Watland v. Ocwen Loan Servicing CA1/5 ( 2016 )

Filed 4/13/16 Watland v. Ocwen Loan Servicing CA1/5
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
JAMES A. WATLAND et al.,
Plaintiffs and Appellants,
A139562
v.
OCWEN LOAN SERVICING, LLC, et al., (Sonoma County
Super. Ct. No. SCV-252322)
Defendants and Respondents.
James A. Watland and Billi R. Watland appeal from a judgment of dismissal
entered after the trial court sustained respondents’ demurrer to their first amended
complaint without leave to amend. They contend the court erred, primarily because
(1) two recorded assignments by Mortgage Electronic Registration Systems, Inc.
(MERS), as nominee of the originating lender, are void because the assignments were
executed after the originating lender ceased operations and after the closure of the
assignee, a securitized trust; and (2) they have standing to challenge the assignments,
even though they are not parties to the assignments or the securitization agreement.
We will affirm the judgment.
I. FACTS AND PROCEDURAL HISTORY
The Watlands filed their first amended complaint—the operative pleading in this
appeal—in January 2013.
1
A. Allegations of the First Amended Complaint
In July 2005, the Watlands obtained a $492,000 loan from WMC Mortgage Corp.
(WMC), evidenced by an adjustable rate note that was secured against their home in
Petaluma pursuant to a deed of trust.
The deed of trust, attached to the first amended complaint as an exhibit, authorized
the “Lender” to, among other things, declare all amounts under the note due upon the
borrowers’ default, invoke a power of sale provision, and cause notice to be sent to the
borrowers of the default and the Lender’s election to sell the property. The deed of trust
identified the “Lender” to be WMC, but also provided that the Lender could transfer the
note, or a partial interest in the note, without notice to the borrowers.
The deed of trust identified MERS as “a separate corporation that is acting solely
as nominee for Lender and Lender’s successors and assigns.” MERS was authorized “to
exercise any or all of those interests [for Lender and Lender’s successors and assigns],
including, but not limited to, the right to foreclose and sell the Property; and to take any
action required of Lender including, but not limited to, releasing and cancelling this
Security Instrument.”
In January 2007, WMC ceased operations. Later in 2007, the servicer of the loan
notified the Watlands that, pursuant to the terms of the note, the interest rate would adjust
from 6.25 percent to 9.25 percent on August 1, 2007.
On November 29, 2007, the Watlands entered into a “Loan Modification
Agreement,” which was recorded in March 2008 (2008 Loan Modification). The 2008
Loan Modification provided that it amended the note and deed of trust, identified the
“Lender” as respondent “Deutsche Bank National Trust Company, as trustee under the
Pooling and Servicing Agreement dated as of November 1, 2005, GSAMP Trust 2005-
WMC2” (DBNTC as Trustee), identified MERS as the Mortgagee, and extended the 6.25
percent interest rate period until July 1, 2009. 1
1
A copy of the 2008 Modification was submitted to the trial court with
respondents’ request for judicial notice in connection with their demurrer. There is no
dispute in this appeal that the 2008 Modification is the proper subject of judicial notice.
2
The Watlands defaulted on the modified loan in 2010 by failing to make
payments.
In December 2011, Ocwen Loan Servicing, LLC (Ocwen), which began servicing
the loan in September 2011, recorded an assignment of the deed of trust from MERS, as
nominee for WMC and its successors and assigns, to DBNTC as Trustee (Assignment-1).
A copy of the assignment was attached to the first amended complaint.
A notice of default and election to sell the property under the deed of trust was
recorded in February 2012. The default was not cured, and a “Notice of Trustee’s Sale”
was recorded on May 25, 2012. The loan remained in default for failure to make
payments.
In August 2012, a second assignment of the deed of trust was recorded, by which
MERS, as nominee for WMC and its successors and assigns, again assigned all interest to
DBNTC as Trustee (Assignment-2).
