Yvanova v. New Century Mortgage Corp.

Filed 2/18/16
IN THE SUPREME COURT OF CALIFORNIA
TSVETANA YVANOVA, )
)
Plaintiff and Appellant, )
) S218973
v. )
) Ct.App. 2/1 B247188
NEW CENTURY MORTGAGE )
CORPORATION et al., )
) Los Angeles County
Defendants and Respondents. ) Super. Ct. No. LC097218
____________________________________)
The collapse in 2008 of the housing bubble and its accompanying system of
home loan securitization led, among other consequences, to a great national wave
of loan defaults and foreclosures. One key legal issue arising out of the collapse
was whether and how defaulting homeowners could challenge the validity of the
chain of assignments involved in securitization of their loans. We granted review
in this case to decide one aspect of that question: whether the borrower on a home
loan secured by a deed of trust may base an action for wrongful foreclosure on
allegations a purported assignment of the note and deed of trust to the foreclosing
party bore defects rendering the assignment void.
The Court of Appeal held plaintiff Tsvetana Yvanova could not state a cause
of action for wrongful foreclosure based on an allegedly void assignment because
she lacked standing to assert defects in the assignment, to which she was not a
party. We conclude, to the contrary, that because in a nonjudicial foreclosure only
the original beneficiary of a deed of trust or its assignee or agent may direct the
trustee to sell the property, an allegation that the assignment was void, and not
merely voidable at the behest of the parties to the assignment, will support an
action for wrongful foreclosure.
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.
FACTUAL AND PROCEDURAL BACKGROUND
This case comes to us on appeal from the trial court‘s sustaining of a
demurrer. For purposes of reviewing a demurrer, we accept the truth of material
facts properly pleaded in the operative complaint, but not contentions, deductions,
or conclusions of fact or law. We may also consider matters subject to judicial
notice. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)1 To determine whether
1 The superior court granted defendants‘ request for judicial notice of the
recorded deed of trust, assignment of the deed of trust, substitution of trustee,
notices of default and of trustee‘s sale, and trustee‘s deed upon sale. The existence
and facial contents of these recorded documents were properly noticed in the trial
court under Evidence Code sections 452, subdivisions (c) and (h), and 453. (See
(footnote continued on next page)
2
the trial court should, in sustaining the demurrer, have granted the plaintiff leave
to amend, we consider whether on the pleaded and noticeable facts there is a
reasonable possibility of an amendment that would cure the complaint‘s legal
defect or defects. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074,
1081.)
In 2006, plaintiff executed a deed of trust securing a note for $483,000 on a
residential property in Woodland Hills, Los Angeles County. The lender, and
beneficiary of the trust deed, was defendant New Century Mortgage Corporation
(New Century). New Century filed for bankruptcy on April 2, 2007, and on
August 1, 2008, it was liquidated and its assets were transferred to a liquidation
trust.
On December 19, 2011, according to the operative complaint, New Century
(despite its earlier dissolution) executed a purported assignment of the deed of
trust to Deutsche Bank National Trust, as trustee of an investment loan trust the
complaint identifies as ―Msac-2007 Trust-He-1 Pass Thru Certificates.‖ We take
notice of the recorded assignment, which is in the appellate record. (See fn. 1,
ante.) As assignor the recorded document lists New Century; as assignee it lists
Deutsche Bank National Trust Company (Deutsche Bank) ―as trustee for the
registered holder of Morgan Stanley ABS Capital I Inc. Trust 2007-HE1 Mortgage
Pass-Through Certificates, Series 2007-HE1‖ (the Morgan Stanley investment
(footnote continued from previous page)
Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264–266.)
Under Evidence Code section 459, subdivision (a), notice by this court is therefore
mandatory. We therefore take notice of their existence and contents, though not of
disputed or disputable facts stated therein. (See Glaski v. Bank of America (2013)
218 Cal.App.4th 1079, 1102.)
3
trust). The assignment states it was prepared by Ocwen Loan Servicing, LLC,
which is also listed as the contact for both assignor and assignee and as the
attorney in fact for New Century. The assignment is dated December 19, 2011,
and bears a notation that it was recorded December 30, 2011.
According to the complaint, the Morgan Stanley investment trust to which
the deed of trust on plaintiff‘s property was purportedly assigned on December 19,
2011, had a closing date (the date by which all loans and mortgages or trust deeds
must be transferred to the investment pool) of January 27, 2007.
On August 20, 2012, according to the complaint, Western Progressive, LLC,
recorded two documents: one substituting itself for Deutsche Bank as trustee, the
other giving notice of a trustee‘s sale. We take notice of a substitution of trustee,
dated February 28, 2012, and recorded August 20, 2012, replacing Deutsche Bank
with Western Progressive, LLC, as trustee on the deed of trust, and of a notice of
trustee‘s sale dated August 16, 2012, and recorded August 20, 2012.
A recorded trustee‘s deed upon sale dated December 24, 2012, states that
plaintiff‘s Woodland Hills property was sold at public auction on September 14,
2012. The deed conveys the property from Western Progressive, LLC, as trustee,
to the purchaser at auction, THR California LLC, a Delaware limited liability
company.
Plaintiff‘s second amended complaint, to which defendants demurred,
pleaded a single count for quiet title against numerous defendants including New
Century, Ocwen Loan Servicing, LLC, Western Progressive, LLC, Deutsche
Bank, Morgan Stanley Mortgage Capital, Inc., and the Morgan Stanley investment
trust. Plaintiff alleged the December 19, 2011, assignment of the deed of trust
from New Century to the Morgan Stanley investment trust was void for two
reasons: New Century‘s assets had previously, in 2008, been transferred to a
bankruptcy trustee; and the Morgan Stanley investment trust had closed to new
4
loans in 2007. (The demurrer, of course, does not admit the truth of this legal
conclusion; we recite it here only to help explain how the substantive issues in this
case were framed.) The superior court sustained defendants‘ demurrer without
leave to amend, concluding on several grounds that plaintiff could not state a
cause of action for quiet title.
The Court of Appeal affirmed the judgment for defendants on their demurrer.
The pleaded cause of action for quiet title failed fatally, the court held, because
plaintiff did not allege she had tendered payment of her debt. The court went on
to discuss the question, on which it had sought and received briefing, of whether
plaintiff could, on the facts alleged, amend her complaint to plead a cause of
action for wrongful foreclosure.
On the wrongful foreclosure question, the Court of Appeal concluded leave
to amend was not warranted. Relying on Jenkins v. JPMorgan Chase Bank, N.A.
(2013) 216 Cal.App.4th 497 (Jenkins), the court held plaintiff‘s allegations of
improprieties in the assignment of her deed of trust to Deutsche Bank were of no
avail because, as an unrelated third party to that assignment, she was unaffected by
such deficiencies and had no standing to enforce the terms of the agreements
allegedly violated. The court acknowledged that plaintiff‘s authority, Glaski v.
