Month: February 2016
Yvanova will now apply to hundreds of demurrs sustained without leave to amend
This is an unofficial transcript derived from video/audio recordings
Court of Appeal, Third District, California.
Tim Boyle et al., Plaintiff and Appellant,
Bank of America N.A. et al., Defendant and Respondent.
July 22, 2015.
Danny A. Barak, United Law Center, Roseville, CA, for petitioner.
Michael Ellis Gerst, Reed Smith LLP, Los Angeles, CA, for respondent.
Vance W. Raye, Presiding Justice; Elena J. Duarte, Ronald B. Robie, Associate Justices.
ORAL ARGUMENT OF DANNY A. BARAK ON BEHALF OF THE PETITIONER
ORAL ARGUMENT OF MICHAEL ELLIS GERST ON BEHALF OF THE RESPONDENT
REBUTTAL ARGUMENT OF DANNY A. BARAK ON BEHALF OF THE PETITIONER
ORAL ARGUMENT OF DANNY A. BARAK ON BEHALF OF THE PETITIONER
MR. BARAK: Good morning, your Honors.
May it please the Court.
My name is Danny Barak, I represent the appellants, Timothy and Darlene Boyle in this action against Bank of America and Mortgage Electronic Registration Systems.
Your Honors, yesterday we informed the Court that we would be referring to the case of Kan v. Guild Mortgage and we’ve filed a letter. And it is of particular importance in this instance — when of this case was filed, there was a preforeclosure action, there had been no foreclosure.
After the notice, appeal was filed. Bank of America transferred its interests to the Nationstar’s purported interest — to Nationstar, another servicing entity. And in March — I believe on March 28 of this year, Nationstar, while this appeal was pending, foreclosed on the subject property.
So we’re looking at a postforeclosure case, although this second amended complaint doesn’t state it. Defendants [inaudible] have created that situation. The reason why we asked the Court to look at Kan v. Guild Mortgage is because that case, the Second District Court of Appeal in that case specifically distinguished between preforeclosure actions and postforeclosure actions when deciding in the light of Glaski v. Bank of America.
JUSTICE: Can I interrupt for just a moment. You — you made us aware of some developments since the notice of appeal was filed in this case. Is that part of the record? Has — have you made a request for judicial notice or in some way make those facts cognizable by us?
MR. BARAK: No, your Honor. Even — even if the — the transfer to the Nationstar — well, the transfer to the Nationstar would have contained no judicially noticeable documents. And it was actually done while the — the opening brief was being drafted.
We recognized in the reply brief that under this Court’s now technically depublished decision in Mendoza as the Supreme Court is reviewing it, this Court probably would not look favorably to any arguments with respect to Glaski.
With respect to the foreclosure that occurred, that occurred after this case was fully briefed. There was no information that could have been given to the court.
JUSTICE: Okay, you can proceed.
MR. BARAK: Thank you, your Honor.
Now, we understand that — that it’s — it’s a touchy subject with respect to new developments while the case is on appeal.
JUSTICE: Well, yeah, but — I — Mr. Barak, Mr. — the Reed Smith people gave us this case and I read it before argument. And it simply says that you can’t use a quiet title to challenge the validity of deeds using a preforeclosure cause of action and they don’t get to talking about Glaski.
And I don’t see how this helps you at all. They — they just didn’t feel I had to doubt — discuss Glaski. But I — I don’t — in other words, the Court — the Court said that the — the deed of trust allows for its assignment and nobody doubts that this is not [inaudible]. And — and that’s it. And so I don’t know how that gonna help your client.
MR. BARAK: Yes, your Honor. Well, I’m happy to — to further elaborate on why Kan we believe is helpful to appellants here. Kan at page 743 states, we disagree with Kan that following Glaski is appropriate here. Critically, the primary claim at issue in Glaski was one for —
JUSTICE DUARTE: Let me — let me just tell you, its headnote 3 — headnote 3 — on what page you said, sir?
MR. BARAK: It would have been 743.
JUSTICE DUARTE: But you’re reading from headnote 3, right?
MR. BARAK: 3, 4, 5, 6, yes, your Honor.
JUSTICE DUARTE: But when you first start to disagree with Kan, that appears at headnote 3.
MR. BARAK: Kan as the — I was referring to the them as the appellant, not as the case Kan.
JUSTICE DUARTE: No — no — no, I understand, you were reading.
MR. BARAK: Yes.
JUSTICE DUARTE: But just to make sure Justice Robie knows where we’re at, are you at headnote 3 —
MR. BARAK: Yes.
JUSTICE DUARTE: — which is where you disagree with Kan, that calling Glaski is appropriate here.
MR. BARAK: Yes, your Honor.
JUSTICE DUARTE: Okay, go ahead.
MR. BARAK: Critically, the primary claim issue —
JUSTICE DUARTE: I didn’t mean you have to read it if you — I’m just meant, go ahead if —
MR. BARAK: I do — I do wanna read it.
Thank you, your Honor.
JUSTICE DUARTE: We don’t have it raised here.
MR. BARAK: Yes, your Honor.
The purpose of reading it is to elucidate to Justice Robie exactly why we think that it matters.
JUSTICE DUARTE: I see.
MR. BARAK: Critically, the primary claim at issue in Glaski was one for wrongful foreclosure. In contrast, Kan seeks to assert a preforeclosure cause of action for quite title.
More importantly — excuse me — although Glaski discussed Gomes and distinguished it in certain respects, Glaski did not take issue with Gomes’s holding that a preforeclosure preemptive action is not authorized but the nonjudicial foreclosure statutes because it creates an additional requirement that a foreclosing entity first demonstrate in court that is entitled to foreclose.
Moreover, the court states, while we acknowledged the extent of this criticism — this is at towards the entity opinion, the criticism of the Glaski — we see no reason to wade into the issue of whether Glaski was correctly decided because the opinion has no direct applicability to this preforeclosure action.
The idea being that the progeny of this area of law prior to Glaski discussed why you cannot bring a preforeclosure action to challenge the ownership of — of — of a loan because that would have — that action would insert itself — insert to courts —
JUSTICE: No, but the — I just — the thing that’s troubling me, Mr. Barak, is not whether it’s a preforeclosure or a postforeclosure but basically it’s whether you can challenge MERS at all. In other words, whether you can — and I — and, you know, we have the — the — the Second District Division Six, Justice Yegan’s point that, you know — which you can’t do that.
And I think, that’s the whole point, that you — that’s the mountain that you have to climb. That you’ve created this — a whole bunch of lawyers have created this theory that MERS illegally has assigned things. When one — when somebody issue — issues a promissory note and — and promises to pay they expect it to be assigned and they have no particular interest. And that’s what the Second District — the Sixth Division case says.
It seems to me that’s the law that you — that we have to deal with, not — not whether it’s pre or postforeclosure.
MR. BARAK: It does not, your Honor, because as we looked to the — to the evolution of these cases in Fontenot, in Jenkins and in Gomes, all of those courts said the reason why that conclusion occurs, what — what your Honor just mentioned, is because you don’t have standing to insert the courts into a preforeclosure action to stop a foreclosure.
However, once the foreclosure is done, there is no risk that the courts will be inserting any sort of a new procedure into the comprehensive framework of 2924.
JUSTICE: I understand — I understand that issue. I understand that issue but the whole point is, Glaski is an anomaly. Glaski was based [inaudible] and some courts follow it but most of them didn’t.
And — and if you — Glaski is the one that says you can — you can challenge MERS — I mean, not — not worrying about pre or post but just — the fact is, that a borrower can complaim about who got the assignment.
You guys are basing all of your theory here on the fact that the person who got the assignment was the wrong one. And — and — and I — I think the Second District case really makes it clear that that doesn’t bind.
MR. BARAK: Are we — is your Honor —
JUSTICE: And why it doesn’t?
MR. BARAK: I’m sorry, does your Honor mean the Second District in Kan?
JUSTICE: Yeah — no, the Second District Division Six, the Justice Yegan’s case.
MR. BARAK: I’m — I’m sorry, which case are we discussing?
JUSTICE: Well, it’s the one that Reed Smith provided for us and which we’re familiar with.
MR. BARAK: I wasn’t aware of any other —
JUSTICE: Isn’t that Boyce?
MR. BARAK: The new case in Boyce, respectfully, your Honor, Boyce says absolutely nothing new. Boyce simply regurgitates what all the other courts have said. The point is, is that none of those —
JUSTICE: Wait a second, what it says is, you can’t challenge MERS as being the wrong entity to foreclose.
MR. BARAK: Your Honor, I would answer the question in a different way. And I know this is —
JUSTICE: [inaudible], isn’t that what it says.