Against the backdrop of these allegations, the Watlands purported to state three
causes of action: (1) cancellation of instruments, pursuant to Civil Code section 3412;
(2) violation of Business and Professions Code section 17200 et seq.; and (3) declaratory
relief. The gravamen of their claims was that Assignment-1 and Assignment-2 were void
because they were executed after the originating lender (WMC) ceased operations;
MERS did not hold an ownership interest in the note that it could convey to DBNTC as
Trustee, MERS could not convey an interest in real property without disclosing its
principal, and the assignments were signed by “robo-signers”; and, therefore, the
assignments and notice of default should be cancelled, no interest under the note or deed
of trust was ever transferred to DBNTC as Trustee, DBNTC as Trustee has no authority
to foreclose, and no foreclosure should proceed. (The Watlands also argue that the
assignments were void because they were executed after the closing date of the
securitized trust (DBNTC as Trustee).)
Although the Watlands did not disclose the 2008 Modification in their first amended
complaint, we mention it at this point so it can be understood in context.
3
B. Respondents’ Demurrer to the First Amended Complaint
In March 2013, DBNTC as Trustee and other respondents filed a demurrer to the
Watlands’ first amended complaint. Respondents argued that the cause of action for
cancellation of instruments failed because the Watlands lacked standing to challenge the
assignments and, in any event, they acknowledged in the 2008 Modification that DBNTC
as Trustee had become the “Lender” under the note and deed of trust. For this reason, the
Watlands’ other claims failed as well.
The Watlands opposed the demurrer, insisting they had a right to challenge the
assignments, and the assignments were invalid and fraudulent because MERS lacked
authority to assign the deed of trust.
In May 2013, after a hearing, the trial court sustained respondents’ demurrer to the
first amended complaint without leave to amend. The court rejected the Watlands’
allegations that the assignments should be voided as fraudulent, because the Watlands
failed to allege fraud with requisite specificity, they could not have justifiably relied on
the purported assignments because they defaulted on the loan before the assignments
were made, and they entered into the modification in which they recognized DBNTC as
Trustee as the lender. In addition, the court ruled there was no impropriety with the
MERS assignments because, under the deed of trust, the Watlands had contractually
authorized MERS to pursue foreclosure in the event of default and the deed of trust
authorized MERS to execute the assignment as nominee on behalf of the original lender’s
successors and assigns. Furthermore, the Watlands, as non-parties to the assignments,
had no standing to challenge them.
In addition, the court denied leave to amend due to the Watlands’ “contradictory
positions across their verified pleadings.” The Watlands had asserted in their original
complaint that DBNTC as Trustee had a duty to them as a party under the deed of trust,
but subsequently claimed that DBNTC as Trustee never acquired any interest in the loan.
Judgment was entered, dismissing the entire action with prejudice. This appeal
followed. According to respondents, the foreclosure sale has not been completed as of
the date of the respondents’ brief.
4
II. DISCUSSION
In our de novo review of an order sustaining a demurrer, we assume the truth of all
facts properly pleaded in the complaint or reasonably inferred from the pleading, but not
mere contentions, deductions, or conclusions of law. (Buller v. Sutter Health (2008)
160 Cal.App.4th 981, 985–986.) We then determine if those facts are sufficient, as a
matter of law, to state a cause of action under any legal theory. (Aguilera v. Heiman
(2009) 174 Cal.App.4th 590, 595.)
In making this determination, we also consider facts of which the trial court
properly took judicial notice. (E.g., Avila v. Citrus Community College District (2006)
38 Cal.4th 148, 165 fn. 12.) Indeed, a demurrer may be sustained where judicially
noticeable facts render the pleading defective (Evans v. City of Berkeley (2006)
38 Cal.4th 1, 6.), and allegations in the pleading may be disregarded if they are contrary
to facts judicially noticed. (Hoffman v. Smithwoods RV Park, LLC (2009) 179
Cal.App.4th 390, 400 (Hoffman); Fontenot v. Wells Fargo Bank, N.A. (2011) 198
Cal.App.4th 256, 265 (Fontenot) [in sustaining demurrer, court properly took judicial
notice of recorded documents that clarified and to some extent contradicted plaintiff’s
allegations], disapproved on other grounds in Yvanova v. New Century Mortgage Corp.