Bank of America, supra, 218 Cal.App.4th 1079 (Glaski), conflicted with Jenkins
on the standing issue, but the court agreed with the reasoning of Jenkins and
declined to follow Glaski.
We granted plaintiff‘s petition for review, limiting the issue to be briefed and
argued to the following: ―In an action for wrongful foreclosure on a deed of trust
securing a home loan, does the borrower have standing to challenge an assignment
of the note and deed of trust on the basis of defects allegedly rendering the
assignment void?‖
5
DISCUSSION
I. Deeds of Trust and Nonjudicial Foreclosure
A deed of trust to real property acting as security for a loan typically has
three parties: the trustor (borrower), the beneficiary (lender), and the trustee.
―The trustee holds a power of sale. If the debtor defaults on the loan, the
beneficiary may demand that the trustee conduct a nonjudicial foreclosure sale.‖
(Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813.) The nonjudicial
foreclosure system is designed to provide the lender-beneficiary with an
inexpensive and efficient remedy against a defaulting borrower, while protecting
the borrower from wrongful loss of the property and ensuring that a properly
conducted sale is final between the parties and conclusive as to a bona fide
purchaser. (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830.)
The trustee starts the nonjudicial foreclosure process by recording a notice of
default and election to sell. (Civ. Code, § 2924, subd. (a)(1).)2 After a
three-month waiting period, and at least 20 days before the scheduled sale, the
trustee may publish, post, and record a notice of sale. (§§ 2924, subd. (a)(2),
2924f, subd. (b).) If the sale is not postponed and the borrower does not exercise
his or her rights of reinstatement or redemption, the property is sold at auction to
the highest bidder. (§ 2924g, subd. (a); Jenkins, supra, 216 Cal.App.4th at p. 509;
Moeller v. Lien, supra, 25 Cal.App.4th at pp. 830–831.) Generally speaking, the
foreclosure sale extinguishes the borrower‘s debt; the lender may recover no
deficiency. (Code Civ. Proc., § 580d; Dreyfuss v. Union Bank of California
(2000) 24 Cal.4th 400, 411.)
2 All further unspecified statutory references are to the Civil Code.
6
The trustee of a deed of trust is not a true trustee with fiduciary obligations,
but acts merely as an agent for the borrower-trustor and lender-beneficiary.
(Biancalana v. T.D. Service Co., supra, 56 Cal.4th at p. 819; Vournas v. Fidelity
Nat. Tit. Ins. Co. (1999) 73 Cal.App.4th 668, 677.) While it is the trustee who
formally initiates the nonjudicial foreclosure, by recording first a notice of default
and then a notice of sale, the trustee may take these steps only at the direction of
the person or entity that currently holds the note and the beneficial interest under
the deed of trust—the original beneficiary or its assignee—or that entity‘s agent.
(§ 2924, subd. (a)(1) [notice of default may be filed for record only by ―[t]he
trustee, mortgagee, or beneficiary‖]; Kachlon v. Markowitz (2008) 168
Cal.App.4th 316, 334 [when borrower defaults on the debt, ―the beneficiary may
declare a default and make a demand on the trustee to commence foreclosure‖];
Santens v. Los Angeles Finance Co. (1949) 91 Cal.App.2d 197, 202 [only a person
entitled to enforce the note can foreclose on the deed of trust].)
Defendants emphasize, correctly, that 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.
(Creative Ventures, LLC v. Jim Ward & Associates (2011) 195 Cal.App.4th 1430,
1445–1446.) The deed of trust, moreover, is inseparable from the note it secures,
and follows it even without a separate assignment. (§ 2936; Cockerell v. Title Ins.
& Trust Co. (1954) 42 Cal.2d 284, 291; U.S. v. Thornburg (9th Cir. 1996) 82 F.3d
886, 892.) In accordance with this general law, the note and deed of trust in this
case provided for their possible assignment.
A deed of trust may thus be assigned one or multiple times over the life of
the loan it secures. But if the borrower defaults on the loan, only the current
beneficiary may direct the trustee to undertake the nonjudicial foreclosure process.
―[O]nly the ‗true owner‘ or ‗beneficial holder‘ of a Deed of Trust can bring to
7
completion a nonjudicial foreclosure under California law.‖ (Barrionuevo v.
Chase Bank, N.A. (N.D.Cal. 2012) 885 F.Supp.2d 964, 972; see Herrera v.
Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1378 [bank and
reconveyance company failed to establish they were current beneficiary and
trustee, respectively, and therefore failed to show they ―had authority to conduct
the foreclosure sale‖]; cf. U.S. Bank Nat. Assn. v. Ibanez (Mass. 2011) 941 N.E.2d
40, 51 [under Mass. law, only the original mortgagee or its assignee may conduct
nonjudicial foreclosure sale].)
In itself, the principle that only the entity currently entitled to enforce a debt
may foreclose on the mortgage or deed of trust securing that debt is not, or at least
should not be, controversial. It is a ―straightforward application[] of well-
established commercial and real-property law: a party cannot foreclose on a
mortgage unless it is the mortgagee (or its agent).‖ (Levitin, The Paper Chase:
Securitization, Foreclosure, and the Uncertainty of Mortgage Title (2013) 63
Duke L.J. 637, 640.) Describing the copious litigation arising out of the recent
foreclosure crisis, a pair of commentators explained: ―While plenty of uncertainty
existed, one concept clearly emerged from litigation during the 2008-2012 period:
in order to foreclose a mortgage by judicial action, one had to have the right to
enforce the debt that the mortgage secured. It is hard to imagine how this notion
could be controversial.‖ (Whitman & Milner, Foreclosing on Nothing: The
Curious Problem of the Deed of Trust Foreclosure Without Entitlement to Enforce
the Note (2013) 66 Ark. L.Rev. 21, 23, fn. omitted.)
More subject to dispute is the question presented here: under what
circumstances, if any, may the borrower challenge a nonjudicial foreclosure on the
ground that the foreclosing party is not a valid assignee of the original lender? Put
8
another way, does the borrower have standing to challenge the validity of an
assignment to which he or she was not a party?3 We proceed to that issue.
II. Borrower Standing to Challenge an Assignment as Void
A beneficiary or trustee under a deed of trust who conducts an illegal,
fraudulent or willfully oppressive sale of property may be liable to the borrower
for wrongful foreclosure. (Chavez v. Indymac Mortgage Services (2013) 219
Cal.App.4th 1052, 1062; Munger v. Moore (1970) 11 Cal.App.3d 1, 7.)4 A
foreclosure initiated by one with no authority to do so is wrongful for purposes of
3 Somewhat confusingly, both the purported assignee‘s authority to foreclose
and the borrower‘s ability to challenge that authority have been framed as
questions of ―standing.‖ (See, e.g., Levitin, The Paper Chase: Securitization,
Foreclosure, and the Uncertainty of Mortgage Title, supra, 63 Duke L.J. at p. 644
[discussing purported assignee‘s ―standing to foreclose‖]; Jenkins, supra, 216
Cal.App.4th at p. 515 [borrower lacks ―standing to enforce [assignment]
agreements‖ to which he or she is not a party]; Bank of America Nat. Assn. v.
