Nationstar Mortgage v. Abalkhad CA2/1 ( 2021 )

Filed 10/22/21 Nationstar Mortgage v. Abalkhad CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
NATIONSTAR MORTGAGE B303946
LLC et al.,
(Los Angeles County
Cross-complainants and Super. Ct. No. LC104455)
Respondents,
v.
RAMIL ABALKHAD,
Cross-defendant and
Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Virginia Keeny, Judge. Affirmed.
Law Office of Richard L. Antognini and Richard L.
Antognini for Cross-defendant and Appellant.
Troutman Pepper Hamilton Sanders and Jared D. Bissell
for Cross-complainants and Respondents.
_______________________________
Cross-defendant Ramil Abalkhad appeals from a judgment
entered in favor of cross-complainants—a loan servicer and a
trust that alleged it owned Abalkhad’s mortgage loan—in this
cross-action for judicial foreclosure. Abalkhad contends (1) cross-
complainants did not have standing to bring this judicial
foreclosure action because they did not establish the trust owned
the loan, and (2) the loan servicer is not entitled to recover
attorney fees in enforcing the promissory note on the mortgage
loan and the deed of trust securing the loan. We reject
Abalkhad’s contentions, and affirm the judgment.
BACKGROUND
In March 2007, Abalkhad borrowed $2,000,000 from
Countrywide Bank, FSB, as memorialized in an Interest Only
Adjustable Rate Note (the Note) and secured by a Deed of Trust
recorded against a residential property located in Calabasas. He
fell behind on his mortgage payments, and in 2012, he obtained a
loan modification. At the time his May 2012 monthly mortgage
payment was due, he stopped paying on the loan.1 He sought
another loan modification, but he was unsuccessful.
In July 2016, Abalkhad filed a complaint in this action
against, among others, Nationstar Mortgage LLC (Nationstar),
the servicer of his loan, and Deutsche Bank National Trust
Company as Trustee for Holders of the BCAP LLC Trust 2007-
AA3, a party he alleged had “purportedly” received an interest in
the Deed of Trust by assignment. He asserted causes of action
against the defendants for violations of the Homeowners Bill of
Rights (Civ. Code, §§ 2920.5 et sq.), negligence, and violations of
1 At the time of the trial in this action in November 2018,
Abalkhad owed mortgage payments from May 2012 forward, a
fact he did not dispute.
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the Unfair Competition Law (Bus. & Prof. Code, § 17200). By his
action, he sought, among other things, to prevent the defendants
from foreclosing on his residential property.
Nationstar filed a cross-complaint against Abalkhad,
asserting several causes of action including judicial foreclosure,
the only cause of action at issue here. The other cross-
complainant, who asserted the same causes of action against
Abalkhad, is named in the cross-complaint as Deutsche Bank
National Trust Company, as Trustee for BCAP Trust LLC 2007-
AA3 Mortgage Pass-Through Certificates Series 2007-AA3, and is
alleged in the operative second amended cross-complaint to have
received an assignment of the Deed of Trust securing Abalkhad’s
loan.
Abalkhad and cross-complainants agreed the cross-
complaint would be tried first, specifically the cause of action for
judicial foreclosure. At the bench trial held in November 2018,
Abalkhad argued cross-complainants did not have standing to
bring the judicial foreclosure action. With respect to the trust, he
argued the trust entity he named as a defendant in his
complaint—Deutsche Bank National Trust Company as Trustee
for Holders of the BCAP LLC Trust 2007-AA3—had standing to
bring this cross-action for judicial foreclosure and had the
authority to foreclose on the property; but, he argued the party
named in the cross-complaint as a cross-complainant—Deutsche
Bank National Trust Company, as Trustee for BCAP Trust LLC
2007-AA3 Mortgage Pass-Through Certificates Series 2007-
AA3—did not have standing to bring this cross-action for judicial
foreclosure because the entity did not exist and any assignment
of the Deed of Trust to this party was outside the proper chain of
title. Abalkhad did not dispute he was in default on his loan.