(2016) 62 Cal.4th 919, 939 fn. 13 (Yvanova).)
In order to prevail on appeal from an order sustaining a demurrer, the appellant
must affirmatively demonstrate error. Specifically, the appellant must show that the facts
pleaded are sufficient to establish every element of a cause of action and overcome all
legal grounds on which the trial court sustained the demurrer. (Cantu v. Resolution Trust
Corp. (1992) 4 Cal.App.4th 857, 879–880.) We will affirm the ruling if there is any
ground on which the demurrer could have been properly sustained. (Debro v. Los
Angeles Raiders (2001) 92 Cal.App.4th 940, 946.)
A. The Watlands Do Not Establish Any Alleged Cause of Action
The Watlands’ first amended complaint purported to allege causes of action for
cancellation of instruments under Civil Code section 3412, violation of Business and
5
Professions Code section 17200, and declaratory relief. The court’s order sustaining
respondents’ demurrer explained why the Watlands failed to establish a cause of action
under Civil Code section 3412, and, therefore, failed to establish any cause of action the
Watlands had purported to assert.
The Watlands’ briefs in this appeal do not explain how the allegations of their first
amended complaint establish all the elements of their specified causes of action for
cancellation of instruments under Civil Code section 3412, violation of Business and
Professions Code section 17200, or declaratory relief. Instead, they address whether they
have standing to challenge the assignments and urge that their action is in essence a
wrongful foreclosure case. Accordingly, they fail to demonstrate that the court erred in
sustaining respondents’ demurrer with respect to their alleged causes of action.2
B. The Watlands Have No Cause of Action for Wrongful Foreclosure
The Watlands contend that the elements of a wrongful foreclosure cause of action
are: “(1) the defendant caused an illegal, fraudulent, or willfully oppressive sale of the
property pursuant to a mortgage or deed of Trust; (2) plaintiff suffered prejudice or harm;
and (3) plaintiff tendered the amount of the secured indebtedness or is excused from
tendering. (Chavez v. IndiMac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062;
Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.)” (Italics added.) The
allegations of their first amended complaint do not establish these elements.
2
Furthermore, the Watlands do not rebut the entirety of the trial court’s reasoning in
sustaining the demurrer. Civil Code section 3412 provides: “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.” The trial court concluded
that the Watlands had failed to state a cause of action under this provision, in part
because they asserted the assignments should be voided as fraudulent, but they failed to
allege the fraud with requisite specificity; they could not have justifiably relied on the
purportedly fraudulent assignments because they defaulted on the loan before the
assignments were made; and they entered into the 2008 Modification in which they
explicitly acknowledged that DBNTC as Trustee was the lender. The Watlands do not
demonstrate that their allegations of fraud were sufficiently pled or otherwise establish
any error in this aspect of the trial court’s reasoning.
6
First, the Watlands’ pleading does not allege that there has been a foreclosure sale.
An unlawful or fraudulent sale is generally held to be a required element of the cause of
action. (Lona v. Citibank, N.A, (2011) 202 Cal.App.4th 89, 112) If the foreclosure sale
has not occurred, there is no sale to set aside, and the damages that would have arisen
from a sale have not been incurred. For this reason, it is often said that there is no claim
for wrongful foreclosure unless a foreclosure sale has taken place. (E.g., Rosenfeld v. JP
Morgan Chase Bank, N.A. (2010) 732 F.Supp.2d 952, 961; Vega v. JP Morgan Chase
Bank, N.A. (E.D. Cal. 2009) 654 F.Supp.2d 1104, 1113.)3
Second, the first amended complaint does not allege facts indicating the Watlands
have been prejudiced. The Watlands’ property has not been sold, and the Watlands do
not cite any allegation that the foreclosure effort of DBNTC as Trustee, as opposed to
WMC or any other lender, has caused them harm. (Accord Yvanova, supra, 62 Cal.4th at
pp. 929, fn. 4, 937 [discussing prejudice with respect to standing, as opposed to prejudice
as an element of a wrongful foreclosure tort].) In their reply brief, they speculate that “if
an invalid assignment had not occurred, the original lender may have exercised more
leniency with missed payments or worked out a loan modification plan with the
homeowner,” or possibly “another lender would have engaged in a slower process that
would have given the homeowner more time to improve their financial situation or seek
alternatives to avoid foreclosure.” But there is no such allegation in their first amended
complaint, and their briefs do not articulate any specific facts they could allege in this
3
Although not mentioned by the Watlands, courts have allowed a pre-sale wrongful
foreclosure claim—at times called an attempted wrongful foreclosure—to the extent it
sought injunctive relief (such as a postponement of the foreclosure sale) in order to
prevent the sale and resulting harm. (Nguyen v. JP Morgan Chase Bank N.A. (N.D.Cal.
