Tag: lis pendence

Pacific Western Bank $227,000 in attorney fees for a 2 hour bench trial eviction wow !!!!

Brillouet Trial Brief 7-8-15

Timothy L. McCandless, Esq. SBN 145577
Law Offices of Timothy L. McCandless
26875 Calle Hermosa Suite A,
Capistrano Beach, CA 92624
Telephone: (925) 957-9797

Attorneys for Defendants
Pierrick Briolette and Yong C. Briolette

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF VENTURA
COASTLINE REAL ESTATE HOLDINGS, INC.

Plaintiff,

vs.

PIERRICK BRILLOUET, an individual;
YONG BRILLOUET, an individual; and DOE 1 through DOE 10, INCLUSIVE;
Defendants.
)
)
) Case No. 56-2014-00461981-CU-UD-VTA

DEFENDANTS’ OPPOSITION TO
PLAINTIFF’S MOTION FOR
ATTORNEY’S FEES AND COSTS, MEMORANDUM OF POINTS AND
AUTHORITIES

DATE: January 6, 2016
TIME: 8:30 a.m.
DEPT.: 41

BANKmagesDefendants Pierrick Brillouet and Yong C. Brillouet respectfully submit their Opposition to Plaintiff’s Motion for Attorney’s Fees and Costs as follows:
MEMORANDUM OF POINTS AND AUTHORITIES
I.
INTRODUCTION AND HISTORICAL PERSPECTIVE
Dates relevant to this matter are as follows:
On December 31, 2014, Plaintiff Coastline Real Estate Holdings, LLC filed the instant unlawful detainer action.
A two hour bench trial was conducted on September 8, 2015, and the court awarded possession to the Plaintiff.
Judgment was entered on October 7, 2015. The time to file an appeal was November 6, 2015, because the matter was filed as a limited action.
Additionally, the deadline to file the present Motion For Attorney’s was November 6, 2015, pursuant to California Rules of Court Rule 3.1702(b)(1). However the Motion was not filed until December 4, 2015. As such, the Motion was filed almost one month after the deadline and for that reason alone must be denied.
Plaintiff now seeks the award of $227,084.50 in attorney’s fees. The Declaration of Attorney Richman at Paragraph 19 specifically alleges that he expended 769.85 hours “in this matter.” However, when you review the charges, the hours were actually incurred for by other parties (Western Commercial Bank, Pacific Western Bank), in entirely different actions. The assertion of 769.85 hours by Plaintiff’s counsel related to this action is an intentional misrepresentation pursuant to California Rules of Professional Conduct 5-200(b).
Additionally, the identical charges were already disallowed in a prior motion in a different action, and therefore are barred by collateral estoppel.
Even worse, Defendant redacted in its Motion what attorney services were performed and the amount of time which was expended in completing those tasks. As a result, even if Plaintiff was entitled to recovery attorney’s fees for this case, based on the information served on Defendant, it is impossible to determine: (1) the nature of the service provided, (2) whether that service was necessary, (3) the amount of time which was expended to complete the service, and (4) is the amount of time and charge a reasonable fees for the “alleged” services. Given the foregoing, the Motion must be denied.
II. THE MOTION IS UNTIMELY FILED.
The unlawful detainer action was filed as a limited action, the Plaintiff paid the filing fee for a limited action, and the defendants likewise paid the filing fees for a limited action. The action was tried as a limited action.
Judgment was entered on October 7, 2015.
The deadline to file the present Motion For Attorney’s was thirty (30) days later, or November 6, 2015, pursuant to California Rules of Court Rule 3.1702(b)(1). Section 3.1702 provides in pertinent part:
(b) Attorney’s fees before trial court judgment
(1) Time for motion
“A notice of motion to claim attorney’s fees for services up to and including the rendition of judgment in the trial court-including attorney’s fees on an appeal before the rendition of judgment in the trial court-must be served and filed within the time for filing a notice of appeal under rules 8.104 and 8.108 in an unlimited civil case or under rules 8.822 and 8.823 in a limited civil case.”

The parties did not enter into a stipulation to extend the time for Plaintiff to file its Motion for Attorney’s Fees.
Plaintiff filed the instant Motion on December 4, 2015.
California Rules of Court Rule 8.822(1)(A) provides in pertinent part:
Rule 8.822. Time to appeal
(a) Normal time
(1) “Unless a statute or rule 8.823 provides otherwise, a notice of appeal must be filed on or before the earliest of:

(A) 30 days after the trial court clerk serves the party filing the notice of appeal a document entitled “Notice of Entry” of judgment or a file-stamped copy of the judgment, showing the date it was served;”

As such, the Motion was filed almost one month after the deadline and for that reason alone must be denied.

III. THE INSTANT MOTION IS NOT SUPPORTED IN CONTRACT OR
STATUTE AND MUST BE DENIED.
Plaintiff Coastline Real Estate Holdings, LLC purchased the position of Pacific Western Bank. Defendants believe that Plaintiff is a wholly owned subsidiary of Pacific Western Bank.
Pacific Western Bank (as successor in interest) became a Defendant in Superior Court of California, County of Ventura Case No. 56-2014-00458447-CU-OR-VTA stylized as:
Pierrick Brillouet and Yong Brillouet v. Western Commerical Bank, brought the identical motion for attorney’s fees. That motion was denied. The court adopted its Tentative Ruling which stated:

The Bank is only entitled to an award of attorney fees in this matter if a contractual provision exists which provides for such an award.
The Bank argues that the construction trust deed contains an attorney provision which provides it with a basis for attorney fees. However, the deed only permits an award of attorney fees by a court “[i]f Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal.” (Emphasis added). Only actions which the “Lender institutes” are subject to the attorney’s fees provision and this action was not brought by the lender. The Bank has made no argument for the extension of the plain language of the provision which would encompass the current suit and as such it has not demonstrated it is entitled to fees under the construction trust deed.
The Bank claims that it is also entitled to attorney fees under the Promissory Note which provides:
Lender may hire or pay someone else to collect this note. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fee and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower will also pay any court costs, in addition to all other sums provided by law.
This was not a suit brought to collect the note. While “that amount” includes attorney fees and legal expenses, there is no indication that the court is authorized to make an award of these fees and expenses as a result of the current litigation. The Promissory Note does not indicate that the prevailing party in an action such as this is entitled to reasonable attorney fees.
The Bank also points to the assumption agreement as a basis for fees. It allegedly provides that “[i]f any lawsuit, arbitration or other proceedings is brought to interpret or enforce the terms of this Agreement, the prevailing party shall be entitled to recover the reasonable fees and costs of its attorneys in such proceeding.” This lawsuit didn’t involve the interpretation or enforcement of the terms of the assumption agreement. Santisas v. Goodin (1988) 17 Cal.4th 599 is of no help to the Bank as it involved an expansive attorney’s fee clause that clearly applied to the suit and the question was whether Civil Code §1717(b)(2) thwarted its application. That is not the case here.” A true and correct copy of the Tentative Ruling is attached hereto as Exhibit “1” and is incorporated by this reference.
Notwithstanding the court’s prior Order denying the very same attorney’s fees, Plaintiff in the instant action once again argues the identical points and seeks fees which are unsupported, unreasonable, and which are untimely. As such, the Motion for Attorney’s fees must be denied.
IV. MOVANTS HAVE THE BURDEN OF PROVING THE REASONABLE
NATURE OF THE SERVICES ALLEGED.
The Declaration of Attorney Steven N. Richman contains an attachment which purports to be a listing of the attorney services which were provided. However, a summary inspection shows that the listing of services, the time incurred for such service and the amount charged for such services have been redacted.
As such, Plaintiffs cannot determine the propriety of: (1) the nature of the services provided, (2) whether those services were necessary, (3) the amount of time which was expended to complete the services, and (4) whether the amount of time and charge is a reasonable fee for the particular service rendered.
Attorney fee shifting statutes and contractual provisions usually provide only the right to recover “reasonable attorneys’ fees” incurred as a result of the litigation. In order to determine the reasonableness of the fee award requested, courts generally start with the “lodestar amount,” which is the reasonable number of hours spent on the litigation multiplied by the reasonable hourly rate. Serrano v. Priest, 20 Cal.3d 25, 48 (1977); Thayer v. Wells Fargo Bank, N.A., 92 Cal.App.4th 819 (2001).
Once this amount is determined, the court can take into consideration additional factors to adjust the “lodestar” either up or down as appropriate. Such factors include: the novelty or difficulty of the issues involved in the case and the skill required to present those issues; the extent to which the nature of the case precluded the employment of other attorneys; and the fee arrangement of the attorney and the client. Serrano, 20 Cal.3d at 48; Thayer, 92 Cal. App.4th at 833. The party seeking the fees has the burden of proof to establish that the time spent and the hourly fee charged is reasonable. Levy v. Toyota Motor Sales, U.S.A., Inc., 4 Cal.App.4th 807 (1992).
This particular case was an unlawful detainer action, the trial lasted two hours, the trial presented no novel issues, nor did it require herculean efforts. The case was disposed by bench trial within two hours. As such, although Defendants believe that no right to attorney’s fees exists in this matter, if the court is going to award attorney’s fees, then Movant has failed to prove the reasonableness of the fees requested. Given the foregoing the Motion should be denied.
Dated: December 22, 2015 LAW OFFICES OF
TIMOTHY L. MCCANDLESS
By ____________________________
Timothy L. McCandless, Esq.
Attorney for Defendants
Pierrick Brillouet and Yong C. Brillouet

 

Watchdog Report: Foreclosure Review Scrapped On Eve Of Critical, Congressman Says

Image

Posted: 12/31/2012 3:53 pm EST  |  Updated: 12/31/2012 4:08 pm EST

Foreclosure Review
242
5
103
211
Get Business Alerts:

The surprising decision by regulators to scrap a massive and expensive foreclosure review program in favor of a $10 billion settlement with 14 banks — reported by The New York Times Sunday night — came after a year of mounting concerns about the independence and effectiveness of the controversial program.

The program, known as the Independent Foreclosure Review, was supposed to give homeowners who believe that their bank made a mistake in handling their foreclosure an opportunity for a neutral third party to review the claim. It’s not clear what factors led banking regulators to abandon the program in favor of a settlement, but the final straw may have been a pending report by the Government Accountability Office, a nonpartisan investigative arm of Congress, which was investigating the review program.

Rep. Brad Miller, a North Carolina Democrat, told The Huffington Post that the report, which has not been released, was “critical” and that the Office of the Comptroller of the Currency, which administers the review, was aware of its findings. Miller said that that one problem the GAO was likely to highlight was an “unacceptably high” error rate of 11 percent in a sampling of bank loan files.

The sample files were chosen at random by the banks from their broader pool of foreclosed homeowners, who had not necessarily applied for relief. The data suggests that of the 4 million families who lost their homes to foreclosure since the housing crash, more than 400,000 had some bank-caused problem in their loan file. It also suggests that many thousands of those who could have applied for relief didn’t — because they weren’t aware of the review, or weren’t aware that their bank had made a mistake. Some of these mistakes pushed homeowners into foreclosure who otherwise could have afforded to keep their homes.

Miller said the news that a settlement to replace the review was in the works caught him by surprise, and stressed that he had no way of knowing whether the impending GAO report had triggered the decision.

It’s not clear what will happen to the 250,000 homeowners who have already applied to the Independent Foreclosure Review for relief. The Times, citing people familiar with the negotiations, said that a deal between the banks and banking regulators, led by the Office of the Comptroller of the Currency, could be reached by the end of the week. It wasn’t clear how that money would be distributed or how many current and former homeowners who lost their homes to foreclosure — or who were hit with an unnecessary fee — might qualify.

Bryan Hubbard, a spokesman for the OCC, which administers the program, declined to comment on the Times’ story. Hubbard told HuffPost, “The Office of the Comptroller of the Currency is committed to ensuring the Independent Foreclosure Review proceeds efficiently and to ensuring harmed borrowers are compensated as quickly as possible.”

Since the housing market crashed in 2007, thousands of foreclosed homeowners have complained that their mortgage company made a mistake in the management of their home loan, such as foreclosing on someone making payments on a loan modification plan. The Independent Foreclosure Review emerged from a legal agreement in April 2011 between 14 mortgage companies and bank regulators over these abusive “servicing” practices. It was supposed to give homeowners an opportunity to have an unbiased third party review their foreclosure and determine whether they might qualify for a cash payout of up to $125,000.

The initial response was tepid, at best. Homeowners and advocates complained that the application forms were confusing and that information about what type of compensation they might get was missing. Some told HuffPost that they were so disillusioned by the federal government’s anemic response to widely reported bank errors that they weren’t going to bother to apply.

In one instance, Daniel Casper, an Illinois wedding videographer, applied to the program in January after years of combat with Bank of America over his home loan. As The Huffington Post reported in October, he was initially rejected, because, according to the bank, his mortgage was not in the foreclosure process during the eligible review period. Promontory Financial Group, which Bank of America hired to review his loan, apparently did not double check Bank of America’s analysis against the extensive documentation that Chase submitted. That documentation clearly showed that his loan was eligible for review.

In recent months ProPublica, an investigative nonprofit, has issued a series of damning articles about the Independent Foreclosure Review. The most recent found that supposedly independent third-party reviewers looking over Bank of America loan files were given the “correct” answers in advance by the bank. These reviewers could override the answers, but they weren’t starting from a blank slate.

Banks, if they did not find a “compensable error,” did not have to pay anything, giving them a strong incentive to find no flaws with their own work.

“It was flawed from the start,” Miller said of the review program. “There was an inherent conflict of interest by just about everyone involved.”

Also on HuffPost:

Related News On Huffington Post:

Bank Of America Supplied Answers For ‘Independent’ Foreclosure Reviewers

ProPublica: The Independent Foreclosure Review is the government’s main effort to compensate homeowners for harm they suffered at the hands of banks — and, as…

Central Valley Foreclosures: Few Homeowners Taking Advantage Of Reviews

MODESTO — Nearly 50,000 Northern San Joaquin Valley homeowners potentially may be owed compensation for financial losses they incurred because of errors made during foreclosure…

Foreclosure-Prevention Roadshow Still Drawing Crowds Indicating Not All Is Well In The Housing Market

* NACA has hosted more than 100 events to assist homeowners * Group plays middleman between borrowers and banks * Foreclosures down from last year,…

Rebecca Mairone, BofA Exec Who Allegedly Enabled Fraud, Now Head Of JPMorgan Chase Foreclosure Review

by Paul Kiel ProPublica, Nov. 9, 2012, 1:18 p.m. An executive who the Justice Department says facilitated a scheme to defraud Fannie Mae and…

Predatory Lending and Predatory Servicing together at last Jan 1, 2013 Civil Code §2924.12(b)

Predatory Lending are abusive practices used in the mortgage industry that strip borrowers of home equity and threaten families with bankruptcy and foreclosure.

Predatory Lending can be broken down into three categories: Mortgage Origination, Mortgage Servicing; and Mortgage Collection and Foreclosure.

Mortgage Origination is the process by which you obtain your home loan from a mortgage broker or a bank.

Predatory lending practices in Mortgage Origination include:
# Excessive points;
# Charging fees not allowed or for services not delivered;
# Charging more than once for the same fee
# Providing a low teaser rate that adjusts to a rate you cannot afford;
# Successively refinancing your loan of “flipping;”
# “Steering” you into a loan that is more profitable to the Mortgage Originator;
# Changing the loan terms at closing or “bait & switch;”
# Closing in a location where you cannot adequately review the documents;
# Serving alcohol prior to closing;
# Coaching you to put minimum income or assets on you loan so that you will qualify for a certain amount;
# Securing an inflated appraisal;
# Receiving a kickback in money or favors from a particular escrow, title, appraiser or other service provider;
# Promising they will refinance your mortgage before your payment resets to a higher amount;
# Having you sign blank documents;
# Forging documents and signatures;
# Changing documents after you have signed them; and
# Loans with prepayment penalties or balloon payments.

Mortgage Servicing is the process of collecting loan payments and credit your loan.

Predatory lending practices in Mortgage Servicing include:
# Not applying payments on time;
# Applying payments to “Suspense;”
# “Jamming” illegal or improper fees;
# Creating an escrow or impounds account not allowed by the documents;
# Force placing insurance when you have adequate coverage;
# Improperly reporting negative credit history;
# Failing to provide you a detailed loan history; and
# Refusing to return your calls or letters.
#

Mortgage Collection & Foreclosure is the process Lenders use when you pay off your loan or when you house is repossessed for non-payment

Predatory lending practices in Mortgage Collection & Foreclosure include:
# Producing a payoff statement that includes improper charges & fees;
# Foreclosing in the name of an entity that is not the true owner of the mortgage;
# Failing to provide Default Loan Servicing required by all Fannie Mae mortgages;
# Failing to follow due process in foreclosure;
# Fraud on the court;
# Failing to provide copies of all documents and assignments; and
# Refusing to adequately communicate with you.

Abuses by Mortgage Service Companies

Although predatory lending has received far more attention than abusive servicing, a significant percentage of consumer complaints over loans involve servicing, not origination. For example, the director of the Nevada Fair Housing Center testified that of the hundreds of complaints of predatory lending issues her office received in 2002, about 42 percent involved servicing once the loan was transferred

Abusive Mortgage Servicing Defined:

Abusive servicing occurs when a servicer, either through action or inaction, obtains or attempts to obtain unwarranted fees or other costs from borrowers, engages in unfair collection practices, or through its own improper behavior or inaction causes borrowers to be more likely to go into default or have their homes foreclosed. Abusive practices should be distinguished from appropriate actions that may harm borrowers, such as a servicer merely collecting appropriate late fees or foreclosing on borrowers who do not make their payments despite proper loss mitigation efforts. Servicing can be abusive either intentionally, when there is intent to obtain unwarranted fees, or negligently, when, for example, a servicer’s records are so disorganized that borrowers are regularly charged late fees even when mortgage payments were made on time.

Abusive servicing often happens to debtors who have filed a Chapter 13 Bankruptcy Plan and are in the process of making payments under the Plan. If you suspect that your mortgage servicer is abusing your relationship by charging unnecessary fees while you are paying off your Chapter 13 Plan, call us. We can help.

There is significant evidence that some Mortgage servicers have engaged in abusive behavior and that borrowers have frequently been the victims. Some servicers have engaged in practices that are not only detrimental to borrowers but also illegal Such abuse has been documented in court opinions and decisions, in the decisions and findings of ratings agencies, in litigation and settlements obtained by government agencies against prominent servicers, in congressional testimony, and in newspaper accounts of borrowers who claim to have been mistreated by servicers. The abusive servicing practices documented in these sources include improper foreclosure or attempted foreclosure, improper fees, improper forced-placed insurance, and improper use or oversight of escrow funds .

Civil Code §2924.12(b) Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees. : )

5 Dec

prohabition-images

H. Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees

2013 is going to be a good year

One of the most important provisions of the Act from a lender’s perspective is that it provides borrowers with the right to sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation of certain enumerated portions of the Act before the trustee’s deed upon sale recorded. (Civil Code §2924.12(a).) In an area that will certainly open up a Pandora’s Box of litigation, the Act does not define what constitutes a “material” violation of the Act. If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000. (Civil Code §2924.12(b).) Furthermore, a violation of the enumerated provisions of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman. (Civil Code §2924.12(d).) Lastly, in a one-sided attorney’s fee provision that only benefits borrowers, the court may award a borrower who obtains an injunction or receives an award of economic damages as a result of the violation of the Act their reasonable attorney’s fees and costs as the prevailing party. (Civil Code §2924.12(i).) This provides all the more reason for lenders and mortgage servicers to comply with the terms of the Act. This provision for the recovery by only the borrower of their reasonable attorney’s fees makes it more likely that borrowers will file litigation against mortgage lenders or servicers than they otherwise would. Compliance is the lender’s or mortgage servicer’s best defense to litigation under the Act.

Significantly for lenders, as long as the mortgage servicer remedies the material violation of the Act before the trustee’s deed upon sale has recorded, the Act specifically provides that the mortgage servicer shall not be liable under the Act for any violation or damages. (Civil Code §2924.12(b) & (c).) The Act also clarifies that signatories to the National Mortgage Settlement who are in compliance with the terms of that settlement, as they relate to the terms of the Act, will not face liability under the Act. (Civil Code §2924.12(g).

Improper foreclosure or attempted foreclosure

Because servicers can exact fees associated with foreclosures, such as attorneys’ fees, some servicers have attempted to foreclose on property even when borrowers are current on their payments or without giving borrowers enough time to repay or otherwise working with them on a repayment plan Furthermore, a speedy foreclosure may save servicers the cost of attempting other techniques that might have prevented the foreclosure.

Some servicers have been so brazen that they have regularly claimed to the courts that borrowers were in default so as to justify foreclosure, even though the borrowers were current on their payments. Other courts have also decried the frequent use of false statements to obtain relief from stay in order to foreclose on borrowers’ homes. For example, in Hart v. GMAC Mortgage Corporation, et al., 246 B.R. 709 (2000), even though the borrower had made the payments required of him by a forbearance agreement he had entered into with the servicer (GMAC Mortgage Corporation), it created a “negative suspense account” for moneys it had paid out, improperly charged the borrower an additional monthly sum to repay the negative suspense account, charged him late fees for failing to make the entire payment demanded, and began foreclosure proceedings.

Improper fees

Claiming that borrowers are in default when they are actually current allows servicers to charge unwarranted fees, either late fees or fees related to default and foreclosure. Servicers receive as a conventional fee a percentage of the total value of the loans they service, typically 25 basis points for prime loans and 50 basis points for subprime loans In addition, contracts typically provide that the servicer, not the trustee or investors, has the right to keep any and all late fees or fees associated with defaults. Servicers charge late fees not only because they act as a prod to coax borrowers into making payments on time, but also because borrowers who fail to make payments impose additional costs on servicers, which must then engage in loss mitigation to induce payment.

Such fees are a crucial part of servicers’ income. For example, one servicer’s CEO reportedly stated that extra fees, such as late fees, appeared to be paying for all of the operating costs of the company’s entire servicing department, leaving the conventional servicing fee almost completely profit The pressure to collect such fees appears to be higher on subprime servicers than on prime servicers:

Because borrowers typically cannot prove the exact date a payment was received, servicers can charge late fees even when they receive the payment on time Improper late fees may also be based on the loss of borrowers’ payments by servicers, their inability to track those payments accurately, or their failure to post payments in a timely fashion. In Ronemus v. FTB Mortgage Services, 201 B.R. 458 (1996), under a Chapter 13 bankruptcy plan, the borrowers had made all of their payments on time except for two; they received permission to pay these two late and paid late fees for the privilege. However, the servicer, FTB Mortgage Services, misapplied their payments, then began placing their payments into a suspense account and collecting unauthorized late fees. The servicer ignored several letters from the borrowers’ attorney attempting to clear up the matter, sent regular demands for late fees, and began harassing the borrowers with collection efforts. When the borrowers sued, the servicer submitted to the court an artificially inflated accounting of how much the borrowers owed.

Some servicers have sent out late notices even when they have received timely payments and even before the end of a borrower’s grace period Worse yet, a servicer might pocket the payment, such as an extra payment of principal, and never credit it to the borrower Late fees on timely payments are a common problem when borrowers are making mortgage payments through a bankruptcy plan

Moreover, some servicers have also added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrowers’ ignorance of the exact amount owed. They can collect such fees or other unwarranted claims by submitting inaccurate payoff demands when a borrower refinances or sells the house). Or they can place the borrowers’ monthly payments in a suspense account and then charge late fees even though they received the payment Worse yet, some servicers pyramid their late fees, applying a portion of the current payment to a previous late fee and then charging an additional late fee even though the borrower has made a timely and full payment for the new month Pyramiding late fees allows servicers to charge late fees month after month even though the borrower made only one late payment

Servicers can turn their fees into a profit center by sending inaccurate monthly payment demands, demanding unearned fees or charges not owed, or imposing fees higher than the expenses for a panoply of actions For example, some servicers take advantage of borrowers’ ignorance by charging fees, such as prepayment penalties, where the note does not provide for them Servicers have sometimes imposed a uniform set of fees over an entire pool of loans, disregarding the fact that some of the loan documents did not provide for those particular fees. Or they charge more for attorneys’, property inspection, or appraisal fees than were actually incurred. Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees

The complexity of the terms of many loans makes it difficult for borrowers to discover whether they are being overcharged Moreover, servicers can frustrate any attempts to sort out which fees are genuine.

Improperly forced-placed insurance

Mortgage holders are entitled under the terms of the loan to require borrowers to carry homeowners’ insurance naming the holder as the payee in case of loss and to force-place insurance by buying policies for borrowers who fail to do so and charging them for the premiums However, some servicers have force-placed insurance even in cases where the borrower already had it and even provided evidence of it to the servicer Worse yet, servicers have charged for force-placed insurance without even purchasing it. Premiums for force-placed insurance are often inflated in that they provide protection in excess of what the loan.

Escrow Account Mismanagement

One of the benefits of servicing mortgages is controlling escrow accounts to pay for insurance, taxes, and the like and, in most states, keeping any interest earned on these accounts Borrowers have complained that servicers have failed to make tax or insurance payments when they were due or at all. The treasurer of the country’s second largest county estimated that this failure to make timely payments cost borrowers late fees of at least $2 million in that county over a two-year span, causing some to lose their homes. If servicers fail to make insurance payments and a policy lapses, borrowers may face much higher insurance costs even if they purchase their own, non-force-placed policy. Worse yet, borrowers may find themselves unable to buy insurance at all if they cannot find a new insurer willing to write them a policy

You can make a claim for mortgage service abuse, and often the court will award actual and punitive damages. If you think you have been a victim of mortgage service abuse, contact us. We can help you make a claim.

Many a client call me when its toooooo late however sometimes something can be done it would envolve an appeal and this application for a stay. Most likely you will have to pay the reasonable rental value till the case is decided. And … Yes we have had this motion granted. ex-parte-application-for-stay-of-judgment-or-unlawful-detainer3
When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case

BILL NUMBER: AB 278	CHAPTERED
	BILL TEXT

	CHAPTER  86
	FILED WITH SECRETARY OF STATE  JULY 11, 2012
	APPROVED BY GOVERNOR  JULY 11, 2012
	PASSED THE SENATE  JULY 2, 2012
	PASSED THE ASSEMBLY  JULY 2, 2012
	AMENDED IN SENATE  SEPTEMBER 1, 2011
	AMENDED IN SENATE  JUNE 23, 2011

INTRODUCED BY   Assembly Members Eng, Feuer, Mitchell, and John A.
Pérez
   (Principal coauthors: Assembly Members Davis, Carter, and Skinner)

   (Principal coauthors: Senators Leno, Evans, Calderon, Corbett,
DeSaulnier, Hancock, Pavley, and Steinberg)

                        FEBRUARY 8, 2011

   An act to amend and add Sections 2923.5 and 2923.6 of, to amend
and repeal Section 2924 of, to add Sections 2920.5, 2923.4, 2923.7,
2924.17, and 2924.20 to, to add and repeal Sections 2923.55, 2924.9,
2924.10, 2924.18, and 2924.19 of, and to add, repeal, and add
Sections 2924.11, 2924.12, and 2924.15 of, the Civil Code, relating
to mortgages.

	LEGISLATIVE COUNSEL'S DIGEST

   AB 278, Eng. Mortgages and deeds of trust: foreclosure.
   (1) Existing law, until January 1, 2013, requires a mortgagee,
trustee, beneficiary, or authorized agent to contact the borrower
prior to filing a notice of default to explore options for the
borrower to avoid foreclosure, as specified. Existing law requires a
notice of default or, in certain circumstances, a notice of sale, to
include a declaration stating that the mortgagee, trustee,
beneficiary, or authorized agent has contacted the borrower, or has
tried with due diligence to contact the borrower, or that no contact
was required for a specified reason.
   This bill would add mortgage servicers, as defined, to these
provisions and would extend the operation of these provisions
indefinitely, except that it would delete the requirement with
respect to a notice of sale. The bill would, until January 1, 2018,
additionally require the borrower, as defined, to be provided with
specified information in writing prior to recordation of a notice of
default and, in certain circumstances, within 5 business days after
recordation. The bill would prohibit a mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent from recording a notice of
default or, until January 1, 2018, recording a notice of sale or
conducting a trustee's sale while a complete first lien loan
modification application is pending, under specified conditions. The
bill would, until January 1, 2018, establish additional procedures to
be followed regarding a first lien loan modification application,
the denial of an application, and a borrower's right to appeal a
denial.
   (2) Existing law imposes various requirements that must be
satisfied prior to exercising a power of sale under a mortgage or
deed of trust, including, among other things, recording a notice of
default and a notice of sale.
   The bill would, until January 1, 2018, require a written notice to
the borrower after the postponement of a foreclosure sale in order
to advise the borrower of any new sale date and time, as specified.
The bill would provide that an entity shall not record a notice of
default or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the deed of trust, the
original or substituted trustee, or the designated agent of the
holder of the beneficial interest, as specified.
   The bill would prohibit recordation of a notice of default or a
notice of sale or the conduct of a trustee's sale if a foreclosure
prevention alternative has been approved and certain conditions exist
and would, until January 1, 2018, require recordation of a
rescission of those notices upon execution of a permanent foreclosure
prevention alternative. The bill would, until January 1, 2018,
prohibit the collection of application fees and the collection of
late fees while a foreclosure prevention alternative is being
considered, if certain criteria are met, and would require a
subsequent mortgage servicer to honor any previously approved
foreclosure prevention alternative.
   The bill would authorize a borrower to seek an injunction and
damages for violations of certain of the provisions described above,
except as specified. The bill would authorize the greater of treble
actual damages or $50,000 in statutory damages if a violation of
certain provisions is found to be intentional or reckless or resulted
from willful misconduct, as specified. The bill would authorize the
awarding of attorneys' fees for prevailing borrowers, as specified.
Violations of these provisions by licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate would also be violations of those
respective licensing laws. Because a violation of certain of those
licensing laws is a crime, the bill would impose a state-mandated
local program.
   The bill would provide that the requirements imposed on mortgage
servicers, and mortgagees, trustees, beneficiaries, and authorized
agents, described above are applicable only to mortgages or deeds of
trust secured by residential real property not exceeding 4 dwelling
units that is owner-occupied, as defined, and, until January 1, 2018,
only to those entities who conduct more than 175 foreclosure sales
per year or annual reporting period, except as specified.
   The bill would require, upon request from a borrower who requests
a foreclosure prevention alternative, a mortgage servicer who
conducts more than 175 foreclosure sales per year or annual reporting
period to establish a single point of contact and provide the
borrower with one or more direct means of communication with the
single point of contact. The bill would specify various
responsibilities of the single point of contact. The bill would
define single point of contact for these purposes.
   (3) Existing law prescribes documents that may be recorded or
filed in court.
   This bill would require that a specified declaration, notice of
default, notice of sale, deed of trust, assignment of a deed of
trust, substitution of trustee, or declaration or affidavit filed in
any court relative to a foreclosure proceeding or recorded by or on
behalf of a mortgage servicer shall be accurate and complete and
supported by competent and reliable evidence. The bill would require
that before recording or filing any of those documents, a mortgage
servicer shall ensure that it has reviewed competent and reliable
evidence to substantiate the borrower's default and the right to
foreclose, including the borrower's loan status and loan information.
The bill would, until January 1, 2018, provide that any mortgage
servicer that engages in multiple and repeated violations of these
requirements shall be liable for a civil penalty of up to $7,500 per
mortgage or deed of trust, in an action brought by specified state
and local government entities, and would also authorize
administrative enforcement against licensees of the Department of
Corporations, the Department of Financial Institutions, and the
Department of Real Estate.
   The bill would authorize the Department of Corporations, the
Department of Financial Institutions, and the Department of Real
Estate to adopt regulations applicable to persons and entities under
their respective jurisdictions for purposes of the provisions
described above. The bill would provide that a violation of those
regulations would be enforceable only by the regulating agency.
   (4) The bill would state findings and declarations of the
Legislature in relation to foreclosures in the state generally, and
would state the purposes of the bill.
   (5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) California is still reeling from the economic impacts of a
wave of residential property foreclosures that began in 2007. From
2007 to 2011 alone, there were over 900,000 completed foreclosure
sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation
were in California, and the current wave of foreclosures continues
apace. All of this foreclosure activity has adversely affected
property values and resulted in less money for schools, public
safety, and other public services. In addition, according to the
Urban Institute, every foreclosure imposes significant costs on local
governments, including an estimated nineteen thousand two hundred
twenty-nine dollars ($19,229) in local government costs. And the
foreclosure crisis is not over; there remain more than two million
"underwater" mortgages in California.
   (b) It is essential to the economic health of this state to
mitigate the negative effects on the state and local economies and
the housing market that are the result of continued foreclosures by
modifying the foreclosure process to ensure that borrowers who may
qualify for a foreclosure alternative are considered for, and have a
meaningful opportunity to obtain, available loss mitigation options.
These changes to the state's foreclosure process are essential to
ensure that the current crisis is not worsened by unnecessarily
adding foreclosed properties to the market when an alternative to
foreclosure may be available. Avoiding foreclosure, where possible,
will help stabilize the state's housing market and avoid the
substantial, corresponding negative effects of foreclosures on
families, communities, and the state and local economy.
   (c) This act is necessary to provide stability to California's
statewide and regional economies and housing market by facilitating
opportunities for borrowers to pursue loss mitigation options.
  SEC. 2.  Section 2920.5 is added to the Civil Code, to read:
   2920.5.  For purposes of this article, the following definitions
apply:
   (a) "Mortgage servicer" means a person or entity who directly
services a loan, or who is responsible for interacting with the
borrower, managing the loan account on a daily basis including
collecting and crediting periodic loan payments, managing any escrow
account, or enforcing the note and security instrument, either as the
current owner of the promissory note or as the current owner's
authorized agent. "Mortgage servicer" also means a subservicing agent
to a master servicer by contract. "Mortgage servicer" shall not
include a trustee, or a trustee's authorized agent, acting under a
power of sale pursuant to a deed of trust.
   (b) "Foreclosure prevention alternative" means a first lien loan
modification or another available loss mitigation option.
   (c) (1) Unless otherwise provided and for purposes of Sections
2923.4, 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11,
2924.18, and 2924.19, "borrower" means any natural person who is a
mortgagor or trustor and who is potentially eligible for any federal,
state, or proprietary foreclosure prevention alternative program
offered by, or through, his or her mortgage servicer.
   (2) For purposes of the sections listed in paragraph (1),
"borrower" shall not include any of the following:
   (A) An individual who has surrendered the secured property as
evidenced by either a letter confirming the surrender or delivery of
the keys to the property to the mortgagee, trustee, beneficiary, or
authorized agent.
   (B) An individual who has contracted with an organization, person,
or entity whose primary business is advising people who have decided
to leave their homes on how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.
   (C) An individual who has filed a case under Chapter 7, 11, 12, or
13 of Title 11 of the United States Code and the bankruptcy court
has not entered an order closing or dismissing the bankruptcy case,
or granting relief from a stay of foreclosure.
   (d) "First lien" means the most senior mortgage or deed of trust
on the property that is the subject of the notice of default or
notice of sale.
  SEC. 3.  Section 2923.4 is added to the Civil Code, to read:
   2923.4.  (a) The purpose of the act that added this section is to
ensure that, as part of the nonjudicial foreclosure process,
borrowers are considered for, and have a meaningful opportunity to
obtain, available loss mitigation options, if any, offered by or
through the borrower's mortgage servicer, such as loan modifications
or other alternatives to foreclosure. Nothing in the act that added
this section, however, shall be interpreted to require a particular
result of that process.
   (b) Nothing in this article obviates or supersedes the obligations
of the signatories to the consent judgment entered in the case
entitled United States of America et al. v. Bank of America
Corporation et al., filed in the United States District Court for the
District of Columbia, case number 1:12-cv-00361 RMC.
  SEC. 4.  Section 2923.5 of the Civil Code is amended to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 30 days after initial contact is made as required by
paragraph (2) or 30 days after satisfying the due diligence
requirements as described in subdivision (e).
   (B) The mortgage servicer complies with paragraph (1) of
subdivision (a) of Section 2924.18, if the borrower has provided a
complete application as defined in subdivision (d) of Section
2924.18.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (b) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

    (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(a). Any loan modification or workout plan offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
    (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (a) provided that the failure to contact
the borrower occurred despite the due diligence of the mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
    (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
    (h) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 5.  Section 2923.5 is added to the Civil Code, to read:
   2923.5.  (a) (1) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until both of the following:
   (A) Either 30 days after initial contact is made as required by
paragraph (2) or 30 days after satisfying the due diligence
requirements as described in subdivision (e).
   (B) The mortgage servicer complies with subdivision (a) of Section
2924.11, if the borrower has provided a complete application as
defined in subdivision (f) of Section 2924.11.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (b) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (c) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (d) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(a). Any loan modification or workout plan offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
   (e) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (a) provided that the failure to contact
the borrower occurred despite the due diligence of the mortgage
servicer. For purposes of this section, "due diligence" shall require
and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) This section shall become operative on January 1, 2018.
  SEC. 6.  Section 2923.55 is added to the Civil Code, to read:
   2923.55.  (a) A mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent may not record a notice of default
pursuant to Section 2924 until all of the following:
    (1) The mortgage servicer has satisfied the requirements of
paragraph (1) of subdivision (b).
   (2) Either 30 days after initial contact is made as required by
paragraph (2) of subdivision (b) or 30 days after satisfying the due
diligence requirements as described in subdivision (f).
   (3) The mortgage servicer complies with subdivision (c) of Section
2923.6, if the borrower has provided a complete application as
defined in subdivision (h) of Section 2923.6.
   (b) (1) As specified in subdivision (a), a mortgage servicer shall
send the following information in writing to the borrower:
   (A) A statement that if the borrower is a servicemember or a
dependent of a servicemember, he or she may be entitled to certain
protections under the federal Servicemembers Civil Relief Act (50
U.S.C. Sec. 501 et seq.) regarding the servicemember's interest rate
and the risk of foreclosure, and counseling for covered
servicemembers that is available at agencies such as Military
OneSource and Armed Forces Legal Assistance.
   (B) A statement that the borrower may request the following:
   (i) A copy of the borrower's promissory note or other evidence of
indebtedness.
   (ii) A copy of the borrower's deed of trust or mortgage.
   (iii) A copy of any assignment, if applicable, of the borrower's
mortgage or deed of trust required to demonstrate the right of the
mortgage servicer to foreclose.
   (iv) A copy of the borrower's payment history since the borrower
was last less than 60 days past due.
   (2) A mortgage servicer shall contact the borrower in person or by
telephone in order to assess the borrower's financial situation and
explore options for the borrower to avoid foreclosure. During the
initial contact, the mortgage servicer shall advise the borrower that
he or she has the right to request a subsequent meeting and, if
requested, the mortgage servicer shall schedule the meeting to occur
within 14 days. The assessment of the borrower's financial situation
and discussion of options may occur during the first contact, or at
the subsequent meeting scheduled for that purpose. In either case,
the borrower shall be provided the toll-free telephone number made
available by the United States Department of Housing and Urban
Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
   (c) A notice of default recorded pursuant to Section 2924 shall
include a declaration that the mortgage servicer has contacted the
borrower, has tried with due diligence to contact the borrower as
required by this section, or that no contact was required because the
individual did not meet the definition of "borrower" pursuant to
subdivision (c) of Section 2920.5.
   (d) A mortgage servicer's loss mitigation personnel may
participate by telephone during any contact required by this section.

   (e) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other adviser
to discuss with the mortgage servicer, on the borrower's behalf, the
borrower's financial situation and options for the borrower to avoid
foreclosure. That contact made at the direction of the borrower shall
satisfy the contact requirements of paragraph (2) of subdivision
(b). Any foreclosure prevention alternative offered at the meeting by
the mortgage servicer is subject to approval by the borrower.
   (f) A notice of default may be recorded pursuant to Section 2924
when a mortgage servicer has not contacted a borrower as required by
paragraph (2) of subdivision (b), provided that the failure to
contact the borrower occurred despite the due diligence of the
mortgage servicer. For purposes of this section, "due diligence"
shall require and mean all of the following:
   (1) A mortgage servicer shall first attempt to contact a borrower
by sending a first-class letter that includes the toll-free telephone
number made available by HUD to find a HUD-certified housing
counseling agency.
   (2) (A) After the letter has been sent, the mortgage servicer
shall attempt to contact the borrower by telephone at least three
times at different hours and on different days. Telephone calls shall
be made to the primary telephone number on file.
   (B) A mortgage servicer may attempt to contact a borrower using an
automated system to dial borrowers, provided that, if the telephone
call is answered, the call is connected to a live representative of
the mortgage servicer.
   (C) A mortgage servicer satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
   (3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
mortgage servicer shall then send a certified letter, with return
receipt requested, that includes the toll-free telephone number made
available by HUD to find a HUD-certified housing counseling agency.
   (4) The mortgage servicer shall provide a means for the borrower
to contact it in a timely manner, including a toll-free telephone
number that will provide access to a live representative during
business hours.
   (5) The mortgage servicer has posted a prominent link on the
homepage of its Internet Web site, if any, to the following
information:
   (A) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options.
   (B) A list of financial documents borrowers should collect and be
prepared to present to the mortgage servicer when discussing options
for avoiding foreclosure.
   (C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with their mortgage servicer.
   (D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
   (g) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 7.  Section 2923.6 of the Civil Code is amended to read:
   2923.6.  (a) The Legislature finds and declares that any duty that
mortgage servicers may have to maximize net present value under
their pooling and servicing agreements is owed to all parties in a
loan pool, or to all investors under a pooling and servicing
agreement, not to any particular party in the loan pool or investor
under a pooling and servicing agreement, and that a mortgage servicer
acts in the best interests of all parties to the loan pool or
investors in the pooling and servicing agreement if it agrees to or
implements a loan modification or workout plan for which both of the
following apply:
   (1) The loan is in payment default, or payment default is
reasonably foreseeable.
   (2) Anticipated recovery under the loan modification or workout
plan exceeds the anticipated recovery through foreclosure on a net
present value basis.
   (b) It is the intent of the Legislature that the mortgage servicer
offer the borrower a loan modification or workout plan if such a
modification or plan is consistent with its contractual or other
authority.
   (c) If a borrower submits a complete application for a first lien
loan modification offered by, or through, the borrower's mortgage
servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not record a notice of default or notice of
sale, or conduct a trustee's sale, while the complete first lien loan
modification application is pending. A mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent shall not record a notice
of default or notice of sale or conduct a trustee's sale until any of
the following occurs:
   (1) The mortgage servicer makes a written determination that the
borrower is not eligible for a first lien loan modification, and any
appeal period pursuant to subdivision (d) has expired.
   (2) The borrower does not accept an offered first lien loan
modification within 14 days of the offer.
   (3) The borrower accepts a written first lien loan modification,
but defaults on, or otherwise breaches the borrower's obligations
under, the first lien loan modification.
   (d) If the borrower's application for a first lien loan
modification is denied, the borrower shall have at least 30 days from
the date of the written denial to appeal the denial and to provide
evidence that the mortgage servicer's determination was in error.
   (e) If the borrower's application for a first lien loan
modification is denied, the mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent shall not record a notice of default
or, if a notice of default has already been recorded, record a
notice of sale or conduct a trustee's sale until the later of:
   (1) Thirty-one days after the borrower is notified in writing of
the denial.
   (2) If the borrower appeals the denial pursuant to subdivision
(d), the later of 15 days after the denial of the appeal or 14 days
after a first lien loan modification is offered after appeal but
declined by the borrower, or, if a first lien loan modification is
offered and accepted after appeal, the date on which the borrower
fails to timely submit the first payment or otherwise breaches the
terms of the offer.
   (f) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying the reasons for denial, including the
following:
   (1) The amount of time from the date of the denial letter in which
the borrower may request an appeal of the denial of the first lien
loan modification and instructions regarding how to appeal the
denial.
   (2) If the denial was based on investor disallowance, the specific
reasons for the investor disallowance.
   (3) If the denial is the result of a net present value
calculation, the monthly gross income and property value used to
calculate the net present value and a statement that the borrower may
obtain all of the inputs used in the net present value calculation
upon written request to the mortgage servicer.
   (4) If applicable, a finding that the borrower was previously
offered a first lien loan modification and failed to successfully
make payments under the terms of the modified loan.

         (5) If applicable, a description of other foreclosure
prevention alternatives for which the borrower may be eligible, and a
list of the steps the borrower must take in order to be considered
for those options. If the mortgage servicer has already approved the
borrower for another foreclosure prevention alternative, information
necessary to complete the foreclosure prevention alternative.
   (g) In order to minimize the risk of borrowers submitting multiple
applications for first lien loan modifications for the purpose of
delay, the mortgage servicer shall not be obligated to evaluate
applications from borrowers who have already been evaluated or
afforded a fair opportunity to be evaluated for a first lien loan
modification prior to January 1, 2013, or who have been evaluated or
afforded a fair opportunity to be evaluated consistent with the
requirements of this section, unless there has been a material change
in the borrower's financial circumstances since the date of the
borrower's previous application and that change is documented by the
borrower and submitted to the mortgage servicer.
   (h) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (i) Subdivisions (c) to (h), inclusive, shall not apply to
entities described in subdivision (b) of Section 2924.18.
   (j) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
    (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 8.  Section 2923.6 is added to the Civil Code, to read:
   2923.6.  (a) The Legislature finds and declares that any duty
mortgage servicers may have to maximize net present value under their
pooling and servicing agreements is owed to all parties in a loan
pool, or to all investors under a pooling and servicing agreement,
not to any particular party in the loan pool or investor under a
pooling and servicing agreement, and that a mortgage servicer acts in
the best interests of all parties to the loan pool or investors in
the pooling and servicing agreement if it agrees to or implements a
loan modification or workout plan for which both of the following
apply:
   (1) The loan is in payment default, or payment default is
reasonably foreseeable.
   (2) Anticipated recovery under the loan modification or workout
plan exceeds the anticipated recovery through foreclosure on a net
present value basis.
   (b) It is the intent of the Legislature that the mortgage servicer
offer the borrower a loan modification or workout plan if such a
modification or plan is consistent with its contractual or other
authority.
   (c) This section shall become operative on January 1, 2018.
  SEC. 9.  Section 2923.7 is added to the Civil Code, to read:
   2923.7.  (a) Upon request from a borrower who requests a
foreclosure prevention alternative, the mortgage servicer shall
promptly establish a single point of contact and provide to the
borrower one or more direct means of communication with the single
point of contact.
   (b) The single point of contact shall be responsible for doing all
of the following:
   (1) Communicating the process by which a borrower may apply for an
available foreclosure prevention alternative and the deadline for
any required submissions to be considered for these options.
   (2) Coordinating receipt of all documents associated with
available foreclosure prevention alternatives and notifying the
borrower of any missing documents necessary to complete the
application.
   (3) Having access to current information and personnel sufficient
to timely, accurately, and adequately inform the borrower of the
current status of the foreclosure prevention alternative.
   (4) Ensuring that a borrower is considered for all foreclosure
prevention alternatives offered by, or through, the mortgage
servicer, if any.
   (5) Having access to individuals with the ability and authority to
stop foreclosure proceedings when necessary.
   (c) The single point of contact shall remain assigned to the
borrower's account until the mortgage servicer determines that all
loss mitigation options offered by, or through, the mortgage servicer
have been exhausted or the borrower's account becomes current.
   (d) The mortgage servicer shall ensure that a single point of
contact refers and transfers a borrower to an appropriate supervisor
upon request of the borrower, if the single point of contact has a
supervisor.
   (e) For purposes of this section, "single point of contact" means
an individual or team of personnel each of whom has the ability and
authority to perform the responsibilities described in subdivisions
(b) to (d), inclusive. The mortgage servicer shall ensure that each
member of the team is knowledgeable about the borrower's situation
and current status in the alternatives to foreclosure process.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g) (1) This section shall not apply to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (2) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in paragraph (1) exceeds
the threshold of 175 specified in paragraph (1), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to this section, which date shall
be the first day of the first month that is six months after the
close of the calendar year or annual reporting period during which
that entity exceeded the threshold.
  SEC. 10.  Section 2924 of the Civil Code, as amended by Section 1
of Chapter 180 of the Statutes of 2010, is amended to read:
   2924.  (a) Every transfer of an interest in property, other than
in trust, made only as a security for the performance of another act,
is to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
   (1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
   (A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
   (B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
   (C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
   (D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
   (2) Not less than three months shall elapse from the filing of the
notice of default.
   (3) Except as provided in paragraph (4), after the lapse of the
three months described in paragraph (2), the mortgagee, trustee, or
other person authorized to take the sale shall give notice of sale,
stating the time and place thereof, in the manner and for a time not
less than that set forth in Section 2924f.
   (4) Notwithstanding paragraph (3), the mortgagee, trustee, or
other person authorized to take sale may record a notice of sale
pursuant to Section 2924f up to five days before the lapse of the
three-month period described in paragraph (2), provided that the date
of sale is no earlier than three months and 20 days after the
recording of the notice of default.
   (5) Until January 1, 2018, whenever a sale is postponed for a
period of at least 10 business days pursuant to Section 2924g, a
mortgagee, beneficiary, or authorized agent shall provide written
notice to a borrower regarding the new sale date and time, within
five business days following the postponement. Information provided
pursuant to this paragraph shall not constitute the public
declaration required by subdivision (d) of Section 2924g. Failure to
comply with this paragraph shall not invalidate any sale that would
otherwise be valid under Section 2924f. This paragraph shall be
inoperative on January 1, 2018.
   (6) No entity shall record or cause a notice of default to be
recorded or otherwise initiate the 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. No agent of the holder of the beneficial interest under the
mortgage or deed of trust, original trustee or substituted trustee
under the deed of trust may record a notice of default or otherwise
commence the foreclosure process except when acting within the scope
of authority designated by the holder of the beneficial interest.
   (b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
   (c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.
   (d) All of the following shall constitute privileged
communications pursuant to Section 47:
   (1) The mailing, publication, and delivery of notices as required
by this section.
   (2) Performance of the procedures set forth in this article.
   (3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
   (e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
  SEC. 11.  Section 2924 of the Civil Code, as amended by Section 2
of Chapter 180 of the Statutes of 2010, is repealed.
  SEC. 12.  Section 2924.9 is added to the Civil Code, to read:
   2924.9.  (a) Unless a borrower has previously exhausted the first
lien loan modification process offered by, or through, his or her
mortgage servicer described in Section 2923.6, within five business
days after recording a notice of default pursuant to Section 2924, a
mortgage servicer that offers one or more foreclosure prevention
alternatives shall send a written communication to the borrower that
includes all of the following information:
   (1) That the borrower may be evaluated for a foreclosure
prevention alternative or, if applicable, foreclosure prevention
alternatives.
   (2) Whether an application is required to be submitted by the
borrower in order to be considered for a foreclosure prevention
alternative.
   (3) The means and process by which a borrower may obtain an
application for a foreclosure prevention alternative.
   (b) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (c) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (d)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 13.  Section 2924.10 is added to the Civil Code, to read:
   2924.10.  (a) When a borrower submits a complete first lien
modification application or any document in connection with a first
lien modification application, the mortgage servicer shall provide
written acknowledgment of the receipt of the documentation within
five business days of receipt. In its initial acknowledgment of
receipt of the loan modification application, the mortgage servicer
shall include the following information:
   (1) A description of the loan modification process, including an
estimate of when a decision on the loan modification will be made
after a complete application has been submitted by the borrower and
the length of time the borrower will have to consider an offer of a
loan modification or other foreclosure prevention alternative.
   (2) Any deadlines, including deadlines to submit missing
documentation, that would affect the processing of a first lien loan
modification application.
   (3) Any expiration dates for submitted documents.
   (4) Any deficiency in the borrower's first lien loan modification
application.
   (b) For purposes of this section, a borrower's first lien loan
modification application shall be deemed to be "complete" when a
borrower has supplied the mortgage servicer with all documents
required by the mortgage servicer within the reasonable timeframes
specified by the mortgage servicer.
   (c) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (d) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (e)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 14.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a foreclosure prevention alternative is approved
in writing prior to the recordation of a notice of default, a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent shall not record a notice of default under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (c) When a borrower accepts an offered first lien loan
modification or other foreclosure prevention alternative, the
mortgage servicer shall provide the borrower with a copy of the fully
executed loan modification agreement or agreement evidencing the
foreclosure prevention alternative following receipt of the executed
copy from the borrower.
   (d) A mortgagee, beneficiary, or authorized agent shall record a
rescission of a notice of default or cancel a pending trustee's sale,
if applicable, upon the borrower executing a permanent foreclosure
prevention alternative. In the case of a short sale, the rescission
or cancellation of the pending trustee's sale shall occur when the
short sale has been approved by all parties and proof of funds or
financing has been provided to the mortgagee, beneficiary, or
authorized agent.
   (e) The mortgage servicer shall not charge any application,
processing, or other fee for a first lien loan modification or other
foreclosure prevention alternative.
   (f) The mortgage servicer shall not collect any late fees for
periods during which a complete first lien loan modification
application is under consideration or a denial is being appealed, the
borrower is making timely modification payments, or a foreclosure
prevention alternative is being evaluated or exercised.
   (g) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of that borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (h) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (i) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 15.  Section 2924.11 is added to the Civil Code, to read:
   2924.11.  (a) If a borrower submits a complete application for a
foreclosure prevention alternative offered by, or through, the
borrower's mortgage servicer, a mortgage servicer, trustee,
mortgagee, beneficiary, or authorized agent shall not record a notice
of sale or conduct a trustee's sale while the complete foreclosure
prevention alternative application is pending, and until the borrower
has been provided with a written determination by the mortgage
servicer regarding that borrower's eligibility for the requested
foreclosure prevention alternative.
   (b) Following the denial of a first lien loan modification
application, the mortgage servicer shall send a written notice to the
borrower identifying with specificity the reasons for the denial and
shall include a statement that the borrower may obtain additional
documentation supporting the denial decision upon written request to
the mortgage servicer.
   (c) If a foreclosure prevention alternative is approved in writing
prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (d) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (1) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (2) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (e) This section applies only to mortgages or deeds of trust as
described in Section 2924.15.
   (f) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (g) This section shall become operative on January 1, 2018.
  SEC. 16.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent where the violation was not corrected and remedied prior to the
recordation of the trustee's deed upon sale. If the court finds that
the material violation was intentional or reckless, or resulted from
willful misconduct by a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent, the court may award the borrower
the greater of treble actual damages or statutory damages of fifty
thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of a trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of a trustee's deed
upon sale.
   (d) A violation of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 by a person licensed by the Department
of Corporations, Department of Financial Institutions, or Department
of Real Estate shall be deemed to be a violation of that person's
licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17 committed by that third-party
encumbrancer, that occurred prior to the sale of the subject property
to the bona fide purchaser.
   (g) A signatory to a consent judgment entered in the case entitled
United States of America et al. v. Bank of America Corporation et
al., filed in the United States District Court for the District of
Columbia, case number 1:12-cv-00361 RMC, that is in compliance with
the relevant terms of the Settlement Term Sheet of that consent
judgment with respect to the borrower who brought an action pursuant
to this section while the consent judgment is in effect shall have no
liability for a violation of Section 2923.55, 2923.6, 2923.7,
2924.9, 2924.10, 2924.11, or 2924.17.
   (h) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (i) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (j) This section shall not apply to entities described in
subdivision (b) of Section 2924.18.
   (k)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 17.  Section 2924.12 is added to the Civil Code, to read:
   2924.12.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a                                                 material
violation of Section 2923.5, 2923.7, 2924.11, or 2924.17.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent has
corrected and remedied the violation or violations giving rise to the
action for injunctive relief. An enjoined entity may move to
dissolve an injunction based on a showing that the material violation
has been corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
be liable to a borrower for actual economic damages pursuant to
Section 3281, resulting from a material violation of Section 2923.5,
2923.7, 2924.11, or 2924.17 by that mortgage servicer, mortgagee,
trustee, beneficiary, or authorized agent where the violation was not
corrected and remedied prior to the recordation of the trustee's
deed upon sale. If the court finds that the material violation was
intentional or reckless, or resulted from willful misconduct by a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent, the court may award the borrower the greater of treble actual
damages or statutory damages of fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent shall not be liable for any violation that it has
corrected and remedied prior to the recordation of the trustee's deed
upon sale, or that has been corrected and remedied by third parties
working on its behalf prior to the recordation of the trustee's deed
upon sale.
   (d) A violation of Section 2923.5, 2923.7, 2924.11, or 2924.17 by
a person licensed by the Department of Corporations, Department of
Financial Institutions, or Department of Real Estate shall be deemed
to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2923.7, 2924.11, or
2924.17 committed by that third-party encumbrancer, that occurred
prior to the sale of the subject property to the bona fide purchaser.

   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.
   (i) This section shall become operative on January 1, 2018.
  SEC. 18.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, paragraph (5) of
subdivision (a) of Section 2924, and Sections 2923.5, 2923.55,
2923.6, 2923.7, 2924.9, 2924.10, 2924.11, and 2924.18 shall apply
only to first lien mortgages or deeds of trust that are secured by
owner-occupied residential real property containing no more than four
dwelling units. For these purposes, "owner-occupied" means that the
property is the principal residence of the borrower and is security
for a loan made for personal, family, or household purposes.
   (b)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 19.  Section 2924.15 is added to the Civil Code, to read:
   2924.15.  (a) Unless otherwise provided, Sections 2923.5, 2923.7,
and 2924.11 shall apply only to first lien mortgages or deeds of
trust that are secured by owner-occupied residential real property
containing no more than four dwelling units. For these purposes,
"owner-occupied" means that the property is the principal residence
of the borrower and is security for a loan made for personal, family,
or household purposes.
   (b) This section shall become operative on January 1, 2018.
  SEC. 20.  Section 2924.17 is added to the Civil Code, to read:
   2924.17.  (a) A declaration recorded pursuant to Section 2923.5
or, until January 1, 2018, pursuant to Section 2923.55, a notice of
default, notice of sale, assignment of a deed of trust, or
substitution of trustee recorded by or on behalf of a mortgage
servicer in connection with a foreclosure subject to the requirements
of Section 2924, or a declaration or affidavit filed in any court
relative to a foreclosure proceeding shall be accurate and complete
and supported by competent and reliable evidence.
   (b) Before recording or filing any of the documents described in
subdivision (a), a mortgage servicer shall ensure that it has
reviewed competent and reliable evidence to substantiate the borrower'
s default and the right to foreclose, including the borrower's loan
status and loan information.
   (c) Until January 1, 2018, any mortgage servicer that engages in
multiple and repeated uncorrected violations of subdivision (b) in
recording documents or filing documents in any court relative to a
foreclosure proceeding shall be liable for a civil penalty of up to
seven thousand five hundred dollars ($7,500) per mortgage or deed of
trust in an action brought by a government entity identified in
Section 17204 of the Business and Professions Code, or in an
administrative proceeding brought by the Department of Corporations,
the Department of Real Estate, or the Department of Financial
Institutions against a respective licensee, in addition to any other
remedies available to these entities. This subdivision shall be
inoperative on January 1, 2018.
  SEC. 21.  Section 2924.18 is added to the Civil Code, to read:
   2924.18.  (a) (1) If a borrower submits a complete application for
a first lien loan modification offered by, or through, the borrower'
s mortgage servicer, a mortgage servicer, trustee, mortgagee,
beneficiary, or authorized agent shall not record a notice of
default, notice of sale, or conduct a trustee's sale while the
complete first lien loan modification application is pending, and
until the borrower has been provided with a written determination by
the mortgage servicer regarding that borrower's eligibility for the
requested loan modification.
   (2) If a foreclosure prevention alternative has been approved in
writing prior to the recordation of a notice of default, a mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall
not record a notice of default under either of the following
circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (3) If a foreclosure prevention alternative is approved in writing
after the recordation of a notice of default, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall not record
a notice of sale or conduct a trustee's sale under either of the
following circumstances:
   (A) The borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or repayment plan.

   (B) A foreclosure prevention alternative has been approved in
writing by all parties, including, for example, the first lien
investor, junior lienholder, and mortgage insurer, as applicable, and
proof of funds or financing has been provided to the servicer.
   (b) This section shall apply only to a depository institution
chartered under state or federal law, a person licensed pursuant to
Division 9 (commencing with Section 22000) or Division 20 (commencing
with Section 50000) of the Financial Code, or a person licensed
pursuant to Part 1 (commencing with Section 10000) of Division 4 of
the Business and Professions Code, that, during its immediately
preceding annual reporting period, as established with its primary
regulator, foreclosed on 175 or fewer residential real properties,
containing no more than four dwelling units, that are located in
California.
   (c) Within three months after the close of any calendar year or
annual reporting period as established with its primary regulator
during which an entity or person described in subdivision (b) exceeds
the threshold of 175 specified in subdivision (b), that entity shall
notify its primary regulator, in a manner acceptable to its primary
regulator, and any mortgagor or trustor who is delinquent on a
residential mortgage loan serviced by that entity of the date on
which that entity will be subject to Sections 2923.55, 2923.6,
2923.7, 2924.9, 2924.10, 2924.11, and 2924.12, which date shall be
the first day of the first month that is six months after the close
of the calendar year or annual reporting period during which that
entity exceeded the threshold.
   (d) For purposes of this section, an application shall be deemed
"complete" when a borrower has supplied the mortgage servicer with
all documents required by the mortgage servicer within the reasonable
timeframes specified by the mortgage servicer.
   (e) If a borrower has been approved in writing for a first lien
loan modification or other foreclosure prevention alternative, and
the servicing of the borrower's loan is transferred or sold to
another mortgage servicer, the subsequent mortgage servicer shall
continue to honor any previously approved first lien loan
modification or other foreclosure prevention alternative, in
accordance with the provisions of the act that added this section.
   (f) This section shall apply only to mortgages or deeds of trust
described in Section 2924.15.
   (g)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 22.  Section 2924.19 is added to the Civil Code, to read:
   2924.19.  (a) (1) If a trustee's deed upon sale has not been
recorded, a borrower may bring an action for injunctive relief to
enjoin a material violation of Section 2923.5, 2924.17, or 2924.18.
   (2) Any injunction shall remain in place and any trustee's sale
shall be enjoined until the court determines that the mortgage
servicer, mortgagee, beneficiary, or authorized agent has corrected
and remedied the violation or violations giving rise to the action
for injunctive relief. An enjoined entity may move to dissolve an
injunction based on a showing that the material violation has been
corrected and remedied.
   (b) After a trustee's deed upon sale has been recorded, a mortgage
servicer, mortgagee, beneficiary, or authorized agent shall be
liable to a borrower for actual economic damages pursuant to Section
3281, resulting from a material violation of Section 2923.5, 2924.17,
or 2924.18 by that mortgage servicer, mortgagee, beneficiary, or
authorized agent where the violation was not corrected and remedied
prior to the recordation of the trustee's deed upon sale. If the
court finds that the material violation was intentional or reckless,
or resulted from willful misconduct by a mortgage servicer,
mortgagee, beneficiary, or authorized agent, the court may award the
borrower the greater of treble actual damages or statutory damages of
fifty thousand dollars ($50,000).
   (c) A mortgage servicer, mortgagee, beneficiary, or authorized
agent shall not be liable for any violation that it has corrected and
remedied prior to the recordation of the trustee's deed upon sale,
or that has been corrected and remedied by third parties working on
its behalf prior to the recordation of the trustee's deed upon sale.
   (d) A violation of Section 2923.5, 2924.17, or 2917.18 by a person
licensed by the Department of Corporations, the Department of
Financial Institutions, or the Department of Real Estate shall be
deemed to be a violation of that person's licensing law.
   (e) No violation of this article shall affect the validity of a
sale in favor of a bona fide purchaser and any of its encumbrancers
for value without notice.
   (f) A third-party encumbrancer shall not be relieved of liability
resulting from violations of Section 2923.5, 2924.17 or 2924.18,
committed by that third-party encumbrancer, that occurred prior to
the sale of the subject property to the bona fide purchaser.
   (g) The rights, remedies, and procedures provided by this section
are in addition to and independent of any other rights, remedies, or
procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or
procedures provided by law.
   (h) A court may award a prevailing borrower reasonable attorney's
fees and costs in an action brought pursuant to this section. A
borrower shall be deemed to have prevailed for purposes of this
subdivision if the borrower obtained injunctive relief or damages
pursuant to this section.
   (i) This section shall apply only to entities described in
subdivision (b) of Section 2924.18.
   (j)  This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
  SEC. 23.  Section 2924.20 is added to the Civil Code, to read:
   2924.20.  Consistent with their general regulatory authority, and
notwithstanding subdivisions (b) and (c) of Section 2924.18, the
Department of Corporations, the Department of Financial Institutions,
and the Department of Real Estate may adopt regulations applicable
to any entity or person under their respective jurisdictions that are
necessary to carry out the purposes of the act that added this
section. A violation of the regulations adopted pursuant to this
section shall only be enforceable by the regulatory agency.
  SEC. 24.  The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
  SEC. 25.   No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.

