Wood v. Germann ( 2014 )

130 Nev., Advance Opinion 5b
IN THE SUPREME COURT OF THE STATE OF NEVADA
DONNA WOOD, AS PERSONAL No. 62768
REPRESENTATIVE OF THE ESTATE
OF DANNY WOOD,
Appellant, FILED
vs.
KEN GERMANN; MICHAEL LINTON; AUG 0 7 2014
MERIDIAN FORECLOSURE SERVICE, Yy_pip,EMAN
CLEW&
INC., A FOREIGN CORPORATION; BY
CHIEF DEPUVIICLERK
AND INDYMAC MORTGAGE
SERVICES,
Respondents.
Appeal from a district court order denying a petition for
judicial review in a Foreclosure Mediation Program matter. Eighth
Judicial District Court, Clark County; Kathleen E. Delaney, Judge.
Affirmed.
Brandon L. Phillips, Attorney at Law, PLLC, Las Vegas,
for Appellant
Brooks Hubley LLP and Michael R. Brooks and Jeffrey J. Todd, Las
Vegas,
for Respondents.
BEFORE HARDESTY, DOUGLAS and CHERRY, JJ.
OPINION
PER CURIAM:
In this appeal, we examine the legal effect of a loan
assignment from a homeowner's original lender to a subsequent purchaser
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when that assignment violates the terms of the original lender and
subsequent purchaser's Pooling and Servicing Agreement (PSA). In
particular, we consider whether a loan assignment that is executed after
the PSA's "closing date" renders the assignment void and ineffective to
transfer ownership of the homeowner's loan. We conclude that a post-
closing-date loan assignment does not render the assignment void, but
merely voidable, and that a homeowner therefore lacks standing to rely on
the timing of the assignment as a basis for challenging the subsequent
purchaser's authority to enforce the loan. We therefore affirm the district
court's denial of appellant's petition for judicial review.
FACTS
In conjunction with obtaining a 2004 home loan from IndyMac
Bank, F.S.B., appellant Danny Wood' executed a promissory note and
deed of trust in favor of IndyMac F.S.B. The deed of trust indicated that
IndyMac F.S.B. was appointing Mortgage Electronic Registration
Systems, Inc. (MERS), as the legal beneficiary of the deed of trust. See
Edelstein v. Bank of N.Y. Mellon, 128 Nev. „ 286 P.3d 249, 256-57
(2012) (explaining this practice and considering its legal implications).
Shortly thereafter, IndyMac F.S.B. contracted to sell appellant's loan and
others to Deutsche Bank National Trust Company, who, in turn, was to
maintain ownership of these loans as the trustee for investors of a
securitization trust. See BlackRock Fin. Mgmt. Inc. v. Segregated Account
of Ainbac Assurance Corp., 673 F.3d 169, 173 (2d Cir. 2012) (summarizing
the process of loan securitization); Cervantes v. Countrywide Home Loans,
'While this appeal was pending, Donna Wood, as personal
representative of Danny Wood's estate, was substituted as the appellant.
NRAP 43(a)(1).
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Inc., 656 F.3d 1034, 1039 (9th Cir. 2011) (same). IndyMac F.S.B.'s and
Deutsche Bank's respective obligations were spelled out in a PSA. As
relevant to this appeal, the PSA required IndyMac F.S.B. to transfer all
subject loans into the trust by a September 2004 "closing date" and
provided that IndyMac F.S.B. would retain the servicing rights to the
transferred loans.
Appellant defaulted on his loan and elected to participate in
Nevada's Foreclosure Mediation Program (FMP) in 2012. Appellant, who
was not represented by counsel, attended mediation with respondent
IndyMac Mortgage Services, who appeared as Deutsche Bank's loan
servicer and representative. 2 Among other documents, IndyMac Mortgage
Services produced certified copies of appellant's original promissory note
that IndyMac F.S.B. had endorsed in blank, appellant's deed of trust, and
an assignment from MERS purporting to assign appellant's deed of trust
and promissory note to Deutsche Bank in January 2012. The mediation
concluded unsuccessfully, with the mediator noting summarily that
appellant disputed whether IndyMac Mortgage Services had complied
with the FMP's document-production requirements.
