Cleek v.Greenpoint Mortgage Funding CA4/3

Filed 11/6/15 Cleek v.Greenpoint Mortgage Funding CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
DENNIS CLEEK,
Plaintiff and Appellant, G050654
v. (Super. Ct. No. 30-2013-00672858)
GREENPOINT MORTGAGE FUNDING, OPINION
INC., et al.,
Defendants and Respondents.
Appeal from a judgment of the Superior Court of Orange County, Robert
D. Monarch, Judge. (Retired Judge of the Orange Super. Ct. assigned by the Chief
Jusitce pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.
Rodriguez Law Group, Patricia Rodriguez and George M. Hill for Plaintiff
and Appellant.
Bryan Cave, Stuart W. Price, and Sarah Samuelson for Defendants and
Respondents Bank of America N.A., Federal National Mortgage Association, and
Mortgage Electronic Registration Systems, Inc.
Doll Amir & Eley, Hunter R. Eley and William H. Edmonson for
Defendant and Respondent GreenPoint Mortgage Funding, Inc.
* * *
Plaintiff Dennis Cleek filed this lawsuit against GreenPoint Mortgage
Funding, Inc. (GreenPoint); Bank of America, N.A. (Bank of America); Seterus, Inc.
(Seterus); Federal National Mortgage Association (Fannie Mae); and Mortage Electronic
Registration Systems, Inc. (MERS), for unlawful foreclosure and related causes of
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action. Plaintiff’s complaint sums itself up as follows: “The gravamen of Plaintiff’s
complaint is that Defendants are attempting to foreclose without any legal authority or
standing to do so . . . .” In particular, plaintiff contends that any assignments of the note
and deed of trust associated with his home mortgage did not comport with the terms of
the pooling and service agreement (PSA) governing the securitization trust to which his
mortgage was allegedly sold. Plaintiff thus challenges the authority of respondents to
initiate foreclosure proceedings. The court sustained a demurrer without leave to amend.
We conclude plaintiff has no standing to challenge assignments of his note and deed of
trust and thus affirm.
1
Seterus is not a party in the present appeal, but is a party in the companion
appeal decided concurrently with this appeal. (Cleek v. Seterus (Oct. 6, 2015, G050234)
[nonpub. opn.].)
2
FACTS
2
Plaintiff’s first amended complaint (FAC) alleged the following:
In January 2006, plaintiff refinanced his residence through GreenPoint,
executing a promissory note and deed of trust. MERS represented that Bank of America
was the servicer of the loan, and Fannie Mae the investor. In August 2012, MERS
assigned the deed of trust to Bank of America. In October 2012, Bank of America
assigned the deed of trust to Fannie Mae. In November 2012, plaintiff was informed that
Seterus was the new loan servicer. Plaintiff alleged on information and belief that his
note was “sold, transferred and securitized into a Trust.” The complaint states “[t]here
currently is no Notice of Default or Notice of Trustee Sale recorded or on file that has
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any relationship to the subject property or the Plaintiffs.”
Nonetheless, plaintiff alleged “the following deficiencies exist, in the ‘True
[4]
Sale’ and securitization process as to this Deed of Trust which renders invalid any
security interest in the Plaintiff’s mortgage, including, but not limited to: [¶] a. The
splitting or separation of title, ownership and interest in Plaintiff’s Note and Deed of
Trust. [¶] b. When the loan was sold to each intervening entity, there were no
Assignments of the Deed of Trust to or from any intervening entity at the time of the sale.
2
Plaintiff also filed a second amended complaint. On appeal, however, he
challenges only the ruling sustaining without leave to amend the demurrer to the
wrongful foreclosure cause of action in his first amended complaint.
3
Presumably plaintiff is in default under the loan, and presumably
foreclosure has at least been threatened — why file a lawsuit challenging the foreclosure
process otherwise? However, there are no allegations in the complaint addressing
plaintiff’s payment status or what defendants have done to threaten foreclosure.
4
Plaintiff later explains that a “true sale” is a prerequisite of securitizing a
mortgage, and it involves a sale from the originator to the sponsor of the trust, and then a
second sale from the sponsor to the depositor of the trust.