Bassman FBT, LLC (Ill.App. Ct. 2012) 981 N.E.2d 1, 7 [―Each party contends that
the other lacks standing.‖].) We use the term here in the latter sense of a
borrower‘s legal authority to challenge the validity of an assignment.
4 It has been held that, at least when seeking to set aside the foreclosure sale,
the plaintiff must also show prejudice and a tender of the amount of the secured
indebtedness, or an excuse of tender. (Chavez v. Indymac Mortgage Services,
supra, 219 Cal.App.4th at p. 1062.) Tender has been excused when, among other
circumstances, the plaintiff alleges the foreclosure deed is facially void, as
arguably is the case when the entity that initiated the sale lacked authority to do so.
(Ibid.; In re Cedano (Bankr. 9th Cir. 2012) 470 B.R. 522, 529–530; Lester v. J.P.
Morgan Chase Bank (N.D.Cal. 2013) 926 F.Supp.2d 1081, 1093; Barrionuevo v.
Chase Bank, N.A., supra, 885 F.Supp.2d 964, 969–970.) Our review being limited
to the standing question, we express no opinion as to whether plaintiff Yvanova
must allege tender to state a cause of action for wrongful foreclosure under the
circumstances of this case. Nor do we discuss potential remedies for a plaintiff in
Yvanova‘s circumstances; at oral argument, plaintiff‘s counsel conceded she seeks
only damages. As to prejudice, we do not address it as an element of wrongful
foreclosure. We do, however, discuss whether plaintiff has suffered a cognizable
injury for standing purposes.
9
such an action. (Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at pp.
973–974; Ohlendorf v. American Home Mortgage Servicing (E.D.Cal. 2010) 279
F.R.D. 575, 582–583.) As explained in part I, ante, only the original beneficiary,
its assignee or an agent of one of these has the authority to instruct the trustee to
initiate and complete a nonjudicial foreclosure sale. The question is whether and
when a wrongful foreclosure plaintiff may challenge the authority of one who
claims it by assignment.
In Glaski, supra, 218 Cal.App.4th 1079, 1094–1095, the court held a
borrower may base a wrongful foreclosure claim on allegations that the
foreclosing party acted without authority because the assignment by which it
purportedly became beneficiary under the deed of trust was not merely voidable
but void. Before discussing Glaski‘s holdings and rationale, we review the
distinction between void and voidable transactions.
A void contract is without legal effect. (Rest.2d Contracts, § 7, com. a.) ―It
binds no one and is a mere nullity.‖ (Little v. CFS Service Corp. (1987) 188
Cal.App.3d 1354, 1362.) ―Such a contract has no existence whatever. It has no
legal entity for any purpose and neither action nor inaction of a party to it can
validate it . . . .‖ (Colby v. Title Ins. and Trust Co. (1911) 160 Cal. 632, 644.) As
we said of a fraudulent real property transfer in First Nat. Bank of L. A. v. Maxwell
(1899) 123 Cal. 360, 371, ― ‗A void thing is as no thing.‘ ‖
A voidable transaction, in contrast, ―is one where one or more parties have
the power, by a manifestation of election to do so, to avoid the legal relations
created by the contract, or by ratification of the contract to extinguish the power of
avoidance.‖ (Rest.2d Contracts, § 7.) It may be declared void but is not void in
itself. (Little v. CFS Service Corp., supra, 188 Cal.App.3d at p. 1358.) Despite its
defects, a voidable transaction, unlike a void one, is subject to ratification by the
10
parties. (Rest.2d Contracts, § 7; Aronoff v. Albanese (N.Y.App.Div. 1982) 446
N.Y.S.2d 368, 370.)
In Glaski, the foreclosing entity purportedly acted for the current beneficiary,
the trustee of a securitized mortgage investment trust.5 The plaintiff, seeking
relief from the allegedly wrongful foreclosure, claimed his note and deed of trust
had never been validly assigned to the securitized trust because the purported
assignments were made after the trust‘s closing date. (Glaski, supra, 218
Cal.App.4th at pp. 1082–1087.)
The Glaski court began its analysis of wrongful foreclosure by agreeing with
a federal district court that such a cause of action could be made out ― ‗where a
party alleged not to be the true beneficiary instructs the trustee to file a Notice of
Default and initiate nonjudicial foreclosure.‘ ‖ (Glaski, supra, 218 Cal.App.4th at
p. 1094, quoting Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at
p. 973.) But the wrongful foreclosure plaintiff, Glaski cautioned, must do more
than assert a lack of authority to foreclose; the plaintiff must allege facts
―show[ing] the defendant who invoked the power of sale was not the true
beneficiary.‖ (Glaski, at p. 1094.)
Acknowledging that a borrower‘s assertion that an assignment of the note
and deed of trust is invalid raises the question of the borrower‘s standing to
5 The mortgage securitization process has been concisely described as
follows: ―To raise funds for new mortgages, 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 Mgmt. v. Ambac Assur. Corp. (2d Cir. 2012) 673 F.3d 169, 173.)
11
challenge an assignment to which the borrower is not a party, the Glaski court
cited several federal court decisions for the proposition that a borrower has
standing to challenge such an assignment as void, though not as voidable. (Glaski,
supra, 218 Cal.App.4th at pp. 1094–1095.) Two of these decisions, Culhane v.
Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282 (Culhane) and
Reinagel v. Deutsche Bank Nat. Trust Co. (5th Cir. 2013) 735 F.3d 220(Reinagel),6 discussed standing at some length; we will examine them in detail in
a moment.
Glaski adopted from the federal decisions and a California treatise the view
that ―a borrower can challenge an assignment of his or her note and deed of trust if
the defect asserted would void the assignment‖ not merely render it voidable.
(Glaski, supra, 218 Cal.App.4th at p. 1095.) Cases holding that a borrower may
never challenge an assignment because the borrower was neither a party to nor a
third party beneficiary of the assignment agreement ― ‗paint with too broad a
brush‘ ‖ by failing to distinguish between void and voidable agreements. (Ibid.,
quoting Culhane, supra, 708 F.3d at p. 290.)
The Glaski court went on to resolve the question of whether the plaintiff had
pled a defect in the chain of assignments leading to the foreclosing party that
would, if true, render one of the necessary assignments void rather than voidable.
(Glaski, supra, 218 Cal.App.4th at p. 1095.) On this point, Glaski held allegations
that the plaintiff‘s note and deed of trust were purportedly transferred into the trust
after the trust‘s closing date were sufficient to plead a void assignment and hence
to establish standing. (Glaski, 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
6 The version of Reinagel cited in Glaski, published at 722 F.3d 700, was
amended on rehearing and superseded by Reinagel, supra, 735 F.3d 220.
12
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.