May 15, 2013, No. 12-CV-04183) 2013 WL 2146606, at p. *4 [nonpub.]; Vong v. Bank
of America, N.A. (E.D.Cal. May 22, 2013, No. CIV.S–12–1860 LKK/DAD) 2013 WL
2254243, at p. *8 & fn. 20 [nonpub.]) The prayer for relief in the Watlands’ first
amended complaint may be construed to seek an order restraining foreclosure efforts;
however, they still fail to state a cause of action, since they fail to allege the other
necessary elements.
7
regard. Indeed, the Watlands stopped making payments by 2010, and they defaulted on
their loan months before the assignments were recorded.
Third, the first amended complaint does not allege there has been a tender of the
secured indebtedness or that they should be excused from this requirement. In short, the
Watlands’ first amended complaint does not allege facts supporting a cause of action for
wrongful foreclosure, and they do not establish any basis for granting leave to amend.
Although this suffices to justify an affirmance of the judgment, we turn next to the
arguments the Watlands do make in their briefs, to provide additional reasons their appeal
is meritless.
C. The Watlands Cannot Demonstrate That the Assignments Are Void
As the basis for the claims alleged in their first amended complaint, as well as any
wrongful foreclosure or other cause of action, the Watlands contend the assignments of
the deed of trust to DBNTC as Trustee of the securitized trust are void because MERS
executed the assignments after WMC ceased operations and after the closure of the trust.
Therefore, they urge, DBNTC as Trustee has no authority to foreclose. Their arguments
fail as a matter of law.
1. The Watlands Cannot Now Dispute DBNTC as Trustee’s Authority
The Watlands’ briefs all but ignore a fundamental reason they cannot establish that
DBNTC as Trustee lacks an interest in the property and the authority to foreclose: the
Watlands represented their understanding that DBNTC as Trustee was, in fact, the
“Lender” for purposes of the amended note and deed of trust, before their default and the
foreclosure proceedings.
The 2008 Modification, signed by the Watlands, explicitly defined DBNTC as
Trustee as the “Lender” and memorialized the amendment of the deed of trust
accordingly. The Watlands are bound by this recital of fact. (Evid. Code, § 622 [“The
facts recited in a written instrument are conclusively presumed to be true as between the
parties thereto . . . . ”]; see Estate of Wilson (1976) 64 Cal.App.3d 786, 800–802.)
8
Indeed, by their execution of the document affirming DBNTC as Trustee to be the
Lender, the Watlands obtained for themselves an extension of the 6.25 percent interest
rate rather than having the interest rate adjust upward to 9.25 percent, and proceeded to
make payments pursuant to the modification. Having received the benefits of the 2008
Modification by contracting with DBNTC as Trustee, they cannot now be heard to claim
that DBNTC as Trustee is not the Lender and has no interest in the note and deed of trust.
And if that were not enough, the 2008 Modification renders moot any issue as to
the validity of the subsequently recorded assignments. The 2008 Modification
establishes that DBNTC as Trustee became the Lender before the Watlands’ default in
2010, and the Watlands do not allege that DBNTC as Trustee lost its interest in the note
and deed of trust between that time and the foreclosure proceedings. The validity of the
later purported assignments to DBNTC as Trustee are therefore irrelevant. (Hoffman,
supra, 179 Cal.App.4th at p. 400 [judicially noticed fact precludes contrary allegation in
pleading for purposes of demurrer]; Fontenot, supra, 198 Cal.App.4th at p. 265.)