3
Therefore, ‘True Sales’ could not and did not occur. [¶] c. The failure to properly
endorse, assign and transfer the beneficial interest in Plaintiffs’ Note together with the
Deed of Trust; [¶] d. The failure to transfer the note and Deed of Trust into the
securitized trust by its closing date.”
Plaintiff alleged five causes of action in his FAC: wrongful foreclosure;
violation of Civil Code section 2924, subdivision (a)(6); violation of Business and
Professions Code; breach of the implied covenant of good faith and fair dealing; and
violation of Real Estate Settlement Procedures Act (RESPA). Bank of America, Fannie
Mae, and MERS demurred. The court sustained the demurrers to the first two causes of
action without leave to amend. The court sustained the demurrers with regard to the
third, fourth, and fifth causes of action with leave to amend. After plaintiff amended, the
court sustained another demurrer, this time without leave to amend. Plaintiff timely
appealed from the judgment of dismissal. On appeal, plaintiff challenges only the court’s
ruling regarding the demurrer to the FAC as it pertains to the wrongful foreclosure cause
of action.
DISCUSSION
Plaintiff’s appeal boils down to a single issue: whether a borrower on a
home loan may challenge a securitized trust’s ownership by attacking intervening
assignments of the note and deed of trust. We conclude he may not.
“We independently review the ruling on a demurrer and determine de novo
whether the complaint alleges facts sufficient to state a cause of action. [Citation.] We
assume the truth of the properly pleaded factual allegations, facts that reasonably can be
inferred from those expressly pleaded, and matters of which judicial notice has been
taken. [Citation.] We construe the pleading in a reasonable manner and read the
allegations in context. [Citation.] We affirm the judgment if it is correct on any ground
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stated in the demurrer, regardless of the trial court’s stated reasons.” (Fremont Indemnity
Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97, 111.)
From a steady line of recent cases in this state, the rule has emerged that a
homeowner generally may not challenge a nonjudicial foreclosure on the basis that the
wrong party is foreclosing without specific facts indicating it is the wrong party, together
with prejudice to the homeowner.
The first of this modern line of cases was Gomes v. Countrywide Home
Loans, Inc. (2011) 192 Cal. App. 4th 1149 (Gomes). There, the homeowner defaulted on a
home loan with a deed of trust that identified MERS as the beneficiary. (Id. at p. 1151.)
The notice of default was sent, and a nonjudicial foreclosure process initiated, by parties
not on the original deed of trust. (Id. at pp. 1151-1152.) The homeowner filed suit,
alleging he did not know the identity of the note’s beneficial owner, and alleged on
information and belief that the parties carrying out the foreclosure process were not
acting with the rightful owner’s authority. (Id. at p. 1152.) The trial court sustained a
demurrer. (Id. at p. 1153.)
The Gomes court affirmed. (Gomes, supra, 192 Cal.App.4th at p. 1159.) It
premised its holding on the nature of California’s nonjudicial foreclosure scheme (Civ.
Code, §§ 2924-2924k), which provides “‘a comprehensive framework for the regulation
of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.’
[Citation.] ‘These provisions cover every aspect of exercise of the power of sale
contained in a deed of trust.’ [Citation.] ‘The purposes of this comprehensive scheme
are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and
efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from
wrongful loss of the property; and (3) to ensure that a properly conducted sale is final
between the parties and conclusive as to a bona fide purchaser.’ [Citation.] ‘Because of
the exhaustive nature of this scheme, California appellate courts have refused to read any
additional requirements into the non-judicial foreclosure statute.’” (Gomes, at p. 1154.)
5
Given the exhaustive nature of the system, the court rejected the
homeowner’s argument that the statutory scheme, by “‘necessary implication,’” permits a
homeowner to “test whether the person initiating the foreclosure has the authority to do
so.” (Gomes, supra, 192 Cal.App.4th at p. 1155.) “[Civil Code s]ection 2924,
subdivision (a)(1) states that a ‘trustee, mortgagee, or beneficiary, or any of their
authorized agents’ may initiate the foreclosure process. However, nowhere does the
statute provide for a judicial action to determine whether the person initiating the
foreclosure process is indeed authorized, and we see no ground for implying such an
action. [Citation.] Significantly, ‘[n]onjudicial foreclosure is less expensive and more
quickly concluded than judicial foreclosure, since there is no oversight by a court,
“[n]either appraisal nor judicial determination of fair value is required,” and the debtor
has no postsale right of redemption.’ [Citation.] The recognition of the right to bring a
lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of
the noteholder would fundamentally undermine the nonjudicial nature of the process and
introduce the possibility of lawsuits filed solely for the purpose of delaying valid
foreclosures.” (Ibid.)