MR. BARAK: I — I — I understand what Boyce says, your Honor. We won’t put the — we won’t put the —
JUSTICE: If you don’t — if you don’t agree with us — you don’t have to agree with us.
MR. BARAK: Definitely don’t agree with it, your Honor.
JUSTICE: Okay, well I think it’s [inaudible]. If you don’t agree with Boyce then that’s fine. But because that’s what it says, it says you can’t challenge MERS, right?
MR. BARAK: Yes, your Honor, the question —
JUSTICE: And you’re challenging MERS here, basically.
MR. BARAK: That’s part of what we’re doing, your Honor. The question —
JUSTICE: No, wait a minute. You are challenging MERS.
MR. BARAK: Yes, your Honor.
JUSTICE: You are.
MR. BARAK: Yes.
MR. BARAK: The question that we would put here is, why if everything we’re saying is true? Let’s — let’s — let’s get rid of standing, let’s forget about the case law that exist, I know that’s difficult to ask in the District Court of Appeal.
But let’s ask, what if this is true? What if the — what if the people who were behind the foreclosure as we know it exist now — what if the people behind the foreclosure literally had no interest in the loan as was alleged in the complaint?
Is the state of the law that no one can ever challenge that position? And that’s essentially what appellants argue in the reply brief, is that if it’s true that MERS transferred the interest of the loan to the Deutsche [inaudible] Trust back when the Deutsche [inaudible] Trust was formed I believe in 2007. And that was determined, that was the end of the beneficiary line of the loan, then how could MERS have any interest in transferring it to Bank of America four years later? It’s impossible.
Now, respondents try to argue that MERS can transfer to members of MERS, that they’ve provided no judicially noticeable evidence that, number 1, Bank of America is a MERS member but —
JUSTICE: I —
MR. BARAK: — more important, your Honors, that the trust is a member of MERS. And it is not trust — this securitized trust are not MERS members. They’re the terminus of what MERS was created to do which was transfer loans into securitized trust.
If the loan actually got to the securitized trust, that was the end of it. Any further interest transfers after that fact could not possibly occur. And that’s essentially the thesis of appellants’ opening brief and the reply brief.
And what we seek the amended complaint to state, that if the laws of trust — of securitized trust are governed under 26 U.S.C. 860(g) which states, that an interest in the loan has to occur within the 90 days after the federally required closing date of the trust. And that transfer occurred after that, then that’s what Glaski allows appellants — or plaintiffs to allege in their complaints. And —
JUSTICE: But if you don’t agree with Glaski, then that argument doesn’t work.
MR. BARAK: Understood, your Honor, we’re — and we would —
JUSTICE: And —
JUSTICE: That’s — that’s what I’m really wondering.
JUSTICE: A lot of courts disagree with Glaski. I think, your — that’s the battle you’re fighting. You did — you should very clearly state, we don’t agree with Glaski, if we — if Glaski is not the law — if Glaski is the law, we win, if it isn’t, we don’t. And — and that’s what the — that’s what Boyce said.
MR. BARAK: True.
JUSTICE: And — and regardless of whether evidence stated in your complaint is true, we can assume that you plead truthfully.
MR. BARAK: Yes, your Honor, and I —
JUSTICE: Maybe the evidence you said is true but that doesn’t change the law. That’s the point I was trying to ask you about.
MR. BARAK: Understood.
JUSTICE: I — I just — I mean, you’re perfectly — correct and proper as a lawyer to say you don’t agree with Glaski, you don’t agree with Boyce, you don’t agree anything that — you can say that to us.
MR. BARAK: Yes, your Honor.
And I — as — I wanna — I would like to reserve three minutes of my time.
JUSTICE: Is that — is that what you’re saying to us, as he summarized your argument for you?
MR. BARAK: Absolutely.
MR. BARAK: Although we never mentioned Boyce.
I just conclude so I can reserve some time here, that it would be prudent to — for this Court to allow the Supreme Court to decide this issue base on its upcoming decision in Yvanova.
And with that I’ll allow respondents — thank you.
JUSTICE: Okay, thank you.
Tort Liability for Bad Servicing and Improper Loan Modification Practices
Tort Liability for Bad Servicing and Improper Loan Modification Practices
While many California attorneys are focused on enforcing borrower’s rights under the Homeowner’s Bill of Rights (HBOR) or the Real Estate Settlement Procedures Act (RESPA) loss mitigation rules, state common law claims may be overlooked. When servicers act unreasonably in handling a loan modification review – either by imposing unreasonable delays, requesting documents repetitively or piecemeal with no good reason, or scheduling a foreclosure sale while a modification is under active review – this conduct may give rise to common law tort claims in addition to raising issues under HBOR and RESPA. Or, when one of the statutory requirements for a claim under HBOR or RESPA is not met, claims for negligence, fraud, or negligent misrepresentation may provide a helpful proxy to raise the issues and leverage a positive resolution for your client.
This article will provide an overview of the common law tort claims of negligence, fraud, negligent misrepresentation, intentional infliction of emotional distress, and unjust enrichment, and recent California case law on each of these causes of action in the context of foreclosures and mortgage servicing.
Negligence often seems like the most applicable common law claim for bad servicing and loss mitigation conduct. Most advocates are aware of the long-touted proposition that the lender-borrower relationship is an arms’ length relationship with no elevated duty of care (much less any fiduciary duty). Because of this widely accepted principal, it’s best not to make arguments based on the existence of a fiduciary duty (unless you have very special facts – which will be rare). But recently, more and more California courts have taken the position that a bank or lender may owe the borrower a duty not to act negligently in handling a loan mod application once it has undertaken to review the application. The premise is that once the bank agrees to review the application, it must review the application up to a reasonable standard of care.
Nymark v. Heart Federal Savings & Loan Association articulated the general rule that “a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” The Nymark court when on to state that negligence liability could arise where a lender “‘actively participates’ in the financed enterprise ‘beyond the domain of the usual money lender.’” Under the facts in Nymark, where the borrower complained of a lender using an inaccurate appraisal, the court found that the lender had obtained the appraisal for its own purposes to ensure adequate security for the debt, and had not used the appraisal to “induce plaintiff to enter into the loan transaction or to assure him that his collateral was sound.” Therefore, the lender had not gone beyond its traditional role as a mere lender of money. Although the lender had not gone exceeded its traditional role, the court still went on to evaluate whether a duty of care might exist based on the six factors identified in Biakanja v. Irving, 49 Cal.2d 647, 650 (1958). These factors will be discussed below.
Of course, lenders have tried to use Nymark’s “general rule” language to imply an across-the-board ban on negligence claims arising out of mortgage lending or servicing. But California courts have squarely rejected such arguments. Instead, a proper reading of Nymark shows that it allows for the existence of a duty of care, and hence a negligence claim based on the breach of that duty, in either of two scenarios: (1) the lender’s activities went beyond the traditional role of a mere lender of money, such as by exerting undue pressure on a borrower to enter into a loan or being actively involved in the financial enterprise at issue or (2) even where the lender’s activities are “confined to their traditional scope,” a duty may exist depending on a case-by-case analysis of the six factors identified in Biankanja v. Irving.
The six factors courts must analyze in determining whether a lender or servicer owes the borrower a duty of care are as follows:
(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant’s conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing future harm.
Courts that rule against the borrower on a negligence claim tend to emphasize their conclusion that a loan modification, “which at its core is an attempt by a money lender to salvage a troubled loan, is nothing more than a renegotiation in terms,” is a traditional money lending activity. The court in Ansanelli disagreed, concluding that the “defendant went beyond its role as a silent lender and loan servicer to offer an opportunity to plaintiffs for loan modification and to engage with them concerning the trial period plan,” and that this was “beyond the domain of a usual money lender.” Still, it is better not to get bogged down with this issue, and instead to focus on the six factors – which, as explained above, the court should apply even when it concludes that the lender was exercising a core money lending function.
A number of courts applying these six factors to wrongful conduct in the review of a loan modification application have found them to weigh solidly in favor of the existence of a duty of care. For example, In Garcia v. Ocwen Loan Servicing, LLC, Ocwen had received documents from the homeowner in support of his loan modification application but routed them to the wrong department, provided a phone number that went automatically to a recorded message rather than allowing the homeowner to speak with any of its employees, and sold the home at a trustee’s sale while the modification was still under review and without notice to the homeowner. The court found that at least five out of the six Nymark factors weighed in favor of finding a duty of care. The transaction was “unquestionably intended to affect [the] Plaintiff,” as it “would determine whether or not he could keep his home.” The potential harm to the plaintiff – loss of an opportunity to save his home – was readily foreseeable. In this regard, the court observed, “Although there was no guarantee that the modification would be granted had the loan been properly processed, the mishandling of the documents deprived Plaintiff of the possibility of obtaining the requested relief.” The injury to the Plaintiff was certain, in that he lost the opportunity to obtain a loan modification and in the process, his home was sold. The court found a close connection between the defendant’s conduct and the injury actually suffered, reasoning that, “to the extent Plaintiff otherwise qualified and would have been granted a modification, Defendant’s conduct in misdirecting the papers submitted by Plaintiff directly precluded the loan modification application from being timely processed.” The court noted that recent actions by the state of California and the federal government (through creating the HAMP program) demonstrated a public policy of preventing future harm to homeowners. The court declined to decide at this stage of the proceedings whether moral blame attached to the defendant’s conduct, but found that five out of six factors in favor of a duty of care was sufficient to easily tip the scales.
