Doan v ETrade California Appeal Case regarding Declaratory Relief

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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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."



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



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

àctual 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 ìn 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 "àctual, 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



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, "àn 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



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

èvent 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



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



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



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



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





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



(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



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.

Documents

Doan v ETrade California Appeal Case regarding Declaratory Relief