Civil Code §2924.12(b) Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees. : )

prohabition-images

H. Right to Sue Mortgage Servicers for Injunctive Relief, Damages, Treble Damages, and Right to Attorney’s Fees

2013 is going to be a good year

One of the most important provisions of the Act from a lender’s perspective is that it provides borrowers with the right to sue mortgage servicers for injunctive relief before the trustee’s deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any “material” violation of certain enumerated portions of the Act before the trustee’s deed upon sale recorded. (Civil Code §2924.12(a).) In an area that will certainly open up a Pandora’s Box of litigation, the Act does not define what constitutes a “material” violation of the Act. If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000. (Civil Code §2924.12(b).) Furthermore, a violation of the enumerated provisions of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman. (Civil Code §2924.12(d).) Lastly, in a one-sided attorney’s fee provision that only benefits borrowers, the court may award a borrower who obtains an injunction or receives an award of economic damages as a result of the violation of the Act their reasonable attorney’s fees and costs as the prevailing party. (Civil Code §2924.12(i).) This provides all the more reason for lenders and mortgage servicers to comply with the terms of the Act. This provision for the recovery by only the borrower of their reasonable attorney’s fees makes it more likely that borrowers will file litigation against mortgage lenders or servicers than they otherwise would. Compliance is the lender’s or mortgage servicer’s best defense to litigation under the Act.

Significantly for lenders, as long as the mortgage servicer remedies the material violation of the Act before the trustee’s deed upon sale has recorded, the Act specifically provides that the mortgage servicer shall not be liable under the Act for any violation or damages. (Civil Code §2924.12(b) & (c).) The Act also clarifies that signatories to the National Mortgage Settlement who are in compliance with the terms of that settlement, as they relate to the terms of the Act, will not face liability under the Act. (Civil Code §2924.12(g).

 

How to chase Chase – People sometimes ask me why do you publish all this stuff. My slogan IF YOUR ENEMY IS MY ENEMY THAN WE ARE FRIENDS !!!!

People sometimes ask me why do you publish all this stuff. My slogan IF YOUR ENEMY IS MY ENEMY THAN WE ARE FRIENDS

Chase–Sucks.org

2. RESOURCES — Pleadings, Orders, and Exhibits

On this page you will find descriptions and links to various pleadings, orders, and exhibits filed by attorneys as well as individuals representing themselves. Where the outcome is known, that information is included. These documents are public records and are made available for your information, but their accuracy, competency, and effectiveness have not been verified. Only a judge can rule on a pleading and only an appellate court opinion that is certified for publication can be cited as precedent. That said, it can be both educational and entertaining to see how the great race is unfolding in the historic controversy of People v. Banks. For an entertaining public outing of history’s all-time greatest pickpockets, go see the documentary “Inside Job.”

Federal District Court

Carswell v. JPMorgan Chase, Case No. CV10-5152 GW

George Wu, Judge, U.S. District Court, Central District of California, Los Angeles
Douglas Gillies, attorney for Margaret Carswell

Plaintiff sued to halt a foreclosure initiated by JPMorgan Chase and California Reconveyance Co. on the grounds of failure to contract, wrongful foreclosure, unjust enrichment, RESPA and TILA violations, and fraud. She asked for quiet title and declaratory relief. Chase responded with a Motion to Dismiss. At a hearing on September 30, 2010, Judge Wu granted defendants’ motion to dismiss with leave to amend. Plaintiff’s First Amended Complaint was filed on October 18. It begins:

It was the biggest financial bubble in history. During the first decade of this century, banks abandoned underwriting practices and caused a frenzy of real estate speculation by issuing predatory loans that ultimately lowered property values in the United States by 30-50%. Banks reaped the harvest. Kerry Killinger, CEO of Washington Mutual, took home more than $100 million during the seven years that he steered WaMu into the ground. Banks issued millions of predatory loans knowing that the borrowers would default and lose their homes. As a direct, foreseeable, proximate result, 15 million families are now in danger of foreclosure. If the legions of dispossessed homeowners cannot present their grievances in the courts of this great nation, their only recourse will be the streets.

Chase responded with yet another Motion to Dismiss, Carswell filed her Opposition to the motion, and a hearing is scheduled for January 6, 2011, 8:30 AM in Courtroom 10, US District Court, 312 N. Spring Street, Los Angeles, CA.

 

Khast v. Washington Mutual, JPMorgan Chase, and CRC, Case No. CV10-2168 IEG

Irma E. Gonzalez, Chief Judge, U.S. District Court, Southern District of California
Kaveh Khast in pro se

A loan mod nightmare where Khast did everything right except laugh out loud when WaMu told him that he must stop making his mortgage payments for 90 days in order to qualify for a loan modification. As Khast leaped through the constantly shifting hoops tossed in the air, first by WaMu, then by Chase, filing no less than four applications, Chase issued a Notice of Trustee’s Sale.

Khast filed a pro se complaint in federal court. The District Court granted a Temporary Restraining Order to stop the sale. Hearing on a Preliminary Injunction is now scheduled for December 3. The court wrote that the conduct by WAMU appears to be “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” and thus satisfies the “unfair” prong of California’s Unfair Competition Law, Cal. Bus.&Prof.Code §17200. Plaintiff has stated that he possesses documents which support his contention that Defendant WAMU instructed Plaintiff to purposefully enter into default and assured Plaintiff that, if he did so, WAMU would restructure his loan. Accordingly, Plaintiff has demonstrated that he is likely to succeed on the merits of his claim.

The court also relied upon the doctrine of promissory estoppel. Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise. He who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted.

 

Saxon Mortgage v. Hillery, Case No. C-08-4357

Edward M. Chen, U.S. Magistrate, Northern District of California
Thomas Spielbauer, attorney for Ruthie Hillery

Hillery obtained a home loan from New Century secured by a Deed of Trust, which named MERS as nominee for New Century and its successors. MERS later attempted to assign the Deed of Trust and the promissory note to Consumer. Consumer and the loan servicer then sued Hillery. The court ruled that Consumer must demonstrate that it is the holder of the deed of trust and the promissory note. In re Foreclosure Cases, 521 F. Supp. 2d 650, 653 (S.D. Oh. 2007) held that to show standing in a foreclosure action, the plaintiff must show that it is the holder of the note and the mortgage at the time the complaint was filed. For there to be a valid assignment, there must be more than just assignment of the deed alone; the note must also be assigned. “The note and mortgage are inseparable; the former as essential, the latter as an incident…an assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” Carpenter v. Longan, 83 U.S. 271, 274 (1872).

There was no evidence that MERS held the promissory note or was given the authority by New Century to assign the note to Consumer. Without the note, Consumer lacked standing. If Consumer did not have standing, then the loan servicer also lacked standing. A loan servicer cannot bring an action without the holder of the note. In re Hwang, 393 B.R. 701, 712 (2008).

 

Serrano v. GMAC Mortgage, Case No. 8:09-CV-00861-DOC

David O. Carter, Judge, U.S. District Court, Central District of California, Los Angeles
Moses S. Hall, attorney for Ignacio Serrano

Plaintiff alleged in state court that GMAC initiated a non-judicial foreclosure sale and sold his residence without complying with the notice requirements of Cal. Civil Code Sec. 2923.5 and 2924, and without attaching a declaration to the 2923.5 notice under penalty of perjury stating that defendants tried with due diligence to contact the borrower. Defendants removed the case to federal court on the basis of diversity jurisdiction. The District Court granted defendants’ motion to dismiss without prejudice, and described in detail the defects in the Complaint with directions how to correct the defects. Plaintiff filed his Second Amended Complaint on 4/01/2010.

 

Sharma v. Provident Funding Associates, Case No. 3:2009-cv-05968

Vaughn R Walker, Judge, U.S. District Court, Northern District of California
Marc A. Fisher, attorney for Anilech and Parma Sharma

Defendants attempted to foreclose and plaintiffs sued in federal court, alleging that defendants did not contact them as required by Cal Civ Code § 2923.5. In considering plaintiffs’ request for an injunction to stop the foreclosure, the court found that plaintiffs had raised “serious questions going to the merits” and would suffer irreparable injury if the sale were to proceed. Property is considered unique. If defendants foreclosed, plaintiffs’ injury would be irreparable because they might be unable to reacquire it. Plaintiffs’ remedy at law, damages, would be inadequate. On the other hand, defendants would not suffer a high degree of harm if a preliminary injunction were ordered. While they would not be able to sell the property immediately and would incur litigation costs, when balanced against plaintiffs’ potential loss, defendants’ harm was outweighed.

The court issued a preliminary injunction enjoining defendants from selling the property while the lawsuit was pending.

 

Federal Bankruptcy Court

In re: Hwang, 396 B.R. 757 (2008), Case No. 08-15337 Chapter 7

Samuel L. Burford, U.S. Bankruptcy Judge, Los Angeles
Robert K. Lee, attorney for Kang Jin Hwang

As the servicer on Hwang’s promissory note, IndyMac was entitled to enforce the secured note under California law, but it must also satisfy the procedural requirements of federal law to obtain relief from the automatic stay in a Chapter 7 bankruptcy proceeding. These requirements include joining the owner of the note, because the owner of the note is the real party in interest under Rule 17, and it is also a required party under Rule 19. IndyMac failed to join the owner of the note, so its motion for relief from the automatic stay was denied.

Reversed on July 21, 2010. District Court Judge Philip Gutierrez reversed the Judge Burford’s determination that IndyMac is not the real party in interest under Rule 17 and that Rule 19 requires the owner of the Note to join the Motion.

 

In re: Vargas, Case No. 08-17036 Chapter 7

Samuel L. Burford, U.S. Bankruptcy Judge, Los Angeles
Marcus Gomez, attorney for Raymond Vargas

 

In re: Walker, Case No. 10-21656 Chapter 11

Ronald H. Sargis, Judge, U.S. Bankruptcy Court, Sacramento
Mitchell L. Abdallah, attorney for Rickie Walker

MERS assigned the Deed of Trust for Debtor’s property to Citibank, which filed a secured claim. Debtor objected to the claim. Judge Sargis ruled that the promissory note and the Deed of Trust are inseparable. An assignment of the note carries the mortgage with it, while an assignment of the Deed of Trust alone is a nullity. MERS was not the owner of the note, so it could not transfer the note or the beneficial interest in the Deed of Trust. The bankruptcy court disallowed Citibank’s claim because it could not establish that it was the owner of the promissory note.

 

California State Court

Cabalu v. Mission Bishop Real Estate

Superior Court of California, Alameda County
Brian A. Angelini, attorney for Cecil and Natividad Cabalu

 

Davies v. NDEX West, Case No. INC 090697

Randall White, Judge, Superior Court of California, Riverside County
Brian W. Davies, in pro per

 

Edstrom v. NDEX West, Wells Fargo Bank, et. al., Case No. 20100314

Superior Court of California, Eldorado County
Richard Hall, attorney for Daniel and Teri Anne Edstrom

A 61-page complaint with 29 causes of action to enjoin a trustee’s sale of plaintiffs’ residence, requesting a judicial sale instead of a non-judicial sale, declaratory relief, compensatory damages including emotional and mental distress, punitive damages, attorneys’ fees, and rescission.

 

Mabry v. Superior Court and Aurora Loan Services
185 Cal.App.4th 208, 110 Cal. Rptr. 3d 201 (4th Dist. June 2, 2010)
California Court of Appeal, 4th District, Division 3
California Supreme Court, Petition for Review filed July 13, 2010.

Moses S. Hall, attorney for Terry and Michael Mabry

The Mabrys sued to enjoin a trustee’s sale of their home, alleging that Aurora’s notice of default did not include a declaration required by Cal. Civil Code §2923.5, and that the bank did not explore alternatives to foreclosure with the borrowers. The trial court refused to stop the sale. The Mabrys filed a Petition for a Writ of Mandate and the Court of Appeal granted a stay to enjoin the sale. Oral argument was heard in Santa Ana on May 18, 2010.

Aurora argued that a borrower cannot sue a lender that fails to contact the borrower to discuss alternatives to foreclosure before filing a notice of default, as required by §2923.5, because §2923.5 does not explicitly give homeowners a “private right of action.” Aurora also argued that a declaration under penalty of perjury is not required because a trustee, who ordinarily files the notice of default, could not have personal knowledge of a bank’s attempts to contact the borrower. Nobody mentioned that the trustee is not authorized by the statute to make the declaration. §2923.5 states that a notice of default “shall include a declaration from the mortgagee, beneficiary, or authorized agent that it has contacted the borrower…”

The Court of Appeal ruled that a borrower has a private right of action under § 2923.5 and is not required to tender the full amount of the mortgage as a prerequisite to filing suit, since that would defeat the purpose of the statute. Under the court’s narrow construction of the statute, §2923.5 merely adds a procedural step in the foreclosure process. Since the statute is not substantive, it is not preempted by federal law. The declaration specified in §2923.5 does not have to be signed under penalty of perjury. The borrower’s remedy is limited to getting a postponement of a foreclosure while the lender files a new notice of default that complies with §2923.5. If the lender ignores the statute and makes no attempt to contact the borrower before selling the property, the violation does not cloud the title acquired by a third party purchaser at the foreclosure sale. Therefore §2923.5 claims must be raised in court before the sale. It is a question of fact for the trial court to determine whether the lender actually attempted to contact the borrower before filing a notice of default. If the lender takes the property at the foreclosure sale, its title is not clouded by its failure to comply with the statute. Finally, the case is not suitable for class action treatment if the lender asserts that it attempted to comply with the statute because each borrower will present “highly-individuated facts.”

In a petition for review to the California Supreme Court, the Mabrys noted that more than 100 federal district court opinions have considered §2923.5 and an overwhelming majority have rejected a private right of action under the statute. The petition for review was denied.

After the case was remanded to the trial court, Mabry’s motion for preliminary injunction was granted. The trial court found that the Notice of Default contained the form language required by the statute, i.e. that the lender contacted the borrower, tried with due diligence to contact the borrower, etc. However, the declaration on the Notice of Default was not made under panalty of perjury, and therefore had no evidentiary value to show whether the defendant satisfied §2923.5

 

Moreno v. Ameriquest

Superior Court of California, Contra Costa County
Thomas Spielbauer, attorney for Gloria and Carlos Moreno

Complaint for declaratory relief and fraud against lender for misrepresenting the terms of the loan, promising fixed rate with one small step after two years both orally and in the Truth In Lending Statement. Loan was actually variable rate with negative amortization. Morenos would have qualified for fixed rate 5% for 30 years, but instead received an exploding 7% ARM. Notary rushed plaintiffs through signing of documents with little explanation. Complaint requests a declaration the note is invalid, unconscionable and unenforceable and the Notice of Trustees Sale is invalid.

 

Other State Courts

JPMorgan Chase Bank v. George, Case No. 10865/06

Arthur M. Schack, Supreme Court Judge, Kings County, New York
Edward Roberts, attorney for Gertrude George

 

Florida Judge tosses foreclosure lawsuit

Homeowners dispute who owns mortgage

by Steve Patterson
St. Augustine Record
June 15, 2010

Changing stories about who owns a mortgage and seemingly fresh evidence from a long-closed bank led a judge to throw out a foreclosure lawsuit. It’s the second time in as many months that Circuit Judge J. Michael Traynor has dismissed with prejudice a foreclosure case where homeowners disputed who owns the mortgage. Lawyers representing New York-based M&T Bank gave three separate accounts of the ownership, with documentation that kept changing.

“The court has been misled by the plaintiff from the beginning,” the judge wrote in his order. He added that documents filed by M&T’s lawyers seemed to contradict each other and “have changed as needed to benefit the plaintiff.”

The latest account was that Wells Fargo owned the note, and M&T was a servicer, a company paid to handle payments and other responsibilities tied to a mortgage. To believe that, the judge wrote, the “plaintiff is asking the court to ignore the documents filed in the first two complaints.” He added that Wells Fargo can still sue on its own, if it has evidence that it owns the mortgage.

More and more foreclosure cases are being argued on shaky evidence, said James Kowalski, a Jacksonville attorney who represented homeowners Lisa and Larry Smith in the fight over their oceanfront home. “I think it’s very representative of what the banks and their lawyers are currently doing in court,” Kowalski said.

He said lawyers bringing the lawsuits are often pressed by their clients to close the cases quickly. But it’s up to lawyers to present solid evidence and arguments. “We are supposed to be better than that,” Kowalski said. “We are supposed to be officers of the court.”

 

Exhibits

Department of Treasury and FDIC Report on WaMu, 4/16/2010

The Offices of Inspector General for Department of the Treasury and Federal Deposit Insurance Corporation released its evaluation of the regulatory oversight of Washington Mutual on April 16. The table of contents tells the story. WaMu pursued a high-risk lending strategy which included systematic underwriting weaknesses. They didn’t care if borrowers could pay back their loans. WaMu did not have adequate controls in place to manage its reckless “high-risk” strategy. OTS examiners found weaknesses in WaMu’s strategy, operations, and asset portfolio but looked the other way.

 

OCC Advisory Letters

How could the regulators allow this breakdown to happen? Was it really fraud when banks arranged loans for homeowners who would inevitably go into defrault, sold them to Wall Street to be bundled into securities, then purchased insurance so that the bank would collect the unpaid balances when the borrowers lost their homes? Did anybody really know that repealing Glass-Steagall and permitting Wall Street banks to get under the covers with Main Street banks would cause so many borrowers to lose their homes? The Glass-Steagall Act, enacted in 1933, barred any institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. It was repealed in 1999, and the repercussions have been immense.

The Office of the Comptroller of the Currency (OCC) issued Advisory Letter 2000-7 only months after Glass-Steagall was repealed. It warned regulators to be on the lookout for indications of predatory or abusive lending practices, including Collateral or Equity Stripping – loans made in reliance on the liquidation value of the borrower’s home or other collateral, rather than the borrower’s independent ability to repay, with the possible or intended result of foreclosure or the need to refinance under duress.

Proving fraud is a painstaking process. Getting inside the mind of a crook requires a careful foundation, and admissable evidence is not always easy to obtain. Many courts will take judicial notice of official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States. See Cal Evidence Code Sec. 452(c).

Here is a set of smoking guns in the form of a series of Advisory Letters issued by OCC:

The Washington Mutual logo prior to its acquis...
The Washington Mutual logo prior to its acquisition by JPMorgan Chase. (Photo credit: Wikipedia)

No right to “HAMP” as third party bene try Negligence with a side of “HAMP”

For all those who have found out the hard way that judges do not like a breach of HAMP contract cause of action, here is a way around it: sue for negligent handling of the HAMP application and use this citation in your opposition to demurrer:

“It is well established that a person may become liable in tort for negligently failing to perform a voluntarily assumed undertaking even in the absence of a contract so to do. A person may not be required to perform a service for another but he may undertake to do so — called a voluntary undertaking. In such a case the person undertaking to perform the service is under a duty to exercise due care in performing the voluntarily assumed duty, and a failure to exercise due care is negligence. [emphasis added]” Valdez v. Taylor Auto. Co. (1954) 129 Cal.App.2d 810, 817; Aim Ins. Co. v. Culcasi (1991) 229 Cal. App. 3d 209, 217-218.

Win the house back at the eviction on summary judgement

Here goes

Timothy L. McCandless, Esq., SBN 147715
LAW OFFICES OF TIMOTHY L. MCCANDLESS
820 Main Street, Suite #1
P.O. Box 149
Martinez, California 94553

Telephone: (925) 957-9797
Facsimile: (925) 957-9799
Email: legal@prodefenders.com

Attorney for Defendant(s):

SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF SAN MATEO

SOUTHERN BRANCH – HALL OF JUSTICE & RECORDS

FEDERAL HOME LOAN MORTGAGE
CORPORATION, ITS ASSIGNEES
AND/OR SUCCESSORS,

Plaintiff(s),

VS.

; and DOES 1 -10, Inclusive,

Defendant(s)

CASE NO:

MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION
FOR SUMMARY JUDGMENT BY
DEFENDANT

[Filed concurrently with: Notice of Motion and
Motion for Summary Judgment by Defendant;
Declaration of Alexander B. Paragas in Support
of Motion for Summary Judgment by
Defendant; Defendant’s Separate Statement of
Undisputed Facts and Supporting Evidence on
Motion for Summary Judgment; [Proposed]
Order]

Hearing’s:
Date : September X, 2012
Time : X:XX a.m.
Dept. : Law and Motions
Reservation No.:

Defendant and Movant herein,  (“Defendant”), submits the
following Memorandum of Points and Authorities in Support of his Motion for Summary

Judgment against Plaintiff FEDERAL HOME LOAN MORTGAGE CORPORATION, ITS
ASSIGNEES AND/OR SUCCESSORS,(hereinafter “FHLMC”)(“Plaintiff”).

POINTS AND AUTHORITIES
I
FACTUAL BACKGROUND OF THIS LITIGATION

On or about January 24, 2008, Defendant executed an “Adjustable Rate Note” promising to
pay INDYMAC BANK, F.S.B. (hereinafter “INDYMAC”)1, the sum of $417,000.00, by monthly
payment commencing February 1, 2008.
The Deed of Trust (“DOT”) and the Note are between Defendant, Defendant’s wife Mrs.
Paragas and INDYMAC, Plaintiff was never a signatory to this Note, or DOT. A true and correct
copy of DOT and Adjustable Rate Rider is attached to the Declaration of Alexander B. Paragas
and incorporated herein as Exhibit “1”.
The issue is does Plaintiff has a right as a stranger to the Note to foreclose on the Note and
DOT that was not in its name and for which Plaintiff was not party to the Note or financing
transaction nor a disclosed beneficiary by virtue of a recorded assignment.
Furthermore Defendant alleges that MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS INC., a/k/a MERSCORP, INC. (hereinafter “MERS”) was not listed anywhere on his
Note executed at the same time as DOT. Furthermore Defendant is informed and believes that
directly after INDYMAC caused MERS to go on title as the “Nominee Beneficiary” this is

1 Independent National Mortgage Corporation “INDYMAC” before its failure was the largest savings and loan association in the
Los Angeles area and the seventh largest mortgage originator in the United States. The failure of INDYMAC on July 11, 2008, was the
fourth largest bank failure in United States history, and the second largest failure of a regulated thrift.

The primary causes of INDYMAC’s failure were largely associated with its business strategy of originating and securitizing Alt-
A loans on a large scale. During 2006, INDYMAC originated over $90 billion of mortgages. INDYMAC’s aggressive growth strategy, use
of Alt-A and other nontraditional loan products, insufficient underwriting, credit concentrations in residential real estate in the California
and Florida markets, and heavy reliance on costly funds borrowed from the Federal Home Loan Bank (FHLB) and from brokered deposits,
led to its demise when the mortgage market declined in 2007. As an Alt-A lender, INDYMAC’s business model was to offer loan products
to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans,
and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments.
The thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market.

When home prices declined in the latter half of 2007 and the secondary mortgage market collapsed, INDYMAC was forced to
hold $10.7 billion of loans it could not sell in the secondary market. Its reduced liquidity was further exacerbated in late June 2008 when
account holders withdrew $1.55 billion or about 7.5% of INDYMAC’s deposits. During this time INDYMAC’s financial situation was
unraveling at the seams, culminating on July 11, 2008 when INDYMAC was placed into conservatorship by the Federal Deposit Insurance
Company “FDIC” due to liquidity concerns. A bridge bank, INDYMAC FEDERAL BANK, F.S.B., Defendant in the instant action, was
established to assume control of INDYMAC’s assets and secured liabilities, and the bridge bank was put into conservatorship under the
control of the FDIC.

On March 19, 2009 the Acting Director of Office of Thrift Supervision “OTS” replaced the FDIC as conservator for INDYMAC
pursuant to Section 5(d)(2)(C) of the Home Owners’ Loan Act (HOLA), 12 U.S.C. 1464(d)(2)(C); and appointed the FDIC as the receiver
for INDYMAC pursuant to Section 5(d)(2) of HOLA, 12 U.S.C. 1464(d)(2) and Section 11(c)(5) of the FDIA, 12 U.S.C. 1821(c)(5).

As a result of the OTS Order, INDYMAC became an “inactive institution” on March 19, 2009, the very same day that the Order
was issued. In other words, INDYMAC, as a defunct corporation, was no longer in existence as of March 19, 2009.

routinely done in order to hide the true identity of the successive Beneficiaries when and as the
loan was sold.
Based upon published reports, including MERS’ web site, Defendant believes and hereon
allege, MERS does not: (1) take applications for, underwrite or negotiate mortgage loans; (2)
make or originate mortgage loans to consumers; (3) extend credit to consumers; (4) service
mortgage loans; or (5) invest in mortgage loans.
MERS is used by Plaintiff and foreclosing entities to facilitate the unlawful transfers or
mortgages, unlawful pooling of mortgages and the injection into the United States banking
industry of un-sourced (i.e. unknown) funds, including, without limitation, improper off-shore
funds. Defendant is informed and thereon believes and alleges that MERS has been listed as
beneficiary owner of more than half the mortgages in the United States. MERS is improperly
listed as beneficiary owner of Defendant’s mortgage.
Nationwide, there are courts requiring banks that claim to have transferred mortgages to MERS
to forfeit their claim to repayment of such mortgages.
MERS’ operations undermine and eviscerate long-standing principles of real property law,
such as the requirement that any person who seeks to foreclose upon a parcel of real property: (1)
be in possession of the original Note and mortgage; and (2) possess a written assignment giving it
rights to the payments due from borrower pursuant to the mortgage and Note.
The Plaintiff and its agents did not want to pay the fees associated with recording mortgages
and they did not wanted to bother with the trouble of keeping track of the originals. That is the
significance of the word ‘Electronic’ in Mortgage Electronic Registration Systems, Inc. The
undermined long-established rights and sabotaged the judicial process, eliminating,
“troublesome” documentation requirements. While conversion to electronic loan documentation
may eventually be implemented, it will ultimately be brought about only through duly enacted
legislation which includes appropriate safeguards and counterchecks.
Upon information and belief:
a) MERS is not the original lender for Defendant’s loan;
b) MERS is not the creditor, beneficiary of the underlying debt or an assignee
under the terms of Defendant’s Promissory Note;
c) MERS does not hold the original Defendant’s Promissory Note, nor has it ever
held the originals of any such Promissory Note;

d) At all material times, MERS was unregistered and unlicensed to conduct
mortgage lending or any other type or real estate or loan business in the State of
California and has been and continues to knowingly and intentionally
improperly record mortgages and conduct business in California and elsewhere
on a systematic basis for the benefit of the Plaintiff and other lenders.
Defendant initiated loan modification negotiation efforts with ONEWEST BANK, F.S.B.,
(hereinafter “ONEWEST”) on or about November 2010, after experiencing unforeseen financial
hardship. Defendant believed that his loan servicer would be willing to avoid a foreclosure since
he and his wife Mrs. Paragas were willing to tender unconditionally but needed the monthly
payments restructured to reflect the downturn in their monthly gross income, and reflect the
current market conditions.
Despite Defendant’s efforts, ONEWEST has refused to work in any reasonable way to modify
the loan or avoid foreclosure sale. Furthermore ONEWEST is presently bound by a Consent
Order, WN-11-0112 , with the United States of America Department of the Office of Thrift
Supervision related to its initiation and handling of foreclosure proceedings. The Consent Order is
based in part on foreclosure affidavits that have been found to be false. ONEWEST presently
manages approximately 141 billion dollars in residential mortgage loans in which it has litigated
numerous wrongful foreclosure proceedings and initiated non-judicial foreclosure proceedings
without proper standing.
The challenged foreclosure process is based upon several Assignments of DOT.
a) First Assignment executed and effective January 3, 2011, a true and correct
copy of the Assignment of DOT is attached to the Declaration of Alexander B.
Paragas and incorporated herein as Exhibit “2”;
b) Second Assignment executed and effective May 24, 2011, a true and correct
copy of the Assignment of DOT is attached to the Declaration of Alexander B.
Paragas and incorporated herein as Exhibit “3”; and
c) Third Assignment executed and effective October 31, 2011, a true and correct
copy of the Assignment of DOT is attached to the Declaration of Alexander B.
Paragas and incorporated herein as Exhibit “4”.
There are no documents of which the Court can take judicial notice that establish that MERS

2 See: http://www.mortgagedaily.com/forms/OccConsentOrderOnewest041311.pdf

either held the Promissory Note or was given the authority by INDYMAC, the original lender, to
assign the Note.
Defendant further alleges and according the San Mateo County Recorder’s Office, that first
Assignment of DOT (See Exhibit “2”) was purportedly signed by Mr. BRIAN BURNETT as the
“Assistant Secretary” of MERS, Defendant believes and alleges that Mr. BRIAN BURNETT was
never, in any manner whatsoever, appointed as the “Assistant Secretary” by the Board of
Directors of MERS, as required by MERS’ corporate by-laws and an adopted corporate resolution
by the Board of Directors of MERS. For that reason, Mr. BRIAN BURNETT never had, nor has,
any corporate or legal authority from MERS, or the lender’s successors and assigns, to execute
the purported “Assignment.” Furthermore Mr. BRIAN BURNETT purports to be ONEWEST’s
“Assistant Vice President” according the Substitution of Trustee (“SOT”) executed and effective
January 13, 2011 a true and correct copy of the SOT is attached to the Declaration of Alexander
B. Paragas and incorporated herein as Exhibit “5”.
This is a shell game where Mr. BRIAN BURNETT purports to be “Assistant Secretary” and
“Assistant Vice President” for two different entities at the same time, in reality Mr. BRIAN
BURNETT is an employee for ONEWEST, so that he can manufacture the paperwork necessary
for ONEWEST to hijack the mortgage and then foreclose on the property. Furthermore this is
example of how MERS is being used by its members to perpetrate a fraud.
On or about October 31, 2011 another MERS’ employee Mrs. WENDY TRAXLER as
“Assistant Secretary” once again assigned same DOT to ONEWEST (See Exhibit “4”).
Defendant is left to wonder, which Assignment is valid, and how is possible that two
employees of same entity, in this case MERS’, Mr. BRIAN BURNETT and Mrs. WENDY
TRAXLER, both “Assistant Secretaries”, did not communicated as to the Defendant’s Note and
DOT before the execution of the Assignments, or it appears that MERS’ employees preparing and
signing off on foreclosures without reviewing them, as the law requires.
It has been widely reported in the media that mortgage servicers, lenders, and major banks
have suspended over a hundred thousand foreclosures because relevant documents may not have
been properly prepared by ROBO-SIGNERS. Typically, the ROBO-SIGNERS were given phony
titles such as “Vice President” and “Assistant Secretary” to make it appear that they were bank
officers. In reality, ROBO-SIGNERS were typically, teens, hair stylists, Wal-Mart workers,
students, and unemployed persons of varying backgrounds.

The ROBO-SIGNING of affidavits and Assignments of Mortgage and all other mortgage
foreclosure documents served to cover up the fact that loan servicers cannot demonstrate the facts
required to conduct a lawful foreclosure.
Here in this instant case Mr. BRIAN BURNETT assigned DOT from MERS to ONEWEST on
or about January 3, 2011 (See Exhibit “2”), on or about May 24, 2011 Mrs. MOLLIE
SCHIFFMAN an “Assistant Vice President” of ONEWEST assigned interest of Plaintiffs’ Note
and DOT to the Plaintiff (See Exhibit “3”), yet on or about October 31, 2011 Mrs. WENDY
TRAXLER once again assigns same Note and DOT from MERS to ONEWEST (See Exhibit
“4”), this fabricated Assignments of DOT is nothing more than an attempt of Plaintiff and its
agents to hijack the mortgage and then foreclose on the property, in violation of California Civil
Law.
Defendant further alleges that purported Assignments of his Note and DOT, is attempt to pave
the way for Plaintiff to be able to claim an estate or interest in the Property adverse to that of
Defendant.
Defendant alleges that, on information and belief, ONEWEST, QUALITY LOAN SERVICE
CORPORATION, (hereinafter “QUALITY”), Plaintiff and/or its agents have been fraudulently
enforcing a debt obligation, fraudulently foreclosed on Plaintiff’s Subject Property in which they
did not have pecuniary, equitable or legal interest. Thus, ONEWEST’s, QUALITY’s and/or
Plaintiff’s conduct was part of a fraudulent debt collection scheme.
Defendant further alleges that on or about January 26, 2011 QUALITY recorded Notice of
Default (“NOD”), a true and correct copy of the NOD is attached to the Declaration of Alexander
B. Paragas and incorporated herein as Exhibit “6”.
Defendant further alleges, on or about May 4, 2011, had received Notice of Trustee’s Sale
(“NTS”) a true and correct copy of the NTS is attached to the Declaration of Alexander B.
Paragas and incorporated herein as Exhibit “7”. The sale was scheduled for May 23, 2011 at 1:00
p.m., but postponed to several times, until April 23, 2012, when sale of the Subject Property was
executed.
On or about April 23, 2012 at 12:31 p.m., Defendant filed voluntary Chapter 13 bankruptcy
protection in the United States Bankruptcy Court for the Northern District of California, Case No.
12-31228 a true and correct copy of the filing is attached to the Declaration of Alexander B.
Paragas and incorporated herein as Exhibit “8”, along with Motion to Extend Automatic Stay

pursuant U.S.C. Section 362(c)(3)(B), Notice of Opportunity for Hearing on Motion to Extend
Automatic Stay pursuant U.S.C. Section 362(c)(3)(B), and Declaration in Support of Hearing on
Motion to Extend Automatic Stay pursuant U.S.C. Section 362(c)(3)(B) a true and correct copy of
the filing is attached to the Declaration of Alexander B. Paragas and incorporated herein as
Exhibit “9”.
Plaintiff and its agents have been notified of the filings, but failed to object and proceeded
with the sale of the Subject Property in violation of the 11 U.S.C. Section 362, and conveyed all
its right, tile and interest in and to the Plaintiffs’ property.
On or about May 4, 2012 QUALITY recorded Trustee’s Deed Upon Sale (“TDUS”) a true and
correct copy of the TDUS is attached to the Declaration of Alexander B. Paragas and incorporated
herein as Exhibit “10”, that operated to prefect the lenders/beneficiary interest in the property of
the Defendant during the pendency of the Chapter 13 proceeding.
On or about June 11, 2012 U.S. Bankruptcy Judge, Mr. THOMAS E. CARLSON granted
Motion to Extend Automatic Stay a true and correct copy of the Order is attached to the
Declaration of Alexander B. Paragas and incorporated herein as Exhibit “11”, stating that
Automatic Stay, under 11 U.S.C. Section 362(a), shall remain in force for the duration of
Defendant’s Chapter 13 proceeding, until is terminated under 11 U.S.C. Section 362(c)(1), or a
Motion for Relief from Stay is granted under 11 U.S.C. Section 362(d), no Motion for Relief has
been filed by any Creditor, including Plaintiff herein.
On or about May 16, 2012, Plaintiff filed this instant case. The Unlawful Detainer Complaint
states that the Plaintiff obtained the right to possession by a Trustee’s sale and that title was
perfected and recorded [UD Complaint, ¶11]. Title is “duly perfected” when all steps have been
taken to make it perfect, that is, to convey to purchaser that which he has purchased, valid and
good beyond all reasonable doubt, Kessler v. Bridge (1958, Cal App Dep’t Super Ct) 161 Cal
App 2d Supp 837, 327 P2d 241, 1958 Cal App LEXIS 1814.
In this instant case, the title has not been perfected in Plaintiff’s since the title to the Property
was not conveyed to Plaintiff under the power of sale contained in the DOT and/or was not
conveyed in compliance with California Civil Code Section 2924 et seq., and in violation of 11
U.S.C. Section 362.
///
///

FHLMC DOES NOT HAVE STANDING TO BRING THE INSTANT ACTION

FHLMC lacks standing to bring the instant action for possession of the subject property. (1)
FHLMC is not a proper party to this action, and as such the court is without jurisdiction to grant
possession of the subject property to Plaintiff. Further, (2) Plaintiff or Plaintiff’s predecessor
failed to perform (2) conditions precedent (i) mandated by the original DOT, Section (20) which
requires a separate Notice and opportunity to cure in addition to the procedure established by
California Civil Code Section 2924 thereby cancelling the performance of Defendant, and (ii)
they failed to record the assignment of the deed of Trust a condition precedent to conducting a
foreclosure sale, (3) Plaintiff cannot prove that the non-judicial foreclosure which occurred,
strictly complied with the tenets of California Civil Code Section 2924 in order to maintain an
action for possession pursuant to California Code of Civil Procedure Section 1161.
1. Plaintiff failed to perform a condition precedent contained in the DOT prior to
bringing this action pursuant to California Code of Civil Procedure Section
1161, which mandates that the trustee attempting in writing prior to the
institution of a non-judicial foreclosure to allow defendant to cure the default;
2. Plaintiff failed to record the assignment of the Note and DOT prior to initiating
the foreclosure therefore the foreclosure was invalid under Section 2924;
3. The original promissory note executed by Defendant and his wife Mrs. Paragas
is invalid due to the ineffective method of assignment utilized by the parties,
assignment of the promissory note was not contained on the body of the page of
the Note, but rather was effectuated on a different paper, notwithstanding the
fact that there was sufficient room to draft the assignment on the face of the
note;
4. At the time of making the Note and DOT, Plaintiff’s predecessor ONEWEST
was operating its business from Inside California; however, ONEWEST was not
lawfully registered with the Secretary of State to conduct business pursuant to
California Corporations Code Section 1502 et seq. invalidating the Note and
DOT; and
5. The Trustee that conducted the non-judicial foreclosure sale was not a holder in
due course of the Original Note, because the Note was rendered non-negotiable
by (i) the manner in which the assignment was attempted, and (ii) the failure of

FHLMC to record the assignment, invalidating the Note, and resulting TDUS,
which denies Plaintiff standing to seek possession under California Code of
Civil Procedure Section 1161a.

LEGAL ANALYSIS

In this matter before the Bench, it becomes pellucidly clear that several fatal errors occurred
throughout the assignment of the Defendant’s Note and DOT, and ineffective non-judicial
foreclosure sale, which when weighed together have the effect of denying Plaintiff the necessary
standing to seek possession.
1. Plaintiff failed to perform a condition precedent contained in the DOT
prior to bringing this action pursuant to California Code of Civil
Procedure Section 1161.
This party is charged with the duty to perform and condition precedent prior to bringing the
instant action and failed to do so. Paragraph (20) of the DOT provides in pertinent part:

Neither borrow or lender may commence, join, or be joined to any judicial action
(as either an individual litigant, or the member of a class, that arises from the other
party’s actions pursuant to this security instrument or alleges that the other party has
breached any provision of, or any duty by reason of, this Security Instrument, until
such borrower or lender has notified the other party (with such notice given in
compliance with the requirements of Section 15) of such alleged breach and
afforded the other party hereto a reasonable period after giving of such notice to
take corrective action. If applicable law provides a time period which must elapse
before certain action can be taken, that time period will be deemed to be reasonable for
the purposes of this paragraph. The notice of acceleration and notice to cure given to
borrower pursuant to Section 22 and the notice of acceleration given to borrower
pursuant to Section 18 shall be deemed to satisfy the notice and opportunity to take
corrective action provisions of this Section 20. (Emphasis added.)

When there is an agreement between the Beneficiary and Trustor, such as the Condition Precedent
expressed in Paragraph 20 of the DOT a Foreclosure cannot take place before the condition is
satisfied. If the Beneficiary fails to carry out its obligation a subsequent foreclosure is invalid.
Haywood Lumber & Investment Co. V. Corbett (1934) 138 CA 644, 650, 33 P2d 41;
The DOT was drafted solely by the original beneficiary, Defendant had no part in drafting this
document, only the execution thereof. Defendant contends that the aforementioned language
contained in the DOT creates a condition precedent prior to either Plaintiff or Defendant bringing
any action, without first giving written notice to perform a covenant.

By virtue of the fact that an Unlawful Detainer involves a forfeiture of the tenant’s right to
possession, the Courts strictly construe the statutory proceedings which regulate it. Kwok v.
Bergren, (1982) 130 Cal.App.3d 596, 600,181 Cal.Rptr. 795. The failure of Plaintiff to perform a
condition precedent, to wit, failure to give Defendant notice and a reasonable period to cure a
breach of the terms and conditions, cancels the performance of Defendant, until the condition
precedent is performed according to the terms of the DOT.
In the absence of proof that Plaintiff timely performed the condition precedent giving
Defendant a chance to cure his breach of the terms and conditions of the DOT, Plaintiff cannot
proceed with the present action. The Plaintiff is a stranger who is not in privity with the
tenant/owner, and he must prove that he is authorized by the statute to prosecute an Unlawful
Detainer proceeding pursuant to a properly conducted foreclosure sale. Therefore, the tenant can
raise the limited defense that the foreclosure sale is invalid because it was not processed ,in
compliance, with the statutes regarding foreclosures, and the Plaintiff has the burden of proof that
the foreclosure statutes were satisfied by performance of all of the notices and procedures
required.
2. Plaintiff failed to record the assignment of the Note and DOT prior to
initiating the foreclosure therefore the foreclosure was invalid under
Section 2924.
There is also a condition precedent to enforcing the note by an assignee, see California Civil
Code Section 2932.5 which states:

2932.5. Where a power to sell real property is given to a mortgagee, or
other encumbrancer, in an instrument intended to secure the payment of
money, the power is part of the security and vests in any person who by
assignment becomes entitled to payment of the money secured by the
instrument. The power of sale may be exercised by the assignee if the
assignment is duly acknowledged and recorded. (emphasis added).

The assignment was not Recorded

The assignment was not recorded. Since FHLMC failed to record the assignment they were not
entitled to enforce the Note or to foreclose on this Property therefore the Title was not perfected
under Section 2924 by a foreclosure sale and was not duly carried out under Section 2924 and was
wholly defective and this Plaintiff has no standing in this Unlawful Detainer action.
In addition to recording the assignment, the Beneficiary must also deliver the Original Note to

the Trustee in order for the Trustee to conduct the foreclosure sale. Haskell V. Matranga (1979)
CA 3d. 471, 479-480, 160 CR 177;
In the Case of a Mortgage with a power of Sale an assignee can only enforce the power of sale
if the assignment is recorded, since the assignee’s authority to conduct the sale must appear in the
public records, New York Life Insurance Co. V. Doane, (1936) 13 CA 2d. 233, 235-237, 56 P2d.
984, 56 ALR 224;
3. Plaintiff is not a holder in due course of the original promissory Note
executed by the borrower, because the method of assignment utilized by the
parties to indorse the assignment rendered the note non-negotiable as a
matter of law.
The assignment of the original promissory Note was invalidated by the manner in which the
assignment was attempted. It has long been settled that the assignment of a Note must be reflected
on the body of the note, as long as there is room available. If room to draft the assignment is
available, but the party making the assignment drafts the assignment on a separate piece of paper,
the Note is no longer negotiable. The public policy is to avoid one party from making multiple
assignments of the same property, at the same time, and defrauding each assignee of their
consideration for the assignment. In Privus vs. Bush, (1981) 118 Cal.App.3d 1003, the court held
that a promissory Note executed as security for a DOT was rendered non-negotiable because the
endorsement by the assignor was not contained on the face of the Note, notwithstanding the fact
that there was sufficient space on the Note to effectuate the assignment.
The Privus, supra., Court held at pages 106-107, in pertinent part: California Uniform
Commercial Code Section 3302, Subdivision (1) provides, “A holder in due course is a holder
who takes the instrument (a) For value; and (b) In good faith; and (c) without notice that it is
overdue or has been dishonored or of any defense against or claim to it on the part of any person.”
In the present case, the trial Court did not question Defendant’s status as a holder in due course
because of any failure to satisfy the value, good faith, or no notice requirements. Rather, the Court
concluded that Defendant is not a holder in due course because he is not a holder at all, an
essential prerequisite to qualifying as a holder in due course. A holder is “a person who is in
possession of … an instrument …, issued or indorsed to him ….” (Section 1201(20).) The trial
Court ruled that the Williams’ signature on the paper attached to the promissory Note did not
qualify as an endorsement because there was adequate space for the endorsement on the note

itself.” (emphasis added).
Section 3202(2) states, “An endorsement must be written by or on behalf of the holder and on
the instrument or on a paper so firmly affixed thereto as to become a part thereof.” Thus, the code
does not say whether or not such a paper, called an “allonge,” may be used when there is still
room for an endorsement on the instrument itself. Nor has any reported California case dealt with
this issue under the code. The code does, however, instruct us as to where to look for the law with
which to resolve the issue. Section 1103 states that, “(u)nless displaced by the particular
provisions of this code, the principles of law and equity, including the law merchant … shall
supplement its provisions,” and that section’s Uniform Commercial Code comment Notes “the
continued applicability to commercial contracts of all supplemental bodies of law except insofar
as they are explicitly displaced by this Act.” Therefore, since the Commercial Code has not
addressed the issue, we decide the present case according to the rules on allonges of the law
merchant.” Privus vs. Bush, (1981) 118 Cal.App.3d 1003,1007.
“Although the cases are not unanimous, the majority view is that the law merchant permits the
use of an allonge only when there is no longer room on the negotiable instrument itself to write an
indorsement. (See generally Annot., Indorsement of Negotiable Instrument By Writing Not On
Instrument Itself (1968) 19 A.L.R.3d 1297, 1301-1304; Annot., Indorsement of Bill or Note by
Writing Not On Instrument Itself (1928) 56 A.L.R. 921, 924-926.) Typical of the majority
position is Bishop v. Chase, (1900) 156 Mo. 158, 56 S.W. 1080. There it was held that the general
rule is that an instrument could be indorsed only by writing on the instrument itself, but that an
exception to the rule allows the use of an attached paper “when the back of the instrument is so
covered as to make it necessary.” (Id., 156 Mo. 158, 56 S.W. at p. 1083.) Thus, the Court
invalidated an attempted endorsement by allonge when “there was plenty of room upon the back
of the Note to have made the endorsement, and the only excuse for not doing so was that it was
more convenient to assign it on a separate paper.” (Id., 156 Mo. 158, 56 S.W. at p. 1084.)” Privus
vs. Bush, (1981) 118 Cal.App.3d 1003, 1007.
Here, the original Note executed had sufficient space for an endorsement, however, the note
does not contain an endorsement, and Defendant has never seen a document which purports to
assign the note to a third party. As such, Plaintiff is not a holder in due course, nor was the trustee
who conducted the non-judicial foreclosure a holder in due course. Such failures on the part of the
trustee who conducted the non-judicial foreclosure clearly demonstrate that the sale was not

conducted pursuant to the strict mandates of California Civil Code Section 2924.
A non-judicial foreclosure sale under the power-of-sale in a DOT or Mortgage, on the other
hand, must be conducted in strict compliance with its provisions and applicable statutory law. A
trustee’s powers and rights are limited to those set forth in the DOT and laws applicable thereto.
(See, e.g., Fleisher v. Continental Auxiliary Co., (1963) 215 Cal.App.2d 136, 139, 30 Cal.Rptr.
137; Woodworth v. Redwood Empire Sav. & Loan Assn., (1971) 22 Cal.App.3d 347, 366, 99
Cal.Rptr. 373). No Court order authorizing or approving the sale is involved. A sale under the
power of sale in a DOT or Mortgage is a “private sale.” Walker v. Community Bank, (1974) 10
Cal.3d at p. 736, 111 Cal.Rptr. 897. (emphasis added).
The statutory procedures governing the conduct of such sales are found in Civil Code Sections
2924, 2924a-2924h, which set forth the time periods in which to comply with certain
requirements, the persons authorized to conduct the sale, the requirements of Notice of Nefault
and Election to Sell and for cure of default and reinstatement, inter alia. The sale is concluded
when the trustee accepts the last and highest bid. (Civil Code Section 2924h, Subd. (c)). Coppola
vs. Superior Court, (1989) 211 Cal.App.3d 848, 868.
Here, Plaintiff’s predecessor rendered the note non-negotiable by failing to list the assignment
on the fact of the Note, notwithstanding the fact that sufficient space existed. Thus, the Note could
not be the security interest utilized for execution of the non-judicial foreclosure pursuant to
California Civil Code Section 2924. Plaintiff cannot prove that the foreclosure strictly complied
with Section 2924 as mandated. Thus, the TDUS is invalid, and does not confer upon Plaintiff a
right to seek possession of the subject premises pursuant to California Code of Civil Procedure
Section 1161a. Therefore, Plaintiff does not have standing to prosecute the instant action, and the
matter must be dismissed or in the alternative Defendant is entitled to Summary Judgment.
As a General Rule a Defendant in an Unlawful Detainer cannot test the strength or validity of
Plaintiff’s Title Vella v. Hudgins, (1977) 20 C3d 251, 255, 142 CR 414, 572 P2d 28; Old
National Financial Services, Inc. v. Seibert, (1987) 194 CA 3d 460, 465, 289 CR 728; However,
a different rule applies in an Unlawful Detainer which is brought by a purchaser after a
foreclosure sale. His right to obtain possession is based on the fact that the property has been
“Duly Sold” by foreclosure proceedings California Code of Civil Procedure Section 1161a, and
therefore it is necessary that the Plaintiff “Prove” that each of the statutory procedures have been
complied with as a condition for obtaining possession of the property Vella V. Hudgins Supra;

Stephens, Pertain and Cunningham V. Hollis (1987) 196 CA3d 948, 953, 242 CR 251.
In the first instance, it appears that Plaintiff is not even the real party in interest. Plaintiff has
the burden of proving that it is the proper Plaintiff and that the TDUS resulted from a properly
conducted non-judicial foreclosure sale.
Again as stated in Privus vs. Bush, (1981) 118 Cal.App.3d 1003, the court held that a
promissory note executed as security for a DOT was rendered non-negotiable because the
endorsement by the assignor was not contained on the face of the Note, notwithstanding the fact
that there was sufficient space on the Note to effectuate the assignment and thus the Plaintiff was
not a holder in due course, notwithstanding their title as a “Holders”.
California Code of Civil Procedure Section 1161(3) mandates that in order to seek possession
after a sale pursuant to Civil Code Section 2924, the Plaintiff’s interest must be “duly perfected”.
California Code of Civil Procedure Section 1161 provides in pertinent part:

(b) In any of the following cases, a person who holds over and continues in possession
of a manufactured home, mobile home, floating home, or real property after a three-day
written notice to quit the property has been served upon the person, or if there is a
subtenant in actual occupation of the premises, also upon such subtenant, as prescribed
in Section 1162, may be removed there from as prescribed in this chapter:

(3) Where the property has been sold in accordance with Section 2924 of the Civil
Code, under a power of sale contained in a deed of trust executed by such person, or a
person under whom such person claims, and the title under the sale has been duly
perfected.

Here, it has been shown that Plaintiff, FHLMC did not perfect its interest because the original
assignment rendered the note non-negotiable, and secondarily they failed to record the assignment
prior to commencing the foreclosure, thus, the non-judicial foreclosure could not lawfully
proceed, and the trustee did not strictly comply with the mandates of Section 2924.
A non-judicial foreclosure sale under the power-of-sale in a DOT or Mortgage, on the other
hand, must be conducted in strict compliance with its provisions and applicable statutory law. A
trustee’s powers and rights are limited to those set forth in the deed of trust and laws applicable
thereto. (See, e.g., Fleisher v. Continental Auxiliary Co., (1963) 215 Cal.App.2d 136, 139, 30
Cal.Rptr. 137. Therefore, the Court would properly exercise its discretion pursuant to California
Code of Civil Procedure Section 631.8, by granting the Motion to Dismiss for lack of standing on
the part of Plaintiff or under California Code of Civil Procedure Section 437C and Granting
Summary Judgment in Favor of Defendant.

LEGAL STANDARD

The standard for granting summary judgment

Summary Judgment shall be granted if all the papers submitted show there is no triable issue of
material fact and that the moving party is entitled to a judgment as a matter of law. Code Civil
Procedure Section 437c(c). A Defendant is entitled to Summary Judgment if the record
establishes that none of the Plaintiff’s asserted causes of actions can prevail as a matter of law.
Molko v. Holy Spirit Ass’n, (1988) 46 CAl.3d 1092, 1107. A Defendant moving for Summary
Judgment must conclusively negate a necessary element of the Plaintiff’s case and show there is
no material issue of fact that requires a trial. Ibid.
The moving Defendant has the burden of introducing evidence that the Plaintiff’s action is
without merit on any legal theory. Hulett v. Farmers Insurance Exchange, (1992) 10 Cal.App.
4th 1051, 1064. Once the Defendant has met that burden, the burden shifts to the Plaintiff to show
that a triable issue of material fact exists. Code Civil Procedure Section 437c(o)(1). But if the
Defendant fails to meet that burden, the adverse party has no burden to demonstrate the claim’s
validity, and the court must deny the motion. Hulett, supra, 10 Cal.App.4th at 1064.
Instead of introducing evidence that would negate the Plaintiff’s action, a moving Defendant
may introduce the Plaintiff’s own factually devoid discovery responses to demonstrate that it has
no case. Union Bank v. Superior Court, (1995) 31 Cal.App.4th 573, 589-593. The burden of
proof would then be on the Plaintiff to introduce evidence that would show a triable issue of
material fact. Id., at 593. But the Defendant does not meet its burden merely by asserting that the
Plaintiff has no evidence. Hagen v. Hickenbottom, (1995) 41 Cal.App.4th 168, 186. Instead, the
Defendant must submit discovery responses that would conclusively foreclose any cause of
action. Id. at 186-187.
When no or insufficient affidavits or other evidence is submitted to demonstrate the absence of
an issue of material fact, the Court may treat the motion as in legal effect one for Judgment on the
pleadings. White v. County of Orange, (1985) 166 Cal.App.3d 566, 569. In that case, the motion
performs the same function as a general demurrer. Ibid. A general demurrer will not test whether
a complaint is ambiguous or uncertain or states essential facts only inferentially or conclusionary.
Johnson v. Mead, (1987) 191 Cal.App.3d 156, 160. The Defendants’ failure to challenge those
defects by way of special demurrer waives them. Hooper v. Deukmejian, (1981) 122 Cal.App.3d

987, 994.

CONCLUSION

Defendant respectfully submits his Motion to Summary Judgment and requests that the court
grant the motion as framed herein.

Respectfully submitted;

DATED: August 24, 2012 LAW OFFICES OF TIMOTHY L. MCCANDLESS

_____________________________________
Timothy L. McCandless, Esq.
Attorney for Defendant(s): Alexander B. Paragas

California non-judicial foreclosure cases and ruling recent to date

California Cases – 2004 to Present
Including Federal cases interpreting California law
LISTED WITH MOST RECENT CASES FIRST
Go to cases 2000 – 2003

Cadlerock Joint Venture v. Lobel     Docket
Cal.App. 4th Dist., Div. 3 (G045936)  6/20/12TRUSTEE’S SALES / DEFICIENCY JUDGMENTS: When a single lender contemporaneously makes two non-purchase money loans secured by two deeds of trust referencing a single parcel of real property and soon thereafter assigns the junior loan to a different entity, the assignee of the junior loan, who is subsequently “sold out” by the senior lienholder’s nonjudicial foreclosure sale, may pursue the borrower for a money judgment in the amount of the debt owed. The court pointed out that there was no suggestion in the record that the loan originator and assignees were affiliated in any way or that two loans were created, when one would have sufficed, as an artifice to evade C.C.P. Section 580d. (Section 580d prohibits a lender from obtaining a deficiency judgment after non-judicially foreclosing its deed of trust.)
Nickell v. Matlock     Docket
Cal.App. 2nd Dist. (B230321)  6/4/12QUIET TITLE: Normally, a defendant has no right to participate in the case after its default has been entered. But Code of Civil Procedure Section 764.010, pertaining to quiet title actions, provides that “[t]he court shall not enter judgment by default but shall in all cases require evidence of plaintiff’s title and hear such evidence as may be offered respecting the claims of any of the defendants . . .” The court held that, while default may be entered, Section 764.010 requires that before issuing a default judgment the trial court must hold an evidentiary hearing in open court, and that defendants were entitled to participate in the hearing even though their answers to the complaint had been stricken as a result of sanctions, and their defaults had been entered.
Cal Sierra Construction v. Comerica Bank     Docket
Cal.App. 3rd Dist. (C060707)  5/31/12MECHANICS LIENS: The court held that only owners, and not lenders, are entitled to bring a “Lambert” motion. This term refers to Lambert v. Superior Court (1991) 228 Cal.App.3d 383, which held that where a claimant has already filed suit to enforce a mechanics lien or stop notice, the owner may file a motion in the action to have the matter examined by the trial court. On such motion, the claimant bears the burden of establishing the “probable validity” of the claim underlying the lien or stop notice. If the claimant fails to meet that burden, the lien and stop notice may be released in whole or in part.
American Property Management Corporation v. Superior Court     Docket
Cal.App., 4th Dist., Div. 1 (D060868)  5/24/12INDIANS – SOVEREIGN IMMUNITY: The court held that a California limited liability company (“the LLC”), which was wholly owned through a series of California limited liability companies by an Indian tribe, was not entitled to sovereign immunity. The LLC owned a hotel and the lawsuit involved a dispute with its property management company. The court stated that the dispositive fact was that the LLC was a California limited liability company. Nevertheless, it went through the weighing process prescribed by the US 10th Circuit Court of Appeals in Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino & Resort629 F.3d 1173, which concluded that a court needs to determine whether a tribe’s entities are an “arm of the tribe” by looking to a variety of factors when examining the relationship between the tribe and its entities, including but not limited to: (1) their method of creation; (2) their purpose; (3) their structure, ownership, and management, including the amount of control the tribe has over the entities; (4) whether the tribe intended for the entities to have tribal sovereign immunity; (5) the financial relationship between the tribe and the entities; and (6) whether the purposes of tribal sovereign immunity are served by granting immunity to the entities. The court concluded that the balance of these factors weighed heavily against sovereign immunity, and reiterated that the most significant fact was the LLC’s organization as a California limited liability company.The concurring opinion would not accord the same dispositive effect of formation under state law as a limited liability company that the majority did, but agreed that the factors set forth by the 10th Circuit weighed against sovereign immunity.