Other courts have analyzed the Biakanja factors and found servicers to owe a duty of care in the loan modification process. In Alvarez v. BAC Home Loans Servicing, LP, the complaint alleged that BAC Home Loans had failed to review the plaintiffs’ loan mod application in a timely manner, foreclosed while a loan modification review was still in process, and mishandled plaintiffs’ applications by relying on incorrect information, such as the wrong figure for monthly income and a false allegation that the second lien holder prevented modification of the loan. In examining the question of whether the defendants’ conduct was blameworthy (the fifth factor), the court found it “highly relevant” that the borrower’s ability to protect his interests in the loan modification process is “practically nil” and the bank “holds all the cards.” Citing a strong brief from consumer advocates that described the flaws in the modern mortgage servicing system, the court concluded, “The borrower’s lack of bargaining power coupled with conflicts of interest that exist in the modern loan servicing industry provide a moral imperative that those with the controlling hand be required to exercise reasonable care in their dealings with borrowers seeking a loan modification.”
However, plenty of California trial courts have arrived at the opposite conclusion, finding no duty of care in the loan mod process. These courts often seem to get hung up on the fourth factor, the close connection between the servicer’s conduct and the borrower’s injury. As the Lueras court argued, “If the modification was necessary due to the borrower’s inability to repay the loan, the borrower’s harm, suffered from denial of a loan modification, would not be closely connected to the lender’s conduct.” The court further argued regarding the fifth factor that “[i]f the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lender’s conduct.” These arguments fundamentally misunderstand the nature and purpose of loss mitigation. Even when a homeowner is in default on the loan because of financial hardship unrelated to the lender’s conduct, the lender’s failure to properly review a loan mod application may be closely connected to the harm of loss of the home if the lender’s failure to review the application properly directly resulted in foreclosure. In heading off these kinds of arguments, it is helpful to plead (whenever possible) that the borrower was in fact qualified for a loan modification under controlling rules, and that but for the lender’s mishandling of the application, the loan mod would have been approved and foreclosure avoided. However, the Alvarez and Garcia courts went even further than this, recognizing that even where there was no guarantee a loan modification would have been approved if processed correctly, the servicer’s conduct “deprived Plaintiff of the possibility of obtaining the requested relief.” Still, in analyzing the close connection factor, the Garcia court also noted that “to the extent Plaintiff otherwise qualified and would have been granted a modification,” the defendant’s conduct had directly prevented the mod from being approved. Therefore, it never hurts to plead eligibility for the modification the plaintiff was seeking.
Although there has been a split of authority from the California Court of Appeals regarding the existence of a duty of care in the handling of loan mod applications, the tide is beginning to turn in favor of homeowners. As one court recently noted, the negative ruling from the Court of Appeals in Lueras v. BAC Home Loans Servicing (2013) relied heavily on the appellate decision in Aspiras v. Wells Fargo Bank, N.A., 219 Cal. App. 4th 948 (2013), which the California Supereme Court recently decertified for publication. The more recent decision in Alvarez, entered August 7, 2014, represents the most “relevant, recent, and well-reasoned decision on the question.”
The cases where borrowers have been successful on a negligence theory have generally not been based on a theory that the lender was required to approve a loan modification, but rather that the lender had a duty not to mishandle the application. Courts have generally agreed that there is no common law duty to provide a loan modification.
Some of the bad trial court decisions seem to stem from insufficient factual allegations – complaints that rest on generic or conclusory statements of lender failing to “properly service the loan” or to handle the loan “in such a way to prevent foreclosure,” rather than clearly pleading the specific conduct that deprived the plaintiff of the opportunity to be approved for a loan modification for which she was qualified. Other decisions seem to reflect good pleading and simply bad reasoning by the court.
In order to increase the odds of a positive ruling on a negligence claim related to poor servicing, it is important to plead specific facts showing that the lender’s conduct was directly related to the failure to approve your client for a loan modification, that your client in fact qualified for a loan modification under the applicable rules (HAMP, Fannie Mae, Freddie Mac, FHA, etc), and that but for the servicer’s wrongful conduct, your client would have been approved for a modification and would have avoided foreclosure.
It may be worth pleading, in addition or in the alternative, negligence based on the lender’s breach of a duty that comes from RESPA. Such duties would include the duty to exercise reasonable diligence to obtain a complete application, the duty to review a complete application within thirty days, or the duty not to initiate foreclosure when a complete application has been received and is still under review.
Even the Lueras court, which fiercely rejected a homeowner’s negligence claim, recognized that lenders do owe borrowers a duty to “not make material misrepresentations about the status of an application for a loan modification or about the date, time or status of a foreclosure sale.” The court noted that it was completely foreseeable that a borrower might be harmed by “an inaccurate or untimely communication about a foreclosure sale or about the status of a loan modification” and the connection between such a misrepresentation and the harm suffered would be “very close.” The Lueras court explicitly acknowledged the viability of a claim for negligent misrepresentation based on facts such as these. We now turn our attention to these kinds of claims, those based on negligent or fraudulent misrepresentations of fact.
Fraud and Negligent Misrepresentation
Claims for fraud or negligent misrepresentation hinge on a material misrepresentation of fact that causes harm to the plaintiff. In the loss mitigation context, this could include a misrepresentation that a foreclosure sale has been canceled, that a loan modification application has been deemed complete and is under active review, or that a borrower is qualified for a loan modification and should refrain from taking other steps to cure the default and avoid foreclosure. It makes sense to discuss these two claims together, since the key difference between them is the defendant’s knowledge of falsity and intent to deceive the plaintiff as additional required elements for a fraud claim. It may be a good idea to plead negligent misrepresentation in the alternative whenever raising a fraud claim. After all, even when there is circumstantial evidence of a lender’s bad intent, proving intent can be difficult.
Under California law, the elements of a claim for negligent misrepresentation are:
(1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce the plaintiff’s reliance, (4) ignorance of the truth and justifiable reliance by the plaintiff, and (5) damages.
The elements of a claim for fraud are:
(1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably and reasonably relied on the representation; and (5) the plaintiff suffered resulting damages.
One key detail regarding these claims is that the misrepresentation generally cannot concern a promise to do something in the future; the defendant must have misrepresented a past or existing material fact. At least one court has held that a servicer’s misrepresentations that it would “continue working for a loan modification that would be approved, which would allow Plaintiff to keep and save his home” and other promises related to the terms of the modification which would be approved in the future could not support a claim for negligent misrepresentation.
However, another court reversed a grant of summary judgment to the lender on fraud and negligent misrepresentation claims based on a servicer’s representations that the borrower “should not make the April 2008 loan payment because ‘the worst thing that’s going to happen is you are going to have a late fee, we will get this done for you’; and [ ] her loan modification request likely would be approved because she was prequalified.” These statements seem awfully close to promises regarding future performance, but the court found them sufficient, focusing primarily on the statement that plaintiff should not make the April 2008 payment. This caused her to fall behind on the loan and incur late fees, and she testified that she could have caught up the missed payments prior to the foreclosure date – just not these additional fees.
The complaint also must provide factual support for the assertion that statements at issue were misrepresentations of fact, rather than merely concluding that the representations were false.
Another difficult element of these claims is showing that the plaintiff justifiably relied on the misrepresentations. Justifiable reliance may be refuted if the lender can point to evidence that should have aroused suspicion or disbelief in the plaintiff regarding the accuracy of the misrepresentations. For example, one court found a lack of justifiable reliance on statements that her loan was “in underwriting” and “under review” and thus a foreclosure would not proceed where the complaint also contained allegations that the application had been denied prior to foreclosure, the file was closed, and the plaintiff had “actual knowledge” of the scheduled foreclosure sale. The court found that these alleged facts rendered it unjustifiable for plaintiff to forego taking the actions “she deemed necessary to avoid the foreclosure sale” because the plaintiff “was on notice of problems to frustrate the notion of her justifiable reliance.” 
Finally, another challenge to these types of claims is the heightened pleading standard of Federal Rule of Civil Procedure 9(b). Recall that these claims must be pled with particularity, not just plausibility. One example of this is that in a fraud claim against a corporation, a plaintiff must “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.”
