Recently, many California Courts have been dismissing lawsuits filed to stop non-judicial foreclosures, ruling that the non-judicial foreclosure statutes occupy the field and are exclusive as long as they are complied with. Thus, in the case where a notice of default is recorded and a lawsuit then filed in response to stop the foreclosure since the foreclosing party does not possess the underlying note, all too often the Court will simply dismiss the case and claim “2924 has no requirement to produce the note.”
Thus, these Courts view the statutes that regulate non-judicial foreclosures as all inclusive of all the requirements and remedies in foreclosure proceedings. Indeed, California Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. This comprehensive statutory scheme has three purposes: ‘“(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.” [Citations.]’ [Citation.]” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249–1250 [26 Cal. Rptr. 3d 413].)
Notwithstanding, the foreclosure statutes are not exclusive. If someone commits murder during an auction taking place under Civil Code 2924, that does not automatically mean they are immune from criminal and civil liability. Perhaps this is where some of these courts are “missing the boat.”
For example, in Alliance Mortgage Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1231 [44 Cal. Rptr. 2d 352, 900 P.2d 601], the California Supreme Court concluded that a lender who obtained the property with a full credit bid at a foreclosure sale was not precluded from suing a third party who had fraudulently induced it to make the loan. The court concluded that “ ‘the antideficiency laws were not intended to immunize wrongdoers from the consequences of their fraudulent acts’ ” and that, if the court applies a proper measure of damages, “ ‘fraud suits do not frustrate the antideficiency policies because there should be no double recovery for the beneficiary.’ ” (Id. at p. 1238.)
Likewise, in South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. [*1071] (1999) 72 Cal.App.4th 1111, 1121 [85 Cal. Rptr. 2d 647], the court held that a junior lienor retains the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure sale. (See also Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at pp. 1257–1258; Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1095 [106 Cal. Rptr. 2d 443] [a trustee’s sale tainted by fraud may be set aside].)
In looking past the comprehensive statutory framework, these other Courts also considered the policies advanced by the statutory scheme, and whether those policies would be frustrated by other laws. Recently, in the case of California Golf, L.L.C. v. Cooper, 163 Cal. App. 4th 1053, 78 Cal. Rptr. 3d 153, 2008 Cal. App. LEXIS 850 (Cal. App. 2d Dist. 2008), the Appellate Court held that the remedies of 2924h were not exclusive. Of greater importance is that the Appellate Court reversed the lower court and specifically held that provisions in UCC Article 3 were allowed in the foreclosure context:
Considering the policy interests advanced by the statutory scheme governing nonjudicial foreclosure sales, and the policy interests advanced by Commercial Code section 3312, it is clear that allowing a remedy under the latter does not undermine the former. Indeed, the two remedies are complementary and advance the same goals. The first two goals of the nonjudicial foreclosure statutes: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor and (2) to protect the debtor/trustor from a wrongful loss of the property, are not impacted by the decision that we reach. This case most certainly, however, involves the third policy interest: to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.
This is very significant since it provides further support to lawsuits brought against foreclosing parties lacking the ability toenforce the underlying note, since those laws also arise under Article 3. Under California Commercial Code 3301, a note may only be enforced if one has actual possession of the note as a holder, or has possession of the note not as a non-holder but with holder rights.
Just like in California Golf, enforcing 3301 operates to protect the debtor/trustor from a wrongful loss of the property. To the extent that a foreclosing party might argue that such lawsuits disrupt a quick, inexpensive, and efficient remedy against a defaulting debtor/trustor, the response is that “since there is no enforceable obligation, the foreclosing entity is not a party/creditor/beneficiary entitled to a quick, inexpensive, and efficient remedy,” but simply a declarant that recorded false documents.
This is primarily because being entitled to foreclose non-judicially under 2924 can only take place “after a breach of the obligation for which that mortgage or transfer is a security.” Thus, 2924 by its own terms, looks outside of the statute to the actual obligation to see if there was a breach, and if the note is unenforceable under Article 3, there can simply be no breach. End of story.