[Ed. note: The “weighing” process is impossible to do with any certainty at the time of contracting with an LLC (or other entity) in which an Indian tribe owns an interest. In spite of the favorable outcome of this state court appellate opinion, it seems that in order to be safe, you need to insist on a specific waiver of sovereign immunity from a tribe that has an interest in any entity you enter into a contract with.]
Shady Tree Farms v. Omni Financial     Docket
Cal.App. 5th Dist. (F062924)  5/22/12MECHANICS LIENS: Plaintiff contracted directly with the owner of a development to deliver trees, and recorded a mechanics lien after not being paid. The court held that plaintiff’s mechanics lien was invalid because it failed to provide defendant construction lender with a preliminary 20-day notice under Civil Code Section 3097(b). Section 3097(a), requiring a 20-day notice to the owner, original contractor and construction lender, did not apply because plaintiff was under direct contract with the owner, and the subsection contains an exception for such persons. However, Section 3097(b) requires a 20-day notice to the construction lender by anyone under direct contract with the owner, except “the contractor”. The court interpreted that term to refer only to the general contractor, so the exception did not apply to plaintiff.
Deutsche Bank v. McGurk     Docket
Cal.App. 2nd Dist. (B231591)  5/22/12QUIET TITLE: Defendant McGurk filed a previous quiet title action against a purchaser who had defrauded her, and recorded a lis pendens. She also named as a defendant the lender holding a deed of trust executed by the purchaser. McGurk dismissed the lender after the lender filed bankruptcy intending to pursue the lender in the bankruptcy action. The lender then assigned the note and deed of trust to plaintiff, after which McGurk took the default of the purchaser. Plaintiff brought this declaratory relief action seeking a determination of the validity of the deed of trust. The court held that 1) even though the assignment was recorded subsequent to the lis pendens, plaintiff stands in the shoes of the lender, whose deed of trust recorded prior to the lis pendens, 2) while plaintiff took the assignment subject to the risk that its assignor’s interest would be proven to have been invalid, that risk never came to fruition because the assignor was dismissed, 3) the case was remanded to the trial court to determine the validity of the deed of trust.
Herrera v. Federal National Mortgage Association     Docket
Cal.App. 4th Dist., Div. 2 (E052943)  5/17/12TRUSTEE’S SALES: MERS, as nominee beneficiary, has the power to assign its interest under a deed of trust. Even assuming plaintiffs can allege specific facts showing that MERS’ assignment of the deed of trust was void, a plaintiff in a suit for wrongful foreclosure is required to demonstrate the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests. Not only did plaintiffs fail to show prejudice, but if MERS lacked the authority to assign the deed of trust, the true victim would not be the plaintiffs, who were admittedly in default, but the lender whose deed of trust was improperly assigned. Finally, Civil Code Section 2932.5, requiring recordation of an assignment of a mortgage, applies only to mortgages that give a power of sale to the creditor, not to deeds of trust which grant a power of sale to the trustee.
Estates of Collins and Flowers (Flowers v. Dancy)     Docket
Cal.App. 3rd Dist. (C064815)FORGERY: The son of one of two property owners forged a deed after they both had died. The court held that the administrator of the estates of the property owners was precluded from attacking the admittedly forged deed due to the “unclean hands” doctrine. The administrator, prior to being appointed as such, wrongfully sought to control the house by filing a defective mechanics lien, filing a baseless quiet title action for his own benefit, and renting the property to tenants for his own benefit, without regard for the other heirs of the two deceased property owners. The court pointed out that a forged deed is a nullity, but a party’s conduct may estop him from asserting that the deed is forged, and that the unclean hands doctrine can prevent a party from attacking a forged deed.The court also addressed the fact that as the other heirs should not suffer as a result of the administrator’s wrongful conduct. However, the court found that there was no evidence that any heirs who had not aided, ratified, or acquiesced in the administrator’s actions actually exist in this case.
Sumner Hill Homeowners’ Association v. Rio Mesa Holdings     Docket
Cal.App. 5th Dist. (F058617)  5/2/12EASEMENTS: In the published portion of the opinion, the court held that a subdivision map failed to provide public access to a river as required by Government Code Section 66478.4 ifthe river is navigable, but that the challenge to the map was barred by the 90-day statute of limitations in Government Code Section 66499.37. The court did not reach the question of whether or not the river is navigable. The court also held that implied and equitable easement rights are sufficient “title” to support a slander of title action, and that defendant slandered plaintiffs’ title by recording a Notice of Permission to Use Land Under Civil Code Section 813 that purported to restrict plaintiffs use of the easement.The court also addressed Streets and Highways Code Section 8353, which provides that the vacation of a street or highway extinguishes all private easements claimed by reason of the purchase of a lot by reference to a map on which the street or highway is shown, unless within two years after the vacation, the claimant records a notice describing the private easement. The court held that this section does not apply to private easements that are based on other or additional grounds besides the fact that the purchase was by reference to a map depicting a street.
Haynes v. EMC Mortgage Corporation     Docket
Cal.App. 1st Dist. (A131023)  4/9/12TRUSTEE’S SALES: Civil Code Section 2932.5, which requires the assignee of a mortgagee to record the assignment before exercising a power to sell the real property, applies only to mortgages and not to deeds of trust. Section 2932.5 requires the assignment of a mortgage to be recorded so that a prospective purchaser knows that the mortgagee has the authority to exercise the power of sale. This is not necessary when a deed of trust is involved, since the trustee conducts the sale and transfers title. (Ed. note: The result was not affected by the fact that the assignee substituted a new trustee.)
Brown v. Wells Fargo Bank     Docket
Cal.App. 2nd Dist (B233679)     Case complete 6/20/12TRUSTEE’S SALES: Plaintiff filed suit and sought a preliminary injunction to prevent a trustee’s sale. The trial court granted the injunction on the condition that plaintiff deposit $1,700 a month into a client trust account. The trial court subsequently dissolved the injunction after plaintiff failed to make any payments. The appellate court affirmed, and further determined that the appeal was frivolous because no viable issue was raised on appeal. It directed the court clerk to send a copy of the opinion to the California State Bar for consideration of discipline of plaintiff’s attorney.
Connolly v. Trabue     Docket     Sup.Ct. Docket
Cal.App. 1st Dist. (A131984)  4/10/12     Petition for review and depublication request filed with Cal Supreme Ct. 5/21/12PRESCRIPTIVE EASEMENTS: Plaintiffs brought an action to establish a prescriptive easement to a portion of defendant’s property they had fenced in 1998. Plaintiff and defendant’s predecessor intended to do a lot line adjustment that would transfer the disputed area to plaintiffs, but it was not accomplished because of an error in a deed. The trial court ruled that, even if such an easement had been acquired by Plaintiffs, their claim was barred by the doctrine of laches because they had delayed in asserting their claim in a timely manner. The appellate court reversed, holding that the doctrine of laches is inapplicable in an action involving a claim for a prescriptive easement because 1) once a prescriptive easement is established for the statutory period, the owner of the easement is under no obligation to take further action, rather, it is the record owner who must bring an action within 5 years after the prescriptive period commences, 2) this was an action at law, not equity, and laches applies only to equitable actions and 3) there was no evidence that plaintiffs were aware of the error in deed until shortly before they filed this action. [Ed. note: Plaintiff’s occupation of the disputed area was apparently exclusive, but the court did not discuss cases holding that a prescriptive easement cannot be established where the use is exclusive. For example, see Harrison v. Welch.]
Bank of America v. Mitchell     Docket
Cal.App. 2nd Dist. (B233924)  4/10/12     Case complete 6/11/12TRUSTEE’S SALES / DEFICIENCY JUDGMENTS: The court acknowledged existing case law holding that a “sold out” junior holder of a deed of trust can obtain a deficiency judgment when the junior lien is wiped out by a trustee’s sale under a senior deed of trust. But the court held that a deficiency judgment was not available in this case where the same lender held both deeds of trust and assigned the junior deed of trust to plaintiff after the trustee’s sale. The court also held that this applies regardless of whether the lender purchases at its own trustee’s sale or where, as here, a 3rd party purchases at the sale.
Montgomery Sansome LP v. Rezai     Docket
Cal.App. 1st Dist. (A130272, A130694)  3/28/12     Case complete 5/29/12MECHANICS LIENS/CONTRACTOR LICENSING: Plaintiff’s certificate of limited partnership with the California Secretary of State was in the name of “Montgomery-Sansome, LP”. Its contractor’s license was in the name of Montgomery Sansome LTD. A fictitious business name statement named Montgomery Sansome LTD, L.P. and incorrectly stated that it was a general partnership. The contract entered into with defendant to perform certain repairs named plaintiff as Montgomery Sansome LTD, LP. The trial court granted a summary judgment in favor of defendant, holding that plaintiff could not recover because the entity that signed the contract was not licensed. The appellate court reversed, holding that there is a triable issue of fact regarding whether there is actually only a single entity. Plaintiff did not violate the licensing law if the entity that entered into the contract is actually the same as the entity that signed the contract. The court distinguished cases holding that the licensing law is violated where a corporation or partnership enters into a contract and the principal is licensed, but not the entity.
Debrunner v. Deutsche Bank     Docket     Sup.Ct. Docket
Cal.App. 6th Dist. (H036379)  3/16/12     Petition for review and depublication request DENIED by Cal Supreme Ct. 6/13/12TRUSTEE’S SALES: The court upheld the trial court’s grant of a demurrer in favor of the lender without leave to amend, holding:
1. Since each assignment of deed of trust provided for the assignment “together with the note or notes therein described”, it was not necessary to separately endorse the promissory note.
2. Physical possession of the note is not a precondition to nonjudicial foreclosure.
3. A notice of default does not need to be filed by the person holding the note. C.C. 2924(a)(1) permits a notice of default to be filed by the “trustee, mortgagee or beneficiary, or any of their authorized agents”.
4. A notice of default (NOD) is valid even though the substitution of the trustee identified in the NOD is not recorded until after the NOD records.
Walker v. Ticor Title Company of California     Docket
Cal.App. 1st Dist. (A126710)  3/15/12     Case complete 5/16/12ESCROW: Plaintiffs filed suit against Ticor and 12 other defendants alleging defendants conspired to fraudulently induce them to refinance real estate loans. The court upheld the judgment in favor of Ticor, holding as follows:
1. Even though Ticor gave the loan documents to the loan broker in order to have plaintiffs sign them at home, this did not violate a provision of the lender’s closing instructions prohibiting the release of loan documents without lender’s prior approval because the lender was fully aware that this was Ticor’s and the loan broker’s practice so, therefore, it impliedly consented to it.
2. It was reasonable for the jury to conclude that Ticor did not violate a provision of the lender’s closing instructions requiring the closing agent to “coordinate the settlement” because the loan broker’s activity of obtaining signatures was only part of the larger coordination of the settlement handled and supervised by Ticor.
3. It was permissible for the loan broker to provide copies of the “Notice of Right to Cancel” because nothing in the language of the instructions precluded Ticor from delegating this task, nor could plaintiffs have been damaged by such a delegation.
4. One of the plaintiffs notified Ticor after the loan closed that his wife had not signed the loan documents. This was insufficient to establish that Ticor aided and abetted the loan broker’s fraud because it did not show that Ticor had actual knowledge of the fraud.
5. It was improper for the trial court to reduce the amount of attorney’s fees awarded to Ticor based on plaintiff’s financial condition.
Kavin v. Frye     Docket
Cal.App. 2nd Dist. (B230076)  3/5/12     Case complete 5/7/12OPTION TO RENEW LEASE:
1. An option to renew a lease was not effective where it was exercised by only one of four tenants, and the other tenants did not authorize the first tenant to do so.
2. A lease provision stating that all lessees are jointly and severally liable for lease obligations is not an authorization for only one lessee to execute an option to extend the lease.
3. The option was executed late per the terms of the lease. Normally, a lessor can waive the time requirement for an option since the provision normally benefits only the lessor. Here, however, the lessor could not waive the provision on behave of two of the tenants who, since they signed the lease basically as guarantors, also stood to benefit by the expiration of the option period.
SCI California Funeral Services v. Five Bridges Foundation     Docket
Cal.App. 1st Dist. (A126053)  2/14/12     Case complete 4/17/12DAMAGES-DIMINUTION IN VALUE: In this non-title insurance case, plaintiff purchased property, including an easement that was determined, in another action, to be invalid. The court held that the buyer’s damages for loss of the easement included, in addition to diminution in value caused by loss of the easement, damages attributable to the fact that the easement had additional unique value to a neighbor, which plaintiff could have used as a “bargaining chip” to obtain a higher price when negotiating a sale of the easement to the neighbor.[Ed. Note: This case may not be applicable to title insurance because standard ALTA policies contain a provision limiting liability for damages to “the difference between the value of the Title as insured and the value of the Title subject to the risk insured against by this policy”. CLTA policies contain a similar provision. The ALTA/CLTA Homeowners Policy of Title Insurance contains a provision limiting damages to “your actual loss”.]
California Redevelopment Association v. Matosantos     Docket
53 Cal.4th 231 – Cal. Supreme Court (S194861)  12/29/11REDEVELOPMENT AGENCIES:
1. Assembly Bill 1X 26, which bars redevelopment agencies from engaging in new business and provides for their windup and dissolution, is constitutional.
2. Assembly Bill 1X 27, which offers redevelopment agencies the alternative to continue to operate if the cities and counties that created them agree to make payments into funds benefiting the state’s schools and special districts, is unconstitutional.
Stebley v. Litton Loan Servicing     Docket     Sup.Ct. Docket
202 Cal.App.4th 522 – 3rd Dist. (C066130)  11/30/11 (Pub. Order 12/29/11)    Petition for review and depublication request by Cal Supreme Ct. DENIED 3/14/12TRUSTEE’S SALES: The court upheld the trial court’s sustaining of a demurrer without leave to amend in an action alleging that defendant violated Civil Code Section 2923.5, which requires that before a notice of default can be filed, a lender must attempt to contact the borrower and explore options to prevent foreclosure. The court held:
1. Section 2923.5 does not provide for damages or for setting aside a foreclosure sale. The only remedy available is to provide the borrower more time before a foreclosure sale occurs. After the sale, the statute provides no relief.
2. The statute does not require a lender to modify the loan.
3. While a tender of the loan amount is not necessary to delay a foreclosure sale, it is necessary in order to set aside a sale after it occurs.
4. Plaintiff’s cause of action for dependant adult abuse fails because plaintiff failed to allege that the property was taken wrongfully where an ordinary foreclosure sale occurred.
Portico Management Group v. Harrison     Docket     Sup.Ct. Docket
202 Cal.App.4th 464 – 3rd Dist. (C062060)  12/28/11     Petition for review by Cal Supreme Ct. DENIED 4/11/12TRUSTS: In the published portion of the opinion, the court held that an arbitration award and judgment against a trust, and not against the trustees in their capacity as trustees, were not valid because a trust is not an entity or person capable of owning title to property. A trust is, rather, a fiduciary relationship with respect to property. The court pointed out that if the judgment had been against the trustees in their representative capacities, it would have also bound successor trustees. Although the lawsuit properly named the trustees, for some reason plaintiff did not seek to correct or modify the arbitration award or judgment to indicate that it was properly against the trustees.
Gray1 CPB v. Kolokotronis     Docket
202 Cal.App.4th 480 – 3rd Dist (C064954)  12/2/11 (Pub. Order 12/28/11)     Case complete 2/28/12GUARANTY: The court rejected defendant’s contention that the guaranty he signed was actually a demand note, which would have meant that he could compel the lender to foreclose on the security first and that the waiver of his rights under various antideficiency statutes would be invalid. The court held that the following language in the guaranty did not turn the guaranty into a promissory note: “whether due or not due,” “on demand,” and “not contingent upon and are independent of the obligations of Borrower.”
Lona v. Citibank     Docket
202 Cal.App.4th 89 – 6th Dist (H036140)  12/21/11     Case complete 2/22/12TRUSTEE’S SALES: The court reversed a summary judgment in favor of defendants in an action seeking to set aside a trustee’s sale on the basis that the loan was unconscionable. The court held that summary judgment was improper for two reasons:
1. The homeowner presented sufficient evidence of triable issues of material fact regarding unconscionability. Plaintiff asserted that the loan broker ignored his inability to repay the loan (monthly loan payments were four times his monthly income) and, as a person with limited English fluency, little education, and modest income, he did not understand many of the details of the transaction which was conducted entirely in English.
2. Plaintiff did not tender payment of the debt, which is normally a condition precedent to an action by the borrower to set aside the trustee’s sale, but defendants’ motion for summary judgment did not address the exceptions to this rule that defendant relied upon.The case contains a good discussion of four exceptions to the tender requirement: 1. If the borrower’s action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmation of the debt. 2. A tender will not be required when the person who seeks to set aside the trustee’s sale has a counter-claim or set-off against the beneficiary. 3. A tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale. 4. No tender will be required when the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face.
Pioneer Construction v. Global Investment Corp.     Modification Order     Docket     Sup.Ct. Docket
202 Cal.App.4th 161 – 2nd Dist. (B225685)  12/21/11     Request for depublication DENIED 3/28/12MECHANICS LIENS: The court held that:
1. A mechanics lien claimant who provided labor and materials prepetition to a debtor in bankruptcy can record a mechanics lien after the property owner files for bankruptcy without violating the automatic stay. (11 U.S.C. §362(b)(3).)
2. A mechanics lienor must, and defendant did, file a notice of lien in the debtor’s bankruptcy proceedings to inform the debtor and creditors of its intention to enforce the lien. (11 U.S.C. §546(b)(2)
3. The 90-day period to file an action after recording a mechanics lien is tolled during the pendency of the property owner’s bankruptcy. Accordingly, an action to enforce the lien was timely when filed 79 days after a trustee’s sale by a lender who obtained relief from the automatic stay. (The property ceased to be property of the estate upon completion of the trustee’s sale.)
Harbour Vista v. HSBC Mortgage Services     Docket
201 Cal.App.4th 1496 – 4th Dist., Div. 3 (G044357)  12/19/11     Case complete 2/21/12QUIET TITLE: Normally, a defendant has no right to participate in the case after its default has been entered. But Code of Civil Procedure Section 764.010, pertaining to quiet title actions, provides that “[t]he court shall not enter judgment by default but shall in all cases require evidence of plaintiff’s title and hear such evidence as may be offered respecting the claims of any of the defendants . . .” The court held that, while default may be entered, Section 764.010 requires that before issuing a default judgment the trial court must hold an evidentiary hearing in open court, and that a defendant is entitled to participate in the hearing even when it has not yet answered the complaint and is in default.
Park v. First American Title Insurance Company     Docket
201 Cal.App.4th 1418 – 4th Dist., Div. 3 (G044118)  11/23/11 (Pub. Order 12/16/11)     Case complete 2/15/12TRUSTEE’S SALES: A trustee’s sale was delayed due to defendant’s error in preparing the deed of trust. However, the court held that plaintiff could not establish damages because she could not prove that a potential buyer was ready, willing and able to purchase the property when the trustee’s sale was originally scheduled. Such proof would require showing that a prospective buyer made an offer, entered into a contract of sale, obtained a cashier’s check, or took any equivalent step that would have demonstrated she was ready, willing, and able to purchase plaintiff’s property. Also, plaintiff would need to show that the prospective buyer was financially able to purchase the property, such as by showing that the prospective buyer had obtained financing for the sale, preapproval for a loan or had sufficient funds to purchase the property with cash.
Bardasian v. Superior Court     Docket
201 Cal.App.4th 1371 – 3rd Dist. (C068488)  12/15/11TRUSTEE’S SALES: Civil Code Section 2923.5 requires that before a notice of default can be filed, a lender must attempt to contact the borrower and explore options to prevent foreclosure. Where the trial court ruled on the merits that a lender failed to comply with Section 2923.5, it was proper to enjoin the sale pending compliance with that section, but it was not proper to require plaintiff to post a bond and make rent payments. Also, discussions in connection with a loan modification three years previously did not constitute compliance with the code section.
Lang v. Roche     Docket
201 Cal.App.4th 254 – 2nd Dist. (B222885)  11/29/11     Case complete 2/3/12SHERIFF’S SALES: Plaintiff sought to set aside a Sheriff’s sale arising from the execution on a judgment rendered in another action. Defendant had obtained that judgment by default after service by publication even though plaintiff was defendant’s next door neighbor and could easily be found. The court set the sale aside, holding that even though C.C.P. 701.780 provides that an execution sale is absolute and cannot be set aside, that statute does not eliminate plaintiff’s right of equitable redemption where the judgment is void due to lack of personal jurisdiction.
Promenade at Playa Vista HOA v. Western Pacific Housing     Docket     Sup.Ct. Docket
200 Cal.App.4th 849 – 2nd Dist. (B225086)  11/8/11     Petition for review by Cal Supreme Ct. GRANTED 1/25/12CC&R’S: In a construction defect action brought by a condominium homeowners association, the court held that a developer cannot compel binding arbitration of the litigation pursuant to an arbitration provision in the Declaration of Covenants, Conditions, and Restrictions. CC&R’s are not a contract between the developer and the homeowners association. Instead, the provisions in the CC&R’s are equitable servitudes and can be enforced only by the homeowners association or the owner of a condominium, not by a developer who has sold all the units.
Alpha and Omega Development v. Whillock Contracting     Docket     Sup.Ct. Docket
200 Cal.App.4th 656 – 4th Dist., Div. 1 (D058445)  11/2/11     Petition for review by Cal Supreme Ct. DENIED 2/15/12LIS PENDENS: This is a slander of title and malicious prosecution action brought after defendant’s unsuccessful action to foreclose a mechanics lien. Plaintiff’s slander of title allegation is based on defendant’s recordation of a lis pendens in the prior mechanics lien action. The appellate court upheld the trial court’s granting of defendant’s anti-SLAPP motion and striking the slander of title cause of action, because recording a lis pendens is privileged under Civil Code Section 47(b)(4).
Biancalana v. T.D. Service Company     Docket     Sup.Ct. Docket
200 Cal.App.4th 527 – 6th Dist. (H035400)  10/31/11     Petition for review by Cal Supreme Ct. GRANTED 2/15/12TRUSTEE’S SALES: Inadequacy of the sale price is not a sufficient ground for setting aside a trustee’s sale of real property in the absence of any procedural errors. The unpaid balance of the loan secured by the subject deed of trust was $219,105. The trustee erroneously told the auctioneer to credit bid the delinquency amount ($21,894.17). Plaintiff was the successful bidder with a bid of $21,896. The court refused to set aside the sale because there were no procedural errors and the mistake was within the discretion and control of the trustee, who was acting as agent for the lender. The court distinguished Millennium Rock Mortgage, Inc. v. T.D. Service Co. because here the mistake was made by defendant in the course and scope of its duty as the beneficiary’s agent, not by the auctioneer as in Millennium Rock.The case also contains a discussion of the rule that once the trustee’s deed has been delivered, a rebuttable presumption arises that the foreclosure sale has been conducted regularly and properly. But where the deed has not been transferred, the sale may be challenged on the grounds of procedural irregularity.
First Bank v. East West Bank     Docket
199 Cal.App.4th 1309 – 2nd Dist. (B226061)  10/17/11     Case complete 12/19/11RECORDING: Where two deeds of trust secured by the same real property were simultaneously time-stamped for recording by the County Recorder’s Office but were indexed at different times, the lenders have equal priority. The recording laws protect subsequent purchasers and neither bank was a subsequent purchaser. The court acknowledged that a subsequent purchaser (or lender) who records his interest before the prior interest is indexed has priority, but this rule does not apply when both deeds of trust were recorded simultaneously.
Dollinger DeAnza Assoc. v. Chicago Title Insurance Company     Docket     Sup.Ct. Docket
199 Cal.App.4th 1132 – 6th Dist. (H035576)  9/9/11 (Pub. Order 10/6/11)     Request for depublication DENIED 1/4/12TITLE INSURANCE: Plaintiff’s title insurance policy, which was issued in 2004, insured property that originally consisted of seven parcels, but which had been merged into a single parcel pursuant to a Notice of Merger recorded by the City of Cupertino in 1984. The policy did not except the Notice of Merger from coverage. Plaintiff filed this action after Chicago Title denied its claim for damages alleged to result from the inability to sell one of the parcels separately. The court ruled in favor of Chicago, holding:
1. While the notice of merger may impact Plaintiff’s ability to market the separate parcel, it has no affect on Plaintiff’s title to that parcel, so it does not constitute a defect in title. It does not represent a third person’s claim to an interest in the property.
2. Chicago is not barred by principals of waiver or estoppel from denying plaintiff’s claim, after initially accepting the claim, because 1) waiver only applies to insurers that do not reserve rights when accepting a tender of defense and 2) plaintiff failed to show detrimental reliance, which is one of the elements of estoppel.
3. Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing cannot be maintained where benefits are not due under plaintiff’s insurance policy.
4. Since the court held that the Notice of Merger was not a defect in title, it did not need to consider Chicago’s contention that the Notice of Merger was void because the County Recorder indexed it under the name of the City, rather than the name of the property owner.
[Ed. note: This case must have dealt with an ALTA 1992 policy. The ALTA 2006 policy made changes to the Covered Risks.]
Sukut Construction v. Rimrock CA     Docket     Sup.Ct. Docket
199 Cal.App.4th 817 – 4th Dist., Div. 1 (D057774)  9/30/11     Petition for review by Cal Supreme Ct. DENIED 12/14/11MECHANICS LIENS: Plaintiff could not establish a mining lien under Civil Code Section 3060 for removing rocks from a quarry because a quarry is not a mine and the rocks were not minerals. The court did not address whether plaintiff could establish a regular mechanics lien because it held that plaintiff was judicially estopped from asserting that position after leading defendant to believe that it was asserting only a mining claim.
UNPUBLISHED: First American Title Insurance Company v. Ordin     Docket
Cal.App. 2nd Dist. (B226671)  9/14/11     Case complete 11/17/11TITLE INSURANCE: An arbitrator found that defendants did not lose coverage under their title policy when they conveyed title to their wholly owned corporation, then to themselves as trustees of their family trust and finally to a wholly owned limited liability company. This conflicts with the holding in Kwok v. Transnation Title Insurance Company and this could have been an interesting case, except that whether the ruling was right or wrong was not before the court. The court held only that the arbitrator’s award could not be overturned, even if the the law was applied incorrectly, because there was no misconduct by the arbitrator.
Calvo v. HSBC Bank     Docket     Sup.Ct. Docket
199 Cal.App.4th 118 – 2nd Dist. (B226494)  9/13/11     Petition for review by Cal Supreme Ct. DENIED 1/4/12TRUSTEE’S SALES: Notice of the assignment of a deed of trust appeared only in the substitution of trustee, which was recorded on the same date as the notice of trustee’s sale, and which stated that MERS, as nominee for the assignee lender, was the present beneficiary. Plaintiff sought to set aside the trustee’s sale for an alleged violation of Civil Code section 2932.5, which requires the assignee of a mortgagee to record an assignment before exercising a power to sell real property. The court held that the lender did not violate section 2932.5 because that statute does not apply when the power of sale is conferred in a deed of trust rather than a mortgage.
Robinson v. Countrywide Home Loans     Docket
199 Cal.App.4th 42 – 4th Dist., Div. 2 (E052011)  9/12/11     Case complete 11/15/11TRUSTEE’S SALES: The trial court properly sustained defendant lender’s demurrer without leave to amend because 1) the statutory scheme does not provide for a preemptive suit challenging MERS authority to initiate a foreclosure and 2) even if such a statutory claim were cognizable, the complaint did not allege facts sufficient to challenge the trustee’s authority to initiate a foreclosure.
Hacienda Ranch Homes v. Superior Court (Elissagaray)     Docket
198 Cal.App.4th 1122 – 3rd Dist. (C065978)  8/30/11     Case complete 11/1/11ADVERSE POSSESSION: Plaintiffs (real parties in interest) acquired a 24.5% interest in the subject property at a tax sale. The court rejected plaintiffs’ claim of adverse possession under both 1) “color of title” because the tax deed by which they acquired their interest clearly conveyed only a 24.5% interest instead of a 100% interest, and 2) “claim of right” because plaintiffs’ claims of posting for-sale signs and clearing weeds 2 or 3 times a year did not satisfy the requirement of protecting the property with a substantial enclosure or cultivating or improving the property, as required by Code of Civil Procedure Section 325. The court also pointed out that obtaining adverse possession against cotenants requires evidence much stronger than that which would be required against a stranger, and plaintiffs failed to establish such evidence in this case.
Gramercy Investment Trust v. Lakemont Homes Nevada, Inc.     Docket
198 Cal.App.4th 903 – 4th Dist., Div. 2 (E051384)  8/24/11     Case complete 10/27/11ANTIDEFICIENCY: After a judicial foreclosure, the lender obtained a deficiency judgment against a guarantor. The court held that the choice of law provision designating the law of New York was unenforceable because there were insufficient contacts with New York. California is where the contract was executed, the debt was created and guaranteed, the default occurred and the real property is located. Also, Nevada law does not apply, even though the guarantor was a Nevada corporation, because Nevada had no connection with the transaction. The court also held that the guarantor was not entitled to the protection of California’s antideficiency statutes because the guaranty specifically waived rights under those statutes in accordance with Civil Code Section 2856.
Hill v. San Jose Family Housing Partners     Docket
198 Cal.App.4th 764 – 6th Dist. (H034931)  8/23/11     Case complete 10/25/11EASEMENTS: Plaintiff, who had entered into an easement agreement with defendant’s predecessor to maintain a billboard on a portion of defendant’s property, filed an action to prevent defendant from constructing a multi-unit building that would allegedly block the view of the billboard. Defendant asserted that the easement was unenforceable because it violated city and county building codes. The court held:
1. The easement was enforceable because the property’s use for advertising purposes is not illegal in and of itself. Although the instrumentality of that use, i.e., the billboard, may be illegal, that is not a bar to the enforcement of the agreement.
2. The easement agreement did not specifically state that it included the right to view the billboard from the street, but the parties necessarily intended the easement to include that right since viewing the billboard by passing traffic is the purpose of the easement.
3. Nevertheless, the trial court improperly denied a motion for a retrial to re-determine damages based on new evidence that the city had instituted administrative proceedings to have the billboard removed. The award of damages was based on plaintiff’s expected revenue from the billboard until 2037, and such damages will be overstated if the city forces plaintiff to remove the billboard.
Fontenot v. Wells Fargo Bank     Docket     Sup.Ct. Docket
198 Cal.App.4th 256 – 1st Dist. (A130478)  8/11/11     Depublication request DENIED 11/30/11FORECLOSURE / MERS: Plaintiff alleged a foreclosure was unlawful because MERS made an invalid assignment of an interest in the promissory note and because the lender had breached an agreement to forbear from foreclosure. The appellate court held that the trial court properly sustained a demurrer to the fourth amended complaint without leave to amend. The court held that MERS had a right to assign the note even though it was not the beneficiary of the deed of trust because in assigning the note it was acting on behalf of the beneficiary and not on its own behalf. Additionally, Plaintiff failed to allege that the note was not otherwise assigned by an unrecorded document. The court also held that plaintiff failed to properly allege that the lender breached a forbearance agreement because plaintiff did not attach to the complaint a copy of a letter (which the court held was part of the forbearance agreement) that purportedly modified the agreement. Normally, a copy of an agreement does not have to be attached to a complaint, but here the trial court granted a previous demurrer with leave to amend specifically on condition plaintiff attach a copy of the entire forbearance agreement to the amended pleading.
Boschma v. Home Loan Center     Docket
198 Cal.App.4th 230 – 4th Dist., Div. 3 (G043716)  8/10/11     Case complete 10/11/11LOAN DISCLOSURE: Borrowers stated a cause of action that survived a demurrer where they alleged fraud and a violation of California’s Unfair Competition Law (B&PC 17200, et seq.) based on disclosures indicating that borrowers’ Option ARM loan may result in negative amortization when, in fact, making the scheduled payments would definitely result in negative amortization. However, the court also pointed out that at trial in order to prove damages plaintiffs will have to present evidence that, because of the structure of the loans, they suffered actual damages beyond their loss of equity. For every dollar by which the loan balances increased, plaintiffs kept a dollar to save or spend as they pleased, so they will not be able to prove damages if their “only injury is the psychological revelation . . . that they were not receiving a free lunch from defendant”.
Thorstrom v. Thorstrom     Docket
196 Cal.App.4th 1406 – 1st Dist. (A127888)  6/29/11     Case complete 8/30/11EASEMENTS: Plaintiffs were not able to preclude defendants’ use of a well on plaintiffs’ property. The historic use of the well by the common owner (the mother of the current owners) indicated an intent for the well to serve both properties, and an implied easement was created in favor of defendants when the mother died and left one parcel to each of her two sons. However, the evidence did not establish that defendants were entitled to exclusive use of the well, so both properties are entitled to reasonable use of the well consistent with the volume of water available at any given time.
Herrera v. Deutsche Bank     Docket
196 Cal.App.4th 1366 – 3rd Dist. (C065630)  5/31/11 (Cert. for pub. 6/28/11)     Case complete 8/30/11TRUSTEE’S SALES: Plaintiffs sought to set aside a trustee’s sale, claiming that the Bank had not established that it was the assignee of the note, and that the trustee (“CRC”) had not established that it was properly substituted as trustee. To establish that the Bank was the beneficiary and CRC was the trustee, defendants requested that the trial court take judicial notice of the recorded Assignment of Deed of Trust and Substitution of Trustee, and filed a declaration by an employee of CRC referring to the recordation of the assignment and substitution, and stating that they “indicated” that the Bank was the assignee and CRC was the trustee. The trial court granted defendants’ motion for summary judgment and the appellate court reversed. The Court acknowledged that California law does not require the original promissory note in order to foreclose. But while a court may take judicial notice of a recorded document, that does not mean it may take judicial notice of factual matters stated therein, so the recorded documents do not prove the truth of their contents. Accordingly, the Bank did not present direct evidence that it held the note.Ed. notes: 1. It seems that the Bank could have avoided this result if it had its own employee make a declaration directly stating that the Bank is the holder of the note and deed of trust, 2. In the unpublished portion of the opinion, the Court held that if the Bank is successful in asserting its claim to the Property, there is no recognizable legal theory that would require the Bank to pay plaintiffs monies they expended on the property for back taxes, insurance and deferred maintenance.
Tashakori v. Lakis     Docket     Sup.Ct. Docket
196 Cal.App.4th 1003 – 2nd Dist. (B220875)  6/21/11     Petition for review by Cal Supreme Ct. DENIED 9/21/11EASEMENTS: The court granted plaintiffs an “equitable easement” for driveway purposes. Apparently, plaintiffs did not have grounds to establish a prescriptive easement. But a court can award an equitable easement where the court applies the “relative hardship” test and determines, as the court did here, that 1) the use is innocent, which means it was not willful or negligent, 2) the user will suffer irreparable harm if relief is not granted and 3) there is little harm to the underlying property owner.
Conservatorship of Buchenau (Tornel v. Office of the Public Guardian)     Docket
196 Cal.App.4th 1031 – 2nd Dist. (B222941)  5/31/11 (Pub. order 6/21/11)     Case complete 8/24/11CONTRACTS: A purchaser of real property was held liable for damages for refusing to complete the purchase contract, even though the seller deposited the deed into escrow 19 days after the date set for close of escrow. The escrow instructions did not include a “time is of the essence” clause, so a reasonable time is allowed for performance. The purchaser presented no evidence that seller’s delay of 19 days was unreasonable following a two-month escrow.
Diamond Heights Village Assn. v. Financial Freedom Senior Funding Corp.     Docket     Sup.Ct. Docket
196 Cal.App.4th 290 – 1st Dist. (A126145)  6/7/11     Petition for review by Cal Supreme Ct. DENIED 9/21/11HOMEOWNERS ASSOCIATION LIENS:
1. A homeowner’s association recorded a notice of assessment lien, judicially foreclosed and obtained a judgment against the homeowners. However, it did not record an abstract of judgment, which would have created a judgment lien, nor did it record a writ of execution, which would have created an execution lien. The court held that a subsequently recorded deed of trust had priority because when an assessment lien is enforced through judicial action, the debt secured by the lien is merged into the judgment. The association’s previous rights were merged into the judgment, substituting in their place only such rights as attach to the judgment.
2. After defendant lender prevailed on summary judgment as to the single cause of action naming the lender, trial proceeded as to the owners of the property, including a cause of action for fraudulent conveyance of a 1/2 interest in the property pertaining to a transfer from the original owner to himself and his mother. The trial court ruled in favor of the Association on the fraudulent conveyance cause of action AND held that defendant lender’s deed of trust was set aside as to that 1/2 interest. The appellate court held that trial of those remaining claims was proper, including trial of the Association’s cause of action against the homeowners for fraudulent conveyance of their condominium unit. It was not proper, however, to void the lender’s security interest in the property (in whole or part) when the lender had not been joined as a party to the fraudulent conveyance cause of action, and final judgment had already been entered in its favor.
Hamilton v. Greenwich Investors XXVI      Modification     Docket
195 Cal.App.4th 1602 – 2nd Dist. (B224896)  6/1/11     Case complete 8/17/11TRUSTEE’S SALES:
1. Plaintiff/borrower’s failure to disclose, in earlier bankruptcy proceedings, the existence of his breach of contract and fraud claims against the lender bars the borrower from litigating those claims now. The court distinguished several cases that permitted a debtor in bankruptcy from subsequently pursuing a cause of action that was not disclosed in the bankruptcy pleadings on the basis that in those cases the defendant was not a creditor in the bankruptcy and because the schedules specifically asked the debtor to disclose any offsets against the debts that were listed. This action against the lender amounts to an offset against the loan, so by listing the loan and failing to list this claim, the borrower’s bankruptcy schedules were inaccurate.
2. The borrower’s causes of action for breach of contract and fraud fail in any event because the borrower did not allege the essential fact of payment of sums due from the borrower (i.e. performance by the borrower) or set forth an excuse for performance.
3. The borrower cannot state a cause of action for violations of Civil Code Section 2923.5, which requires lenders to contact borrowers to explore options to avoid foreclosure, because the only remedy for such violations is postponement of the foreclosure sale, and borrower’s house has been sold.
***DECERTIFIED***
Ferguson v. Avelo Mortgage     Modification     Docket     Sup.Ct. Docket
Cal.App. 2nd Dist. (B223447)  6/1/11     Petition for review by Cal Supreme Ct. DENIED & DECERTIFIED 9/14/11FORECLOSURE / MERS:
1. A Notice of Default was defective because it was signed by a trustee before recordation of the substitution of trustee substituting it in place of the original trustee. But the Notice of Sale was properly given because it recorded at the same time as the substitution and included the statutorily required affidavit attesting to the mailing of a copy of the substitution to all persons to whom an NOD must be mailed. Since the NOS was valid, the court held that the sale was merely voidable and not void. Therefore, unlike a void sale (such as where a substitution of trustee is not recorded until after the trustee’s sale is completed), where the sale is merely voidable the plaintiff must tender full payment of the debt in order to bring an action setting aside the sale. The plaintiff did not make such a tender, so the trial court properly refused to set aside the sale.
2. Mortgage Electronic Registration Systems (MERS), as nominee of the original lender had the authority to assign the note and deed of trust to defendant, even if MERS does not possess the original note.
Creative Ventures, LLC v. Jim Ward & Associates     Docket     Sup.Ct. Docket
195 Cal.App.4th 1430 – 6th Dist. (H034883)  5/31/11     Petition for review by Cal Supreme Ct. DENIED 8/10/11USURY:
1. The real estate broker arranged loan exception to the Usury Law does not apply were a corporation was not licensed as a broker, even though the officer who negotiated the loan was licensed, where the officer was acting on behalf of the corporation and not on his own behalf.
2. The payee of the note assigned the note to multiple investors. In order to take free of the borrower’s defenses against the original payee, the assignees would have had to be holders in due course. They were not holders in due course because a) the original payee did not endorse the note and transfer possession of the note to the assignees, both of which are requirements for holder in due course status, and b) each investor was assigned a partial interest and partial assignees cannot be holders in due course.
3. The individual investors did not receive usurious interest because the interest rate itself was not usurious. But since the overall interest was usurious when the payee’s brokerage fee was included, the investors must refund the illegal interest each received.
4. The fact that the investors did not intend to violate the Usury Law is irrelevant because the only intent required is the intent to receive payment of interest.
5. An award of treble damages is within the discretion of the trial court, and the trial court properly exercised its discretion not to award treble damages because the conduct of defendants was not intentional.
Ribeiro v. County of El Dorado     Docket     Sup.Ct. Docket
195 Cal.App.4th 354 – 3rd Dist. (C065505)  5/10/111     Petition for review by Cal Supreme Ct. DENIED 8/24/11TAX SALES: “Caveat emptor” applies to tax sales. Accordingly, plaintiff/tax sale purchaser could not rescind the tax sale and obtain his deposit back where he was unaware of the amount of 1915 Act bond arrearages and where the County did not mislead him.
The Main Street Plaza v. Cartwright & Main, LLC     Docket
194 Cal.App.4th 1044 – 4th Dist., Div. 3 (G043569)  4/27/11     Case complete 6/27/11EASEMENTS: Plaintiff sought to establish a prescriptive easement for parking and access. The trial court granted a motion for summary judgment against plaintiff because it had not paid taxes on the easement. The appellate court reversed because, while payment of property taxes is an element of a cause of action for adverse possession, payment of taxes is not necessary for an easement by prescription, unless the easement has been separately assessed. A railway easement over the same area was separately assessed, but that is irrelevant because the railway easement and the prescriptive easement were not coextensive in use.
Liberty National Enterprises v. Chicago Title Insurance Company     Docket
194 Cal.App.4th 839 – 2nd Dist. (B222455)  4/6/11 (pub. order 4/26/11)     Case complete 6/28/11NOTE: This case is not summarized because it deals with disqualification of a party’s attorney, and not with issues related to title insurance. It is included here only to point out that fact.
Barry v. OC Residential Properties     Docket     Sup.Ct. Docket
194 Cal.App.4th 861 – 4th Dist., Div. 3 (G043073)  4/26/11     Petition for review by Cal Supreme Ct. DENIED 7/13/11TRUSTEE’S SALES: Under C.C.P. 729.035 a trustee’s sale to enforce a homeowners association lien is subject to a right of redemption for 90 days after the sale, and under C.C.P. 729.060 the redemption price includes reasonable amounts paid for maintenance, upkeep and repair. Defendant purchased plaintiff’s interest in a common interest development at a foreclosure sale of a homeowners association lien. Plaintiff sought to redeem the property and defendant included certain repair costs in the redemption amount. Plaintiff asserted that the costs were not for reasonable maintenance, upkeep and repair. The court held that the costs were properly included because the person seeking to redeem has the burden of proof, and plaintiff failed to carry that burden in this case. Plaintiff also asserted that she should not have to pay the repair costs because the work was performed by an unlicensed contractor. The court held that the cost of the repair work was properly included because plaintiff would receive a windfall if she did not have to reimburse those costs and because this is not an action in which a contractor is seeking compensation.
McMackin v. Ehrheart     Docket
194 Cal.App.4th 128 – 2nd Dist. (B224723)  4/8/11     Case complete 6/9/11CONTRACTS / PROBATE: This case involves a “Marvin” agreement, which is an express or implied contract between nonmarital partners. Plaintiff sought to enforce an alleged oral agreement with a decedent to leave plaintiff a life estate in real property. The court held that since the agreement was for distribution from an estate, it is governed by C.C.P. Section 366.3, which requires the action to be commenced within one year after the date of death. But the court further concluded that, depending on the circumstances of each case, the doctrine of equitable estoppel may be applied to preclude a party from asserting the statute of limitations set forth in section 366.3 as a defense to an untimely action where the party’s wrongdoing has induced another to forbear filing suit.
Ferwerda v. Bordon     Docket
193 Cal. App. 4th 1178 – 3rd Dist. (C062389)  3/25/11     Petition for review by Cal Supreme Ct. DENIED 6/8/11CC&R’s
In the published portion of the opinion, the court held:
1. The following language in the CC&R’s gave the Homeowners Association the authority to adopt new design standards pertaining to development of lots in the subdivision: “in the event of a conflict between the standards required by [the Planning] Committee and those contained herein, the standards of said Committee shall govern”; and
2. The Planning Committee could not adopt a rule that allowed for attorney’s fees to be awarded to the prevailing party in a lawsuit because such a provision was not contained in the CC&R’s. Adopting the rule was an attempt by the committee to insert a new provision that binds homeowners without their approval.In the unpublished portion of the opinion, the court held that the Planning Committee acted properly in denying the plaintiff’s building plans. (The details are not summarized here because that part of the opinion is not certified for publication.)
Capon v. Monopoly Game LLC     Docket
193 Cal. App. 4th 344 – 1st Dist. (A124964)  3/4/11     Case complete 5/5/11HOME EQUITY SALES CONTRACT ACT: In the published portion of the opinion, the court held that plaintiff was entitled to damages under the Home Equity Sales Contract Act because the purchaser was subject to the Act and the purchase contract did not comply with it. There is an exception in the Act for a purchaser who intends to live in the property. The principal member of the LLC purchase asserted that he intended to live in the property, but the court held the exception does not apply because the purchaser was the LLC rather than the member, so his intent was irrelevant.
Gomes v. Countrywide Home Loans     Docket     Cal. Sup.Ct. Docket     U.S. Supreme Ct. Docket
192 Cal. App. 4th 1149 – 4th Dist., Div. 1 (D057005)  2/18/11     Petition for review by Cal Supreme Ct. DENIED 5/18/11, Petition for a writ of certiorari DENIED 10/11/11FORECLOSURE / MERS: A borrower brought an action to restrain a foreclosure of a deed of trust held by MERS as nominee for the original lender. A Notice of Default had been recorded by the trustee, which identified itself as an agent for MERS. The court held that 1) There is no legal basis to bring an action in order to determine whether the person electing to sell the property is duly authorized to do so by the lender, unless the plaintiff can specify a specific factual basis for alleging that the foreclosure was not initiated by the correct party; and 2) MERS has a right to foreclose because the deed of trust specifically provided that MERS as nominee has the right to foreclose.
Schuman v. Ignatin     Docket
191 Cal. App. 4th 255 – 2nd Dist. (B215059)  12/23/10     Case complete 2/23/11CC&R’s: The applicable CC&R’s would have expired, but an amendment was recorded extending them. Plaintiff filed this action alleging that defendant’s proposed house violated the CC&R’s. The trial court held that the amendment was invalid because it was not signed by all of the lot owners in the subdivision. Since the CC&R’s had expired, it did not determine whether the proposed construction would have violated them. The appellate court reversed and remanded, holding that the defect in the amendment rendered it voidable, not void, and it could no longer be challenged because the four-year statute of limitations contained in C.C.P. 343 had run.
Schelb v. Stein     Docket
190 Cal. App. 4th 1440 – 2nd Dist. (B213929)  12/17/10     Case complete 2/16/11MARKETABLE RECORD TITLE ACT: In a previous divorce action, in order to equalize a division of community property, the husband was ordered to give the wife a note secured by a deed of trust on property awarded to the husband. In this case (many years later), the court held that under the Marketable Record Title Act, the deed of trust had expired. (Civil Code Section 882.020.) However, under Family Code Section 291, the underlying family law judgment does not expire until paid, so it is enforceable as an unsecured judgment.
Vuki v. Superior Court     Docket
189 Cal. App. 4th 791 – 4th Dist., Div. 3 (G043544)  10/29/10     Case complete 1/3/11TRUSTEE’S SALES: Unlike section 2923.5 as construed by this court in Mabry v. Superior Court (2010) 185 Cal.App.4th 208, neither Section 2923.52 or Section 2923.53 provides any private right of action, even a very limited one as this court found in Mabry. Civil Code section 2923.52 imposes a 90-day delay in the normal foreclosure process. But Civil Code section 2923.53 allows for an exemption to that delay if lenders have loan modification programs that meet certain criteria. The only enforcement mechanism is that a violation is deemed to be a violation of lenders license laws. Section 2923.54 provides that a violation of Sections 2923.52 or 2923.53 does not invalidate a trustee’s sale, and plaintiff also argued that a lender is not entitled to a bona fide purchaser protection. The court rejected that argument because any noncompliance is entirely a regulatory matter, and cannot be remedied in a private action.
Abers v. Rounsavell     Mod Opinion     Docket
189 Cal. App. 4th 348 – 4th Dist., Div. 3 (G040486)  10/18/10     Case complete 12/20/10LEASES: Leases of residential condominium units required a re-calculation of rent after 30 years based on a percentage of the appraised value of the “leased land”. The term “leased land” was defined to consist of the condominium unit and an undivided interest in the common area of Parcel 1, and did not include the recreational area (Parcel 2), which was leased to the Homeowners Association. The Court held that the language of the leases was clear. The appraisals were to be based only on the value of the lessees’ interest in Parcel 1 and not on the value of the recreational parcel.
UNPUBLISHED: Residential Mortgage Capital v. Chicago Title Ins. Company     Docket
Cal.App. 1st Dist. (A125695)  9/20/10     Case complete 11/23/10ESCROW: An escrow holder released loan documents to a mortgage broker at the broker’s request in order to have the borrowers sign the documents at home. They were improperly backdated and the broker failed to provide duplicate copies of the notice of right to rescind. Due these discrepancies, the lender complied with the borrower’s demand for a rescission of the loan, and filed this action against the escrow holder for amounts reimbursed to the borrower for finance charges and attorney’s fees. The Court held that the escrow holder did not breach a duty to the lender because it properly followed the escrow instructions, and it is common for escrow to release documents to persons associated with the transaction in order for them to be signed elsewhere.
Starr v. Starr     Docket
189 Cal. App. 4th 277 – 2nd Dist. (B219539)  9/30/10     Case complete 12/16/10COMMUNITY PROPERTY: In a divorce action the Court ordered the husband to convey title to himself and his former wife. Title had been taken in the husband’s name and the wife executed a quitclaim deed. But Family Code Section 721 creates a presumption that a transaction that benefits one spouse was the result of undue influence. The husband failed to overcome this presumption where the evidence showed that the wife executed the deed in reliance on the husband’s representation that he would subsequently add her to title. The husband was, nevertheless, entitled to reimbursement for his separate property contribution in purchasing the property.
Malkoskie v. Option One Mortgage Corp.     Docket
188 Cal. App. 4th 968 – 2nd Dist. (B221470)  9/23/10     Case complete 11/23/10TRUSTEE’S SALES: After plaintiff stipulated to a judgment in an unlawful detainer action, she could not challenge the validity of the trustee’s sale in a subsequent action because the subsequent action is barred by collateral estoppel. Because the action was barred, the court did not reach the question of the validity of the trustee’s sale based on the substitution of trustee being recorded after trustee’s sale proceedings had commenced and based on assignments of the deed of trust into the foreclosing beneficiary being recorded after the trustee’s deed.
Lee v. Fidelity National Title Ins. Co.     Docket     Sup.Ct. Docket
188 Cal. App. 4th 583 – 1st Dist. (A124730)  9/16/10     Petition for review and depublication by Cal Supreme Ct. DENIED 12/1/10TITLE INSURANCE:
1. The insureds could have reasonably expected that they were buying a title insurance policy on APN 22, and not just APN 9, where both the preliminary report and policy included a reference to APN 22, listed exclusions from coverage that were specific to APN 22, and attached an assessor’s parcel map with an arrow pointing to both APN 9 and 22.
2. A preliminary report is merely an offer to issue a title policy, but an insured has the right to expect that the policy will be consistent with the terms of the offer.
3. There was a triable issue of fact as to whether a neighbor’s construction of improvements on APN 22 was sufficient to commence the running of the statute of limitations, where the insureds testified that they did not know the precise location of APN 22 and assumed that the neighbors constructed the improvements on their own property.
4. There was a triable issue of fact as to whether Fidelity National Title Insurance Company acted as escrow holder or whether the escrow was conducted by its affiliate, Fidelity National Title Company (only the insurance company was named as a defendant).
Chicago Title Insurance Company v. AMZ Insurance Services     Docket     Sup.Ct. Docket
188 Cal. App. 4th 401 – 4th Dist., Div. 3 (G041188)  9/9/10     Petition for review and depublication by Cal Supreme Ct. DENIED 12/15/10ESCROW: A document entitled “Evidence of Property Insurance” (“EOI”) constitutes a binder under Insurance Code Section 382.5(a). In this case an EOI was effective to obligate the insurer to issue a homeowner’s policy even though the escrow failed to send the premium check. In order to cancel the EOI the insured has to be given notice pursuant to Insurance Code Section 481.1, which the insurer did not do. The escrow holder paid the insured’s loss and obtained an assignment of rights. The court held that the escrow holder did not act as a volunteer in paying the amount of the loss, and is entitled to be reimbursed by the insurance company under the doctrine of equitable subrogation.
Vanderkous v. Conley     Docket
188 Cal. App. 4th 111 – 1st Dist (A125352)  9/2/10     Case complete 11/3/10QUIET TITLE: 1) In a quiet title action the court has equitable powers to award compensation as necessary to do complete justice, even though neither party’s pleadings specifically requested compensation. 2) Realizing that the court was going to require plaintiff to compensate defendant in exchange for quieting title in plaintiff’s favor, plaintiff dismissed the lawsuit. However, the dismissal was invalid because it was filed following trial after the case had been submitted to the court.
Purdum v. Holmes     Docket
187 Cal. App. 4th 916 – 2nd Dist. (B216493)  7/29/10     Case complete 10/22/10NOTARIES: A notary was sued for notarizing a forged deed. He admitted that he knew the grantor had not signed the deed, but the lawsuit was filed more than six years after the deed was signed and notarized. The court held that the action was barred by the six-year limitation period in C.C.P. 338(f)(3) even though plaintiff did not discover the wrongful conduct until well within the six year period.
Perlas v. GMAC Mortgage     Docket
187 Cal. App. 4th 429 – 1st Dist. (A125212)  8/11/10     Case complete 10/10/10DEEDS OF TRUST: Borrowers filed an action against a lender to set aside a deed of trust, setting forth numerous causes of action. Borrowers’ loan application (apparently prepared by a loan broker) falsely inflated the borrowers’ income. In the published portion of the opinion. The court held in favor of the lender, explaining that a lender is not in a fiduciary relationship with borrowers and owes them no duty of care in approving their loan. A lender’s determination that the borrowers qualified for the loan is not a representation that they could afford the loan. One interesting issue in the unpublished portion of the opinion was the court’s rejection of the borrowers’ argument that naming MERS as nominee invalidated the deed of trust because, as borrower argued, the deed of trust was a contract with MERS and the note was a separate contract with the lender.
Soifer v. Chicago Title Company     Modification     Docket     Sup.Ct. Docket
187 Cal. App. 4th 365 – 2nd Dist. (B217956)  8/10/10     Petition for review by Cal Supreme Ct. DENIED 10/27/10TITLE INSURANCE: A person cannot recover for errors in a title company’s informal communications regarding the condition of title to property in the absence of a policy of title insurance or the purchase of an abstract of title. There are two ways in which an interested party can obtain title information upon which reliance may be placed: an abstract of title or a policy of title insurance. Having purchased neither, plaintiff cannot recover for title company’s incorrect statement that a deed of trust in foreclosure was a first lien.
In re: Hastie (Weinkauf v. Florez)     Docket     Sup.Ct. Docket
186 Cal. App. 4th 1285 – 1st Dist. (A127069)  7/22/10     Petition for review by Cal Supreme Ct. filed late and DENIED 9/21/10DEEDS: An administrator of decedent’s estate sought to set aside two deeds on the basis that the grantees were the grandson and granddaughter of decedent’s caregiver. Defendant did not dispute that the transfers violated Probate Code Section 21350, which prohibits conveyances to a fiduciary, including a caregiver, or the fiduciary’s relatives, unless specified conditions are met. Instead, defendant asserted only that the 3-year statute of limitations had expired. The court held that the action was timely because there was no evidence indicating that the heirs had or should have had knowledge of the transfer, which would have commenced the running of the statute of limitations.
Bank of America v. Stonehaven Manor, LLC     Docket     Sup.Ct. Docket
186 Cal. App. 4th 719 – 3rd Dist. (C060089)  7/12/10     Petition for review by Cal Supreme Ct. DENIED 10/20/10ATTACHMENT: The property of a guarantor of a debt–a debt which is secured by the real property of the principal debtor and also that of a joint and several co-guarantor–is subject to attachment where the guarantor has contractually waived the benefit of that security (i.e. waived the benefit of Civil Code Section 2849).
Jackson v. County of Amador     Docket
186 Cal. App. 4th 514 – 3rd Dist. (C060845)  7/7/10     Depublication request DENIED 9/15/10RECORDING LAW: An owner of two rental houses sued the county recorder for recording a durable power of attorney and two quitclaim deeds that were fraudulently executed by the owner’s brother. The superior court sustained the recorder’s demurrer without leave to amend. The court of appeal affirmed, holding that the legal insufficiency of the power of attorney did not provide a basis for the recorder to refuse to record the power of attorney under Government Code Section 27201(a) and the recorder did not owe the owner a duty to determine whether the instruments were fraudulently executed because the instruments were notarized.
Luna v. Brownell     Docket
185 Cal. App. 4th 668 – 2nd Dist. (B212757)  6/11/10     Case complete 8/17/10DEEDS: A deed transferring property to the trustee of a trust is not void as between the grantor and grantee merely because the trust had not been created at the time the deed was executed, if (1) the deed was executed in anticipation of the creation of the trust and (2) the trust is in fact created thereafter. The deed was deemed legally delivered when the Trust was established.
Mabry v. Superior Court     Docket     Sup.Ct. Docket
185 Cal. App. 4th 208 – 4th Dist., Div. 3 (G042911)  6/2/10     Petition for review by Cal Supreme Ct. DENIED 8/18/10TRUSTEE’S SALES: The court answered, and provided thorough explanations for, a laundry list of questions regarding Civil Code Section 2923.5, which requires a lender to explore options for modifying a loan with a borrower prior to commencing foreclosure proceedings.
1. May section 2923.5 be enforced by a private right of action?  Yes.
2. Must a borrower tender the full amount of the mortgage indebtedness due as a prerequisite to bringing an action under section 2923.5?  No.
3. Is section 2923.5 preempted by federal law?  No.
4. What is the extent of a private right of action under section 2923.5?  It is limited to obtaining a postponement of a foreclosure to permit the lender to comply with section 2923.5.
5. Must the declaration required of the lender by section 2923.5, subdivision (b) be under penalty of perjury?  No.
6. Does a declaration in a notice of default that tracks the language of section 2923.5(b) comply with the statute, even though such language does not on its face delineate precisely which one of three categories applies to the particular case at hand?  Yes.
7. If a lender forecloses without complying with section 2923.5, does that noncompliance affect the title acquired by a third party purchaser at the foreclosure sale?  No.
8. Did the lender comply with section 2923.5?  Remanded to the trial court to determine which of the two sides is telling the truth.
9. Can section 2923.5 be enforced in a class action in this case?  Not under these facts, which are highly fact-specific.
10. Does section 2923.5 require a lender to rewrite or modify the loan? No.
612 South LLC v. Laconic Limited Partnership     Docket
184 Cal. App. 4th 1270 – Cal.App. 4th Dist., Div. 1 (D056646)  5/25/10     Case complete 7/26/10ASSESSMENT BOND FORECLOSURE:
1. Recordation of a Notice of Assessment under the Improvement Act of 1911 imparted constructive notice even though the notice did not name the owner of the subject property and was not indexed under the owner’s name. There is no statutory requirement that the notice of assessment be indexed under the name of the property owner.
2. A Preliminary Report also gave constructive notice where it stated: “The lien of special tax for the following municipal improvement bond, which tax is collected with the county taxes. . .”
3. A property owner is not liable for a deficiency judgment after a bond foreclosure because a property owner does not have personal liability for either delinquent amounts due on the bond or for attorney fees incurred in prosecuting the action.
Tarlesson v. Broadway Foreclosure Investments     Docket
184 Cal. App. 4th 931 – 1st Dist. (A125445)  5/17/10     Case complete 7/20/10HOMESTEADS: A judgment debtor is entitled to a homestead exemption where she continuously resided in property, even though at one point she conveyed title to her cousin in order to obtain financing and the cousin subsequently conveyed title back to the debtor. The amount of the exemption was $150,000 (later statutorily changed to $175,000) based on debtor’s declaration that she was over 55 years old and earned less than $15,000 per year, because there was no conflicting evidence in the record.
UNPUBLISHED: MBK Celamonte v. Lawyers Title Insurance Corporation     Docket     Sup.Ct. Docket
Cal.App. 4th Dist., Div. 3 (G041605)  4/28/10     Petition for review by Cal Supreme Ct. DENIED 7/21/10TITLE INSURANCE / ENCUMBRANCES: A recorded authorization for a Mello Roos Assessment constitutes an “encumbrance” covered by a title policy, even where actual assessments are conditioned on the future development of the property.
Plaza Home Mortgage v. North American Title Company     Docket     Sup.Ct. Docket
184 Cal. App. 4th 130 – 4th Dist., Div. 1 (D054685)  4/27/10     Depublication request DENIED 8/11/10ESCROW / LOAN FRAUD: The buyer obtained 100% financing and managed to walk away with cash ($54,000) at close of escrow. (Actually, the buyer’s attorney-in-fact received the money.) The lender sued the title company that acted as escrow holder, asserting that it should have notified the lender when it received the instruction to send the payment to the buyer’s attorney-in-fact after escrow had closed. The court reversed a grant of a motion for summary judgment in favor of the escrow, pointing out that its decision is narrow, and holding only that the trial court erred when it determined the escrow did not breach the closing instructions contract merely because escrow had closed. The case was remanded in order to determine whether the escrow breached the closing instructions contract and if so, whether that breach proximately caused the lender’s damages.
Garcia v. World Savings     Docket     Sup.Ct. Docket
183 Cal. App. 4th 1031 – 2nd (B214822)  4/9/10     Petition for review and depublication by Cal Supreme Ct. DENIED 6/23/10TRUSTEE’S SALES: A lender told plaintiffs/owners that it would postpone a trustee’s sale by a week to give plaintiffs time to obtain another loan secured by other property in order to bring the subject loan current. Plaintiffs obtained a loan the following week, but the lender had conducted the trustee’s sale on the scheduled date and the property was sold to a third party bidder. Plaintiffs dismissed causes of action pertaining to setting aside the sale and pursued causes of action for breach of contract, wrongful foreclosure and promissory estoppel. The court held that there was no consideration that would support the breach of contract claim because plaintiffs promised nothing more than was due under the original agreement. Plaintiffs also could not prove a cause of action for wrongful foreclosure because that cause of action requires that the borrower tender funds to pay off the loan prior to the trustee’s sale. However, plaintiffs could recover based on promissory estoppel because procuring a high cost, high interest loan by using other property as security is sufficient to constitute detrimental reliance.
LEG Investments v. Boxler     Docket
183 Cal. App. 4th 484 – 3rd Dist. (C058743)  4/1/10     Certified for Partial Publication     Case complete 6/2/10PARTITION: A right of first refusal in a tenancy in common agreement does not absolutely waive the right of partition. Instead, the right of first refusal merely modifies the right of partition to require the selling cotenant to first offer to sell to the nonselling cotenant before seeking partition. [Ed. note: I expect that the result would have been different if the right of partition had been specifically waived in the tenancy in common agreement.]
Steiner v. Thexton     Docket
48 Cal. 4th 411 – Cal. Supreme Court (S164928)  3/18/10OPTIONS: A contract to sell real property where the buyer’s performance was entirely conditioned on the buyer obtaining regulatory approval to subdivide the property is an option. Although plaintiffs’ promise was initially illusory because no consideration was given at the outset, plaintiffs’ part performance of their bargained-for promise to seek a parcel split cured the initially illusory nature of the promise and thereby constituted sufficient consideration to render the option irrevocable.
Grotenhuis v. County of Santa Barbara     Docket
182 Cal. App. 4th 1158 – 2nd Dist. (B212264)  3/15/10     Case complete 5/18/10PROPERTY TAXES: Subject to certain conditions, a homeowner over the age of 55 may sell a principle residence, purchase a replacement dwelling of equal or lesser value in the same county, and transfer the property tax basis of the principal residence to the replacement dwelling. The court held that this favorable tax treatment is not available where title to both properties was held by an individual’s wholly owned corporation. The court rejected plaintiffs’ argument that the corporation was their alter ego because that concept is used to pierce the corporate veil of an opponent, and not to enable a person “to weave in and out of corporate status when it suits the business objective of the day.”
Clear Lake Riviera Community Assn. v. Cramer     Docket
182 Cal.App. 4th 459 – 1st Dist. (A122205)  2/26/10     Case complete 4/29/10HOMEOWNER’S ASSOCIATIONS: Defendant homeowners were ordered to bring their newly built house into compliance with the homeowners association’s guidelines where the house exceed the guidelines’ height restriction by nine feet. Even though the cost to the defendants will be great, they built the house with knowledge of the restriction and their hardship will not be grossly disproportionate to the loss the neighbors would suffer if the violation were not abated, caused by loss in property values and loss of enjoyment of their properties caused by blocked views. The height restriction was contained in the associations guidelines and not in the CC&R’s, and the association did not have records proving the official adoption of the guidelines. Nevertheless, the court held that proper adoption was inferred from the circumstantial evidence of long enforcement of the guidelines by the association.
Forsgren Associates v. Pacific Golf Community Development     Docket     Sup. Ct. Docket
182 Cal.App. 4th 135 – 4th Dist., Div. 2 (E045940)  2/23/10     Petition for review by Cal Supreme Ct. DENIED 6/17/10MECHANIC’S LIENS: 1. Owners of land are subject to mechanic’s liens where they were aware of the work being done by the lien claimant and where they failed to record a notice of non-responsibility.
2. Civil Code Section 3128 provides that a mechanic’s lien attaches to land on which the improvement is situated “together with a convenient space about the same or so much as may be required for the convenient use and occupation thereof”. Accordingly, defendant’s land adjacent to a golf course on which the lien claimant performed work is subject to a mechanic’s lien, but only as to the limited portions where a tee box was located and where an irrigation system was installed.
3. The fact that adjacent property incidentally benefits from being adjacent to a golf course does not support extending a mechanic’s lien to that property.
4. The owners of the adjacent property were liable for interest, but only as to their proportionate share of the amount of the entire mechanic’s lien.
Steinhart v. County of Los Angeles      Docket
47 Cal.4th 1298 – Cal. Supreme Court (S158007)  2/4/10PROPERTY TAXES: A “change in ownership”, requiring a property tax reassessment, occurs upon the death of a trust settlor who transferred property to a revocable trust, and which became irrevocable upon the settlor’s death. The fact that one trust beneficiary was entitled to live in the property for her life, and the remaining beneficiaries received the property upon her death, did not alter the fact that a change in ownership of the entire title had occurred.
Kuish v. Smith     Docket
181 Cal.App.4th 1419 – 4th Dist., Div. 3 (G040743)  2/3/10     Case complete 4/12/10CONTRACTS: 1. Defendants’ retention of a $600,000 deposit designated as “non-refundable” constituted an invalid forfeiture because a) the contract did not contain a valid liquidated damages clause, and b) plaintiff re-sold the property for a higher price, so there were no out-of-pocket damages. 2. The deposit did not constitute additional consideration for extending the escrow because it was labeled “non-refundable” in the original contract.
Kendall v. Walker (Modification attached)     Docket
181 Cal.App.4th 584 – 1st Dist. (A105981)  12/30/09     Case complete 3/29/10WATER RIGHTS: An owner of land adjoining a navigable waterway has rights in the foreshore adjacent to his property separate from that of the general public. The court held that the boundary in the waterway between adjacent parcels of land is not fixed by extending the boundary lines into the water in the direction of the last course ending at the shore line. Instead, it is fixed by a line drawn into the water perpendicular to the shore line. Accordingly, the court enjoined defendants from allowing their houseboat from being moored in a manner that crossed onto plaintiffs’ side of that perpendicular boundary line.
Junkin v. Golden West Foreclosure Service     Docket
180 Cal.App.4th 1150 – 1st Dist. (A124374)  1/5/10     Case complete 3/12/10USURY: The joint venture exception to the Usury Law, which has been developed by case law, provides that where the relationship between the parties is a bona fide joint venture or partnership, an advance by a joint venturer is an investment and not a loan, making the Usury Law inapplicable. The court applied the exception to a loan by one partner to the other because instead of looking at the loan in isolation, it looked at the entire transaction which it determined to be a joint venture. The case contains a good discussion of the various factors that should be weighed in determining whether the transaction is a bona fide joint venture. The presence or absence of any one factor is not, alone, determinative. The factors include whether or not: 1) there is an absolute obligation of repayment, 2) the investor may suffer a loss, 3) the investor has a right to participate in management, 4) the subject property was purchased from a third party and 5) the parties considered themselves to be partners.
Banc of America Leasing & Capital v. 3 Arch Trustee Services     Docket
180 Cal.App.4th 1090 – 4th Dist., Div. 3 (G041480)  12/11/09     Case complete 3/8/10TRUSTEE’S SALES: A judgment lien creditor is not entitled to receive a notice of default, notice of trustee’s sale or notice of surplus sale proceeds unless the creditor records a statutory request for notice. The trustee is required to disburse surplus proceeds only to persons who have provided the trustee with a proof of claim. The burden rests with the judgment creditor to keep a careful watch over the debtor, make requests for notice of default and sales, and to submit claims in the event of surplus sale proceeds.
Park 100 Investment Group v. Ryan     Docket
180 Cal.App.4th 795 – 2nd Dist. (B208189)  12/23/09     Case complete 2/26/10LIS PENDENS: 1. A lis pendens may be filed against a dominant tenement when the litigation involves an easement dispute. Although title to the dominant tenement would not be directly affected if an easement right was shown to exist, the owner’s right to possession clearly is affected2.A recorded lis pendens is a privileged publication only if it identifies an action previously filed with a court of competent jurisdiction which affects the title or right of possession of real property. If the complaint does not allege a real property claim, or the alleged claim lacks evidentiary merit, the lis pendens, in addition to being subject to expungement, is not privileged.
Millennium Rock Mortgage v. T.D. Service Company     Modification     Docket
179 Cal.App.4th 804 – 3rd Dist. (C059875)  11/24/09     Case complete 1/26/10TRUSTEE’S SALES: A trustee’s sale auctioneer erroneously read from a script for a different foreclosure, although the correct street address was used. The auctioneer opened the bidding with the credit bid from the other foreclosure that was substantially less than the correct credit bid. The errors were discovered after the close of bidding but prior to the issuance of a trustee’s deed. The court held that the errors constituted an “irregularity” sufficient to give the trustee the right to rescind the sale.The court distinguished 6 Angels v. Stuart-Wright Mortgage, in which the court held that a beneficiary’s negligent miscalculation of the amount of its credit bid was not sufficient to rescind the sale. In 6 Angels the error was totally extrinsic to the proper conduct of the sale itself. Here there was inherent inconsistency in the auctioneer’s description of the property being offered for sale, creating a fatal ambiguity in determining which property was being auctioned.
Fidelity National Title Insurance Company v. Schroeder     Docket
179 Cal.App.4th 834 – 5th Dist. (F056339)  11/24/09     Case complete 1/25/10JUDGMENTS: A judgment debtor transferred his 1/2 interest in real property to the other cotenant prior to the judgment creditor recording an abstract of judgment. The court held that if the trial court on remand finds that the transfer was intended to shield the debtor’s property from creditors, then the transferee holds the debtor’s 1/2 interest as a resulting trust for the benefit of the debtor, and the creditor’s judgment lien will attach to that interest. The court also held that the transfer cannot be set aside under the Uniform Fraudulent Transfer Act because no recoverable value remained in the real property after deducting existing encumbrances and Gordon’s homestead exemption.The case contains a good explanation of the difference between a resulting (“intention enforcing”) and constructive (“fraud-rectifying”) trust. A resulting trust carries out the inferred intent of the parties; a constructive trust defeats or prevents the wrongful act of one of them.
Zhang v. Superior Court     Docket     Sup.Ct. Docket
Cal.App. 4th Dist., Div. 2 (E047207) 10/29/09     Petition for review by Cal Supreme Ct. GRANTED 2/10/10INSURANCE / BAD FAITH: Fraudulent conduct by an insurer does not give rise to a private right of action under the Unfair Insurance Practices Act (Insurance Code section 790.03 et seq.), but it can give rise to a private cause of action under the Unfair Competition Law (Business and Professions Code section 17200 et seq.).
Presta v. Tepper     Docket
179 Cal.App.4th 909 – 4th Dist., Div. 3 (G040427)  10/28/09     Case complete 1/25/10TRUSTS: An ordinary express trust is not an entity separate from its trustee, like a corporation is. Instead, a trust is merely a relationship by which one person or entity holds property for the benefit of some other person or entity. Consequently, where two men entered into partnership agreements as trustees of their trusts, the provision of the partnership agreement, which required that upon the death of a partner the partnership shall purchase his interest in the partnership, was triggered by the death of one of the two men.
Wells Fargo Bank v. Neilsen      Modification     Docket     Sup.Ct. Docket
178 Cal.App.4th 602 – 1st Dist. (A122626)  10/22/09 (Mod. filed 11/10/09)     Petition for review by Cal Supreme Ct. DENIED 2/10/10CIRCUITY OF PRIORITY: The Court follows the rule in Bratcher v. Buckner, even though Bratcherinvolved a judgment lien and two deeds of trust and this case involves three deeds of trust. The situation is that A, B & C have liens on the subject property, and A then subordinates his lien to C’s lien. The problem with this is that C appears to be senior to A, which is senior to B, which is senior to C, so that each lien is senior and junior to one of the other liens.The Court held that the lien holders have the following priority: (1) C is paid up to the amount of A’s lien, (2) if the amount of A’s lien exceeds C’s lien, A is paid the amount of his lien, less the amount paid so far to C, (3) B is then paid in full, (4) C is then paid any balance still owing to C, (5) A is then paid any balance still owing to A.