Intentional (or Negligent) Infliction of Emotional Distress
A claim for intentional infliction of emotional distress (IIED) can be difficult to plead, as it requires some pretty extreme facts. The elements of the tort of intentional infliction of emotional distress are:
(1) [E]xtreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct. Conduct to be outrageous must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.
A number of California courts have held that the act of foreclosing on a home (absent other circumstances) is not the kind of extreme conduct that supports an intentional infliction of emotional distress claim. Without other aggravating circumstances showing outrageousness, an intentional infliction of emotional distress claim will fail. Denial of a loan modification alone is not likely sufficient.
However, the court in Ragland found that an intentional, unlawful foreclosure could be outrageous enough to sustain a claim for IIED. The court likened an unlawful foreclosure to the deliberate, unlawful eviction that supported a claim for IIED in Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th 1004, 1045 (2009). In the Spinks case, the court noted that even without threats, violence, or abusive language, a deliberate and intentional eviction without legal justification was outrageous. The Ragland court reasoned that whether the defendant had the right to foreclose was the issue at the heart of the case, and the plaintiff had created a triable issue of fact on that point. If the foreclosure was not justified, the court reasoned that the lender’s conduct was at least as bad as the conduct in Spinks and therefore exceeded the bounds of decency.
The court in Davenport v. Litton Loan Servicing also opened the door to the possibility of an IIED claim arising out of a bad faith foreclosure. The court explained, “Common sense dictates that home foreclosure is a terrible event and likely to be fraught with unique emotions and angst. Where a lending party in good faith asserts its right to foreclose according to contract, however, its conduct falls shy of ‘outrageous,’ however wrenching the effects on the borrower.” The court went on to consider whether the borrower had shown bad faith in the foreclosure process, so as to support a claim for IIED. The court determined that plaintiff had not pled sufficient facts linking the lender’s conduct to her emotional distress, but dismissed the claim with leave to amend in case further facts could be pled.
The second IIED element requires intentional or reckless conduct. Failing to plead any specific facts relating to defendants’ mental state may lead to dismissal of a claim for IIED.
California does recognize a claim for negligent infliction of emotional distress, but a plaintiff cannot recover emotional distress damages caused by injury to property unless there is intentional conduct or a preexisting relationship between the parties creating a special duty of care. In Ragland, the court dismissed plaintiff’s claim for negligent infliction of emotional distress because she had suffered only injury to her property and she could not prove a relationship with the lender giving rise to a duty of care.
California courts diverge on whether unjust enrichment can function as an independent claim for relief or “is instead an effect that must be tethered to a distinct legal theory to warrant relief.” Some courts have read a plaintiff’s “claim” for unjust enrichment as a claim for relief; other courts view it merely as an “effect” of some other wrongful conduct. The theory behind unjust enrichment is that based on equity and justice, a person who has been unjustly enriched at the expense of another should be required to make restitution. The general elements of an unjust enrichment claim are: (1) a benefit conferred on the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without making restitution. A claim for unjust enrichment, to the extent it is viable in California, might be premised on conduct by a servicer such as retaining funds from the borrower for force-placed insurance when it was not entitled to impose force-place insurance.
In sum, advocates should consider alleging claims for common law torts such as negligence, fraud, negligent misrepresentation, and intentional infliction of emotional distress whenever the facts of your case support such claims. These can be a helpful addition to the statutory claims your client may have under HBOR or RESPA, or a common law alternative when statutory claims are not available.
Summaries of Recent Cases
Published California Cases
Breach of Contract; Damages for Wrongful Foreclosure Claim Includes all Proximately Caused Damages; Pleading Standard for Fraud Claims
Miles v. Deutsche Bank Nat’l Tr. Co., __ Cal. App. 4th __, 2015 WL 1929732 (Apr. 29, 2015): A breach of contract claim requires a contract, plaintiff’s performance or excuse for failure to perform, breach by defendant, and resulting damage to plaintiff. Miles alleged that he contracted with Deutsche Bank to refinance his loan. He made payments under the agreement and alleged that the bank breached that contract by repudiating it and refusing to accept payments. And he alleged he was damaged by having to pay fees and by having been subjected to an eviction. Deutsche Bank advanced several technical arguments in defense of the lower court decision, including a claimed failure to attach or plead the verbatim contract terms, or to specify the form of the contract, that were rejected. The court reversed the trial court’s dismissal of plaintiff’s breach of contract claim.
The trial court granted summary judgment to Wells Fargo against Miles’s wrongful foreclosure claim on the sole basis that there were no damages to Miles as his home was underwater and therefore had no lost equity. Reviewing the existing wrongful foreclosure case law, the court noted that the cause of action was a tort, not contract – and as such, damages were not so limited. The court noted that a wrongful foreclosure may cause damages and listed moving expenses, lost rental income, damage to credit, and emotional distress as types of damages recoverable through a tort for wrongful foreclosure. The court reversed the grant of summary judgment on the claim of wrongful foreclosure.
Fraud claims demand specific pleading of: 1) a misrepresentation; 2) defendant’s knowledge that the misrepresentation is false; 3) defendant’s intent to induce borrower’s reliance; 4) the borrower’s justifiable reliance; and 5) damages. After falling behind on his mortgage payments, Miles applied for and was granted a loan modification with servicer HomEq. Miles continued to make payments under that agreement even as HomEq declared it would no longer honor it and sent him revised documentation inexplicably increasing his loan balance. HomEq eventually refused to accept Miles’s payments and, when Miles insisted on the terms of the agreement, the servicer declared him in default and recorded a notice of trustee’s sale of the property. The bank argued that Miles failed to plead fraud with sufficient specificity. Reversing the trial court decision against Miles, the court noted that any missing names and phone numbers were the sort of information more to be reasonably in the possession of defendants; “in an era of electronic signing, it is often unrealistic to expect plaintiffs to know the who-and-the-what authority when mortgage servicers themselves may not actually know the who-and-the-what authority.” The court reversed the dismissal of Miles’s claim for fraud and negligent misrepresentation causes of action.
Promissory Estoppel; Statute of Frauds
Granadino v. Wells Fargo Bank, N.A., __ Cal. App. 4th __, 2015 WL 1929455 (Apr. 14, 2015): To state a claim for promissory estoppel, a borrower must show that the servicer promised a benefit, did not perform on that promise, and that the borrower detrimentally relied on that promise. A Wells Fargo representative told the Granadinos’ law firm that no trustee sale was scheduled because they were being reviewed for a modification. Instead, shortly thereafter, Wells Fargo gave notice that the foreclosure process would proceed and the property was sold. The court upheld the trial court’s grant of Wells Fargo’s motion for summary judgment. The factual statement by the servicer’s representative, even if incorrect, did not amount to a promise that Wells Fargo would refrain from completing a trustee sale in the future. The record also did not support a conclusion that the borrowers had relied on the statement by Wells Fargo to their detriment because Wells Fargo told the borrowers that the foreclosure sale would go forward. Because the property had negative equity, the borrowers also failed to establish damages. The court questioned whether their damaged credit was due to missed mortgage payments or other factors, rather than the foreclosure.
The court also applied the statute of frauds to reject the promissory estoppel claim because the borrowers “presented no argument” to support an estoppel exception to the application of the statute of frauds. Finally, the court rejected Granadinos’ third request for continuance and a request to amend the complaint. The mere statement that case law on mortgage modification had evolved dramatically since the complaint had been filed was deemed insufficient.
Borrower Does Not Need to Reaffirm Loan to Qualify for Loan Modification; Definition of “Borrower” under HBOR; Dual Tracking Claim Fails Without Documentation of Material Change of Financial Circumstances; SPOC Claim May Proceed Independently of Dual Tracking Claim
McLaughlin v. Aurora Loan Services, 2015 WL 1926268 (C.D. Cal. Apr. 28, 2015): HBOR prohibits a servicer from moving forward with the foreclosure process, once a borrower has submitted a complete loan modification application. Damages are available only after a trustee’s deed upon sale has been recorded. McLaughlin submitted multiple loan modifications to Nationstar. The modification was denied, and McLaughlin submitted a letter within the required appeal period. After requesting further information from McLaughlin, Nationstar recorded a Notice of Trustee Sale on the property. The trustee’s deed upon sale was subsquently rescinded, approximately six months later. Nationstar argued that McLauglin is not a “borrower” under HBOR section 2924.12(b), due to the rescission of the deed and McLaughlin’s discharge of personal liability of loan in bankruptcy. The court held that rescission of the trustee’s deed does not extinguish McLaughlin’s HBOR claims that existed prior to rescission, although it may limit damages to the period between the date of recording of the trustee’s deed to the date of rescission. The court also rejected Nationstar’s argument that McLaughlin was not a “borrower” if he did not reaffirm his loan that was discharged in bankruptcy. To accept the argument, the court reasoned, would add an exception to the statutory definition of “borrower” where one does not exist. What’s more, there is no requirement to reaffirm for a borrower to seek a loan modification on a discharged loan. Nationstar’s motion for summary judgment on the basis that McLaughlin was not a “borrower” was denied.