Returning to the question that is before us, we consider in more detail the
authority Glaski relied on for its standing holding. In Culhane, a Massachusetts
home loan borrower sought relief from her nonjudicial foreclosure on the ground
that the assignment by which Aurora Loan Services of Nebraska (Aurora) claimed
authority to foreclose—a transfer of the mortgage from Mortgage Electronic
Registration Systems, Inc. (MERS),7 to Aurora—was void because MERS never
properly held the mortgage. (Culhane, supra, 708 F.3d at pp. 286–288, 291.)
Before addressing the merits of the plaintiff‘s allegations, the Culhane court
considered Aurora‘s contention the plaintiff lacked standing to challenge the
assignment of her mortgage from MERS to Aurora. On this question, the court
first concluded the plaintiff had a sufficient personal stake in the outcome, having
shown a concrete and personalized injury resulting from the challenged
assignment: ―The action challenged here relates to Aurora‘s right to foreclose by
7 As the Culhane court explained, MERS was formed by a consortium of
residential mortgage lenders and investors to streamline the transfer of mortgage
loans and thereby facilitate their securitization. A member lender may name
MERS as mortgagee on a loan the member originates or owns; MERS acts solely
as the lender‘s ―nominee,‖ having legal title but no beneficial interest in the loan.
When a loan is assigned to another MERS member, MERS can execute the
transfer by amending its electronic database. When the loan is assigned to a
nonmember, MERS executes the assignment and ends its involvement. (Culhane,
supra, 708 F.3d at p. 287.)
13
virtue of the assignment from MERS. The identified harm—the foreclosure—can
be traced directly to Aurora‘s exercise of the authority purportedly delegated by
the assignment.‖ (Culhane, supra, 708 F.3d at pp. 289–290.)
Culhane next considered whether the prudential principle that a litigant
should not be permitted to assert the rights and interest of another dictates that
borrowers lack standing to challenge mortgage assignments as to which they are
neither parties nor third party beneficiaries. (Culhane, supra, 708 F.3d at p. 290.)
Two aspects of Massachusetts law on nonjudicial foreclosure persuaded the court
such a broad rule is unwarranted. First, only the mortgagee (that is, the original
lender or its assignee) may exercise the power of sale,8 and the borrower is
entitled to relief from foreclosure by an unauthorized party. (Culhane, at p. 290.)
Second, in a nonjudicial foreclosure the borrower has no direct opportunity to
challenge the foreclosing entity‘s authority in court. Without standing to sue for
relief from a wrongful foreclosure, ―a Massachusetts mortgagor would be deprived
of a means to assert her legal protections . . . .‖ (Ibid.) These considerations led
the Culhane court to conclude ―a mortgagor has standing to challenge the
assignment of a mortgage on her home to the extent that such a challenge is
necessary to contest a foreclosing entity‘s status qua mortgagee.‖ (Id. at p. 291.)
The court immediately cautioned that its holding was limited to allegations of
a void transfer. If, for example, the assignor had no interest to assign or had no
authority to make the particular assignment, ―a challenge of this sort would be
sufficient to refute an assignee‘s status qua mortgagee.‖ (Culhane, supra, 708
F.3d at p. 291.) But where the alleged defect in an assignment would ―render it
8 Massachusetts General Laws chapter 183, section 21, similarly to our Civil
Code section 2924, provides that the power of sale in a mortgage may be exercised
by ―the mortgagee or his executors, administrators, successors or assigns.‖
14
merely voidable at the election of one party but otherwise effective to pass legal
title,‖ the borrower has no standing to challenge the assignment on that basis.
(Ibid.)9
In Reinagel, upon which the Glaski court also relied, the federal court held
that under Texas law borrowers defending against a judicial foreclosure have
standing to ― ‗challenge the chain of assignments by which a party claims a right
to foreclose.‘ ‖ (Reinagel, supra, 735 F.3d at p. 224.) Though Texas law does not
allow a nonparty to a contract to enforce the contract unless he or she is an
intended third-party beneficiary, the borrowers in this situation ―are not attempting
to enforce the terms of the instruments of assignment; to the contrary, they urge
that the assignments are void ab initio.‖ (Id. at p. 225.)
Like Culhane, Reinagel distinguished between defects that render a
transaction void and those that merely make it voidable at a party‘s behest.
―Though ‗the law is settled‘ in Texas that an obligor cannot defend against an
assignee‘s efforts to enforce the obligation on a ground that merely renders the
assignment voidable at the election of the assignor, Texas courts follow the
majority rule that the obligor may defend ‗on any ground which renders the
assignment void.‘ ‖ (Reinagel, supra, 735 F.3d at p. 225.) The contrary rule
would allow an institution to foreclose on a borrower‘s property ―though it is not a
valid party to the deed of trust or promissory note . . . .‖ (Ibid.)10
9 On the merits, the Culhane court rejected the plaintiff‘s claim that MERS
never properly held her mortgage, giving her standing to challenge the assignment
from MERS to Aurora as void (Culhane, supra, 708 F.3d at p. 291); the court held
MERS‘s role as the lender‘s nominee allowed it to hold and assign the mortgage
under Massachusetts law. (Id. at pp. 291–293.)
10 The Reinagel court nonetheless rejected the plaintiffs‘ claim of an invalid
assignment after the closing date of a securitized trust, observing they could not
enforce the terms of trust because they were not intended third-party beneficiaries.
(footnote continued on next page)
15
Jenkins, on which the Court of Appeal below relied, was decided close in
time to Glaski (neither decision discusses the other) but reaches the opposite
conclusion on standing. In Jenkins, the plaintiff sued to prevent a foreclosure sale
that had not yet occurred, alleging the purported beneficiary who sought the sale
held no security interest because a purported transfer of the loan into a securitized
trust was made in violation of the pooling and servicing agreement that governed
the investment trust. (Jenkins, supra, 216 Cal.App.4th at pp. 504–505.)
The appellate court held a demurrer to the plaintiff‘s cause of action for
declaratory relief was properly sustained for two reasons. First, Jenkins held
California law did not permit a ―preemptive judicial action[] to challenge the right,
power, and authority of a foreclosing ‗beneficiary‘ or beneficiary‘s ‗agent‘ to
initiate and pursue foreclosure.‖ (Jenkins, supra, 216 Cal.App.4th at p. 511.)
Relying primarily on Gomes v. Countrywide Home Loans, Inc. (2011) 192
Cal.App.4th 1149, Jenkins reasoned that such preemptive suits are inconsistent
with California‘s comprehensive statutory scheme for nonjudicial foreclosure;
allowing such a lawsuit ― ‗would fundamentally undermine the nonjudicial nature
of the process and introduce the possibility of lawsuits filed solely for the purpose
of delaying valid foreclosures.‘ ‖ (Jenkins, at p. 513, quoting Gomes at p. 1155.)
This aspect of Jenkins, disallowing the use of a lawsuit to preempt a
nonjudicial foreclosure, is not within the scope of our review, which is limited to a
(footnote continued from previous page)
The court‘s holding appears, however, to rest at least in part on its conclusion that
a violation of the closing date ―would not render the assignments void‖ but merely
allow them to be avoided at the behest of a party or third-party beneficiary.