This is entirely fair because A loses priority as to the amount of C’s lien, which conforms to the intent of the subordination agreement. B remains in the same position he would be in without the subordination agreement since his lien remains junior only to the amount of A’s lien. C steps into A’s shoes only up to the amount of A’s lien.

NOTE: The odd thing about circuity of priority cases is that they result in surplus proceeds after a foreclosure sale being paid to senior lienholders. Normally, only junior lienholders and the foreclosed out owner are entitled to share in surplus proceeds, and the purchaser takes title subject to the senior liens.
Schmidli v. Pearce     Docket
178 Cal.App.4th 305 – 3rd Dist. (C058270)  10/13/09      Case complete 12/15/09MARKETABLE RECORD TITLE ACT: This case was decided under the pre-2007 version of Civil Code Section 882.020, which provided that a deed of trust expires after 10 years if the maturity date is “ascertainable from the record”. The court held that this provision was not triggered by a Notice of Default, which set forth the maturity date and which was recorded prior to expiration of the 10-year period. NOTE: In 2007, C.C. Section 882.020 was amended to make it clear that the 10-year period applies only where the maturity date is shown in the deed of trust itself.
Nielsen v. Gibson     Docket
178 Cal.App.4th 318 – 3rd Dist. (C059291)  10/13/09     Case complete 12/15/09ADVERSE POSSESSION: 1. The “open and notorious” element of adverse possession was satisfied where plaintiff possessed the subject property by actual possession under such circumstances as to constitute reasonable notice to the owner. Defendant was charged with constructive knowledge of plaintiff’s possession, even though defendant was out of the country the entire time and did not have actual knowledge.2. The 5-year adverse possession period is tolled under C.C.P. Section 328 for up to 20 years if the defendant is “under the age of majority or insane”. In the unpublished portion of the opinion the court held that although the defendant had been ruled incompetent by a court in Ireland, there was insufficient evidence that defendant’s condition met the legal definition of “insane”.
Ricketts v. McCormack     Docket     Sup.Ct. Docket
177 Cal.App.4th 1324 – 2nd Dist. (B210123)  9/27/09     Petition for review by Cal Supreme Ct. DENIED 12/17/09RECORDING LAW: Civil Code Section 2941(c) provides in part, “Within two business days from the day of receipt, if received in recordable form together with all required fees, the county recorder shall stamp and record the full reconveyance or certificate of discharge.” In this class action lawsuit against the County recorder, the court held that indexing is a distinct function, separate from recording a document, and is not part of section 2941(c)’s stamp-and-record requirement.The court distinguished indexing, stamping and recording:
Stamping: The “stamping” requirement of Section 2941(c) is satisfied when the Recorder endorses on a reconveyance the order of receipt, the day and time of receipt and the amount of fees paid.
Recording: The reconveyance is “recorded” once the Recorder has confirmed the document meets all recording requirements, created an entry for the document in the “Enterprise Recording Archive” system, calculated the required fees and confirmed payment of the correct amount and, finally, generated a lead sheet containing, among other things, a bar code, a permanent recording number and the words “Recorded/Filed in Official Records.”
Indexing: Government Code Section 27324 requires all instruments “presented for recordation” to “have a title or titles indicating the kind or kinds of documents contained therein,” and the recorder is “required to index only that title or titles captioned on the first page of a document.
Starlight Ridge South Homeowner’s Assn. v. Hunter-Bloor     Docket
177 Cal.App.4th 440 – 4th Dist., Div. 2 (E046457)  8/14/09 (Pub. Order 9/3/09)     Case complete 10/19/09CC&R’s: Under Code Civ. Proc. Section 1859, where two provisions appear to cover the same matter, and are inconsistent, the more specific provision controls over the general provision. Here the provision of CC&R’s requiring each homeowner to maintain a drainage ditch where it crossed the homeowners’ properties was a specific provision that controlled over a general provision requiring the homeowner’s association to maintain landscape maintenance areas.
First American Title Insurance Co. v. XWarehouse Lending Corp.     Docket
177 Cal.App.4th 106 – 1st Dist. (A119931)  8/28/09      Case complete 10/30/09TITLE INSURANCE: A loan policy provides that “the owner of the indebtedness secured by the insured mortgage” becomes an insured under the loan policy. Normally, this means that an assignee becomes an insured. However, where the insured lender failed to disburse loan proceeds for the benefit of the named borrower, an indebtedness never existed, and the warehouse lender/assignee who disbursed money to the lender did not become an insured. The court pointed out that the policy insures against defects in the mortgage itself, but not against problems related to the underlying debt.NOTE: In Footnote 8 the court distinguishes cases upholding the right of a named insured or its assignee to recover from a title insurer for a loss due to a forged note or forged mortgage because in those cases, and unlike this case, moneys had been actually disbursed or credited to the named borrower by either the lender or its assignee.
Wells Fargo v. D & M Cabinets     Docket
177 Cal.App.4th 59 – 3rd Dist. (C058486)  8/28/09     Case complete 10/28/09JUDGMENTS: A judgment creditor, seeking to sell an occupied dwelling to collect on a money judgment, may not bypass the stringent requirements of C.C.P. Section 704.740 et seq. when the sale is conducted by a receiver appointed under C.C.P Section 708.620. The judgment creditor must comply with Section 704.740, regardless of whether the property is to be sold by a sheriff or a receiver.
Sequoia Park Associates v. County of Sonoma     Docket     Sup.Ct. Docket
176 Cal.App.4th 1270 – 1st Dist. (A120049)  8/21/09     Petition for review by Cal Supreme Ct. DENIED 12/2/09PREEMPTION: A County ordinance professing to implement the state mobilehome conversion statutes was preempted for the following reasons: (1) Gov. Code Section 66427.5 expressly preempts the power of local authorities to inject other factors when considering an application to convert an existing mobilehome park from a rental to a resident-owner basis, (2) the ordinance is impliedly preempted because the Legislature has established a dominant role for the state in regulating mobilehomes, and has indicated its intent to forestall local intrusion into the particular terrain of mobilehome conversions and (3) the County’s ordinance duplicates several features of state law, a redundancy that is an established litmus test for preemption.
Citizens for Planning Responsibly v. County of San Luis Obispo     Docket     Sup.Ct. Docket
176 Cal.App.4th 357 – 2nd Dist (B206957)  8/4/09     Petition for review by Cal Supreme Ct. DENIED 10/14/09PREEMPTION: The court held that the State Aeronautics Act, which regulates the development and expansion of airports, did not preempt an initiative measure adopted by the voters because none of the following three factors necessary to establish preemption was present: (1) The Legislature may so completely occupy the field in a matter of statewide concern that all, or conflicting, local legislation is precluded, (2) the Legislature may delegate exclusive authority to a city council or board of supervisors to exercise a particular power over matters of statewide concern, or (3) the exercise of the initiative power would impermissibly interfere with an essential governmental function.
Delgado v. Interinsurance Exchange of the Auto Club of So. Cal.     Docket
47 Cal.4th 302 – Cal. Supreme Court (S155129)  8/3/09INSURANCE / BAD FAITH: The case is not as relevant to title insurance as the lower court case, which held that an insurance company acted in bad faith as a matter of law where a potential for coverage was apparent from the face of the complaint. The Supreme Court reversed, basing its decision on the meaning of “accident” in a homeowner’s policy, and holding that an insured’s unreasonable belief in the need for self-defense does not turn the resulting intentional act of assault and battery into “an accident” within the policy’s coverage clause. Therefore, the insurance company had no duty to defend its insured in the lawsuit brought against him by the injured party.
1538 Cahuenga Partners v. Turmeko Properties     Docket
176 Cal.App.4th 139 – 2nd Dist. (B209548)  7/31/09     Case complete 10/7/09RECONVEYANCE: [This is actually a civil procedure case that it not of much interest to title insurance business, but it is included here because the underlying action sought to cancel a reconveyance.] The court ordered that a reconveyance of a deed of trust be cancelled pursuant to a settlement agreement. The main holding was that a trial court may enforce a settlement agreement against a party to the settlement that has interest in the subject matter of the action even if the party is not named in the action, where the non-party appears in court and consents to the settlement.
Lee v. Lee     Docket
175 Cal.App.4th 1553 – 5th Dist. (F056107)  7/29/09     Case complete 9/28/09DEEDS / STATUTE OF FRAUDS:
1. The Statute of Frauds does not apply to an executed contract, and a deed that is executed by the grantor and delivered to the grantee is an executed contract. The court rejected defendants’ argument that the deed did not reflect the terms of sale under a verbal agreement.
2. While the alteration of an undelivered deed renders the conveyance void, the alteration of a deed after it has been delivered to the grantee does not invalidate the instrument as to the grantee. The deed is void only as to the individuals who were added as grantees after delivery.
White v. Cridlebaugh     Docket
178 Cal.App.4th 506 – 5th Dist. (F053843)  7/29/09  (Mod. 10/20/09)     Case complete 12/21/09MECHANIC’S LIENS: Under Business and Professions Code Section 7031, a property owner may recover all compensation paid to an unlicensed contractor, in addition to not being liable for unpaid amounts. Furthermore, this recovery may not be offset or reduced by the unlicensed contractor’s claim for materials or other services.
Linthicum v. Butterfield     Docket     Sup.Ct. Docket
175 Cal.App.4th 259 – 2nd Dist. (B199645)  6/24/09     Petition for review by Cal Supreme Ct. DENIED 9/9/09NOTE: This is a new opinion following a rehearing. The only significant changes from the original opinion filed 4/2/09 (modified 4/8/09) involve the issue of a C.C.P. 998 offer, which is not a significant title insurance or escrow issue.
EASEMENTS: The court quieted title to an easement for access based on the doctrine of “balancing conveniences ” or “relative hardship”. Prohibiting the continued use of the roadway would cause catastrophic loss to the defendants and insignificant loss to the plaintiffs. However, the court remanded the case for the trial court to determine the width of the easement, which should be the minimal width necessary. The court reversed the judgment insofar as it awarded a utility easement to the defendants because they did not seek to quiet title to an easement for utilities, even though they denied the material allegations of that cause of action.
United Rentals Northwest v. United Lumber Products     Docket
174 Cal.App.4th 1479 – 5th Dist. (F055855)  6/18/09     Case complete 8/18/09MECHANIC’S LIENS: Under Civil Code Section 3106, a “work of improvement” includes the demolition and/or removal of buildings. The court held that lumber drying kilns are “buildings” so the contractor who dismantled and removed them was entitled to a mechanic’s lien.
People v. Shetty     Docket     Sup.Ct. Docket
174 Cal.App.4th 1488 – 2nd Dist. (B205061)  6/18/09     Petition for review by Cal Supreme Ct. DENIED 9/30/09HOME EQUITY SALES CONTRACT ACT: This case is not significant from a title insurance standpoint, but it is interesting because it is an example of a successful prosecution under the Home Equity Sales Contract Act (Civil Code Section 1695 et seq.).
Strauss v. Horton     Modification     Docket
46 Cal.4th 364 – Cal. Supreme Court (S168047)  5/26/09SAME SEX MARRIAGE: The California Supreme Court upheld Proposition 8, which amended the California State Constitution to provide that: “Only marriage between a man and a woman is valid or recognized in California.” Proposition 8 thereby overrode portions of the ruling of In re Marriage Cases, which allowed same-sex marriages. But the Court upheld the marriages that were performed in the brief time same-sex marriage was legal from 5:00pm on June 16, 2008 (when In re Marriage Cases was final) through November 4, 2008 (the day before Proposition 8 became effective restricting the definition of marriage to a man and a woman).
In re Marriage of Lund     Docket
174 Cal.App.4th 40 – 4th Dist., Div. 3 (G040863)  5/21/09     Case complete 7/27/09COMMUNITY PROPERTY: An agreement accomplished a transmutation of separate property to community property even though it stated that the transfer was “for estate planning purposes”. A transmutation either occurs for all purposes or it doesn’t occur at all.
St. Marie v. Riverside County Regional Park, etc.     Docket
46 Cal.4th 282 – Cal. Supreme Court (S159319)  5/14/09OPEN SPACE DEDICATION: Property granted to a Regional Park District is not “actually dedicated” under Public Resources Code Section 5540 for open space purposes until the district’s Board of Directors adopts a resolution dedicating the property for park or open space purposes. Therefore, until the Board of Directors adopts such a resolution, the property may be sold by the District without voter or legislative approval.
Manhattan Loft v. Mercury Liquors     Docket     Sup.Ct. Docket
173 Cal.App.4th 1040 – 2nd Dist. (B211070)  5/6/09     Petition for review by Cal Supreme Ct. DENIED 8/12/09LIS PENDENS: An arbitration proceeding is not an “action” that supports the recordation of a notice of pendency of action. The proper procedure is for a party to an arbitration agreement to file an action in court to support the recording of a lis pendens, and simultaneously file an application to stay the litigation pending arbitration.
Murphy v. Burch     Docket
46 Cal.4th 157 – Cal. Supreme Court (S159489)  4/27/09EASEMENT BY NECESSITY: This case contains a good discussion of the law of easements by necessity, which the court held did not apply in this case to provide access to plaintiff’s property. This means plaintiff’s property is completely landlocked because the parties had already stipulated that a prescriptive easement could not be established.An easement by necessity arises by operation of law when 1) there is a strict necessity as when a property is landlocked and 2) the dominant and servient tenements were under the same ownership at the time of the conveyance giving rise to the necessity. The second requirement, while not categorically barred when the federal government is the common grantor, requires a high burden of proof to show 1) the intent of Congress to establish the easement under federal statutes authorizing the patent and 2) the government’s lack of power to condemn the easement. Normally, a reservation of an easement in favor of the government would not be necessary because the government can obtain the easement by condemnation.

The court pointed out that there is a distinction between an implied grant and implied reservation, and favorably quotes a treatise that observes: “an easement of necessity may be created against the government, but the government agency cannot establish an easement by necessity over land it has conveyed because its power of eminent domain removes the strict necessity required for the creation of an easement by necessity.”
Abernathy Valley, Inc. v. County of Solano     Docket
173 Cal.App.4th 42 – 1st Dist. (A121817)  4/17/09     Case complete 6/22/09SUBDIVISION MAP ACT: This case contains a very good history of California’s Subdivision Map Act statutes. The court held that parcels shown on a 1909 map recorded pursuant to the 1907 subdivision map law are not entitled to recognition under the Subdivision Map Act’s grandfather clause (Government Code Section 66499.30) because the 1907 act did not regulate the “design and improvement of subdivisions”. The court also held that a local agency may deny an application for a certificate of compliance that seeks a determination that a particular subdivision lot complies with the Act, where the effect of issuing a certificate would be to effectively subdivide the property without complying with the Act.
Linthicum v. Butterfield     Modification     Docket     Sup.Ct. Docket
172 Cal.App.4th 1112 – 2nd Dist. (B199645)  4/2/09
SEE NEW OPINION FILED 6/24/09
EASEMENTS: The court quieted title to an easement for access based on the doctrine of “balancing conveniences ” or “relative hardship”. Prohibiting the continued use of the roadway would cause catastrophic loss to the defendants and insignificant loss to the plaintiffs. However, the court remanded the case for the trial court to determine the width of the easement, which should be the minimal width necessary. The court reversed the judgment insofar as it awarded a utility easement to the defendants because they did not seek to quiet title to an easement for utilities, even though they denied the material allegations of that cause of action.
McAvoy v. Hilbert     Docket
172 Cal.App.4th 707 – 4th Dist., Div 1 (D052802)  3/24/09     Case complete 5/27/09ARBITRATION: C.C.P. Section 1298 requires that an arbitration provision in a real estate contract be accompanied by a statutory notice and that the parties indicate their assent by placing their initials on an adjacent space or line. The court held that a listing agreement that is part of a larger transaction for the sale of both a business and real estate is still subject to Section 1298, and refused to enforce an arbitration clause that did not comply with that statute.
Peak-Las Positas Partners v. Bollag     Modification     Docket
172 Cal.App.4th 101 – 2nd Dist. (B205091)  3/16/09     Case complete 5/27/09ESCROW: Amended escrow instructions provided for extending the escrow upon mutual consent which “shall not be unreasonably withheld or delayed”. The court held that substantial evidence supported the trial court’s determination that the seller’s refusal to extend escrow was unreasonable. The court pointed out the rule that equity abhors a forfeiture and that plaintiff had paid a non-refundable deposit of $465,000 and spent $5 million in project costs to obtain a lot line adjustment that was necessary in order for the property to be sold.
Alfaro v. Community Housing Improvement System & Planning Assn     Modification     Docket     Sup.Ct. Docket
171 Cal.App.4th 1356 6th Dist. (H031127)  2/19/09     Petition for review by Cal Supreme Ct. DENIED 5/13/09CC&R’s: The court upheld the validity of recorded CC&R’s containing an affordable housing restriction that required property to remain affordable to buyers with low to moderate income. The court reached several conclusions:
1. Constructive notice of recorded CC&R’s is imparted even if they are not referenced in a subsequent deed,
2. CC&R’s may describe an entire tract, and do not need to describe individual lots in the tract,
3. An affordable housing restriction is a reasonable restraint on alienation even if it is of indefinite duration,
4. Defendants had a duty as sellers to disclose the existence of the CC&R’s. Such disclosure was made if plaintiffs were given, prior to close of escrow, preliminary reports that disclosed the CC&R’s.
5. The fact that a victim had constructive notice of a matter from public records is no defense to fraud. The existence of such public records may be relevant to whether the victim’s reliance was justifiable, but it is not, by itself, conclusive.
6. In the absence of a claim that defendants somehow prevented plaintiffs from reading the preliminary reports or deeds, or misled them about their contents, plaintiffs cannot blame defendants for their own neglect in reading the reports or deeds. Therefore, the date of discovery of alleged fraud for failing to disclose the affordable housing restriction would be the date plaintiffs received their preliminary reports or if they did not receive a preliminary report, the date they received their deeds.
Kwok v. Transnation Title Insurance Company     Docket     Sup.Ct. Docket
170 Cal.App.4th 1562 – 2nd Dist. (B207421)  2/10/09     Petition for review by Cal Supreme Ct. DENIED 4/29/09TITLE INSURANCE: Plaintiffs did not succeed as insureds “by operation of law” under the terms of the title insurance policy after transfer of the property from a wholly owned limited liability company, of which appellants were the only members, to appellants as trustees of a revocable family trust. This case highlights the importance of obtaining a 107.9 endorsement, which adds the grantee as an additional insured under the policy.
Pro Value Properties v. Quality Loan Service Corp.     Docket
170 Cal.App.4th 579 – 2nd Dist. (B204853)  1/23/09     Case complete 3/27/09TRUSTEE’S SALES: A Trustee’s Deed was void because the trustee failed to record a substitution of trustee. The purchaser at the sale was entitled to a return of the money paid plus interest. The interest rate is the prejudgment interest rate of seven percent set forth in Cal. Const., Art. XV, Section 1. A trustee’s obligations to a purchaser are based on statute and not on a contract. Therefore, Civil Code Section 3289 does not apply, since it only applies to a breach of a contract that does not stipulate an interest rate.
Sixells v. Cannery Business Park     Docket     Sup.Ct. Docket
170 Cal.App.4th 648 – 3rd Dist. (C056267)  12/29/08     Petition for review by Cal Supreme Ct. DENIED 3/25/09CONTRACTS: The Subdivision Map Act (Gov. Code, Section 66410 et seq.) prohibits the sale of a parcel of real property until a final subdivision map or parcel map has been filed unless the contract to sell the property is “expressly conditioned” upon the approval and filing of a final map (66499.30(e)). Here, the contract satisfied neither requirement because it allowed the purchaser to complete the purchase if, at its election, the subject property was made into a legal parcel by recording a final map or if the purchaser “waived” the recording of a final map. Therefore the contract was void.
Patel v. Liebermensch     Docket
45 Cal.4th 344 – Cal. Supreme Court (S156797)  12/22/08SPECIFIC PERFORMANCE: The material factors required for a  written contract are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred, describing it so it may be identified. Here, specific performance of an option was granted even though it was not precise as to the time and manner of payment because where a contract for the sale of real property specifies no time of payment, a reasonable time is allowed. The manner of payment is also a term that may be supplied by implication.
In re Marriage of Brooks and Robinson     Docket     Sup.Ct. Docket
169 Cal.App.4th 176 – 4th Dist., Div. 2 (E043770)  12/16/08     Request for review and depublication by Cal Supreme Ct. DENIED 3/25/09COMMUNITY PROPERTY: The act of taking title to property in the name of one spouse during marriage with the consent of the other spouse effectively removes that property from the general presumption that the property is community property. Instead, there is a presumption that the parties intended title to be held as stated in the deed. This presumption can only be overcome by clear and convincing evidence of a contrary agreement, and not solely by tracing the funds used to purchase the property or by testimony of an intention not disclosed at the time of the execution of the conveyance. Because the court found that there was no agreement to hold title other than as the separate property of the spouse who acquired title in her own name, it did not reach the issue of whether a purchaser from that spouse was a BFP or would be charged with knowledge of that the seller’s spouse had a community property interest in the property.
The Formula, Inc. v. Superior Court     Docket
168 Cal.App.4th 1455 – 3rd Dist. (C058894)  12/10/09     Case complete 2/10/09LIS PENDENS: A notice of litigation filed in another state is not authorized for recording under California’s lis pendens statutes. An improperly filed notice of an action in another state is subject to expungement by a California court, but not under the authority of C.C.P. Section 405.30, and an order of expungement is given effect by being recorded in the chain of title to overcome the effect of the earlier filing.
Ekstrom v. Marquesa at Monarch Beach HOA     Docket     Sup.Ct. Docket
168 Cal.App.4th 1111 – 4th Dist., Div. 3 (G038537)  12/1/08     Depublication request DENIED 3/11/09CC&R’s: A provision in CC&R’s requiring all trees on a lot to be trimmed so as to not exceed the roof of the house on the lot, unless the tree does not obstruct views from other lots, applies to palm trees even though topping a palm tree will kill it. All trees means “all trees”, so palm trees are not exempt from the requirement that offending trees be trimmed, topped, or removed.
Spencer v. Marshall     Docket
168 Cal.App.4th 783 – 1st Dist. (A119437)  11/24/08     Case complete 1/26/09HOME EQUITY SALES: The Home Equity Sales Contract Act applies even where the seller is in bankruptcy and even where the seller’s Chapter 13 Bankruptcy Plan allows the seller to sell or refinance the subject property without further order of the court.
Kachlon v. Markowitz     Docket
168 Cal.App.4th 316 – 2nd Dist. (B182816)  11/17/08     Case complete 1/27/09TRUSTEE’S SALES:
1. The statutorily required mailing, publication, and delivery of notices in nonjudicial foreclosure, and the performance of statutory nonjudicial foreclosure procedures, are privileged communications under the qualified, common-interest privilege, which means that the privilege applies as long as there is no malice. The absolute privilege for communications made in a judicial proceeding (the “litigation privilege”) does not apply.
2. Actions seeking to enjoin nonjudicial foreclosure and clear title based on the provisions of a deed of trust are actions on a contract, so an award of attorney fees under Civil Code Section 1717 and provisions in the deed of trust is proper.
3. An owner is entitled to attorney fees against the trustee who conducted trustee’s sale proceedings where the trustee did not merely act as a neutral stakeholder but rather aligned itself with the lender by denying that the trustor was entitled to relief.
Hines v. Lukes     Docket
167 Cal.App.4th 1174 – 2nd Dist. (B199971)  10/27/08     Case complete 12/31/08EASEMENTS: [Not significant from a title insurance standpoint]. The underlying dispute concerns an easement but the case involves only civil procedure issues pertaining to the enforcement of a settlement agreement.
Satchmed Plaza Owners Association v. UWMC Hospital Corp.     Docket
167 Cal.App.4th 1034 – 4th Dist., Div. 3 (G038119)  10/23/08     Case complete 12/23/08RIGHT OF FIRST REFUSAL: [Not significant from a title insurance standpoint]. The underlying dispute concerns a right of first refusal but the case involves only civil procedure issues pertaining to a party’s waiver of its right to appeal where it has accepted the benefits of the favorable portion of judgment.
Gray v. McCormick     Docket     Sup.Ct. Docket
167 Cal.App.4th 1019 – 4th Dist., Div. 3 (G039738)  10/23/08     Petition for review by Cal Supreme Ct. DENIED 1/14/09EASEMENTS: Exclusive easements are permitted under California law, but the use by the owner of the dominant tenement is limited to the purposes specified in the grant of easement, not all conceivable uses of the property.
In re Estate of Felder     Docket
167 Cal.App.4th 518 – 2nd Dist.   (B205027)  10/9/08     Case complete 12/11/08CONTRACTS: [Not significant from a title insurance standpoint]. The case held that an estate had the right to retain the entire deposit upon a purchaser’s breach of a sales contract even though the estate had only a 1/2 interest in the subject property.
Secrest v. Security National Mortgage Loan Trust     Order Modifying Opinion     Docket     Sup.Ct. Docket
167 Cal.App.4th 544 – 4th Dist., Div. 3 (G039065)  10/9/08, Modified 11/3/08     Petition for review by Cal Supreme Ct. DENIED 12/17/08LOAN MODIFICATION: Because a note and deed of trust come within the statute of frauds, a Forbearance Agreement also comes within the statute of frauds pursuant to Civil Code section 1698. Making the downpayment required by the Forbearance Agreement was not sufficient part performance to estop Defendants from asserting the statute of frauds because payment of money alone is not enough as a matter of law to take an agreement out of the statute, and the Plaintiffs have legal means to recover the downpayment if they are entitled to its return. In addition to part performance, the party seeking to enforce the contract must have changed position in reliance on the oral contract to such an extent that application of the statute of frauds would result in an unjust or unconscionable loss, amounting in effect to a fraud.
FDIC v. Dintino     Docket
167 Cal.App.4th 333 – 4th Dist., Div. 1 (D051447)  9/9/08 (Pub. Order 10/2/08)     Case complete 12/2/08TRUST DEEDS: A lender who mistakenly reconveyed a deed of trust could not sue under the note because it would violate the one action rule. However, the lender prevailed on its unjust enrichment cause of action. The applicable statute of limitations was the 3-year statute for actions based on fraud or mistake, and not the 4-year statute for actions based on contract. Nevertheless, the action was timely because the statute did not begin to run until the lender reasonably discovered its mistake, and not from the date of recordation of the reconveyance. Finally, the court awarded defendant attorney’s fees attributable to defending the contract cause of action because defendant prevailed on that particular cause of action even though he lost the lawsuit.
California Coastal Commission v. Allen     Docket     Sup.Ct. Docket
167 Cal.App.4th 322 – 2nd Dist. (B197974)  10/1/08     Petition for review by Cal Supreme Ct. DENIED 1/14/09HOMESTEADS:
1. The assignees of a judgment properly established their rights as assignees by filing with the clerk of the court an acknowledgement of assignment of judgment.
2. The subject property was not subject to a homestead exemption because the debtor transferred the property to a corporation of which he was the sole shareholder. The homestead exemption only applies to the interest of a natural person in a dwelling.
3. The debtor could not claim that he was only temporarily absent from a dwelling in order to establish it as his homestead where he leased it for two years. This is true even though the debtor retained the right to occupy a single car section of the garage and the attic.
In re Marriage of Holtemann     Docket     Sup.Ct. Docket
162 Cal.App.4th 1175 – 2nd Dist. (B203089)  9/15/08     Petition for review by Cal Supreme Ct. DENIED 12/10/08COMMUNITY PROPERTY: Transmutation of separate property to community property requires language which expressly states that the characterization or ownership of the property is being changed. Here, an effective transmutation occurred because the transmutation agreement clearly specified that a transmutation was occurring and was not negated by arguably confusing language in a trust regarding the parties’ rights to terminate the trust. The court also stated that it was not aware of any authority for the proposition that a transmutation can be conditional or temporary. However, while questioning whether a transmutation can be conditional or temporary, the court did not specifically make that holding because the language used by the parties was not conditional.
Mission Shores Association v. Pheil     Docket
166 Cal.App.4th 789 – 4th Dist., Div. 2 (E043932)  9/5/08     Case complete 11/7/08CC&R’s: Civil Code Section 1356 allows a court to reduce a super-majority voting requirement to amend CC&R’s where the court finds that the amendment is reasonable. Here the court reduced the 2/3 majority requirement to a simple majority for an amendment to limit rentals of homes to 30 days or more.
Zanelli v. McGrath     Docket
166 Cal.App.4th 615 – 1st Dist. (A117111)  9/2/08     Case complete 11/4/08EASEMENTS:
1. The doctrine of merger codified in Civil Code Sections 805 and 811 applies when “the right to the servitude,” and “the right to the servient tenement” are not vested in a single individual, but in the same persons;2. The doctrine of merger applies regardless of whether the owners held title as joint tenants or tenants in common. Also, the fact that one owner held his interest in one of the properties as trustee for his inter vivos revocable trust does not preclude merger because California law recognizes that when property is held in this type of trust the settlor has the equivalent of full ownership of the property. (If he had held title only in a representative capacity as a trustee for other beneficiaries under the terms of an irrevocable trust, then his ownership might not result in extinguishment by merger because he would only hold the legal title for the benefit of others.) The court cites Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, stating that a revocable inter vivos trust is recognized as simply a probate avoidance device, but does not prevent creditors of the settlers from reaching trust property.

(3) After being extinguished by merger, an easement is not revived upon severance of the formerly dominant and servient parcels unless it is validly created once again.
Ritter & Ritter v. The Churchill Condominium Assn.     Docket
166 Cal.App.4th 103 – 2nd Dist. (B187840) 7/22/08  (pub. order 8/21/08)     Case complete 10/21/08HOMEOWNERS’ ASSOCIATIONS: A member of a condominium homeowners’ association can recover damages from the association which result from a dangerous condition negligently maintained by the association in the common area. However, the court found in favor of the individual directors because a greater degree of fault is necessary to hold unpaid individual board members liable, and such greater degree of fault was not present here.
Kempton v. City of Los Angeles     Docket     Sup.Ct. Docket
165 Cal.App.4th 1344 – 2nd Dist. (B201128) 8/13/08     Request for Depublication by Cal Supreme Ct. DENIED 11/12/08NUISANCE: A private individual may bring an action against a municipality to abate a public nuisance when the individual suffers harm that is specially injurious to himself, or where the nuisance is a public nuisance per se, such as blocking a public sidewalk or road. The court held that plaintiff’s assertions that neighbors’ fences were erected upon city property, prevent access to plaintiff’s sidewalk area, and block the sightlines upon entering and exiting their garage were sufficient to support both a public nuisance per se and specific injury.
Claudino v. Pereira     Docket     Sup.Ct. Docket
165 Cal.App.4th 1282 – 3rd Dist. (C054808) 8/12/08     Petition for review by Cal Supreme Ct. DENIED 11/12//08SURVEYS: Determining the location of a boundary line shown on a plat recorded pursuant to the 1867 Townsite Acts requires an examination of both the plat and the surveyor’s field notes. Here, the plat showed the boundary as a straight line, but the court held that the boundary followed the center line of a gulch because the field notes stated that the boundary was “down said gulch”.
Zack’s, Inc. v. City of Sausalito     Docket
165 Cal.App.4th 1163 – 1st Dist. (A118244) 8/11/08     Case complete 10/14/08TIDELANDS / PUBLIC STREETS: A statute authorizing the City’s lease of tidelands does not supersede other state laws establishing procedures for the abandonment of public streets. Because the City failed to follow the normal procedure for abandonment of the portion of the street upon which it granted a lease, the leasehold was not authorized and can therefore be deemed a nuisance.
Gehr v. Baker Hughes Oil Field Operations     Docket     Sup.Ct. Docket
165 Cal.App.4th 660 – 2nd Dist. (B201195) 7/30/08     Petition for review by Cal Supreme Ct. DENIED 10/16/08NUISANCE: Plaintiff purchased from Defendant real property that was contaminated, and Defendant had begun the remediation process. The 3-year statute of limitations for suing under a permanent nuisance theory had expired. So Plaintiff sued for nuisance damages under a continuing nuisance theory, seeking interest rate differential damages based on the difference in the interest rate between an existing loan and a loan that plaintiff could have obtained if not for the contamination.The court held that plaintiff’s claim for interest rate differential damages is actually a claim for diminution in value, which may not be recovered under a continuing nuisance theory. Damages for diminution in value may only be recovered for permanent, not continuing, nuisances. When suing for a continuing nuisance, future or prospective damages are not allowed, such as damages for diminution in the value of the subject property. A nuisance can only be considered “continuing” if it can be abated, and therefore a plaintiff suing under this theory may only recover the costs of abating the nuisance.

If the nuisance has inflicted a permanent injury on the land, the plaintiff generally must bring a single lawsuit for all past, present, and future damages within three years of the creation of the nuisance. But if the nuisance is one which may be discontinued at any time, it is considered continuing in character and persons harmed by it may bring successive actions for damages until the nuisance is abated. Recovery is limited, however, to actual injury suffered prior to commencement of each action.
Witt Home Ranch v. County of Sonoma     Docket     Sup.Ct. Docket
165 Cal.App.4th 543 – 1st Dist. (A118911) 7/29/08     Petition for review by Cal Supreme Ct. DENIED 5/28/08SUBDIVISION MAP ACT: This case contains a good history of California’s Subdivision Map Act statutes. The court held that the laws governing subdivision maps in 1915 did not regulate the “design and improvement of subdivisions,” as required by the grandfather clause of Government Code Section 66499.30. The subdivision map in this case was recorded in 1915 and no lots were subsequently conveyed, so the map does not create a valid subdivision.
T.O. IX v. Superior Court     Docket     Sup.Ct. Docket
165 Cal.App.4th 140 – 2nd Dist. (B203794) 7/24/08     Petition for review by Cal Supreme Ct. DENIED 9/10/08MECHANIC’S LIENS: A mechanic’s lien claimant recorded a mechanic’s lien against each of the nine parcels in a project, each lien for the full amount due under the contract. The court held that defendant could record a single release bond under Civil Code Section 3143 to release all of the liens.
Kassir v. Zahabi     Docket
164 Cal.App.4th 1352 – 4th Dist., Div. 3 (G038449) 3/5/08 (Pub. Order 4/3/08, Received 7/16/08)     Case complete 5/9/08SPECIFIC PERFORMANCE: The trial court ordered Defendant to specifically perform his contract to sell real property to Plaintiff, and further issued a judgment ordering Defendant to pay Plaintiff for rents accruing during the time Defendant was able to perform the agreement but refused to do so. The court held that because the property was overencumbered, Defendant would have received nothing under the agreement and no offset was required.The court explained that because execution of the judgment in a specific performance action will occur later than the date of performance provided by the contract, financial adjustments must be made to relate their performance back to the contract date, namely: 1) when a buyer is deprived of possession of the property pending resolution of the dispute and the seller receives rents and profits, the buyer is entitled to a credit against the purchase price for the rents and profits from the time the property should have been conveyed to him, 2) a seller also must be treated as if he had performed in a timely fashion and is entitled to receive the value of his lost use of the purchase money during the period performance was delayed, 3) if any part of the purchase price has been set aside by the buyer with notice to the seller, the seller may not receive credit for his lost use of those funds and 4) any award to the seller representing the value of his lost use of the purchase money cannot exceed the rents and profits awarded to the buyer, for otherwise the breaching seller would profit from his wrong.
Grant v. Ratliff     Docket     Sup.Ct. Docket
164 Cal.App.4th 1304 – 2nd Dist. (B194368) 7/16/08     Request for depublication by Cal Supreme Ct. DENIED 10/1/08PRESCRIPTIVE EASEMENTS: The plaintiff/owner of Parcel A sought to establish a prescriptive easement to a road over Parcel B. In order to establish the requisite 5-year period of open and notorious possession, the plaintiff needed to include the time that the son of the owner of Parcel B spent living in a mobile home on Parcel A. The court held that the son’s use of Parcel A was not adverse but was instead a matter of “family accommodation” and, therefore, a prescriptive easement was not established. The court also discussed: 1) a party seeking to establish a prescriptive easement has the burden of proof by clear and convincing evidence and 2) once the owner of the dominant tenement shows that use of an easement has been continuous over a long period of time, the burden shifts to the owner of the servient tenement to show that the use was permissive, but the servient tenement owner’s burden is a burden of producing evidence, and not a burden of proof.
SBAM Partners v. Wang     Docket
164 Cal.App.4th 903 – 2nd Dist. (B204191) 7/9/08     Case complete 9/10/08HOMESTEADS: Under C.C.P. Section 704.710, a homestead exemption is not allowed on property acquired by the debtor after the judgment has been recorded unless it was purchased with exempt proceeds from the sale, damage or destruction of a homestead within the six-month safe harbor period.
Christian v. Flora     Docket
164 Cal.App.4th 539 – 3rd Dist. (C054523) 6/30/08     Case complete 9/2/08EASEMENTS: Where parcels in a subdivision are resubdivided by a subsequent parcel map, the new parcel map amends the provisions of any previously recorded parcel map made in compliance with the Map Act. Here, although the deeds to plaintiffs referred to the original parcel map, since the intent of the parties was that the easement shown on the amended parcel map would be conveyed, the grantees acquired title to the easement shown on the amended map.
Lange v. Schilling     Docket
163 Cal.App.4th 1412 – 3rd Dist. (C055471) 5/28/08; pub. order 6/16/08     Case Complete 8/18/08REAL ESTATE AGENTS: The clear language of the standard California real estate purchase agreement precludes an award of attorney’s fees if a party does not attempt mediation before commencing litigation. Because plaintiff filed his lawsuit before offering mediation, there was no basis to award attorney’s fees.
Talbott v. Hustwit     Docket     Sup.Ct. Docket
164 Cal.App.4th 148 – 4th Dist., Div. 3 (G037424) 6/20/08     Petition for review and depublication DENIED by Cal Supreme Ct. 9/24/08GUARANTEES:
1. C.C.P. 580a, which requires an appraisal of the real property security before the court may issue a deficiency judgment, does not apply to an action against a guarantor.
2. A lender cannot recover under a guaranty where there the debtor and guarantor already have identical liability, such as with general partners or trustees of a revocable trust in which the debtor is the settlor, trustee and primary beneficiary. Here, however, a  guarantee signed by the trustees of the debtors’ trust is enforceable as a “true guarantee” because, although the debtors were the settlors, they were a) secondary, not primary, beneficiaries and b) were not the trustees.
Mayer v. L & B Real Estate     Sup.Ct. Docket
43 Cal.4th 1231 – Cal. Supreme Court (S142211) 6/16/08TAX SALES: The one-year statute of limitations for attacking a tax sale does not begin to run against a property owner who is in “undisturbed possession” of the subject property until that owner has actual notice of the tax sale. Ordinarily, a property owner who has failed to pay property taxes has sufficient knowledge to put him on notice that a tax sale might result. However, in this case the property owners did not have notice because they purchased a single piece of commercial property and received a single yearly tax bill. They had no reason to suspect that due to errors committed by the tax assessor, a small portion of their property was being assessed separately and the tax bills were being sent to a previous owner.NOTE: This creates a hazard for title companies insuring after a tax sale in reliance on the one-year statute of limitations in Revenue and Taxation Code Section 3725.
California Golf v. Cooper     Docket     Sup.Ct. Docket
163 Cal.App.4th 1053 – 2nd Dist. (B195211) 6/9/08     Petition for review by Cal Supreme Ct. DENIED 9/17/08TRUSTEE’S SALES:
1. A bidder at a trustee’s sale may not challenge the sale on the basis that the lender previously obtained a decree of judicial foreclosure because the doctrine of election of remedies benefits only the trustor or debtor.
2. A lender’s remedies against a bidder who causes a bank to stop payment on cashier’s checks based on a false affidavit asserting that the checks were lost is not limited to the remedies set forth in CC Section 2924h, and may pursue a cause of  action for fraud against the bidder.
(The case contains a good discussion (at pp. 25 – 26) of the procedure for stopping payment on a cashier’s check by submitting an affidavit to the issuing bank.)
Biagini v. Beckham     Docket
163 Cal.App.4th 1000 – 3rd Dist. (C054915) 6/9/08     Case complete 8/11/08DEDICATION:
1. Acceptance of a dedication may be actual or implied. It is actual when formal acceptance is made by the proper authorities, and implied when a use has been made of the property by the public 1) of an  intensity that is reasonable for the nature of the road and 2) for such a length of time as will evidence an intention to accept the dedication. BUT the use in this case was not sufficient because the use was by neighbors whose use did not exceed what was permitted pursuant to a private easement over the same area.
2. A statutory offer of dedication can be revoked as to the public at large by use of the area that is inconsistent with the dedication, but the offer remains open for formal acceptance by the public entity to which the offer was made.
Steiner v. Thexton     Docket     Sup.Ct. Docket
Cal.App. 3rd Dist. (C054605) 5/28/08     REVERSED by Cal. Supreme Ct.OPTIONS: A contract to sell real property where the buyer’s performance was entirely conditioned on the buyer obtaining regulatory approval to subdivide the property is an option. An option must be supported by consideration, but was not here, where the buyer could back out at any time. Buyer’s promise to deliver to seller copies “of all information, reports, tests, studies and other documentation” was not sufficient consideration to support the option.
In re Marriage Cases     Docket
43 Cal.4th 757 – Cal. Supreme Court (S147999) 5/15/08MARRIAGE: The language of Family Code Section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples.
Harvey v. The Landing Homeowners Association     Docket
162 Cal.App.4th 809 – 4th Dist., Div. 1 (D050263) 4/4/08 (Cert. for Pub. 4/30/08)     Case complete 6/30/08HOMEOWNERS ASSOCIATIONS: The Board of Directors of an HOA has the authority to allow owners to exclusively use common area accessible only to those owners where the following provision of the CC&R’s applied: “The Board shall have the right to allow an Owner to exclusively use portions of the otherwise nonexclusive Common Area, provided that such portions . . . are nominal in area and adjacent to the Owner’s Exclusive Use Area(s) or Living Unit, and, provided further, that such use does not unreasonably interfere with any other Owner’s use . . .” Also, this is allowed under Civil Code Section 1363.07(a)(3)(E).
Salma v. Capon     Docket
161 Cal.App.4th 1275 – 1st Dist. (A115057) 4/9/08     Case complete 6/11/08HOME EQUITY SALES: A seller claimed he sold his house for far less than it was worth “due to the duress of an impending trustee’s sale and the deceit of the purchasers”. The case involves procedural issues that are not relevant to this web site. However, it is included here because it demonstrates the kind of mess that can occur when you are dealing with property that is in foreclosure. Be careful, folks.
Aviel v. Ng     Docket
161 Cal.App.4th 809 – 1st Dist. (A114930) 2/28/08; pub. order 4/1/08     Case complete 5/6/08LEASES / SUBORDINATION: A lease provision subordinating the lease to “mortgages” also applied to deeds of trust because the two instruments are functionally and legally the same. Therefore a foreclosure of a deed of trust wiped out the lease.
People v. Martinez     Docket
161 Cal.App.4th 754 – 4th Dist., Div. 2 (E042427) 4/1/08     Case complete 6/2/08FORGERY: This criminal case involves a conviction for forgery of a deed of trust. [NOTE: The crime of forgery can occur even if the owner actually signed the deed of trust. The court pointed out that “forgery is committed when a defendant, by fraud or trickery, causes another to execute a document where the signer is unaware, by reason of such trickery, that he is executing a document of that nature.”
Pacific Hills Homeowners Association v. Prun     Docket
160 Cal.App.4th 1557 – 4th Dist., Div. 3 (G038244) 3/20/08     Case complete 5/27/08CC&R’s: Defendants built a gate and fence within the setback required by the CC&R’s. 1) The court held that the 5-year statute of limitations of C.C.P. 336(b) applies to unrecorded as well as recorded restrictions, so that the shorter 4-year statute of limitations of C.C.P. 337 is inapplicable. 2) The court upheld the trial court’s equitable remedy of requiring the HOA to pay 2/3 of the cost of relocation defendant’s gate based upon the HOA’s sloppiness in not pursuing its case more promptly.
Nicoll v. Rudnick     Docket
160 Cal.App.4th 550 – 5th Dist. (F052948) 2/27/08     Case complete 4/28/08WATER RIGHTS: An appropriative water right established in a 1902 judgment applied to the entire 300 acre parcel so that when part of the parcel was foreclosed and subsequently re-sold, the water rights must be apportioned according to the acreage of each parcel, not according to the prior actual water usage attributable to each parcel. NOTE: This case contains a good explanation of California water rights law.
Real Estate Analytics v. Vallas     Docket
160 Cal.App.4th 463 – 4th Dist., Div. 1 (D049161) 2/26/08     Case complete 5/29/08SPECIFIC PERFORMANCE: Specific performance is appropriate even where the buyer’s sole purpose and entire intent in buying the property was to earn money for its investors and turn a profit as quickly as possible. The fact that plaintiff was motivated solely to make a profit from the purchase of the property does not overcome the strong statutory presumption that all land is unique and therefore damages were inadequate to make plaintiff whole for the defendant’s breach.
Fourth La Costa Condominium Owners Assn. v. Seith     Docket
159 Cal.App.4th 563 – 4th Dist., Div. 1 (D049276) 1/30/08     Case complete 4/1/08CC&R’s/HOMEOWNER’S ASSOCIATIONS: The court applied CC 1356(c)(2) and Corp. Code 7515, which allow a court to reduce the supermajority vote requirement for amending CC&R’s and bylaw because the amendments were reasonable and the balloting requirements of the statutes were met.
02 Development, LLC v. 607 South Park, LLC     Docket
159 Cal.App.4th 609 – 2nd Dist. (B200226) 1/30/08     Case complete 4/3/08SPECIFIC PERFORMANCE: 1) An assignment of a purchaser’s rights under a purchase agreement prior to creation of the assignee as an LLC is valid because an organization can enforce pre-organization contracts if the organization adopts or ratifies them. 2) A purchaser does not need to prove that it already had the necessary funds, or already had binding commitments from third parties to provide the funds, when the other party anticipatorily repudiates the contract. All that plaintiff needed to prove was that it would have been able to obtain the necessary funding (or funding commitments) in order to close the transaction on time.
Richeson v. Helal     Docket     Sup.Ct. Docket
158 Cal.App.4th 268 – 2nd Dist. (B187273) 11/29/07; Pub. & mod. order 12/21/07 (see end of opinion)     Petition for review by Cal Supreme Ct. DENIED 2/20/08CC&R’s / MUNICIPALITIES: An Agreement Imposing Restrictions (“AIR”) and CC&R’s did not properly lend themselves to an interpretation that would prohibit the City from changing the permitted use or zoning and, were they so construed, the AIR and CC&R’s would be invalid as an attempt by the City to surrender its future right to exercise its police power respecting the property. Here, the AIR and CC&R’s did not prohibit the City from issuing a new conditional use permit allowing the continued use of the subject property as a neighborhood market.
Bill Signs Trucking v. Signs Family Ltd. Partnership     Docket     Sup.Ct. Docket
157 Cal.App.4th 1515 – 4th Dist., Div. 1 (D047861) 12/18/07     Petition for review by Cal Supreme Ct. DENIED 4/9/08LEASES / RIGHT OF FIRST REFUSAL: A tenant’s right of first refusal under a commercial lease is not triggered by the conveyance of an interest in the property between co-partners in a family limited partnership that owns the property and is the landlord.
Schweitzer v. Westminster Investments     Docket     Sup.Ct. Docket
157 Cal.App.4th 1195 – 4th Dist., Div. 1 (D049589) 12/13/07     Petition for review by Cal Supreme Ct. DENIED 3/26/08EQUITY PURCHASERS:
1) The bonding requirement of the Home Equity Sales Contracts Act (Civil Code Section 1695.17) is void for vagueness under the due process clause and may not be enforced. Section 1695.17 is vague because it provides no guidance on the amount, the obligee, the beneficiaries, the terms or conditions of the bond, the delivery and acceptance requirements, or the enforcement mechanisms of the required bond.
2) Although the bond requirement may not be enforced, the remainder of the statutory scheme remains valid because the bond provisions are severable from the balance of the enactment.
3) The court refused to set aside the deed in favor of the equity purchaser because, first, the notice requirements of Civil Code Section 1695.5 appear to have been met and, second, the seller’s right to rescind applies before the deed is recorded but the statute “does not specify that a violation of section 1695.5 provides grounds for rescinding a transaction after recordation of the deed”.
Crestmar Owners Association v. Stapakis     Docket
157 Cal.App.4th 1223 – 2nd Dist. (B191049) 12/13/07     Case complete 2/15/07CC&R’s: Where a developer failed to convey title to two parking spaces as required by the CC&R’s, the homeowner’s association was able to quiet title even though more than 20 years had passed since the parking spaces should have been conveyed. The statute of limitations does not run against someone, such as the homeowner’s association here, who is in exclusive and undisputed possession of the property.
Washington Mutual Bank v. Blechman     Docket     Sup.Ct. Docket
157 Cal.App.4th 662 – 2nd Dist. (B191125) 12/4/07     Petition for review by Cal Supreme Ct. DENIED 3/19/08TRUSTEE’S SALES: The foreclosing lender and trustee are indispensable parties to a lawsuit which seeks to set aside a trustee’s sale. Therefore, a default judgment against only the purchaser at the trustee’s sale is subject to collateral attack.
Garretson v. Post     Docket     Sup.Ct. Docket
156 Cal.App.4th 1508 – 4th Dist., Div.2 (E041858) 11/20/07     Petition for review by Cal Supreme Ct. DENIED 2/27/08TRUSTEE’S SALES: A cause of action for wrongful foreclosure does not fall within the protection of Code of Civil Procedure section 425.16, commonly referred to as the anti-SLAPP statute (strategic lawsuit against public participation).
Murphy v. Burch     Docket     Sup.Ct. Docket
Cal.App. 1st Dist. (A117051) 11/19/07
AFFIRMED by Cal Supreme Ct. 4/27/09EASEMENT BY NECESSITY: An easement by necessity arises by operation of law when 1) there is a strict necessity as when a property is landlocked and 2) the dominant and servient tenements were under the same ownership at the time of the conveyance giving rise to the necessity. However, the second requirement is not met when the properties were owned by the federal government because the Government has the power of eminent domain, rendering it unnecessary to resort to the easement by necessity doctrine in order to acquire easements.The court attempts to distinguish Kellogg v. Garcia, 102 Cal.App.4th 796, by pointing out that in that case the issue of eminent domain did not arise because the dominant tenement was owned by a private party and the servient tenements by the federal government. [Ed. Note: the court does not adequately address the fact that the government does not always have the power of eminent domain. It only has that power if a public purpose is involved. Also, I do not think the court adequately distinguishes Kellogg, which seems to hold that common ownership by the federal government satisfies the requirement of common ownership.]
Elias Real Estate v. Tseng     Docket     Sup.Ct. Docket
156 Cal.App.4th 425 – 2nd Dist. (B192857) 10/25/07     Petition for review by Cal Supreme Ct. DENIED 2/13/08SPECIFIC PERFORMANCE: Acts of a partner falling within Corp. Code 16301(1) (acts in ordinary course of business) are not subject to the statute of frauds. Acts of a partner falling within Corp. Code 16301(2) (acts not in the ordinary course of business) are subject to the statute of frauds. In this case, a sale of the partnership’s real property was not in the ordinary course of business, so it fell within Corp. Code 16301(2) and plaintiff could not enforce a contract of sale signed by only one partner.
Strong v. State Board of Equalization     Docket     Sup.Ct. Docket
155 Cal.App.4th 1182 – 3rd Dist. (C052818) 10/2/07     Petition for review by Cal Supreme Ct. DENIED 1/3/08CHANGE OF OWNERSHIP: The statute that excludes transfers between domestic partners from property tax reassessment is constitutional.
County of Solano v. Handlery     Docket     Sup.Ct. Docket
155 Cal.App.4th 566 – 1st Dist. (A114120) 9/21/07     Petition for review by Cal Supreme Ct. DENIED 12/12/07DEEDS: The County brought an action against grantors’ heirs to invalidate restrictions in a deed limiting the subject property to use as a county fair or similar public purposes. The court refused to apply the Marketable Record Title Act to eliminate the power of termination in favor of the grantors because the restrictions are enforceable under the public trust doctrine.
Baccouche v. Blankenship     Docket
154 Cal.App.4th 1551 – 2nd Dist (B192291) 9/11/07     Case complete 11/16/07EASEMENTS: An easement that permits a use that is prohibited by a zoning ordinance is not void. It is a valid easement, but cannot be enforced unless the dominant owner obtains a variance. As is true with virtually all land use, whether a grantee can actually use the property for the purposes stated in the easement is subject to compliance with any applicable laws and ordinances, including zoning restrictions.
WRI Opportunity Loans II LLC v. Cooper     Docket
154 Cal.App.4th 525 – 2nd Dist. (B191590) 8/23/07     Case complete 10/26/07USURY: The trial court improperly granted a motion for summary judgment on the basis that the loan was exempt from the usury law.1. The common law exception to the usury law known as the “interest contingency rule” provides that interest that exceeds the legal maximum is not usurious when its payment is subject to a contingency so that the lender’s profit is wholly or partially put in hazard. The hazard in question must be something over and above the risk which exists with all loans – that the borrower will be unable to pay.
2. The court held that the interest contingency rule did not apply to additional interest based on a percentage of the sale price of completed condominium units because the lender was guaranteed additional interest regardless of whether the project generated rents or profits.
3. The loan did not qualify as a shared appreciation loan, permitted under Civil Code Sections 1917-1917.006, because the note guaranteed the additional interest regardless of whether the property appreciated in value or whether the project generated profits.
4. The usury defense may not be waived by guarantor of a loan. (No other published case has addressed this issue.)
Archdale v. American International Specialty Lines Ins. Co.     Docket
154 Cal.App.4th 449 – 2nd Dist. (B188432) 8/22/07     Case complete 10/26/07INSURANCE: The case contains good discussions of 1) an insurer’s liability for a judgment in excess of policy limits where it fails to accept a reasonable settlement offer within policy limits and 2) the applicable statutes of limitation.
REVERSED by Cal. Supreme Court 12/22/08
Patel v. Liebermensch     Docket     Sup.Ct. Docket
154 Cal.App.4th 373 – 4th, Div. 1 (D048582) 8/21/07REVERSED: SPECIFIC PERFORMANCE: Specific performance of an option was denied where the parties never reached agreement on the amount of  the deposit, the length of time of the escrow or payment of escrow expenses if there were a delay. One judge dissented on the basis that the option contract was sufficiently clear to be specifically enforced and the court should insert reasonable terms in place of the uncertain terms.
In Re Marriage of Ruelas     Docket
154 Cal.App.4th 339 – 2nd Dist. (B191655) 8/20/07     Case complete 10/26/07RESULTING TRUST: A resulting trust was created where a daughter acquired property in her own name and the evidence showed that she was acquiring the property for her parents who had poor credit.
Stoneridge Parkway Partners v. MW Housing Partners     Docket     Sup.Ct. Docket
153 Cal.App.4th 1373 – 3rd Dist. (C052082) 8/3/07     Petition for review by Cal Supreme Ct. DENIED 11/14/07USURY: The exemption to the usury law for loans made or arranged by real estate brokers applies to a loan in which the broker who negotiated the loan was an employee of an affiliate of the lender, but nevertheless acted as a third party intermediary in negotiating the loan.
Kinney v. Overton     Docket     Sup.Ct. Docket
153 Cal.App.4th 482 – 4th Dist., Div. 3 (G037146) 7/18/07     Petition for review by Cal Supreme Ct. DENIED 10/10/07EASEMENTS: Former Civil Code Section 812 provided that

“[t]he vacation . . . of streets and highways shall extinguish all private easements therein claimed by reason of the purchase of any lot by reference to a map or plat upon which such streets or highways are shown, other than a private easement necessary for the purpose of ingress and egress to any such lot from or to a public street or highway, except as to any person claiming such easement who, within two years from the effective date of such vacation or abandonment . . . shall have recorded in the office of the recorder of the county in which such vacated or abandoned streets or highways are located a verified notice of his claim to such easement . . .” [Emphasis added.]

