Yvanova will now apply to hundreds of demurrs sustained without leave to amend

26 Feb

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.
No. C074713.
July 22, 2015.
Oral Argument

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.


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.
Now —
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: [inaudible]
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.
JUSTICE DUARTE: But just to make sure Justice Robie knows where we’re at, are you at headnote 3 —
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.
Critically —
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.
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: 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 —
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: 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.

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