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8/8/2019 Doan v ETrade California Appeal Case regarding Declaratory Relief
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MICHAEL G. DOAN, Plaintiff and Appellant,
v.
E*TRADE BANK, Defendant and Respondent.
No. D056867.
Court of Appeals of California, Fourth District, Division One.
Filed December 17, 2010.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
IRION, J.
In this declaratory relief action concerning the right of defendant E*TRADE
Bank (the Bank)[1]
to enforce a promissory note executed by plaintiff
Michael G. Doan, Doan appeals the judgment of dismissal entered after
the trial court sustained the Bank's general demurrer to Doan's complaint
without leave to amend. We agree with the Bank that there is no actual
controversy between the parties that might warrant declaratory relief and
affirm the judgment on that basis.
FACTUAL AND PROCEDURAL BACKGROUND
On appeal from a judgment entered after a general demurrer is sustained
without leave to amend, we accept as true all material facts properly
pleaded in the complaint and all relevant facts that may be judicially
noticed and determine as a matter of law whether these facts state a
cause of action. (Campbell v. Regents of University of California (2005) 35
Cal.4th 311, 320; Alameda County Land Use Assn. v. City of Hayward
(1995) 38 Cal.App.4th 1716, 1719.) We recite the facts pertinent to our
decision.[2]
Doan borrowed $940,000 from E*TRADE Wholesale Lending Corp. to
purchase a condominium in Imperial Beach in September 2006. As part of
the loan transaction, Doan executed an "InterestFirstSM Adjustable Rate
Note"[3]
(the Note) in favor of E*TRADE Wholesale Lending Corp. The Note
contains the usual terms included in residential mortgage loan documents
(e.g., maturity date, interest rate, monthly payment amount and notice
provisions). It also provides that "Lender may transfer this Note," and that
the "Note Holder" may accelerate the maturity date and demand full
payment if Doan does not pay the full amount of each monthly payment
when due and cure any deficiency after notice. Doan alleged he "is current
on his payments under the Note."
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The Note was secured by a deed of trust that Doan signed on September
5, 2006 (the Deed of Trust).[4]
The Deed of Trust identifies E*TRADE
Wholesale Lending Corp. as "Lender" but lists other entities as trustee and
beneficiary. Like the Note, the Deed of Trust states that the Note can be
sold. The Deed of Trust obligates Doan, among other things, to pay all
taxes and other assessments on the property and to keep the property
insured against fire and other hazards. As stated in the Note, the Deed of
Trust "protects the Note Holder from possible losses which might result" if
Doan does not keep the repayment and other promises he made in the
Note. In particular, if Doan were to default and not timely cure after
written notice from the Lender, the Lender could exercise its power of
sale. Doan does not allege that the Bank or any other entity has notified
him of a default, demanded that he cure the default or attempted to
exercise the power of sale.
Doan developed "reason to believe that the [Note] may not beenforceable," after E*TRADE Wholesale Lending Corp. dissolved in 2008,
and "[i]n light of . . . recent global events arising from the securitization of
residential loans . . . ." He therefore wrote a letter to E*TRADE Servicing
Center in June 2009 requesting the identities of the owner and holder of
the Note and other information and documents concerning his loan.
Approximately two weeks later, E*TRADE Financial responded that the
Bank currently owned the loan and that E*TRADE Financial was servicing
the loan. Enclosed with the response were a payment history and copies
of the "Note and Mortgage." E*TRADE Financial, however, declined to
provide some of the other information and documents Doan hadrequested. Additional correspondence followed, in which E*TRADE
Financial asserted "[t]he ownership of the loan has no [e]ffect on the
enforceability of the Note . . .," and refused to provide all of the
information and documents Doan wanted, including the original endorsed
Note.
Dissatisfied with E*TRADE Financial's responses to his inquiries and having
"serious doubts and suspicions" about who "is the rightful party to enforce
the Note," Doan filed this lawsuit to obtain a declaratory judgment
regarding the right of the Bank to enforce the Note. In his verifiedcomplaint, Doan alleged he has no contractual relationship with the Bank
or with E*TRADE Financial, and complained that "E*TRADE Financial's
refusal [to produce the original endorsed Note and other documents] has
raised serious doubts and suspicions that E*TRADE possesses the Note."
