of the complaint addressing this cause of action: "[They] were

6 Citing no law, the Grimms state in their opening brief: " 'Pleading a claim' compared to pleading facts sufficient to constitute a cause of action as required to sustain a demurrer are very different standards for ruling, particularly without leave to amend. [¶] That [they] allege to have been fraudulently induced into signing the purported [deed of trust] is just that, an allegation, not a cause of action alleged in [their] complaint," such as to require specificity. " ' "When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived." ' [Citation.] 'We are not bound to develop appellants' argument for them. [Citation.] The absence of cogent legal argument or citation to authority allows this court 9 fraudulently induced into signing the [deed of trust]." (Italics added.) The Grimms

further claim on information and belief that "there were numerous unrecorded

'assignments' of this [deed of trust] through the MERS 'system,' or by other means, which

were not disclosed to them. Said information and belief is partly predicated on [the

defendant credit union] being a MERS member, which is commonly understood to mean

the 'loan' has been 'securitized' and 'sold' to numerous 'investors.' [¶] [] Accordingly the

Grimms contend [the deed of trust] "was fraudulent or wrongfully recorded because the

'title to their property was not clear of these previous breaks in or clouds on title and said

[deed of trust] is therefore unsecured and invalid." [¶] [¶] [] An action to remove a

fraudulently or wrongfully recorded instrument is authorized by [section] 3412 . . . ."7

(Italics added; some capitalization omitted.)

The third cause of action for "defective substitutions of trustee, assignments of

deeds of trust, notices of default and notices of trustee sale," likewise sounds in fraud.

Specifically, the Grimms alleged on information and belief that each of the challenged

documents was "bogus, wrongful, invalid and wrongfully or fraudulently recorded," and

to treat the contention as waived.' " (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956.)

7 Section 3412 states: "A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled." This statute was interpreted in M.F. Farming Co. v. Couch Distributing Co., Inc. (2012) 207 Cal.App.4th 180, 200, which concluded, " 'In a suit to remove a cloud the complaint must state facts, not mere conclusions, showing the apparent validity of the instrument designated, and point out the reason for asserting that it is actually invalid.' "

10 likewise most of them were subject to an "action to remove a fraudulently or wrongfully

recorded instrument" under section 3412. (Italics added.)

To state a cause of action for fraud, plaintiffs must allege (1) a misrepresentation

(a false representation, concealment or nondisclosure) of a material fact; (2) knowledge

of its falsity or scienter; (3) intent to defraud; (4) justifiable reliance; and (5) resulting

damage. (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 990.) "In

California, fraud must be pled specifically; general and conclusory allegations do not

suffice." (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) The heightened pleading

standard for fraud requires " 'pleading facts which "show how, when, where, to whom,

and by what means the representations were tendered." ' " (Ibid.) The normal policy of

liberally construing pleadings against a demurrer will not be invoked to sustain a fraud

cause of action that fails to set forth such specific allegations. (Lazar, at p. 645.)

The heightened pleading rule serves two purposes. One is "notice to the

defendant, to 'furnish [it] with certain definite charges which can be intelligently met.' "

(Committee On Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197,

216, superseded by statute on another ground as stated in Californians for Disability

Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 227.) The second is to weed out

nonmeritorious actions based on the complaint; to " ' "enable the court to determine

whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge

of fraud." ' " (Committee On Children's Television, Inc., at pp. 216-217.)

Exceptions exist to the particularity requirement, however. "Less specificity is

required when 'it appears from the nature of the allegations that the defendant must

11 necessarily possess full information concerning the facts of the controversy . . . . ' "

(Committee on Children's Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p.

217; see Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47 [the

pleading rule for fraud "is relaxed when it is apparent from the allegations that the

defendant necessarily possesses knowledge of the facts"].) A court may relax the strict

pleading standards where a plaintiff alleges many affirmative misrepresentations

occurring over a period of several years in methods whose time and place are fully

known to the defendant. (See Committee On Children's Television, Inc., at p. 217

[dispensing with heightened pleading requirement where multiple plaintiffs alleged

thousands of misrepresentations in various media, including television advertisements

and cereal boxes, over a span of four years]; see also Alfaro v. Community Housing Imp.

System & Planning Ass'n, Inc. (2009) 171 Cal.App.4th 1356, 1384-1385 [particularity

requirement is not violated where 38 plaintiffs alleged fraudulent nondisclosures on the

part of unnamed corporate employees concerning the existence of a deed].)