Accordingly, if there is no possession of the note or possession was not obtained until after the notice of sale was recorded, it is impossible to trigger 2924, and simple compliance with the notice requirements in 2924 does not suddenly bless the felony of grand theft of the unknown foreclosing entity. To hold otherwise would create absurd results since it would allow any person or company the right to take another persons’ home by simply recording a false notice of default and notice of sale.
Indeed, such absurdity would allow you to foreclose on your own home again to get it back should you simply record the same false documents. Thus it is obvious that these courts improperly assume the allegations contained in the notice of default and notice of sale are truthful. Perhaps these courts simply cannot or choose not to believe such frauds are taking place due to the magnitude and volume of foreclosures in this Country at this time. One can only image the chaos that would ensue in America if the truth is known that millions of foreclosures took place unlawfully and millions more are now on hold as a result of not having the ability to enforce the underlying obligation pursuant to Article 3.
So if you are in litigation to stop a foreclosure, you can probably expect the Court will want to immediately dismiss your case. These Courts just cannot understand how the law would allow someone to stay in a home without paying. Notwithstanding, laws cannot be broken, and Courts are not allowed to join with the foreclosing parties in breaking laws simply because “not paying doesn’t seem right.”
Accordingly, at least for appeal purposes, be sure to argue that 2924 was never triggered since there was never any “breach of the obligation” and that Appellate Courts throughout California have routinely held that other laws do in fact apply in the non-judicial foreclosure process since the policies advanced by the statutory non-judicial foreclosure scheme are not frustrated by these other laws. The recent exposure and discovery of Robosigners and notary fraud has added another dimension to the “exclusive 2924 argument as seen in the 22/20 special aired April 3, 2011.
Scott Pelley reports how problems with mortgage documents are prompting lawsuits and could slow down the weak housing market
- Play CBS Video Video The next housing shockAs more and more Americans face mortgage foreclosure, banks’ crucial ownership documents for the properties are often unclear and are sometimes even bogus, a condition that’s causing lawsuits and hampering an already weak housing market. Scott Pelley reports.
- Video Extra: Eviction reprieveFlorida residents AJ and Brenda Boyd spent more than a year trying to renegotiate their mortgage and save their home. At the last moment, questions about who owns their mortgage saved them from eviction.
- Video Extra: “Save the Dream” eventsBruce Marks, founder and CEO of the nonprofit Neighborhood Assistance Corporation of America talks to Scott Pelley about his “Save the Dream” events and how foreclosures are causing a crisis in America.
(CBS News)If there was a question about whether we’re headed for a second housing shock, that was settled last week with news that home prices have fallen a sixth consecutive month. Values are nearly back to levels of the Great Recession. One thing weighing on the economy is the huge number of foreclosed houses.Many are stuck on the market for a reason you wouldn’t expect: banks can’t find the ownership documents.Who really owns your mortgage?
Scott Pelley explains a bizarre aftershock of the U.S. financial collapse: An epidemic of forged and missing mortgage documents.
It’s bizarre but, it turns out, Wall Street cut corners when it created those mortgage-backed investments that triggered the financial collapse. Now that banks want to evict people, they’re unwinding these exotic investments to find, that often, the legal documents behind the mortgages aren’t there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people – down on their luck – out of their homes.In the 1930s we had breadlines; venture out before dawn in America today and you’ll find mortgage lines. This past January in Los Angeles, 37,000 homeowners facing foreclosure showed up to an event to beg their bank for lower payments on their mortgage. Some people even slept on the sidewalk to get in line.So many in the country are desperate now that they have to meet in convention centers coast to coast.In February in Miami, 12,000 people showed up to a similar event. The line went down the block and doubled back twice.
Video: The next housing shock
Extra: Eviction reprieve
Extra: “Save the Dream” events
Dale DeFreitas lost her job and now fears her home is next. “It’s very emotional because I just think about it. I don’t wanna lose my home. I really don’t,” she told “60 Minutes” correspondent Scott Pelley.