The court held that cross-complainant could not maintain an action against the person occupying the disputed abandoned parcel because it was not necessary for access and he did not record the notice required by C.C. Section 812. The court specifically did not address the state of title to the disputed parcel or what interest, if any, cross-defendant may have in the parcel.
Hartzheim v. Valley Land & Cattle Company     Docket     Sup.Ct. Docket
153 Cal.App.4th 383 – 6th Dist. (H030053) 7/17/07     Petition for review by Cal Supreme Ct. DENIED 10/10/07LEASES / RIGHT OF FIRST REFUSAL: A right of first refusal in a lease was not triggered by a partnership’s conveyance of property to the children and grandchildren of its partners for tax and estate planning purposes because it did not constitute a bona fide offer from any third party. The court considered three factors: 1) the contract terms must be reviewed closely to determine the conditions necessary to invoke the right, 2) where a right of first refusal is conditioned upon receipt of a bona fide third party offer to purchase the property, the right is not triggered by the mere conveyance of that property to a third party and 3) the formalities of the transaction must be reviewed to determine its true nature.
Berryman v. Merit Property Mgmt.     Docket     Sup.Ct. Docket
152 Cal.App.4th 1544 – 4th Dist., Div. 3 (G037156) 5/31/07     Petition for review by Cal Supreme DENIED 10/10/07HOMEOWNER’S ASSOCIATIONS: Fees charged by a homeowner’s association upon a transfer of title by a homeowner are limited by Civil Code Section 1368 to the association’s actual costs. The court held that this limitation does not apply to fees charged by a management company hired by the association.
Cal-Western Reconveyance Corp. v. Reed     Docket
152 Cal.App.4th 1308 – 2nd Dist. (B193014) 6/29/07     Case complete 8/29/07TRUSTEE’S SALES: After a trustee’s sale, the trustee deposited the surplus proceeds into court under CC 2924j in order to determine who was entitled to the excess proceeds. The court held that:
(1) The distribution of surplus proceeds to satisfy child and spousal support arrearages was proper because the County had properly recorded an abstract of support judgment,
(2) The trial court erred in distributing proceeds to the debtor’s former wife to satisfy her claims for a community property equalization payment and for attorney fees ordered in the dissolution proceeding, because no recorded lien or encumbrance secured those claims, which in any event were discharged in the debtor’s bankruptcy proceeding (because child and spousal support obligations are not dischargeable, but property settlement payments are dischargeable), and
(3) The trial court erred in distributing proceeds to the debtor’s former lawyer, who was retained to assist the debtor in the collection of proceeds from the trustee’s sale, because an attorney’s lien on the prospective recovery of a client must be enforced in a separate action.
(4) The debtor failed to produce sufficient evidence to support his claim that he was entitled to the $150,000 homestead exemption applicable when a debtor is physically disabled and unable to engage in substantial gainful employment (so he was entitled to only the standard $50,000 homestead exemption).
Poseidon Development v. Woodland Lane Estates     Order Modifying Opinion     Docket
152 Cal.App.4th 1106 – 3rd Dist. (C052573) 6/28/07     Case complete 8/31/07PROMISSORY NOTES: A penalty that applied to late payments of installments did not apply to a late payment of the final balloon payment of principal. The penalty was 10% of the amount due, which made sense for regular installments, but bore no reasonable relationship to actual damages if applied to the balloon payment.
Carr v. Kamins     Docket
151 Cal.App.4th 929 – 2nd Dist. (B191247) 5/31/07     Case complete 8/1/07QUIET TITLE: A quiet title judgment was set aside by defendant’s heir four years after being entered because the heir was not named and served. The plaintiff believed the defendant to be deceased, but made no effort to locate and serve the defendant’s heirs. [Even though this case contains some unique facts, the fact that a default judgment can be set aside four years after being entered demonstrates the danger of relying on default judgments and the need to closely examine the court file and surrounding circumstances before doing so.]
Estate of Yool     Docket
151 Cal.App.4th 867 – 1st Dist. (A114787) 5/31/07     Case complete 7/31/07RESULTING TRUST: A decedent held title with her daughter for the purpose of facilitating financing and did not intend to acquire beneficial title. A probate court properly ordered the Special Administrator to convey title to the daughter based on the Resulting Trust Doctrine. It held that the four-year statute of limitations under C.C.P. 343 applied and not C.C.P. 366.2, which limits actions to collect on debts of the decedent to one year after the date of death.
Kalway v. City of Berkeley     Docket
151 Cal.App.4th 827 – 1st Dist. (A112569) 5/31/07     Case complete 8/1/07SUBDIVISION MAP ACT: Plaintiff husband transferred title of a parcel to his wife in order to avoid merger under the Subdivision Map Act of a substandard parcel into their adjoining lot. The court held that plaintiffs could not evade the Map Act in this manner. It also held that the City had no authority to obtain an order canceling the deed, but that the wife also had no right to further transfer title to the substandard lot except back to her husband.
Delgado v. Interinsurance Exchange of the Auto Club of So. Cal.     Docket     Sup.Ct. Docket
Cal.App. 2nd Dist. (B191272) 6/25/07
REVERSED BY CALIFORNIA SUPREME COURTBAD FAITH: An insurance company acted in bad faith as a matter of law where a potential for coverage was apparent from the face of the complaint. The insured allegedly assaulted plaintiff and there was a potential for coverage because the insured may have acted in self defense. The case contains a thorough analysis of the duties of defense and indemnity.
Blackmore v. Powell     Docket     Sup.Ct. Docket
150 Cal.App.4th 1593 – 2nd Dist. (B185326) 5/22/07     Request for depublication DENIED 8/29/07EASEMENTS: An easement “for parking and garage purposes” includes the exclusive right to build and use a garage. Granting an exclusive easement may constitute a violation under the Subdivision Map act, but here there is no violation because the exclusive use of the garage covers only a small portion of the easement and is restricted to the uses described in the easement deed.
Amalgamated Bank v. Superior Court     Docket     Sup.Ct. Docket
149 Cal.App.4th 1003 – 3rd Dist. (C052156, C052395) 4/16/07     Petition for review by Cal Supreme Ct. DENIED 8/8/07LIS PENDENS:
1. In deciding a writ petition from an order granting or denying a motion to expunge a lis pendens after judgment and pending appeal, an appellate court must assess whether the underlying real property claim has “probable validity”. This is the same test that is used before judgment. “Probable validity” post-judgment means that it is more likely than not the real property claim will prevail at the end of the appellate process.
2. A judicial foreclosure sale to a third party is absolute, subject only to the right of redemption, and may not be set aside, except that under C.C.P. Section 701.680(c)(1) the judgment debtor may commence an action to set aside the sale within 90 days only if the purchaser at the sale was the judgment creditor. Here, a potential bidder who was stuck in traffic and arrived too late to the sale could not set it aside because only the judgment debtor can do that and because a third party purchased at the sale.
L&B Real Estate v. Housing Authority of Los Angeles     Docket
149 Cal.App.4th 950 – 2nd Dist. (B189740) 4/13/07     Case complete 6/13/07TAX DEEDS: Because public property is exempt from taxation, tax deeds purporting to convey such property for nonpayment of taxes are void. Two parcels were inadvertently not included in a deed to the State (subsequently conveyed to the Housing Authority of Los Angeles). Accordingly, the tax collector thought that those parcels were still owned by the seller and sold them at a tax sale after real estate taxes were not paid on them. The court also points out that plaintiff was not a good faith purchaser because it had constructive and actual knowledge of the fact that the Housing Authority’s low income housing was partially located on the two parcels sold at the tax sale.
Ulloa v. McMillin Real Estate     Docket
149 Cal.App.4th 333 – 4th Dist., Div. 1 (D048066) 3/7/07 (Cert. for pub. 4/4/07)     Case complete 6/4/07STATUTE OF FRAUDS: The Statute of Frauds requires the authority of an agent who signs a sales agreement to be in writing if the agent signs on behalf of the party to be charged. However, a plaintiff purchaser whose agent signed her name with only verbal authorization is not precluded by the Statute of Frauds from bringing the action because the defendant is the party to be charged.
Jordan v. Allstate Insurance Company     Docket     Sup.Ct. Docket
148 Cal.App.4th 1062 – 2nd Dist. (B187706) 3/22/07      Petition for review and depublication DENIED 6/27/07BAD FAITH: Where there is a genuine issue as to the insurer’s liability under the policy, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute. However, there can be bad faith liability where an insurer denies coverage but a reasonable investigation would have disclosed facts showing the claim was covered under other provisions of the policy. The court clarified that an insurer’s failure to investigate can result in bad faith liability only if there is coverage. If there is no coverage, then any failure to properly investigate cannot cause the insured any damage.
Shah v. McMcMahon     Docket
148 Cal.App.4th 526 – 2nd Dist. (B188972) 3/12/07     Case complete 5/16/07LIS PENDENS: Plaintiffs could not appeal an order for attorney’s fees awarded in a hearing of a motion to expunge a lis pendens. The only remedy is to challenge the award by way of a petition for writ of mandate.
Sterling v. Taylor     Docket
40 Cal.4th 757 – Cal. Supreme Court (S121676) 3/1/07STATUTE OF FRAUDS: If a memorandum signed by the seller includes the essential terms of the parties’ agreement (i.e. the buyer, seller, price, property and the time and manner of payment), but the meaning of those terms is unclear, the memorandum is sufficient under the statute of frauds if extrinsic evidence clarifies the terms with reasonable certainty. Because the memorandum itself must include the essential contractual terms, extrinsic evidence cannot supply those required terms, however, it can be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others. In this case, the memorandum did not set forth the price with sufficient clarity because it was uncertain whether it was to be determined by a multiplier applied to the actual rent role or whether the price specified was the agreed price even though it was based on the parties’ incorrect estimate of the rent role.
Jet Source Charter v. Doherty     Docket
148 Cal.App.4th 1 – 4th Dist., Div. 1 (D044779) 1/30/07     (Pub. order and modification filed 2/28/07 – see end of opinion) Case complete 5/1/07PUNITIVE DAMAGES: Parts I, II, III and IV NOT certified for publication: Where the defendant’s conduct only involves economic damage to a single plaintiff who is not particularly vulnerable, an award which exceeds the compensatory damages awarded is not consistent with due process.
Dyer v. Martinez     Docket     Sup.Ct. Docket
147 Cal.App.4th 1240 – 4th Dist., Div. 3 (G037423) 2/23/07     Petition for review by Cal Supreme Ct. DENIED 6/13/07RECORDING: A lis pendens that was recorded but not indexed does not impart constructive notice, so a bona fide purchaser for value takes free of the lis pendens. The party seeking recordation must ensure that all the statutory requirements are met and the recorder is deemed to be an agent of the recording party for this purpose.
Behniwal v. Mix     Docket
147 Cal.App.4th 621 – 4th Dist., Div. 3 (G037200) 2/7/07     Case complete 4/13/07SPECIFIC PERFORMANCE: In a specific performance action, a judgment for plaintiff’s attorneys’ fees cannot be offset against the purchase price that the successful plaintiff must pay defendant for the property. A judgment for attorneys’ fees is not an incidental cost that can be included as part of the specific performance judgment, and it is not a lien that relates back to the filing of the lis pendens. Instead, it is an ordinary money judgment that does not relate back to the lis pendens. So, while plaintiff’s title will be superior to defendant’s liens that recorded subsequent to the lis pendens, those liens are nevertheless entitled to be paid to the extent of available proceeds from the full purchase price.
Castillo v. Express Escrow     Docket
146 Cal.App.4th 1301 – 2nd Dist. (B186306) 1/18/07     Case complete 3/20/07MOBILEHOME ESCROWS:
1) Health and Safety Code Section 18035(f) requires the escrow agent for a mobile home sale to hold funds in escrow upon receiving written notice of a dispute between the parties, even though the statute specifically states “unless otherwise specified in the escrow instructions” and even though the escrow instructions provided that escrow was to close unless “a written demand shall have been made upon you not to complete it”.
2) Section 18035(f) does not require the written notice of dispute to cite the code section, or to be in any particular form, or that the notice be addressed directly to the escrow holder, or that the notice contain an express request not to close escrow. The subdivision requires nothing more than that the escrow agent receive notice in writing of a dispute between the parties. So receiving a copy of the buyer’s attorney’s letter to the seller was sufficient to notify the escrow agent that a dispute existed.
Rappaport-Scott v. Interinsurance Exchange     Docket
146 Cal.App.4th 831 – 2nd Dist (B184917) 1/11/07     Case complete 3/14/07INSURANCE: An insurer’s duty to accept reasonable settlement offers within policy limits applies only to third party actions and not to settlement offers from an insured. An insurer has a duty not to unreasonable withhold payments due under a policy. But withholding benefits under a policy is not unreasonable if there is a genuine dispute between the insurer and the insured as to coverage or the amount of payment due, which is what occurred in this case.
In re: Rabin
BAP 9th Circuit 12/8/06BANKRUPTCY/HOMESTEADS: Under California law, the homestead exemption rights of registered domestic partners are identical to those of people who are married. Therefore, domestic partners are limited to a single combined exemption, in the same manner as people who are married. In the absence of a domestic partnership or marriage, each cotenant is entitled to the full homestead exemption.
Wachovia Bank v. Lifetime Industries     Docket
145 Cal.App.4th 1039 – 4th Dist., Div. 2 (E037560) 12/15/06     Case complete 2/16/07OPTIONS:
1. When the holder of an option to purchase real property exercises the option and thereby obtains title to the property, the optionee’s title relates back to the date the option was given, as long as the optionee has the right to compel specific performance of the option. But where the optionee acquires title in a transaction unconnected with the option, such as where there has been a breach of the option agreement so that the optionee did not have the right to specific performance, the optionee takes subject to intervening interests just like any other purchaser.
2. Civil Code Section 2906 provides a safe harbor for a lender to avoid the rule against “clogging” the equity of redemption as long as the option is not dependent on the borrower’s default. But even if the lender falls outside the safe harbor because the exercise of the option is dependent upon borrower’s default, it does not automatically follow that the option is void. Instead, the court will analyze the circumstances surrounding the transaction and the intent of the parties to determine whether the option is either void or a disguised mortgage. Also, even if the transaction is a disguised mortgage the optionee (now mortgagee) has a right to judicially foreclose, which will wipe out intervening interests.
Wright v. City of Morro Bay     Docket     Sup.Ct. Docket
144 Cal.App.4th 767, 145 Cal.App.4th 309a – 2nd Dist (B176929) 11/7/06     Modification of Opinion 12/6/06     Petition for review by Cal Supreme Ct. DENIED 2/21/07DEDICATION/ABANDONMENT: C.C.P. 771.010, which provides for termination of an offer of dedication if not accepted within 25 years, did not apply because 1) the statute cannot be applied retroactively to the City’s acceptance occurring more than 25 years after the offer of dedication and 2) the area covered by the dedicated road has never been used by anyone, so the requirement that the property be “used as if free of the dedication” was not met.
State Farm General Insurance Co. v. Wells Fargo Bank     Docket
143 Cal.App.4th 1098 – 1st Dist. (A111643) 10/10/06     Case complete 12/11/06The “superior equities rule” prevents an insurer, who is subrogated to the rights of the insured after paying a claim, from recovering against a party whose equities are equal or superior to those of the insurer. Thus, an insurer may not recover from an alleged tortfeasor where the tortfeasor’s alleged negligence did not directly cause the insured’s loss. The court questioned the continued vitality of the superior equities rule in California, but felt compelled to follow a 1938 Supreme Court case that applied the rule. The court suggests that the Supreme Court should re-address the issue in light of modern day fault principles.
Corona Fruits & Veggies v. Frozsun Foods     Docket     Sup.Ct. Docket
143 Cal.App.4th 319 – 2nd Dist. (B184507) 9/25/06     Petition for review by Cal Supreme Ct. DENIED 12/20/06UCC: A UCC-1 financing statement filed in the name of Armando Munoz is not effective where the debtor’s true name was Armando Munoz Juarez.
Warren v. Merrill     Docket
143 Cal.App.4th 96 – 2nd Dist. (B186698) 9/21/06     Case complete 11/21/06QUIET TITLE: The Court quieted title in plaintiff where title was taken in the real estate agent’s daughter’s name as part of a fraudulent scheme perpetrated by the agent. This is not a significant title insurance case, but I posted it for reference since it involves quiet title.
McKell v. Washington Mutual     Docket     Sup.Ct. Docket
142 Cal.App.4th 1457 – 2nd Dist. (B176377) 9/18/06     Request for depublication DENIED 1/17/07RESPA: Washington Mutual (i) charged hundreds of dollars in “underwriting fees” when the underwriting fee charged by Fannie Mae and Freddie Mac to WAMU was only $20 and (ii) marked up the charges for real estate tax verifications and wire transfer fees. The court followed Kruse v. Wells Fargo Home Mortgage (2d Cir. 2004) 383 F.3d 49, holding that marking up costs, for which no additional services are performed, is a violation of RESPA. Such a violation of federal law constitutes an unlawful business practice under California’s Unfair Competition Law (“UCL”) and a breach of contract. Plaintiffs also stated a cause of action for an unfair business practice under the UCL based on the allegation that WAMU led them to believe they were being charged the actual cost of third-party services.
Reilly v. City and County of San Francisco     Docket     Sup.Ct. Docket
142 Cal.App.4th 480 – 1st Dist. (A109062) 8/29/06     Request for depublication DENIED 12/13/06PROPERTY TAX: A change in ownership of real property held by a testamentary trust occurs when an income beneficiary of the trust dies and is succeeded by another income beneficiary. Also, for purposes of determining change in ownership, a life estate either in income from the property or in the property itself is an interest equivalent in value to the fee interest.
Markowitz v. Fidelity     Docket     Sup.Ct. Docket
142 Cal.App.4th 508 – 2nd Dist. (B179923) 5/31/06     Publication ordered by Cal. Supreme Court 8/30/06ESCROW: Civil Code Section 2941, which permits a title insurance company to record a release of a deed of trust if the lender fails to do so, does not impose an obligation on an escrow holder/title company to record the reconveyance on behalf of the trustee. Citing other authority, the Court states that an escrow holder has no general duty to police the affairs of its depositors; rather, an escrow holder’s obligations are limited to faithful compliance with the parties’ instructions, and absent clear evidence of fraud, an escrow holder’s obligations are limited to compliance with the parties’ instructions. The fact that the borrower had an interest in the loan escrow does not mean that he was a party to the escrow, or to the escrow instructions.
Cebular v. Cooper Arms Homeowners Association     Docket     Sup.Ct. Docket
142 Cal.App.4th 106 – 2nd Dist. (B182555) 8/21/06     Request for review by Cal Supreme Ct. DENIED 11/15/06; Request to publish Part III, Sec. B filed 10/24/06COVENANTS, CONDITIONS AND RESTRICTIONS: It is not unreasonable for CC&R’s to allocate dues obligations differently for each unit, along with the same allocation of voting rights, even though each unit uses the common areas equally. Although the allocation does not make much sense, courts are disinclined to question the wisdom of agreed-to restrictions.
Bernard v. Foley     Docket
39 Cal.4th 794 – Cal. Supreme Court (S136070) (8/21/06)TESTAMENTARY TRANSFERS: Under Probate Code Section 21350, “care custodians” are presumptively disqualified from receiving testamentary transfers from dependent adults to whom they provide personal care, including health services. The Court held that the term “care custodian” includes unrelated persons, even where the service relationship arises out of a preexisting personal friendship rather than a professional or occupational connection. Accordingly, the Court set aside amendments to decedent’s will that were made shortly before decedent’s death, which would have given most of the estate to the care providers.
Regency Outdoor Advertising v. City of Los Angeles     Docket
39 Cal.4th 507 – Cal. Supreme Court (S132619) 8/7/06     Modification of Opinion 10/11/06ABUTTER’S RIGHTS: There is no right to be seen from a public way, so the city is not liable for damages resulting from the view of plaintiff’s billboard caused by planting trees along a city street. The court pointed out that a private party who blocks the view of someone’s property by obstructing a public way would be liable to someone in plaintiff’s position.
Kleveland v. Chicago Title Insurance Company     Docket     Sup.Ct. Docket
141 Cal.App.4th 761 – 2nd Dist. (B187427) 7/24/06     Case complete 10/5/06     Request for depublication DENIED 10/25/06TITLE INSURANCE: An arbitration clause in a title policy is not enforceable where the preliminary report did not contain an arbitration clause and did not incorporate by reference the arbitration clause in the CLTA policy actually issued. (The preliminary report incorporated by reference the provisions of a Homeowner’s Policy of Title Insurance with a somewhat different arbitration clause, but a CLTA policy was actually issued.)
Essex Insurance Company v. Five Star Dye House     Docket
38 Cal.4th 1252 – Cal. Supreme Court (S131992) 7/6/06INSURANCE: When an insured assigns a claim for bad faith against the insurer, the assignee may recover Brandt (attorney) fees. Although purely personal causes of action are not assignable, such as claims for emotional distress or punitive damages, Brandt fees constitute an economic loss and are not personal in nature.
Peak Investments v. South Peak Homeowners Association     Docket
140 Cal.App.4th 1363 – 4th Dist., Div. 3 (G035851) 6/28/06     Case complete 8/31/06HOMEOWNER’S ASSOCIATIONS: Where CC&R’s require approval by more than 50 percent of owners in order to amend the Declaration, Civil Code Section 1356(a) allows a court, if certain conditions are met, to reduce the percentage of votes required, if it was approved by “owners having more than 50 percent of the votes in the association”. The Court held that the quoted phrase means a majority of the total votes in the HOA, not merely a majority of those votes that are cast.
CTC Real Estate Services v. Lepe     Docket
140 Cal.App.4th 856 – 2nd Dist. (B185320) 6/21/06     Case complete 8/23/06TRUSTEE’S SALES: The victim of an identity theft, whose name was used to obtain a loan secured by a purchase money deed of trust to acquire real property, may, as the only claimant, recover undistributed surplus proceeds that remained after a trustee sale of the property and the satisfaction of creditors. The Court pointed out that a victim of theft is entitled to recover the assets stolen or anything acquired with the stolen assets, even if the value of those assets exceeds the value of that which was stolen.
Slintak v. Buckeye Retirement Co.     Docket     Sup.Ct. Docket
139 Cal.App.4th 575 – 2nd Dist. (B182875) 5/16/06     Request for review by Cal Supreme Ct. DENIED 9/13/06MARKETABLE RECORD TITLE ACT
1) Under Civil Code Section 882.020(a)(1), a deed of trust expires after 10 years where “the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the record”. Here, the October 1992 Notice of Default was recorded and contained the due date of the subject note; thus, the due date is “ascertainable from the record” and the 10-year limitations period of section 882.020(a)(1) applies.2) Under C.C. Section 880.260, if an action is commenced and a lis pendens filed by the owner to quiet or clear title, the running of the 10-year limitations period is reset and a new 10-year limitations period commences on the date of the recording of the lis pendens. After the expiration of the recommenced 10-year period, the power of sale in the trust deed expires.
Preciado v. Wilde     Docket     Sup.Ct. Docket
139 Cal.App.4th 321 – 2nd Dist. (B182257) 5/9/06     Request for review by Cal Supreme Ct. DENIED 8/16/06ADVERSE POSSESSION: Plaintiffs failed to establish adverse possession against defendant, with whom they held title as tenants in common. Before title may be acquired by adverse possession as between cotenants, the occupying tenant must impart notice to the tenant out of possession, by acts of ownership of the most open, notorious and unequivocal character, that he intends to oust the latter of his interest in the common property. Such evidence must be stronger than that which would be required to establish title by adverse possession in a stranger.
UNPUBLISHED Harbor Pipe v. Stevens
Cal.App. 4th Dist., Div. 3 (G035530) 4/4/06     Case complete 6/6/06JUDGMENTS: A judgment lien against the settlor of a revocable trust attached to trust property where the identity of the settlor is reflected in the chain of title, so a purchaser takes subject to the judgment lien. NOTE: In other words, title companies need to check the names of the settlors in the General Index when title is held in trust.
Aaron v. Dunham     Docket     Sup.Ct. Docket
137 Cal.App.4th 1244 – 1st Dist. (A109488) 3/15/06     Request for review by Cal Supreme Ct. DENIED 6/21/06PRESCRIPTIVE EASEMENTS: 1) Permission granted to an owner does not constitute permission to a successor. 2) Under Civil Code Section 1008, signs preventing prescriptive rights must be posted by an owner or his agent, so signs posted by a lessee without the knowledge of the owner, do not qualify.
***DECERTIFIED***
Newmyer v. Parklands Ranch     Docket     Sup.Ct. Docket
Cal.App. 2nd Dist. (B180461) 3/23/06     Request for review by Cal Supreme Ct. DENIED; CA opinion DECERTIFIED 6/14/06EASEMENTS: The owner of the dominant tenement possessing over the servient tenement an access easement that includes the right to grant other easements for “like purposes” may convey to an owner of property adjoining the dominant tenement an enforceable easement for access over the servient tenement.
Marion Drive LLC v. Saladino     Docket     Sup.Ct. Docket
136 Cal.App.4th 1432 – 2nd Dist. (B182727) 2/27/06     Request for review by Cal Supreme Ct. DENIED 5/24/06ASSESSMENT LIEN: After a tax sale, the holder of a bond secured by a 1911 Act assessment lien has priority as to surplus tax sale proceeds over a subsequently recorded deed of trust. This is true even though the bond holder purchased the property from the tax sale purchaser. The Court rejected defendant’s argument that fee title had merged with the assessment lien.
Barnes v. Hussa     Docket
136 Cal.App.4th 1358 – 3rd Dist. (C049163) 2/24/06     Case complete 4/26/06LICENSES / WATER RIGHTS: The Plaintiff did not overburden a license to run water in a pipeline across defendant’s property where he extended the pipeline to other property he owned because there was no increase in the burden on the servient tenement and no harm to defendants. A couple of interesting things pointed out by the Court are: 1) A person entitled to use water may use it elsewhere as long as others are not injured by the change, and 2) “An irrevocable license . . . is for all intents and purposes the equivalent of an easement.”
***REVERSED***
Mayer v. L & B Real Estate     Docket     Sup.Ct. Docket
Cal.App. 2nd Dist. (B180540) 2/14/06     REVERSED by Cal Supreme Ct. 6/16/08TAX SALES: The one-year statute of limitations for attacking a tax sale applies to preclude an action by a property owner who had actual notice of the tax sale, even where the tax collector’s conduct was egregious. The Court did not reach the question of whether the tax collector satisfied its due process obligations, but refers to a Supreme Court case which held that the limitations period is enforceable even if the defect is constitutional in nature. That case recognized a limited exception where an owner is in “undisturbed possession” such that the owner lacked any reasonable means of alerting himself to the tax sale proceedings.
Wright Construction Co. v. BBIC Investors     Docket     Sup.Ct. Docket
136 Cal.App.4th 228 – 1st Dist. (A109876) 1/31/06     Request for review by Cal Supreme Ct. DENIED 4/26/06MECHANICS’ LIENS: A mechanic’s lien is premature and invalid under Civil Code Section 3115 if it is recorded before the contractor “completes his contract”. A contract is complete for purposes of commencing the recordation period under section 3115 when all work under the contract has been performed, excused, or otherwise discharged. Here, because of the tenant’s anticipatory breach of the contract, plaintiff had “complete[d] [its] contract” within the meaning of section 3115 the day before the claim of lien was recorded, so the claim of lien was not premature. In a previous writ proceeding, the Court held that the landlord’s notice of nonresponsibility was invalid under the “participating owner doctrine” because the landlord caused the work of improvement to be performed by requiring the lessee to make improvements.
Torres v. Torres     Docket     Sup.Ct. Docket
135 Cal.App.4th 870 – 2nd Dist. (B179146) 1/17/06     Request for review by Cal Supreme Ct. DENIED 4/12/06POWER OF ATTORNEY: 1) A statutory form power of attorney is not properly completed where the principal marks the lines specifying the powers with an “X” instead of initials, as required by the form. However, the form is not the exclusive means of creating a power of attorney, so even though it is not valid as a statutory form, it is valid as regular power of attorney. 2) Under Probate Code Section 4264, an attorney in fact may not make a gift of the principal’s property unless specifically authorized to do so in the power of attorney. Here, the principal quitclaimed the property to himself, the other attorney in fact and the principal as joint tenants. However, the court refused to invalidate the conveyance because the plaintiff failed to produce any evidence that the conveyance was not supported by consideration.
Ung v. Koehler     Order Modifying Opinion     Docket     Sup.Ct. Docket
135 Cal.App.4th 186 – 1st Dist. (A109532) 12/28/05     Request for review by Cal Supreme Ct. DENIED 4/12/06TRUSTEE’S SALES:
1. Expiration of the underlying obligation does not preclude enforcement of the power of sale under a deed of trust.
2. A power of sale expires after 60 years or, if the last date fixed for payment of the debt is ascertainable from the record, 10 years after that date.
3. In order to avoid a statutory absurdity, a notice of default that is recorded more than 10 years after “the last date fixed for payment of the debt” does not constitute a part of the “record” for purposes of Civil Code Section 882.020(a).
Trust One Mortgage v. Invest America Mortgage     Docket
134 Cal.App.4th 1302 – 4th Dist., Div. 3 (G035111) 12/15/05     Case complete 2/21/06TRUSTEE’S SALES/ANTI-DEFICIENCY: An indemnification agreement is enforceable after a non-judicial foreclosure where the indemnitor is not the same person as the obligor. If the indemnitor and obligor were the same, the indemnity would be void as an attempt to circumvent antideficiency protections.
UNPUBLISHED OPINION
Citifinancial Mortgage Company v. Missionary Foundation     Docket
Cal.App. 2nd (B178664) 12/14/05     Case complete 2/16/06MARKETABLE RECORD TITLE ACT: (UNPUBLISHED OPINION) Under Civil Code Section 882.020(a)(1), a deed of trust becomes unenforceable 10 years after the final maturity date, or the last date fixed for payment of the debt or performance of the obligation, if that date is ascertainable from the record. Here, the record showed via an Order Confirming Sale of Real Property that the obligation was due five years after close of escrow. The Court held that since “close of escrow” is an event, and not a date certain, Section 882.020(a)(1) did not apply in spite of the fact that escrow must have closed in order for the deed of trust to have been recorded.
McElroy v. Chase Manhattan Mortgage Corp.     Docket
134 Cal.App. 4th 388 – 4th Dist., Div. 3 (G034588) 11/1/05     Case complete 2/1/06TRUSTEE’S SALES: The Court refused to set aside a trustee’s sale where the lender foreclosed after the trustors tendered payment in the form of a “Bonded Bill of Exchange Order”. The Court determined that “the Bill is a worthless piece of paper, consisting of nothing more than a string of words that sound as though they belong in a legal document, but which, in reality, are incomprehensible, signifying nothing.”
***DECERTIFIED***
The Santa Anita Companies v. Westfield Corporation     Docket     Sup.Ct. Docket
134 Cal.App.4th 77 – 2nd Dist. (B175820) 11/17/05     Request for review by Cal Supreme Ct. DENIED and DECERTIFIED 01/25/06DEEDS: The 3-year statute of limitations under C.C.P. 338(d) to seek relief on the ground of mistake does not begin to run until discovery of the mistake or receiving facts that would put a reasonable person on notice of the mistake. The fact that carefully reading the deed would have revealed the mistake is not sufficient to charge the plaintiff with notice, so the statute of limitations did not begin to run until plaintiff actually became aware of the error, and this action was therefore timely.
Big Valley Band of Pomo Indians v. Superior Court     Docket
133 Cal.App.4th 1185 – 1st Dist. (A108615) 11/1/05     Case complete 1/4/06INDIANS: An employment agreement with an Indian tribe contained the following clause: “Any claim or controversy arising out of or relating to any provisions of this Agreement, or breach thereof, shall . . . be resolved by arbitration under the rules of the American Arbitration Association in San Francisco, California, and judgment on any award by the arbitrators may be entered in any court having such jurisdiction”. The court held that the effect of the arbitration clause as limited to a consent to arbitrate and enforce any award in state court. But this clause was insufficient to waive the tribe’s immunity from a breach of contract action brought in state court. So plaintiffs are apparently free to bring the same breach of contract claims in an arbitration proceeding.
Behniwal v. Mix     Docket
133 Cal.App.4th 1027 – 4th Dist., Div. 3 (G034074) 9/30/05     Case complete 1/3/06STATUTE OF FRAUDS: A sales contract signed on the sellers’ behalf by their real estate agent did not satisfy the Statute of Frauds because the agent did not have written authority to sign for the sellers. However, a contract which must be in writing can be ratified if the ratification is also in writing. Here the sellers ratified the contract by a sufficient written ratification where they subsequently signed disclosure documents that specifically referred to the contract signed by the real estate agent.
Behniwal v. Superior Court     Docket
133 Cal.App.4th 1048 – 4th Dist., Div. 3 (G035299) 9/30/05     Case complete 1/3/06LIS PENDENS: (Related to Mix v. Superior Court, several cases below.) Having determined that the plaintiffs have at least a “probably valid” real property claim, the Court issued a peremptory writ of mandate directing the Superior Court to vacate its order expunging the lis pendens. The lis pendens will therefore protect plaintiff’s claim until the time for appeal to the Supreme Court expires or unless the Supreme Court issues its own writ directing that the lis pendens be expunged.
Zipperer v. County of Santa Clara     Docket
133 Cal.App.4th 1013 – 6th Dist. (H028455) 9/30/05 (Mod. 10/28/05)     Case complete 12/28/05EASEMENTS:
PUBLISHED PORTION: The Solar Shade Control Act provides that “. . . no person owning, or in control of a property shall allow a tree or shrub to be placed, or, if placed, to grow on such property, subsequent to the installation of a solar collector on the property of another so as to cast a shadow greater than 10 percent of the collector absorption area”. The County is exempt from the Act because it adopted an ordinance pursuant to a statute allowing cities and counties to exempt themselves from the Act. The Court did not address the issue of whether the act applies where a tree is not “placed” by a property owner.UNPUBLISHED PORTION: A common law easement for light and air generally may be created only by express written instrument. A statutory “solar easement” under Civil Code Section 801.5 may be created only by an instrument containing specified terms. The Court held that the County did not have an obligation to trim trees to avoid shading plaintiff’s solar panels, rejecting several theories asserted by plaintiff.
Fishback v. County of Ventura     Docket
133 Cal.App.4th 896 – 2nd Dist. (B177462) 10/26/05     Case complete 1/9/06SUBDIVISION MAP ACT: Under the 1937 and 1943 Subdivision Map Acts, “subdivision” was defined as “any land or portion thereof shown on the last preceding tax roll as a unit or as contiguous units which is divided for the purpose of sale . . . into five or more parcels within any one year period.” The Court makes numerous points interpreting those statutes, some of the most significant being: 1) Once the fifth parcel is created within a one-year period, all the parcels created within that year constitute a subdivision; 2) Even though a unit of land is defined as a unit as shown on the last tax roll preceding the division, that does not mean the unit shown on the last preceding tax roll is a legal parcel, and legal parcels cannot be created by dividing that illegal parcel; and 3) If land is divided for the purpose of sale, it is irrelevant that the retained parcel is not held for the purpose of sale. Thus, for example, if the owner of a unit of land divides it in half, the unit is divided for the purpose of sale even if the owner intends to sell only one half and keep the other.
Attorney General Opinion No. 04-1105
10/3/05ASSESSOR’S RECORDS: County Assessors maintain parcel boundary map data, which is detailed geographic information used to describe and define the precise geographic boundaries of assessor’s parcels. When maintained in electronic format, Assessors must make copies in electronic format available to the public. The fee charged for producing the copy is limited to the direct cost of producing the copy in electronic format, and may not include expenses associated with the county’s initial gathering of the information, with initial conversion of the information into electronic format, or with maintaining the information.
Villacreses v. Molinari     Docket     Sup.Ct. Docket
132 Cal.App.4th 1223 – 4th Dist., Div. 3 (G034719) 9/26/05     Request for review by Cal Supreme Ct. DENIED 12/14/05ARBITRATION: Section 1298 requires that an arbitration provision in a real estate contract be accompanied by a statutory notice and that the parties indicate their assent by placing their initials on an adjacent space or line. The arbitration notice, standing alone, does not constitute an arbitration provision. So the Defendants could not compel arbitration where the contract contained only the notice, but did not contain a separate arbitration provision.The Court has a good sense of humor. The opinion contains the following memorable quotes:

1. “If the first rule of medicine is ‘Do no harm,’ the first rule of contracting should be ‘Read the documents’.”

2. “. . . to paraphrase the immortal words of a former President of the United States, the applicability of this purported arbitration agreement to the instant dispute ‘depends upon what the meaning of the word “it” is.'”
Campbell v. Superior Court (La Barrie)     Docket     Sup.Ct. Docket
132 Cal.App.4th 904 – 4th Dist., Div. 1 (D046064) 9/14/05     Request for review by Cal Supreme Ct. DENIED 12/14/05LIS PENDENS: A cause of action for a constructive trust or an equitable lien does not support a lis pendens where it is merely for the purpose of securing a judgment for money damages. [Ed. Note: The Court in this and similar cases make the absolute statement that “an equitable lien does not support a lis pendens”, and explain that the lien is sought merely to secure a money judgment. But it is unclear whether the Court would reach the same conclusion in a pure equitable lien case. For example, where a loan is paid off with the proceeds of a new loan, but the new mortgage accidentally fails to be recorded, an action to impose an equitable lien seeks more than a mere money judgment. It seeks to allow the new lender to step into the shoes of the old lender and, in my opinion, a lis pendens should be allowed.]
Fripp v. Walters Docket     Docket     Sup.Ct. Docket
132 Cal.App.4th 656 – 3rd Dist. (C046733) 9/7/05 (ONLY PART I CERTIFIED FOR PUBLICATION)     Request for review by Cal Supreme Ct. DENIED 11/16/05BOUNDARIES / SURVEYS: A conveyance referring to a parcel map cannot convey more property than the creator of the parcel map owned. The Court rejected Defendant’s claim that the recorded parcel map was a “government sanctioned survey” which precludes a showing that the boundaries established by the parcel map are erroneous. The court explained that the rule cited by Defendants applies only to official survey maps that create boundaries. Boundary lines cannot be questioned after the conveyance of public land to a private party, even if they are inaccurate.
Title Trust Deed Service Co. v. Pearson     Docket
132 Cal.App.4th 168 – 2nd Dist (B175067) 8/25/05     Case complete 10/28/05HOMESTEADS: A declared homestead exemption applies to surplus proceeds from a trustee’s sale. [Comment: Applying the declared homestead exemption to trustee’s sales is fine. But the Court also seems to want to pay surplus proceeds to the debtor up to the amount of the exemption before paying the holder of a junior trust deed. This should be wrong since the homestead exemption does not apply to voluntary liens. I think the Court does not adequately address what appears to me to be a circuity of priority problem: The homestead exemption is senior to the judgment lien, which in this case happens to be senior to a junior TD, which is senior to the homestead exemption.]
In re Marriage of Benson     Docket
36 Cal.4th 1096 – Cal. Supreme Court (S122254) 8/11/05COMMUNITY PROPERTY: The doctrine of partial performance, which is an exception to the Statute of Frauds, is not an exception to the requirement of Family Code Section 852 that an agreement to transmute property be in writing. The concurring opinion points out that the Court does not decide what statutory or equitable remedy would be available to make whole a spouse who has been disadvantaged by an illusory oral promise to transmute property, or what sanction may be employed against a spouse who has used section 852(a) as a means of breaching his or her fiduciary duty and gaining unjust enrichment.
First Federal Bank v. Fegen     Docket
131 Cal.App.4th 798 – 2nd Dist. (B174252) 7/29/05     Case complete 9/29/05JUDGMENTS: The Court dismissed an appeal as being moot where the debtor did not post a bond after a sheriff’s sale of real property. C.C.P. Section 917.4 provides that an appeal of an order directing the sale of real property does not stay enforcement of the order. A sheriff’s sale is final, except that the debtor can commence an action within 90 days to set aside the sale if the judgment creditor is the successful bidder. Here, the debtor failed to file an action within 90 days so the sale is final.
Bear Creek Master Association v. Edwards     Docket     Sup.Ct. Docket
130 Cal.App.4th 1470 – 4th Dist. Div. 2 (E034859) 7/13/05     Request for review by Cal Supreme Ct. DENIED 10/19/05CONDOMINIUMS: The definition of “condominium” in Civil Code Section 1351(f) does not require that an actual structure has been built; rather it only requires that it be described in a recorded condominium plan. (Note, however, that under CC 1352 the condominium does not come into existence until a condominium unit has been conveyed.) The case also contains an extensive discussion of the procedural requirements for foreclosing on an assessment lien recorded by the homeowner’s association.
Woodridge Escondido Property Owners Assn. v. Nielsen     Docket     Sup.Ct. Docket
130 Cal.App.4th 559 – 4th Dist. Div. 1 (D044294) 5/25/05 (pub. order 6/16/05)     Request for review by Cal Supreme Ct. DENIED 8/31/05CC&R’s: A provision in CC&R’s that prohibited construction of a permanent structure in an easement area applied to a deck because it was attached to the house and had supporting posts that were buried in the ground, such that it was designed to continue indefinitely without change and was constructed to last or endure.
Beyer v. Tahoe Sands Resort     Docket
129 Cal.App.4th 1458 – 3rd Dist. (C045691) 6/8/05     Case complete 8/8/05EASEMENTS: California Civil Code Section 805 provides that a servitude cannot be held by the owner of the servient tenement. The Court held that the term “owner” under Section 805 means the owner of the full fee title, both legal and equitable, such that a property owner who owns less than full title may validly create easements in his own favor on his land. Here, the Court held that the grantor could reserve an easement over property conveyed to a time-share trustee where the grantor held all beneficial interest in the trust and the grantee held just bare legal title.
Bank of America v. La Jolla Group     Docket     Sup.Ct. Docket
129 Cal.App.4th 706 – 5th Dist. (F045318) 5/19/05     Request for review by Cal Supreme Ct. DENIED 9/7/05TRUSTEE’S SALES: A trustee’s sale, which was accidentally held after the owner and lender agreed to reinstate the loan, is invalid. The conclusive presumptions in Civil Code Section 2924 pertain only to notice requirements, not to every defect or inadequacy. The Court points out that the advantages of being a bona fide purchaser are not limited to the presumptions set forth in Section 2924, but does not discuss it further because the defendant did not argue that its bona fide purchaser status supports its position in any way other than the statutory presumptions.
Zabrucky v. McAdams     Docket
129 Cal.App.4th 618 – 2nd Dist. (B167590) 5/18/05     Case complete 7/20/05COVENANTS, CONDITIONS & RESTRICTIONS: The Court interpreted a provision in CC&R’s to prohibit an addition to a house which would unreasonably obstruct a neighbor’s view. The Court painstakingly nit-picked through the provisions of the CC&R’s and compared the provisions and the facts to other cases where courts have done the same. The main conclusion I draw is that these cases are each unique and it is very difficult to determine in advance what a court will do. In fact, one judge dissented in this case. This means it can be very dangerous to issue endorsements such as CLTA Endorsement No. 100.6 or 100.28, insuring against this kind of provision in CC&R’s.
Anolik v. EMC Mortgage Corp.     Docket     Sup.Ct. Docket
Cal.App. 3rd Dist. (C044201) 4/29/05 (Mod. 5/26/05)     Request for review by Cal Supreme Ct. DENIED and DECERTIFIED 8/10/05***DECERTIFIED***
 TRUSTEE’S SALES:
1. To be valid, a notice of default must contain at least one correct statement of a breach, and it must be substantial enough to authorize use of the drastic remedy of nonjudicial foreclosure.
2. An assertion in a notice of default of one or more breaches qualified with the words “if any” does not satisfy the requirements of section 2924 because it indicates that the lender has no clue as to the truth or falsity of the assertion.
3. It is not proper to declare a payment in default when the time for imposing a late fee on that payment has not expired because the default is not sufficiently substantial at that point.
4. Under Civil Code Section 2954, a lender cannot force impound payments for property taxes until the borrower has failed to pay two consecutive tax installments.
Kangarlou v. Progressive Title Company     Docket
128 Cal.App.4th 1174 – 2nd Dist. (B177400) 4/28/05     Case complete 6/29/05ESCROW: 1. Under Civil Code Section 1717, plaintiff can recover attorney’s fees after prevailing in an action against the escrow holder, even though the escrow instructions limited attorney’s fees to actions to collect escrow fees.
2. Under Business and Professions Code Section 10138, an escrow holder has a duty to obtain evidence that a real estate broker was regularly licensed before delivering compensation.
Paul v. Schoellkopf     Docket     Sup.Ct. Docket
128 Cal.App.4th 147 – 2nd Dist. (B170379) 4/5/05     Request for review by Cal Supreme Ct. DENIED 6/15/05ESCROW: A provision for attorneys’ fees in escrow instructions limited to fees incurred by the escrow company in collecting for escrow services does not apply to other disputes between the buyer and seller.
Knight v. Superior Court     Docket     Sup.Ct. Docket
128 Cal.App.4th 14 – 3rd Dist. (C048378) 4/4/05     Request for review by Cal Supreme Ct. DENIED 6/29/05DOMESTIC PARTNERSHIPS: Family Code Section 308.5, enacted by Proposition 22, 3/7/00, states: “Only marriage between a man and a woman is valid or recognized in California.” This statute did not prohibit the legislature from enacting California’s Domestic Partnership Law, Family Code Section 297, et seq., because Section 308.5 pertains only to marriages, not to other relationships.
Estate of Seifert     Docket     Sup.Ct. Docket
128 Cal.App.4th 64 – 3rd Dist. (C046456) 4/4/05     Request for review by Cal Supreme Ct. DENIED 6/22/05ADVERSE POSSESSION: A fiduciary, including an executor, may not acquire title by adverse possession against the heirs. Once the executor was appointed, the statutory period for his adverse possession of the subject property ceased to run.
Melendrez v. D & I Investment     Docket     Sup.Ct. Docket
127 Cal.App.4th 1238 – 6th Dist. (H027098) 3/29/05     Request for review by Cal Supreme Ct. DENIED 6/22/05 TRUSTEE’S SALES: A trustee’s sale cannot be set aside where the purchaser at the sale is a bona fide purchaser (“BFP”). The elements of being a BFP are that the buyer 1) purchase the property in good faith for value, and 2) have no knowledge or notice of the asserted rights of another. The value paid may be substantially below fair market value. Also, the buyer’s sophistication and experience in purchasing at trustee’s sales does not disqualify him from being a BFP, although in evaluating whether the buyer is a BFP, the buyer’s foreclosure sale experience may be considered in making the factual determination of whether he had knowledge or notice of the conflicting claim.
Radian Guaranty v. Garamendi     Docket     Sup.Ct. Docket
127 Cal.App.4th 1280 – 1st Dist. (A105789) 3/29/05     Request for review by Cal Supreme Ct. DENIED 7/20/05TITLE INSURANCE: Radian’s Lien Protection Policy constitutes title insurance pursuant to Insurance Code Section 12340.1. Because Radian does not possess a certificate of authority to transact title insurance, it is not authorized to sell the policy in California or anywhere else in the United States, pursuant to California’s monoline statutes: Ins. Code Section 12360 (title insurance) and Ins. Code Section 12640.10 (mortgage guaranty insurance).
Gardenhire v. Superior Court     Docket     Sup.Ct. Docket
128 Cal.App.4th 426a – 6th Dist. (H026601) 3/22/05     Request for review by Cal Supreme Ct. DENIED 6/8/05TRUSTS: A trust can be revoked by a will where the trust provided for revocation by “any writing” and the will expressed a present intent to revoke the trust. The Court pointed out that a will, which is inoperative during the testator’s life, can nevertheless have a present and immediate effect upon delivery, such as notice of intent to revoke.
Jones v. Union Bank of California     Docket     Sup.Ct. Docket
127 Cal.App.4th 542 – 2nd Dist. (B173302) 3/11/05     Request for review by Cal Supreme Ct. DENIED 6/8/05When a lender successfully defends an action to set aside or enjoin a foreclosure sale, the antideficiency provisions of C.C.P. Section 580d do not prohibit an award of attorney fees. In addition, Civil Code sections 2924c and 2924d do not limit the amount of fees the court may award.
O’Toole Company v. Kingsbury Court HOA     Docket
126 Cal.App.4th 549 – 2nd Dist. (B172607) 2/3/05     Case complete 4/8/05HOMEOWNER’S ASSOCIATIONS: In a suit to enforce a judgment, the trial court properly appointed a receiver and levied a special emergency assessment when defendant-homeowners association failed to pay. The Court pointed out that regular assessments are exempt from execution, but not special assessments.
State of California ex rel. Bowen v. Bank of America     Docket     Sup.Ct. Docket
126 Cal.App.4th 225 – 2nd Dist. (B172190) 1/31/05     Request for review by Cal Supreme Ct. DENIED 5/18/05ESCHEAT: This is a qui tam action filed on behalf of the State Controller. The court held that unused reconveyance fees do not need to be escheated because the obligation to return a specific sum of money is neither certain nor liquidated under Civil Code Section 2941 or under the provisions of the deeds of trust. This case was against lenders and I believe it would not apply in the context of escrow and title insurance.
Van Klompenburg v. Berghold     Docket     Sup.Ct. Docket
126 Cal.App.4th 345 – 3rd Dist. (C045417) 1/31/05     Request for review by Cal Supreme Ct. DENIED 5/11/05EASEMENTS: Where the grant of easement states that the right of way shall be “kept open” and “wholly unobstructed”, the normal rule does not apply, which would otherwise allow the owner of the servient estate to erect a locked gate as long as the owner of the dominant estate is given a key and the gate does not unreasonably interfere with the use of the easement.
State of California v. Old Republic Title Company     Docket     Sup.Ct. Docket
125 Cal.App.4th 1219 – 1st Dist. (A095918) 1/20/05     NOTE: request for order directing republication of court of appeal opinion DENIED 8/16/06.
Overruled in part on issue not significant to title insurance – SEE BELOW.TITLE INSURANCE: Old Republic was found liable for 1) failing to escheat unclaimed funds in escrow accounts, 2) failing to return fees collected for reconveyances which were not used and 3) failing to pay interest collected on escrow funds to the depositing party.Of particular interest, the Court stated:
“Insurance Code Section 12413.5 provides that interest on escrow funds must be paid to the depositing party ‘unless the escrow is otherwise instructed by the depositing party . . . .’ Any title company is free to draft escrow instructions that, with full disclosure to and agreement from the depositing party, direct that the arbitrage interest differential be paid to the company. It is a matter of disclosing the pertinent costs and benefits to the customer.”

State of California v. PriceWaterhouseCoopers
39 Cal.4th 1220 – Cal. Supreme Court (S131807) 8/31/06

FALSE CLAIMS ACT: A political subdivision may not bring an action under Government Code section 12652, subdivision (c), to recover funds on behalf of the state or another political subdivision.
Frei v. Davey     Docket
124 Cal.App.4th 1506 – 4th Dist., Div. 3 (G033682) 12/17/04     Case complete 2/22/05CONTRACTS: Under the most recent version of the CAR purchase contract, the prevailing party is barred from recovering attorney fees if he refused a request to mediate.
Mix v. Superior Court     Docket      Sup.Ct. Docket
124 Cal.App.4th 987 – 4th Dist., Div. 3  12/7/04  (G033875)     Request for review by Cal Supreme Ct. DENIED 2/16/05LIS PENDENS: (Related to Behniwal v. Superior Court, several cases above.) After the claimant loses at trial, the trial court must expunge a lis pendens pending appeal unless claimant can establish by a preponderance of the evidence the probable validity of the real property claim. Claimants will rarely be able to do this because it requires a trial court to determine that its own decision will probably be reversed on appeal. The court points out that this strict result is tempered by claimant’s ability to petition the appellate court for a writ of mandate, so that the appellate court can make its own determination of the probability of the trial court’s decision being reversed on appeal.
D’Orsay International Partners v. Superior Court     Docket     Sup.Ct. Docket
123 Cal.App.4th 836 – 2nd Dist. 10/29/04 (B174411)     Request for review by Cal Supreme Ct. DENIED 1/26/05MECHANIC’S LIENS: The court ordered the release of a mechanic’s lien because there was no actual visible work on the land or the delivery of construction materials. The criteria applicable to a design professional’s lien do not apply where the claimant filed a mechanic’s lien. The court specifically did not address the question of whether a contractor performing design services or employing design professionals may assert a design professionals’ lien.
Gibbo v. Berger     Docket     Sup.Ct. Docket
123 Cal.App.4th 396 – 4th Dist., Div. 2 10/22/04 (E035201)     Case complete 12/27/04    Req. for Depublication by Cal. Supreme Ct. DENIED 2/16/05USURY: The usury exemption for loans arranged by real estate brokers does not apply where the broker functioned as an escrow whose involvement was limited to preparing loan documents on the terms provided by the parties, ordering title insurance, and dispersing funds, all in accordance with the parties’ instructions. In order to “arrange a loan” the broker must act as a third party intermediary who causes a loan to be obtained or procured. Such conduct includes structuring the loan as the agent for the lender, setting the interest rate and points to be paid, drafting the terms of the loan, reviewing the loan documents, or conducting a title search.
Knapp v. Doherty     Docket
123 Cal.App.4th 76 – 6th Dist. 9/20/04 (H026670)     Case complete 12/21/04TRUSTEE’S SALES:
1. Civil Code Section 2924 requires the trustee to give notice of sale only “after the lapse of the three months” following recordation of the notice of default. The Notice of Sale technically violated this requirement because it was served by mail on the property owner several days prior to the end of three months. However, this did not invalidate the sale because the owner did not suffer prejudice from the early notice.
2. Incorrectly stating the date of the default in the Notice of Default did not invalidate the sale because the discrepancy was not material.
Royal Thrift and Loan v. County Escrow     Docket
123 Cal.App.4th 24 – 2nd Dist. 10/15/04 (B165006)     Case complete 12/16/04TRUSTEE’S SALES:
1. Postponements of a trustee’s sale during an appeal were reasonable, so they do not count toward the 3-postponement limit of Civil Code Section 2924g(c)(1). The postponements fall under the “stayed by operation of law” exception. However, the Court recognized that the better course would have been to re-notice the trustee’s sale after the appeal.
2. The court indicated that an appeal from an action to quiet title against a deed of trust should stay the trustee’s sale proceedings under Code of Civil Procedure Section 916 pending the appeal. However, the court did not formally make that holding because the owner did not appeal and the issues involving the appellants (escrow holder and bonding company) did not require a holding on that issue.
Tesco Controls v. Monterey Mechanical Co.     Docket
124 Cal.App.4th 780 – 3rd Dist. 12/6/04 (C042184) (Opinion on rehearing)     Case complete 2/7/05MECHANIC’S LIENS: A mechanic’s lien release that waives lien rights up to the date stated in the release is effective to waive lien rights up to that date, even if the progress payments did not fully compensate the lien claimant.
Gale v. Superior Court     Docket
122 Cal.App.4th 1388 – 4th Dist., Div. 3  10/6/04 (G033968) (Mod. 10/22/04)     Rehearing Denied 10/22/04; Case Complete 12/10/04LIS PENDENS / DIVORCE
1. The automatic stay contained in a divorce summons does not apply to the sale by the husband, as managing member of a family-owned management company, of real property vested in the management company.
2. A petition for dissolution of marriage which does not allege a community interest in specific real property does not support the filing of a lis pendens.
Nwosu v. Uba     Docket
122 Cal.App.4th 1229 – 6th Dist. 10/1/04 (H026182)     Case complete 12/01/04The court held that a transaction was a bona fide sale and not an equitable mortgage. The complicated facts provide little of interest to the title insurance business, other than to note the fact that a deed can be held to be a mortgage if the deed was given to secure a debt. The case contains a good discussion of the distinction between legal claims, for which there is a right to a jury trial, and equitable claims, for which there is no right to a jury trial.
Moores v. County of Mendocino     Docket
122 Cal.App.4th 883 – 1st Dist. 9/24/04 (A105446)     Case complete 11/24/04SUBDIVISION MAP ACT: The enactment of an ordinance requiring the County to record notices of merger did not result in the unmerger of parcels that had previously merged under the County’s previous automatic merger ordinance. The County properly sent a subsequent notice under Gov. Code Section 66451.302 notifying property owners of the possibility of a merger. Accordingly, plaintiff’s parcels remain merged.
Larsson v. Grabach     Docket     Sup.Ct. Docket
121 Cal.App.4th 1147 – 5th Dist. 8/25/04 (F042675)     Request for review by Cal Supreme Ct. DENIED 12/15/04EASEMENTS: An easement by implication can be created when an owner of real property dies intestate and the property is then divided and distributed to the intestate’s heirs by court decree.
Felgenhauer v. Soni     Docket
121 Cal.App.4th 445 – 2nd Dist. 8/5/04 (B157490)     Case complete 10/8/04PRESCRIPTIVE EASEMENTS: To establish a claim of right, which is one of the elements necessary to establish a prescriptive easement, the claimant does not need to believe he is entitled to use of the easement. The phrase “claim of right” has caused confusion because it suggests the need for an intent or state of mind. But it does not require a belief that the use is legally justified; it simply means that the property was used without permission of the owner of the land.
Jonathan Neil & Assoc. v. Jones     Docket
33 Cal.4th 917 – Cal. Supreme Court (S107855) 8/5/04 (Mod. 10/20/04)INSURANCE: A tort action for breach of the duty of good faith and fair dealing exists only in regard to the issues of bad faith payment of claims and unreasonable failure to settle. It does not pertain to the general administration of an insurance policy or to other contract settings. In this case, a tort cause of action does not lie for the insurer’s bad faith conduct in setting an unfairly high insurance premium.
Bello v. ABA Energy Corporation     Docket
121 Cal.App.4th 301 – 1st Dist. 8/2/04 (A102287)     Case complete 10/6/04RIGHTS OF WAY: A grant of a public right of way includes uses made possible by future development or technology, which are not in existence at the time of the grant. Here, the Court held that a right of way included the right to install a pipeline to transport natural gas.
California National Bank v. Havis     Docket
120 Cal.App.4th 1122 – 2nd Dist. 7/23/04 (B167152)     Case complete 9/22/04DEEDS OF TRUST: A bank holding a deed of trust holder was paid outside of escrow with a check. The bank sent a letter to escrow stating that it had “received payoff funds . . . it is our policy to issue the Full Reconveyance 10 days after receipt of the payoff check. Therefore, a Full Reconveyance will be sent to the County Recorder on or about August 5, 2002”. The escrow relied on the letter and closed escrow without paying off the lender. The check bounced and the lender began foreclosure.The Court reversed a summary judgment in favor of defendants, holding that the letter did not constitute a payoff demand statement binding on the bank under CC 2943. The Court determined that there was a triable issue of fact as to whether the parties could reasonably have relied on the letter. [Ed. note: The Court exhibited a scary lack of understanding of real estate transactions, and could not come to grips with the fact that reconveyances from institutional lenders never record at close of escrow.]
Kirkeby v. Sup. Ct. (Fascenelli)     Docket
33 Cal.4th 642 – Cal. Supreme Court 7/22/04 (S117640)LIS PENDENS: An action to set aside a fraudulent conveyance supports the recording of a lis pendens. The court stated that “[b]y definition, the voiding of a transfer of real property will affect title to or possession of real property”. (Ed. note: Several appellate court decisions have held that actions to impose equitable liens and constructive trusts do not support a lis pendens. The Supreme Court did not deal with those issues but it seems that, using the court’s language, it could similarly be said that “by definition imposing an equitable lien or constructive trust will affect title to or possession of real property.”)
Tom v. City and County of San Francisco     Docket     Sup.Ct. Docket
120 Cal.App.4th 674 – 1st Dist. 6/22/04 (A101950)     Request for review by Cal Supreme Ct. DENIED 10/13/04TENANCY IN COMMON AGREEMENTS: In order to evade burdensome regulations for converting apartments to condominiums, it has become a common practice in San Francisco for a group of people to acquire a multi-unit residential building and enter into a tenancy in common agreement establishing an exclusive right of occupancy for each dwelling unit. Seeking to end this practice, the People’s Republic of San Francisco enacted an ordinance prohibiting exclusive right of occupancy agreements. The Court held that the ordinance is unconstitutional because it violates the right of privacy set forth in Article I, section I of the California Constitution.
California Attorney General Opinion No. 03-1108
6/9/04RECORDING: A memorandum of lease is a recordable instrument.
Yeung v. Soos     Docket
119 Cal.App.4th 576 – 2nd Dist. 6/16/04 (B165939) (Mod. 7/2/04)     Case complete 9/10/04QUIET TITLE: A default judgment after service by publication is permissible in a quiet title action. However, the judgment may not be entered by the normal default prove-up methods; the court must require evidence of the plaintiff’s title, including live witnesses and complete authentication of the underlying real property records. Nevertheless, the judgment is not rendered void because the default prove-up method was used rather than an evidentiary hearing.
Villa de Las Palmas HOA v. Terifaj     Docket
33 Cal.4th 73 – Cal. Supreme Court 6/14/04 (S109123)RESTRICTIONS: Use restrictions in amended declarations are binding on owners who purchased prior to recordation of the amendment. They are also subject to the same presumption of validity as the original declaration.
In re Marriage of Gioia     Docket
119 Cal.App.4th 272 – 2nd Dist. 6/9/04 (B166803)     Case complete 8/11/04BANKRUPTCY: A bankruptcy trustee’s notice of abandonment of property was effective even though it was ambiguous because it did not specifically state that the trustee will be deemed to have abandoned the property 15 days from the date of mailing of the notice. The court also states that an abandonment is irrevocable even if the property later becomes more valuable.
Dieckmeyer v. Redevelopment Agency of Huntington Beach     Docket     Sup.Ct. Docket
127 Cal.App.4th 248 – 4th Dist., Div. 3  2/28/05 (G031869) (2nd Opinion)     Case complete 5/5/05DEEDS OF TRUST: Where a deed of trust secures both payment of a promissory note and performance of contractual obligations (CC&R’s in this case), the trustor is not entitled to reconveyance of the deed of trust after the note is paid off, but before the contractual obligations are satisfied.
Textron Financial v. National Union Fire Insurance Co.     Docket      Sup.Ct. Docket
118 Cal.App.4th 1061 – 4th Dist., Div. 3  5/20/04 (G020323) (Mod. 6/18/04)     Req. for rev. and depub. by Cal Supreme Ct. DENIED 9/15/04INSURANCE / PUNITIVE DAMAGES:
1. The amount of attorney’s fees incurred by an insured in obtaining policy benefits and recoverable under Brandt v. Sup. Ct. are limited to the fees under the contingency fee agreement between the insured and its counsel, and not a higher figure based on the reasonable value of the attorney’s services.
2. Punitive damages must be based on compensatory damages awarded for tortious conduct, including breach of the implied covenant of good faith and fair dealing, excluding the sum recovered on the breach of contract claim.
3. When compensatory damages are neither exceptionally high nor low, and the defendant’s conduct is neither exceptionally extreme nor trivial, the outer constitutional limit on the amount of punitive damages is approximately four times the amount of compensatory damages.
4. The wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award.
Blackburn v. Charnley     Docket     Sup.Ct. Docket
117 Cal.App.4th 758 – 2nd Dist. 4/8/04 (B166080)     Request for review by Cal Supreme Ct. DENIED 7/21/04SPECIFIC PERFORMANCE: Specific performance is available even though the contract referred to lots which had not yet been subdivided. This violation of the Subdivision Map Act made the contract voidable at the option of the buyer, who chose to enforce the contract instead. The requirement in the standard CAR contract to mediate in order to collect attorney’s fees does not apply where an action is filed in order to record a lis pendens and where mediation was conducted pursuant to the court’s own practices.
Hedges v. Carrigan     Docket
117 Cal.App.4th 578 – 2nd Dist. 4/6/04 (B166248)     Case complete 6/11/04ARBITRATION: The Federal Arbitration Act preempts C.C.P. Section 1298, which requires that an arbitration clause in a real estate contract contain a specified notice and be in a specified type size. Preemption requires that the transaction affect interstate commerce, which the court found existed because the anticipated financing involved an FHA loan, and the purchase agreement was on a copyrighted form that stated it could only be used by members of the National Association of Realtors. [Ed. note: the form does not say that!] However, in the unpublished portion of the opinion, the court held that the arbitration clause could not be enforced because it required that the parties initial it in order to acknowledge their agreement to arbitration, and they did not all do so. [Ed. note: the concurring opinion makes much more sense than the majority opinion!]
Kapner v. Meadowlark Ranch Assn.     Docket
116 Cal.App.4th 1182 – 2nd Dist. 3/17/04 (B163525)     Case complete 5/25/04ADVERSE POSSESSION / PRESCRIPTIVE EASEMENTS: A prescriptive easement cannot be established where the encroacher’s use is exclusive. The Court affirmed the trial court’s order requiring the property owner to sign an encroachment agreement or remove the encroachment.
Harrison v. Welch     Docket     Sup.Ct. Docket
116 Cal.App.4th 1084 – 3rd Dist. 3/12/04 (C044320)     Request for depublication DENIED 6/23/04ADVERSE POSSESSION / PRESCRIPTIVE EASEMENTS:
1) In the uncertified Part I of the opinion, the court rejected Defendant’s claim of adverse possession because real property taxes were not paid on any area outside of Defendant’s lot. The court rejected defendant’s creative argument that real property taxes were paid on all land within the setback area where defendant’s house was 3-1/2 feet from the property line, and a zoning ordinance required a 5-foot setback.
2) A prescriptive easement cannot be established where the encroacher’s use is exclusive. The opinion contains an excellent discussion of the case law on this issue.
3) The 5-year statute of limitations in C.C.P. Sections 318 and 321, within which a plaintiff must bring an action to recover real property, does not commence until the encroacher’s use of the property has ripened into adverse possession.
Brizuela v. CalFarm Insurance Company     Docket     Sup.Ct. Docket
116 Cal.App.4th 578 – 2nd Dist. 3/3/04 (B160875)     Review by Cal Supreme Ct. DENIED 6/9/04INSURANCE: Where an insurance policy requires an insured who has filed a claim to submit to an examination under oath, that obligation is a condition precedent to obtaining benefits under the policy. The insurer is entitled to deny the claim without showing it was prejudiced by the insured’s refusal.
Hanshaw v. Long Valley Road Assn.     Docket     Sup.Ct. Docket
116 Cal.App.4th 471 – 3rd Dist. 3/2/04 (C041796)     Review by Cal Supreme Ct. DENIED 5/19/04PUBLIC STREETS: An offer of dedication of a public street that is not formally accepted may, nevertheless, be accepted by subsequent public use. This is known as common law dedication. However, counties have a duty to maintain only those roads that are “county roads”, and a public road does not become a county road unless specifically accepted as such by the appropriate resolution of the Board of Supervisors.
Miner v. Tustin Avenue Investors     Docket
116 Cal.App.4th 264 – 4th Dist., Div.3  2/27/04 (G031703)     Case complete 5/4/04LEASES / ESTOPPEL CERTIFICATES: A lease contained an option to renew for 5 years, but the tenant signed an estoppel certificate stating that the lease was in full force and effect, and that the tenant had no options except the following: (blank lines that followed were left blank). The Court held that the tenant was not bound by the estoppel certificate because it was ambiguous as to whether it referred only to options outside of the lease or whether the tenant had somehow given up his option rights.
Tremper v. Quinones     Docket
115 Cal.App.4th 944 – 2nd Dist. 2/17/04 (B165218)     Case complete 5/3/04GOOD FAITH IMPROVER: Attorney’s fees and costs may be included in the calculation of damages awarded against a person bringing an action as a good faith improver under C.C.P. Section 871.3, regardless of whether the costs and fees were incurred in prosecuting a complaint or defending against a cross complaint, and even where the good faith improver issues are part of a quiet title action which would not ordinarily support an award of attorney’s fees and costs.
Kertesz v. Ostrovsky     Docket
115 Cal.App.4th 369 – 4th Dist., Div.3  1/28/04 (G030640)     Case complete 4/2/04JUDGMENTS / BANKRUPTCY: The time for renewing a judgment was 10 years from entry of the judgment, plus the amount of time between the debtor’s filing of a bankruptcy petition and the date of the Bankruptcy Court’s order of nondischargeability, plus an additional 30 days under Bankruptcy Code Section 108(c). The court reached this conclusion even though the judgment was entered before the bankruptcy petition was filed, and the 10-year period for renewing the judgment expired long after the bankruptcy was closed.NOTE: I believe the judge misunderstood the automatic stay and Bankruptcy Code Section 108(c). I do not believe the automatic stay applies when a period of time for taking an action commences prior to bankruptcy, and expires after the bankruptcy case is closed.
Rancho Santa Fe Association v. Dolan-King     Docket     Sup.Ct. Docket
115 Cal.App.4th 28 – 4th Dist., Div.1  1/7/04 (D040637/D041486)     Pet. for Review by Cal Supreme Ct. DENIED 4/28/04HOMEOWNER’S ASSOCIATIONS: Regulations adopted and interpreted by a Homeowner’s Association must be reasonable from the perspective of the entire development, not by determining on a case-by-case basis the effect on individual homeowners.
Gray Cary Ware & Freidenrich v. Vigilant Insurance Co.     Docket
114 Cal.App.4th 1185 – 4th Dist., Div.1  1/12/04 (D041811)     Case complete 3/15/04INSURANCE: Civil Code Section 2860(c) provides for the arbitration of disputes over the amount of legal fees or the hourly billing rate of Cumis counsel, but does not apply to other defense expenses.

Post Foreclosure and Reversing your CA Foreclosure Sale under new Case Law

Reversing a foreclosure sale:  Avoiding the “Tender Rule”

Firm commentary:

Foreclosure auction signs
Foreclosure auction signs (Photo credit: niallkennedy)

If you are considering suing to reverse a foreclosure sale, consider the LONA case for a better understanding on CA non-judicial sales and exceptions to the requirement that you must offer to pay off the loan to title to your home back in your name.

After a nonjudicial foreclosure sale has been completed, the traditional method by which the sale is challenged is a suit in equity to set aside the trustee’s sale. (Anderson v. Heart Federal Sav. & Loan Assn. (1989) 208 Cal.App.3d 202, 209-210.) Generally, a challenge to the validity of a trustee’s sale is an attempt to have the sale set aside and to have the title restored. (Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424 (Onofrio), citing 4 Miller & Starr, Cal. Real Estate (2d ed. 1989) Deeds of Trusts & Mortgages, § 9.154, pp. 507-508.)

 

The burden of proof is on the former owner:

A nonjudicial foreclosure sale is accompanied by a common law presumption that it ‗was conducted regularly and fairly.  This presumption may only be rebutted by substantial evidence of prejudicial procedural irregularity. The mere inadequacy of price, absent some procedural irregularity that contributed to the inadequacy of price or otherwise injured the trustor, is insufficient to set aside a nonjudicial foreclosure sale.

It is the burden of the party challenging the trustee’s sale to prove such irregularity and thereby overcome the presumption of the sale’s regularity.‖ (Melendrez v. D & I Investment, Inc. (2005) 127 Cal. App.4th 1238, 1258 (Melendrez) In addition, under section 2924,6 there is a conclusive statutory presumption created in favor of a bona fide purchaser who receives a trustee’s deed that contains a recital that the trustee has fulfilled its statutory notice requirements. (Melendrez, supra, 127 Cal App.4th at p. 1250.)

Case law instructs that the elements of an equitable cause of action to set aside a foreclosure sale are: (1) 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) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and

(3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering. (Bank of America etc. Assn. v. Reidy, supra, 15 Cal.2d at p. 248; Saterstrom v. Glick Bros. Sash, Door & Mill Co. (1931) 118 Cal.App. 379, 383 (Saterstrom) [trustee’s sale set aside where deed of trust was void because it failed to adequately describe property]; Stockton v. Newman (1957) 148 Cal.App.2d 558, 564 (Stockton) [trustor sought rescission of the contract to purchase the property and the promissory note on grounds of fraud]; Sierra-Bay Fed. Land Bank Ass’n v. Superior Court (1991) 227 Cal.App.3d (1991) 227 Cal.App.3d 318, 337 (Sierra-Bay) [to set aside sale, ―debtor must allege such unfairness or irregularity that, when coupled with the inadequacy of price obtained at the sale, it is appropriate to invalidate the sale‖; ―debtor must offer to do equity by making a tender or otherwise offering to pay his debt‖]; Abadallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109 (Abadallah) [tender element]; Munger v. Moore (1970) 11 Cal.App.3d 1, 7 [damages action for wrongful foreclosure]; see also 1 Bernhardt, Mortgages, Deeds of Trust and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2011 supp.) § 7.67, pp. 580-581 and cases cited therein summarizing grounds for setting aside trustee sale.)

 

The Tender requirement

Because the action is in equity, a defaulted borrower who seeks to set aside a trustee’s sale is required to do equity before the court will exercise its equitable powers. (MCA, Inc. v. Universal Diversified Enterprises Corp. (1972) 27 Cal.App.3d 170, 177 (MCA).)

Consequently, as a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. (Abadallah, supra, 43 Cal.App.4th at p. 1109; Onofrio, supra, at p. 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action].)

The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].– (FPCI RE-HAB 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022.)

 

A series of cases have come down in the last few weeks that have some very serious ramifications for lenders.

The most dramatic case is that of Lona v. Citibank, based on a property right here in my back yard. The fact pattern in Lona is that the bank foreclosed and Lona sued the bank to void the sale on the absurd theory that the lender made him an unconscionable loan he couldn’t possibly afford therefore the loan was void. (Apparently, he’s a mushroom farmer in Hollister making $40k/yr)*.

Lona alleged that he agreed to refinance the home, on which he owed $1.24 million at the time, in response to an ad. The monthly payments were more than four times his income, so unsurprisingly, he defaulted within five months and the home was sold at a trustee’s sale in August 2008.