The Watlands’ briefs offer no rebuttal to these points, except to claim in their
reply brief that they executed the 2008 Modification “under duress” and have “since
learned there was no legal basis by which [DBNTC as Trustee] could have acquired”
their loan. Tellingly, however, there is no such allegation in their first amended
complaint, and the Watlands do not establish that they could, or at this point should be
allowed to, amend their pleading in this regard. Even at the hearing on the demurrer,
after respondents’ counsel raised the issue of the 2008 Modification, the Watlands’
counsel did not utter a peep about the document being a product of duress or otherwise
unenforceable.
In particular, the Watlands have not alleged facts from which it could reasonably
be inferred that DBNTC as Trustee had not lawfully acquired the loan by the time of the
2008 Modification. The 2008 Modification demonstrates that DBNTC as Trustee knew
about the terms of the note and had become the note holder; with the transfer of the note
to DBNTC as Trustee, the deed of trust was automatically assigned to DBNTC as Trustee
as a matter of law, without the need for the assignment to be recorded. (Fontenot, supra,
9
198 Cal.App.4th at p. 272 [“plaintiff was required to allege not only that the purported
MERS assignment was invalid, but also that [the purported assignee] did not receive an
assignment of the debt in any other manner”]; Yvanova, supra, 62 Cal.4th at p. 927
(Yvanova) [“The deed of trust . . . is inseparable from the note it secures, and follows it
even without a separate assignment.”]; Civ. Code, § 2936 [“The assignment of a debt
secured by mortgage carries with it the security.”].) There is no factual allegation leading
to the conclusion that the note, and therefore the deed of trust, had not been assigned to
DBNTC as Trustee before the 2008 Modification, regardless of the viability of the
assignment documents recorded in 2011 and 2012.
Based on the appellate record and the briefing in this case, the Watlands cannot
prove that DBNTC as Trustee lacks authority to foreclose. This in itself warrants an
affirmance of the judgment of dismissal.
2. The Watlands Lack Standing to Challenge the Assignments
As yet another reason for affirming the judgment, as a matter of law the Watlands
cannot challenge the sufficiency of the assignments to DBNTC as Trustee, or the
authority of DBNTC as Trustee to initiate the foreclosure, because they have no standing
to do so.
The nature of California’s statutory nonjudicial foreclosure process precludes a
court action, before the property has been sold, to determine whether the foreclosing
party is authorized to foreclose as the one with the secured interest in the property—at
least in the absence of specific factual allegations showing why the foreclosure was not
initiated by the correct party. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216
Cal.App.4th 497, 511–512 (Jenkins) [“California courts have refused to delay the
nonjudicial foreclosure process by allowing trustor-debtors to pursue preemptive judicial
actions to challenge the right, power, and authority of a foreclosing ‘beneficiary’ or
beneficiary’s ‘agent’ to initiate and pursue foreclosure.”], disapproved on other grounds
in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; Gomes v. Countrywide Home Loans, Inc.
(2011) 192 Cal.App.4th 1149, 1155 (Gomes) [presale actions to determine a nominee’s
10
authorization to proceed with foreclosure “would fundamentally undermine the
nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for
the purpose of delaying valid foreclosures”]; Robinson v. Countrywide Home Loans,
Inc.(2011) 199 Cal.App.4th 42, 46 [no legal basis for claim seeking damages or
declaratory relief to determine whether foreclosing party had authority to foreclose,
because Civil Code sections 2924–2924k do not provide for a preemptive suit
challenging the foreclosing party’s authority].)
The Watlands’ arguments to the contrary are unpersuasive.
a. The Watlands Have Not Alleged any Exception
Gomes left open the possibility that a borrower might obtain standing by alleging
specific facts indicating the foreclosure was not initiated by the correct party. (Gomes,
supra, 192 Cal.App.4th at p. 1155.) Although the Watlands contend that the assignments
were made by MERS after WMC ceased operations and after the securitized trust
(DBNTC as Trustee) closed, their contentions are insufficient.