(Reinagel, supra, 735 F.3d at p. 228.) As discussed above in relation to Glaski,
that question is not within the scope of our review.
16
borrower‘s standing to challenge an assignment in an action seeking remedies for
wrongful foreclosure. As framed by the proceedings below, the concrete question
in the present case is whether plaintiff should be permitted to amend her complaint
to seek redress, in a wrongful foreclosure count, for the trustee‘s sale that has
already taken place. We do not address the distinct question of whether, or under
what circumstances, a borrower may bring an action for injunctive or declaratory
relief to prevent a foreclosure sale from going forward.
Second, as an alternative ground, Jenkins held a demurrer to the declaratory
relief claim was proper because the plaintiff had failed to allege an actual
controversy as required by Code of Civil Procedure section 1060. (Jenkins, supra,
216 Cal.App.4th at p. 513.) The plaintiff did not dispute that her loan could be
assigned or that she had defaulted on it and remained in arrears. (Id. at p. 514.)
Even if one of the assignments of the note and deed of trust was improper in some
respect, the appellate court reasoned, ―Jenkins is not the victim of such invalid
transfer[] because her obligations under the note remained unchanged. Instead,
the true victim may be an individual or entity that believes it has a present
beneficial interest in the promissory note and may suffer the unauthorized loss of
its interest in the note.‖ (Id. at p. 515.) In particular, the plaintiff could not
complain about violations of the securitized trust‘s transfer rules: ―As an
unrelated third party to the alleged securitization, and any other subsequent
transfers of the beneficial interest under the promissory note, Jenkins lacks
standing to enforce any agreements, including the investment trust‘s pooling and
servicing agreement, relating to such transactions.‖ (Ibid.)
For its conclusion on standing, Jenkins cited In re Correia (Bankr. 1st Cir.
2011) 452 B.R. 319. The borrowers in that case challenged a foreclosure on the
ground that the assignment of their mortgage into a securitized trust had not been
made in accordance with the trust‘s pooling and servicing agreement (PSA). (Id.
17
at pp. 321–322.) The appellate court held the borrowers ―lacked standing to
challenge the mortgage‘s chain of title under the PSA.‖ (Id. at p. 324.) Being
neither parties nor third party beneficiaries of the pooling agreement, they could
not complain of a failure to abide by its terms. (Ibid.)
Jenkins also cited Herrera v. Federal National Mortgage Assn. (2012) 205
Cal.App.4th 1495, which primarily addressed the merits of a foreclosure
challenge, concluding the borrowers had adduced no facts on which they could
allege an assignment from MERS to another beneficiary was invalid. (Id. at pp.
1502–1506.) In reaching the merits, the court did not explicitly discuss the
plaintiffs‘ standing to challenge the assignment. In a passage cited in Jenkins,
however, the court observed that the plaintiffs, in order to state a wrongful
foreclosure claim, needed to show prejudice, and they could not do so because the
challenged assignment did not change their obligations under the note. (Herrera,
at pp. 1507–1508.) Even if MERS lacked the authority to assign the deed of trust,
―the true victims were not plaintiffs but the lender.‖ (Id. at p. 1508.)
On the narrow question before us—whether a wrongful foreclosure plaintiff
may challenge an assignment to the foreclosing entity as void—we conclude
Glaski provides a more logical answer than Jenkins. As explained in part I, ante,
only the entity holding the beneficial interest under the deed of trust—the original
lender, its assignee, or an agent of one of these—may instruct the trustee to
commence and complete a nonjudicial foreclosure. (§ 2924, subd. (a)(1);
Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at p. 972.) If a purported
assignment necessary to the chain by which the foreclosing entity claims that
power is absolutely void, meaning of no legal force or effect whatsoever (Colby v.
Title Ins. and Trust Co., supra, 160 Cal. at p. 644; Rest.2d Contracts, § 7, com. a),
the foreclosing entity has acted without legal authority by pursuing a trustee‘s sale,
18
and such an unauthorized sale constitutes a wrongful foreclosure. (Barrionuevo v.
Chase Bank, N.A., at pp. 973–974.)
Like the Massachusetts borrowers considered in Culhane, whose mortgages
contained a power of sale allowing for nonjudicial foreclosure, California
borrowers whose loans are secured by a deed of trust with a power of sale may
suffer foreclosure without judicial process and thus ―would be deprived of a means
to assert [their] legal protections‖ if not permitted to challenge the foreclosing
entity‘s authority through an action for wrongful foreclosure. (Culhane, supra,
708 F.3d at p. 290.) A borrower therefore ―has standing to challenge the
assignment of a mortgage on her home to the extent that such a challenge is
necessary to contest a foreclosing entity‘s status qua mortgagee‖ (id. at p. 291)—
that is, as the current holder of the beneficial interest under the deed of trust.
(Accord, Wilson v. HSBC Mortgage Servs., Inc. (1st Cir. 2014) 744 F.3d 1, 9 [―A
homeowner in Massachusetts—even when not a party to or third party beneficiary
of a mortgage assignment—has standing to challenge that assignment as void
because success on the merits would prove the purported assignee is not, in fact,
the mortgagee and therefore lacks any right to foreclose on the mortgage.‖].)11
Jenkins and other courts denying standing have done so partly out of concern
with allowing a borrower to enforce terms of a transfer agreement to which the
borrower was not a party. In general, California law does not give a party
11 We cite decisions on federal court standing only for their persuasive value
in determining what California standing law should be, without any assumption
that standing in the two systems is identical. The California Constitution does not
impose the same ― ‗case-or-controversy‘ ‖ limit on state courts‘ jurisdiction as
article III of the United States Constitution does on federal courts. (Grosset v.
Wenaas (2008) 42 Cal.4th 1100, 1117, fn. 13.)
19
personal standing to assert rights or interests belonging solely to others.12 (See
Code Civ. Proc., § 367 [action must be brought by or on behalf of the real party in
interest]; Jasmine Networks, Inc. v. Superior Court (2009) 180 Cal.App.4th 980,
992.) 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.
When the plaintiff alleges a void assignment, however, the Jenkins court‘s
concern with enforcement of a third party‘s interests is misplaced. Borrowers who
challenge the foreclosing party‘s authority on the grounds of a void assignment
―are not attempting to enforce the terms of the instruments of assignment; to the
contrary, they urge that the assignments are void ab initio.‖ (Reinagel, supra, 735
F.3d at p. 225; accord, Mruk v. Mortgage Elec. Registration Sys., Inc. (R.I. 2013)
82 A.3d 527, 536 [borrowers challenging an assignment as void ―are not
attempting to assert the rights of one of the contracting parties; instead, the
homeowners are asserting their own rights not to have their homes unlawfully
foreclosed upon‖].)