The Grimms provide no additional information from which we may conclude

Capital One will necessarily have superior knowledge of any alleged fraudulent

recordation of the instruments. And, because the first and third causes of action sound in

fraud, the Grimms were required to allege specific facts in order to make out a prima

facie charge of fraud, or to provide Capital One with sufficient notice to defend against

the charge. They failed to do so. "The pleading of fraud . . . is . . . the last remaining

habitat of the common law notion that a complaint should be sufficiently specific that the

court can weed out nonmeritorious actions on the basis of the pleadings." (Committee On

12 Children's Television, supra, 35 Cal.3d at pp. 216-217.) The Grimms several times

repeat in their complaint that each instrument is "bogus, wrongful, invalid and wrongfully

or fraudulently recorded." But that allegation did not suffice to put Capital One on notice

to prepare its defense. The Grimms' claim that they needed to conduct further forensic

examination on the documents is also unavailing in light of the requirement for specific

pleading. Accordingly, we will not dispense with the long-held principle of law in

California requiring heightened pleading for fraud.

III. Arguments Against MERS and Securitization of the Loan

The Grimms attack MERS' status as a beneficiary: "A 'Trustee' is required to be a

third party having been entrusted by both the Beneficiary ('Lender') and Trustor with the

power of sale. Because [Chevy Chase] was not a third party to the [deed of trust], this

means that: 1) no Trustee existed (therefore no 'substitution' of a trustee could occur.

'Substitution' by its very name, means there needed to be a trustee in the first place to

replace or substitute); or 2) because MERS was listed 'SOLELY as nominee' for the

'lender' and as the 'beneficiary' under the [deed of trust]; because there was no statement

that title was held in trust, said [deed of trust] was actually a 'mortgage' not a [deed of

trust]. . . . [¶] The Grimms contend that [Chevy Chase] as 'Lender' was the actual

'beneficiary' according to the [deed of trust]; and MERS was nothing of the sort. At best,

MERS was [Chevy Chase's] agent ('solely as nominee') the legitimacy of which is yet to

be determined." The Grimms continue, "[I]f, arguendo, MERS is deemed to be the

'beneficiary' (which the Grimms contend MERS was not) because the 'Trustee' is

13 identified as same entity as the named 'Lender,' either way, recording of all assignments

[was required under section 2932.5]."8 (Some capitalization omitted.)

Under California law, MERS has authority to act as the beneficiary under a deed

of trust. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155-

1156 ; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270-271 [MERS

has the authority to act as nominee for the lender].) Here, the deed of trust states that

MERS was "the beneficiary." However, the deed of trust also specifically restricts

MERS' interest to that of a " 'nominee' " for the lender. "A 'nominee' is a person or entity

designated to act for another in a limited role—in effect, an agent." (Fontenot, at p. 270.)

Furthermore, the trial court rejected the Grimms' contention by relying on Bank of

America Nat. Trust & Savings Ass'n v. Century Land & Water Co (1937) 19 Cal.App.2d

194, 196 ["It has been held that the trustee may also be the beneficiary and may become a

purchaser at the sale."].)

To the extent the Grimms rely on section 2932.5, such reliance is unavailing. "It

is well established that section 2932.5 does not apply to trust deeds, in which the power

of sale is granted to a third party, the trustee. [Citation.] Section 2932.5 applies to

mortgages, in which the mortagor or borrower has granted a power of sale to the

mortgagee or lender." (Herrera v. Federal National Mortgage Assn. (2012) 205

8 Section 2932.5 states: "Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded." 14 Cal.App.4th 1495, 1509.) The Grimms have not alleged that they were unable to make

their payments or negotiate a modification of their loans because they did not know the

lender's identity. Thus, the Grimms' contention that MERS is not a proper beneficiary

under the deed of trust cannot support their claim that Capital One violated section

2932.5 because MERS is recorded as a beneficiary.

Similarly, the Grimms' allegations regarding securitization of the loans do not

suffice to state a claim for defective title. Securitization does not affect the validity of a

loan. A secured promissory note that is traded on the secondary market remains secured

because the mortgage or deed of trust follows the note. (§ 2936 ["The assignment of a

debt secured by mortgage carries with it the security."].) Thus, a lender or trustee does

not lose its interest in the loan when it "was packaged and resold in the secondary market,

where it was put into a trust pool and securitized." (Lane v. Vitek Real Estate Industries

Group (E.D.Cal. 2010) 713 F.Supp.2d 1092, 1099; Hafiz v. Greenpoint Mortgage

Funding, Inc. (N.D.Cal. 2009) 652 F.Supp.2d 1039, 1042-1043 [rejecting the plaintiff's

theory that "defendants lost their power of sale pursuant to the deed of trust when the

original promissory note was assigned to a trust pool"].)