He also alleged he "is entitled to know to whom the legal rights and duties
under [the] Note in this mat[t]er belong." Doan sought a declaration that
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the Bank (1) "is not the holder of the instrument," (2) "is not a nonholder
in possession of the instrument who has the rights of a holder," and (3) "is
a person not in possession of the Note who is entitled to enforce the
instrument pursuant to [Commercial] Code section 3309 or subdivision (d)
of [Commercial Code] section 3418."[5]
(Emphasis in original.) In short,
Doan sought a declaratory judgment that the Bank has no right to enforce
the Note against him.
The Bank demurred on the ground the complaint failed to state facts
sufficient to constitute a cause of action. More specifically, the Bank
contended "[t]here is no requirement under California law for a creditor to
have actual physical possession of a note in order to enforce it." The trial
court agreed, sustained the Bank's demurrer without leave to amend, and
entered an "order of dismissal following sustaining of demurrer without
leave to amend."[6]
DISCUSSION
The issue dispositive of this appeal is whether Doan's complaint for
declaratory relief presents a justiciable controversy. We hold that it does
not. We therefore need not, and do not, determine whether Doan is
correct that the Bank may not enforce the Note against him because the
Bank does not qualify as a "`[p]erson entitled to enforce'" a negotiable
instrument within the meaning of Commercial Code section 3301.
A. Declaratory Relief Is Proper Only When There Is an Actual Controversy
Between Adverse Parties Appropriate for Judicial Resolution
A threshold requirement for declaratory relief is the existence of a
justiciable dispute. The declaratory judgment statute expressly provides
that declaratory relief is available to parties to contracts or written
instruments "in cases of actual controversy relating to the legal rights and
duties of the respective parties." (Code Civ. Proc., § 1060, italics added.)
Because Code of Civil Procedure section 1060 "makes the presence of an
`actual controversy' a jurisdictional requirement to the grant of
declaratory relief ̀ " (Environmental Defense Project of Sierra County v.
County of Sierra (2008) 158 Cal.App.4th 877, 885 (Environmental DefenseProject )), a "court is only empowered to declare and determine the rights
and duties of the parties `in cases of actual controversy'" (Pittenger v.
Home Savings & Loan Assn. (1958) 166 Cal.App.2d 32, 36 (Pittenger )). For
this reason, the existence of an "`actual, present controversy '" is
"`fundamental' "to an action for declaratory relief.[7]
(City of Cotati v.
Cashman (2002) 29 Cal.4th 69, 79 (Cashman); In re Claudia E. (2008) 163
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Cal.App.4th 627, 639.)
One requirement for a justiciable controversy is ripeness: there must be a
dispute between adverse parties on a specific set of facts that has reached
the point that an invasion of one party's rights is likely unless the court
orders relief and enters a conclusive judgment declaring the parties' rightsand obligations. (See, e.g., Pacific Legal Foundation v. California Coastal
Com. (1982) 33 Cal.3d 158, 170-171 (Pacific Legal Foundation); Selby
Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110, 117 (Selby
Realty ); County of San Diego v. State of California (2008) 164 Cal.App.4th
580, 606-608; Environmental Defense Project, supra, 158 Cal.App.4th at
pp. 884-885.) Furthermore, because declaratory relief is designed to settle
disputes before they lead to an actual violation of rights (Babb v. Superior
Court (1971) 3 Cal.3d 841, 848; County of San Diego , at p. 607), the
ripeness doctrine in the declaratory relief context requires that the
dispute "has reached, but has not passed, the point that the facts havesufficiently congealed to permit an intelligent and useful decision to be
made" (California Water & Telephone Co. v. County of Los Angeles (1967)
253 Cal.App.2d 16, 22; accord Pacific Legal Foundation , at p. 171; County
of San Diego , at p. 606).