Unlike a voidable transaction, a void one cannot be ratified or validated by
the parties to it even if they so desire. (Colby v. Title Ins. and Trust Co., supra,160 Cal. at p. 644; Aronoff v. Albanese, supra, 446 N.Y.S.2d at p. 370.) Parties to
12 In speaking of personal standing to sue, we set aside such doctrines as
taxpayer standing to seek injunctive relief (see Code Civ. Proc., § 526a) and
― ‗ ―public right/public duty‖ ‘ ‖ standing to seek a writ of mandate (see Save the
Plastic Bag Coalition v. City of Manhattan Beach (2011) 52 Cal.4th 155, 166).
20
a securitization or other transfer agreement may well wish to ratify the transfer
agreement despite any defects, but no ratification is possible if the assignment is
void ab initio. In seeking a finding that an assignment agreement was void,
therefore, a plaintiff in Yvanova‘s position is not asserting the interests of parties
to the assignment; she is asserting her own interest in limiting foreclosure on her
property to those with legal authority to order a foreclosure sale. This, then, is not
a situation in which standing to sue is lacking because its ―sole object . . . is to
settle rights of third persons who are not parties.‖ (Golden Gate Bridge etc. Dist.
v. Felt (1931) 214 Cal. 308, 316.)
Defendants argue a borrower who is in default on his or her loan suffers no
prejudice from foreclosure by an unauthorized party, since the actual holder of the
beneficial interest on the deed of trust could equally well have foreclosed on the
property. As the Jenkins court put it, when an invalid transfer of a note and deed
of trust leads to foreclosure by an unauthorized party, the ―victim‖ is not the
borrower, whose obligations under the note are unaffected by the transfer, but ―an
individual or entity that believes it has a present beneficial interest in the
promissory note and may suffer the unauthorized loss of its interest in the note.‖
(Jenkins, supra, 216 Cal.App.4th at p. 515; see also Siliga v. Mortgage Electronic
Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85 [borrowers had no
standing to challenge assignment by MERS where they do not dispute they are in
default and ―there is no reason to believe . . . the original lender would have
refrained from foreclosure in these circumstances‖]; Fontenot v. Wells Fargo
Bank, N.A., supra, 198 Cal.App.4th at p. 272 [wrongful foreclosure plaintiff could
not show prejudice from allegedly invalid assignment by MERS as the assignment
―merely substituted one creditor for another, without changing her obligations
under the note‖].)
21
In deciding the limited question on review, we are concerned only with
prejudice in the sense of an injury sufficiently concrete and personal to provide
standing, not with prejudice as a possible element of the wrongful foreclosure tort.
(See fn. 4, ante.) As it relates to standing, we disagree with defendants‘ analysis
of prejudice from an illegal foreclosure. A foreclosed-upon borrower clearly
meets the general standard for standing to sue by showing an invasion of his or her
legally protected interests (Angelucci v. Century Supper Club (2007) 41 Cal.4th
160, 175)—the borrower has lost ownership to the home in an allegedly illegal
trustee‘s sale. (See Culhane, supra, 708 F.3d at p. 289 [foreclosed-upon borrower
has sufficient personal stake in action against foreclosing entity to meet federal
standing requirement].) Moreover, the bank or other entity that ordered the
foreclosure would not have done so absent the allegedly void assignment. Thus
―[t]he identified harm—the foreclosure—can be traced directly to [the foreclosing
entity‘s] exercise of the authority purportedly delegated by the assignment.‖
(Culhane, at p. 290.)
Nor is it correct that the borrower has no cognizable interest in the identity of
the party enforcing his or her debt. Though the borrower is not entitled to object
to an assignment of the promissory note, he or she is obligated to pay the debt, or
suffer loss of the security, only to a person or entity that has actually been assigned
the debt. (See Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 292 [party
claiming under an assignment must prove fact of assignment].) The borrower
owes money not to the world at large but to a particular person or institution, and
only the person or institution entitled to payment may enforce the debt by
foreclosing on the security.
It is no mere ―procedural nicety,‖ from a contractual point of view, to insist
that only those with authority to foreclose on a borrower be permitted to do so.
(Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of
22
Mortgage Title, supra, 63 Duke L.J. at p. 650.) ―Such a view fundamentally
misunderstands the mortgage contract. The mortgage contract is not simply an
agreement that the home may be sold upon a default on the loan. Instead, it is an
agreement that if the homeowner defaults on the loan, the mortgagee may sell the
property pursuant to the requisite legal procedure.‖ (Ibid., italics added and
omitted.)
The logic of defendants‘ no-prejudice argument implies that anyone, even a
stranger to the debt, could declare a default and order a trustee‘s sale—and the
borrower would be left with no recourse because, after all, he or she owed the debt
to someone, though not to the foreclosing entity. This would be an ―odd result‖
indeed. (Reinagel, supra, 735 F.3d at p. 225.) As a district court observed in
rejecting the no-prejudice argument, ―[b]anks are neither private attorneys general
nor bounty hunters, armed with a roving commission to seek out defaulting
homeowners and take away their homes in satisfaction of some other bank‘s deed
of trust.‖ (Miller v. Homecomings Financial, LLC (S.D.Tex. 2012) 881 F.Supp.2d
825, 832.)
Defendants note correctly that a plaintiff in Yvanova‘s position, having
suffered an allegedly unauthorized nonjudicial foreclosure of her home, need not
now fear another creditor coming forward to collect the debt. The home can only
be foreclosed once, and the trustee‘s sale extinguishes the debt. (Code Civ. Proc.,
§ 580d; Dreyfuss v. Union Bank of California, supra, 24 Cal.4th at p. 411.) But as
the Attorney General points out in her amicus curiae brief, a holding that anyone
may foreclose on a defaulting home loan borrower would multiply the risk for
homeowners that they might face a foreclosure at some point in the life of their
loans. The possibility that multiple parties could each foreclose at some time, that
is, increases the borrower‘s overall risk of foreclosure.
23
Defendants suggest that to establish prejudice the plaintiff must allege and
prove that the true beneficiary under the deed of trust would have refrained from
foreclosing on the plaintiff‘s property. Whatever merit this rule would have as to
prejudice as an element of the wrongful foreclosure tort, it misstates the type of
injury required for standing. A homeowner who has been foreclosed on by one
with no right to do so has suffered an injurious invasion of his or her legal rights at
the foreclosing entity‘s hands. No more is required for standing to sue.
(Angelucci v. Century Supper Club, supra, 41 Cal.4th at p. 175.)
Neither Caulfield v. Sanders (1861) 17 Cal. 569 nor Seidell v. Tuxedo Land
Co. (1932) 216 Cal. 165, upon which defendants rely, holds or implies a home
loan borrower may not challenge a foreclosure by alleging a void assignment. In
the first of these cases, we held a debtor on a contract for printing and advertising
could not defend against collection of the debt on the ground it had been assigned
without proper consultation among the assigning partners and for nominal
consideration: ―It is of no consequence to the defendant, as it in no respect affects
his liability, whether the transfer was made at one time or another, or with or
without consideration, or by one or by all the members of the firm.‖ (Caulfield v.