As to their allegation that the recorded assignments were made after WMC ceased
operations, the deed of trust authorized MERS not just to act on behalf of the original
Lender WMC, but to act on behalf of the Lender’s successors and assigns: MERS may
“exercise any or all of those interests [for Lender and Lender’s successors and assigns],
including, but not limited to the right to foreclose and sell the Property.” (Italics added.)
The first amended complaint does not allege any specific facts showing that MERS was
not acting on behalf of a “successor[] or assign[]” of WMC when it executed the
assignments.
As to the Watlands’ contention that the recorded assignments were signed after the
closure of the securitized trust, their argument fails for two reasons. First, the Watlands
did not make this allegation in their first amended complaint or rely on it in the trial
court. Second, as discussed ante, an assignment may be made without the recordation of
an assignment of the deed of trust, and the Watlands do not allege any facts indicating
that the note and deed of trust were not actually assigned to (or obtained by) DBNTC as
11
Trustee before the 2008 Modification and the foreclosure proceedings. (Fontenot, supra,
198 Cal.App.4th at pp. 271–272; Yvanova, supra, 62 Cal.4th at p. 927; Civ. Code,
§ 2936.)4
b. Glaski and Yvanova
In Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski), the borrower
alleged that a foreclosure sale was wrongful because the transfer of his loan to a
securitized trust occurred after the trust’s closing date. (Id. at pp. 1093–1095.) The court
held that the borrower had standing to contest the assignment to the trust, concluding an
untimely assignment would render it void (rather than voidable) under New York law,
under which the investment trust was formed. (Id. at pp. 1094–1098.)
Glaski is inapposite. Glaski was a postforeclosure case, in which the borrower
sought to set aside a foreclosure sale; here, the Watlands seek to assert a preforeclosure
sale cause of action. Glaski did not decide whether a preforeclosure preemptive action
would be available, or address Gomes’s holding in this regard. (See Glaski, supra, 218
Cal.App.4th at pp. 1098–1099; Kan v. Guild Mortgage Company (2014) 230 Cal.App.4th
736, 743–744 [distinguishing Glaski on this ground].)
Yvanova is also unhelpful to the Watlands. In Yvanova, the plaintiff borrower
alleged that the assignment of the deed of trust to the foreclosing party was void because,
by the date of the recorded assignment, the assignor’s assets had already been transferred
and (as argued here and in Glaski) the investment trust had already closed. (Yvanova,
supra, 62 Cal.4th at p. 925.) The trial court sustained a demurrer and denied leave to
amend; the court of appeal concluded leave to amend was not warranted because the
borrower, as a third party to the assignment, had no standing to enforce its terms. (Id. at
p. 926.) Our Supreme Court granted review, limiting the question to whether a borrower
4
The Watlands argue that they have standing to enforce the terms of the trust’s
pooling and securitization agreement because courts in other contexts allowed plaintiffs
to assert tort claims when they were not in privity of contract with the tortfeasor. (Citing
Barrera v. State Farm Mut. Auto. Ins. Co. (1969) 71 Cal.2d 659, 675–676.) They urge
that whether a plaintiff may proceed on this basis involves consideration of factors set
forth in Biakanja v. Irving (1958) 49 Cal.2d 647. Their argument is unpersuasive.
12
in a foreclosure action may challenge an assignment as void. (Ibid.) The Supreme Court
held that an allegation that the assignment of the deed of trust was void, and not merely
voidable, would provide standing for a borrower to challenge the right of a purported
assignee to foreclose on the property, and therefore support an action for wrongful
foreclosure. (Id. at pp. 923, 939.) However, the court admonished: “Our ruling in this
case is a narrow one. We hold only that a borrower who has suffered a nonjudicial
foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly
void assignment merely because he or she was in default on the loan and was not a party
to the challenged assignment. We do not hold or suggest that a borrower may attempt to
preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s
right to proceed. Nor do we hold or suggest that plaintiff in this case has alleged facts
showing the assignment is void or that, to the extent she has, she will be able to prove
those facts. Nor, finally, in rejecting defendants’ arguments on standing do we address
any of the substantive elements of the wrongful foreclosure tort or the factual showing
necessary to meet those elements.” (Id. at p. 924, italics added; see id. at p. 934.)