3
At trial, cross-complainants presented testimony from two
witnesses: Simon Ward Brown, a Nationstar employee; and Alice
Sorenson, cross-complainants’ expert witnesses. Both witnesses
were deemed by the trial court to be experts “in the field of
mortgage origination, default servicing and securitization,” with
no objection by Abalkhad. After reviewing relevant documents,
including various assignments and transfers of the Note and
Deed of Trust, both witnesses testified that the trust entity
named as a defendant in Abalkhad’s complaint and the trust
entity named as a cross-complainant in the cross-action for
judicial foreclosure were one and the same trust, regardless of
whether the long name or a short name was used to refer to the
trust, and regardless of whether the letters LLC appeared before
or after the word Trust in whichever name was used. The
witnesses explained the trust was not a limited liability company,
and the use of the letters LLC in the name was simply a naming
convention. Both witnesses also testified the trust owned the
loan, as indicated by the assignments and transfers of the Note
and Deed of Trust, and the fact cross-complainants possessed and
presented at trial the “wet” ink originals of the Note and Deed of
Trust.2 The witnesses further testified Nationstar, the loan
servicer, had the authority and obligation to initiate foreclosure
2 We need not set forth here the history of the assignments
and transfers of the Note and Deed of Trust between the time
Countrywide Bank, FSB originated Abalkhad’s mortgage loan
and the loan was deposited into the trust. That history is not
germane to our resolution of the specific arguments Abalkhad
raises on appeal in support of his contention cross-complainants
did not have standing to bring this judicial foreclosure action.
The arguments he raises on appeal are entirely different from the
arguments he raised at trial, as explained below.
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proceedings on behalf of the trustee of the trust under the Deed of
Trust, the loan servicing agreement, and a limited power of
attorney entered into between Nationstar and the trustee.
Abalkhad did not call any witnesses at trial.
After the bench trial, the trial court issued a 15-page
statement of decision, finding in favor of cross-complainants on
their cause of action for judicial foreclosure. Cross-complainants
filed a motion for attorney fees against Abalkhad, which he
opposed (on grounds he does not raise on appeal). The trial court
awarded cross-complainants $508,186.49 in attorney fees.
After resolving the remaining matters between these
parties, in proceedings which are not germane to the issues on
appeal, the trial court entered judgment in favor of cross-
complainants and against Abalkhad.
DISCUSSION
I. Cross-Complainants’ Right to Judicial Foreclosure
On appeal, Abalkhad contends cross-complainants did not
establish standing to bring this judicial foreclosure action
because they did not prove the trust owned the loan on which
Abalkhad was in default.
“A judicial foreclosure action arises out of a borrower’s
failure to repay his mortgage as promised.” (Arabia v. BAC Home
Loans Servicing, L.P. (2012) 208 Cal.App.4th 462, 481 (Arabia).)
Under Code of Civil Procedure section 725a, “The beneficiary or
trustee named in a deed of trust or mortgagee named in a
mortgage with power of sale upon real property or any interest
therein to secure a debt or other obligation, or if there be a
successor or successors in interest of such beneficiary, trustee or
mortgagee, then such successor or successors in interest, shall
have the right to bring suit to foreclose the same in the manner
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and subject to the provisions, rights and remedies relating to the
foreclosure of a mortgage upon such property.” A beneficiary or
trustee may “contract[] its right” to file suit for judicial
foreclosure to a loan servicer. (Arabia, at pp. 469, 476-477.)3
Abalkhad did not dispute at trial, and he does not dispute
on appeal, that he borrowed $2,000,000 from Countrywide Bank,
FSB, memorialized in the Note and secured by the Deed of Trust
recorded against the property in Calabasas; that he is in default
on the loan; and that, at the time of trial, he was contractually
due for his May 2012 monthly loan payment, meaning he had not
made a payment on his loan in six and a half years (now nine and
a half years). Cross-complainants possessed, and presented at
trial, the “wet” ink original Note and Deed of Trust, and expert
witness Sorenson testified possession of these wet ink originals
indicates the trust owns the loan.