These requirements for a justiciable controversy must be met at the
pleading stage. A plaintiff seeking declaratory relief "must allege facts
from which a court may determine that an actual controversy relating to
legal rights and duties of the respective parties exists." (Lord v. Garland
(1946) 27 Cal.2d 840, 851.) "Unless all the allegations of a complaint showthat an actual controversy does exist between the parties, there is no basis
for declaratory relief." ( Amer. Mission Army v. City of Lynwood (1956) 138
Cal.App.2d 817, 819 ( American Mission Army ).) Accordingly, to withstand
demurrer, "`an actual, present controversy must be pleaded specifically'
and ̀ the facts of the respective claims concerning the [underlying] subject
must be given.'" (Cashman, supra, 29 Cal.4th at p. 80.) If it appears no
such controversy exists, then an action for declaratory relief should be
dismissed. (Connerly, supra, 146 Cal.App.4th at p. 746; Pittenger, supra,
166 Cal.App.2d at p. 36.)
B. Doan Has Not Alleged an "Actual Controversy" with the Bank
Applying these general principles, we do not discern in the factual
allegations of Doan's complaint any justiciable controversy.[8]
Doan has not
alleged that he is in default or that the Bank has taken steps to enforce the
terms of the Note or the Deed of Trust against him or otherwise to deprive
him of his interest in the property that secures performance of his
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obligations. Nor does the record indicate the Bank has ever threatened to
do so. Indeed, the record is to the contrary. In the complaint Doan alleged
he "is current on his payments under the Note." In opposition to the
Bank's demurrer, Doan wrote he is not "seeking to avoid the obligation"
and "is making advance payments under the obligation and is ahead of the
payment schedule."[9] In his opening brief on appeal, Doan states he "has
not missed any payments, and is current on the obligation. T here is no
enforcement activity to seize t he collateral liened against t he mortgage.
T here is no pending foreclosure and t he non-judicial foreclosure statute
has not been invoked by [t he Bank ]." (Italics added.) In his reply brief on
appeal, Doan admits he has been paying the insurance and the taxes on
the property. It thus appears that Doan has been faithfully keeping his
promises to the Bank and that the Bank has never taken a contrary
position.[10]
Unless Doan actually defaults, the Bank's right to enforce the Note andDeed of Trust will not be triggered.
[11]A lender generally enforces a
borrower's repayment and other obligations by foreclosure proceedings,
which may be either judicial (i.e., by lawsuit) or nonjudicial (i.e., by private
trustee's sale). (See Code Civ. Proc., §§ 725a-730.5 [judicial foreclosure];
Civ. Code, §§ 2924-2924l [nonjudicial foreclosure]; Alliance Mortgage Co.
v. Rot hwell (1995) 10 Cal.4th 1226, 1236 [describing "elaborate and
interrelated set of foreclosure and antideficiency statutes relating to the
enforcement of obligations secured by interests in real property"].)
Indeed, a secured creditor must "proceed against the security before
enforcing the underlying debt." (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 999.) Consistent with the usual practices in
residential mortgage lending, the Deed of Trust Doan signed expressly
authorizes the Lender to exercise foreclosure remedies only if a default is
not timely cured after notice. (See Bank of America v. La Jolla Group II
(2005) 129 Cal.App.4th 706, 712 ["As is typical, the deed of trust involved
in this case allows the beneficiary to exercise its power of sale only if an
`event of default' occurs."].) The Bank therefore cannot invoke these
remedies unless and until Doan defaults. (See Civ. Code, § 2924, subd.
(a)(1) [notice of default must be recorded before power of sale can be
exercised]; New hall v. Sherman (1899) 124 Cal. 509, 511 [borrower's
nonpayment of amount due essential for judicial foreclosure]; Pacific Mut.
Life Ins. Co. v. Hansen (1919) 44 Cal.App. 463, 465-466 [borrower's default
essential for judicial foreclosure].)
It is therefore not surprising that courts in California have approved
declaratory relief in cases concerning enforcement of notes and deeds of
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trust only in cases in w hich t he borrower has defaulted. In R. G. Hamilton
Corp, Ltd., v. Corum (1933) 218 Cal. 92, declaratory relief was available to
determine the validity of a deed of trust after the notice of default had
been recorded. In Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d
570, declaratory relief was available to determine whether a trustee's sale
was invalid for noncompliance with the requirements for notices of
default and sale. In a case in which the borrowers sought a declaratory
judgment as to the enforceability of certain provisions of a deed of trust in
which the lender had recorded a notice of default, we held "[t]he time was
ripe for such a declaration, inasmuch as [the bank's] proceedings for
foreclosure under the trust deed were not by court action." (Lomanto v.