Sanders, at p. 572.) In the second, we held landowners seeking to enjoin a
foreclosure on a deed of trust to their land could not do so by challenging the
validity of an assignment of the promissory note the deed of trust secured. (Seidell
v. Tuxedo Land Co., at pp. 166, 169–170.) We explained that the assignment was
made by an agent of the beneficiary, and that despite the landowner‘s claim the
agent lacked authority for the assignment, the beneficiary ―is not now
complaining.‖ (Id. at p. 170.) Neither decision discusses the distinction between
allegedly void and merely voidable, and neither negates a borrower‘s ability to
challenge an assignment of his or her debt as void.
24
For these reasons, we conclude Glaski, supra, 218 Cal.App.4th 1079, was
correct to hold a wrongful foreclosure plaintiff has standing to claim the
foreclosing entity‘s purported authority to order a trustee‘s sale was based on a
void assignment of the note and deed of trust. Jenkins, supra, 216 Cal.App.4th
497, spoke too broadly in holding a borrower lacks standing to challenge an
assignment of the note and deed of trust to which the borrower was neither a party
nor a third party beneficiary. Jenkins‘s rule may hold as to claimed defects that
would make the assignment merely voidable, but not as to alleged defects
rendering the assignment absolutely void.13
In embracing Glaski‘s rule that borrowers have standing to challenge
assignments as void, but not as voidable, we join several courts around the nation.
(Wilson v. HSBC Mortgage Servs., Inc., supra, 744 F.3d at p. 9; Reinagel, supra,
735 F.3d at pp. 224–225; Woods v. Wells Fargo Bank, N.A. (1st Cir. 2013) 733
F.3d 349, 354; Culhane, supra, 708 F.3d at pp. 289–291; Miller v. Homecomings
Financial, LLC, supra, 881 F.Supp.2d at pp. 831–832; Bank of America Nat. Assn.
v. Bassman FBT, LLC, supra, 981 N.E.2d at pp. 7–8; Pike v. Deutsche Bank Nat.
Trust Co. (N.H. 2015) 121 A.3d 279, 281; Mruk v. Mortgage Elec. Registration
Sys., Inc., supra, 82 A.3d at pp. 534–536; Dernier v. Mortgage Network, Inc. (Vt.
2013) 87 A.3d 465, 473.) Indeed, as commentators on the issue have stated:
―[C]ourts generally permit challenges to assignments if such challenges would
prove that the assignments were void as opposed to voidable.‖ (Zacks & Zacks,
13 We disapprove Jenkins v. JPMorgan Chase Bank, N.A., supra, 216
Cal.App.4th 497, Siliga v. Mortgage Electronic Registration Systems, Inc., supra,
219 Cal.App.4th 75, Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th
256, and Herrera v. Federal National Mortgage Assn., supra, 205 Cal.App.4th
1495, to the extent they held borrowers lack standing to challenge an assignment
of the deed of trust as void.
25
Not a Party: Challenging Mortgage Assignments (2014) 59 St. Louis U. L.J. 175,
180.)
That several federal courts applying California law have, largely in
unreported decisions, agreed with Jenkins and declined to follow Glaski does not
alter our conclusion. Neither Khan v. Recontrust Co. (N.D.Cal. 2015) 81
F.Supp.3d 867 nor Flores v. EMC Mort. Co. (E.D.Cal. 2014) 997 F.Supp.2d 1088adds much to the discussion. In Khan, the district court found the borrower, as a
nonparty to the pooling and servicing agreement, lacked standing to challenge a
foreclosure on the basis of an unspecified flaw in the loan‘s securitization; the
court‘s opinion does not discuss the distinction between a void assignment and a
merely voidable one. (Khan v. Recontrust Co., supra, 81 F.Supp.3d at pp. 872–
873.) In Flores, the district court, considering a wrongful foreclosure complaint
that lacked sufficient clarity in its allegations including identification of the
assignment or assignments challenged, the district court quoted and followed
Jenkins‘s reasoning on the borrower‘s lack of standing to enforce an agreement to
which he or she is not a party, without addressing the application of this reasoning
to allegedly void assignments. (Flores v. EMC Mort. Co., supra, at pp. 1103–
1105.)
Similarly, the unreported federal decisions applying California law largely
fail to grapple with Glaski‘s distinction between void and voidable assignments
and tend merely to repeat Jenkins‘s arguments that a borrower, as a nonparty to an
assignment, may not enforce its terms and cannot show prejudice when in default
on the loan, arguments we have found insufficient with regard to allegations of
void assignments. While unreported federal court decisions may be cited in
California as persuasive authority (Kan v. Guild Mortgage Co. (2014) 230
Cal.App.4th 736, 744, fn. 3), in this instance they lack persuasive value.
26
Defendants cite the decision in Rajamin v. Deutsche Bank Nat. Trust Co.
(2nd Cir. 2014) 757 F.3d 79 (Rajamin), as a ―rebuke‖ of Glaski. Rajamin‘s
expressed disagreement with Glaski, however, was on the question whether, under
New York law, an assignment to a securitized trust made after the trust‘s closing
date is void or merely voidable. (Rajamin, at p. 90.) As explained earlier, that
question is outside the scope of our review and we express no opinion as to
Glaski‘s correctness on the point.
The Rajamin court did, in an earlier discussion, state generally that borrowers
lack standing to challenge an assignment as violative of the securitized trust‘s
pooling and servicing agreement (Rajamin, supra, 757 F.3d at pp. 85–86), but the
court in that portion of its analysis did not distinguish between void and voidable
assignments. In a later portion of its analysis, the court ―assum[ed] that ‗standing
exists for challenges that contend that the assigning party never possessed legal
title,‘ ‖ a defect the plaintiffs claimed made the assignments void (id. at p. 90), but
concluded the plaintiffs had not properly alleged facts to support their voidness
theory (id. at pp. 90–91).
Nor do Kan v. Guild Mortgage Co., supra, 230 Cal.App.4th 736, and Siliga
v. Mortgage Electronic Registration Systems, Inc., supra, 219 Cal.App.4th 75(Siliga), which defendants also cite, persuade us Glaski erred in finding borrower
standing to challenge an assignment as void. The Kan court distinguished Glaski
as involving a postsale wrongful foreclosure claim, as opposed to the preemptive
suits involved in Jenkins and Kan itself. (Kan, at pp. 743–744.) On standing, the
Kan court noted the federal criticism of Glaski and our grant of review in the
present case, but found ―no reason to wade into the issue of whether Glaski was
correctly decided, because the opinion has no direct applicability to this
preforeclosure action.‖ (Kan, at p. 745.)
27
Siliga, similarly, followed Jenkins in disapproving a preemptive lawsuit.