Despite this apparently inflexible rule, the Gomes court distinguished three
similar federal district court cases where the plaintiffs were permitted to proceed with a
cause of action on the basis that, in those cases, the plaintiff identified a “specific factual
basis for alleging that the foreclosure was not initiated by the correct party.” (Id. at pp.
1155- 1156.)
This language gave rise to a split of authority concerning whether a plaintiff
may ever bring a cause of action to challenge a foreclosing party’s authority in the
context of a nonjudicial foreclosure, and our Supreme Court has recently granted review
of a case on the issue. (Yvanova v. New Century Mortgage Corp., review granted Aug.
27, 2014, S218973.) The only case to hold that a plaintiff can bring such a claim is
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Glaski v. Bank of America (2013) 218 Cal. App. 4th 1079 (Glaski), which is the case
plaintiff relies upon here.
In Glaski, the homeowner’s note and deed of trust were transferred to a
securitization trust, and, as in our case, plaintiff alleged the transfer was defective
because “the attempted transfers were made after the closing date of the securitized trust
holding the pooled mortgages . . . .” (Glaski, supra, 218 Cal.App.4th at p. 1082.) The
Glaski court concluded “that a borrower may challenge the securitized trust’s chain of
ownership by alleging the attempts to transfer the deed of trust to the securitized trust
(which was formed under N.Y. law) occurred after the trust’s closing date. Transfers that
violate the terms of the trust instrument are void under New York trust law, and
borrowers have standing to challenge void assignments of their loans even though they
are not a party to, or a third party beneficiary of, the assignment agreement.” (Id. at p.
1083.)
With respect to standing, the Glaski court reasoned that while third parties
have no standing to challenge an assignment merely voidable at the election of the
assignor, a homeowner may challenge an assignment that is void. (Glaski, supra, 218
Cal.App.4th at pp. 1094-1095.) Interpreting a New York statute that has generated
conflicting interpretations among various courts, the Glaski court concluded the best
interpretation was that the attempted transfer to the securitization trust was void. This
conclusion, it reasoned, “protects the beneficiaries of the . . . Securitized Trust from the
potential adverse tax consequence of the trust losing its status as a [real estate mortgage
investment conduit] trust under the Internal Revenue Code.” (Id. at p. 1097.)
7
Glaski distinguished Gomes on two grounds. First, it narrowly interpreted
Gomes as limited to challenges to the ability of the nominee, MERS, to participate in the
foreclosure process. (Glaski, supra, 218 Cal.App.4th at pp. 1098-1099.) Second, the
court relied on the “‘specific factual basis’” language Glaski employed to distinguish the
federal cases. (Id. at p. 1099.) Glaski found the plaintiff’s allegations had met that
requirement.
Several cases both before and after Glaski have reached the opposite
conclusion. (E.g., Mendoza v. JPMorgan Chase Bank, N.A., review granted Nov. 12,
2014, S220675; Keshtgar v. U.S. Bank, N.A., review granted Oct. 1, 2014, S220012;
Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal. App. 4th 75
(Siliga); Herrera v. Federal National Mortgage Assn. (2012) 205 Cal. App. 4th 1495
(Herrera); Jenkins v. JPMorgan Chase Bank, N.A. (2012) 216 Cal. App. 4th 497
(Jenkins); Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal. App. 4th 256 (Fontenot).)
Federal courts have likewise largely rejected Glaski as unpersuasive. (See Kan v. Guild
Mortgage Co. (2014) 230 Cal. App. 4th 736, 744 [collecting cases].) In particular, the
Second Circuit Court of Appeals has rejected Glaski’s analysis on the standing issue,
holding that under New York law an improper transfer to an investment trust is voidable,
not void, and thus a third party plaintiff has no standing to challenge such a transfer.