Bank of America (1972) 22 Cal.App.3d 663, 668.)
When, by contrast, the borrower (or buyer) has not defaulted or the
lender (or seller) has not sought to foreclose, courts have held that
purported controversies regarding the validity of encumbrances or thelender's right to enforce them were not justiciable. For example, in
Shepherd v. Paul A. Hauser, Inc. (1934) 138 Cal.App. 384 (Shepherd ), the
court held there was no actual controversy warranting declaratory relief as
to the validity of an encumbrance because, as is true in this case, the
parties fully understood their obligations under the contract and had
performed their obligations for several years. In fact, other courts have
refused to decide the very issue raised by Doan whether a lender has
the right to enforce a note or mortgage when, as in this case, there was
no foreclosure attempt by the lender. (See, e.g., Coffin v. Malvern Federal
Savings Bank (3d Cir. 1996) 90 F.3d 851, 854 ["The determination of whether the Bank's lien is enforceable will eventually have to be made by
another court in foreclosure proceedings and the bankruptcy court's
advice will have no legal effect."]; Colonial Sav., FA v. Gulino (D.Ariz. May
19, 2010, No. CV-09-1635-PHX-GMS) 2010 U.S.Dist Lexis 49755, *9
["Similarly, to the extent Borrowers argue that Colonial Savings and MERS
are not entitled to enforce the note, whether or not they are in possession
of it, that issue is not properly before the Court as Borrowers do not allege
that Colonial Savings or MERS has attempted to foreclose on Borrower's
property."].) We agree with the dispositive principle of these cases that
the issue of who has the right to enforce a note is not justiciable without
an attempt at enforcement.
In sum, Doan does not challenge the validity of his obligations under the
Note or the Deed of Trust, and he admits both that he is not in default and
that the Bank has not sought to pursue its foreclosure remedies against
him. Thus, declaratory relief is not available because "[n]o dispute has
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arisen that would cause these remedial provisions to come into play, and
[Doan] do[es] not allege that the continuation of the contractual
relationship depends on the resolution of [any] questions [concerning the
Bank's right to invoke them]." (Meyer v. Sprint Spectrum L.P. (2009) 45
Cal.4th 634, 648.) Any judgment at this time would be advisory only, since
Doan might never default, and even if he did, the Bank might have sold
the Note by that time and so might not seek to enforce it. We have no
power to render declaratory judgments that are purely advisory. (Selby
Realty, supra, 10 Cal.3d at p. 117 ["The judgment must decree, not
suggest, what the parties may or may not do."]; Winter v. Gnaizda (1979)
90 Cal.App.3d 750, 756 (Winter ) [advisory opinions are "explicitly
forbidden by law in an action brought for declaratory relief"].)
C. Doan's Arguments That He Has an Actual Controversy with the Bank
Have No Merit
Doan offers several reasons why the controversy is ripe and the trial
court's dismissal of his case should be reversed. None is persuasive.
Doan initially asserts, "As a primer, [the Bank] did not raise the ripeness
doctrine at the trial court, thus it apparently argues this issue de novo." If
by this statement Doan means we may not consider the Bank's ripeness
argument, we disagree. A jurisdictional point, such as ripeness, may be
raised for the first time on appeal. (See, e.g., In re Estevez (2008) 165
Cal.App.4th 1445, 1458; Farm Sanctuary, Inc. v. Department of Food &
Agriculture (1998) 63 Cal.App.4th 495, 501, fn. 5.) We may also decide a
question of law that does not involve a factual dispute, such as whether a
complaint alleges an "actual controversy" within the meaning of Code of
Civil Procedure section 1060, even if the question was not raised in the
trial court. (See, e.g., Tyre v. Aetna Life Ins. Co. (1960) 54 Cal.2d 399, 405;
Sheller v. Superior Court (2008) 158 Cal.App.4th 1697, 1709.) Further, we
may affirm the trial court's decision if it is correct on any theory supported
by the record, even if the trial court relied on a different ground for its
decision. (See, e.g., Davey v. Sout hern Pacific Co. (1897) 116 Cal. 325, 329;
In re Marriage of Mat hews (2005) 133 Cal.App.4th 624, 632.) We
therefore may decide the ripeness point and affirm on that ground.