HBOR’s dual tracking protections do not apply to borrowers who submit multiple applications, unless the borrower experienced a material change in financial circumstances and documented and submitted that change to their servicer. McLaughlin’s third loan modification application asserted an increase in income, without identifying its source. After the denial of her application, McLaughlin submitted a letter within the required appeal period. Her letter identified a new source of increased income, but it provided no supporting documents. The court observed that (1) the new future income did not constitute a basis for challenging Nationstar’s prior denial of her application, and (2) unsupported assertions are insufficient to constitute evidence of a material change in circumstances. Nationstar’s motion for summary judgment on the dual tracking claim was granted.
Borrowers who request a foreclosure prevention alternative are to be provided with a single point of contact (SPOC) by a servicer, including a “direct means” of communicating with that SPOC. Nationstar argued without supporting authority that the dismissal of McLaughlin’s dual tracking claim was fatal to her SPOC claim. The court noted multiple cases in which a SPOC claim survived dismissal of a dual tracking claim. Nationstar’s motion for summary judgment on the SPOC claim was denied.
Dual Tracking: “Complete” Application and Material Change in Financial Circumstances; Inability to Communicate with SPOC Resulting in Loss of Modification Can Constitute Material Violation
Mackensen v. Nationstar Mortg., 2015 WL 1938729 (N.D. Cal. Apr. 28, 2015): Servicers may not move forward with foreclosure while a borrower’s complete first lien loan modification application is pending. This dual tracking restriction also applies to a borrower’s subsequent modification applications, if borrower “documented” and “submitted” a material change in their financial circumstances to their servicer. CC 2923.6(g). Here, the complaint alleged that the borrower’s monthly income increased over $2,000 per month and he “documented [this] in his loan modification.” The allegation is sufficient to show documentation of a material change in circumstances. Nationstar also argued that the loan modification application was not complete. The court disagreed. Plaintiff alleges both that he “submit all required documents requested by Nationstar,” and that he timely submitted appeals of the denials of his loan modification applications; nonetheless, a notice of trustee sale was recorded prior to a decision on his appeals. These allegations are sufficient to show that the application was complete before the sale. The court denied the servicer’s MTD borrower’s dual tracking claim.
HBOR requires servicers to provide borrowers with a single point of contact, or “SPOC,” during the loan modification process. SPOCs may be an individual or a “team” of people and have several responsibilities, including: facilitating the loan modification process and document collection, possessing current information on the borrower’s loan and application, and having the authority to take action, like stopping a sale. Here, the borrower was unable to contact either of his two assigned SPOCs to confirm the inclusion of a balloon payment in the proposed loan modification despite repeated calls. This was sufficient to state a SPOC claim because even though the law does not require a single SPOC, neither SPOC was able to perform inform the borrower of his current status required by CC 2923.7. The court also rejected Nationstar’s argument that the violation was not material when the complaint alleged that Nationstar’s violation resulted in his inability to accept the loan modification offer. The court denied Nationstar’s MTD borrower’s SPOC claim.
Borrower who Qualifies for HAMP can Enforce HAMP TPP; Duty of Care for Loan Servicer; Fraud; UCL
Meixner v. Wells Fargo Bank, N.A., __ F. Supp. 3d __, 2015 WL 1893514 (E.D. Cal. Apr. 24, 2015): A breach of contract claim requires a contract, plaintiff’s performance or excuse for failure to perform, breach by defendant, and resulting damage to plaintiff. Meixner had been sent a TPP by Wells Fargo that provided that if he complied with the terms of the agreement and qualified for HAMP, the bank would provide a permanent loan modification agreement. Meixner alleged that the HAMP TPP was a contract between Wells Fargo himself conditioned on his making the required payments, which he did. The bank countered that the TPP was not a contract, pointing to conditional language in the offer letter, and argued that Meixner failed to allege that he qualified for HAMP. But case law does not recognize conditional language as limiting the contractual effect of a TPP. And Meixner alleged multiple specific errors made by Wells Fargo in concluding he was ineligible for HAMP. The court denied the bank’s motion to dismiss the breach of contract claim.
To state a claim for promissory estoppel, borrowers must show that a servicer promised a benefit and went back on that promise, and that the borrower detrimentally relied on that promise. In cases involving a written TPP agreement, TPP payments themselves can demonstrate reliance and injury. Meixner was made an offer of a TPP, he made the three payments required under the TPP, and he alleged multiple specific errors made by Wells Fargo in concluding he was ineligible for HAMP. Wells Fargo countered that the promise to Meixner was conditional, but the court noted that case law does not support that position. The bank’s motion to dismiss the promissory estoppel claim was denied.
The elements of a claim for negligence include: (1) the existence of a duty to exercise due care; (2) breach of that duty; (3) causation; and (4) damages. Meixner alleged that Wells Fargo mishandled his loan modification application. The bank responded that it had no duty to exercise due care in its relationship with Meixner. In holding that a duty of care existed, the court found the Alvarez decision persuasive; once parties entered into a home loan, the relationship “vastly differs from the one which exists when a borrower is seeking a loan from a lender because the borrower may seek a different lender if he does not like the terms of the loan.” The court denied Wells Fargo’s motion to dismiss Meixner’s negligence claim.
Intentional misrepresentation claims demand specific pleading of: 1) a misrepresentation; 2) defendant’s knowledge that the misrepresentation is false; 3) defendant’s intent to induce borrower’s reliance; 4) the borrower’s justifiable reliance; and 5) damages. In a claim for negligent misrepresentation, the plaintiff need not allege the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true. Meixner entered into a TPP with Wells Fargo and timely made all agreed payments. He was repeatedly told his loan modification was about to be finalized, and also advised to miss payments in order to qualify for HAMP. Meixner alleged that the statements by Wells Fargo’s agents were made either with knowledge of their falsity or without any reasonable basis for believing them to be true. Meixner alleged that he justifiably relied on these statements, because their falsity was not readily ascertainable. And he alleged damages in fees, costs and negative credit impacts, as well as the lengthy process itself. The court ruled that Meixner had met his pleading burden, and denied Wells Fargo’s motion to dismiss the negligent and intentional misrepresentation claims.
The elements of a claim for wrongful foreclosure include (1) that the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) prejudice or harm to the party attacking the sale; and (3) where the trustor or mortgagor challenges the sale, that party must have tendered or be excused from tendering the amount of the debt. Meixner brought a claim for wrongful foreclosure, alleging that a break in the chain of title occurred and that HSBC Bank was not the rightful owner of his loan when it caused the his property to be sold at a non-judicial foreclosure sale. Citing the weight of authority against allowing homeowners to make such a claim, the court nevertheless deferred judgment on this element of Meixner’s suit pending the California Supreme Court’s decision in Yvanova v. New Century Mortgage Corp., 331 P.3d 1275 (Cal. 2014).
The court found that because Meixner had adequately pled intentional and negligent misrepresentation, and because those claims are unlawful, unfair, and fraudulent, Meixner also had a claim under the UCL. Wells Fargo’s motion to dismiss the UCL claim was denied by the court.
Delinquent Borrower may Sue under ECOA’s 30-Day Notice Requirement; SPOC; Duty of Care for Loan Servicers
MacDonald v. Wells Fargo Bank, N.A., 2015 WL 1886000 (N.D. Cal. Apr. 24, 2015): The Equal Credit Opportunity Act (ECOA) requires lenders to provide credit applicants with a determination within 30 days of receiving applicant’s request. The lender must also explain reasons for any adverse actions against the applicant. This second requirement only applies if applicant is not delinquent or in default. Here, borrowers claimed the servicer failed to provide them with a written determination within 30 days of her request. They did not plead anything related to the adverse action part of the statute. They therefore did not have to demonstrate that they was not delinquent or in default. The 30-day violation claim survived servicer’s MTD.
A borrower who requests a foreclosure prevention alternative is to be provided with a single point of contact (SPOC) by the servicer, including a “direct means of communication” with that SPOC. The MacDonalds were assigned a SPOC and were working on a loan modification application when they received notice from Wells Fargo that their application was closed on the grounds that they had filed for bankruptcy (which they in fact had not). They were assigned a new SPOC along with a case number that belong to a different person. After informing the bank of its mistake and being instructed to submit a new application, the MacDonalds were unable to again make contact with their SPOC. Wells Fargo filed a motion to dismiss asserting that the changing of SPOCs is not prohibited. The bank further alleged that a complaint that the SPOC did not “speak” with borrowers did not foreclose the possibility of other forms of communication with the MacDonalds. The court rejected both claims: the MacDonalds did not allege a violation based on the transfer to a new SPOC, nor did their complaint solely rest on a refusal to “speak” with them. Instead, the borrowers also alleged that their SPOC failed to contact them and failed to communicate the current status of loan modification application, duties required by CC 2923.7. Wells Fargo’s motion to dismiss was denied by the court.