Appellant, then represented by counsel, filed a petition for
judicial review in district court. Appellant argued that his loan had been
improperly securitized and that, consequently, IndyMac Mortgage
2 IndyMac F.S.B., which was Deutsche Bank's original servicer and
appellant's original lender, subsequently entered FDIC receivership, and
OneWest Bank acquired IndyMac F.S.B.'s assets. Respondent IndyMac
Mortgage Services is a division of OneWest Bank. Although the other
named respondents in this appeal were involved to some extent in the
underlying mediation, the issues presented in this appeal do not directly
concern those respondents.
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Services had failed to establish that Deutsche Bank owned his note and
held the beneficial interest in his deed of trust. Specifically, according to
appellant, because the terms of the PSA required appellant's original
lender to transfer his loan to Deutsche Bank no later than the PSA's
September 2004 closing date, the January 2012 MERS assignment
necessarily violated the PSA's terms and was therefore "void." The district
court denied appellant's petition for judicial review, and this appeal
followed.
DISCUSSION
On appeal, appellant maintains his argument that the
January 2012 MERS assignment was "void" because it was executed after
the PSA's closing date. According to appellant, because the assignment
was void, respondents therefore failed to produce the documents necessary
to demonstrate that Deutsche Bank was the entity entitled to enforce his
note and to foreclose. 3 While appellant points to an unpublished New
3 Respondents suggest that the FMP judicial review process should
be limited to determining whether the required documents have been
produced and that a homeowner's concerns regarding the veracity of those
documents are beyond the FMP's limited scope. We disagree with this
suggestion. As this court has repeatedly recognized, the purpose of the
FMP's document-production requirements is to ensure that the party
seeking to enforce the homeowner's promissory note and to proceed with
foreclosure is actually authorized to do so. Einhorn v. BAG Home Loans
Servicing, LP, 128 Nev. „ 290 P.3d 249, 251 (2012); Edelstein v.
Bank of N.Y. Mellon, 128 Nev. „ 286 P.3d 249, 255 (2012); Leyva v.
Nat'l Default Servicing Corp., 127 Nev. „ 255 P.3d 1275, 1279
(2011). It is not difficult to envision how this purpose might be defeated if
a homeowner were prohibited from challenging the veracity of a lender's
documents. Thus, we reject respondents' broader proposition. To the
extent that respondents are simply suggesting that not all document-
related improprieties call into question a party's authority to enforce the
continued on next page...
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York trial court decision in arguing that an assignment executed after a
PSA's closing date is void, see Wells Fargo Bank, N.A. v. Erobobo, No.
31648/2009, 2013 WL 1831799, at *8 (N.Y. Sup. Ct. Apr. 29, 2013), and
while some authority exists to support that argument, see, e.g., Glaski v.
Bank of Am., N.A., 160 Cal. Rptr. 3d 449, 463 (Ct. App. 2013), most courts
to consider this issue instead hold that the assignment is voidable at the
option of the parties to the PSA.
These courts have recognized that a PSA is a contract between
the originating lender and the subsequent purchaser/trustee and that,
under traditional principles of contract law, a contracting party is capable
of ratifying conduct that is done in violation of the contract. See, e.g.,
Rajam,in v. Deutsche Bank Nat'l Trust Co., F.3d „ 2014 WL
2922317, at *7-9 (2d Cr. 2014); Calderon v. Bank of Am., N.A., 941 F.
Supp. 2d 753, 766-67 (W.D. Tex. 2013); Dernier v. Mortg. Network, Inc., 87
A.3d 465, 473-74 (Vt. 2013). Thus, although a post-closing-date loan
assignment violates the terms of the PSA, these courts conclude that such
an assignment is not void, 4 but is merely voidable, because the trustee has
...continued
note and to foreclose (and may therefore not require further district court
scrutiny), we agree with this proposition.
4A scenario in which a loan assignment might be void is where the
assignor did not possess the rights it was purporting to assign. See
Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291 (1st Cir. 2013).
Here, while appellant raises various arguments regarding the authority of
MERS to assign his loan, this court has confirmed MERS' authority to
assign a loan on behalf of an original lender or the original lender's
successor. See Edelstein v. Bank of N.Y. Mellon, 128 Nev. „ 286
P.3d 249, 258 (2012). Because appellant's deed of trust contains language
identical to the language considered in Edelstein, appellant's arguments
regarding MERS' authority do not warrant further consideration.
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the option of accepting the loan assignment despite its untimeliness. See,
e.g., Rajamin, F.3d at , 2014 WL 2922317, at *9; Calderon, 941 F.