Lona obtained two re-financed loans: the first being $1.125 million, a 30-year term and an interest rate that was fixed at 8.25% for five years and adjustable annually after that, with a cap of 13.255 and the second loan being $375,000, with a term of 15 years, a fixed rate of 12.25%, monthly payments of nearly $4,000, and a balloon payment of $327,000 at the end of the 15 year term.

Lona testified that English was not his first language, he was 50 years old at the time of the loan and he that he did not understand the loan documents. Of course, he also did not read the loan documents.

After Citibank foreclosed, it filed an unlawful detainer action (“UD”) to evict Lona, but the UD was consolidated with Lona’s lawsuit to void and set aside the foreclosure sale. According to Citibank, Lona had been “living for free” in the house and had not posted bond or paid any “impound funds.” (since 2007!!!)

San Benito County Superior Court Judge Harry Tobias said Lona’s “bare allegations” were not enough to persuade him that the bank or the broker had engaged in misconduct and that it was “hard to believe” that the Lonas weren’t “responsible for their own conduct,” especially since they owned other property that had been foreclosed upon.

Despite the craziness of Plaintiff’s theory, the appellate court rendered a 32 page opinion that discussed in major detail that:
1) The borrower did not have to tender offer (which goes against almost a century of a legal precedent); and
2) The borrower’s allegations of the loan being unconscionable were not wholly disproven by the lenders.

The Court decision stated “Lona had received $1.5 million from the lenders and had not made any payments since June 2007. Meanwhile, he and his wife continued to live in the house for free, without paying rent or any impound funds…” and so it was quite aware of the inequities or injustice of the situation. However, the Court still concluded that the Lenders did not meet their burden of proof on summary judgment and so the case may continue at its snail pace until trial. [Lona v. Citibank No. H036140. Court of Appeals of California, Sixth District. (December 21, 2011.)]

The other case that came down a week before Lona (Dec. 21) was the Bardasian (Dec. 15) case, where the borrower sued because the lender’s trustee did not discuss loan mod options with her as required by Civil Code Section 2923.5. The court granted the borrower’s injunction and like Lona, the borrowers did not tender, nor put up an undertaking or surety for the bond. The lower court had ruled at the injunction hearing that the trustee had not complied with the code and that Bardasian must bond in the amount of $20k. When she failed to do so, the lower court dissolved the injunction.

On appeal, the appellate court concluded that since the injunction had been issued after the court had ruled on the merits stating:

“Plaintiff seeks postponement of the foreclosure sale until the defendants comply with Civil Code [section] 2923.5. Plaintiff has established that BAC Home Loan Servicing did not comply with Civil Code section 2923.5 prior to the issuance of the notice of default on September 15, 2010.” “Plaintiff states under penalty of perjury that no contact was ever made at least 30 days before the notice of default was issued…”

that the injunction was not actually “preliminary” at all, but that the plaintiffs had essentially won their argument showing that the defendants had not complied with Section 2923.5 and so no Notice of Default could successfully issue and the trustee’s sale could not take place until Section 2923.5 had been complied with. (Bardasian v. Santa Clara Partners Mortgage C068488. Court of Appeals of California, Third District. (December 15, 2011).

So in one month, two appellate cases came down where the borrower could either pursue voiding a trustee’s sale or enjoin one without tendering!

2012 will prove to be an interesting year as more decisions stemming from the subprime meltdown start coming down the pipeline.

* The decision contained a footnote that Lona’s loan application that apparently stated Lona made $20k/month, or $240k/yr. Clearly, as stated income loans go, that was a whopper!

The Exceptions to the Tender requirement under LONA

First, if the borrower’s action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmation of the debt. (Stockton, supra, (1957) 148 Cal.App.2d at p. 564) [trustor sought rescission of the contract to purchase the property and the promissory note on grounds of fraud]; Onofrio, supra, 55 Cal.App.4th at p. 424.)

Second, a tender will not be required when the person who seeks to set aside the trustee’s sale has a counter-claim or set-off against the beneficiary. In such cases, it is deemed that the tender and the counter claim offset one another, and if the offset is equal to or greater than the amount due, a tender is not required. (Hauger, supra, (1954) 42 Cal.2d at p. 755.)

 

Third, a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale. (Humboldt Savings Bank v. McCleverty (1911) 161 Cal. 285, 291 (Humboldt). In Humboldt, the defendant’s deceased husband borrowed $55,300 from the plaintiff bank secured by two pieces of property. The defendant had a $5,000 homestead on one of the properties. (Id. at p. 287.) When the defendant’s husband defaulted on the debt, the bank foreclosed on both properties. In response to the bank’s argument that the defendant had to tender the entire debt as a condition precedent to having the sale set aside, the court held that it would be inequitable to require the defendant to•pay, or offer to pay, a debt of $57,000, for which she is in no way liable– to attack the sale of her $5,000 homestead.10 (Id. at p. 291.)

Fourth, no tender will be required when the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face. (Dimock, supra, 81 Cal.App.4th at p. 878 [beneficiary substituted trustees; trustee’s sale void where original trustee completed trustee’s sale after being replaced by new trustee because original trustee no longer had power to convey property].)

 For a better understanding of how this new case affects your individual situation, contact the Firm and set up an appointment.

Related articles

WRONGFUL FORECLOSURE IN BANKRUPTCY (most bankruptcy judges won’t hear it the send you to state court)

in RE: Macklin: Deutsche Must Answer Wrongful Foreclosure and Quiet Title

By Daniel Edstrom
DTC Systems, Inc.

Excerpts on Wrongful Foreclosure (changed by the Judge Sargis to Breach of Contract)

… a record has been created that someone not of record title purported to take action on a Deed of Trust prior to compliance with Civil Code 2932.5.

The court will not sanction conduct by this Defendant which puts into question the validity of the nonjudicial foreclosure process and California real property records.  Though this issue could have been simply addressed by the recording of a new notice of default months ago, the ninety days under the new notice of default allowed to run and this creditor be on the door step of conducting a nonjudicial foreclosure sale consistent with the California statutes, it has elected to continue with the existing notice of default, subsequent substitution of trustee, and sale.

The contract between the parties is the Note and Deed of Trust.

Excerpt on Quiet Title

Though not artfully done, Macklin sufficiently explains that he asserts superior title to the Property over the Trustee’s Deed through which DBNTC asserts its interest in the Property.  Given that Macklin has asserted that DBNTC cannot show that it complied with the minimal requirements for properly conducting a nonjudicial foreclosure sale, the motion to dismiss the Tenth Cause of Action is denied.

Download order here:  http://dtc-systems.net/wp-content/uploads/2012/02/Macklin-222-Order.pdf

Download memorandum opinion and decision (part 1) here:  http://dtc-systems.net/wp-content/uploads/2012/02/Macklin-221-Memorandum_Opinion_and_Decision_Part1.pdf

Download memorandum opinion and decision (part 2) here:  http://dtc-systems.net/wp-content/uploads/2012/02/Macklin-221-Memorandum_Opinion_and_Decision_Part2.pdf

Tagged with: • • • • • • • • • • • • •

Related articles

Freddie Mac Bets Against American Homeowners

Freddie Mac
Image via Wikipedia


Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.

Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.

No evidence has emerged that these decisions were coordinated. The company is a key gatekeeper for home loans but says its traders are “walled off” from the officials who have restricted homeowners from taking advantage of historically low interest rates by imposing higher fees and new rules.

Freddie’s charter calls for the company to make home loans more accessible. Its chief executive, Charles Haldeman Jr., recently told Congress that his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”

But the trades, uncovered for the first time in an investigation by ProPublica and NPR, give Freddie a powerful incentive to do the opposite, highlighting a conflict of interest at the heart of the company. In addition to being an instrument of government policy dedicated to making home loans more accessible, Freddie also has giant investment portfolios and could lose substantial amounts of money if too many borrowers refinance.

“We were actually shocked they did this,” says Scott Simon, who as the head of the giant bond fund PIMCO’s mortgage-backed securities team is one of the world’s biggest mortgage bond traders. “It seemed so out of line with their mission.”

The trades “put them squarely against the homeowner,” he says.

Those homeowners have a lot at stake, too. Many of them could cut their interest payments by thousands of dollars a year.

Freddie Mac, along with its cousin Fannie Mae, was bailed out in 2008 and is now owned by taxpayers. The companies play a pivotal role in the mortgage business because they insure most home loans in the United States, making banks likelier to lend. The companies’ rules determine whether homeowners can get loans and on what terms.

The Federal Housing Finance Agency effectively serves as Freddie’s board of directors and is ultimately responsible for Freddie’s decisions. It is run by acting director Edward DeMarco, who cannot be fired by the president except in extraordinary circumstances.

Freddie and the FHFA repeatedly declined to comment on the specific transactions.

Freddie’s moves to limit refinancing affect not only individual homeowners but the entire economy. An expansive refinancing program could help millions of homeowners, some economists say. Such an effort would “help the economy and put tens of billions of dollars back in consumers’ pockets, the equivalent of a very long-term tax cut,” says real-estate economist Christopher Mayer of the Columbia Business School. “It also is likely to reduce foreclosures and benefit the U.S. government” because Freddie and Fannie, which guarantee most mortgages in the country, would have lower losses over the long run.

Freddie Mac’s trades, while perfectly legal, came during a period when the company was supposed to be reducing its investment portfolio, according to the terms of its government takeover agreement. But these trades escalate the risk of its portfolio, because the securities Freddie has purchased are volatile and hard to sell, mortgage securities experts say.

The financial crisis in 2008 was made worse when Wall Street traders made bets against their customers and the American public. Now, some see similar behavior, only this time by traders at a government-owned company who are using leverage, which increases the potential profits but also the risk of big losses, and other Wall Street stratagems. “More than three years into the government takeover, we have Freddie Mac pursuing highly levered, complicated transactions seemingly with the purpose of trading against homeowners,” says Mayer. “These are the kinds of things that got us into trouble in the first place.”

Freddie Mac is betting against, among others, Jay and Bonnie Silverstein. The Silversteins live in an unfinished development of cul-de-sacs and yellow stucco houses about 20 miles north of Philadelphia, in a house decorated with Bonnie’s orchids and their Rose Bowl parade pin collection. The developer went bankrupt, leaving orange plastic construction fencing around some empty lots. The community clubhouse isn’t complete.

“We’re in financial Jail”

The Silversteins have a 30-year fixed mortgage with an interest rate of 6.875 percent, much higher than the going rate of less than 4 percent.  They have borrowed from family members and are living paycheck to paycheck. If they could refinance, they would save about $500 a month. He says the extra money would help them pay back some of their family members and visit their grandchildren more often.

But brokers have told the Silversteins that they cannot refinance, thanks to a Freddie Mac rule.

The Silversteins used to live in a larger house 15 minutes from their current place, in a more upscale development. They had always planned to downsize as they approached retirement. In 2005, they made the mistake of buying their new house before selling the larger one. As the housing market plummeted, they couldn’t sell their old house, so they carried two mortgages for 2½ years, wiping out their savings and 401(k). “It just drained us,” Jay Silverstein says.

Finally, they were advised to try a short sale, in which the house is sold for less than the value of the underlying mortgage. They stopped making payments on the big house for it to go through. The sale was finally completed in 2009.

Such debacles hurt a borrower’s credit rating. But Bonnie has a solid job at a doctor’s office, and Jay has a pension from working for more than two decades for Johnson & Johnson. They say they haven’t missed a payment on their current mortgage.

But the Silversteins haven’t been able to get their refi. Freddie Mac won’t insure a new loan for people who had a short sale in the last two to four years, depending on their financial condition. While the company’s previous rules prohibited some short sales, in October 2010 the company changed its criteria to include all short sales. It is unclear whether the Silverstein mortgage would have been barred from a short sale under the previous Freddie rules.

Short-term, Freddie’s trades benefit from the high-interest mortgage in which the Silversteins are trapped. But in the long run, Freddie could benefit if the Silversteins refinanced to a more affordable loan. Freddie guarantees the Silversteins’ mortgage, so if the couple defaults, Freddie — and the taxpayers who own the company — are on the hook. Getting the Silversteins into a more affordable mortgage would make a default less likely.

If millions of homeowners like the Silversteins default, the economy would be harmed. But if they switch to loans with lower interest rates, they would have more money to spend, which could boost the economy.

“We’re in financial jail,” says Jay, “and we’ve never been there before.”

How Freddie’s investments work

Here’s how Freddie Mac’s trades profit from the Silversteins staying in “financial jail.” The couple’s mortgage is sitting in a big pile of other mortgages, most of which are also guaranteed by Freddie and have high interest rates. Those mortgages underpin securities that get divided into two basic categories.

Anatomy of a Deal

How Freddie Mac structured a deal in which it profited if homeowners stayed trapped in high-interest mortgages.

One portion is backed mainly by principal, pays a low return, and was sold to investors who wanted a safe place to park their money. The other part, the inverse floater, is backed mainly by the interest payments on the mortgages, such as the high rate that the Silversteins pay. So this portion of the security can pay a much higher return, and this is what Freddie retained.

In 2010 and ’11, Freddie purchased $3.4 billion worth of inverse floater portions — their value based mostly on interest payments on $19.5 billion in mortgage-backed securities, according to prospectuses for the deals. They covered tens of thousands of homeowners. Most of the mortgages backing these transactions have high rates of about 6.5 percent to 7 percent, according to the deal documents.

Between late 2010 and early 2011, Freddie Mac’s purchases of inverse floater securities rose dramatically. Freddie purchased inverse floater portions of 29 deals in 2010 and 2011, with 26 bought between October 2010 and April 2011. That compares with seven for all of 2009 and five in 2008.

In these transactions, Freddie has sold off most of the principal, but it hasn’t reduced its risk.

First, if borrowers default, Freddie pays the entire value of the mortgages underpinning the securities, because it insures the loans.

It’s also a big problem if people like the Silversteins refinance their mortgages. That’s because a refi is a new loan; the borrower pays off the first loan early, stopping the interest payments. Since the security Freddie owns is backed mainly by those interest payments, Freddie loses.

And these inverse floaters burden Freddie with entirely new risks. With these deals, Freddie has taken mortgage-backed securities that are easy to sell and traded them for ones that are harder and possibly more expensive to offload, according to mortgage market experts.

The inverse floaters carry another risk. Freddie gets paid the difference between the high mortgages rates, such as the Silversteins are paying, and a key global interest rate that right now is very low. If that rate rises, Freddie’s profits will fall.

It is unclear what kinds of hedging, if any, Freddie has done to offset its risks.

At the end of 2011, Freddie’s portfolio of mortgages was just over $663 billion, down more than 6 percent from the previous year. But that $43 billion drop in the portfolio overstates the risk reduction, because the company retained risk through the inverse floaters. The company is well below the cap of $729 billion required by its government takeover agreement.

How Freddie tightened credit

Restricting credit for people who have done short sales isn’t the only way that Freddie Mac and Fannie Mae have tightened their lending criteria in the wake of the financial crisis, making it harder for borrowers to get housing loans.

Some tightening is justified because, in the years leading up to the financial crisis, Freddie and Fannie were too willing to insure mortgages taken out by people who couldn’t afford them.

In a statement, Freddie contends it is “actively supporting efforts for borrowers to realize the benefits of refinancing their mortgages to lower rates.”

The company said in a statement: “During the first three quarters of 2011, we refinanced more than $170 billion in mortgages, helping nearly 835,000 borrowers save an average of $2,500 in interest payments during the next year.” As part of that effort, the company is participating in an Obama administration plan, called the Home Affordable Refinance Program, or HARP. But critics say HARP could be reaching millions more people if Fannie and Freddie implemented the program more effectively.

Indeed, just as it was escalating its inverse floater deals, it was also introducing new fees on borrowers, including those wanting to refinance. During Thanksgiving week in 2010, Freddie quietly announced that it was raising charges, called post-settlement delivery fees.

In a recent white paper on remedies for the stalled housing market, the Federal Reserve criticized Fannie and Freddie for the fees they have charged for refinancing. Such fees are “another possible reason for low rates of refinancing” and are “difficult to justify,” the Fed wrote.

A former Freddie employee, who spoke on condition he not be named, was even blunter: “Generally, it makes no sense whatsoever” for Freddie “to restrict refinancing” from expensive loans to ones borrowers can more easily pay, since the company remains on the hook if homeowners default.

In November, the FHFA announced that Fannie and Freddie were eliminating or reducing some fees. The Fed, however, said that “more might be done.”

The regulator as owner

The trades raise questions about the FHFA’s oversight of Fannie and Freddie. But the FHFA is not just a regulator. With the two companies in government conservatorship, the FHFA now plays the role of their board of directors and shareholders, responsible for the companies’ major decisions.

Under acting director DeMarco, the FHFA has emphasized that its main goal is to limit taxpayer losses by managing the two companies’ giant investment portfolios to make profits. To cover their previous losses and ongoing operations, Fannie and Freddie already had received $169 billion from taxpayers through the third quarter of last year.

The FHFA has frustrated the administration because the agency has made preserving the value of the companies’ investment portfolios a priority over helping homeowners in expensive mortgages. In 2010, President Barack Obama nominated a permanent replacement for acting director DeMarco, but Republicans in Congress blocked him. Obama has not nominated anyone else to replace DeMarco.

Even though Freddie is a ward of the state, top executives are highly compensated. Peter Federico, who’s in charge of the company’s investment portfolio, made $2.5 million in 2010, and he had target compensation of $2.6 million for last year, when most of these leveraged investments were made.

One of Federico’s responsibilities — tied to his bonuses —  is to “support and provide liquidity and stability in the mortgage market,” according to Freddie’s annual filing with the Securities and Exchange Commission. Mortgage experts contend that the inverse floater trades don’t further that goal.

ProPublica and NPR made numerous attempts to reach Federico. A woman who answered his home phone said he declined to comment.

The FHFA knew about the trades before ProPublica and NPR approached the regulatory agency about them, according to an FHFA official. The FHFA has the power to approve and disapprove trades, though it doesn’t involve itself in day-to-day decisions. The official declined to comment on whether the FHFA knew about them as Freddie was conducting them or whether the FHFA had explicitly approved them.

Liz Day of ProPublica contributed to this story.

Related articles

Chase Accused of Brazen Bankruptcy Fraud

English: Category:JPMorgan Chase
Image via Wikipedia


LOS ANGELES (CN) – JPMorgan Chase routinely fabricated documents to deceive bankruptcy judges, going so far as to Photoshop documents to “create the illusion” of standing “in tens of thousands of bankruptcy cases,” according to a federal class action.

Lead plaintiff Ernest Michael Bakenie claims that Chase’s “pattern and practice of playing ‘hide-and-seek’ with debtors, judges and other bankruptcy players” bore rich fruit: that Chase secured motions for relief of stay and proofs of claim in 95 percent of its cases.

“Through the use of fabricated assignments, endorsements and affidavits that purport to transfer deeds of trust, notes and the rights to all monies due under the terms of tens of thousands of non-negotiable promissory notes (the ‘MLNs’); Chase has demonstrated a pattern and practice of playing ‘hide-and-seek’ with debtors, judges and other bankruptcy players,” the complaint states.

“Chase intentionally conceals the identity of the true parties in interest entitled to enforce the tens of tens of thousands of residential non-negotiable promissory notes (the ‘MLNs’) for its own financial benefit, at the expense of the class and to the detriment of the integrity of the bankruptcy system.”

Bakenie says Chase used a network of attorneys to file more than 7,000 motions for relief from automatic stay in bankruptcy cases in the Central District of California, “wherein they falsely claim to be the party entitled to monies due under the terms of MLNs.”

Chase rewards attorneys based on how quickly they can secure the stays, and uses fabricated documents to establish chain of title on loans, according to the complaint.

“Rather than incur the cost of ‘proving up’ its own standing or the standing of its principal Mortgage Backed Security Trust, Chase systemically misrepresents Chase or a designated MBST to be a creditor in tens of thousands of bankruptcy cases by utilizing manufactured documents,” the complaint states.

Bakenie claims: “That said practice is utilized for all mortgage loans originated by Chase, and other loan originators, including insolvent Washington Mutual Bank, whose assets were purchased by Chase.

“That said manufactured documents are fabrications intended to create the illusion of a valid transfers MLNs and support the assertion of standing in tens of thousands of bankruptcy cases. …

“That the aforementioned fabricated evidence is ‘photo-shopped’ and is highly persuasive and authentic in appearance so as to ensure legal victory in the bankruptcy courts.

“That said manufactured evidence is systemically utilized to deceive bankruptcy players and increase the profits of Chase, its agents and its principals through massive cost savings and the imposition of attorney fees upon class borrowers.

“As a direct result of this practice, over 95 percent of Chase’s motions for relief of stay and proofs of claim are granted without objection.

“That the use of the fabricated evidence has a chilling effect on class debtors and their attorneys. Said business practices discourages bankruptcy players from offering objections or from questioning the validity of Chase’s false claims based on standing.”

Bakenie adds: “That said practice allows Chase to dump defaulted loans that were never properly securitized by WAMU and other originators acquired by Chase into private mortgage backed security trusts by creating the illusion of a valid transfer.

“Said practice shifts the liability of defaulted loans not properly securitized by WAMU, from Chase to private mortgage backed security trusts. The practice allows Chase to effectively mitigate the millions of dollars in liability of the WAMU acquisition, where WAMU failed to transfer MLNs of its portfolio before its demise. Said practice shifts losses from WAMU toMBST bond investors.

“That after a non-judicial foreclosure sale, class members remain indebted to the true beneficiary for the unsecured note but without credit for the loss of the collateral to Chase’s designated assignee.

“Most egregiously, the network attorneys utilize the inducing documents to obtain attorney fees awards from by the bankruptcy judges ranging from $600-$1,000 for each successful motion for relief of stay.”

Bakenie concludes that “degradation of the integrity of our bankruptcy court system cannot be justified in the name of Chase’s cost savings and unjust enrichment.”

Bakenie seeks class certification, disgorgement, compensatory, statutory and punitive damages for unfair and deceptive trade, and “an order vacating all bankruptcy orders, claims and awards granted based on Chase’s misrepresentation and deceptive business practices”.

He is represented by Joseph Arthur Roberts of Newport Beach.

Related articles

The Trustee sale can be set aside

Bank of America, N.A. v. La Jolla Group II, 129 Cal. App. 4th 706, 15 710,717 (5th Dist. 2005) (void foreclosure sale required rescission of trustee’s deed returning title to the status quo prior to the foreclosure sale); Dimock v. Emerald Properties, 81 Cal. App. 4th 868, 874 (4th Dist. 2000) (sale under deed of trust by former trustee void, and tender of the amount due is unnecessary).

THE COURT MUST STRICTLY ENFORCE

THE TECHNICAL REQUIREMENTS FOR A FORECLOSURE.

The harshness of non-judicial foreclosure has been recognized. “The exercise of the power of sale is a harsh method of foreclosing the rights of the grantor.” Anderson v. Heart Federal Savings (1989) 208 Cal.App.3d 202, 6 215, citing to System Inv. Corporation v. Union Bank (1971) 21 Cal.App.3d 137, 153.  The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of his property Moeller v. Lien (1994) 25 Cal.App.4th 822, 830; accord, Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 503; Lo Nguyen v. Calhoun (6th District 2003) 105 Cal.App.4th 428, 440, and a valid foreclosure by the private power of sale requires strict compliance with the requirements of the statute. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.179; Anderson v. Heart Federal Sav. & Loan Assn., 208 Cal. App. 3d 202, 211 (3d Dist. 1989), reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Bisno v. Sax (2d Dist. 1959) 175 Cal. App. 2d 714, 720.

It has been a cornerstone of foreclosure law that the statutory requirements, intending to protect the Trustor and or Grantor from a wrongful or unfair loss of the property, must be complied with strictly. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182.   “Close” compliance does not count. As a result, any trustee’s sale based on a statutorily deficient Notice of Default is invalid (emphasis added). Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182; Anderson v. Heart Federal Sav. & Loan Assn. (3dDist. 1989) 208 Cal. App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Saterstrom v. Glick Bros. Sash, Door & Mill Co.(3d Dist. 1931) 118 Cal. App. 379.

Additionally, any Trustee’s Sale based on a statutorily deficient Notice of Trustee Sale is invalid.  Anderson v. Heart Federal Sav. & Loan Assn. (3d Dist. 1989) 11 208 Cal.App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989). The California Sixth District Court of Appeal observed, “Pursuing that policy [of judicial interpretation], the courts have fashioned rules to protect the debtor, one of them being that the notice of default will be strictly construed and must correctly set forth the amounts required to cure the default.” Sweatt v. The Foreclosure Co., Inc. (1985 – 6th District) 166 Cal.App.3d 273 at 278, citing to Miller v. Cote (1982) 127 Cal.App.3d 888, 894 and SystemInv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153.

The same reasoning applies even to a Notice of Trustee’s Sale.  Courts will set aside a foreclosure sale when there has been fraud, when the sale has been improperly, unfairly, or unlawfully conducted, or when there has been such a mistake that it would be inequitable to let it stand. Bank of America Nat. Trust & Savings Ass’n v. Reidy (1940) 15 Cal. 2d 243, 248; Whitman v. Transtate Title Co.(4th Dist. 1985) 165 Cal. App. 3d 312, 322-323; In re Worcester (9th Cir. 1987) 811 F.2d 1224, 1228.  See also Smith v. Williams (1961) 55 Cal. 2d 617, 621; Stirton v. Pastor (4th Dist. 1960) 177 Cal. App. 2d 232, 234; Brown v. Busch (3d Dist. 1957) 152 Cal.App. 2d 200, 203-204.

English: Foreclosure auction 2007
Image via Wikipedia
Related articles

MARK J. DEMUCHA AND CHERYL M. DEMUCHA, a Reply Brief that worked

No. F059476

IN THE COURT OF APPEAL FOR THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

                                                                                                                                                           

Wells Fargo in Laredo, Texas
Image via Wikipedia

Appellants and Plaintiffs

v.

WELLS FARGO HOME MORTGAGE, INC.; WELLS FARGO BANK, NATIONAL ASSOCIATION a.k.a. WELLS FARGO BANK, N.A.; FIRST AMERICAN LOANSTAR TRUSTEE SERVICES; FIRST AMERICAN CORPORATION; AND DOES 1 TO 45

Respondents and Defendants

                                                                                                                                                           

Appeal from the Superior Court of the State of California, County of Kern

Case No.  S-1500-CV-267074

Honorable SIDNEY P. CHAPIN, Judge

Department 4

Tele: 661.868.7205

                                                                                                                                                           

REPLY BRIEF OF APPELLANTS MARK J. DEMUCHA AND CHERYL M. DEMUCHA

                                                                                                                                                           

Michael D. Finley, Esq.

Law Offices of Michael D. Finley

25375 Orchard Village Road, Suite 106

Valencia, CA 91355-3000

661.964.0444

Attorneys for Plaintiffs-Appellants,

MARK J. DEMUCHA and CHERYL M. DEMUCHA

TABLE OF CONTENTS

TABLE OF AUTHORITIES                                                                                                        ii

INTRODUCTION                                                                                                                         1

STATEMENT OF THE FACTS                                                                                                  2

PROCEDURAL HISTORY                                                                                                          4

STANDARD OF REVIEW                                                                                                          4

ARGUMENT                                                                                                                                5

A.   THE DEMURRER WAS NOT PROPERLY SUSTAINED                                    5

B.   THE COMPLAINT VERY PLAINLY CONTAINS A
TENDER, EVEN THOUGH IT IS NOT REQUIRED FOR
A QUIET TITLE ACTION                                                                                        5

C.   SUSTAINING OF THE DEMURRER WAS REVERSIBLE
ERROR BECAUSE CALIFORNIA LAW REQUIRES
WELLS FARGO TO POSSESS THE NOTE IN ORDER TO
ENFORCE THE LOAN                                                                                             7

D.   THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS
REGARDING THE PROPRIETY OF SUSTAINING THE
DEMURRER ON THE CLAIMS TO QUIET TITLE AND
REMOVE CLOUD ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE NATURE OF THE
DEMUCHAS’ COMPLAINT                                                                                   8

E.    THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS
REGARDING THE PROPRIETY OF SUSTAINING THE
DEMURRER ON THE CLAIM FOR FRAUD AND MISREPRESENTATION ARE BASED UPON THE
DELIBERATE MISREPRESENTATION OF THE CONTENT
OF THE DEMUCHAS’ COMPLAINT                                                                    9

F.    THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS
REGARDING THE PROPRIETY OF SUSTAINING THE
DEMURRER ON THE CLAIM FOR INFLICTION OF
EMOTIONAL DISTRESS ARE BASED UPON THE
DELIBERATE MISREPRESENTATION OF THE CONTENT
OF THE DEMUCHAS’ COMPLAINT                                                                    9

G.   THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS
REGARDING THE PROPRIETY OF SUSTAINING THE
DEMURRER ON THE CLAIM FOR SLANDER OF
CREDIT ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE CONTENT OF THE
DEMUCHAS’ COMPLAINT                                                                                  10

H.   THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS
REGARDING THE PROPRIETY OF SUSTAINING THE
DEMURRER ON THE CLAIM FOR INFLICTION OF
EMOTIONAL DISTRESS ARE BASED UPON THE
DELIBERATE MISREPRESENTATION OF THE
CONTENT OF THE DEMUCHAS’ COMPLAINT                                               10

CONCLUSION                                                                                                                            10

TABLE OF AUTHORITIES

CASES

                                                                                                                                                     Page

Caporale v. Saxon Mortgage, Bankr. North Dist. Cal., San Jose Case No. 07-54109.                  8

In re Foreclosure Cases, 2007 WL 3232430 (Bankr. N.D. Ohio 2007).                                        8

Staff Mortgage v. Wilke (1980) 625 F.2d 281                                                                               8

Starr v. Bruce Farley Corp. (9th Cir. 1980), 612 F.2d 1197.                                                           8

Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 322-323.                              6

STATUTES

Commercial Code § 3301.                                                                                                     7, 8, 9,

INTRODUCTION

            Defendants/Respondents continue to mischaracterize the Plaintiffs’/Appellants’ complaint very deliberately, apparently because they realize that the Plaintiff’s complaint as actually plead is beyond their ability to oppose it. Calling the Plaintiffs’ Complaint “inartfully drafted” because it does not state that it is a challenge to a non-judicial foreclosure is wishful thinking. The complaint is very artfully drafted as a Quiet Title action. The plaintiffs are not seeking to “stave off foreclosure of a mortgage,” but seeking to remove a false claim against their title to the property. No non-judicial foreclosure has taken place. No foreclosure sale has occurred, so there is no foreclosure sale to challenge or undo, but the Defendants/Respondents insist on arguing the case at the demurrer level and on this appeal as a complaint to challenge or set aside a non-judicial foreclosure and keep trying to apply those inapplicable pleading requirements to the complaint. The plaintiffs did seek a preliminary injunction against the foreclosure and obtained it because the Defendants/Respondents did not comply with the laws regarding non-judicial foreclosure. However, that does not make their complaint a “central defense” to non-judicial foreclosure as Defendants/Respondents argue throughout their brief. The mischaracterization of the case was a key element of the lower court’s error and continues to be a key element of the Defendants’/Respondents’ false arguments.

Further, Plaintiffs/Appellants never argued that producing the note was a preliminary requirement to non-judicial foreclosure, but Plaintiffs/Appellants have plead very specifically throughout the complaint that possessing the note is a requirement for the Defendants/Respondents to have any right to enforce the note whatsoever, which has been established California law (and in every state that has adopted the Uniform Commercial Code) for a very long time. The references to producing the note were merely offered as evidence demonstrating that the Defendants/Respondents do no possess the note because they repeatedly fail and refuse to produce it. In fact, it is important to note that the Defendants/Respondents have never yet argued that the note is in their possession as required by law.

STATEMENT OF THE FACTS

A.        THE SUBJECT TRANSACTION.

The Defendants’/Respondents’ Statement of Facts has a very subtle attempt at subterfuge and misdirection in that it places a statement made about their finances during litigation after Plaintiffs/Appellants incurred legal fees in a different context as though the statement were made prior to litigation during the time that the prior (and possibly current) note holder CTX Mortgage had the loan and prior to the recording of the notice of default. Defendants/Respondents have gone to great lengths to take this statement out of context and have argued extensively that this constitutes proof that the Plaintiffs/Appellants were unable to tender payment. However, this requires the assumption that only one conclusion may be drawn from the statement rather than a range of possibilities, including the fact that the Plaintiffs/Appellants had incurred attorney’s fees by that time.

B.        THE DEMUCHAS’ CONTENTIONS.

As in the underlying Demurrer, the Defendants/Respondents continue to falsely argue that there was no allegation of Tender in the Complaint. However, as demonstrated in the Appellants’ Opening Brief, there is no requirement of tender to plead Quiet Title. Even so, the Defendants/Respondents quote the allegation of tender that is in the Complaint even while arguing that there is no allegation of tender. This demonstrates the Defendants’/Respondents’ motive in deliberately mischaracterizing the complaint: they wish to apply a non-applicable standard to the complaint. Then when the non-applicable standard has been complied with anyway, they attempt to mislead the court by arguing that a plain allegation of tender is not an allegation of tender. However, as will be shown, the Defendants/Respondents have cited a case that states that tender can be offered in the complaint, and need not have been offered prior to filing the complaint.

C.        DEFENDANTS’/RESPONDENTS’ ASSERTION OF NO ALLEGATION OF TENDER OF ALL AMOUNTS DUE IS BLATANTLY FALSE.

As stated above, Plaintiffs/Appellants have already demonstrated that tendering payment is not a required element of a Quiet Title action, but that they have pleaded tender anyway. The Defendants’/Respondents’ arguments that payments must be tendered “when due” misstates the law, even for cases challenging non-judicial foreclosures, which this case is not. As will be shown below, the Defendants/Respondents cited a case that indicates very clearly that even in non-judicial foreclosure cases, a tender may be made in the complaint and need not have been made prior to filing the complaint.

D.        THE FORECLOSURE PROCEEDINGS AND THE DEMUCHAS’ ATTEMPTS TO DELAY OR HALT THEM.

The Defendants/Respondents’ focus on these extra proceedings within the case is a red herring to distract the court’s focus from the demurrer. The appeal is not about the ex-parte application for a preliminary injunction that was granted due to the fact that the Defendants/Respondents did not comply with California law requiring a specific declaration to be signed under penalty of perjury that was not. The Defendants/Respondents are going well outside the Complaint’s four corners to abuse the details of the ex-parte application that was not about the Complaint nor the Demurrer that are the subjects of this appeal. And once again, they are trying to argue the issue of the Plaintiffs’/Appellants’ financial situation as stated during the ex-parte proceedings after they had already incurred attorney’s fees for the false proposition that the Plaintiffs/Appellants were allegedly incapable of tendering payment prior to incurring the additional attorney’s fees of litigation when that is not the only conclusion that can be drawn from the separate ex-parte pleadings. Finally, they continue to shout endlessly about the issue of tender when it is not a required part of pleading the elements of Quiet Title and when pleading tender is required, an offer made in the complaint itself is deemed sufficient, as will be shown below.

E.        THE ARGUMENTS ABOUT FAILURE TO “PRODUCE THE NOTE” ARE A RED HERRING TO DISTRACT THE COURT FROM THE LEGAL REQUIREMENT THAT THE DEFENDANTS “POSSESS THE NOTE.”

The Defendants/Respondents continue to make a big deal about the fact that in a few places, the Complaint mentions that the defendants have failed to produce the original note. However, their own arguments on this point mention that the complaint further alleges their failure to hold or possess the original note, which is the more key portion of the pleadings.

PROCEDURAL HISTORY

            The parties’ explanations of the case’s procedural history are close enough that no further discussion is necessary.

STANDARD OF REVIEW

            Some of the arguments contained in the Defendants’/Respondents’ Standard of Review section of their brief are specious, especially in the final paragraph arguing the subjects of tender and producing the note. The Defendants/Respondents have never demonstrated that California law requires an allegation of tender for a Quiet Title action, but have only cited as authority for this position cases that are focused on undoing a foreclosure sale after it has been completed. However, even those cases state that tender does not have to be made before filing the complaint, but the tender itself can be made within the complaint, and there cannot be any question that an offer of tender is made within the complaint. The Plaintiffs’/Appellants’ current attorney helped prepare pleadings for them in the trial court case and even made special, limited scope appearances for them, even though they were officially in pro per, so they incurred considerable legal fees during the litigation, which certainly had an effect on their financial situation at the time that they filed their ex parte application for a preliminary injunction, so the Defendants’/Respondents’ argument that the ex parte papers demonstrate that the Plaintiffs/Appellants could not tender payment is false. Further, the Defendants’/Respondents’ argument that “the central premise of each cause of action of the DeMuchas’ First Amendent Complaint [is] that a lender must ‘produce the note’ while conducting a non-judicial foreclosure” is a blatant misstatement of the Complaint’s content. The Complaint is not about non-judicial foreclosure, it is about quieting title. And the central premise is that a lender must possess the note in order to have a right to enforce the note, which is the law in California and every other state that has adopted the Uniform Commercial Code. No non-judicial foreclosure has yet taken place regarding the subject property.

ARGUMENT

A.        THE DEMURRER WAS NOT PROPERLY SUSTAINED.

Defendants/Respondents are demonstrating to this court the same misdirection and deliberate mischaracterization of the pleadings that misled the trial court into committing reversible error by improperly sustaining a demurrer to a valid complaint. The Defendants/Respondents have never demonstrated that tender is a requirement for a Quiet Title action. They have mischaracterized the case as a case to undo a non-judicial foreclosure when no non-judicial foreclosure has ever been completed regarding the subject property. The cases that they cited to the trial court and to this court regarding the requirements of a tender allegation were cases in which the subject property had been sold at a non-judicial foreclosure sale, which was being challenged after the fact. They have mischaracterized the Complaint’s allegations as though they state that “producing the note” is a requirement for non-judicial foreclosure, which is a blatant misstatement. The complaint states the true fact that the defendants have failed and refused to produce the note only as evidence of the fact that they do not possess the note and therefore have no right to enforce the note under California law. It is worth noting that the Defendants’/Respondents’ 34-page Appellate Brief never claims that they are the holders of the note as required by law.

B.        THE COMPLAINT VERY PLAINLY CONTAINS A TENDER, EVEN THOUGH IT IS NOT REQUIRED FOR A QUIET TITLE ACTION.

Defendants/Respondents continue their same improper tactic used with the trial court of citing irrelevant cases seeking to undo a foreclosure sale after the fact. Since no foreclosure sale has yet taken place regarding the subject property and this is a Quiet Title action, those cases are all irrelevant and inapplicable to the First Amended Complaint that is the subject of the Demurrer and this appeal. However, even under the Defendants’/Respondents’ inapplicable cases, the Defendants/Respondents have swerved into something that destroys their arguments completely: Citing Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 322-323, the Defendants/Respondents correctly stated on page 11 of their brief, “therefore as a condition precedent to any action challenging a foreclosure, a plaintiff must pay or offer to pay the secured debt before an action is commenced or in the complaint.” (Emphasis added).  This is not an action challenging a foreclosure, but even if those standards were inappropriately applied to this action, the tender or offer to pay can be made “in the complaint.” The Verified First Amended Complaint (“VFAC”) states, “Plaintiff offers to pay and mortgage payments on the property to the individual or entity that is the valid holder of the original note as required by California Commercial Code § 3301, et seq. and all property taxes to the appropriate government agency.” (VFAC page 3, line 28 through page 4, line 7). This is a very clear tender, made “in the complaint,” even though it is not required in a Quiet Title Action.

Since tender is not a statutory element of a Quiet Title action, the Defendants’/Respondents’ arguments regarding the difficult financial times mentioned in the Plaintiffs’/Appellants’ ex-parte application for a preliminary injunction are moot. However, it should be noted that by the time the Plaintiffs/Appellants filed their ex-parte application, they had the additional financial burden of paying for attorney’s fees to have the same attorney who now represents them on appeal prepare pleadings for them and make special, limited scope appearances for them on the trial court level, so the conclusion that the Defendants/Respondents are asking the court to make are inaccurate.

Even the Defendants’/Respondents’ arguments regarding “implicit integration” of foreclosure issues are irrelevant, because the cases that they cited specifically involved a non-judicial foreclosure in which the sale had been completed, but no non-judicial foreclosure sale has taken place regarding the subject property. The defendants’ argument that Plaintiffs’/Appellants’ have failed to cite any authority for the fact that no allegation of tender is required is another false statement. Plaintiffs have directly quoted Code of Civil Procedure § 761.020, which fully sets forth the elements of a Quiet Title Action, and there is no requirement of tender. However, even if the court somehow found that a tender allegation was required, the tender allegation has been made in the Complaint in accordance with the Defedants’/Appellants’ own citations as set forth above. Further, the Defendants’/Respondents’ arguments that “a court of equity will not order a useless act performed” (FPCI Re-Hab 01, etc. v. E&G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022, and “equity will not interpose its remedial power in the accomplishment of what seemingly would be nothing but an idly and expensively futile act” (Leonard v. Bank of America Ass’n (1936) 16 Cal. App. 2d 341, 344) could and should just as easily be applied to the futile and useless acts that Defendants’/Respondents’ are requesting to be required and plead when they do not possess the original note and therefore have no right to expect payments, seek payments, nor threaten foreclosure because they did not receive payments that they had no right to receive in the first place, pursuant to Commercial Code § 3301. It can and should also be used to destroy their argument that plaintiff must be subjected to the requirements of case law regarding actions seeking to undo foreclosure irregularities before the foreclosure has even been completed, as though plaintiff should be able to foresee every foreclosure irregularity with a crystal ball before the process is even completed!

C.        SUSTAINING OF THE DEMURRER WAS REVERSIBLE ERROR BECAUSE CALIFORNIA LAW REQUIRES WELLS FARGO TO POSSESS THE NOTE IN ORDER TO ENFORCE THE LOAN.

Plaintiffs/Appellants have cited a fully binding California Statute, Commercial Code § 3301, which specifically states that in order to be a “person entitled to enforce an instrument,” the Defendants/Respondents must have been the holder of the instrument, with very limited exceptions. In opposition, the Defendants/Respondents continue their same bad habit engaged in during the trial court proceedings of citing and relying upon federal trial court cases, which are not binding authority in any way, without disclosing to the court that they are citing non-binding authority. In addition, many of their citations do not even contain the full reference, so that it is difficult or impossible to locate and read the case. As for the federal trial court cases, all that they have demonstrated is that there is a need for a California appellate court to clear up the confusion that clearly exists regarding California’s law, and especially Commercial Code § 3301. Further, their statement that every court that has considered the issue has ruled that possessing the note is not necessary for a foreclosure is false. For example, in the U.S. Bankruptcy Court for the Northern District of California in San Jose, a federal trial court judge stopped a foreclosure because the bank could not produce the note in the case of Caporale v. Saxon Mortgage, Case No. 07-54109. Like the Defendants’/Respondents’ authorities, this case is only persuasive authority, not binding, but it was reported on by ABC News, and a copy of the news video is available to be viewed online at http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=6839404. If the court is going to consider the non-binding federal trial court decisions offered by the Defendants/Respondents, the court should also consider the non-binding persuasive authority of In re Foreclosure Cases, 2007 WL 3232430 (Bankr. N.D. Ohio 2007), wherein U.S. Bankruptcy Court Judge Christopher Boyko dismissed without prejudice fourteen judicial foreclosure actions filed by the trustees of securitized trusts against borrowers who had defaulted on their residential mortgages that had been sold into securitized trusts, based upon the application of Uniform Commercial Code § 3-301 to the mortgages in question.

As for their claim that the commercial code does not apply to a mortgage or a note secured by deed of trust, the Defendants/Respondents are willfully ignoring Staff Mortgage v. Wilke (1980) 625 F.2d 281, 6 Bankr.Ct.Dec. 1385, 29 UCC Rep.Serv. 639, cited in Plaintiffs’/Appellants’ Opening Brief, which clearly states that “notes secured by deeds of trust…were ‘instruments’ under the California Commercial Code.” This holding is repeated in Starr v. Bruce Farley Corp. (9th Cir. 1980), 612 F.2d 1197. The Defendants/Respondents have offered nothing other than their own opinion for the proposition that the note secured by deed of trust in question is not a “negotiable instrument” within the meaning of Commercial Code § 3301, even though they claim to have purchased the note, which by definition makes it negotiable.

D.        THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS REGARDING THE PROPRIETY OF SUSTAINING THE DEMURRER ON THE CLAIMS TO QUIET TITLE AND REMOVE CLOUD ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE NATURE OF THE DEMUCHAS’ COMPLAINT.

As always, the Defendants/Respondents insist upon misrepresenting the nature of the First Amended Complaint. Every element of each of these causes of action was specifically plead, as has been demonstrated. Pursuant to Commercial Code § 3301, the Defendants/Respondents have no right to enforce the note unless they possess the note. Plaintiffs/Appellants rely upon the appellate court to read the First Amended Complaint and comprehend it independently of the Defendants’/Respondents’ misrepresentations.

E.        THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS REGARDING THE PROPRIETY OF SUSTAINING THE DEMURRER ON THE CLAIM FOR FRAUD AND MISREPRESENTATION ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE CONTENT OF THE DEMUCHAS’ COMPLAINT.

The content of the First Amended Complaint speaks for itself. The Defendants/Respondents continue to look right at the paragraphs of the document that contain the elements required by law for each cause of action and to falsely state that the required allegations are not there. Plaintiffs/Appellants rely upon the appellate court to read the First Amended Complaint and comprehend it independently of the Defendants’/Respondents’ misrepresentations.

F.         THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS REGARDING THE PROPRIETY OF SUSTAINING THE DEMURRER ON THE CLAIM FOR INFLICTION OF EMOTIONAL DISTRESS ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE CONTENT OF THE DEMUCHAS’ COMPLAINT.

The content of the First Amended Complaint speaks for itself. The Defendants/Respondents continue to look right at the paragraphs of the document that contain the elements required by law for each cause of action and to falsely state that the required allegations are not there. Plaintiffs/Appellants rely upon the appellate court to read the First Amended Complaint and comprehend it independently of the Defendants’/Respondents’ misrepresentations.

G.        THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS REGARDING THE PROPRIETY OF SUSTAINING THE DEMURRER ON THE CLAIM FOR SLANDER OF CREDIT ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE CONTENT OF THE DEMUCHAS’ COMPLAINT.

The content of the First Amended Complaint speaks for itself. The Defendants/Respondents continue to look right at the paragraphs of the document that contain the elements required by law for each cause of action and to falsely state that the required allegations are not there. Plaintiffs/Appellants rely upon the appellate court to read the First Amended Complaint and comprehend it independently of the Defendants’/Respondents’ misrepresentations.

H.        THE DEFENDANTS’/RESPONDENTS’ ARGUMENTS REGARDING THE PROPRIETY OF SUSTAINING THE DEMURRER ON THE CLAIM FOR INFLICTION OF EMOTIONAL DISTRESS ARE BASED UPON THE DELIBERATE MISREPRESENTATION OF THE CONTENT OF THE DEMUCHAS’ COMPLAINT.

The content of the First Amended Complaint speaks for itself. The Defendants/Respondents continue to look right at the paragraphs of the document that contain the elements required by law for each cause of action and to falsely state that the required allegations are not there. Plaintiffs/Appellants rely upon the appellate court to read the First Amended Complaint and comprehend it independently of the Defendants’/Respondents’ misrepresentations.

CONCLUSION

            The trial court erred in sustaining the demurrer without leave to amend and entering a judgment of dismissal. The rules of a non-judicial foreclosure proceeding and litigation to set aside a non-judicial foreclosure do not apply to a quiet title action that is filed prior to a foreclosure sale. The Commercial Code’s requirements that the entity enforcing a note must possess the original note (with limited exceptions) applies to a Note Secured by Deed of Trust. Even in the context of a non-judicial foreclosure, there is no “breach” unless the entity that did not receive the mortgage payments had a right to receive the mortgage payments through possession of the original note or compliance with another recognized exception under the Commercial Code. Any other result would cause an unnecessary conflict of laws and allow fraudulent “lenders” to engage in non-judicial foreclosures and sales of property so long as they complied with the technical requirements of a non-judicial foreclosure. All of the causes of action of the Verified First Amended Complaint are properly plead, with the exception that “punitive damages” is not technically a cause of action, but that can be resolved by striking the label “Sixth Cause of Action” and just allowing the heading “Punitive Damages” to stand.

RESPECTFULLY SUBMITTED,

            Dated: 23 December 2010                                                                                                                  

Michael D. Finley, Esq.

Counsel for Plaintiffs/Appellants

Mark J. DeMucha & Cheryl M. DeMucha

CERTIFICATE OF COMPLIANCE

Pursuant to rule 8.204(c) of the California Rules of Court, I hereby certify that this brief contains 3,914 words, including footnotes. In making this certification, I have relied on the word count of the computer program used to prepare the brief.

Dated: 23 December 2010                                                                                                                  

Michael D. Finley, Esq.

Counsel for Plaintiffs/Appellants

Mark J. DeMucha & Cheryl M. DeMucha

 PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is: 25375 Orchard Village Road, Suite 106, Valencia, CA 91355-3000.

On 23 December 2010 I served the foregoing document described as: Appellant’s Opening Brief on the interested parties in this action by placing a true copy thereof in sealed envelopes addressed as follows:

(Attorneys for Wells Fargo Home Mortgage, Inc. & Wells Fargo Bank, N.A.): Kutak Rock LLP, 18201 Von Karman, Suite 1100, Irvine, CA 92612

(Attorneys for First American Loanstar Trustee Services & First American Corporation): Wright, Finlay & Zak, LLP, 4665 MacArthur Court, Suite 280, Newport Beach, CA 92660

Judge Sidney P. Chapin, Kern County Superior Court, Metropolitan Division, 1415 Truxtun Ave., Bakersfield, CA 93301

BY MAIL: I deposited such envelopes in the mail at Valencia, California. The envelopes were mailed with first class postage thereon fully prepaid.

ALSO, BY ELECTRONIC FILING WITH THE SUPREME COURT: In addition, I filed an electronic copy of the Appellant’s Opening Brief with the Supreme Court of California on 23 December 2010, through the Supreme Court’s website.

Dated: 23 December 2010                                                                                                                  

Michael D. Finley, Esq.

Counsel for Plaintiffs/Appellants

Mark J. DeMucha & Cheryl M. DeMucha

Related articles

Challenge Your Lender… Now!

Don’t delay – Opt in to the follow Blog and gain access to over 680 ideas and posts to hold your Lender accountable new post every day!

Do you want to hold your lender responsible for their illegal actions?

Challenge Your Lender… Now!

image003

My name is Timothy McCandless, and I’m here to tell you what most banks and mortgage loan servicers don’t want you to know: More than 65 million homes in the US may not be subject to foreclosure after all, and your home is very likely one of the “safe” homes. The reason these homes are not technically subject to foreclosure is because the lenders, mortgage companies, mortgage servicers, and title companies broke the law throughout the process of managing your loan, both at the inception of your loan and throughout the life of the loan. Because of their fraudulent actions, they are unable to produce a title for, or show ownership of, your property. This causes what we call a “defect of title”, and legally prohibits your lender or servicer from foreclosing, regardless of whether or not your loan is current.

This situation is all over the news, and now, starting today, you can learn how to protect yourself from unlawful foreclosure.

WE CAN TRAIN YOU HOW TO CHALLENGE YOUR LENDER

Most Mortgage Assignments are Illegal

In a major ruling in the Massachusetts Supreme Court today, US Bank National Association and Wells Fargo lost the “Ibanez case”, meaning that they don’t have standing to foreclose due to improper mortgage assignment. The ruling is likely to send shock waves through the entire judicial system, and seriously raise the stakes on foreclosure fraud. Bank stocks plummeted after this ruling. These assignments are what people need to challenge in their own mortgages.

I am prepared to show you the most amazing information on how you can actually Challenge Your Lender. Once you opt in for our free ebook (just enter your email address above and to the right), you’ll get immediate access to our first, very informative webinar, as well as to our free ebook. You’ll learn more about the Challenge Your Lender program, and more importantly, how the US mortgage system is rigged to take advantage of you and how to can fight back. My program will show you exactly how to get a copy of your loan documents that your lender or loan servicer currently has in their possession, and then how to begin examining these documents to learn more about how your lender, as well as other parties involved, has used your name and credit to make millions of dollars. Analyzing your loan documents is a crucial first step in beginning the Challenge Your Lender process.


Save your home from foreclosure

The information that you will be receiving in my free material and webinar will further your knowledge on what most lenders are doing to homeowners, and how you can save yourself from foreclosure. You will have the opportunity to acquire a free copy of my Challenge Your Lender workbook and learn how to begin building the paper trail that you will need to defend yourself and to prove the wrongdoings of your lender and loan servicer. Once you go through the workbook and listen in on the free webinar, you will be on top of your Challenge and ready to begin the program.

The Challenge Your Lender program will help put you in a position of power and control over your loan, and will allow you to decide what you would like to do with your property. This leverage will be advantageous when you begin negotiating your foreclosure. Most importantly, your lender or loan servicer should not be able to foreclose on you once you notify them that you have identified fraudulent activity. My program is your first step in saving your property from foreclosure.

Don’t wait – opt in today. Every day counts in the battle against your lender.

Best regards,
Tim

Related articles

Fighting Foreclosure in California

Using the Courts to Fight a California or Other Non-Judicial Foreclosure – 3-Stage Analysis – including a Homeowner Action to “Foreclose” on the Bank’s Mortgage Security Interest – rev.

image003

 

California real property foreclosures are totally different from foreclosures in New York and many other states. The reason is that more than 99% of the California foreclosures take place without a court action, in a proceeding called a “non-judicial foreclosure”. Twenty-one states do not have a non-judicial foreclosure. [These states are CT, DE, FL, IL, IN, KS, KY, LA, ME, MD, MA, NE, NJ, NM, NY, ND, OH, PA, SC, UT, VT. – Source: realtytrac.com] In California, the lending institution can go through a non-judicial foreclosure in about 4 months from the date of the filing and recording of a “Notice of Default”, ending in a sale of the property without any court getting involved. The California homeowner can stop the sale by making full payment of all alleged arrears no later than 5 days prior to the scheduled sale. Unlike a judicial foreclosure, the homeowner will have no right to redeem the property after the sale (“equity of redemption”, usually a one-year period after judicial foreclosure and sale). For a visual presentation of the timeline for California and other state non-judicial foreclosures, go to Visual Timeline for California Non-Judicial Foreclosures.

A 50-state analysis of judicial and non-judicial foreclosure procedures is available at 50-State Analysis of Judicial and Non-Judicial Foreclosure Procedures.]

The problem I am going to analyze and discuss is under what circumstances can a homeowner/mortgagor go into court to obtain some type of judicial relief for wrongful or illegal conduct by the lender or others relating to the property and mortgage. My discussion applies as to all states in which non-judicial foreclosures are permitted.

There are three distinct stages that need to be separately discussed. These stages are the borrower’s current situation. The three stages are:

 

  • Homeowner is not in any mortgage arrears [declaratory judgment action]
  • Homeowner is behind in mortgage payments – at least 5 days before auction [injunction action, which could even be called an action by a homeowner to “foreclose” upon or eliminate the lending institution’s mortgage security interest]
  • Property was sold at auction [wrongful foreclosure action]

 

I. Homeowner Is Not in any Mortgage Arrears [Declaratory Judgment Action]

As long as a homeowner keeps making the mortgage payments, and cures any occasional short-term default, the homeowner is in a position to commence an action in federal or state court for various types of relief relating to the mortgage and the obligations thereunder. One typical claim is a declaratory judgment action to declare that the mortgage and note are invalid or that the terms are not properly set forth. There are various other types of claims, as well. The filing of such an action would not precipitate a non-judicial foreclosure. Compare this to a regular foreclosure, in which the homeowner stops paying on the mortgage, gets sued in a foreclosure action, and then is able in the lawsuit to raise the issues (as “defenses”) which the California homeowner would raise as “claims” or “causes of action” in the lawsuit being discussed for this first stage.

II. Homeowner Is Behind in Mortgage Payments – at Least 5 Days before Auction [Injunction Action seeking TRO and Preliminary Injunction, which you might say is a homeowner’s own “foreclosure proceeding against the bank and its mortgage interest”]

This is the most difficult of the three stages for making use of the courts to oppose foreclosure. The reasons are: foreclosure and sale is apt to take place too quickly; the cost of seeking extraordinary (injunctive) relief is higher because of the litigation papers and hearing that have to be done in a very short period of time to obtain fast TRO and preliminary injunctive relief to stop the threatened sale; the cost of this expensive type of injunctive litigation is probably much higher for many homeowners than just keeping up the mortgage payments; and, finally, you would have to show a greater probability of success on the merits of the action than you would need to file a lawsuit as in Stage 1, so that the homeowner’s chances of prevailing (and getting the requested injunction) are low and the costs and risks are high.

Nevertheless, when the facts are in the homeowner’s favor, the homeowner should consider bringing his plight to the attention of the court, to obtain relief from oppressive lending procedures. The problem with most borrower-homeowners is that they do not have any idea what valid bases they may have to seek this kind of relief. What anyone should do in this case is talk with a competent lawyer as soon as possible, to prevent any further delay from causing you to lose an opportunity to fight back. You need to weigh the cost of commencing a court proceeding (which could be $5,000 more or less to commence) against the loss of the home through non-judicial foreclosure.

 

III. Property Was Sold at Auction [Wrongful Foreclosure Action]

If the property has already been sold, you still have the right to pursue your claims, but in the context of a “wrongful foreclosure” lawsuit, which has various legal underpinnings including tort, breach of contract and statute. This type of suit could not precipitate any foreclosure and sale of the property because the foreclosure and sale have already taken place. Your remedy would probably be monetary damages, which you would have to prove. You should commence the action as soon as possible after the wrongful foreclosure and sale, and particularly within a period of less than one year from the sale. The reason is that some of your claims could be barred by a short, 1-year statute of limitations.

If you would like to talk about any possible claims relating to your mortgage transaction, please give me a call. There are various federal and state statutes and court decisions to consider, with some claims being substantially better than others. I am available to draft a complaint in any of the 3 stages for review by your local attorney, and to be counsel on a California or other-state action “pro hac vice” (i.e., for the one case) when associating with a local lawyer.

The Law of Capitalism THE MASS MISS JOINDER

I attended the Attorney General and state Bar hearing as to the intervention of the state bar into the law practice of Mitchell Stein and the K2 mass Joinder cases in Los Angeles in front of Judge Johnson. The tentative was a scathing implication of Mitchell Stein and his purported involvement with the “marketing companies” and the allegations of unfair business practices all needed for the AG and the State Bar to step in and confiscate 1.6 million in various accounts.

I was there to opine the status of the case itself and the merits of the cases and as to the victims rights as against the banks. If the Bar took over the practice would they defend the cases would they protect the victims right. No they are not; right now they the State Bar are telling the victims they are on there own.

Once again these suits I have been following and hoping could get past the Demur stage the Banks would be forced to answer. Then there would be motions for Summary Judgement and if the Victims could survive the Summary Judgement and thousands of requests for admissions and interrogatories propounded on the thousands of plaintiffs. It could be done I would have to associate about 10 other lawyers and 30 paralegals but it could be done for about $700,000.00. Then I believe the Banks would enter settlement negotiations with the victims witch I calculate to be about 6500 victims to date.

Mandelman characterized the case as follows:

The case at the core of the Kramer and Kaslow mass joinder lawsuit is: Ronald vs. Bank of America. Basically, the case accuses Countrywide (subsequent cases being filed include Citibank, One West, GMAC/Ally Bank, and perhaps others) of perpetrating a massive fraud upon homeowners by knowingly inflating appraisals, creating a bubble the bank knew would pop and leave homeowner equity devastated, violate privacy statutes, and then Civil Code sections when they refused to modify… you get the idea.

The case says that Countrywide execs knew and did it anyway in order to make zillions of dollars securitizing the loans and therefore only others would incur the future losses.

Here’s an overview of what the third amended complaint says in its Introduction section:

2. This action seeks remedies for the foregoing improper activities, including a massive fraud perpetrated upon Plaintiffs and other borrowers by the Countrywide Defendants that devastated the values of their residences, in most cases resulting in Plaintiffs’ loss of all or substantially all of their net worths.

6. Hand-in-hand with its fraudulently-obtained mortgages, Mozilo and others at Countrywide hatched a plan to “pool” the foregoing mortgages and sell the pools for inflated value. Rapidly, these two intertwined schemes grew into a brazen plan to disregard underwriting standards and fraudulently inflate property values – county-by- county, city-by-city, person-by-person – in order to take business from legitimate mortgage-providers, and moved on to massive securities fraud hand-in-hand with concealment from, and deception of, Plaintiffs and other mortgagees on an unprecedented scale.

7. From as early as 2004, Countrywide’s senior management led by Mozilo knew the scheme would cause a liquidity crisis that would devastate Plaintiffs’ home values and net worths. But, they didn’t care, because their plan was based on insider trading – pumping for as long as they could and then dumping before the truth came out and Plaintiffs’ losses were locked in.

9. It is now all too clear that this was the ultimate high-stakes fraudulent investment scheme of the last decade. Couched in banking and securities jargon, the deceptive gamble with consumers’ primary assets – their homes – was nothing more than a financial fraud perpetrated by Defendants and others on a scale never before seen. This scheme led directly to a mortgage meltdown in California that was substantially worse than any economic problems facing the rest of the United States. From 2008 to the present, Californians’ home values decreased by considerably more than most other areas in the United States as a direct and proximate result of the Defendants’ scheme set forth herein.

This massive fraudulent scheme was a disaster both foreseen by Countrywide and waiting to happen. Defendants knew it, and yet Defendants still induced the Plaintiffs into their scheme without telling them.

10. As a result, Plaintiffs lost their equity in their homes, their credit ratings and histories were damaged or destroyed, and Plaintiffs incurred material other costs and expenses, described herein. At the same time, Defendants took from Plaintiffs and other borrowers billions of dollars in interest payments and fees and generated billions of dollars in profits by selling their loans at inflated values.

14. Since the time Plaintiffs filed the initial Complaint herein, Defendants’ improper acts have continued, including, inter alia: (i) issuing Notices of Default in violation of Cal. Civil Code §2923.5; (ii) misrepresenting their intention to arrange loan modifications for Plaintiffs, while in fact creating abusive roadblocks to deprive Plaintiffs of their legal rights; and (iii) engaging in intrinsic fraud in this Court and in Kentucky by stalling in addressing Plaintiffs’ legitimate requests to cancel notices of default and for loan modifications, and by refusing to respond, in any way, to Plaintiffs’ privacy causes of action.

Now, there’s no question… this is a real lawsuit. Some attorneys believe it will be a very difficult case to win, while others think it’s quite viable and likely to settle. I can see both sides of that argument.

On one hand, it would seem difficult to prove that Countrywide caused the housing bubble; there were certainly many parties involved and numerous other contributing factors as well. On the other hand, the case has numerous aspects that are unquestionably true and certainly wrong.

Then there’s what’s known as “the banker factor.” Actually, I’m making that up, but you know what I mean. The banks aren’t going to lay down for this as it would open an enormous can of litigating worms… so they have to fight… or is there no percentage in that either? Well, now you’ve seen first hand why I chose not to go to law school.

I really haven’t the foggiest idea what’s going to happen… and neither does anyone else.

But then, Columbus couldn’t exactly stop and ask for directions either, which, it’s worth noting is why, when sailing for The New World, he landed in the Bahamas and named them San Salvador, but assumed he had found the Indies so he named the native people Indians (leading me to always wonder what he would have named them had he not gotten so hopelessly lost.)

(What if his favorite word was “Jujubees,” and he had named the natives “Jujubees?” Then I would have grown up playing Cowboys & Jujubees?)

So, since no one can know what’s going to happen in the future of this case, I thought I’d take a look at where it is today. From a review of the Los Angeles Superior Court’s online records database we find these events have transpired to-date or are set for the near future…
1. Original complaint was filed in March 2009.
2. First amended complaint was in June of 2009.
3. Second amended complaint March 2010.
4. August 2010: the banks try to remove the case to federal court, but fail.
5. Third amended complaint was filed July 7, 2010.
6. The defendant banksters have demurred again, but it doesn’t appear that the demurs filed in December have been heard.
7. Status conference set for Thursday, February 3rd, 2011.
8. There is a hearing date scheduled for March 29, 2011, but it’s not clear to me what will be happening at that hearing.

So, this is their third “amended complaint.” That means the defendants… the banks… have demurred twice. That means that the banks have come to court claiming that the mass joinder plaintiffs don’t state a cause of action… or in other words saying the plaintiffs have no case… and the court has allowed the plaintiffs to amend the complaint three times so far.

Like almost everything in the law, I guess you could read that a couple of different ways. On one hand it seems positive… the case brought by the mass joinder plaintiffs has not been tossed out by the judge yet. That’s good, right?
On the other hand… the court could “sustain the demur without leave to amend,” in which case the mass joinder suit would be over and done.

And that’s why litigating is always a gamble, and by no means a sure thing.
Here’s an oversimplified look at the mass joinder’s causes of action.

First Cause of Action… Fraudulent Concealment – This is saying that the bank was hiding things from the borrowers.

Second Cause of Action… Intentional Misrepresentation – This is lying when you knew you were lying. In other words, you knew an appraisal was wrong… it came in at $500,000, but you knew it was worth $400,000 and you passed it off anyway.