Doan next contends that although this controversy may not be a
"`traditional'" one regarding a residential mortgage loan, "the era of
mortgage backed securities, and sloppy practices, ha[ve] created problems
for consumers like [him]" that are ripe for judicial resolution. He asserts
that "homeowners and the public have a right to know who[] owns the
mortgage," and he complains that mortgage lenders are systematically
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frustrating this right and harming consumers by "hiding" that information.
As other courts have recognized in similar cases, however, "the fact that
an issue raised in an action for declaratory relief is of broad general
interest is not enough for the courts to grant such relief in the absence of
a true justiciable controversy." (Winter, supra, 90 Cal.App.3d at p. 756; see
also Pittenger, supra, 166 Cal.App.2d at p. 38 [courts have no general
control over business practices that may be of "great public interest"].)
Thus, not until the practices alleged by Doan actually affect his rights may
he seek a declaratory judgment regarding them.[12]
(Pacific Legal
Foundation, supra, 33 Cal.3d p. 170 [ripeness doctrine bars lawsuits that
seek only general guidance rather than resolution of specific legal
dispute]; Pittenger, supra, 166 Cal.App.2d at p. 38 [courts' duty limited to
"declar[ing] and administer[ing] the law in controversies that are properly
brought to them"].)
Doan reminds us that "the ripeness requirement does not prevent us fromresolving a concrete dispute if the consequence of a deferred decision will
be lingering uncertainty in t he law, especially when there is widespread
public interest in the answer to a particular legal question." (Hunt v.
Superior Court (1999) 21 Cal.4th 984, 998, italics added; accord, Pacific
Legal Foundation, supra, 33 Cal.3d at p. 170.) This rule does not apply
here, however, because Doan has not alleged a "concrete dispute."
Moreover, it does not appear there will be any lingering uncertainty in t he
law if we affirm the trial court's dismissal of this case. The uncertainty of
immediate concern to Doan consists of the "serious doubts and
suspicions" he has about who "is the rightful party to enforce the Note" atissue here. That is uncertainty about t he specific facts of t his particular
case, not about the generally applicable legal rules governing who may
enforce an obligation secured by residential real property when the
borrower defaults. In any event, California statutes already clearly identify
who has those rights (see Code Civ. Proc., § 725a [beneficiary or trustee
under deed of trust or mortgagee under mortgage or their successors];
Civ. Code, § 2924, subd. (a)(1) [trustee, mortgagee, beneficiary or
authorized agent]); and the cases from federal trial courts that Doan
contends "are creating a body of law inconsistent with California law" are
not to the contrary. (See, e.g., Garcia v. HomEq Servicing Corp. (E.D.Cal.
Aug. 18, 2009, No. CIV-F-09-0374 AWI SMS) 2009 U.S.Dist. Lexis 77697,
*11-12 [trustee may initiate nonjudicial foreclosure]; Gamboa v. Trustee
Corps (N.D.Cal. Mar. 12, 2009, No. 09-0007 SC) 2009 U.S.Dist. Lexis 19613,
*9 [assignee of note may direct substituted trustee to initiate nonjudicial
foreclosure]; Putkkuri v. ReconTrust Co. (S.D.Cal. Jan. 5, 2009, No.
08cv1919 WQH (AJB)) 2009 U.S.Dist. Lexis 32, *6 [trustee may initiate
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nonjudicial foreclosure].)[13]
Doan lastly argues his dispute is ripe for resolution because the Bank is
enforcing the Note and he is suffering "hardship" as a result. According to
Doan, the Bank enforces the Note by "threatening to notify credit bureaus
if [he]is 30 days late in payment " and by "requiring [him to] pay insuranceand substantial amounts for taxes," and he "is burdened by having to pay
the loan amounts, possibly to the wrong party, which he now does under
protest." (Italics added.) We reject this argument.