A servicer is not obligated to initiate the modification process or to offer a modification, but once it agrees to engage in the process with a borrower a servicer owes a duty of care not to mishandle the application or negligently conduct the modification process. Wells Fargo moved to dismiss on the ground that no such duty of care exists. The court explained that Lueras v. BAC Home Loans Servicing, L.P., 221 Cal. App. 4th 49 (2013) and every other case cited by the bank predated Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 941 (2014), which marked “a sea change of jurisprudence on this issue.” The court also noted that “Wells Fargo does not direct the Court to a single decision in which a court weighed both the Lueras and Alvarez decisions and decided to follow Lueras.” The court denied the servicer’s motion to dismiss the borrower’s negligence claim.
Limitations on Successive Rule 12(b)(6) Motions
Hild v. Bank of Am., N.A., 2015 WL 1813571 (C.D. Cal. Apr. 21, 2015): Federal Rule of Civil Procedure 12(g) limits a defendant’s ability to bring successive motions to dismiss. If the defendant fails to assert an argument in a 12(b)(6) motion to in the initial complaint, the argument is waived and may not be raised in a second motion to dismiss. Here, the defendant’s first motion to dismiss “argued that it owed no duty to Plaintiffs but did not assert any insufficiency of Plaintiffs’ allegations with regard to Nationstar’s breach of that duty and Plaintiff’s resulting damages.” Nationstar then tried to raise these additional arguments in the motion to dismiss the Second Amended Complaint. Because Nationstar failed to raise the arguments in the first 12(b)(6) motion, the argument is waived and may not be raised in a subsequent 12(b)(6) motion under Rule 12(g).
No Specific Request Required for SPOC Claim when Servicer Said One Would be Provided; Failure to Provide Reason for Denial Constitutes Material Violation
Hendricks v. Wells Fargo Bank, N.A., 2015 WL 1644028 (C.D. Cal. Apr. 14, 2015): HBOR requires servicers to provide a single point of contact (SPOC) “[u]pon request from a borrower who requests a foreclosure prevention alternative.” CC § 2923.7(a). SPOCs may be an individual or a “team” of people and have several responsibilities, including informing borrowers of the status of their applications and helping them apply for all available loss mitigation options. Here, the borrower alleged her servicer violated these requirements when he was trying to obtain information about his loan modification but was given “multiple and divergent instructions.” The servicer also never provided him with a reason for the loan modification denial and information on how to appeal, all arising from failure to provide a SPOC.
The court first rejected Wells Fargo’s argument that the claim fails because the borrower did not allege he specifically requested a SPOC. Although the court agreed that a specific request was necessary, it was sufficient that the borrower alleged that a Wells Fargo representative told him a SPOC would be provided. Wells Fargo also argued that the SPOC violation was not material. The court disagreed. Having accepted Plaintiff’s loan modification – whether a second application or not – Wells Fargo was obliged to abide by California law governing servicing of home loans and not cause harm to the borrowers whose loans it services. If Wells Fargo had provided a SPOC, the borrower would have received “clear, non-contradictory answers to his inquiries regarding his modification, including the basis for his denial allowing him to appeal.” The court denied Wells Fargo’s motion to dismiss the SPOC claim.
Dual Tracking: “Complete Application” and Denial Letter; Debt Collection under Rosenthal Act
Agbowo v. Nationstar Mortg. LLC., 2015 WL 1737848 (N.D. Cal. Apr. 10, 2015): Servicers may not move forward with foreclosure while a borrower’s complete first lien loan modification application is pending. This dual tracking restriction also applies to a borrower’s subsequent modification applications, if borrower “documented” and “submitted” a material change in their financial circumstances to their servicer. CC 2923.6(g). Here, the borrowers alleged that their loan modification application was complete, and Nationstar’s subsequent requests asked for documents they already submitted. Despite Nationstar’s letter denying the application for incomplete documents, the letter does not establish this fact as true as the court must credit the allegations in the complaint at the pleadings stage. The court also rejected Nationstar’s argument that the letter stating the borrowers could not be consider due to missing documents was not a denial. The letter said that Nationstar is “unable to offer” the borrowers a loan modification and did not say that the application “could not be considered.” The court denied Nationstar’s MTD the dual tracking claim.
While providing its own standards governing debt-collection practices, the RFDCPA also provides, with limited exceptions, that “every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of” the federal Fair Debt Collection Practices Act. One of these incorporated FDCPA provisions is that which prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Here, the borrowers alleged that Nationstar gave “the false impression to [borrowers] that their mortgage modification request . . . was being processed in good faith,” and as a result of this impression, the borrowers “did not take any further steps to protect” the Property from foreclosure. The complaint made clear that it is Nationstar’s actions with respect to Plaintiffs’ loan modification applications, rather than or in addition to Nationstar’s foreclosure-related actions, that violated the RFDCPA. This was sufficient to allege that Nationstar was engaging in “debt collection.” The court denied Nationstar’s MTD the RFDCPA claim.
Servicer’s Letter Requesting Additional Documents Not Admissible; Dual Tracking; Transferee’s Breach of TPP
Mendonca v. Caliber Home Loans, Inc., 2015 WL 1566847 (C.D. Cal. Apr. 6, 2015): Federal Rule of Civil Procedure 56(e) does not require that all documents be authenticated through personal knowledge when submitted in a summary judgment motion. Yet there is such a requirement “where exhibits are introduced by being attached to an affidavit.” Here, Caliber offered letters requesting additional documentation in support of its argument that the borrower’s application was not complete. The letters, attached to a declaration by a Caliber employee, were not properly authenticated when the declaration does not establish “that he wrote the letters in question, that he signed them, that he used any of the letters . . ., or that he saw others do so.” He only attempts to authenticate the letters by stating that they are part of Caliber’s business records that he reviewed. Without any evidence of personal knowledge regarding the authenticity of the letters, they are not admissible.
Servicers may not move forward with foreclosure while a borrower’s complete first lien loan modification application is pending. Here, Caliber contends that the borrowers did not submit a complete application. The only evidence Caliber supplied in support, however, was correspondence deemed inadmissible by the court. Because Caliber had the burden of proof as the movant, there remain triable issues of fact as to whether the borrowers submitted a complete application. Caliber’s MSJ is denied as to the CC 2923.6 claim.
To succeed on a breach of contract claim, plaintiffs must establish (1) the existence of a contract, (2) plaintiffs’ performance or an excuse for nonperformance, (3) breach by Caliber, and (4) resulting damages to plaintiffs. Here, the borrowers argue that their TPP with Chase binds Caliber as soon as Chase transferred servicing to Caliber. Caliber argued that the borrowers did not comply with the agreement because their payments were late. However, the borrowers submitted evidence that the only reason for the late payments was Caliber’s refusal to acknowledge the TPP agreement. The court found that borrowers complied with the agreement and that triable issues remain as to whether the TPP bound Caliber and whether Caliber breached the agreement. Caliber’s MSJ is denied as to the breach of contract claim.
Servicer’s Duty of Care
Salazar v. U.S. Bank Nat’l Ass’n, 2015 WL 1542908 (C.D. Cal. Apr. 6, 2015): Servicers may not move forward with foreclosure while a borrower’s complete first lien loan modification application is pending. This dual tracking restriction also applies to a borrower’s subsequent modification applications, if borrower “documented” and “submitted” a material change in their financial circumstances to their servicer. CC 2923.6(g). Here, the borrower previously applied for and was denied a loan modification in 2011. The complaint alleged that she documentation of these changed circumstances to Citibank, submitted this updated income information online, and spoke to a Citibank representative about her financial circumstances, the court still held that the complaint failed to show that the change in circumstances was documented and submitted to the servicer. The CC 2923.6 claims (alleged as part of wrongful foreclosure claim) also fails because the complaint only alleged submission of “preliminary information” through Citibank’s web site and not a complete application.
Under CC 2923.7, servicers promptly provide borrowers with a single point of contact (SPOC), including a “direct means” of communicating with that SPOC. Here, Citibank failed to appoint a SPOC until a month after the borrower submitted a loan modification application. The court first rejected Citibank’s argument that the late appointment did not violate the statutory mandate for a prompt SPOC appointment. Citibank also argued that it satisfied the SPOC requirement because the borrowers were able to discuss her loan modification application with several individuals. The court disagreed, pointing to the conflicting information these purported SPOCs told the plaintiff, leading the borrower with no one to talk to. Finally, the court held that the plaintiff pled a sufficiently material SPOC violation because “it is plausible that CMI’s failure to appoint a SPOC prevented her from submitting a complete modification application and sufficient documentation of the material change in her financial circumstances.” Therefore, if a proper SPOC had been provided, the borrower may have avoided foreclosure.