(Siliga, supra, 219 Cal.App.4th at p. 82.) Without discussing Glaski, the Siliga
court also held the borrower plaintiffs failed to show any prejudice from, and
therefore lacked standing to challenge, the assignment of their deed of trust to the
foreclosing entity. (Siliga, at p. 85.) As already explained, this prejudice analysis
misses the mark in the wrongful foreclosure context. When a property has been
sold at a trustee‘s sale at the direction of an entity with no legal authority to do so,
the borrower has suffered a cognizable injury.
In further support of a borrower‘s standing to challenge the foreclosing
party‘s authority, plaintiff points to provisions of the recent legislation known as
the California Homeowner Bill of Rights, enacted in 2012 and effective only after
the trustee‘s sale in this case. (See Leuras v. BAC Home Loans Servicing, LP
(2013) 221 Cal.App.4th 49, 86, fn. 14.)14 Having concluded without reference to
this legislation that borrowers do have standing to challenge an assignment as
void, we need not decide whether the new provisions provide additional support
for that holding.
14 Plaintiff cites newly added provisions that prohibit any entity from
initiating a 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‖ (§ 2924, subd. (a)(6)); require the loan servicer to inform the borrower,
before a notice of default is filed, of the borrower‘s right to request copies of any
assignments of the deed of trust ―required to demonstrate the right of the mortgage
servicer to foreclose‖ (§ 2923.55, subd. (b)(1)(B)(iii)); and require the servicer to
ensure the documentation substantiates the right to foreclose (§ 2924.17, subd.
(b)). The legislative history indicates the addition of these provisions was
prompted in part by reports that nonjudicial foreclosure proceedings were being
initiated on behalf of companies with no authority to foreclose. (See Sen. Rules
Com., Conference Rep. on Sen. Bill No. 900 (2011–2012 Reg. Sess.) as amended
June 27, 2012, p. 26.)
28
Plaintiff has alleged that her deed of trust was assigned to the Morgan
Stanley investment trust in December 2011, several years after both the securitized
trust‘s closing date and New Century‘s liquidation in bankruptcy, a defect plaintiff
claims renders the assignment void. Beyond their general claim a borrower has
no standing to challenge an assignment of the deed of trust, defendants make
several arguments against allowing plaintiff to plead a cause of action for
wrongful foreclosure based on this allegedly void assignment.
Principally, defendants argue the December 2011 assignment of the deed of
trust to Deutsche Bank, as trustee for the investment trust, was merely
―confirmatory‖ of a 2007 assignment that had been executed in blank (i.e., without
designation of assignee) when the loan was added to the trust‘s investment pool.
The purpose of the 2011 recorded assignment, defendants assert, was merely to
comply with a requirement in the trust‘s pooling and servicing agreement that
documents be recorded before foreclosures are initiated. An amicus curiae
supporting defendants‘ position asserts that the general practice in home loan
securitization is to initially execute assignments of loans and mortgages or deeds
of trust to the trustee in blank and not to record them; the mortgage or deed of trust
is subsequently endorsed by the trustee and recorded if and when state law
requires. (See Rajamin, supra, 757 F.3d at p. 91.) This claim, which goes not to
the legal issue of a borrower‘s standing to sue for wrongful foreclosure based on a
void assignment, but rather to the factual question of when the assignment in this
case was actually made, is outside the limited scope of our review. The same is
true of defendants‘ remaining factual claims, including that the text of the
investment trust‘s pooling and servicing agreement demonstrates plaintiff‘s deed
of trust was assigned to the trust before it closed.
29
CONCLUSION
We conclude a home loan borrower has standing to claim a nonjudicial
foreclosure was wrongful because an assignment by which the foreclosing party
purportedly took a beneficial interest in the deed of trust was not merely voidable
but void, depriving the foreclosing party of any legitimate authority to order a
trustee‘s sale. The Court of Appeal took the opposite view and, solely on that
basis, concluded plaintiff could not amend her operative complaint to plead a
cause of action for wrongful foreclosure. We must therefore reverse the Court of
Appeal‘s judgment and allow that court to reconsider the question of an
amendment to plead wrongful foreclosure. We express no opinion on whether
plaintiff has alleged facts showing a void assignment, or on any other issue
relevant to her ability to state a claim for wrongful foreclosure.
30
DISPOSITION
The judgment of the Court of Appeal is reversed and the matter is remanded
to that court for further proceedings consistent with our opinion.
WERDEGAR, J.
WE CONCUR:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
HUFFMAN, J.*
* Associate Justice of the Court of Appeal, Fourth Appellate District,
Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
31
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Yvanova v. New Century Mortgage Corporation
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 226 Cal.App.4th 495Rehearing Granted
__________________________________________________________________________________
Opinion No. S218973
Date Filed: February 18, 2016
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Russell S. Kussman
__________________________________________________________________________________
Counsel:
Tsvetana Yvanova, in pro. per.; Law Offices of Richard L. Antognini and Richard L. Antognini for
Plaintiff and Appellant.
Law Office of Mark F. Didak and Mark F. Didak as Amici Curiae on behalf of Plaintiff and Appellant.
Kamala D. Harris, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele Van Gelderen
and Sanna R. Singer, Deputy Attorneys General, for Attorney General of California as Amicus Curiae on
behalf of Plaintiff and Appellant.
Lisa R. Jaskol; Kent Qian; and Hunter Landerholm for Public Counsel, National Housing Law Project and
Neighborhood Legal Services of Los Angeles County as Amici Curiae on behalf of Plaintiff and Appellant.
The Sturdevant Law Firm and James C. Sturdevant for National Association of Consumer Advocates and
National Consumer Law Center as Amici Curiae on behalf of Plaintiff and Appellant.
The Arkin Law Firm, Sharon J. Arkin; Arbogast Law and David M. Arbogast for Consumer Attorneys of
California as Amicus Curiae on behalf of Plaintiff and Appellant.
Houser & Allison, Eric D. Houser, Robert W. Norman, Jr., Patrick S. Ludeman; Bryan Cave, Kenneth Lee
Marshall, Nafiz Cekirge, Andrea N. Winternitz and Sarah Samuelson for Defendants and Respondents.
Pfeifer & De La Mora and Michael R. Pfeifer for California Mortgage Bankers Association as Amicus
Curiae on behalf of Defendants and Respondents.
Denton US and Sonia Martin for Structured Finance Industry Group, Inc., as Amicus Curiae on behalf of
Defendants and Respondents.
Goodwin Proctor, Steven A. Ellis and Nicole S. Tate-Naghi for California Bankers Association as Amicus
Curiae on behalf of Defendants and Respondents.
Wright, Finlay & Zak and Jonathan D. Fink for American Legal & Financial Network and United Trustees
Association as Amici Curiae on behalf of Defendants and Respondents.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Richard L. Antognini
Law Offices of Richard L. Antognini
2036 Nevada City Highway, Suite 636
Grass Valley, CA 95945-7700
(916) 295-4896
Kenneth Lee Marshall
Bryan Cave
560 Mission Street, Suite 2500
San Francisco, CA 94105
(415) 675-3400