The Grimms filed a letter bringing to our attention a recently published case,

Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, which they claim "is relevant to

the issue on appeal related to [Capital One's] improper securitization procedures and lack

of assignment into the trust by the closing date rendering the assignment of the subject

deed of trust invalid." The Grimms do not discuss the Glaski case by explaining its

holding and its relevance to the facts of this case. Accordingly, we regard the matter as

15 forfeited. In any event, we have reviewed the Glaski case, which raises different legal

issues because it involved a foreclosure sale, as opposed to this case, where there was no

foreclosure. Moreover, the points for which the Grimms cite the Glaski case—the role of

MERS as a beneficiary and the alleged securitization of their loan—leave unaffected our

conclusions that the causes of action for defective instruments were not pleaded with

sufficient facts, and that Capital One did not lose its interest in the loan though

securitization of the loan. Therefore, we conclude the Grimms' reliance on Glaski is

unavailing.

IV. Cause of Action for Wrongful Loan Modification

The Grimms allege they were wrongfully induced to sign the loan modification

agreement which included "absurd" language: "The [loan modification agreement] itself

states (which is not controlling [the deed of trust] and Note are) that the 'Note Holder'

mean [sic] the 'Lender identified above or anyone who takes the Note (defined below)'

which was NOT defined, and does not matter as [the deed of trust] controls; 'by transfer

or assignment and who is entitled to receive payments under the Note.' Notes are NOT

transferred or assigned but are indorsed [citation] and [section] 2926 still control where

[the deed of trust] follows the Note, not the other way around. This inaccurate language

in this [loan modification agreement], which leads to false and misleading conclusions

which the Grimms could not possibly be expected to have understood related to the

underpinnings of basic contract law . . . the parties must understand what they are

signing. The language of the document is NOT clear and explicit and is absurd.

[Citations.] [¶] The Grimms could NOT have possibly understood the terms of this [loan

16 modification agreement] given the numerous inequities in the document and should be

deemed a 'contract of adhesion' as a take it or leave it, regardless whether it is a legal

document or not." (Some capitalization omitted.)

The Grimms' subjective failure to fully understand the effect of the loan

modification agreement at the time of signing it is defeated by several cardinal rules of

contract law. One is that a party's failure to "carefully read a contract . . . is no defense to

the contract's enforcement." (Desert Outdoor Advertising v. Superior Court (2011) 196

Cal.App.4th 866, 872.) Another is that a bad bargain, if that is what the Grimms made, is

not a ground for setting aside the agreement. (See Odorizzi v. Bloomfield School Dist.

(1966) 246 Cal.App.2d 123, 132 ["If we are temporarily persuaded against our better

judgment to do something about which we later have second thoughts, we must abide the

consequences of the risks inherent in managing our own affairs."].) A third is that mutual

consent is determined by objective rather than subjective criteria. (Meyer v. Benko

(1976) 55 Cal.App.3d 937, 942-943.) Viewed objectively, the Grimms' signing of the

loan modification agreement would lead a reasonable person to believe that they

understood and agreed to its terms. Therefore, based on the Grimms' allegations, their

undisclosed misunderstanding of one section of the loan modification agreement is

irrelevant. (Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 185.)

V. Cause of Action for Slander of Title

The Grimms allege in their complaint that the property was slandered because

Capital One and other defendants caused to be recorded wrongful and fraudulent

instruments, including the deed of trust, notices of default, notices of rescission,

17 assignment and sales of trusts. They claim the instruments were "invalid" and "constitute

improper clouds on [Grimms'] title to the property and are all consisting of unprivileged

publications of a false statement." (Some capitalization omitted.)

To make out a valid claim for slander of title, the Grimms were required to

establish each of the following four elements: (1) a publication, (2) without privilege or

justification, (3) that is false, and (4) that causes direct and immediate pecuniary loss.

(Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1051.)

The publication of a notice of default is a privileged communication. (§ 2924,

subd. (d)(1).) Further, contrary to the Grimms' legal conclusion that the recorded

documents are "invalid," they allege no facts in the complaint indicating that is so. The

recording of the notices of default caused no damage to the Grimms because the notices

were subsequently rescinded and defendants never recorded a notice of sale. The

Grimms did not allege facts indicating that the recording of the instruments somehow

caused them direct pecuniary loss. The complaint therefore fails to state facts sufficient

to constitute a slander of title cause of action.