Doan has not alleged that the Bank actually notified any credit bureau that
he had been late on his payments. To the contrary, he alleges in his
complaint that he "is current on his payments under the Note" and stated
in his brief in opposition to the Bank's demurrer that he "is making
advance payments under the obligation and is ahead of the payment
schedule." Moreover, Doan does not cite any authority to support or
otherwise explain how the obligations to repay the loan and to pay the
insurance and taxes on the property pledged as security for these
obligations obligations he voluntarily undertook when he executed the
Note and Deed of Trust, which he has been performing for years, and
which he admits he is not trying to avoid could possibly constitute
"hardship." We are "not required to examine undeveloped claims, nor to
make arguments for parties." (Paterno v. State of California (1999) 74
Cal.App.4th 68, 106; see also Wright v. City of Los Angeles (2001) 93
Cal.App.4th 683, 689 ["Generally, asserted grounds for appeal that are
unsupported by any citation to authority and that merely complain of error without presenting a coherent legal argument are deemed
abandoned and unworthy of discussion."].) These circumstances simply do
not present an actual controversy ripe for declaratory relief. (Shepherd,
supra, 138 Cal.App. at pp. 387-388.)
D. Doan Is Not Entitled to Leave to Amend His Complaint
Doan argues on appeal, as he did in the trial court, that the trial court
should not have sustained the Bank's demurrer without leave to amend
because he "can amend his complaint to assert other causes of action for
relief. For example, Doan can amend his complaint for an action ininterpleader, where [he] makes his mortgage payments in trust to the
court, or another trustee, until the party with the legal rights to the money
can appear in the case to prove its standing." To be entitled to leave to
amend, Doan must specify the facts or legal theory he can add that "would
change the legal effect of [his] pleading." (Hernandez v. City of Pomona
(2009) 46 Cal.4th 501, 520, fn. 16; accord, Hendy v. Losse (1991) 54 Cal.3d
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financial services that include trading, investing, banking, and lending.
Banking and lending products and services are offered by E*TRADE Bank, a
Federal savings bank, Member FDIC, or its subsidiaries."
[2] Doan has requested that we take judicial notice of, or alternatively
augment, the record to include certain correspondence and discoveryresponses that he claims substantiate some of the factual assertions in his
opening brief. Since these documents are not relevant to the ripeness
question we decide, we deny the request. (See Gbur v. Cohen (1979) 93
Cal.App.3d 296, 301 [judicial notice "is always confined to those matters
which are relevant to the issue at hand"]; McCart hy v. Mobile Cranes, Inc.
(1962) 199 Cal.App.2d 500, 502 [augmentation proper when material
should be considered to decide appeal].)
[3] Doan attached an unsigned copy of the Note as an exhibit to his
complaint.
[4] Doan did not attach a copy of the Deed of Trust to his complaint. The
Bank submitted a recorded copy with its demurrer and asked the trial
court to take judicial notice of the document. Such notice is proper. (Evid.
Code, § 452, subds. (c), (h); Poseidon Development, Inc. v. Woodland Lane
Estates, LLC (2007) 152 Cal.App.4th 1106, 1117; Cal-American Income
Property Fund II v. County of Los Angeles (1989) 208 Cal.App.3d 109, 112,
fn. 2.)
[5] These are the three categories of persons entitled to enforce
negotiable instruments, which include promissory notes. (See Com. Code,§§ 3104, subds. (a), (e), 3301.) Doan's request as to the third category
appears to contain a typographical error. In the charging allegations of the
complaint, Doan alleges that "Defendants do not have the ability to
enforce the instrument as a lost note . . . ." (Italics added.) Hence, he
presumably meant to request a declaration that the Bank is not "a person
not in possession of the instrument who is entitled to enforce the
instrument pursuant to Section 3309 or subdivision (d) of Section 3418."
(Com. Code, § 3301.) The latter provisions deal with enforcement of lost,
destroyed or stolen negotiable instruments and those paid or accepted by
mistake when the payor or acceptor recovers payment or revokesacceptance. (Id., §§ 3309, 3418, subd. (d).)