“It’s your American dream,” he remarked.
“It was. And still is,” she replied.
These convention center events are put on by the non-profit Neighborhood Assistance Corporation of America, which helps people figure what they can afford, and then walks them across the hall to bank representatives to ask for lower payments. More than half will get their mortgages adjusted, but the rest discover that they just can’t keep their home.
For many that’s when the real surprise comes in: these same banks have fouled up all of their own paperwork to a historic degree.
“In my mind this is an absolute, intentional fraud,” Lynn Szymoniak, who is fighting foreclosure, told Pelley.
While trying to save her house, she discovered something we did not know: back when Wall Street was using algorithms and computers to engineer those disastrous mortgage-backed securities, it appears they didn’t want old fashioned paperwork slowing down the profits.
“This was back when it was a white hot fevered pitch to move as many of these as possible,” Pelley remarked.
“Exactly. When you could make a whole lotta money through securitization. And every other aspect of it could be done electronically, you know, key strokes. This was the only piece where somebody was supposed to actually go get documents, transfer the documents from one entity to the other. And it looks very much like they just eliminated that stuff all together,” Szymoniak said.
Szymoniak’s mortgage had been bundled with thousands of others into one of those Wall Street securities traded from investor to investor. When the bank took her to court, it first said it had lost her documents, including the critical assignment of mortgage which transfers ownership. But then, there was a courthouse surprise.
“They found all of your paperwork more than a year after they initially said that they had lost it?” Pelley asked.
“Yes,” she replied.
Asked if that seemed suspicious to her, Szymoniak said, “Yes, absolutely. What do you imagine? It fell behind the file cabinet? Where was all of this? ‘We had it, we own it, we lost it.’ And then more recently, everyone is coming in saying, ‘Hey we found it. Isn’t that wonderful?'”
But what the bank may not have known is that Szymoniak is a lawyer and fraud investigator with a specialty in forged documents. She has trained FBI agents.
She told Pelley she asked for copies of those documents.
Asked what she found, Szymoniak told Pelley, “When I looked at the assignment of my mortgage, and this is the assignment: it looked that even the date they put in, which was 10/17/08, was several months after they sued me for foreclosure. So, what they were saying to the court was, ‘We sued her in July of 2008 and we acquired this mortgage in October of 2008.’ It made absolutely no sense.”
Produced by Robert Anderson and Daniel Ruetenik
Now for the pleading
Timothy L. McCandless, Esq. SBN 147715
LAW OFFICES OF TIMOTHY L. MCCANDLESS
1881 Business Center Drive, Ste. 9A
San Bernardino, CA 92392
Attorney for Plaintiffs
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF ____________
And ROES 1 through 5,000,
SAND CANYON CORPORATION f/k/a OPTION ONE MORTGAGE CORPORATION; AMERICAN HOME MORTGAGE SERVICES, INC.; WELLS FARGO BANK, N.A., as Trustee for SOUNDVIEW HOME LOAN TRUST 2007-OPT2; DOCX, LLC; and PREMIER TRUST DEED SERVICES and all persons unknown claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to Plaintiff’s title, or any cloud on Plaintiff’s title thereto, Does 1 through 10, Inclusive,
FIRST AMENDED COMPLAINT
FOR QUIET TITLE, DECLARATORY RELIEF, TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNTION AND PERMANENT INJUNCTION, CANCELATION OF INSTRUMENT AND FOR DAMAGES ARISING FROM:
SLANDER OF TITLE; TORTUOUS
VIOLATION OF STATUTE [Penal
Code § 470(b) – (d); NOTARY FRAUD;
Plaintiffs ___________________________ allege herein as follows:
1. Plaintiffs ___________ (hereinafter individually and collectively referred to as “___________”), were and at all times herein mentioned are, residents of the County of _________, State of California and the lawful owner of a parcel of real property commonly known as: _________________, California _______ and the legal description is:
Parcel No. 1:
A.P.N. No. _________ (hereinafter “Subject Property”).