VI. Cause of Action for Quiet Title

In their quiet title cause of action, the Grimms incorporated by reference their

fraud allegations and claimed misrepresentations relating to the signing of the note and

deed of trust. Specifically, the complaint alleged: "Due to the fraudulent nature of the

foreclosure and lack of pecuniary interest in the Note and Deed of Trust by the

foreclosing parties, the Grimms are not required to tender. . . . The Grimms do not

dispute the right to securitize the mortgage, but allege that as a result of improper

18 procedures, the true owner of his [sic] mortgage is unclear. As a result, on information

and belief, the Grimms have been paying improper entities and improper amount."

(Italics added; some capitalization omitted.) Given our conclusion that the Grimms failed

to state a claim for relief under a fraud theory, they cannot state a cognizable cause of

action for quiet title based on fraud.

VII. UCL Cause of Action

The Grimms allege that Capital One violated the UCL by the following actions:

attempting to dispose of the Grimms' property; inducing the public to purchase the

Grimms' property at the trustee sale; disseminating or causing to be disseminated before

the public by publishing by recording said notice of trustee sale; and seeking to confiscate

the Grimms' property by "credit bid" for the benefit of Capital One when the property

cannot in its present condition be sold due to the recorded fraudulent and wrongful

instruments.

In order to state a claim for a violation of the UCL, the Grimms must allege that

Capital One committed a business act or practice that is fraudulent, unlawful, or unfair.

(See Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) A UCL claim " 'is not

confined to anticompetitive business practices, but is also directed toward the public's

right to protection from fraud, deceit, and unlawful conduct. [Citation.] Thus, California

courts have consistently interpreted the [UCL law] broadly.' " (South Bay Chevrolet v.

General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 877.)

In discussing this cause of action in their opening brief, the Grimms allege Capital

One violated Penal Code section 532f, subdivision (a)(4), which states that "[a] person

19 commits mortgage fraud if, with the intent to defraud, the person . . . [f]iles or causes to

be filed with the recorder of any county in connection with a mortgage loan transaction

any document the person knows to contain a deliberate misstatement, misrepresentation,

or omission." (Italics added.) The Grimms' argument on this cause of action, in its

substantive entirety, is that the trial court erred in sustaining the demurrer because "even

a cursory review of [their] complaint shows" "unlawful business activities . . . which are

too numerous to list." However, the Grimms only specify one other unfair practice that

they claim Capital One engaged in: "recording fabricated and/or fraudulent documents."

(Italics added.)

In light of our conclusion the gravamen of the Grimms' complaint sounds in fraud,

and their pleading lacks specificity, the Grimms' UCL claim necessarily fails because

they have not pleaded any other unfair practice unrelated to fraud. (Price v. Starbucks

Corp. (2011) 192 Cal.App.4th 1136, 1147.)

VIII. Motion To Amend

In considering whether the Grimms have carried the burden of showing that they

can amend their complaint to cure any defects, we note that they must show "in what

manner" they can amend their complaint "and how that amendment will change the legal

effect" of their pleading. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) "[L]eave to

amend should not be granted where . . . amendment would be futile." (Vaillette v.

Fireman's Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685.)

Here, besides the fact we decline to interpret the pleadings liberally because the

allegations sound in fraud, the Grimms failed to carry their burden to show how the

20 complaint can be amended. They apparently believe, as they stated in their complaint,

that they are not in default: "Under the terms of the Pooling and Servicing Agreements,

the Grimms' proposed mortgage obligations have been paid in full, therefore, there is no

'default.' " Further, in opposing the demurrer in the trial court, they never stated how they

proposed to amend their complaint. Rather, they flatly asserted, "There are no defects in

[their] complaint or alleged causes of action." (Some capitalization omitted.)

On appeal, their efforts are no more detailed or helpful. In their opening brief,

after restating the law regarding amendment of complaints, they apply that law to this

case in one sentence that includes a citation to their arguments made in the hearing on the

demurrer motion: "Appellants offered to amend their complaint and Respondents did not

object." Because the Grimms fail to specify how the complaint can be amended, we

conclude the trial court did not err in declining to grant them leave to amend their

complaint. (Accord, Hamilton v. Greenwich Investors XXVI, LLC (2011) 195

Cal.App.4th 1602, 1615.)

21

DISPOSITION

The judgment is affirmed. Capital One, N.A. is awarded its costs on appeal.

O'ROURKE, J.

WE CONCUR:

McCONNELL, P. J.

McDONALD, J.

22