Yvanova is inapposite to this case for at least two reasons. First, Yvanova applies
only to a borrower who has suffered a nonjudicial foreclosure sale, and it disavows any
suggestion that a borrower may sue the foreclosing party before the foreclosure sale on
this ground. Here, the Watlands have not suffered a foreclosure sale.5
Second, Yvanova applies only to allegations that an assignment of the deed of trust
is void. Although the court in Yvanova noted Glaski’s view that an assignment dated
after the closure of the assignee investment trust would render the assignment void under
applicable New York law, Yvanova did not affirm Glaski in this respect. (Yvanova,
supra, 62 Cal.4th at p. 931.)6 Moreover, courts other than Glaski have held that the fact
5
Our Supreme Court granted review in a preforeclosure case in Keshtgar v. U.S.
Bank, N.A.,(2014) 226 Cal.App.4th 1201, review granted October 1, 2014, S220012, and
deferred the matter pending the disposition in Yvanova.
6
The court in Yvanova stated: “On this point, Glaski held allegations that the
plaintiff’s note and deed of trust were purportedly transferred into the trust after the
13
that a recorded assignment is dated after the closure of the assignee investment trust
would render the assignment voidable, not void. (E.g., Calderon v. Bank of Am., N.A.
(W.D.Tex. 2013) 941 F.Supp.2d 753, 766–767; Sandri v. Capital One, N.A. (In re
Sandri), (Bankr. N.D. Cal. 2013) 501 B.R. 369, 375–376.) Indeed, Glaski’s
interpretation of New York law has been rejected by the Second Circuit Court of
Appeals. (Rajamin v. Deutsche Bank Nat’l Trust Co. (2d Cir. 2014) 757 F.3d 79, 88–90
[borrower has no standing to challenge an assignment allegedly in violation of a pooling
and servicing agreement governed by New York law, rejecting Glaski’s view that the
violation would render the assignment void rather than voidable].) We conclude the
Watlands have not alleged facts from which it could be inferred that the assignment to
DBNTC as Trustee is void.
c. The Language of the Deed of Trust Does Not Provide Standing
The Watlands argue that the power of sale is created by contract, not statute, so
whether they have standing to challenge a party’s authority to foreclose turns on the
language of the contract, not the foreclosure statutes. In other words, a nonjudicial
foreclosure could proceed in any manner the parties agree, notwithstanding the statutes
authorizing the nonjudicial foreclosure procedure. The Watlands provide no legal
authority for this proposition; to the contrary, the deed of trust language is subject to, and
must be interpreted in light of, the statutory scheme. (See, e.g., Jenkins, supra, 216
Cal.App.4th at pp. 509–510 [“[T]he [statutory] provisions setting forth California’s
nonjudicial foreclosure scheme [citations] ‘ “ cover every aspect of [the] exercise of [a]
power of sale contained in a deed of trust. ” ’ ”].)
trust’s closing date were sufficient to plead a void assignment and hence to establish
standing. (Glaski, [supra, 218 Cal.App.4th] at pp. 1096–1098.) This last holding of
Glaski is not before us. On granting plaintiff’s petition for review, we limited the scope
of our review to whether ‘the borrower [has] standing to challenge an assignment of the
note and deed of trust on the basis of defects allegedly rendering the assignment void.’
We did not include in our order the question of whether a postclosing date transfer into a
New York securitized trust is void or merely voidable, and though the parties’ briefs
address it, we express no opinion on the question here.” (Yvanova, supra, 62 Cal.4th at p.
931.)
14
In any event, the language of the deed of trust in this case cannot reasonably be
interpreted as the Watlands suggest. They point to language that the lender must give
notice to the borrower before accelerating the loan and “inform Borrower of the right to
reinstate after acceleration and the right to bring court action to assert the non-existence
of a default or any other defense of Borrower to acceleration and sale.” (Italics added.)