Supp. 2d at 766-67; Dernier, 87 A.3d at 474. Applying these traditional
principles of contract law, these courts further hold that the homeowner,
who is neither a party to the PSA nor an intended third-party beneficiary,
lacks standing to challenge the validity of the loan assignment. See, e.g.,
Rajamin, F.3d at , 2014 WL 2922317, at *7-8; Calderon, 941 F.
Supp. 2d at 767; Dernier, 87 A.3d at 474-75.
We are persuaded by the reasoning of these courts because
their reasoning comports with Nevada law regarding who is entitled to
enforce a contract. 5 See Morelli v. Morelli, 102 Nev. 326, 328, 720 P.2d
704, 705-06 (1986) (recognizing that a nonparty to a contract has standing
to enforce the contract only when the nonparty is an intended third-party
beneficiary). Thus, we conclude that the January 2012 MERS assignment
was not void, but was merely voidable, as Deutsche Bank was entitled to
ratify the post-closing-date loan assignment; and appellant, who is neither
a party nor an intended third-party beneficiary of the PSA, lacked
standing to challenge the assignment's validity. Consequently, by
5 Appellant contends that consideration of this issue should be
governed by New York trust law, which, under N.Y. Estates, Powers &
Trusts Law § 7-2.4 (McKinney 2002), purportedly renders a trustee's ultra
vires act void. We note that the "vast majority" of courts to consider this
argument, Butler v. Deutsche Bank Trust Co. Ams., 748 F.3d 28, 37 n.8
(1st Cir. 2014), including those that this opinion follows, see Rajamin,
F.3d at , 2014 WL 2922317, at *9-11; Calderon, 941 F. Supp. 2d at 766;
Dernier, 87 A.3d at 473-75, have rejected the contention that a loan
assignment in violation of a PSA is void. See also Bank of Am. Nat'l Ass'n
v. Bassman FBT, L.L.C., 981 N.E.2d 1, 8-9 (Ill. App. Ct. 2012) (reaching
the same conclusion).
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appearing at the mediation and producing certified copies of appellant's
original promissory note, deed of trust, and the January 2012 MERS
assignment, IndyMac Mortgage Services produced the documents
necessary to establish that Deutsche Bank was the entity entitled to
enforce appellant's note and to proceed with foreclosure. NRS 107.086(4)
and (5) (2011) 6 (providing that a deed of trust beneficiary must bring to
the mediation the original or a certified copy of the deed of trust, mortgage
note, and each assignment of the deed of trust or note, and that the
beneficiary or its authorized representative must participate in good faith
in order to obtain an FMP certificate); see Leyva v. Nat'l Default Servicing
Corp., 127 Nev. , , 255 P.3d 1275, 1278-79 (2011) (discussing
document-production requirements under the FMP's statutory and rule
provisions). The district court therefore properly denied appellant's
petition for judicial review and ordered the issuance of an FMP certificate.
Edelstein, 128 Nev. at , 286 P.3d at 260 (noting that this court defers to
the district court's factual determinations and reviews de novo its legal
determinations in appeals from orders resolving FMP petitions for judicial
review).
CONCLUSION
A loan assignment made in violation of a PSA is not void, but merely
voidable and may be ratified or rejected at the option of the parties
6 EffectiveOctober 1, 2013, the Legislature added a new subsection 4
to NRS 107.086. See 2013 Nev. Stat., ch. 536, §§ 3, 6(2), at 3480, 3484.
While the previous subsections 4 and 5 were not substantively changed,
they are now codified at NRS 107.086(5) and (6) (2013). Because the
mediation in this case took place before the 2013 amendment's effective
date, this opinion refers to the version of NRS 107.086 in effect at that
time.
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to the PSA. Because the homeowner is neither a party to nor an intended
beneficiary of thefl PSA, the homeowner lacks standing to contest the
assignment's validity. Here, although respondents produced an
assignment at the mediation that was executed after the PSA's closing
date, the assignment was nevertheless effective to transfer ownership of
appellant's loan to Deutsche Bank. Consequently, respondents produced
the documents necessary to establish that Deutsche Bank was entitled to
enforce appellant's note and to proceed with foreclosure. We therefore
affirm the judgment of the district court.
KlecA.,62.-ct-\
Hardesty
WA1 AS J.
Douglas
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