[6] The order mistakenly references Code of Civil Procedure section 581,
subdivision (f)(2). That provision applies when a demurrer is sustained,
leave to amend is granted, and the plaintiff does not amend within the
time allowed. (Ibid .) The applicable provision is section 581, subdivision
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(f)(1), which applies where, as here, a demurrer is sustained wit hout leave
to amend. In any event, the clerk filed a written order of dismissal signed
by the trial court, which constitutes a judgment and is appealable. (Code
Civ. Proc., §§ 581d, 904.1, subd. (a)(1); Et heridge v. Reins Internat.
California, Inc. (2009) 172 Cal.App.4th 908, 913.)
[7] The actual controversy requirement is not unique to actions for
declaratory relief. "An indispensable element to jurisdiction is that there
be an actual controversy between parties who have an adversarial interest
in the outcome of the litigation." (Connerly v. Schwarzenegger (2007) 146
Cal.App.4th 739, 746 (Connerly ).) "It is, of course, the prevailing doctrine in
our judicial system that an action not founded upon an actual controversy
between the parties to it, and brought for the purpose of securing a
determination of a point of law, is collusive and will not be entertained . . .
." (Golden Gate Bridge etc. Dist. v. Felt (1931) 214 Cal. 308, 316.)
[8] We disregard the allegation in Doan's complaint that a "present and
actual controversy exists." The "mere allegation that such a controversy
exists is not sufficient." (Wilson v. Transit Aut h. (1962) 199 Cal.App.2d 716,
724 (Wilson).) A "party seeking declaratory relief must plead facts rather
than conclusions of law." ( Auberry Union School Dist. v. Rafferty (1964)
226 Cal.App.2d 599, 603.) "To say that a controversy exists," as Doan has
done, "is a mere conclusion; it is not a statement of ultimate facts that are
indispensable to a valid pleading." ( American Mission Army, supra, 138
Cal.App.2d at p. 819.)
[9] Such concessions are binding on the party making them. (Electric
Supplies Distributing Co. v. Imperial Hot Mineral Spa (1981) 122 Cal.App.3d
131, 134; Smit h v. Walter E. Heller & Co. (1978) 82 Cal.App.3d 259, 269.)
[10] As a practical matter, there would be no reason for the Bank to
enforce the Note or Deed of Trust against Doan at this time. To "enforce"
means "[t]o give force or effect to (a law, etc.); to compel obedience to."
(Black's Law Dict. (9th ed. 2009) p. 608, col. 2.) The Bank obviously has no
need to compel Doan to obey terms of a Note and Deed of Trust that he is
already obeying voluntarily.
[11] Although Doan conceded in his opening brief that "[t]he promissory
note and the deed of trust are inseparable," he insists in his reply brief
that enforcement of the Note must be analyzed separately from
enforcement of the Deed of Trust. Doan had it right the first time. The
Note expressly refers to the Deed of Trust and states that the latter
"protects the Note Holder from possible losses which might result" if Doan
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does not keep the repayment and other promises made in the Note. It is
the Deed of Trust, not the Note, which sets out the remedies available for
enforcement of the obligations contained in those documents. The Note
and the Deed of Trust thus form part of the same loan transaction and
must be construed together. (Civ. Code, § 1642; K erivan v. Title Ins. &
Trust Co. (1983) 147 Cal.App.3d 225, 230.)
[12] If, in the meantime, Doan is truly concerned about "[i]mproper non-
judicial foreclosures harm[ing] many" "older citizens [being]
disproportionately victimized" "preventing fraud" and "causing the
retail lending industry to adopt standardized custodial guidelines," as he
claims in this appeal, he may address his concerns to the Legislature.
[13] In most of these cases, "homeowners seeking to forestall foreclosure"
unsuccessfully argued that only someone in possession of the promissory
note could foreclose. (Garcia v. HomEq Servicing Corp., supra, 2009 U.S.
Dist. Lexis 77697, *11 [collecting cases]; see also Spencer v. DHI Mortgage
Co. (E.D.Cal. 2009) 642 F.Supp.2d 1153, 1166 ["Like many other borrowers
subject to foreclosure, plaintiffs appear to claim defendants need to
possess the original promissory note to permit foreclosure. Such is not the
case in California."].) This argument is very similar to the one Doan wants
adjudicated here, i.e., that only a "`[ p]erson entitled to enforce'" a
negotiable instrument as defined in Commercial Code section 3301 may
enforce a promissory note.
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