(Rajamin v. Deutsche Bank National Trust Co. (2d Cir. 2014) 757 F.3d 79, 90.) And
more recently the New York Supreme Court, Appellate Division, concluded a borrower
has no standing to challenge improper assignments in this context. (Wells Fargo Bank,
N.A. v. Erobobo (N.Y. 2015) 127 A.D.3d 1176, 1178 [9 N.Y.S.3d 312, 314] [“Erobobo,
as a mortgagor whose loan is owned by a trust, does not have standing to challenge the
plaintiff’s possession or status as assignee of the note and mortgage based on purported
noncompliance with certain provisions of the PSA”].)
8
In our view, the principal defect in the Glaski ccourt’s analysis is its failure
to assess prejudice. A plaintiff alleging a defect in the assignment of a mortgage must
demonstrate prejudice. For example, in Siliga, where the plaintiffs made essentially the
same allegations as those made here, the court affirmed the sustaining of a demurrer on,
among other grounds, the plaintiffs’ inability to demonstrate prejudice: “the [plaintiffs]
fail to allege any facts showing that they suffered prejudice as a result of any lack of
authority of the parties participating in the foreclosure process. The [plaintiffs] do not
dispute that they are in default under the note. The assignment of the deed of trust and
the note did not change the [plaintiffs’] obligations under the note, and there is no reason
to believe that . . . the original lender would have refrained from foreclosure in these
circumstances. Absent any prejudice, the [plaintiffs] have no standing to complain about
any alleged lack of authority or defective assignment.” (Siliga, supra, 219 Cal.App.4th.
at p. 85.) Likewise, in Fontenot, where the plaintiff also challenged a foreclosure based
on an invalid assignment of a mortgage, the court affirmed the sustaining of a demurrer
on the basis that plaintiff could not demonstrate prejudice: “Even if MERS lacked
authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by
MERS’s purported assignment, and there is no allegation to this effect. Because a
promissory note is a negotiable instrument, a borrower must anticipate it can and might
be transferred to another creditor. As to plaintiff, an assignment merely substituted one
creditor for another, without changing her obligations under the note. Plaintiff effectively
concedes she was in default, and she does not allege that the transfer to HSBC interfered
in any manner with her payment of the note [citation], nor that the original lender would
have refrained from foreclosure under the circumstances presented. If MERS indeed
lacked authority to make the assignment, the true victim was not plaintiff but the original
lender, which would have suffered the unauthorized loss of a $1 million promissory
note.” (Fontenot, supra, 198 Cal.App.4th at p. 272.)
9
Glaski did not analyze these holdings, nor did it mention the word
“prejudice.” This omission is fatal to Glaski’s holding, and thus we decline to follow it.
In the absence of prejudice, a cause of action based on technicalities in the chain of title
serves no other purpose than to permit the borrower to continue living in the home
without paying for it. To the extent the various financial institutions involved object to
the manner or validity of the assignments involved, they can sort the matter out
themselves, probably without recourse to the courts. We see no benefit in permitting a
defaulted borrower to maintain such a suit in the absence of real harm to the borrower.
Plaintiff’s complaint does not adequately allege prejudice. Plaintiff alleges
in vague and conclusory terms that the allegedly improper assignments have “caused the
value of the Home to significantly decrease and has, in effect, caused the Plaintiff to lose
either all or a substantial part of the equity they [sic] would have created in their [sic]
Home after making payments.” We fail to see how assignments conducted in private
could possibly affect the value of plaintiff’s home. And to the extent the assignments
were recorded and thus public, assignments of notes and deeds of trust are commonplace
occurrences. Without some explanation of how these particular assignments impacted
plaintiff’s home value in a unique and detrimental way, plaintiff’s conclusory allegation
is insufficient to allege prejudice. Beyond that, we note that plaintiff has not even alleged
what payments he made or did not make, nor what actions defendants have or have not
taken to threaten foreclosure, rendering it nearly impossible to assess prejudice. And
finally, plaintiff has not articulated how he could amend his complaint to allege
prejudice. Indeed, in response to the court’s ruling below, plaintiff simply submitted on
the tentative without any attempt to articulate facts he might allege that would survive a
demurrer. Accordingly, the court properly sustained defendants’ demurrers without leave
5
to amend.
5
Because we conclude the demurrers were properly sustained based on the
allegations in the complaint, we need not reach plaintiff’s contention that the court
10
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal.
IKOLA, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
MOORE, J.
impermissibly relied on the truth of the content of judicially noticed documents.
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