At trial, Abalkhad agreed Deutsche Bank National Trust
Company (Deutsche Bank) as Trustee for the BCAP LLC Trust
2007-AA3—which Abalkhad referred to as BCAP 1 in his trial
brief—had the right to bring this judicial foreclosure action. In
his trial brief, Abalkhad asserted “the only entity that has the
right to foreclose on the Subject Property is BCAP 1” because the
December 19, 2012 assignment of interest in the Deed of Trust to
BCAP 1 was “in the proper chain of title.” He argued in his trial
3 On appeal, Abalkhad only challenges the loan servicer
Nationstar’s right to bring this judicial foreclosure action based
on his contention the beneficiary (the trust) and the trustee
(Deutsche Bank National Trust Company) did not have standing
to bring this judicial foreclosure action. He does not separately
challenge on appeal Nationstar’s right to bring this judicial
foreclosure action.
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brief, however, that the trust entity that actually brought this
judicial foreclosure cross-action—Deutsche Bank as Trustee for
BCAP Trust LLC 2007-AA3, Mortgage Pass-Through Certificates
Series 2007-AA3, which he referred to as BCAP 2—did not have
standing because the October 13, 2015 assignment of interest in
the Deed of Trust to BCAP 2 (to correct a prior assignment to an
unrelated entity made in error) was outside the chain of title
because the interest had already been assigned to BCAP 1.
Again, during trial, Abalkhad’s counsel stated: “BCAP LLC
Trust 2007-AA3 can foreclose. They can judicially foreclose.
That’s -- I want to make that clear.” In entering judgment in
favor of cross-complainants, the trial court agreed with the expert
witnesses’ testimony that there was only one BCAP trust,
regardless of whether it used a long name or a short name or
whether it placed the letters LLC before or after the word Trust
in its long name or its short name. Abalkhad’s assertion of two
different entities, BCAP 1 and BCAP 2, was a fiction; they were
one and the same entity. Abalkhad does not ask this court to
review the trial court’s determination that BCAP 1 and BCAP
2—so named by Abalkhad—were the same entity.
On appeal, Abalkhad makes entirely different arguments
in support of his contention cross-complainants did not establish
standing to bring this judicial foreclosure action. Although he
mentions the different names used by the trust in his statement
of facts in his appellate brief, he does not argue the judgment
must be reversed because the wrong BCAP trust entity brought
this action. Instead, he argues for the first time on appeal: (1)
“the Abalkhad loan was not sold to the trust”4 because a
Throughout the Argument section of his appellate brief,
4
Abalkhad refers to “the trust,” seeming to concede for purposes of
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“complete” sale under the terms of the trust agreement required
delivery to the custodian of the trust of the “original mortgage
note, endorsed without recourse in blank by the last endorsee,
including all endorsements showing a complete chain of
endorsements from the originator to the last endorsee,” and
cross-complainants did not present at trial all such
endorsements; and (2) cross-complainants “failed to prove a valid
transfer of the Abalkhad loan from Countrywide Bank, FSB to
Countrywide Home Loans, Inc.” (which transfer occurred prior to
the assignment that Abalkhad argued below gave BCAP Trust
LLC 2007-AA3 the right to bring this judicial foreclosure action
and the right to foreclose on the property).
Cross-complainants do not argue Abalkhad forfeited his
new arguments by failing to raise them below. They argue,
among other things, that as a matter of law, Abalkhad cannot
defeat the judicial foreclosure action by challenging assignments
of interest in the Deed of Trust to which he was not a party based
on defects that might make the assignments voidable by the
parties to the assignments, but would not render the assignments
void.