2. At all times herein mentioned, SAND CANYON CORPORATION f/k/a OPTION ONE MORTGAGE CORPORATION (hereinafter SAND CANYON”), is and was, a corporation existing by virtue of the laws of the State of California and claims an interest adverse to the right, title and interests of Plaintiff in the Subject Property.
3. At all times herein mentioned, Defendant AMERICAN HOME MORTGAGE SERVICES, INC. (hereinafter “AMERICAN”), is and was, a corporation existing by virtue of the laws of the State of Delaware, and at all times herein mentioned was conducting ongoing business in the State of California.
4. At all times herein mentioned, Defendant WELLS FARGO BANK, N.A., as Trustee for SOUNDVIEW HOME LOAN TRUST 2007-OPT2 (hereinafter referred to as “WELLS FARGO”), is and was, a member of the National Banking Association and makes an adverse claim to the Plaintiff MADRIDS’ right, title and interest in the Subject Property.
5. At all times herein mentioned, Defendant DOCX, L.L.C. (hereinafter “DOCX”), is and was, a limited liability company existing by virtue of the laws of the State of Georgia, and a subsidiary of Lender Processing Services, Inc., a Delaware corporation.
6. At all times herein mentioned, __________________, was a company existing by virtue of its relationship as a subsidiary of __________________.
7. Plaintiffs are ignorant of the true names and capacities of Defendants sued herein as DOES I through 10, inclusive, and therefore sues these Defendants by such fictitious names and all persons unknown claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to Plaintiffs’ title, or any cloud on Plaintiffs’ title thereto. Plaintiffs will amend this complaint as required to allege said Doe Defendants’ true names and capacities when such have been fully ascertained. Plaintiffs further allege that Plaintiffs designated as ROES 1 through 5,000, are Plaintiffs who share a commonality with the same Defendants, and as the Plaintiffs listed herein.
8. Plaintiffs are informed and believe and thereon allege that at all times herein mentioned, Defendants, and each of them, were the agent and employee of each of the remaining Defendants.
9. Plaintiffs allege that each and every defendants, and each of them, allege herein ratified the conduct of each and every other Defendant.
10. Plaintiffs allege that at all times said Defendants, and each of them, were acting within the purpose and scope of such agency and employment.
11. Plaintiffs are informed and believe and thereupon allege that circa July 2004, DOCX was formed with the specific intent of manufacturing fraudulent documents in order create the false impression that various entities obtained valid, recordable interests in real
properties, when in fact they actually maintained no lawful interest in said properties.
12. Plaintiffs are informed and believe and thereupon allege that as a regular and ongoing part of the business of Defendant DOCX was to have persons sitting around a table signing names as quickly as possible, so that each person executing documents would sign approximately 2,500 documents per day. Although the persons signing the documents claimed to be a vice president of a particular bank of that document, in fact, the party signing the name was not the person named on the document, as such the signature was a forgery, that the name of the person claiming to be a vice president of a particular financial institution was not a “vice president”, did not have any prior training in finance, never worked for the company they allegedly purported to be a vice president of, and were alleged to be a vice president simultaneously with as many as twenty different banks and/or lending institutions.
13. Plaintiffs are informed and believe and thereupon allege that the actual signatories of the instruments set forth in Paragraph 12 herein, were intended to and were fraudulently notarized by a variety of notaries in the offices of DOCX in Alpharetta, GA.
14. Plaintiffs are informed and believe and thereupon allege that for all purposes the intent of Defendant DOCX was to intentionally create fraudulent documents, with forged signatures, so that said documents could be recorded in the Offices of County Recorders through the United States of America, knowing that such documents would forgeries, contained false information, and that the recordation of such documents would affect an interest in real property in violation of law.
15. Plaintiffs allege that on or about, ____________, that they conveyed a first deed of trust (hereinafter “DEED”) in favor of Option One Mortgage, Inc. with an interest of
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