Third Cause of Action… Negligent Misrepresentation – This is like saying that you’re lying but it wasn’t intentional. Let’s say that you ordered an appraisal but never really looked at the appraisal to make sure it was done correctly. You include this cause of action in case the conduct doesn’t rise to the level of intentional misrepresentation, and perhaps because some insurance policies don’t cover intentional acts.

Fourth Cause if Action… Invasion of Constitutional Right to Privacy – This is saying that the banks disclosed personal information… perhaps when selling the loans to another investor.

Fifth Cause of Action… Violation of California Financial Information Privacy Act – See above or read the actual complaint.

Sixth Cause of Action… Civil Code 2923.5 – Defendants are prohibited by statute from recording a Notice of Default against the primary residential property of any Californian without first making contact with that person as required under § 2923.5 and then interacting with that person in the manner set forth in detail under § 2923.5. Nothing special here, but its been upheld by other courts in California.

Seventh Cause of Action… Civil Code 1798 – When they gave away your private information, they didn’t tell you they did it? Defendants failed to timely disclose to Plaintiffs the disclosure of their personal information as required under California Civil Code § 1798.82

Eighth Cause of Action… Unfair Competition Against All Defendants – Defendants’ actions in implementing and perpetrating their fraudulent scheme of inducing Plaintiffs to accept mortgages for which they were not qualified based on inflated property valuations and undisclosed disregard of their own underwriting standards and the sale of overpriced collateralized mortgage pools, all the while knowing that the plan would crash and burn, taking the Plaintiffs down and costing them the equity in their homes and other damages, violates numerous federal and state statutes and common law protections enacted for consumer protection, privacy, trade disclosure, and fair trade and commerce.

In Conclusion…

Attorney Phillip Kramer, in his own words, made it quite clear that his firm was not responsible for the mailer I received or the telemarketing about which I’ve been notified. Once again, he says…

“I know of no outbound calling. If asked, I would not approve of that. I knew that some law firms wanted to send out mailers. I have insisted that everyone comply with State Bar rules and that anything with my name must be pre-approved. As of this date, no one has submitted any proposed marketing for my review. That piece was done without my knowledge.

I am happy to pay a referral fee to other law firms. I do not split fees, pay commissions, nor do I pay referral fees to non-lawyers. I do not use cappers, and have never authorized anyone to robocall, telemarket, spam email, or undertake any mass marketing on my behalf.”

With that said I was going to apply to the Bar to take over the cases if they would relinquish the 1.6 to pay for the work to be done for the victims. Before making such a wild leap into this caos I called my State bar lawyer. He informed me that I should not even go close to these cases that all lawyers involved will be DISBARRED. I said wow but what about the merits of the cases the judge in the case had already overruled the demur as to some of the causes of action. The State Bar (by their actions in not finding a lawyer to protect the victims) is recommending that case be dismissed the Attorney General IS NOT PURSUING THE RIGHTS OF THE VICTIMS . I persisted with my lawyer. To which he exclaimed ” DON’T YOU GET IT MCCANDLESS THE AG AND THE BAR ARE WORKING FOR THE BANKS”.

Fannie Mae Foreclosure Lawyers Acted Improperly

Thumbnail image for Foreclosure.jpgHomeowners in Northern California have questioned the practices of Fannie Mae and Freddie Mac in foreclosure proceedings. If you are facing a foreclosure, you may be able to keep the property by filing for bankruptcy. You should consult with an attorney regarding your legal options.

After news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, Fannie Mae’s overseer started to scrutinize the conduct of its attorneys. The inspector general of the Federal Housing Finance Agency severely criticized the FHFA’s oversight of Fannie Mae and the practices of its foreclosure attorneys in a report issued Tuesday. “American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” Inspector General Steve Linick told the New York Times. “Increased oversight by F.H.F.A. could help to prevent these abuses.”

According to the New York Times, the report is the second in two weeks in which the inspector general has outlined lapses at both the Federal Housing Finance Agency and the companies it oversees Federal National Mortgage Assn (Fannie Mae) and Federal Home Loan Mortgage Corp (Freddie Mac). The agency has acted as conservator for the companies since they were taken over by the government in 2008. Its duty is to ensure that their operations do not pose additional risk to the taxpayers who now own them. The companies have tapped the taxpayers to cover mortgage losses totaling about $160 billion. The new report from the inspector general tracks Fannie Mae’s dealings with the law firms handling its foreclosures from 1997, when the company created its so-called retained attorney network. At the time, Fannie Mae was a highly profitable and powerful institution, and it devised the legal network to ensure that borrower defaults would be resolved with efficiency and speed.

The law firms in the network agreed to a flat-rate fee structure and pricing model based on the volume of foreclosures they completed. The companies that serviced the loans for Fannie Mae, were supposed to monitor the law firms’ performance and practices, the report noted

After receiving information from a shareholder in 2003 about foreclosure abuses by its law firms, Fannie Mae assigned its outside counsel to investigate, according to the report. That law firm concluded in a 2006 analysis that “foreclosure attorneys in Florida are routinely filing false pleadings and affidavits,” and that the practice could be occurring elsewhere. “It is axiomatic that the practice is improper and should be stopped,” the law firm said.

The inspector general’s report said that it could not be determined whether Fannie Mae had alerted its regulator, then the Office of Federal Housing Enterprise Oversight, to the legal improprieties identified by its internal investigation.

The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

The report cited a media report from early 2008 detailing foreclosure abuses by law firms doing work for Fannie Mae. Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices,.

Finally last fall, after an outcry over apparently forged foreclosure documents and other improprieties, the Federal Housing Finance Agency began investigating the company’s process. In a report issued early this year, it determined that Fannie Mae’s management of its network of lawyers did not meet safety and soundness standards. Among the reasons: the company’s controls to prevent or detect foreclosure abuses were inadequate, as was the company’s monitoring of the law firms. “If a law firm self-reported no issues as it processed cases,” the inspector general said, “then Fannie Mae presumed the firm was doing a good job.” The agency is still deciding how to handle the lawyer network, the inspector general said.

Officials at the housing agency have agreed with the recommendations in the inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the agency was concluding its supervisory work in this area and would direct Fannie Mae to take necessary action when the work was completed.

In a response, the agency said that by Sept. 29, 2012, it would review its existing supervisory practices and act to resolve “deficiencies in the management of risks associated with default-related legal services vendors.”

If you are having problems with a loan or foreclosure, we provide free legal consultations for bankruptcy in San Francisco County, Sacramento County, Alameda County, Contra Costa County, San Mateo County, Santa Clara County, Stanislaus County, San Joaquin County, Marin County, Solano County and throughout Northern California. Contact us for a free legal consultation today.925-957-9797

If the loan was not perfected; then there is no lien; and if the servicer was obligated to make the payment as a co-obligor; then there was no default

SEE 42-in RE Cruz vs Aurora
AURORA LOAN SERVICES LLC, SCME MORTGAGE BANKERS INC, ING BANK FSB, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS ALL BITE THE DUST, SUBJECT TO LIABILITY AND NO ABILITY TO FORECLOSE WITHOUT COMPLYING WITH LAW.
Salient points of Judge Mann’s Decision:

TRUTH IN LENDING was dismissed because they were time-barred. LESSON: Don’t ignore TILA claims or TILA audits. Get a forensic Analysis as early as possible, assert them immediately, assert rescission as soon as possible. TILA has teeth, but if you assert it late in the game.
YOU CAN’T FORECLOSE ON UNRECORDED INSTRUMENTS: Judge Mann came right out and said the California Supreme Court would not and could not decide otherwise. Any other holding would defeat the purpose of recording and create uncertainty in the marketplace. This will cause a lot of grief to pretenders. It is getting harder for them to come up with people who are willing to lie, forge or fabricate documents. Getting a notary to affix their signature and seal will soon be a thing of the past unless the signature, the person and the document is real.
THE ASSUMPTION THAT THE LOAN IS IN DEFAULT IS STILL A PROBLEM: As long as lawyers and pro se litigants are willing to concede that the obligation was in default, they are giving up their largest chip — i.e., that the loan was not in default and the loan was not subject to a perfected lien for the same reason that the court cites in its opinion. Our loan level analysis shows repeatedly that in most cases the servicer is continuing to make payments and reporting to investors that the loan is performing even as they send delinquency letter’s notices of default and notices of sales. The Court missed this point because nobody brought it up. Don’t expect the Court to do your work for you. If you have reason to believe that the servicer is still paying on your loan you should be stating that the loan is not in de fault, denying any delinquency to the creditor and objecting to any action that is based upon the premise of “default.” Note that if the servicer is paying your bills, the servicer MIGHT have a right of action against you, but it certainly isn’t under the terms of the note or mortgage.
THE ASSUMPTION THAT A VALID PERFECTED MORTGAGE LIEN EXISTS IS STILL A PROBLEM: Again, the problem is not with the Courts but with the lawyers and pro se litigants who simply assume that this is not an issue. Put yourself in the banks’ shoes. If all you had were nominees for undisclosed principals on the note and mortgage would you be OK with that? No? Then the lien was never perfected, which means for legal purposes it doesn’t exist. Just because it shows in black and white doesn’t make it true. LESSON: Deny the lien exists, deny it was perfected and make them prove how it was perfected. They can’t. In most cases neither the mortgage originator nor the nominee beneficiary (MERS) had a disclosed lender or beneficiary, nor did they incorporate the real terms of the payment to the investor/lenders. If this was a law school exam and the student wrote that the loan was perfected, the grade would be “F”.
THE ISSUE OF FEDERAL PREEMPTION AND THEREFORE JURISDICTION AND VENUE ARE STILL IN FLUX: This Judge found that federal preemption prevents the homeowner from alleging TILA as state claims. The courts are not decided on this and the issue of res judicata and Rooker -Feldman will come into play once the issue is really resolved with finality. Beware then how you assert a claim and that you don’t let the statute of limitations run out by failing to assert the right claim under TILA in the right court. better to get dismissed than to find out that you are time-barred.
WRONGFUL FORECLOSURE IS A TITLE ISSUE NOT A FAIRNESS OR TECHNICAL ISSUE: Judge Mann, correctly in my opinion, states that an assignment from MERS must be allowed in order to clear up title. But, she states that without recording an interest within the chain of title, you have no right to foreclose under the states recording laws. I think this is right, and I think it applies in all 50 states. LESSON: Plead your wrongful foreclosure, slander of title and quiet title cases as title cases and stop adding extra things that you think may them juicier. Either the title is right or it is wrong. There is no middle ground.
MERS ISSUE IS STILL OBSCURE: While the assignment from MERS, if recorded clears up one part it leaves another part undecided again because it wasn’t raised properly. There is a difference between “bare record title” and an “interest in the land.” The MERS assignment is like a quit-claim deed from someone without any interest in the land and used to clear up the chain of title on paper, but it does not convey any interest. MERS on its website and in the public domain specifically disclaims any interest in the obligation, note or mortgage. That is its selling point to members who use its “Service.” And that is why it can’t foreclose and it is subject to cease and desist orders from regulators. As with other affidavits or quit-claims to clear up apparent clouds on title, the recorded assignment or quitclaim does nothing to convey a larger interest than that possessed by the grantor. LESSON: If the pretenders want to foreclose they can’t rely on the MERS assignment. They must file a credible affidavit that states that the affiant was the undisclosed principal in the original transaction with the borrower and that it joins in or separately assigns the actual interest in the obligation, note or mortgage. In my opinion, this is the only way to perfect the original “lien.” Whether it will relate back to the original transaction is an issue the courts must decide.
NO DIFFERENCE BETWEEN A DEED OF TRUST AND A MORTGAGE: Pretenders who try to elevate a deed of trust above a mortgage are headed for a brick wall. Courts never liked non-judicial foreclosure in the first place. They are not about to to reverse centuries of law and provide higher status to a non-judicial foreclosure or the instruments that allow it. ONLY the statutes that provide for extra care on the part of the trustee are constitutional, since due process is the only way anyone in this country can be deprived of life, liberty or property. LESSON: Pound on the issue that the pretender cannot prevail in a judicial foreclosure so they are trying to get away with it in a non-judicial foreclosure. If you want to see how this will eventually unfold, look at Florida and other states that had similar issues in their “Contracts for deed.” Despite clear contractual language the courts have universally held they are mortgages and that they must be foreclosed as mortgages.

JUDGES: ASSUME THE BORROWER IS WRONG

So you have denied the claims of the pretenders and put that in issue. You have even alleged fraud, forgery and fabrication and the catch-word “robosigning”. But the Judge, alleging that he did not want to “make new law” (which wasn’t true) or allegedly because he didn’t want to start an avalanche of litigation interfering with judicial economy (and therefore allowing fraud and theft on the largest scale ever known to human history) has not only denied your claims and motions, but refused to even put the matter at issue, thus enabling you to at least use discovery to prove your point.

So the pretenders have their way: no evidence has been introduced into the record. You have proffered, they have proffered, but somehow their proffer means something more than your proffer even though no proffer is evidence.

Attorneys recognize this as low hanging fruit on appeal, where the trial judge is going to get the case back on remand with instructions to listen to the evidence and allow each side to produce real evidence, not proffers from counsel, and allow each side to conduct discovery. It’s not guaranteed but it is very likely. And the pretenders know that if it ever gets down to real evidence as opposed to arguments of counsel, they are dead in the water, subject to sanctions and liability for slander of title and other claims.

So they have come up with this strategy of setting supersedeas bond higher and higher so that the order appealed from goes into effect and they are able to kick the can down the road with a foreclosure sale, more transfers etc in the title chain, thus enabling them to argue the deed is done and the “former” homeowner must be relegated to only claiming damages, not the home itself. People can be kicked out by eviction proceedings that typically are conducted in courts of limited jurisdiction where in most states you are not allowed to even allege that the title is not real or that it was illegally obtained.

Initially supersedeas bond was set at levels that could be met by homeowners — sometimes as little as $500 or a monthly amount equal to a small fraction of the former monthly payment. Now, Judges who are heavily influenced by banks and large law firms, especially chief Judges who stick their noses into cases not assigned to them, are making sure that the case does NOT go to jury trial and essentially influencing the presiding Judge ex parte, to set a high supersedeas bond thus preventing the homeowner from obtaining a stay of execution on the eviction or the final judgment regarding title.

Of course it is wrong. But it is happening. You counter this by (1) making the record on appeal as to the merits of the appeal (2) adding to the record actual affidavits and testimony as to value, rental value etc. and (3) of course demanding and evidential hearing on the proper amount of the bond. Here you want to search out and produce the bond set in similar cases in the county in which your case is pending. Make sure you have a court reporter and a transcript on appeal and that the record on appeal is complete. It is not uncommon for certain documents to get “lost” or allegedly not “introduced” so when the appellate court gets it you can be met with the question of “what document?”

The other reason they are increasing supersedeas bond is because of a misconception by many pro se litigants and even some attorneys. They have the impression that the appeal is over if the bond is NOT posted with the clerk. And they have the impression that they can’t challenge the amount of bond set, or even go to the appellate court just on that issue and ask the appellate court to set bond — something they might not do but when they remand it, it is usually with instructions to the trial judge to hear evidence on the relevant issues — again something the pretenders don’t want.

Supersedeas bond ONLY applies to execution of the order or judgment that you are appealing. You can AND should continue with the appeal and if you win, the Judgment might be overturned — which means by operation of law you probably get your house back.

All these things are technical matters. Listening to other pro se litigants or even relying upon this other sites intended to help you is neither wise nor helpful. Before you act or fail to act, you should be in close contact with an attorney licensed in the jurisdiction in which your property is located. Local rules can sometimes spell the difference between the life or death of your case.

The Free House Myth

posted by Katie Porter
As challenges to whether a “bank” (usually actually a securitized
trust) has the right to foreclose because it owns the note and mortgage become more common, rumors swirl about the ability to use such tactics to get a “free house.” There are a few instances of consumer getting a free house, see here and here, for examples, but these are extreme situations not premised on ownership, but on a more fundamental flaw with the mortgage. In general, the idea that even a successful ownership challenge will create a free house to the borrower is an urban myth. I’ll explain why below, but there is a policy point here. The myth of the free house drives policymakers to complain about the moral hazard risks of holding mortgage companies to the law and tries to set up homeowners who are paying their mortgages against those who are not. It serves the banks’ political agenda to be able to point to the “free house” as an obviously unacceptable alternative of consumers winning legal challenges. It’s key then to understand that the “free house” is largely a creature of consumers’
and banks’ over-active imaginations.

In sorting out why even a successful ownership challenge does not give homeowners a free house, it is helpful to parse some key concepts. The first one is standing, which is the right of a party to ask a court for the relief it seeks. This comes in different flavors, including constitutional standing, but in the foreclosure context, usually boils down to whether the moving party is the “real party in interest.” In re Veal, the recent decision from the 9th Circuit BAP authored by Judge Bruce Markell, mentioned previously on Credit Slips , contains a discussion of standing in the foreclosure context. At least in part, the concern of the real party in interest doctrine is to make sure that the plaintiff is the right person to get legal relief in order to protect the defendant from a later action by the person truly entitled to relief. Note that standing is a concept that only applies in court; here that means in judicial foreclosures. In states that allow non-judicial foreclosure, the issue is slightly different. Does the party initiating the non-judicial foreclosure have the authority to do so under the state statute authorizing the sale? For example, cases such as In re Salazar discuss whether a recorded assignment of the mortgage is needed, as opposed to an unrecorded assignment, to initiate a foreclosure. Under either standing or statutory authority, a “win” by the homeowner leads to the same result. The foreclosure cannot proceed.

But this win is not the same as a free house. Just because a party lacked standing or statutory authority does not mean that there is not some party out there that does have the authority to foreclosure. Nor does a win on standing mean that there cannot be action taken to give the initial foreclosing party the authority that they need, which might occur by transferring possession of the note or by executing a series of assignments, to foreclose at a later date. Unless other problems exist, there is still a valid note that obligates the homeowner to pay money due and there is still a mortgage encumbering the house. The homeowner does not get a free house. Rather, the homeowner just doesn’t lose her house today to foreclosure. These are pretty different outcomes!

This doesn’t mean that I think the standing/ownership issue is inconsequential. For homeowners, a successful challenge that results in the dismissal of a foreclosure can lead to a loan modification or the delay itself can give the homeowner the time to find another solution. For investors in mortgage-backed securities, the problems with paperwork likely increase their loss severities in foreclosure, both because of increased litigation costs and because of delay in correcting problems. (And there may be even more serious problems for investors relating to whether the transfers even succeeded in putting the homes in the trust.) But we shouldn’t confuse these issues with the idea that what is at stake in sorting out this mess is giving a “free house” to some Americans, despite the lamentations of this LaSalle Bank lawyer after a judge ruled that LaSalle as trustee lacked standing to foreclose. A fruitful discussion of these issues needs to begin with a clear understanding of the consequences of the problem, as well as empirical evidence on how widespread these problems are.
The free house is political handwringing, not legal reality.

July 18, 2011 at 4:22 AM in Mortgage Debt & Home Equity Comments It’s certainly not a “free” house. I think it’ll be a nightmare for homeowners who prevail in one of these actions to try and sell their homes. Just because party X can’t foreclose doesn’t mean that there isn’t a valid mortgage still on the property. No buyer is going to want to buy (and no title insurer will want to insure) unless that mortgage is paid off. And that means determining who is the mortgagee.
Adverse possession and/or quiet title actions might help solve some of this, but they are not self-executing solutions. Homeowners will have to go to court and litigate. That’s expensive and it takes time. So, at best, these homeowners are getting not “free” houses but houses with a severely depressed value.

Posted by: Adam Levitin | July 18, 2011 at 06:46 AM

The author skims the surface of the latte and finds after skimming the surface there is no more cream. Duh.
The Banks are often appearing as trustees on behalf of NY Trusts most of which died on or about 2008. If the trusts are dead than who has the right to appear in court? Nemo est hires viventis. No one is the heir of a living person and I would suggest, no one is the a trustee able to act on behalf of a dead trust. If the paper was successfully transferred to the trust, then perhaps the thousands of suckers who bought a RMBS are the owners. But if the paper was never successfully transferred, then the trusts and the trustees are certainly not the owners with standing. The original lenders might be but after phony documents have been created assigning the note and the mortgage to dead trusts, how could they possibly have the right of ownership?
The “myth” of the free houses was created not by consumers “oy!!” but by the very Banks who are picking up “free” houses every day by pretending to be trustees acting on behalf of dead trusts or trusts that never properly held the mortgages and notes. It is very much like Ronald Reagan calling a nuclear submarine the Corpus Christie or calling armed combatants “peacekeepers.” The “free house” was the Orwellian double speak created by Bankers for Bankers and their judicial minions and hand maidens have adopted their language very well.

—
Jake Naumer
Resolution Advisors
3187 Morgan Ford
St Louis Missouri 63116
314 961 7600
Fax Voice Mail 314 754 9086

MERS and invalid assignments

Brand New, Hot Off The Presses MERS Policy Bulletin

July 24th, 2011 | Author:

After years of claiming that assignments don’t matter and the date of assignment certainly doesn’t matter, the MERS Monster has finally changed its tune, effective July 21, 2011:

The Certifying Officer must execute the assignment of the Security Instrument from MERS before initiating foreclosure proceedings or filing Legal Proceedings and promptly send the assignment of the Security Instrument for recording in the applicable public land records

Well, harumph says I…what of all those damn post filing assignments?  What about all them specious arguments made in courtrooms all across this country that said the date of assignment didn’t matter?  What about the absurd argument that an “equitable assignment” had already occurred? (despite the fact that neither the pooling and servicing a agreement nor law permit such assignments)  For foreclosure cases already adjudged this is problematic and for all those hundreds of thousands still pending, this change in policy is exhibit #1 in the argument that a post filing assignment cannot confer standing.

This certainly ain’t “Ding Dong The Witch Is Dead”, it’s just another stanza in “Humpty Dumpty Sat on A Wall”

And all the kings horses and all the kings men couldn’t put Humpty Dumpty back together again.

Humpty Dumpty is our real property recording system that was developed over hundreds of years in this country.  A key read is Hernando Desoto’s “The Mystery of Capital” for a long explanation that our country’s success is tied largely to our real property record system that has been completely obliterated in just a few short years by all this mortgage madness.  What is most astonishing (and the biggest indictment of the whole MERS madness) is the fact that no law, legislation or court decision was ever rendered to justify the MERS system prior to its widespread implementation.  It was merely spread all across this country like a virulent virus that was transmitted and lay dormant in the property records impacting millions of homes all across America.

MERS Policy Bulletin

2924 unconstitutional ???

2924 unconstitutional  Check out this pro per complaint they raise some interesting issues.

PJATSI+Supplemental+Complaint+March+25+2011

Wrongful foreclosure and California Judge Firmat

Orange County (Cali) Superior Court Judge Firmat posted these notes on
the law and motion calendar to assist attorneys pleading various
theories in wrongful foreclosure cases etc.  Some interesting
points….

FOOTNOTES TO DEPT. C-15 LAW AND MOTION CALENDARS

Note 1 – Cause of Action Under CCC § 2923.5, Post Trustee’s Sale –
There is no private right of action under Section 2923.5 once the
trustee’s sale has occurred.  The “only remedy available under the
Section is a postponement of the sale before it happens.”  Mabry v.
Superior  Court, 185 Cal. App. 4th 208, 235 (2010).

Note 2 – Cause of Action Under CCC § 2923.6 – There is no private
right of action under Section 2923.6, and it does not operate
substantively.  Mabry v. Superior Court, 185 Cal. App. 4th 208,
222-223 (2010).  “Section 2923.6 merely expresses the hope that
lenders will offer loan modifications on certain terms.”  Id. at 222.

Note 3 – Cause of Action for Violation of CCC §§ 2923.52 and / or
2923.53 – There is no private right of action.  Vuki v. Superior
Court, 189 Cal. App. 4th 791, 795 (2010).

Note 4 –  Cause of Action for Fraud, Requirement of Specificity – “To
establish a claim for fraudulent misrepresentation, the plaintiff must
prove: (1) the defendant represented to the plaintiff that an
important fact was true; (2) that representation was false; (3) the
defendant knew that the representation was false when the defendant
made it, or the defendant made the representation recklessly and
without regard for its truth; (4) the defendant intended that the
plaintiff rely on the representation; (5) the plaintiff reasonably
relied on the representation; (6) the plaintiff was harmed; and, (7)
the plaintiff’s reliance on the defendant’s representation was a
substantial factor in causing that harm to the plaintiff. Each element
in a cause of action for fraud must be factually and specifically
alleged. In a fraud claim against a corporation, a plaintiff must
allege the names of the persons who made the misrepresentations, their
authority to speak for the corporation, to whom they spoke, what they
said or wrote, and when it was said or written.”  Perlas v. GMAC
Mortg., LLC, 187 Cal. App. 4th 429, 434 (2010) (citations and
quotations omitted).

Note 5 –Fraud – Statute of Limitations- The statute of limitations for
fraud is three years.  CCP § 338(d).  To the extent Plaintiff wishes
to rely on the delayed discovery rule, Plaintiff must plead the
specific facts showing (1) the time and manner of discovery and (2)
the inability to have made earlier discovery despite reasonable
diligence.”  Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 808
(2005).

Note 6 – Cause of Action for Negligent Misrepresentation – “The
elements of negligent misrepresentation are (1) the misrepresentation
of a past or existing material fact, (2) without reasonable ground for
believing it to be true, (3) with intent to induce another’s reliance
on the fact misrepresented, (4) justifiable reliance on the
misrepresentation, and (5) resulting damage.  While there is some
conflict in the case law discussing the precise degree of
particularity required in the pleading of a claim for negligent
misrepresentation, there is a consensus that the causal elements,
particularly the allegations of reliance, must be specifically
pleaded.”  National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge
Integrated Services Group, Inc., 171 Cal. App. 4th 35, 50 (2009)
(citations and quotations omitted).

Note 7 – Cause of Action for Breach of Fiduciary Duty by Lender –
“Absent special circumstances a loan transaction is at arm’s length
and there is no fiduciary relationship between the borrower and
lender. A commercial lender pursues its own economic interests in
lending money. A lender owes no duty of care to the borrowers in
approving their loan. A lender is under no duty to determine the
borrower’s ability to repay the loan. The lender’s efforts to
determine the creditworthiness and ability to repay by a borrower are
for the lender’s protection, not the borrower’s.”  Perlas v. GMAC
Mortg., LLC, 187 Cal. App. 4th 429, 436 (2010) (citations and
quotations omitted).

Note 8 – Cause of Action for Constructive Fraud – “A relationship need
not be a fiduciary one in order to give rise to constructive fraud.
Constructive fraud also applies to nonfiduciary “confidential
relationships.” Such a confidential relationship may exist whenever a
person with justification places trust and confidence in the integrity
and fidelity of another. A confidential relation exists between two
persons when one has gained the confidence of the other and purports
to act or advise with the other’s interest in mind. A confidential
relation may exist although there is no fiduciary relation ….”
Tyler v. Children’s  Home Society, 29 Cal. App. 4th 511, 549 (1994)
(citations and quotations omitted).

Note 9 – Cause of Action for an Accounting – Generally, there is no
fiduciary duty between a lender and borrower.  Perlas v. GMAC Mortg.,
LLC, 187 Cal. App. 4th 429, 436 (2010).  Further, Plaintiff (borrower)
has not alleged any facts showing that a balance would be due from the
Defendant lender to Plaintiff.  St. James Church of Christ Holiness v.
Superior Court, 135 Cal. App. 2d 352, 359 (1955).  Any other duty to
provide an accounting only arises when a written request for one is
made prior to the NTS being recorded.  CCC § 2943(c).

Note 10 – Cause of Action for Breach of the Implied Covenant of Good
Faith and Fair Dealing – “[W]ith the exception of bad faith insurance
cases, a breach of the covenant of good faith and fair dealing permits
a recovery solely in contract.  Spinks v. Equity Residential Briarwood
Apartments, 171 Cal. App. 4th 1004, 1054 (2009).  In order to state a
cause of action for Breach of the Implied Covenant of Good Faith and
Fair Dealing, a valid contract between the parties must be alleged.
The implied covenant cannot be extended to create obligations not
contemplated by the contract.  Racine & Laramie v. Department of Parks
and Recreation, 11 Cal. App. 4th 1026, 1031-32 (1992).

Note 11 – Cause of Action for Breach of Contract – “A cause of action
for damages for breach of contract is comprised of the following
elements: (1) the contract, (2) plaintiff’s performance or excuse for
nonperformance, (3) defendant’s breach, and (4) the resulting damages
to plaintiff. It is elementary that one party to a contract cannot
compel another to perform while he himself is in default. While the
performance of an allegation can be satisfied by allegations in
general terms, excuses must be pleaded specifically.”  Durell v. Sharp
Healthcare, 183 Cal. App. 4th 1350, 1367 (2010) (citations and
quotations omitted).

Note 12 – Cause of Action for Injunctive Relief – Injunctive relief is
a remedy and not a cause of action.  Guessous v. Chrome Hearts, LLC,
179 Cal. App. 4th 1177, 1187 (2009).

Note 13 – Cause of Action for Negligence – “Under the common law,
banks ordinarily have limited duties to borrowers. Absent special
circumstances, a loan does not establish a fiduciary relationship
between a commercial bank and its debtor. Moreover, for purposes of a
negligence claim, as a general rule, 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. As explained in Sierra-Bay Fed. Land Bank
Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334, 277 Cal.Rptr.
753, “[a] commercial lender is not to be regarded as the guarantor of
a borrower’s success and is not liable for the hardships which may
befall a borrower. It is simply not tortious for a commercial lender
to lend money, take collateral, or to foreclose on collateral when a
debt is not paid. And in this state a commercial lender is privileged
to pursue its own economic interests and may properly assert its
contractual rights.”  Das v. Bank of America, N.A., 186 Cal. App. 4th
727, 740-741 (2010) (citations and quotations omitted).

Note 14 – Cause of Action to Quiet Title – To assert a cause of action
to quiet title, the complaint must be verified and meet the other
pleading requirements set forth in CCP § 761.020.

Note 15 – Causes of Action for Slander of Title – The recordation of
the Notice of Default and Notice of Trustee’s Sale are privileged
under CCC § 47, pursuant to CCC § 2924(d)(1), and the recordation of
them cannot support a cause of action for slander of title against the
trustee.  Moreover, “[i]n performing acts required by [the article
governing non-judicial foreclosures], the trustee shall incur no
liability for any good faith error resulting from reliance on
information provided in good faith by the beneficiary regarding the
nature and the amount of the default under the secured obligation,
deed of trust, or mortgage. In performing the acts required by [the
article governing nonjudicial foreclosures], a trustee shall not be
subject to [the Rosenthal Fair Debt Collection Practices Act].”  CCC §
2924(b).

Note 16 – Cause of Action for Violation of Civil Code § 1632 – Section
1632, by its terms, does not apply to loans secured by real property.
CCC § 1632(b).

Note 17 – Possession of the original promissory note – “Under Civil
Code section 2924, no party needs to physically possess the promissory
note.” Sicairos v. NDEX West, LLC, 2009 WL 385855 (S.D. Cal. 2009)
(citing CCC § 2924(a)(1); see also Lomboy v. SCME Mortgage Bankers,
2009 WL 1457738 * 12-13 (N.D. Cal. 2009) (“Under California law, a
trustee need not possess a note in order to initiate foreclosure under
a deed of trust.”).

Note 18 – Statute of Frauds, Modification of Loan Documents – An
agreement to modify a note secured by a deed of trust must be in
writing signed by the party to be charged, or it is barred by the
statute of frauds.  Secrest v. Security Nat. Mortg. Loan Trust 2002-2,
167 Cal. App. 4th 544, 552-553 (2008).

Note 19 – Statute of Frauds, Forebearance Agreement – An agreement to
forebear from foreclosing on real property under a deed of trust must
be in writing and signed by the party to be charged or it is barred by
the statute of frauds.  Secrest v. Security Nat. Mortg. Loan Trust
2002-2, 167 Cal. App. 4th 544, 552-553 (2008).

Note 20 – Tender – A borrower attacking a voidable sale must do equity
by tendering the amount owing under the loan.  The tender rule applies
to all causes of action implicitly integrated with the sale.  Arnolds
Management Corp. v. Eischen, 158 Cal. App. 3d 575, 579 (1984).

Note 21 – Cause of Action for Violation of Bus. & Prof. Code § 17200 –
“The UCL does not proscribe specific activities, but broadly prohibits
any unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising. The UCL governs
anti-competitive business practices as well as injuries to consumers,
and has as a major purpose the preservation of fair business
competition. By proscribing “any unlawful business practice,” section
17200 “borrows” violations of other laws and treats them as unlawful
practices that the unfair competition law makes independently
actionable.  Because section 17200 is written in the disjunctive, it
establishes three varieties of unfair competition-acts or practices
which are unlawful, or unfair, or fraudulent. In other words, a
practice is prohibited as “unfair” or “deceptive” even if not
“unlawful” and vice versa.”  Puentes v. Wells Fargo Home Mortg., Inc.,
160 Cal. App. 4th 638, 643-644 (2008) (citations and quotations
omitted).

“Unfair” Prong

[A]ny finding of unfairness to competitors under section 17200 [must]
be tethered to some legislatively declared policy or proof of some
actual or threatened impact on competition. We thus adopt the
following test: When a plaintiff who claims to have suffered injury
from a direct competitor’s “unfair” act or practice invokes section
17200, the word “unfair” in that section means conduct that threatens
an incipient violation of an antitrust law, or violates the policy or
spirit of one of those laws because its effects are comparable to or
the same as a violation of the law, or otherwise significantly
threatens or harms competition.

Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.,
20 Cal. 4th 163, 186-187 (1999).

“Fraudulent” Prong

The term “fraudulent” as used in section 17200 does not refer to the
common law tort of fraud but only requires a showing members of the
public are likely to be deceived. Unless the challenged conduct
targets a particular disadvantaged or vulnerable group, it is judged
by the effect it would have on a reasonable consumer.

Puentes, 160 Cal. App. 4th at 645 (citations and quotations
omitted).

“Unlawful” Prong

By proscribing “any unlawful” business practice, Business and
Professions Code section 17200 “borrows” violations of other laws and
treats them as unlawful practices that the UCL makes independently
actionable. An unlawful business practice under Business and
Professions Code section 17200 is an act or practice, committed
pursuant to business activity, that is at the same time forbidden by
law. Virtually any law -federal, state or local – can serve as a
predicate for an action under Business and Professions Code section
17200.

Hale v. Sharp Healthcare, 183 Cal. App. 4th 1373, 1382-1383 (2010)
(citations and quotations omitted).

“A plaintiff alleging unfair business practices under these statutes
must state with reasonable particularity the facts supporting the
statutory elements of the violation.”  Khoury v. Maly’s of California,
Inc., 14 Cal. App. 4th 612, 619 (1993) (citations and quotations
omitted).

Note 22 – Cause of Action for Intentional Infliction of Emotional
Distress –  Collection of amounts due under a loan or restructuring a
loan in a way that remains difficult for the borrower to repay is not
“outrageous” conduct.  Price v. Wells Fargo Bank, 213 Cal. App. 3d
465, 486 (1989).

Note 23 – Cause of Action for Negligent Infliction of Emotional
Distress – Emotional distress damages are not recoverable where the
emotional distress arises solely from property damage or economic
injury to the plaintiff.  Butler-Rupp v. Lourdeaux, 134 Cal. App. 4th
1220, 1229 (2005).

Note 24 – Cause of Action for Conspiracy – There is no stand-alone
claim for conspiracy.  Applied Equipment Corp. v. Litton Saudi Arabia
Ltd., 7 Cal. 4th 503, 510-511 (1994).

Note 25 – Cause of Action for Declaratory Relief – A claim for
declaratory relief is not “proper” since the dispute has crystallized
into COA under other theories asserted in other causes of actions in
the complaint.  Cardellini v. Casey, 181 Cal. App. 3d 389, 397-398
(1986).

Note 26 – Cause of Action for Violation of the Fair Debt Collection
Practices Acts – Foreclosure activities are not considered “debt
collection” activities.  Gamboa v. Trustee Corps, 2009 WL 656285, at
*4 (N.D. Cal. March 12, 2009).

Note 27 – Duties of the Foreclosure Trustee – The foreclosure
trustee’s rights, powers and duties regarding the notice of default
and sale are strictly defined and limited by the deed of trust and
governing statutes.  The duties cannot be expanded by the Courts and
no other common law duties exist.  Diediker v. Peelle Financial Corp.,
60 Cal. App. 4th 288, 295 (1997).

Note 28 – Unopposed Demurrer – The Demurrer is sustained [w/ or w/o]
leave to amend [and the RJN granted].  Service was timely and good and
no opposition was filed.
Failure to oppose the Demurrer may be construed as having abandoned
the claims.  See, Herzberg v. County of Plumas, 133 Cal. App. 4th 1,
20 (2005) (“Plaintiffs did not oppose the County’s demurrer to this
portion of their seventh cause of action and have submitted no
argument on the issue in their briefs on appeal.  Accordingly, we deem
plaintiffs to have abandoned the issue.”).

Note 29 – Responding on the Merits Waives Any Service Defect – “It is
well settled that the appearance of a party at the hearing of a motion
and his or her opposition to the motion on its merits is a waiver of
any defects or irregularities in the notice of the motion.”  Tate v.
Superior Court, 45 Cal. App. 3d 925, 930 (1975) (citations omitted).

Note 30 – Unargued Points – “Contentions are waived when a party fails
to support them with reasoned argument and citations to authority.”
Moulton Niguel Water Dist. v. Colombo, 111 Cal. App. 4th 1210, 1215
(2003).

Note 31 – Promissory Estoppel – “The doctrine of promissory estoppel
makes a promise binding under certain circumstances, without
consideration in the usual sense of something bargained for and given
in exchange. Under this doctrine a promisor is bound when he should
reasonably expect a substantial change of position, either by act or
forbearance, in reliance on his promise, if injustice can be avoided
only by its enforcement. The vital principle is that he who by his
language or conduct leads another to do what he would not otherwise
have done shall not subject such person to loss or injury by
disappointing the expectations upon which he acted. In such a case,
although no consideration or benefit accrues to the person making the
promise, he is the author or promoter of the very condition of affairs
which stands in his way; and when this plainly appears, it is most
equitable that the court should say that they shall so stand.”  Garcia
v. World Sav., FSB, 183 Cal. App. 4th 1031, 1039-1041 (2010)
(citations quotations and footnotes omitted).

Note 32 – Res Judicata Effect of Prior UD Action – Issues of title are
very rarely tried in an unlawful detainer action and moving party has
failed to meet the burden of demonstrating that the title issue was
fully and fairly adjudicated in the underlying unlawful detainer.
Vella v. Hudgins, 20 Cal. 3d 251, 257 (1977).  The burden of proving
the elements of res judicata is on the party asserting it.  Id. The
Malkoskie case is distinguishable because, there, the unlimited
jurisdiction judge was convinced that the title issue was somehow
fully resolved by the stipulated judgment entered in the unlawful
detainer court.  Malkoskie v. Option One Mortg. Corp., 188 Cal. App.
4th 968, 972 (2010).

Note 33 – Applicability of US Bank v. Ibanez – The Ibanez case, 458
Mass. 637 (January 7, 2011), does not appear to assist Plaintiff in
this action.  First, the Court notes that this case was decided by the
Massachusetts Supreme Court, such that it is persuasive authority, and
not binding authority.  Second, the procedural posture in this case is
different than that found in a case challenging a non-judicial
foreclosure in California.  In Ibanez, the lender brought suit in the
trial court to quiet title to the property after the foreclosure sale,
with the intent of having its title recognized (essentially validating
the trustee’s sale).  As the plaintiff, the lender was required to
show it had the power and authority to foreclose, which is
established, in part, by showing that it was the holder of the
promissory note.  In this action, where the homeowner is in the role
of the plaintiff challenging the non-judicial foreclosure, the lender
need not establish that it holds the note.

Note 34 – Statutes of Limitations for TILA and RESPA Claims – For TILA
claims, the statute of limitations for actions for damages runs one
year after the loan origination.  15 U.S.C. § 1640(e).  For actions
seeking rescission, the statute of limitations is three years from
loan origination.  15 U.S.C. § 1635(f).  For RESPA, actions brought
for lack of notice of change of loan servicer have a statute of
limitation of three years from the date of the occurrence, and actions
brought for payment of kickbacks for real estate settlement services,
or the conditioning of the sale on selection of certain title services
have a statute of limitations of one year from the date of the
occurrence.  12 U.S.C. § 2614.

Yau v. Deutsche FIRST AMENDED CLASS ACTION COMPLAINT

Yau_-_complaint_First_Amended_Pleading.78103044

FIRST AMENDED CLASS ACTION COMPLAINT
Yau v. Deutsche Bank National Trust Company Americas
Request for IMMEDIATE RELIEF:

Lenore L. Albert, Esq. SBN 210876
LAW OFFICES OF LENORE ALBERT
7755 Center Avenue, Suite #1100
Huntington Beach, CA 92647
Telephone (714) 372-2264
Facsimile (419) 831-3376
Email: lenorealbert@msn.com
Attorney for Plaintiffs and the Class
EDDIE YAU, GLORIA YAU,
ROBERT H. RHOADES, NICOLE
RHOADES, STEVE BURKE, CHEN
PI AS AN INDIVIDUAL AND AS
TRUSTEE FOR THE PI TRUST
DATED MAY 17, 2004, SALIM
BENSRHIR, KIMBERLY
CHRISTENSEN, ALICE MBAABU,
CARMEN ARBALLO, ANGELA
BROWN, ANTHONY JOHNSON,
OTIS BANKS, RICHARD
APOSTOLOS, REGAN OWEN,
JENNIFER OWEN, JOANNE
ANDERSON, JEREMY JOHN DALE,
DOUGLAS L. EDMAN, and
DOUGLAS L. EDMAN and ERIC
EDMAN as trustees of the HIGH
DESERT ENTERPRISES TRUST,
on behalf of themselves and all others
similarly situated,
Plaintiffs,
vs.
DEUTSCHE BANK NATIONAL
TRUST COMPANY, DEUTSCHE
1. Breach/Unjust Enrichment
2. HAMP Breach/Unjust Enrichment
3. Breach of Contract – Third Party Ben.
4. Declaratory Relief/Default Cured
5. Declaratory Relief/Unsecured Creditor
6. Declaratory Relief/Fees and Costs
7. Fraud
8. Injunctive Relief
9. Accounting
10.Unlawful/Unfair Acts §17200
11.Fraud
12.Declaratory Relief/Injunction
[ ]
***
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CASE NO. SACV11-0006-JVS (RNBx)
Assigned for all purposes to the honorable:
James V. Selna
FIRST AMENDED CLASS ACTION
COMPLAINT
Demand for Jury Trial
FIRST AMENDED CLASS ACTION COMPLAINT
Yau v. Deutsche Bank National Trust Company Americas
TEMPORARY RESTRAINING ORDER and
INJUNCTION filed Concurrently herewith

BANK TRUST COMPANY
AMERICAS and AURORA LOAN
SERVICES, LLC, Inclusive,
Defendants.
***
FIRST AMENDED CLASS ACTION COMPLAINT
Yau v. Deutsche Bank National Trust Company Americas
Plaintiffs, by and through their attorney, bring this action on behalf of themselves
and all others similarly situated against Deutsche Bank National Trust Company
(“DBNT” or “Defendant”). Deutsche Bank Trust Company Americas (“DBTCA” or
“Defendant”) and Aurora Loan Services, LLC. (“Aurora” or “Defendant”). Plaintiffs
allege the following on information and belief, except as to those allegations which
pertain to the named Plaintiffs:
1. Plaintiffs bring this action to challenge the defendants’ manipulation and use of
the federal and state programs surrounding the mortgage crisis, such as HAMP and other
foreclosure prevention services.
2. The defendants defaulted the plaintiffs and those similarly situated then offered
them federal and state home retention programs such as Home Affordability
Modification Program agreements (HAMP).
3. After the Plaintiffs made their post default payments as requested, the
defendants never-the-less denied the permanent modification, did not cure the default or
reinstate the plaintiffs’ loans on the grounds they couldn’t get the loan to work.
4. The program guidelines state that if the Net Present Value (“NPV”) of the loan
modification is greater than the NPV at foreclosure, then the lenders modify the
loan.
1. Introduction
5. Plaintiff is informed and believes and alleges thereon that the defendants were
already made whole upon the loans because these loans were securitized with credit
default swaps (“CDS”) and other security interests, and the CDS were factored into the
NPV and not merely the amount that the defendants may receive on a foreclosure sale.
6. The securitization of their loans with CDS was never revealed to the plaintiffs
and the Class prior to their default.
7. The Court has subject matter jurisdiction over this action under 28 USC § 1331
wherein the action arises under the Constitution, laws or treaties of the United States.
8. The Court has personal jurisdiction over the defendants in this action by the
fact that the Defendants are corporations conducting business in the state of California.
9. Venue is proper in this Court pursuant to 28 USC § 1392 because the action
involves real property located in both the Central and Southern District of California; and
pursuant to 28 USC § 1391(b) inasmuch as defendant DBNT and DBTCA reside in the
Central District of California, and a substantial part of the events or omissions on which
the claims are based occurred in this District.
10.Plaintiffs Eddie Yau and Gloria Yau (the “Yaus,” “plaintiff,” “plaintiffs” or
“borrowers”) are a married couple residing in Vista, California. Plaintiff is now, and at
all times mentioned herein relevant to this complaint was the owner of real property
2. Jurisdiction and Venue
3. The Parties
commonly known as 1307 Summer Court, Vista, California 92084 (“subject property”).
Douglas L. Edman was the borrower on the loan.
11.Plaintiffs Robert Rhoades and Nicole Rhoades (the “Rhoades,” “plaintiff,” or
“borrowers”) are a married couple residing in Chino, California. Plaintiff is now, and at
all times mentioned herein relevant to this complaint was the owner of real property
commonly known as 7746 Holland Park, Chino, California 92401 (“subject property”).
Robert Rhoades was the borrower on the loan.
12.Plaintiff Steve Burke is an adult residing in Paradise, California. Plaintiff is
now, and at all times mentioned herein relevant to this complaint was the owner of real
property commonly known as 5871 Pine Circle, Paradise, California 95969 (“subject
property”). Steve Burke was the borrower on the loan.
13.Plaintiff Chen Pi, acting on her own behalf and as trustee for the Pi Trust dated
May 17, 2004 resides in La Puente California. Plaintiff is now, and at all times
mentioned herein relevant to this complaint was the owner of real property commonly
known as17116 Samgerry Dr., La Puente, California (“subject property”). Chen Pi was
the borrower on the loan.
14.Plaintiff Otis Banks is an individual residing in Inglewood, California. Plaintiff
is now, and at all times mentioned herein relevant to this complaint was the owner of real
property commonly known as 5408-5408 ½ 8TH Avenue, Los Angeles, California 90045
(“subject property”). Otis Banks was the borrower on the loan.

15.Plaintiff Salim Bensrhir and Kimberly Christensen are a married couple
residing in Los Angeles, California. Plaintiff is now, and at all times mentioned herein
relevant to this complaint was the owner of real property commonly known as 842 N
Dillon Street, Los Angeles, California 90026 (“subject property”). Salim Bensrhir and
Kimberly Christensen were the borrowers on the loan.
16.Plaintiff Alice Mbaabu is an individual residing in Fontana, California.
Plaintiff is now, and at all times mentioned herein relevant to this complaint was the
owner of real property commonly known as 13536 Whipple Street, Fontana, California
92336 (“subject property”). Alice Mbaabu was the borrower on the loan.
17.Plaintiff Carmen Arballo is an individual residing in Chino, California.
Plaintiff is now, and at all times mentioned herein relevant to this complaint was the
owner of real property commonly known as 6952 Gloria Street, Chino, California 91710
(“subject property”). Carmen Arballo was the borrower on the loan.
18.Plaintiff Angela Brown is an individual residing in Stockton, California.
Plaintiff is now, and at all times mentioned herein relevant to this complaint was the
owner of real property commonly known as 4516 Abruzzi Circle, Stockton, California
95206 (“subject property”). Angela Brown was the borrower on the loan.
19.Plaintiff Anthony Johnson is an individual is an individual residing in Corona,
California. Plaintiff is now, and at all times mentioned herein relevant to this complaint
was the owner of real property commonly known as 382 Minaret Street, Corona, CA
92881 (“subject property”). Anthony R. Johnson was the borrower on the loan.
20.Plaintiff Richard Apostolos is an individual residing in Perris, California.
Plaintiff is now, and at all times mentioned herein relevant to this complaint was the
owner of real property commonly known as 21200 Mountain Ave., Perris, California
92570 (“subject property”). Richard Apostolos was the borrower on the loan.
21.Regan Owen and Jennifer Owen are a married couple residing in Chula Vista,
California. Plaintiff is now, and at all times mentioned herein relevant to this complaint
was the owner of real property commonly known as 2872 Ranch Gate Rd., Chula Vista,
California (“subject property”). Regan Owen was the borrower on the loan.
22.Plaintiff Joanne Anderson is an individual residing in Laguna Niguel,
California. Plaintiff is now, and at all times mentioned herein relevant to this complaint
was the owner of real property commonly known as 24291 Park Pl Dr, Laguna Niguel,
CA 92677 (“subject property”). Joanne Anderson was the borrower on the loan.
23. Jeremy John Dale is an individual residing in Paynes Creek, California.
Plaintiff is now, and at all times mentioned herein relevant to this complaint was the
owner of real property commonly known as 30510 HWY 36 East, Paynes Creek,
California 96075 (“subject property”). Jeremy John Dale was the borrower on the loan.
24.Douglas L. Edman is an individual residing in Malibu, California. Plaintiff is
now, and at all times mentioned herein relevant to this complaint was the owner of real
property commonly known as 612 Thrift Road, Malibu, California 90265 (“subject
property”). Douglas L. Edman was the borrower on the loan.
25.Douglas L. Edman and Eric Edman as trustees of the HIGH DESERT
ENTERPRISES TRUST reside in Malibu, California. Plaintiff is now, and at all times
mentioned herein relevant to this complaint was the owner of real property commonly
known as 612 Thrift Road, Malibu, California 90265 (“subject property”). Douglas L.
Edman was the borrower on the loan. Then after the loan was made, the property was
transferred by Douglas L. Edman to Douglas L. Edman, Trustee of the High Desert
Enterprises Trust.
26.Defendant DEUTSCHE BANK NATIONAL TRUST COMPANY (“DBNT”
or “Custodian”) has its principal place of business at 1761 Saint Andrews Place, Santa
Ana, CA 92705.
27.Defendant DEUTSCHE BANK TRUST COMPANY AMERICAS
(“DBTCA”) has its principal place of business at 1761 Saint Andrews Place, Santa Ana,
CA 92705. When DBNT and DBTCA are mentioned together in this complaint they
may be referred to as “Deutsche Bank.”
28.Defendant AURORA LOAN SERVICES, LLC (“Aurora” or “loan servicer”) is
headquartered in Littleton, Colorado and regularly conducts business in the state of
California.

29. Plaintiffs are informed and believe and allege thereon that their loans are in
securitized trusts where the defendants are either the Servicer, Custodian, or Trustee of
that trust.
30.Plaintiff is informed and believes and alleges thereon that DBNTC and
DBTCA act as board members and are referred to as the Company each with different
duties in the trusts.
31.DBNTC and DBTCA are both subsidiaries created by nonparty Deutsche Bank
Company (“DBC”) which has its principal place of business in Germany. Plaintiff is
informed and believes and alleges thereon DBNTC and DBTCA were either acting in
concert, instructing, adopting, ratifying, assisting DBC’s conduct as alleged in this
complaint through an agency or contractual relationship. As such, the actions or failure
to act are the actions or failure to act of each other.
32.Nonparty FANNIE MAE/FREDDIE MAC (“Fannie Mae”) entered into an
agreement with defendant Aurora of which the plaintiffs and the Class were intended
beneficiaries.
33.Plaintiff is informed and believes and alleges thereon that each defendant is
responsible in some manner for the occurrences alleged in this complaint, and that
plaintiff’s damages were proximately caused by the defendants and at all times
mentioned in this complaint, were the agents, servants, representatives, and/or employees
of their co-defendants, and in doing the things hereinafter alleged were acting in the
scope of their authority as agents, servants, representatives, family members and/or
employees, and with the permission and consent of their co-defendants.
34.Additionally, plaintiff is informed and believes and alleges thereon that each
defendant assisted, aided and abetted, adopted, ratified, approved, or condoned the
actions of every other defendant and that each corporate defendant, if any, was acting as
the alter ego of the other in the acts alleged herein.
35.On March 4, 2009 President Obama signed into law the Making Home
Affordable Plan as part of the Emergency Economic Stabilization Act of 2008. It is in
two parts: the Home Affordable Refinance program (“HARP”) and the Home Affordable
Modification program (“HAMP”).
36.Under these programs, the U.S. Department of the Treasury directed the large
national bank servicers to take corrective action by providing loan modifications that
produced more sustainable loan payments.
37.On March 4, 2009 the U.S. Department of the Treasury explained,
38.With the information now available, servicers can begin immediately to modify
eligible mortgages under the Modification program so that at-risk borrowers can better
afford their payments.
39.Aurora entered into a Servicer Participation Agreement for the HAMP program
with Fannie Mae; the latter acted as Financial Agent of the United States. ( ).
3. Statutory and Regulatory Scheme
Exhibit 1

40.However, Aurora failed and refused to put Mr. Yau immediately into a
modification program until they first defaulted and gave Notice of Sale of Mr. Yau’s
home. Plaintiff is informed and believes and alleges thereon that defendant Aurora first
caused Notices of Default and Notice of Foreclosure Sale to be served on the Class prior
to placing the Class into a temporary HAMP also.
41.By March 2010, the White House fortified the HAMP program because only
borrowers out of the it was aimed at were placed in a
more affordable home loan.
42.Thereafter, the contract between Aurora and Fannie Mae was amended and
restated on or about September 1, 2010. The Amended and restated contract is attached
hereto and fully incorporated herein as .
43.The United States Treasury, Office of the Comptroller of Currency (hereinafter
the “OCC”) regulates the banking industry such as defendant Deutsche Bank. The OCC
mandated that the largest banks institute HAMP programs.
44.The Office of Thrift Supervision (hereinafter the “OTS”) regulates loan
services such as defendant Aurora.
45.According to the Aurora Loan Services – Issuer Profile dated June 24, 2008 by
Analyst Kathleen Tillwitz, Aurora Loan Services was a wholly owned subsidiary of
Lehman Brothers Bank, FSB, servicing 20,000 to 110,380 (or 21.4% of their loans) in
170,000 3 to 4 million borrowers
Exhibit 2
California. As of February 29, 2008 Aurora serviced 514,831 mortgage loans totaling
$113.2 billion dollars.
46.On 11/19/10 the OCC supplied the following written testimony:
47.HAMP guidelines now preclude the servicer from initiating a foreclosure
action until the borrower has been determined to be ineligible for a HAMP modification.
48.Aurora actions in working with the borrowers on the loans at issue in this
complaint violated and continue to violate these directives.
49.Under the contract, the Servicer of the loan must perform a Net Present Value
(NPV) Test to compare the value of the money that it would receive if the loan were
modified with the value it could expect from foreclosure.
50. If the servicer and owner of the loan can expect a greater return from modifying
the loan, the loan is considered NPV positive and the servicer and owner then
modify the loan. ( )
51. In plaintiff’s case, plaintiff is informed and believes and alleges thereon that the
defendants as the servicer and owner of the loan could have expected no more than onethird
of what the plaintiff would have paid under the HAMP loan modification which
would have been anywhere from $934,560.00 to over $1 million dollars.
52.As servicer of the loan, Aurora must modify the loan unless the contractual
agreement it has with the actual holder of the loan prohibits modification. In that case,
must
Exhibit 4
the servicer is required to use reasonable efforts to obtain waivers or approval of a
modification from the owner and/or investor
53.Plaintiff is informed and believes and alleges thereon that Aurora failed to
disclose to Fannie Mae that loans like the Yau’s which appear to nicely fit under the
program’s protected class, were actually the loans that would never become permanently
modified because these loans were backed by CDS and such. Signing up as a servicer of
the HAMP program, was a carrot to lure distressed homeowners into default.
54.The defendants signed up for exemptions with the California Commissioner for
the same reason, motive or to assist in effectuating this plan.
55.Plaintiff is informed and believes and alleges thereon defendant failed to make
these material disclosures to Fannie Mae and the California Commissioner, so the
defendants could use the guise of being able to offer these “Programs” to maximize their
own profit by luring homeowners into default, dragging out the process and obtaining
more money from the defaulted homeowner than otherwise would likely occur if the
homeowner did not have hope they may qualify for one of the foreclosure alternatives,
such as HAMP.
56. In the Yau’s case, who were initially only behind by $5,000.00, if they had
known and understood the truth to this scheme, they would have had an incentive to find
a short term loan or other capital to cure the late payment prior to default instead of
relying on their lender to place them in a foreclosure alternative program; they most
$3.86 Trillion dollars.
likely would have never entered into the mortgage in the first place; and surely would
have never paid a dime to the defendants after they gave notice of default and
foreclosure.
57.The impact of Aurora’s practice of defaulting before processing a foreclosure
alternative request by a homeowner, then dragging out the process while the homeowner
is making monthly payments and denying blocks of HAMP modifications after obtaining
a temporary modification is nothing more than a financial “Death Spiral” for the
homeowner.
58.At all times herein mentioned, plaintiff and the Class believed that they were
eligible for HAMP.
59.Although the plaintiffs and the Class complied with the terms of the post
default program agreements, Defendants refused to cure the default, offer such a
permanent modification under the program or to take corrective action by providing loan
modifications that produced more sustainable loan payments to plaintiff.
60.The market size for credit default swaps by 2008 in the United States was
estimated to be Dodd- Frank Wall Street Reform and Consumer Protection Act
Critics assert that naked CDS should be banned, comparing them to
buying fire insurance on your neighbor’s house, which creates a huge
incentive for arson.1 [emphasis added]
61. In essence the defendants bet against the borrower from the beginning then
used the Federal Government through the federal HAMP program to take even more
money from the defaulting homeowner in this class knowing that they would never grant
this class of homeowners a permanent loan modification or any other type of relief. The
defendants never fully disclosed or adequately explained this to Fannie Mae/Freddie
Mac. The entire program failed to the assist the very class of homeowners it was
intended to protect.
62.On or about February 2, 2011 the Securities and Exchange Commission started
accepting comment on creating an exchange called “Swap Execution Facilities” under
the in order to create
greater transparency with Credit Default Swaps which the SEC refers to as “Security
Based Swaps.”
63.The plaintiffs and the Class in this Complaint are the class of homeowners
these federal and state programs, including the HAMP program were intended to protect.
64.The plaintiffs and the Class were led to believe that they would have the
opportunity to cure their default and be reinstated, but no matter how much they paid the
defendants each month or what they signed, it never happened and they were kept in
constant foreclosure status the entire time while doling out money and their private
financial information to the defendants.
65.Plaintiff alleges defendants intended to, did and still continue to use these
Programs to manipulate more money from the Plaintiffs and the Class.
66.After obtaining the agreements with Fannie Mae and the California
Commissioner, the defendants used the guise of offering these “Programs” to lure
homeowners into default, drag out the process and confuse the homeowners on the type
of alternative temporary program they were placing the homeowner in just to get them to
shell out more money to the defendants after a Notice of Default and Notice of Sale was
filed and served.
67.Plaintiff is informed and believes and alleges thereon that defendant Aurora
knew or had reason to know that defendant Deutsche Bank bought credit default swaps
or other types investment security/insurance that were either worth more than making the
loan modifications permanent prior to default on these blocks of homes when entering to
the contract with Fannie Mae or defendants failed to properly calculate the Net Present
Value (“NPV”) on these loan modifications. But Aurora never disclosed these facts to
Fannie Mae/Freddie Mac.
68.Plaintiff is informed and believes and alleges thereon that these CD swaps and
other financial arrangements and the NPV calculations as applied to these asset-backed
loans were material facts and as such Defendants had a duty to disclose these material
facts under the agreement with Fannie Mae/Freddie Mac or comply with the terms with
regard to NPV calculations.
69.Even if such material facts were disclosed to Fannie Mae/Freddie Mac, these
material facts were never disclosed to the intended beneficiaries of the agreements
between Fannie Mae/Freddie Mac and Aurora, the plaintiffs and the Class.
70. If it is later interpreted that the facts were disclosed to Fannie Mae/Freddie Mac
but the defendants were forbidden from using the gains they could expect to receive from
the CDS by defaulting the homeowners, then the plaintiffs allege that the defendants
breached that covenant to the injury of the plaintiffs.
71.As intended beneficiaries of the agreements between Fannie Mae/Freddie Mac
and Aurora, the Plaintiffs and the Class were injured due to the failure to disclose these
material facts and/or comply with the terms of the agreement.
72. The impact of defendants’ practice and/or scheme as more fully described
below was nothing more than a financial “Death Spiral” to the borrower resulting in
making extortion like payments after giving a complete disclosure of their remaining
financial assets, and allowing their credit to be decimated or face foreclosure sale.
73.And even if these borrowers had the ability to reinstate their loans, under this
scheme the proceeds the defendants received on default would not be applied to the loan
but become a windfall to the defendants, still leaving the homeowner’s credit and
financial health badly battered, making the entire scheme outrageous, despicable and
deserving of punitive or exemplary damages.
74.The plaintiffs each received a written agreement such as a temporary HAMP
agreement after default appearing to give the plaintiffs an opportunity to save their home
if they made the requested payments.
75.Plaintiffs and those similarly situated made all payments, however the
defendants did not cure the default, reinstate the loan or permanently modify the loan.
76.Plaintiff is informed and believes and alleges thereon that at all times
mentioned in this complaint, the defendants knew California was not a deficiency
judgment state and understood their actions of collecting payment after default without
cure or reinstatement was unlawful.
77.Yet, the defendants collected money from the plaintiffs before satisfying the
debt with the security.
78.Mr. Burke has paid the defendants approximately $20,279.00 since the Notice
of Default dated 9/16/08 originally for $6,312.74.
79.Plaintiff, Mr. Apostolos has paid $27,928.00 after his Notice of Default dated
6/7/10 in the amount of $33,014.53 and turned over approximately $7,000.00 payments
to his attorney to be held in trust for payments on his home.
4. General Factual Allegations
80.Plaintiff Ms. Brown has paid the defendants approximately $24,728.00 after
her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also placed
additional payments in trust with her attorney and/or deposited with the court.
81.Plaintiff Mr. Salem Benshir and Kimberly Christensen has paid the defendants
approximately $51,991.25 after their Notice of Default dated 11/16/08 in the amount of
$10,495.23.
82.Plaintiff Regan Owens and Jennifer Owens paid the defendants approximately
$38,059.00 after their Notice of Default dated 3/10/09 in the amount of $27,371.99.
83.Plaintiff Ms. Chen Pi has paid the defendants approximately $24,728.00 after
her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also placed
additional payments in trust with her attorney and/or deposited with the court.
84.Plaintiff Ms. Alice Mbaabu has paid the defendants approximately $24,728.00
after her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also placed
additional payments in trust with her attorney and/or deposited with the court.
85.Plaintiff Ms. Carmen Arballo has paid the defendants approximately
$24,728.00 after her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also
placed additional payments in trust with her attorney and/or deposited with the court.
86.Plaintiff Mr. Anthony Johnson has paid the defendants approximately
$24,728.00 after her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also
placed additional payments in trust with her attorney and/or deposited with the court.
87.Plaintiff Mr. Otis Banks has paid the defendants approximately $24,728.00
after her Notice of Default dated 2/14/09 in the amount of $5,899.60 and also placed
additional payments in trust with her attorney and/or deposited with the court.
88. In fact, each of the named plaintiffs and those similarly situated have entered
into agreements with the defendants after default and tendered payments as requested.
89. In 2009, 632,573 California properties had some type of foreclosure filed on its
property record.2
90.According to a California Consumer Banking article dated December 13, 2010,
the outlook for 2011 is worse.
91.The number of foreclosures is expected to increase in 2011 as more mortgage
defaults work their way through the pipeline. Rick Sharga, a senior vice president for
RealtyTrac, said there were approximately 1.2 million bank repossessions in 2010,
900,000 in 2009, and “We expect we will top both of those numbers in 2011,” he said.3
92.Quality Loan Service Corporation, agent of defendant Aurora Loan Services,
LLC recorded over foreclosure type filings in in 2010
alone.
93.Recently, the Attorney General of Arizona was quoted by Business Week as
stating
What I’m most angry about is the simultaneous modifications and
foreclosures… We need to look for a stipulated judgment in all 50 states,
that if someone is in modification, they can’t be foreclosed.
(www.businessweek.com/news/2010-10-28/arizona-seeks-changes-tobanks-
home-loan-modification-process.html).
94.The plaintiffs and the Class were led to believe that they would have an
opportunity to cure their default, receive a modification and have their loan reinstated,
but no matter how much they paid the defendants each month or what they signed, it
never happened. Attached hereto and fully incorporated herein as is a true and
correct copy of the Yaus’ Temporary HAMP Agreement.
95.Some plaintiffs signed temporary modification agreements, others were
actually placed in limited modification Special Forbearance agreements, and some were
placed in both after notice of default.
96. Defendant Aurora contracted with Fannie Mae to provide foreclosure
prevention services intending to benefit homeowners with affordable loan modifications.
In return Aurora would be compensated over in taxpayer funds as
incentive to do so. Attached hereto and fully incorporated herein as is a true
and correct copy of the original Agreement between Aurora and Fannie Mae.
Exhibit 3
$2.873 Billion dollars
Exhibit 1
97.Plaintiff is informed and believes and alleges thereon that Aurora Loan
Services made and/or is making more money on defaults and/or foreclosures than on the
loan modifications and knew it would do so when entering into the contract with Fannie
Mae.
98.Plaintiff is informed and believes and alleges thereon that defendant Aurora
knew or had reason to know that defendant Deutsche Bank bought credit default swaps
or other types investment security/insurance that were either worth more than making the
loan modifications permanent prior to default on these blocks of homes when entering to
the contract with Fannie Mae or they failed to report the way they were calculating NPV
under the agreement. But Aurora never disclosed these facts to Fannie Mae.
99.Plaintiff is informed and believes and alleges thereon that these CDS and other
financial arrangements were material facts and as such Defendants had a duty to disclose
these material facts under the agreement or the NPV calculations violated the terms of
the agreement with Fannie Mae/Freddie Mac. Attached hereto and fully incorporated
herein as is a true and correct copy of the March 4, 2009 Home Affordable
Modification Program Guidelines including the NPV calculations.
100. But defendants never disclosed or adequately explained these material facts.
101. Assistant Treasury Secretary Herbert M. Allison admitted that modifying
mortgages has been more difficult than administration officials had anticipated.”
Exhibit 4
FIRST AMENDED CLASS ACTION COMPLAINT
Yau v. Deutsche Bank National Trust Company Americas