In Yvanova v. New Century Mortgage Corp. (2016) 62
Cal.4th 919, a case Abalkhad cites that involved a borrower’s
wrongful foreclosure action against a lender after a nonjudicial
foreclosure, our Supreme Court explained “a borrower can
generally raise no objection to assignment of the note and deed of
trust. A promissory note is a negotiable instrument the lender
may sell without notice to the borrower. [Citation.] The deed of
trust, moreover, is inseparable from the note it secures, and
his appellate arguments that there is only one BCAP trust entity
that claims an ownership interest in the Note and Deed of Trust.
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follows it even without a separate assignment.” (Id. at p. 927.)
“In general, California law does not give a party personal
standing to assert rights or interests belonging solely to others.
[Citations.] When an assignment is merely voidable, the power
to ratify or avoid the transaction lies solely with the parties to the
assignment; the transaction is not void unless and until one of
the parties takes steps to make it so. A borrower who challenges
a foreclosure on the ground that an assignment to the foreclosing
party bore defects rendering it voidable could thus be said to
assert an interest belonging solely to the parties to the
assignment rather than to herself [or himself].” (Id. at p. 936, fn.
omitted.) “Unlike a voidable transaction, a void one cannot be
ratified or validated by the parties to it even if they so desire.”
(Ibid.) “A void contract is without legal effect. [Citation.] ‘It
binds no one and is a mere nullity.’ [Citation.] ‘Such a contract
has no existence whatever. It has no legal entity for any purpose
and neither action nor inaction of a party can validate it. . . .’ ”
(Id. at p. 929.) A borrower, who is not a party to an assignment,
may challenge the assignment if it is void and of no legal effect,
but may not challenge the assignment if it is merely voidable.
(Id. at pp. 942-943.) Abalkhad does not argue the purported
defects in the assignments or transfers of the Note and Deed of
Trust that he raises for the first time on appeal render the
assignments or transfers void. Nor does he argue these legal
principles set forth in Yvanova in the context of a wrongful
foreclosure action after nonjudicial foreclosure are inapplicable in
this judicial foreclosure context, and we are aware of no such
authority.5
5We review these arguments Abalkhad now raises,
although he did not raise them below, because to the extent an
9
We cannot review Abalkhad’s claim that the transfer of the
Note and Deed of Trust to the BCAP trust violated the terms of
the trust agreement because the trust agreement, which was
admitted into evidence at trial, is not before us. It is not in the
record on appeal, and there is no indication Abalkhad filed a
notice in the superior court designating any trial exhibits to be
transmitted for our review, pursuant to California Rules of Court,
rule 8.224(a)(1). In any event, case law indicates a transfer that
violates a term or terms of a trust agreement is voidable, not
void. (See Hacker v. Homeward Residential, Inc. (2018) 26
Cal.App.5th 270, 280 [“A number of cases have held that
assignments which ‘allegedly breach[] a term or terms of a PSA
[pooling and service agreement of a securitized investment trust]’
are voidable rather than void because ‘the beneficiaries, not the
borrower, have the right to ratify the trustee’s unauthorized acts’
”].) This alleged violation of the trust agreement, which
Abalkhad raises for the first time on appeal, does not undermine
cross-complainants’ position that the trust owns the loan, as
supported by evidence Abalkhad does not challenge on appeal.
Abalkhad’s other argument on appeal in support of his
contention cross-complainants did not have standing to bring this
judicial foreclosure action is based on Countrywide Bank, FSB’s
transfer of the Note to Countrywide Home Loans, Inc. after
origination of the March 2007 loan. We note that although
evidence of this transfer was presented at trial, Abalkhad did not
argue below that this transfer affected the trust’s standing to
bring this judicial foreclosure action. Abalkhad now asserts
assignment or transfer was void as a matter of law, that is a legal
issue we are in a position to review although it is raised for the
first time on appeal.