Servicer Fails to Follow Local “Meet and Confer” Rule
Goldberg v. Nationstar Mortg. LLC, No. CV 14-8759 PSG (MANx) (C.D. Cal. Apr. 1, 2015): Local Rule 7-3 in the federal Central District of California requires parties to “meet and confer.” These conferences “shall take place at least seven days prior to the filing of [a] motion,” “preferably in person.” Here, servicer claimed it attempted to “meet and confer” by speaking to Plaintiff’s counsel by telephone. However, the defendant’s declaration failed to demonstrate that counsel “discuss[ed] thoroughly…the substance of the contemplated motion[,]” as required by the rule. Rather, counsel simply “stated to [Plaintiffs’ counsel] that plaintiff’s entire complaint, and all claims for relief therein, fails to state a claim upon which relief can be granted.” The court found the conference does not satisfy Local Rule 7-3’s requirement that counsel thoroughly discuss the substance of the motion. Because strict compliance with the rule is required, the court denied servicer’s MTD.
 Id. at 1096-97.
 See, e.g., Alvarez v. BAC Home Loans Servicing, LP, 228 Cal. App. 4th 941 (2014); Osei v. Countrywide Home Loans, 692 F. Supp. 2d 1240, 1249 (E.D. Cal. 2010).
 Osei, 692 F. Supp. 2d at 1249.
 See Nymark, 231 Cal. App. 3d at 1098, (quoting Biakanja 49 Cal. 2d 647, 650).
 Maomanivong v. National City Mortgage Co., 2014 WL 4623873, at * 14 (N.D. Cal. Sept. 15, 2014).
 Ansanelli v. JP Morgan Chase Bank, N.A., 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011).
 2010 WL 1881098, at *2 (N.D. Cal. May 10, 2010).
 Id. at *3.
 Id. (emphasis supplied).
 228 Cal. App. 4th 941, 945 (2014).
 Id. at 949 (quoting Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872, 900 (2013).
 Id. at 949.
 Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49 (2013); see also Guillermo v. Caliber Home Loans, Inc., 2015 WL 1306851, at *7 (N.D. Cal. Mar. 23, 2015) (quoting this language from Lueras).
 Alvarez, 228 Cal. App. 4th at 949; Garcia v. Ocwen Loan Servicing, LLC, 2010 WL 1881098, at *2 (N.D. Cal. May 10, 2010).
 Garcia, 2010 WL 1881098, at *3.
 Segura v. Wells Fargo Bank, N.A., 2014 WL 4798890, at *13 (C.D. Cal. Sept. 26, 2014).
 Id. at *13; see also Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872, 906 (2013) (finding a duty of care in loan modification process).
 Guillermo v. Caliber Home Loans, Inc., 2015 WL 1306851 (N.D. Cal. Mar. 23, 2015); Alvarez, 228 Cal. App. 4th at 945; Rijhwani v. Wells Fargo Home Mortgage Inc., 2014 WL 890016, at *17 (N.D. Cal. Mar. 3, 2014).
 See, e.g., Khan v. CitiMortgage Inc., 975 F. Supp. 2d 1127, 1147 (E.D. Cal. 2013).
 Guillermo, 2015 WL 1306851, at * 5 (no facts showing that servicer mishandled documents in loan modification review, and plaintiff did not allege that failure to properly process their application deprived them of the possibility of obtaining a loan modification).
 Maomanivong v. National City Mortgage Co., 2014 WL 4623873, at *2-3, 15 (N.D. Cal. Sept. 15, 2014) (complaint alleged that defendant urged plaintiff to refrain from reinstating her loan because she qualified for a modification and that would be her “best option,” misrepresented that it would not foreclose while her modification was under review, and then foreclosed anyway; however court noted that there was “no indication that a loan modification actually would have been approved” had she been properly reviewed).
 See Alvarez, 228 Cal. App. 4th at 951 (noting that plaintiffs alleged they were qualified for the modification which servicer’s conduct barred them from obtaining).
 See Osei v. Countrywide Home Loans, 692 F. Supp. 2d 1240, 1250 (E.D. Cal. 2010) (finding a negligence claim based on lender’s duty of care to make the disclosures required by RESPA).
 12 C.F.R. § 1024.41(b)(1); (c)(1); (f).
 Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 68 (2013).
 Id. at 69.
 Garcia v. Ocwen Loan Servicing, LLC, 2010 WL 1881098, at *2 (N.D. Cal. May 10, 2010) (citing Fox v. Pollack, 181 Cal.App.3d 954, 962, 226 Cal.Rptr. 532 (1986)).
 Ragland v. U.S. Bank Nat. Ass’n, 209 Cal. App. 4th 182, 199-200 (2012) (citing Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996)).
 Garcia, 2010 WL 1881098, at *2; see also Erickson v. Long Beach Mortgage Co., 2011 WL 830727, at *5 (W.D. Wash. Mar. 2, 2011) aff’d, 473 F. App’x 746 (9th Cir. 2012) (rejecting fraud claim based on representation that making three monthly trial payments would qualify the plaintiffs for a loan modification; promise of a modification in the future is not a misrepresentation of existing fact).
 Garcia, 2010 WL 1881098, at *2.
 Ragland, 209 Cal. App. 4th at 196-97.
 Id. at 196-99.
 Khan v. CitiMortgage Inc., 975 F. Supp. 2d 1127, 1141 (E.D. Cal. 2013).
 Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 157 (1991).
 Quinteros v. Aurora Loan Servs., 740 F. Supp. 2d 1163, 1172-73 (E.D. Cal. 2010).
 See Harvey G. Ottovich Revocable Living Trust Dated May 12, 2006 v. Wash. Mut., Inc., 2010 WL 3769459 (N.D. Cal. Sept. 22, 2010); Mehta v. Wells Fargo Bank, N.A., 737 F. Supp. 2d 1185, 1204 (S.D. Cal. 2010) (“The fact that one of Defendant Wells Fargo’s employees allegedly stated that the sale would not occur but the house was sold anyway is not outrageous as that word is used in this context”).
 Singh v. Wells Fargo Bank, 2011 WL 66167, at *8 (E.D. Cal. Jan. 7, 2011).
 See Erickson v. Long Beach Mortgage Co., 2011 WL 830727, at *7 (W.D. Wash. Mar. 2, 2011), aff’d, 473 F. App’x 746 (9th Cir. 2012)
 Ragland v. U.S. Bank Nat. Ass’n, 209 Cal. App. 4th 182, 204-05 (2012).
 Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th 1004, 1045-46 (2009).
 Ragland, 209 Cal. App. 4th at 204-05.
 Davenport v. Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal. 2010).
 Id. (emphasis supplied)
 Erickson v. Long Beach Mortgage Co., 2011 WL 830727, at *7 (W.D. Wash. Mar. 2, 2011), aff’d, 473 F. App’x 746 (9th Cir. 2012).
 Ragland, 209 Cal. App. 4th at 203-04 (explaining that recovery based on damage to property may be had for intentional infliction of emotional distress, but not generally for negligent infliction of emotional distress).
 Id. at 205. But see Davenport, 725 F. Supp. 2d at 884 (allowing for the possibility of negligent infliction of emotional distress with no mention of this issue).
 Davenport, 725 F. Supp. 2d at 885.
 See Restatement (First) of Restitution § 1 (2005).
 Vician v. Wells Fargo Home Mortgage, 2006 WL 694740 (N.D. Ind. Mar. 16, 2006); see also Ellsworth v. U.S. Bank, 30 F. Supp. 3d 886 (N.D. Cal. Mar. 31, 2014) (borrowers stated unjust enrichment claim where servicer allegedly manipulated force-placed flood insurance coverage, provided kickbacks, and backdated policies); Casey v. Citibank, 915 F. Supp. 2d 255 (N.D.N.Y. 2013) (allegations of unnecessary or excessive flood insurance).
YVANOVA affirms GLASKI!!!
IN THE SUPREME COURT OF CALIFORNIA
TSVETANA YVANOVA, )
Plaintiff and Appellant, )
) 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
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.)
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,
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
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
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
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
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
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.
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
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
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.
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.
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
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
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.)
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.)
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
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
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.
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
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
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.)
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.)
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
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.)
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..
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
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.
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.
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
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.
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
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.
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,
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
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.)
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
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.
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).
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
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
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.].)
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
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
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
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.
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.
