Bank of New York Mellon v. Superior Court CA2/4 ( 2015 )

Filed 10/9/15 Bank of New York Mellon v. Superior Court CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 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 This opinion has not been certified for publication or ordered published for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
BANK OF NEW YORK MELLON, as B263701
Trustee, etc. et al.,
(Los Angeles County
Petitioners, Super. Ct. No. BC522808)
v.
THE SUPERIOR COURT OF LOS
ANGELES COUNTY,
Respondent;
JONATHAN LEDESMA,
Real Party in Interest.
ORIGINAL PROCEEDINGS in mandate. Joseph R. Kalin, Judge. Petition
granted.
Reed Smith, Zareh A. Jaltorossian, David C. Powell, Molly T. Zapala, and
Jamie D. Wells for Petitioners.
No appearance for Respondent.
Law Offices of Joseph De Clue and Joseph De Clue for Real Party in Interest.
______________________________
Petitioners Bank of New York Mellon (BNYM) as trustee for the CWALT, Inc.
Alternative Loan Trust OA2 Mortgage Pass Through Certificated, Series 2007-OA2
(CWALT Trust) and ReconTrust Company, N.A. (ReconTrust) seek the reversal of an
order denying their motion for summary judgment. They argue that real party in interest
Jonathan Ledesma lacks standing to bring a pre-foreclosure action challenging the
alleged irregularities in the securitization of his home loan. We agree and grant the
petition.
FACTUAL AND PROCEDURAL SUMMARY
In 2006, Ledesma obtained a loan secured by a deed of trust on real property
located in West Hollywood. The deed of trust identifies Countrywide Bank, N.A.
(Countrywide) as lender, ReconTrust as trustee, and Mortgage Electronic Registration
Systems, Inc. (MERS) as beneficiary. Ledesma defaulted on the loan in 2008. In
September 2009, ReconTrust recorded a notice of default. In November 2009, MERS
recorded an assignment of the deed of trust to BNYM as trustee for the CWALT Trust.
The assignment was dated September 14, 2009. A further corrective assignment was
recorded in 2013. ReconTrust recorded notices of trustee’s sale in 2010, 2011, and 2013,
but the parties represent that no foreclosure sale has taken place.
In September 2013, Ledesma filed a complaint for declaratory relief, wrongful
foreclosure, quiet title and cancelation of instruments. He alleged that the transfer of the
loan to BNYM as trustee for the CWALT Trust was subject to a pooling and servicing
agreement, according to which the cutoff date for placing loans in the securitized trust
was January 1, 2007 and the trust’s closing date was February 15, 2007. Because the
recorded assignments were dated after those dates, Ledesma argued they are void under
governing New York law.
In January 2015, petitioners moved for summary judgment. They argued that
Ledesma lacked standing to challenge the securitization of his loan, and submitted a
declaration by Justin Bradley, a representative of BNYM’s attorney in fact, stating that
the loan had been assigned to BNYM on or before February 14, 2007. The trial court
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denied the motion. It followed Glaski v. Bank of America (2013) 218 Cal. App. 4th 1079
(Glaski) in concluding that Ledesma had standing to challenge the assignment of his loan
as void. The court sustained Ledesma’s objection to Bradley’s statement as to the 2007
assignment as lacking foundation and concluded that the date on the recorded assignment
raised an issue of fact regarding its timeliness.
DISCUSSION
We determine de novo whether a moving party is entitled to summary judgment as
a matter of law. (Conroy v. Regents of University of California (2009) 45 Cal. 4th 1244,
1250.)
Securitization occurs when “a mortgage lender sells pools of mortgages into trusts
created to receive the stream of interest and principal payments from the mortgage
borrowers. The right to receive trust income is parceled into certificates and sold to
investors, called certificateholders. The trustee hires a mortgage servicer to administer
the mortgages by enforcing the mortgage terms and administering the payments. The
terms of the securitization trusts as well as the rights, duties, and obligations of the
trustee, seller, and servicer are set forth in a Pooling and Servicing Agreement (‘PSA’).”
(BlackRock Financial Management Inc. v. Segregated Account of Ambac Assur. Corp.
(2d Cir. 2012) 673 F.3d 169, 173.) If it complies with certain requirements set in the
Internal Revenue Code, the securitization trust qualifies as a tax-exempt real estate
mortgage investment conduit (REMIC). (26 U.S.C. §§ 860A-G.)
Ledesma proceeds on the theory that the assignment of his loan to the CWALT
Trust after the trust’s closing date is void because it affects the trust’s REMIC status, and
therefore BNYM as trustee for the trust has no right to foreclose. He relies on Glaski,
supra, 218 Cal. App. 4th 1079, the only California case supporting that theory.1
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Glaski, supra, 218 Cal. App. 4th 1079 has been criticized in other cases (see Kan
v. Guild Mortgage Company (2014) 230 Cal. App. 4th 736, 744 (Kan)), and the California
Supreme Court has granted review in several cases that have disagreed with it. (See
Yvanova v. New Century Mortgage Corp. (2014) 226 Cal. App. 4th 495, review granted
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Glaski, supra, 218 Cal. App. 4th 1079 is distinguishable because it is a wrongful
foreclosure case. The consensus in California is that “a preforeclosure, preemptive action
is not authorized by the nonjudicial foreclosure statutes because it creates an additional
requirement that a foreclosing entity first demonstrate in court that it is entitled to
foreclose.” (Kan, supra, 230 Cal.App.4th at p. 743, citing Jenkins v. JPMorgan Chase
Bank, N.A. (2013) 216 Cal. App. 4th 497, 512–513.) Ledesma relies on the Homeowners
Bill of Rights, which in 2012 amended Civil Code section 2924 to provide in relevant
part that “[n]o 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.” (Civ. Code, § 2924,
subd. (a)(6).) But nothing in that provision gives a borrower the right to preemptively
challenge the foreclosing entity’s beneficiary status; nor does a violation of section 2924
give a borrower a right to enjoin a trustee’s sale under Civil Code sections 2924.12 and
2924.19, which allow temporary injunctions for violations of specified provisions.