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cross-complainants “failed to prove a valid transfer of the
Abalkhad loan from Countrywide Bank, FSB to Countrywide
Home Loans, Inc.” because “this transfer was not through a sales
agreement,” but rather “came through an indorsement to the last
page of the Abalkhad promissory note.” He argues this lack of a
writing violates the statute of frauds, as set forth in Civil Code
section 1624, subdivision (a). We need not address this assertion
because even if it were correct, “It is well established under
California law that ‘a contract falling within the operation of the
statute [Civil Code section 1624], but made in contravention
thereof, is not invalid in the sense that it is void. It is merely
voidable.’ ” (Safarian v. Govgassian (2020) 47 Cal.App.5th 1053,
1069.) Again, the alleged defect in this transfer, which Abalkhad
raises for the first time on appeal, does not undermine cross-
complainants’ position that the trust owns the loan, as supported
by evidence Abalkhad does not challenge on appeal.
We agree with Abalkhad that cross-complainants, as the
parties bringing the judicial foreclosure action, had the burden of
proving their ownership interest in the Note and Deed of Trust.
There is no dispute cross-complainants presented at trial
admissible and competent evidence demonstrating the
assignments and transfers that led to the Note and Deed of Trust
being deposited in the BCAP trust, and that cross-complainants
were in possession of the “wet” ink originals of the Note and Deed
of Trust. Abalkhad pointing out purported defects in the
assignments or transfers, that might render the assignments or
transfers voidable as between the parties to those transactions,
does not undermine the sufficiency of cross-complainants’ proof
that the BCAP trust owns the Note and Deed of Trust and has
the right to foreclose on the property. Abalkhad does not even
11
speculate there is some party other than cross-complainants who
claims an ownership interest in the Note and Deed of Trust and
would seek to void the prior assignments or transfers.
Abalkhad’s contention cross-complainants did not have standing
to bring this judicial foreclosure action because they did not prove
the trust owned the loan is without merit.
II. Nationstar’s Entitlement to Attorney Fees
On appeal, Abalkhad challenges Nationstar’s entitlement
to attorney fees on a ground he did not raise below in opposition
to cross-complainants’ motion for attorney fees. He now contends
because Nationstar is the loan servicer, and not the lender,
Nationstar is not entitled to fees under the attorney fees
provisions in the Note and Deed of Trust. Entitlement to
attorney fees is an issue subject to our de novo review. (Apex
LLC v. Korusfood.com (2013) 222 Cal.App.4th 1016.) Cross-
complainants do not argue Abalkhad forfeited the issue by failing
to raise it below.
Under the Note, “Lender or anyone who takes this Note by
transfer and who is entitled to receive payments under this Note”
is entitled to recover reasonable attorney fees “in enforcing this
Note.” The Deed of Trust provides the lender may recover
reasonable attorney fees incurred to protect its interest in the
property and/or its rights under the Deed of Trust. There can be
no dispute that the owner of the loan (the trust) could recover
attorney fees under these provisions.
In his appellate brief, Abalkhad states, “Nationstar, as the
loan servicer, acted as the agent for the trust in enforcing the
deed of trust.” “The essence of any agency relationship is the
delegation of authority from the principal to the agent which
permits the agent to act ‘not only for, but in the place of, his
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principal’ in dealings with third parties.” (Channel Lumber Co.,
Inc. v. Porter Simon (2000) 78 Cal.App.4th 1222, 1227.)
Accordingly, as a party bringing this judicial foreclosure action to
enforce the trust’s rights under the Note and Deed of Trust,
Nationstar is entitled to recover its attorney fees under the
attorney fees provisions in the Note and Deed of Trust. On
appeal, Abalkhad does not challenge the amount of the attorney
fees the trial court awarded to Nationstar.
DISPOSITION
The judgment is affirmed. Respondents are entitled to
recover costs on appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
CRANDALL, J.*
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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