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
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.
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,
Not a Party: Challenging Mortgage Assignments (2014) 59 St. Louis U. L.J. 175,
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 1088
adds 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–
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.
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.)
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.)
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.
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.
The judgment of the Court of Appeal is reversed and the matter is remanded
to that court for further proceedings consistent with our opinion.
CANTIL-SAKAUYE, C. 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
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Yvanova v. New Century Mortgage Corporation
Review Granted XXX 226 Cal.App.4th 495
Opinion No. S218973
Date Filed: February 18, 2016
County: Los Angeles
Judge: Russell S. Kussman
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
Kenneth Lee Marshall
560 Mission Street, Suite 2500
San Francisco, CA 94105
The Supreme Court has just announced it will issue its opinion in Yvanova 10 a.m. tomorrow, Feb. 18. Thanks.
2923.6(g) obviates a mortgage servicer’s duty to make a “written determination”
This is the first case I’ve seen that states this so clearly.Norris v Bayview Loan Servicing (CD Cal Jan 25 2016)
it is far from clear section 2923.6(g) obviates a mortgage servicer’s duty
to make a “written determination” of repeated loan modification applications. True
enough, the mortgage servicer need not “evaluate” such applications, but it still must,
according to the plain words of section 2923.6(c), inform the borrower of that decision.
Otherwise, the borrower would not know when to appeal the denial of his request and
when to argue that “there has been a material change in the borrower’s financial
circumstances since the borrower’s [first] application”—an explicit exception to the
general rule of section 2923.6(g). Defendants present no authority whatsoever
supporting their contrary interpretation of the statutory language.
[CAMFFG] MENJIVAR VS. WELLS FARGO BANK – Argument at the Ninth Circuit – February 2, 2016 [1 Attachment]
|Feb 6 (4 days ago)|
(please disregard my earlier post a few minutes ago and look at this one instead.)
here is our argument before the Ninth Circuit in Menjivar v. Wells Fargo from last Tuesday, February 2, 2016. Richard Antognini argued our side. we are appealing US Bankruptcy Judge Neil Bason’s order dismissing our complaint with prejudice.
the very OBVIOUS takeaway from this hearing is that everyone better damn-well-plead an EXPLICIT rescission claim in any action on a mortgage.
if you watch it, please send your thoughts to the group or directly to me or Richard Antognini. we are especially interested in whether you agree that all three judges really wish we had used the word “rescission” in the complaint and that they are inclined to rule for us so long as they don’t feel prohibited by the rule – real or not – that arguments not made below are waived.
we lost at the bankruptcy court and the bankruptcy appellate panel (“BAP”) because those four judges believed that our claims for relief for nonformation of contract due, in part, to fraud in the inducement were NOT claims in contract with a four-year statute of limitation. nor were any of our other contract-related claims deemed to be contract claims. instead they said we had pleaded fraud claims which were only entitled to three years SOL and therefore we filed too late.
it was bizarre to me since i hadn’t even included fraud as an alternative to our various contract and fraudulent transfer claims (unless you consider discriminatory lending or predatory lending as fraud claims, which i didn’t. i consider them allegations that undermine the essential element of the formation of any contract – a mutual meeting of the minds).
when Richard Antognini came into the case, he observed that all of the facts we had pleaded fit neatly into a contract rescission claim. we took a gamble and dumped all of the arguments that we had made below and threw everything into the rescission argument. it appears from watching the video that our gamble has almost paid off, but for the pesky problem that arguments not raised below may be waived. we believe its within the Ninth Circuit’s discretion to accept our “rescission” argument now. indeed, we believe it has been there the whole time.
(if someone could explain to me the difference between “nonformation of contract” and “rescission” i would be grateful, because I fear that I have let my great Loyola contracts professor down. i still don’t see the difference.)
all three judges chase Richard around the complaint asking him where the word “rescission” is used and why we didn’t plead “rescission damages.” Hon. Consuelo Callahan starts off pointing out our gall to believe that we can raise “rescission” for the first time at this time. even the Hon. Dorothy Nelson – a truly wonderful presence in the courtroom – jumps right in and Richard adroitly points precisely to the pages in the record that best support our “rescission” claim.
The Hon. N. Randy Smith (“I’ve pled rescission claims many times myself”) is especially annoyed with us/me for leaving it out. (if you listen closely, i am pretty sure you can hear him say “duh.”) as hard as it was to listen silently while my work was thusly criticized, the Judges’ passion and their engagement suggests they are taking the question very very seriously.
of course, we believe that federal court is a notice or fact pleading court and that so long as the facts are there, we should have been allowed to amend the complaint to insert the single word “rescission” into it. we used the words “disallow,” “cancel” and “avoid” throughout the complaint. (see our 18 claims for relief below and in the complaint that i attach.)
it is very encouraging, i think, that the judges ask Wells Fargo what prejudice they would suffer if we are allowed to amend and then they ask us the same question. Wells Fargo’s response is that they would have to keep fighting us in court – pretty lame – but our response is that at this point – because of the statute of limitations that everyone is so keenly aware of – the Menjivars would forever lose their right to challenge the origination of their mortgage. to me, the judges really seem concerned that the Menjivars would be prejudiced if they are not allowed to amend. (i hope i am not projecting.)
thanks for watching and reading.
here are our 18 claims. the complaint was amended by right, not after any court order dismissing with leave to amend so it really should not be thought of as a first amended complaint in the sense that the court gave us any chance to fix it. the dismissal with prejudice came as a complete surprise to us.
FIRST AMENDED COMPLAINT TO DISALLOW CLAIM AS UNENFORCEABLE OR TO DETERMINE CLAIM IS UNSECURED AND NOT TIMELY FILED:
1. TO DECLARE MORTGAGE CLAIM CONSISTS OF IN PERSONAM NOTE OBLIGATION AND IN REM DEED OF TRUST SECURITY INTEREST TRANSFER INCIDENT TO NOTE [11 U.S.C. § 101, Carpenter v. Longan 83 U.S. 271, Johnson v Home State Bank, 501 U.S. 78, Madrid 725 F.2d 1197];
2. TO DISALLOW CLAIM AS UNENFORCEABLE – CONTRACT NOT FORMED [11 U.S.C. § 502(b)(1)];
3. TO DISALLOW CLAIM AS UNENFORCEABLE – PREDATORY LENDING [11 U.S.C. § 502(b)(1), 15 U.S.C. §§ 1601-1667f, 12 C.F.R. pt 226];
4. TO DISALLOW CLAIM AS UNENFORCEABLE – DISCRIMINATION IN LENDING [11 U.S.C. § 502(b)(1), 15 U.S.C. §§ 1691-1691f, 42 U.S.C. §§3601-3619];
5. TO DECLARE DEBTOR HAS STANDING TO AVOID OBLIGATION [Cohen 305 BR 886];
6. TO USE STRONG-ARM POWERS TO AVOID NOTE AS ACTUALLY FRAUDULENT OBLIGATION [11 U.S.C. § 544, Cal.Civ.C. § 3439.04(a)(1)];
7. TO USE STRONG-ARM POWERS TO AVOID NOTE AS CONSTRUCTIVELY FRAUDULENT OBLIGATION [11 U.S.C. § 544, Cal.Civ.C. §§ 3439.04(a)(2), 3439.05];
8. TO DISALLOW CLAIM AS UNENFORCEABLE – SECURITY INTEREST FOLLOWS THE NOTE [11 U.S.C. § 502(b)(1), Carpenter v. Longan 83 U.S. 271];
9. TO DECLARE DEBTOR HAS STANDING TO AVOID TRANSFER [11 U.S.C. § 522(h), Cohen 305 BR 886];
10. TO USE STRONG-ARM POWERS TO AVOID DEED OF TRUST AS ACTUALLY FRAUDULENT TRANSFER [11 U.S.C. § 544, Cal.Civ.C. §§ 3439.04(a)(1)];
11. TO USE STRONG-ARM POWERS TO AVOID DEED OF TRUST AS CONSTRUCTIVELY FRAUDULENT TRANSFER [11 U.S.C. § 544, Cal.Civ.C. §§ 3439.04(a)(2), 3439.05];
12. TO DISALLOW IN REM DEED OF TRUST SECURITY INTEREST AS AVOIDABLE TRANSFER [11 U.S.C. § 502(d)];
13. TO DETERMINE IN PERSONAM NOTE IS UNSECURED [11 U.S.C. § 506];
14. TO DISALLOW UNSECURED CLAIM AS UNTIMELY [11 U.S.C. § 502(b)(9)];
15. FOR QUIET TITLE [28 U.S.C. § 2201];
16. FOR INJUNCTIVE RELIEF [11 U.S.C. §§ 105, 362];
17. FOR DAMAGES;
18. FOR COSTS