Even assuming that a preforeclosure action such as this one is authorized, the
reasoning of Glaski, supra, 218 Cal. App. 4th 1079 has been discredited. Glaski held that
a borrower has standing to challenge the assignment of a loan to a securitized trust in
violation of a PSA to which the borrower is neither a party nor a beneficiary because,
under governing New York law, an assignment after the closing date of the trust is void.
(Id. at pp. 1094–1096.) Its holding followed Wells Fargo Bank, N.A. v. Erobobo (2013)
39 Misc.3d 1220(A) (Erobobo I), which stated: ‘“Under New York Trust Law, every
sale, conveyance or other act of the trustee in contravention of the trust is void. EPTL
§ 7–2.4. Therefore, the acceptance of the note and mortgage by the trustee after the date
Aug. 27, 2014, S218973; Keshtgar v. U.S. Bank, N.A. (2014) 226 Cal. App. 4th 1201,
review granted Oct. 1, 2014, S220012; Mendoza v. JPMorgan Chase Bank, N.A. (2014)
228 Cal. App. 4th 1020, review granted Nov. 12, 2014, S220675; Boyce v. T.D. Service
Co. (2015) 235 Cal. App. 4th 429, review granted July 15, 2015, S226267.)
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the trust closed, would be void. [Citations.]’” (Glaski, at p. 1097.) Erobobo I has since
been reversed. (Wells Fargo Bank, N.A. v. Erobobo (2015) 127 A.D.3d 1176 (Erobobo
II).) In reversing Erobobo I, the Appellate Division of the Supreme Court of New York
held that a borrower whose loan was assigned to a securitized trust has no standing to
challenge the assignee’s status “based on purported noncompliance with certain
provisions of the PSA.” (Erobobo II, at p. 1178, citing Rajamin v. Deutsche Bank Nat’l.
Trust Co. (2d Cir. 2014) 757 F.3d 79, 90 (Rajamin) [holding that, under weight of New
York authority, assignments in contravention of PSA are voidable at the trust
beneficiary’s election, not void ab initio].)
Glaski, supra, 218 Cal. App. 4th 1079 also reasoned that treating the attempted
assignment as void rather than voidable “is justified because it protects the [trust]
beneficiaries . . . from the potential adverse tax consequence of the trust losing its status
as a REMIC trust under the Internal Revenue Code.” (Id. at p. 1097.) It is doubtful that a
borrower’s challenge to the securitization process protects the trust beneficiaries, whose
interests are adverse to those of the borrower. (Rajamin, supra, 757 F.3d at p. 90; see
also Bank of America Nat. Assn. v. Bassman FBT, L.L.C. (Ill. App. 2012) 981 N.E.2d 1,
13 [“New York legislature could [not] have intended to allow a debtor in a commercial
transaction to invoke the provisions of a trust to which it is a stranger in order to frustrate
the collection of the debt”].)
Whether or not improper securitization invalidates the trust’s tax-free status,
federal district courts have concluded that it does not give rise to a private right of action
by the borrower under the Internal Revenue Code. (See, e.g., Martin v. Litton Loan
Servicing LP (E.D.Cal., Mar. 12, 2014, No. 2:12-cv-970-MCE-EFB PS), 2014 WL
977507, at *11; Kloss v. RBS Citizens, N.A. (E.D.Mich., 2014), 996 F. Supp. 2d 574;
Oliver v. Delta Fin. Liquidating Trust (D.Or., Aug. 27, 2012, No. 6:12-cv-00869-AA),
2012 WL 3704954, at *2, fn. 8; Obal v. Deutsche Bank Nat’l. Trust Co. (S.D.N.Y.,
Feb. 13, 2015, No. 14 Civ. 2463), 2015 WL 631404, at *4, reconsideration denied sub
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nom., Obal v. Deutsche Bank Nat’l. Trust Co. (S.D.N.Y. June 25, 2015, No. 14 Civ.
2463), 2015 WL 3999455.)2
Ledesma’s additional arguments—that a borrower need not show tender or
prejudice—are premised on the assumption that improper securitization renders an
assignment void under Glaski, supra, 218 Cal. App. 4th 1079. Since we reject that
assumption, we do not consider those arguments. Nor do we consider Ledesma’s
evidentiary objections to petitioners’ documentary evidence regarding the timeliness of
the assignment or his claim that respondents did not comply with a discovery order.
Irrespective of when Ledesma’s loan was assigned to the CWALT Trust, the assignment
is not void under New York law and Ledesma lacks standing to challenge it. Petitioners
are, therefore, entitled to summary judgment as a matter of law.
DISPOSITION
The petition is granted. The trial court is directed to vacate its order denying
petitioners’ motion for summary judgment and to enter a new order granting the motion.
Petitioners are entitled to their costs in this writ proceeding.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EPSTEIN, P. J.
We concur:
WILLHITE, J. MANELLA, J.
2
Unpublished federal cases may be cited as persuasive authority. (Aleman v.
AirTouch Cellular (2012) 209 Cal. App. 4th 556, 576, fn. 8.)
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