But this provision empowers the borrower to assert the nonexistence of a default, or legal
defense, not to subvert the statutory process by claiming the foreclosing party is not the
proper party to foreclose. In addition, the Watlands point to language precluding the
borrower and lender from commencing a judicial action that arises from the other party’s
actions “pursuant to this Security Instrument or that alleges that the other party has
breached any provision of, or any duty owed, by reason of this Security Instrument, until
such Borrower or Lender has notified the other party . . . of such breach and afforded the
other party hereto a reasonable period after the giving of such notice to take corrective
action.” However, nowhere does that language state that the borrower can sue over
whether the foreclosing party is the one with the secured interest entitling it to foreclose.
The Watlands next argue that the deed of trust is an adhesion contract, and there is
no conspicuous, plain and clear language depriving a borrower of standing to challenge
the transfer of the loan. (Citing Fischer v. First Internat. Bank (2003)109 Cal.App.4th
1433, 1445–1450 [under language of particular deed of trust and other documents, no
clear and unambiguous expression of mutual intent to cross-collateralize two loans].)
However, they do not provide any authority that a deed of trust must spell out a
borrower’s lack of standing to interrupt the nonjudicial foreclosure process with a judicial
action to challenge an assignment.
d. Newly Enacted Statutes Do Not Convey Standing
The Watlands direct us to certain provisions of the “Homeowner Bill of Rights,”
which took effect on January 1, 2013. Since the Watlands’ loan went into foreclosure
proceedings long before this date, these provisions do not apply, but the Watlands urge
that they reflect a policy that existed before their enactment. In any event, the allegations
of the first amended complaint do not set forth any violation.
15
Civil Code section 2923.55 requires mortgage servicers, before a notice of default
is recorded, to notify the borrower in writing of the right to request a copy of the
promissory note, deed of trust, and any assignment of the deed of trust “required to
demonstrate the right of the mortgage servicer to foreclose.” (Civ. Code, § 2923.55,
subd. (b).) There is no allegation, however, that the Watlands made such a request.
Civil Code section 2924, subdivision (a)(6) provides: “No entity shall record or
cause a notice of default to be recorded or otherwise initiate the foreclosure process
unless it is the holder of the beneficial interest under the mortgage or deed of trust, the
original trustee or the substituted trustee under the deed of trust, or the designated agent
of the holder of the beneficial interest. No agent of the holder of the beneficial interest
under the mortgage or deed of trust, original trustee or substituted trustee under the deed
of trust may record a notice of default or otherwise commence the foreclosure process
except when acting within the scope of authority designated by the holder of the
beneficial interest.” (Italics added.) Here, however, the 2008 Modification establishes
that DBNTC as Trustee is the holder of the beneficiary interest, and there is no indication
the foreclosure was commenced by an entity not authorized by the statute.
None of the provisions cited by the Watlands, nor the policy reflected in these
provisions, gives them standing to challenge DBNTC as Trustee’s authority to foreclose
in a preemptive preforeclosure sale lawsuit.
For all of the foregoing reasons, the trial court did not err in sustaining the
demurrer to the first amended complaint.7
7
In their opening brief in this appeal, the Watlands also challenge the validity of the
substitution of trustee. The deed of trust allowed the trustee—Westwood Associates, a
California Corporation—to initiate and conduct a foreclosure, and allowed the lender to
appoint a successor trustee by a recorded instrument. The Watlands urge that the original
lender (WMC) never executed a substitution of trustee, and the substitution of trustee by
Deutsche Bank as Trustee was void because it was signed by Ocwen as its attorney in
fact. However, the Watlands do not establish that an attorney in fact cannot sign a
substitution of trustee on behalf of its principal; nor do they establish that they have
standing to challenge it.
16
D. Denial of Leave to Amend
The Watlands contend in their opening brief that they could amend their pleading
to allege a claim for rescission under the Truth in Lending Act (15 U.S.C. § 1635(a)).
They have not established their entitlement to amend on this or any other basis, or
demonstrated an abuse of discretion in the trial court’s denial of leave to amend.
III. DISPOSITION
The judgment is affirmed.
17
NEEDHAM, J.
We concur.
JONES, P.J.
BRUINIERS, J.
(A139562)
18