“Certainly we’ve seen a lot of frustration with this program since its
inception,” he told lawmakers. “We did not fully envision the
challenges we would encounter.” (http://rismedia.com/2010-03-
28/white-house-to-adjust-troubled-mortgage-modification-program/)
102. Section 5 of the Servicer agreement between Aurora and Fannie Mae
contains the representations, warranties and covenants which state in part:
(b) Servicer is in compliance with, and covenants that all
Services will be performed in compliance with all applicable
Federal, state and local law, regulations, regulatory guidance,
statutes, ordinances, codes and requirements, including, but not
limited to, the Truth in Lending Act, 15 USC 1601 et seq., the
home Ownership and Equity Protection Act, 15 USC 1639, the
Federal Trade Commission Act, 15 USC 41 et seq., the Equal
Credit Opportunity Act, 15 USC 701 et seq., the Fair Credit
Reporting Act, 15 USC 1681 et seq., the fair Housing Act and
other Federal and state laws designed to prevent unfair,
discriminatory or predatory lending practices and all applicable
laws governing tenant rights…Servicer is not aware of any
other legal or financial impediments to performing its
obligations under the Program in which Servicer participates or
the Agreement and shall promptly notify Fannie Mae of any
financial and/or operational impediments which may impair its
ability to perform its obligations under such Programs or the
Agreement…
(c) Servicer covenants that:…all data …that is relied upon by
Fannie Mae or Freddie Mac in calculating the Purchase Price or
in performing any compliance review will be true, complete and
accurate in all material respects, and consistent with all relevant
business records, as and when provided.
(d) Servicer covenants that it will(i) perform the Services
required under the Program Documentation and the Agreement
in accordance with the practices, high professional standards of
care, and degree of attention used in a well-managed
operation…

(f) Servicer acknowledges that the provision of false or
misleading information to Fannie Mae or Freddie mac in
connection with any of the Programs or pursuant to the
Agreement may constitute a violation of: (a) Federal criminal
law involving fraud, conflict of interest, bribery, or gratuity
violations found in Title 18 of the United States Code; or (b) the
civil False Claims Act (31 USC § 3729-3733). Servicer
covenants to disclose to Fannie Mae and Freddie Mac any
credible evidence, in connection with the Servicers, that a
management official, employee, or contractor of Servicer has
committed, or may have committed, a violation of the
referenced statutes.
(g) Servicer covenants to disclose to Fannie Mae and Freddie
Mac any other facts or information that the Treasury, Fannie
Mae or Freddie Mac should reasonably expect to know about
Servicer and its contractors to help protect the reputational
interests of the Treasury, Fannie Mae and Freddie Mac in
managing and monitoring the Programs in which Servicer
participates.” ( page A-2 to A-4 ; Exhibit 2 page B-3
to B-4)
103. Plaintiff alleges that defendants breached these covenents.
104. Defendants used the offering of the federal HAMP Program as an incentive
to get the homeowners to default on their loans which would trigger payment on the CDS
without any care about placing the homeowners at risk of a foreclosure sale and then
have the homeowners like the plaintiffs in this case continue to make monthly payments
on them while in default facing a foreclosure sale all to the defendants’ financial benefit.
105. On July 7, 2007 plaintiff Eddie Yau borrowed $608,000.00 from
Homecomings Financial, LLC on a 30 year negative adjustable rate note to purchase his
Exhibit 1
8. Factual Allegations of the Yaus Repesenting the HAMP Subclass
home where he lives with his wife. His payments were supposed to be fixed at $2,402.34
per month for the first five years of the loan.
106. Mr. Yau, a retired military veteran and mechanic, has no mortgage or home
lending financial experience beyond basic financial matters.
107. Plaintiff, as trustor, executed and delivered a deed of trust, conveying the
real property described herein to secure payment of the principal sum and interest as
provided in the note and as part of the same transaction to Homecomings Financial, LLC
which was then later assigned, sold or transferred by the lender to either DBNT or
DBTCA as beneficiary and serviced by defendant Aurora.
108. Mr. Yau missed his July 2008 payment and telephoned defendant Aurora
Loan Services and explained he was experiencing financial difficulties due to a decrease
in his income and inquired as to alternatives to foreclosure.
109. On or about September 24, 2008 defendant Aurora Loan Services sent a
letter explaining the following programs it offered and that by entering into the programs
the borrower “will avoid the loss of your home through foreclosure or further impairment
on your credit.”
“Repayment Plan: If you recently experienced a temporary reduction
in income or an increase in living expenses, a repayment plan will
allow you to repay the past due amount over a specified period of
time.
Forbearance Plan: You may be able to suspend or reduce your
mortgage payments for a short period of time. Thereafter, we would
review your current financial situation and determine what home
retention option would best assist you in bringing your loan current.
Loan Modification: A loan modification may offer you the ability to
change on or more of the terms of your mortgage. This may assist
you with providing an affordable payment and avoiding foreclosure.
Again, we would need to review your financial situation and ability to
pay. If your loan is current and you anticipate that you may have
difficulty in making the increased monthly payment, we may be able
to assist you with a loan modification that will provide you with an
affordable payment based on your current financial information.
110. Then on December 02, 2008 defendant Aurora Loan Services wrote Mr.
Yau which stated:
“Based upon the information that you provided during your telephone
conversation with Aurora, your loan may qualify for a loan
modification….You must provide documentation to support your
inability to reinstate the mortgage loan in one lump sum…under some
circumstances,
111. Then on December 19, 2008 Aurora Loan Services sent Mr. Yau a letter
noting Mr. Yau’s was in default in the amount of $4,828.68 and that
“If you do not bring your loan current within thirty (30) days of the
date of this letter, Aurora Loan Services may demand the entire
balance outstanding under the terms of your Mortgage/Deed of Trust.”
112. Aurora then followed up with the same letter of September 24, 2008 again
on December 24, 2008 and January 20, 2009.
113. Instead of sending Mr. Yau a loan modification plan, defendant Aurora
Loan Services sent him a Repayment Agreement expecting him to pay an additional
$802.78 per month ($3,207.12 per month for 6 months) which equaled a 33% increase in
you may be expected to pay a loan modification fee.”
[Emphasis added]
his monthly mortgage payment. This payment plan did not create a “more sustainable
payment plan.”
114. In 2009 the Yau’s financial situation became worse as their investments
were depleted from what was later characterized as a “Ponzi scheme.”
115. From that time up to June 2009, plaintiff would telephone defendant Aurora
seeking a modification and Aurora would take down information representing the
defendants would start the process, but the process was never started.
116. Mrs. Yau spoke to a person at Aurora Loan Services named Steve who
promised that someone from Aurora Loan Services would call them back no later than
June 1st about the Making Home Affordable Loan Program.
117. On June 16, 2009 defendant caused to be served and recorded a purported
Notice of Default and Election to Sell under Deed of Trust (NOD) alleging (a) that a
breach of the obligation secured by the deed of trust had occurred, consisting of Mr.
Yau’s failure to pay $12,655.67 as of 6/15/09, and (b) that the defendant, as beneficiary,
elected to sell, or to cause to be sold, the property to satisfy that obligation.4
4 However, that Notice of Default was outside the chain of title because Lawyers Title Company, as
the original trustee and Mortgage Electronic Registration Systems, Inc. as the nominee did not
assign this right until June 24, 2009. Attached hereto and fully incorporated herein as is a
true and correct copy of the Assignment to Quality Loan Service which was not notarized until
6/24/09.
Exhibit 8

118. A few months later defendant Aurora Loan Services faxed a “customized
Home Affordable Modification Trial Period Plan (“Trial Period Plan”)” under HAMP
wherein Mr. Yau was supposed to make payments of $1,943.70 on 10/01/09, 11/01/09,
and 12/01/09.
119. The temporary HAMP agreement which is incorporated herein stated in part
“If I comply with the requirements in Section 2 and my
representations in Section 1 continue to be true in all material
respects, the Lender will send me a Modification Agreement for my
signature which will modify my Loan Documents as necessary to
reflect this new payment amount and waive any unpaid late charges
accrued to date.”
120. Aurora promised:
“If you qualify under the federal government’s Home Affordable
Modification program and comply with the terms of the Trial Period
Plan, we will modify your mortgage loan and you can avoid
foreclosure.”
121. These terms are boilerplate in all such agreements received by the coplaintiffs
and the class.
122. Mr. Yau believed he was eligible for HAMP and made the payments as laid
out in the agreement under Section 2, provided the necessary documents and his
representations in Section 1 continued to be true in all material respects, yet defendant
Aurora Loan Services failed and refused to send the Modification Agreement for him to
sign, or to cure the default and reinstate the loan.
123. On or about March 6, 2010 defendant Aurora Loan Services sent a letter to
Mr. Yau explaining,
“Unfortunately, we are unable to offer you a Home Affordable
Modification for the following reasons: Excessive Forbearance. We
are unable to offer you a Home Affordable Modification because we
are unable to create an affordable payment equal to 31% of your
reported monthly gross income without changing the terms loan
beyond the requirements of the program.”
124. Defendant’s representation in that letter was false. According to Aurora
Loan Service’s Customer Account Activity Statement the principal balance on the loan
was at $643,178.83 when he entered the temporary payment plan.
125. The contract required Aurora to place the Yaus into a permanent
modification if the NPV was greater under modification than a foreclosure sale. Plaintiffs
allege the defendants breached by failing to place them in the permanent modification.
126. Plaintiff is informed and believes and alleges thereon that Plaintiff’s home
at foreclosure would not have resulted in a sale in excess of the NPV of the modification.
127. Plaintiff through counsel, demanded defendant’s calculations used to deny
plaintiff’s modification and NPV. To date, defendant failed to provide plaintiff with a
HAMP-compliant modification or any documentation showing its calculations to justify
why a permanent modification was not offered to Plaintiff.
128. Mr. Yau’s loan accelerated from $643,178.83 to $649,482.15 during the
interim.
129. Along with the notice that Mr. Yau did not qualify for the loan modification,
defendant Aurora stated that Mr. Yau may qualify for other foreclosure alternatives such
as “Repayment Plan: allows you to repay the past due amount over a
specified period of time.
Forbearance Plan: allows you to suspend or reduce your mortgage
payments for a short period of time until a long term solution is
available.
Loan Modification: allows us to modify one or more of your original
mortgage terms which will provide you with an affordable payment
based on your current financial information.
Pre-foreclosure Sale (short sale): allows you to sell your property,
pay off your mortgage for an amount less than total pay off to avoid
foreclosure and minimize damage to your credit rating.
Deed in lieu of foreclosure: allows you to voluntarily deed your
property to Aurora Loan Services to payoff your mortgage. Taking
this action may not save your home, but it may help your ability to
qualify for another mortgage in the future.”
130. The Yaus telephoned Aurora and were assured that the defendants would
work with the Yaus and that they could cure their default by having the lender
temporarily forebear the terms of the agreement so that the Yaus could catch up.
131. Consequently, Mr. Yau continued making monthly payments on his home
and entered into a Special Forbearance Plan with defendant Aurora when they sent him
the application to sign.
132. On or about April 7. 2010 Defendant Aurora sent Plaintiffs a letter stating it
had enclosed a “Special Forbearance Agreement which has been prepared on your
behalf.” On page 2 of the agreement it stated “WHEREAS, customer has requested and
Lender has agreed to allow Customer to repay the Arrearage pursuant to a loan work-out
arrangement on the terms set forth herein.”
133. However, there was no real consideration and the agreement was illusory
because the Lender had been given the right to proceed with a foreclosure sale during the
term of the agreement at its discretion and the terms never gave the Yaus an opportunity
to repay the arrearage.
134. The Plan was not the same as advertised in its prior letters to Mr. Yau or as
represented on the telephone. The forbearance Plan did not allow Mr. Yau to suspend or
reduce his mortgage payments for a short period of time until a long term solution was
available.
135. Mr. Yau made the required $4,804.72 initial payment and monthly
payments of $2,875.00 but he was only getting further in debt.
136. The true facts were that his payments were increased to $2,875.00 per
month and no other terms of his loan were modified or suspended during the forbearance
period. He was still in default and the foreclosure sales were still pending.
137. Furthermore, the terms of the Agreement violated California law.
138. Mr.Yau continued to make the $2,875.00 monthly payments until this action
was filed.
139. Instead of putting Mr. Yau into a temporary modification, they delayed
processing, requesting the same documents they already had over and over again.
140. As a result of defendants’ unlawful practices, unfair acts and failure to place
Mr. Yau into a permanent HAMP loan modification on December 1, 2009, his loan as of
October 10, 2010 approached the HAMP cap.
Total Unpaid principal $664,711.59
Interest from 12/1/09 to 10/10/10 47,916.49
Escrow/Impound Overdraft 12,983.09
Corporate advance 3,652.84
Unpaid Late Charges 120.12
Recording Fee 37.00
Suspense Balance -2,345.75
Total: $727,075.38
141. On November 5, 2010 defendant Aurora sent notice that it intended on
increasing Mr. Yau’s monthly loan payment to $5,466.57 on 3/01/11.
142. Defendant then notified Mr. Yau it intended to sell his home on 12/13/10.
143. From September 2008 when Mr. Yau was behind by approximately
$5,000.00 through present plaintiff has paid defendants approximately $54,293.08. This
is very close to the amount he would have paid the defendants if he had never defaulted
on the loan in the first place ($2402.34*24 months = $57,656.16).
144. Plaintiff further alleges the defendants were deceptive and unlawful in their
handling of the loans and business practices. Examples in the Yaus’ case, include but are
not limited to the fact that defendant has not rescinded the Notice of Default or Notice of
foreclosure sale although the Notice was filed before Quality Loan Services received
assignment and as such is outside the chain of title. Failing to send the plaintiffs a loan
modification application until after they filed a Notice of Default. Additionally, flood
hazard insurance was not required on the Yaus loan but the defendants charged Mr. Yau
$1592.00 for flood hazard insurance after the loan went into default in addition to other
fees and charges for allegedly driving by the home and such. Also, Defendant obtained
an exemption to allow defendant Aurora to offer modifications and other programs in
excess of 38% of the borrower’s income from the California Commissioner but
defendant never notified plaintiff of that fact as required under California law and never
took the foreclosure off of the home when it was notified of this failure to notify.
Defendants failed and refused to request partition even after being notified only Mr. Yau
was on the Note and Mrs. Yau at most was a trustee and was given no consideration for
her name to be placed on their filed recordings as a “co-borrower” for non-judicial
foreclosure purposes.
5. Factual Allegations of Mr. Edman representing the Forebearance Class
145. Mr. Edman obtained a loan to build a home on his land in Malibu,
California.
146. On or about 12/07/06, for valuable consideration, plaintiff, as borrower
made, executed and delivered to his original lender a written promissory note in the
amount of $850,000.00, a true and correct copy of which is attached as and
incorporated by reference herein.
147. According to the terms of the Note, Mr. Edman was required to pay
$3,141.77 per month for the first five (5) years.
148. Plaintiff, as trustor, executed and delivered a deed of trust, conveying the
real property described herein to secure payment of the principal sum and interest as
provided in the note and as part of the same transaction which was then transferred to
defendant, as beneficiary.
149. Said deed of trust was recorded against the subject property in the Official
Records in Los Angeles County, California, a true and correct copy of which is attached
as and incorporated by reference herein.
150. On or about 1/14/09, defendant caused to be recorded a notice of default
and election to sell in the Official Records in Los Angeles, County, California alleging
(a) that a breach of the obligation secured by the deed of trust had occurred, consisting
of plaintiff’s alleged failure to pay $14,267.35 as of 1/13/09, and (b) that the defendant,
as beneficiary, elected to sell, or to cause to be sold, the trust property to satisfy that
Exhibit 10
Exhibit B

obligation, a true and correct copy of which is attached as and incorporated
by reference herein.
151. A week later on or about 1/23/09, defendants delivered a document to Mr.
Edman which represented a “Special Forbearance Agreement [] has been prepared on
your behalf.”
“WHEREAS, customer has requested and Lender has agreed to allow Customer to
repay the Arrearage pursuant to a loan work-out arrangement on the terms set forth
herein…NOW, THEREFORE…Lender shall forbear from exercising any or all of its
rights and remedies..” [pg 2]
“The amount of each Plan payment specified above includes both (1) the regularly
scheduled monthly payment, plus (2) the portion of the Arrearage specified above…
in the event Customer cures the Arrearage by making all Plan payments on or before
the Expiration Date, and is current with the payments then due, and no default then
exists under the Loan Documents and Agreement, Lender shall consider the Note
and Security Instrument to be current and in effect according to their original terms
and conditions.” Attached hereto and fully incorporated herein as is a
true and correct copy of the Special Forbearance Agreement entered into postdefault.
152. Consequently, Mr. Edman made the monthly payments on his home and
entered into a Special Forbearance Plan with defendant Aurora.
Exhibit 11
Exhibit 12

concert therewith after default, but whose default was not cured and loan was not
reinstated by defendants after plaintiff tendered the requested payments.
California homeowners who were denied permanent HAMP loan
agreements after entering in a temporary HAMP agreement with
defendant Aurora whose loans are held by DBNT as Custodian, and
making their payments as requested under the temporary HAMP
agreement.
California homeowners who were denied permanent HAMP loan
agreements after entering in a temporary limited modification Special
Forbearance agreement with defendant Aurora whose loans are held
by DBNT as Custodian, and making their payments as requested
under the temporary HAMP agreement.
159. Excluded from the Class are governmental entities, defendants, and their
affiliates, subsidiaries, current or former employees, officers, directors, agents,
representatives, their family members, the members of this Court and its staff.
160. Defendants subjected plaintiffs and each of their respective Classes to the
same unfair, unlawful and deceptive practices and harmed them in the same manner.
Now plaintiffs and each of their respective Classes seek to enforce the same rights and
remedies under the same substantive law.
161. Plaintiffs do not know the exact size or identities of the members of the
proposed class, since such information is in the exclusive control of the Defendants.
Plaintiffs believe that the Class encompasses over 41 individuals California homeowners
HAMP Subclass:
Forbearance Subclass:

which could reach into the thousands whose identities can be readily ascertained from
Defendant’s books and records. Defendants filed over 4,000 foreclosure documents with
the Orange County Recorder’s office in 2010 alone. Therefore, the proposed Class are so
numerous that joinder of all members is impracticable.
162. Based on the market value of these homes in foreclosure and the size of the
payments made by the Class members under the temporary HAMP agreements and
thereafter, plaintiffs believe the amount in controversy could range anywhere from
$1,250,000 for the first 25 members to over $2 billion dollars for the entire anticipated
class.
163. All members of the Class have been subject to and affected by the same
conduct. The claims are based on wrongfully forcing the Class into default before
implementing a written foreclosure alternative program then wrongfully failing to cure
the default, reinstate the loan or permanently modifying the loan under HAMP and other
government programs after the Class made the payments as requested.
164. There are questions of law and fact that are common to the Class, and
predominate over any questions affecting only individual members of the Class. These
questions include, but are not limited to the following:
a. The validity of the contracts at issue in this case (
(5th Cir 1985) 759 F2d 466, 471);
See, Black Gold Marine,
Inc. v Jackson Marine Co.
b. The nature, scope and operation of defendants’ obligations to the borrowers
under the Servicer Participation Agreements entered into between Aurora
and Fannie Mae ( . (2nd Cir
1986) 799 F.2d 851, 856);
c. Whether the defendants must now be reclassified as unsecured creditors.
d. Whether the plaintiffs have cured their defaults and are entitled to
reconveyance upon payments of subsequent sums due and owing, if any.
e. Whether plaintiffs are entitled to reconveyance of their deeds.
f. The defendants’ obligations to the borrowers when the borrower holds a
CDS or some similar type of security/insurance against default on the
borrower’s loan;
g. Whether the existence of a CDS or similar type of security/insurance to a
borrower should be disclosed at the time the borrower signs the promissory
note and mortgage or as soon as the lender obtains a CDS contract that
could cover the loan.
h. Whether the failure to disclose the existence of a CDS or similar type of
security/insurance to a borrower before default is a breach of good faith and
fair dealing;
See, Topps Chewing Gum, Inc. v Fleer Corp
i. The Class’ right to terminate and rescind the contracts at issue in this action
( . (2nd
Cir. 1994) 17 F3d 38, 39-40).
j. The nature, scope and operation of defendants’ obligations to the borrowers
under the temporary HAMP agreements;
k. Whether the temporary HAMP agreements created any legally binding
obligation on the defendants;
l. Whether the agreements entered into by the borrowers after they were
denied a permanent HAMP agreement were void ab initio for failure or
partial failure of consideration;
m. Whether the agreements entered into by the borrowers after they were
denied a permanent HAMP agreement were illusory;
n. Whether the promissory note and mortgage agreements entered into by the
borrowers after the owner purchased a CDS or similar security/insurance
were void ab initio for failure to disclose this adverse interest or partial
failure of consideration;
o. Whether defendants actions failed to take corrective action by providing
loan modifications that produced more sustainable loan payments;
p. Whether the plaintiffs and the Class (“borrowers’”) payments after the
Notice of Default were the result of fraud of duress;
See, Leisure Time Productions, B.V. v Columbia Pictures Indus. Inc

q. Whether Aurora violated California law by using false, deceptive, and
misleading statements and omission in connection their collection of
Plaintiffs’ and the Class’s mortgage debt;
r. Whether defendants actions or failure to act constituted a breach of their
obligation of good faith and fair dealing;
s. Whether contracts implied in fact were created when Aurora required the
borrowers to continue to make payments after the temporary HAMP
agreement expired;
t. Whether Aurora was required to rescind or otherwise nullify the pending
foreclosure proceedings for all borrowers who were still being considered
for a HAMP modification after the OCC stated “HAMP guidelines now
preclude a servicer from initiating a foreclosure action until the borrower
has been deemed ineligible for a HAMP modification.”
u. Whether the disclosure of the credit default swaps or other types of
investment security/insurance were “material” under federal law;
v. Whether the plaintiff and the Class members are intended beneficiaries of
the agreement between defendant Aurora and Fannie Mae/Freddie Mac;
w. Whether defendant Aurora breached its agreement with Fannie Mae/Freddie
Mac;
x. Whether defendant Aurora failed to disclose a material fact to Fannie
Mae/Freddie Mac as required under its contract with them to the detriment
of its intended beneficiaries;
y. Whether defendants conduct as described in this Complaint constituted
fraud or duress;
z. Whether defendants were unjustly enriched;
aa.Whether defendants acts and practices described herein constitute unfair or
deceptive business practices under California Unfair Competition Law
(“UCL”)
bb.Whether injunctive relief is appropriate
cc.Whether specific performance is appropriate
dd.Whether punitive or exemplary damages are appropriate
165. The claims of the individual named Plaintiffs are typical of the claims of the
Class and do not conflict with the interests of any other members of the Class in that both
the Plaintiffs and the other members of the Class’ loans were all securitized in vehicles
that had default and other types of swaps placed on them, they were subjected to the
same conduct, the same terms, and tendered payments to the defendants after being
served with a Notice of Default pursuant to a post default foreclosure alternative
program.
166. The individually named Plaintiffs will fairly and adequately protect the
interests of the Class. They are committed to the vigorous prosecution of the Class’
claims and have retained attorneys who are qualified to pursue this litigation.
167. A class action is superior to other methods for the fast and efficient
adjudication of this controversy. A class action regarding the issues in this case does not
create any problems of manageability.
168. The putative class action meets the requirements of Federal Rules of Civil
Procedure 23(b)(2) and 23(b)(3).
169. The nature of notice to the proposed class required and/or contemplated is
the best practicable method possible and contemplated the defendant’s list when
disclosed would most likely be mailing to the property addresses affected by the filed
foreclosures and internet and other general notices are contemplated to ensure notice.
170. Defendants have acted or refused to act on grounds that apply generally to
the Class so that final injunctive relief or corresponding declaratory relief is appropriate
respecting the Class as a whole.
7. Claims for Relief
FIRST CAUSE OF ACTION
Breach of Contract/Unjust Enrichment
(All Plaintiffs and Classes against All Defendants)
171. Plaintiff incorporates the allegations in paragraphs 1 through 170 in this
cause of action as though fully set forth herein.
172. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
173. Defendant represented to plaintiff that by entering into the Special
Forbearance Agreement, the temporary HAMP agreement, or other written post-default
agreement, plaintiff would be able to save his home in that defendant would not sell
plaintiff’s home, and plaintiff would be able to either cure their default or receive a
permanent loan modification.
174. In reliance on defendants’ representations, plaintiff paid the defendants
after Notice of Default was served and recorded.
175. All of the terms in the forbearance agreements, temporary HAMP
agreements or other post-default agreements were drafted by the defendant, and not
negotiable.
176. Plaintiff had no bargaining power in negotiating the terms of these
agreements or the amounts of payments requested.
177. Defendants took the money then elected to sell the property through
foreclosure.
178. Plaintiff alleges said conduct constituted a breach of good faith and fair
dealing, was unconscionable, unjust and/or coercive.

179. As a result of defendant’s conduct, plaintiff was damaged financially.
180. Plaintiff seeks damages according to proof and reserves the right to seek
equitable remedies of unjust enrichment and disgorgement of profit made on the
Plaintiff under guise of performance of this agreement.
181. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 180 as though set forth in full herein.
182. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and the Subclass described above.
183. Defendant Aurora and the Plaintiffs and Class entered into a Temporary
HAMP agreement as alleged above, a true and correct copy of the Mr. Yau’s agreement
is attached hereto and fully incorporated herein as
184. Defendant Aurora agreed to permanently modify plaintiff and each
members of the Class’s loan if plaintiffs and the Class complied with the terms of the
temporary modification.
SECOND CAUSE OF ACTION
Unjust Enrichment/Breach of Temporary HAMP Agreement
(Plaintiffs, Eddie Yau, Gloria Yau, Rob Rhoades, Nicole Rhoades, Steve Burke,
Otis Banks, Richard Apostolos, Joanne Anderson and the HAMP Class against
all Defendants)
Exhibit 3.

185. Plaintiff and the Class complied with the terms of the temporary
modification, except for those terms and conditions that were excused or waived.
186. Defendant unjustifiably and inexcusably breached the contract by failing to
perform its obligations thereunder as described above.
187. As a result of defendant’s breach, plaintiff’s loan was not permanently
modified causing injury to the plaintiff and Class.
188. As a result of Defendants’ unjust enrichment, Plaintiffs and the Class have
sustained damages in an amount to be determined at trial (which include legal and other
fees in excess of the principal and interest due on their loans) and seek full
disgorgement and restitution of Defendants’ enrichments, benefits, and ill-gotten gains
acquired as a result of the wrongful conduct alleged above. Alternatively, Plaintiffs and
the Class seek specific performance or if specific performance cannot be granted,
reformation of the contract from temporary to permanent under the same monthly
payment terms for a term of 30 years or if reformation of the contract cannot be granted,
damages according to proof and reserve the right to seek equitable remedies to rescind
the payments made to defendants under guise of performance of this contract and
disgorgement of profits made on the Plaintiffs and the Class loans above reasonable
rental value of their homes from the time the loans originated.
THIRD CAUSE OF ACTION
Breach of Written Contracts – Third Party Beneficiary
(All Plaintiffs and Classes against all Defendants)
Exhibit 1
Exhibit 2
189. Plaintiffs repeat and re-allege every allegation in paragraphs 1 through 188
as though set forth in full herein.
190. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
191. Plaintiffs and the Class members are third party beneficiaries to the
contract attached hereto and fully incorporated herein as and to the Amended
and Restated contract attached hereto and fully incorporated herein as .
192. Plaintiff and the Class are intended beneficiaries under the contracts.
193. Defendants Aurora and DBTCA and DBNTC, jointly and severally,
unjustifiably and inexcusably breached the Contract by failing to perform their
obligations thereunder as described above.
194. Defendants’ breach of the contract resulted in harm to plaintiff.
195. Pursuant to California Civil Code §1559 and/or federal law, plaintiff may
enforce the contract’s provisions.
196. Plaintiffs and the Class seek specific performance or if specific
performance cannot be granted, reformation of the contract from temporary to
permanent under the same monthly payment terms for a term of 30 years or if
reformation of the contract cannot be granted, damages according to proof and reserve
the right to seek equitable remedies to rescind the payments made to defendants under
phs 1 through 196 as though fully set forth herein.
198. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
199. An actual controversy exists between plaintiff and defendant concerning
their respective rights and duties pertaining to the subject property and described
transactions because plaintiff alleges there was a cure and reinstatement by mutual
consent.
200. As a result, plaintiff desires a judicial determination and declaration that
the default was cured, plaintiff is entitled to reconveyance upon payment of subsequent
sums and the defendant has no ability to foreclose on plaintiff’s home.
201. Such a declaration is appropriate at this time so that plaintiff may
determine his or her rights and duties before the subject property is sold at a foreclosure
sale.
FOURTH CAUSE OF ACTION
Declaratory Relief – Cure and Reinstatement by Mutual Consent
(All plaintiffs and classes against all defendants)
FIFTH CAUSE OF ACTION
Declaratory Relief – One Action Rule
(All plaintiffs and classes against all defendants)
202. Plaintiff incorporated in this cause of action all of the allegations in
paragraphs 1 through 201 and the allegations in the Second cause of action as though
fully set forth herein.
203. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
204. An actual controversy exists between plaintiff and defendant concerning
their respective rights and duties pertaining to the subject property and described
transactions because plaintiff alleges the defendant violated the One Action Rule so
defendant is reduced to the status of unsecured creditor, entitling plaintiff to injunctive
relief, attorney fees and costs of suit.
205. As a result, plaintiff desires a judicial determination and declaration the
defendants are reduced to the status of unsecured creditor(s), the defendants have no
ability to foreclose on plaintiff’s home as unsecured creditors, and plaintiff is entitled to
reasonable attorney’s fees and costs of suit.
206. Such a declaration is appropriate at this time so that plaintiff may
determine his or her rights and duties before the subject property is sold at a foreclosure
sale.
SIXTH CAUSE OF ACTION
Declaratory Relief
Improper Application and/or Calculation of Payments, Fees and Costs
(All plaintiffs and classes against all defendants)
207. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 206 as though fully set forth herein.
208. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
209. An actual controversy exists between plaintiff and defendant concerning
their respective rights and duties pertaining to the subject property and described
transactions because plaintiff alleges a breach of the obligation for which the deed of
trust is security has not occurred or is excused because the beneficiary improperly
applied and/or calculated plaintiff’s payments, costs, fees, insurance, taxes and other
charges prior to, during, and/or after default.
210. As a result, plaintiff desires a judicial determination and declaration of
plaintiff’s and defendant’s respective rights and duties; specifically that plaintiff did not
breach his or her obligations and as such the Notice of default and election to sell was
null and void.
211. Such a declaration is appropriate at this time so that plaintiff may
determine his or her rights and duties before the subject property is sold at a foreclosure
sale.
212. Plaintiff incorporates by reference the allegations in paragraphs 1 through
211 as though fully set out herein.
213. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
214. Consent to the special forbearance was not real or free in that it was
obtained solely through fraud and misrepresentations as herein alleged.
215. Plaintiffs thus seek to rescind the agreements under California Civil Code
section 1689(b)(1). Plaintiffs have retained no consideration provided by defendants
Aurora or Deutsche Bank that can be tendered back to Aurora or Deutsche Bank prior to
rescission.
216. Aurora led plaintiff to believe that it wanted to help Plaintiff maintain
ownership of their homes.
217. Aurora represented it wanted to help Plaintiff maintain ownership of his
home through the language of the special forbearance agreement which states
SEVENTH CAUSE OF ACTION
(Fraud/Misrepresentation of Material Fact)
[By all plaintiffs and classes against all defendants)
“WHEREAS, Customer has requested and Lender has agreed to allow Customer to
repay the Arrearage pursuant to a loan work-out arrangement on the terms set forth
herein.” Aurora led Plaintiff to believe that their arrearage in payments that led to
default would be repaid if they made the payments under the special forbearance
agreement.
218. Plaintiff reasonably relied on defendant’s representations which led
Plaintiff to believe that the default on his home would be cured and his loan would
eventually be reinstated under the agreement.
219. At the time that Aurora made these representations, Aurora know or should
have known that they were not true.
220. Plaintiff is informed and believes and alleges thereon that Aurora would
ensure that the requested payments were never enough to repay the arrearage due to the
way the payments were applied.
221. Plaintiff is informed and believes and further alleges thereon that the notice
of default was on file before the special forbearance was offered so that Aurora could
execute the Trustee’s sale and foreclose after obtaining the payments knowing that the
arrearage would not be repaid.
222. Aurora made these representations with the purpose of persuading Plaintiff
to enter into the Special Forbearance agreements and to continue to make payments of
thousands of dollars.
223. Plaintiff reasonably relied on these representations.
224. Plaintiff would not have entered into the special forbearance agreement and
paid thousands of dollars to defendants Aurora and Deutsch Bank after default had he
known that he would not have had a genuine opportunity to save his home.
225. As a proximate result of defendant’s conduct plaintiff has been financially
injured in an amount to be proven at trial and his credit has been damaged.
226. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 225 as though fully set forth herein.
227. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
228. Defendants beneficiary and trustee intend to sell and unless restrained will
sell or cause to be sold, the subject property, all to plaintiff’s great and irreparable injury
in that defendant has given notice that the trustee sale of the property will take place on
March 11, 2011 or anytime thereafter, and if the sales take place as scheduled, plaintiff
will forfeit it.
229. The scheduled sales should be enjoined by virtue of the facts alleged that
said sale is wrongful.
EIGHTH CAUSE OF ACTION
Injunctive Relief
(All Plaintiffs and Classes against all Defendants)
230. Plaintiff has no other plain, speedy, or adequate remedy, and the injunction
relief prayed for below is necessary and appropriate at this time to prevent irreparable
loss to plaintiff’s interests.
231. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 230 as though fully set forth herein.
232. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
233. The amount of money defendant owes to plaintiff or vice versa is unknown
and cannot be determined without an accounting.
234. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 233 as though set forth in full herein.
235. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
NINTH CAUSE OF ACTION
Accounting
(All Plaintiffs and Classes against all Defendants)
TENTH CAUSE OF ACTION
Unfair and Unlawful Practices
(All plaintiffs and Classes against All Defendants)
236. California’s Unfair Competition Law (UCL) defines unfair competition to
include any “unlawful, unfair, or fraudulent” business act or practice. Cal Bus & Prof
Code 17200 et seq.
237. By its terms, the statute is broad in scope. “It governs „anti-competitive
business practices? as well as injuries to consumers, and has as a major purpose “the
preservation of fair business competition.” [Citations.]” (
(1999) 20 Cal.4th 163, 180.) “By defining
unfair competition to include any „ . . . business act or practice? [citation], the
UCL permits violations of other laws to be treated as unfair competition that is
independently actionable. [Citation.]” ( (2002) 27 Cal.4th 939, 949.)
In addition, under the UCL, “„a practice may be deemed unfair even if not specifically
proscribed by some other law.? [Citation.]” (
(2003) 29 Cal.4th 1134, 1143.) The remedies available under the UCL are
“cumulative . . . to the remedies or penalties available under all other laws of this state.”
(Bus. & Prof. Code, § 17205.) (2010)
238. Defendants have violated Cal Bus & Prof Code §17200 et seq with the
conduct as alleged above.
239. Such acts include but are not limited to:
a. Defendants have a pattern and practice of refusing to provide permanent
loan modifications to those borrowers who loans were placed in temporary
Cel-Tech Communications,
Inc. v. Los Angeles Cellular Telephone Co.
unlawful
Kasky v. Nike, Inc.
Korea Supply Co. v. Lockheed Martin
Corp.
Arce v Kaiser Foundations Health Plan, Inc.
HAMP plans but were covered by CDS or other securities/insurance, and
this refusal to provide permanent loan modifications constitutes an
unlawful, unfair or fraudulent business act or practice in violation of UCL,
and/or
b. Defendant Aurora engaged in “fraudulent” business practices under the
UCL because its temporary HAMP Agreements and post temporary HAMP
Agreements were intended and likely to mislead the public into believing
that if they made the additional payments that Aurora required they would
have an opportunity to cure their loan defaults with a permanent HAMP
modification or similar type of agreement prior to foreclosure. A true
opportunity to cure their defaults was “material” to Plaintiffs and the Class
within the meaning of , (2009) 46 Cal 4th 298, 325,
and/or
c. Aurora engaged in “unlawful” business practices under the UCL based on
its violations of the Security First Rule, Cal Code Civ Pro 726 which states
in pertinent part:
(a) There can be but one form of action for the recovery of any debt or
the enforcement of any right secured by mortgage upon real property
or an estate for years therein, which action shall be in accordance with
the provisions of this chapter. n the action the court may, by its
judgment, direct the sale of the encumbered real property or estate for
years therein (or so much of the real property or estate for years as
may be necessary), and the application of the proceeds of the sale to
In re Tobacco II Cases
the payment of the costs of court, the expenses of levy and sale, and
the amount due plaintiff, including, where the mortgage provides for
the payment of attorney’s fees, the sum for attorney’s fees as the court
shall find reasonable, not exceeding the amount named in the
mortgage.
(b) The decree for the foreclosure of a mortgage or deed of trust
secured by real property or estate for years therein shall declare the
amount of the indebtedness or right so secured and, unless judgment
for any deficiency there may be between the sale price and the amount
due with costs is waived by the judgment creditor or a deficiency
judgment is prohibited by Section 580b, shall determine the personal
liability of any defendant for the payment of the debt secured by the
mortgage or deed of trust and shall name the defendants against whom
a deficiency judgment may be ordered following the proceedings
prescribed in this section….
d. Aurora engaged in “unfair” business practices under the UCL because it
violated the laws and underlying legislative policies concerning: (1)
foreclosure prevention; (2) the unavailability of deficiency judgments after
a lender exercised its election to sell under non-judicial foreclosure; and (3)
the rights of contracting parties to enjoy the benefits of their agreements
after having paid valuable consideration for such benefits.
240. As a proximate result of defendant Aurora’s conduct, plaintiff was injured
financially and/or to his property rights. Aurora’s conduct as set forth herein resulted in
loss of money or property to Plaintiff.
241. Plaintiff seeks damages, disgorgement of profits on the CD Swaps,
injunctive relief in the form of correction of his/her, their damaged credit, cure of
default and reconveyance of the deed, and any other equitable relief that the court deems
appropriate.
242. Plaintiff incorporates by reference the allegations in paragraphs 1 through
241 as though fully set out herein.
243. Plaintiffs bring this claim on their own behalf and on behalf of each
member of the Class and Subclass described above.
244. As more fully described above defendants concealed the following material
facts that they had a duty disclose:
e. Defendants Deutsche Bank and Aurora concealed the material fact that
Deutsche Bank National Trust Company Americas as trustee was the
owner of the note and mortgage loan until after the plaintiffs and Class
were thrown into default on their loans.
f. Defendant Deutsche Bank concealed the material fact that the plaintiffs and
Class’s loans were covered with CDS or other similar security/insurance
after the defendant defaulted the plaintiffs and Class’s loans.
g. Defendant Aurora concealed a material fact that the way the contract was
written between Fannie Mae and Aurora, there was a substantial amount of
ELEVENTH CAUSE OF ACTION
(Fraud/Concealment of Material Fact)
(All Plaintiffs and Classes against All Defendants)
loans aimed at receiving a more sustainable and affordable mortgage under
HAMP that would not pass the NPV test because the lenders such as
defendant Deutsche Bank had purchased credit default swaps or other types
of investment security/insurance against these mortgages.
245. In plain language, the very types of mortgages the federal HAMP program
was designed to protect were the very types of mortgages that were not being protected
by the terms of the agreement between Aurora and Fannie Mae. The lenders like
defendant Deutsche Bank knew it. The servicers such like defendant Aurora knew or
should have known it and the plaintiffs and the Class in this action didn’t have a clue.
246. Aurora was under a duty by the terms of the contract with Fannie Mae to
disclose this material fact to Fannie Mae when it entered into this Agreement or when it
learned of this material fact from defendant Deutsche Bank. The defendants were under
a duty to disclose the owner of the loan.
247. The suppression of this fact was likely to mislead and did mislead Fannie
Mae, the plaintiffs and the Class.
248. The representations and failure to disclose information and suppression of
the information herein alleged to have been made by defendant were made with the
intent to induce plaintiffs and the Class to act in the manner herein alleged in reliance
thereon.
249. In reliance upon the representation that defendants were qualified to offer
the HAMP program to plaintiffs and the Class and without knowing that their loans
were asset-backed pass-through securities held by Deutsche Bank who bought credit
default swaps or other types of investment security/insurance or what that really meant,
the plaintiffs and the members of the Class continued to make payments on their
mortgage after they were in default and entered into the temporary HAMP agreements
as described above believing if they continued to make their payments they would be
accepted into a permanent HAMP modification.
250. Plaintiffs and the members of the Class, at the time these failures to
disclose and suppressions of facts occurred, and at the time plaintiff took the actions
herein alleged, was ignorant of the existence of the facts which defendant suppressed
and failed to disclose. If plaintiff had been aware of the existence of the facts not
disclosed by defendant, plaintiff would not have paid these additional amounts to the
defendants after default; may not have even signed the note or mortgage loan; and most
likely would not have relied on defendant Aurora’s representations which lulled them
into default without looking beyond the servicer for an alternate solution.
251. As a proximate result of Defendants’ fraudulent conduct as herein alleged,
plaintiffs and the Class were induced to disclose all of their private financial information
and pay Aurora additional monies without any real consideration by reason of which
plaintiffs and the Class have been damaged in the sum of their payments so made.
252. Plaintiffs and the Class seek specific performance or if specific
performance cannot be granted, reformation or if reformation cannot be granted, offset,
equitable remedies to rescind the payments made to defendants under guise of
performance of this contract and disgorgement of profits made on the Plaintiffs and the
Class loans above reasonable rental value of their homes from the time the loans
originated.
253. The aforementioned conduct of defendant(s) was an intentional
misrepresentation, deceit, or concealment of a material fact known to the defendant(s)
with the intention on the part of the defendant(s) of thereby depriving plaintiff of
property or legal rights or otherwise causing injury, and was despicable conduct that
subjected plaintiff to a cruel and unjust hardship in conscious disregard of plaintiff’s
rights, so as to justify an award of exemplary and punitive damages.
254. Plaintiffs and the Class seek specific performance of the temporary HAMP
agreement by converting it to a permanent modification on the same terms and if
specific performance cannot be granted; rescission of all of the agreements as a result of
these failures of consideration. Plaintiffs have no other adequate remedy at law and will
suffer irreparable harm if the agreements are not rescinded and if the fees paid (which
included legal and other fees not required to be paid under their notes) are not returned.
TWELFTH CAUSE OF ACTION
Declaratory Relief/Injunction
FIRST AMENDED CLASS ACTION COMPLAINT
Yau v. Deutsche Bank National Trust Company Americas
(As between plaintiff Gloria Yau and all those similarly situated and all
defendants)
8. PRAYER FOR RELIEF
255. Plaintiff incorporates in this cause of action all of the allegations in
paragraphs 1 through 254 as though set forth in full herein.
256. Plaintiff Gloria Yau and all those similarly situated always held title in the
home described in the complaint and in the Notice of Default and Foreclosure Sale
attached hereto as exhibits.
257. Plaintiff Gloria Yau was not a signer on the Note and was not a coborrower
on the loan, in fact.
258. Defendants contend that they have the right to non-judicially foreclose on
plaintiff Gloria Yau’s home, and conduct a trustee’s sale relative to that property and
evict her.
259. Plaintiff contends that Defendants do not have a right to foreclose on her
portion of the home.
260. An actual controversy presently exists between Plaintiff Gloria Yau and
Defendants as to the existence of the ability or right to foreclose on her home and evict
her. A judicial decision is necessary and appropriate at this time so that Plaintiff Gloria
Yau and Defendants may ascertain their respective rights relative to Plaintiffs and the
Class’s homes and the appropriate injunction issued.

WHEREFORE, Plaintiffs pray for judgment
against defendants, Aurora Loan
Services, LLC, DBNTC, DBTCA and each of them, jointly and severally, as
follows:
A judicial determination and decree that:
the plaintiffs have cured their default and plaintiff is entitled to
reconveyance upon payment of subsequent sums;
the defendants, and each of them, have no legal right or authority to
foreclose on plaintiff’s home,
that the defendant is reduced to the status of an unsecured creditor,
that defendant improperly applied and/or calculated plaintiff’s payments
requiring a full accounting;
B. An accounting;
C. A permanent or final injunction to force defendants to request immediate
removal of default or foreclosure status and all other derogatory/negative
information from the Plaintiff’s credit reports and to refrain such derogatory
reporting in the future;
A permanent or final injunction, to effect full and fair relief consistent with the
law, including but not limited to forcing defendants to reconvey the deed of the
trust to the plaintiffs and Class and refrain from holding the debt out as
“secured” to any other creditors. Such injunctive relief could include, case
dismissals, rescissions of sales, reconveyance of deeds, cures of defaults,
reinstatement of loans at the principal and rate consistent with the rest of the
relief afforded by way of this Complaint.
Restitution to the Plaintiffs and the Class in amounts to be proven at trial;
Statutory damages and civil penalties;
Disgorgement of profits;
Costs of this action, including the fees and costs of experts;
Attorneys’ fees;
Prejudgment interest at the statutory rate;
Post-judgment interest;
Exemplary and Punitive Damages; and
Grant plaintiffs and the class such other and further relief as this Court finds
necessary and proper.
Plaintiffs hereby demand a jury trial.
Dated: March 11, 2011 LAW OFFICES OF LENORE ALBERT
By _______________
LENORE ALBERT, ESQ.
Attorney for the Plaintiffs and the Class

Yau_-_complaint_First_Amended_Pleading.78103044

Foreclosure Trustee duties and obligations

Because of the significant increase in defaults and foreclosures, mortgage servicers need to understand the duties and liabilities the law imposes upon foreclosure trustees.

Litigation based upon trustee error can slow, stop or invalidate foreclosures and impair the servicer’s ability to dispose of properties following foreclosure. When borrowers refinance or pay off during foreclosure, trustees are often responsible for the payoffs and reconveyances. After foreclosure, the trustee is responsible for distribution of surplus funds – the funds in excess of the debt due under the foreclosed deed of trust. All these responsibilities are sources of claims against trustees.

Foreclosure litigation plaintiffs often name and seek to hold lenders and servicers responsible for trustee errors on the theory that the trustee is the agent of the lender and servicer. According to Miller & Starr’s “California Real Estate,” this claim is particularly easy to make when the lender or servicer uses an in-house trustee and especially when the trustee acquires the property by credit bid for the lender or servicer at its own foreclosure sale. This article examines a trustee’s liability for damages under California law for conduct of the foreclosure sale, payoffs, reconveyances and distribution of surplus funds. The scope of a trustee’s duties differs for each of these services, and a breach of one of these duties can subject the trustee, lender and servicer to substantial compensatory damages, punitive damages and even criminal sanctions. Foreclosure sales In the I.E. Associates v. Safeco case, the California Supreme Court limited the scope of the trustee’s duties in conducting foreclosure sales. The issue in that case was whether a trustee breached its duty to a trustor by failing to ascertain the current address of the trustor where the current address was different from the address of record. The trustee did not have actual knowledge of the current address, but through reasonable diligence could have discovered it. The Supreme Court held that the trustee did not have a duty to find the current address. The court found that a foreclosure trustee is not a true trustee, such as a trustee of a person or a trustee under a trust agreement. Instead, a foreclosure trustee is merely “a middleman” between the beneficiary and the trustor who only carries out the specific duties that the deed of trust and foreclosure law specifically impose upon it.

The deed of trust and the statute are the exclusive source of the rights, duties and liabilities governing notice of nonjudicial foreclosure sales. Because neither the deed of trust nor the statute required the trustee to search for an address it did not have, the court held that the trustee had no duty to do so. The Stephens v. Hollis case reiterated the rule that a foreclosure trustee is not a true trustee: “Just as a panda is not an ordinary bear, a trustee of a deed of trust is not an ordinary trustee. ‘A trustee under a deed of trust has neither the powers nor the obligations of a strict trustee. He serves as a kind of common agent for the parties.’”

It is critical to recognize, however, that these rules of limited duty only apply to the trustee’s duty to provide proper notice of the sale. The trustee also has a broad common law duty to conduct a sale that is fair in all respects. In Hatch v. Collins, the court noted that “A trustee has a general duty to conduct the sale ‘fairly, openly, reasonably and with due diligence,’ exercising sound discretion to protect the rights of the mortgagor and others…A breach of the trustee’s duty to conduct an open, fair and honest sale may give rise to a cause of action for professional negligence, breach of an obligation created by statute, or fraud.” Examples of such a breach could be conspiring to “chill the bidding” by overstating the debt, thereby dissuading others from appearing and bidding at the sale. California Civil Code Section 2924h(g) states that it is “unlawful for any person, acting alone or in concert with others, (1) to offer to accept or accept from another any consideration of any type not to bid, or (2) to fix or restrain bidding in any manner at a sale of property conducted pursuant to a power of sale in a deed of trust or mortgage.” The code continues: “In addition to any other remedies, any person committing any act declared unlawful by this subdivision or any act which would operate as a fraud or deceit upon any beneficiary, trustor or junior [lien holder] shall, upon conviction, be fined not more than $10,000 or imprisoned in the county jail for not more than one year, or be punished by both that fine and imprisonment.” In addition to imposing criminal penalties, this section also imposes civil liability upon the trustee.

The courts will review foreclosure sale proceedings to make sure they have been fair in all respects. A trustee who violates its contractual duties under the deed of trust or its statutory or common law duties is liable to the trustor or to an affected junior lien holder for such person’s lost equity in the property. This is measured by the difference between the fair market value of the property and the liens senior to the affected person’s interest at the time of the sale. In addition, pursuant to Civil Code Section 3333, the trustee has liability for all other damages proximately caused by its wrongful conduct, whether those damages were foreseeable or not. A willful violation of these duties can subject the trustee to punitive damages under Civil Code Section 3294. Payoffs and reconveyances Civil Code Section 2943(c) requires a beneficiary or its representative, which is frequently the trustee, to provide a payoff statement to an “entitled person” within 21 days after a written request for a payoff demand. An “entitled person” means the trustor, a junior lien holder, their successors or assigns, or an escrow. Failure to provide a timely payoff demand makes the beneficiary or its representative liable to the entitled person for all actual damages such a person may sustain due to a failure to provide a timely payoff demand, plus $300 in statutory damages. Failure to provide an accurate payoff demand can have dire consequences. If the entitled person closes a sale or refinance in reliance upon a payoff demand that understates the payoff, the beneficiary must reconvey its lien. The beneficiary is then left with only an unsecured claim against the entitled person. A trustee who is responsible for such an error could have substantial liability to its beneficiary. After the note and deed of trust are paid off, Civil Code Section 2941 requires the beneficiary to deliver the original note, the deed of trust and a request for reconveyance to the trustee. Within 21 days thereafter, the trustee must record the reconveyance and deliver the original note to the trustor. If the reconveyance has not been recorded within 60 days after the payoff, upon the trustee’s written request, the beneficiary must substitute himself as trustee and record the reconveyance. If the reconveyance is not recorded within 75 days after payoff, any title company may prepare and record a release of the obligation. A person who violates any of these provisions is liable for $500 in statutory damages and all actual damages caused by the violation. These can include damages for emotional distress. A willful violation of these requirements is a misdemeanor which can subject the violator to a $400 fine, plus six months’ imprisonment in the county jail. Surplus funds Civil Code Sections 2924j and 2924k impose upon the trustee a duty to distribute surplus funds that the trustee receives at a sale to lien holders and trustors whose interests are junior to the foreclosed deed of trust. Surplus funds are defined as funds in excess of the debt due to the holder of the foreclosed lien and the costs of the foreclosure sale. As previously referenced in the I. E. Associates and Stephens cases, those courts held that with respect to the conduct of the foreclosure sale, a foreclosure trustee is not a true trustee – only a middleman. Further, in Hatch v. Collins, the court held that a breach of the trustee’s duties in the conduct of the sale does not constitute a breach of a fiduciary duty. While no case holds that a trustee is a fiduciary with respect to surplus funds, a trustee’s surplus funds duties closely resemble those of a fiduciary – a fiduciary is one who holds and manages property for the benefit of another. Fiduciaries are held to a higher standard of care than others in discharging their duties. If a trustee has a fiduciary duty in handling surplus funds, a trustee may have a duty to do more than simply follow the statute with respect to giving notice of and distributing the surplus funds. For instance, a trustee may have a duty to take reasonable steps to find an interested party whose address is unknown to the trustee if the trustee has reason to believe such an address can be found. This is particularly so because the trustee can pay for the expense of the investigation from the surplus funds. Also, a trustee as a fiduciary may face greater exposure to punitive damages, which can be awarded for breach of fiduciary duty when coupled with fraud, malice or oppression. Servicers Using In-House Foreclosure Trustees Must Beware in Mortgage Servicing > Foreclosure by John Clark Brown Jr. on Tuesday 19 June 2007 email the content item print the content item comments: 0 Servicing Management, June 2007. Because of the significant increase in defaults and foreclosures, mortgage servicers need to understand the duties and liabilities the law imposes upon foreclosure trustees. Litigation based upon trustee error can slow, stop or invalidate foreclosures and impair the servicer’s ability to dispose of properties following foreclosure. When borrowers refinance or pay off during foreclosure, trustees are often responsible for the payoffs and reconveyances. After foreclosure, the trustee is responsible for distribution of surplus funds – the funds in excess of the debt due under the foreclosed deed of trust. All these responsibilities are sources of claims against trustees. Foreclosure litigation plaintiffs often name and seek to hold lenders and servicers responsible for trustee errors on the theory that the trustee is the agent of the lender and servicer. According to Miller & Starr’s “California Real Estate,” this claim is particularly easy to make when the lender or servicer uses an in-house trustee and especially when the trustee acquires the property by credit bid for the lender or servicer at its own foreclosure sale. This article examines a trustee’s liability for damages under California law for conduct of the foreclosure sale, payoffs, reconveyances and distribution of surplus funds. The scope of a trustee’s duties differs for each of these services, and a breach of one of these duties can subject the trustee, lender and servicer to substantial compensatory damages, punitive damages and even criminal sanctions. Foreclosure sales In the I.E. Associates v. Safeco case, the California Supreme Court limited the scope of the trustee’s duties in conducting foreclosure sales. The issue in that case was whether a trustee breached its duty to a trustor by failing to ascertain the current address of the trustor where the current address was different from the address of record. The trustee did not have actual knowledge of the current address, but through reasonable diligence could have discovered it. The Supreme Court held that the trustee did not have a duty to find the current address. The court found that a foreclosure trustee is not a true trustee, such as a trustee of a person or a trustee under a trust agreement. Instead, a foreclosure trustee is merely “a middleman” between the beneficiary and the trustor who only carries out the specific duties that the deed of trust and foreclosure law specifically impose upon it. The deed of trust and the statute are the exclusive source of the rights, duties and liabilities governing notice of nonjudicial foreclosure sales. Because neither the deed of trust nor the statute required the trustee to search for an address it did not have, the court held that the trustee had no duty to do so. The Stephens v. Hollis case reiterated the rule that a foreclosure trustee is not a true trustee: “Just as a panda is not an ordinary bear, a trustee of a deed of trust is not an ordinary trustee. ‘A trustee under a deed of trust has neither the powers nor the obligations of a strict trustee. He serves as a kind of common agent for the parties.’” It is critical to recognize, however, that these rules of limited duty only apply to the trustee’s duty to provide proper notice of the sale. The trustee also has a broad common law duty to conduct a sale that is fair in all respects. In Hatch v. Collins, the court noted that “A trustee has a general duty to conduct the sale ‘fairly, openly, reasonably and with due diligence,’ exercising sound discretion to protect the rights of the mortgagor and others…A breach of the trustee’s duty to conduct an open, fair and honest sale may give rise to a cause of action for professional negligence, breach of an obligation created by statute, or fraud.” Examples of such a breach could be conspiring to “chill the bidding” by overstating the debt, thereby dissuading others from appearing and bidding at the sale. California Civil Code Section 2924h(g) states that it is “unlawful for any person, acting alone or in concert with others, (1) to offer to accept or accept from another any consideration of any type not to bid, or (2) to fix or restrain bidding in any manner at a sale of property conducted pursuant to a power of sale in a deed of trust or mortgage.” The code continues: “In addition to any other remedies, any person committing any act declared unlawful by this subdivision or any act which would operate as a fraud or deceit upon any beneficiary, trustor or junior [lien holder] shall, upon conviction, be fined not more than $10,000 or imprisoned in the county jail for not more than one year, or be punished by both that fine and imprisonment.” In addition to imposing criminal penalties, this section also imposes civil liability upon the trustee. The courts will review foreclosure sale proceedings to make sure they have been fair in all respects. A trustee who violates its contractual duties under the deed of trust or its statutory or common law duties is liable to the trustor or to an affected junior lien holder for such person’s lost equity in the property. This is measured by the difference between the fair market value of the property and the liens senior to the affected person’s interest at the time of the sale. In addition, pursuant to Civil Code Section 3333, the trustee has liability for all other damages proximately caused by its wrongful conduct, whether those damages were foreseeable or not. A willful violation of these duties can subject the trustee to punitive damages under Civil Code Section 3294. Payoffs and reconveyances Civil Code Section 2943(c) requires a beneficiary or its representative, which is frequently the trustee, to provide a payoff statement to an “entitled person” within 21 days after a written request for a payoff demand. An “entitled person” means the trustor, a junior lien holder, their successors or assigns, or an escrow. Failure to provide a timely payoff demand makes the beneficiary or its representative liable to the entitled person for all actual damages such a person may sustain due to a failure to provide a timely payoff demand, plus $300 in statutory damages. Failure to provide an accurate payoff demand can have dire consequences. If the entitled person closes a sale or refinance in reliance upon a payoff demand that understates the payoff, the beneficiary must reconvey its lien. The beneficiary is then left with only an unsecured claim against the entitled person. A trustee who is responsible for such an error could have substantial liability to its beneficiary. After the note and deed of trust are paid off, Civil Code Section 2941 requires the beneficiary to deliver the original note, the deed of trust and a request for reconveyance to the trustee. Within 21 days thereafter, the trustee must record the reconveyance and deliver the original note to the trustor. If the reconveyance has not been recorded within 60 days after the payoff, upon the trustee’s written request, the beneficiary must substitute himself as trustee and record the reconveyance. If the reconveyance is not recorded within 75 days after payoff, any title company may prepare and record a release of the obligation. A person who violates any of these provisions is liable for $500 in statutory damages and all actual damages caused by the violation. These can include damages for emotional distress. A willful violation of these requirements is a misdemeanor which can subject the violator to a $400 fine, plus six months’ imprisonment in the county jail. Surplus funds Civil Code Sections 2924j and 2924k impose upon the trustee a duty to distribute surplus funds that the trustee receives at a sale to lien holders and trustors whose interests are junior to the foreclosed deed of trust. Surplus funds are defined as funds in excess of the debt due to the holder of the foreclosed lien and the costs of the foreclosure sale. As previously referenced in the I. E. Associates and Stephens cases, those courts held that with respect to the conduct of the foreclosure sale, a foreclosure trustee is not a true trustee – only a middleman. Further, in Hatch v. Collins, the court held that a breach of the trustee’s duties in the conduct of the sale does not constitute a breach of a fiduciary duty. While no case holds that a trustee is a fiduciary with respect to surplus funds, a trustee’s surplus funds duties closely resemble those of a fiduciary – a fiduciary is one who holds and manages property for the benefit of another. Fiduciaries are held to a higher standard of care than others in discharging their duties. If a trustee has a fiduciary duty in handling surplus funds, a trustee may have a duty to do more than simply follow the statute with respect to giving notice of and distributing the surplus funds. For instance, a trustee may have a duty to take reasonable steps to find an interested party whose address is unknown to the trustee if the trustee has reason to believe such an address can be found. This is particularly so because the trustee can pay for the expense of the investigation from the surplus funds. Also, a trustee as a fiduciary may face greater exposure to punitive damages, which can be awarded for breach of fiduciary duty when coupled with fraud, malice or oppression.

From the Dark side on Wrongful foreclosure

Defending Wrongful Foreclosure Actions in California

Nearly all foreclosure professionals and loan servicers are familiar with the process for a non-judicial foreclosure action in California. A notice of intent to foreclose is followed by a notice of default which is followed by a notice of trustee’s sale. The last step, the actual non-judicial foreclosure sale, usually occurs within approximately 120 days from the filing of the notice of default. For the vast majority of loans, the California non-judicial foreclosure process is an effective and relatively inexpensive method for a servicer to obtain its security. In most non-judicial foreclosures, the only court time and court costs involved are those for the usually uncontested municipal court unlawful detainer which is initiated by the servicer in order to obtain possession from former borrowers who refuse to vacate their former homes.

For a small but seemingly growing number of loans, the non-judicial foreclosure process has become rather judicial. To borrowers who choose to allocate their resources away from debt payment towards fighting a loan servicer’s right to its payments and its security, the nonjudicial foreclosure process is a war of attrition which ranges from the bankruptcy court, to superior court to municipal court. While serial bankruptcy filings are often a frustrating delay to a servicer obtaining possession of its security, the wrongful foreclosure action filed in superior court is potentially the most time consuming weapon in the arsenal of the litigious borrower.

What is a Wrongful Foreclosure Action?

A wrongful foreclosure action is an action filed in superior court by the borrower against the servicer, the holder of the note, and usually the foreclosing trustee. The complaint usually alleges that there was an “illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust.” Munger v. Moore (1970) 11 Cal.App.3d. 1. The wrongful foreclosure action is often brought prior to the non-judicial foreclosure sale in order to delay the sale, but the action may also be brought after the non-judicial foreclosure sale. In most cases, a wrongful foreclosure action alleges that the amount stated as due and owing in the notice of default is incorrect for one or more of the following reasons: an incorrect interest rate adjustment, incorrect tax impound accounts, misapplied payments, a forbearance agreement which was not adhered to by the servicer, unnecessary forced place insurance, improper accounting for a confirmed chapter 11 or chapter 13 bankruptcy plan. Wrongful foreclosure actions are also brought when the servicers accept partial payments after initiation of the wrongful foreclosure process, then continue with the foreclosure. Companion allegations for emotional distress and punitive damages usually accompany any wrongful foreclosure action.

The causes of action alleged in a wrongful foreclosure action filed in California may include the following: breach of contract, intentional infliction of emotional distress, negligent infliction of emotional distress, violation of Business and Professions Code Section 17200 (Unfair Business Practices), quiet title, wrongful foreclosure (violation of Civil Code Section 2924), accounting and/or promissory estoppel.

The reciprocal nature of attorney fees provisions in all real property notes and deeds of trust dictate that any wrongful foreclosure action be taken seriously. Damages available to a borrower in a wrongful foreclosure action are an amount sufficient to compensate for all detriment proximately caused by the servicer or trustee’s wrongful conduct. Civil Code Section 3333. Damages are usually measured by value of the property at the time of the sale in excess of the mortgage and lien against the property. Munger v. Moore (1970) 11 Cal.App.3d. 1. Additionally, the borrower may also obtain damages for emotional distress in a wrongful foreclosure action. Young v. Bank of America (1983) 141 Cal.App.3d 108; Anderson v. Heart Federal Savings & Loan Assn. (1989) 208 Cal.App.3d. 202. Further, if the borrower can prove by clear and convincing evidence that the servicer or trustee was guilty of fraud, oppression or malice in its wrongful conduct, punitive damages may be awarded.

How Can a Wrongful Foreclosure Action Delay Recovery of the Security?

A wrongful foreclosure suit filed in superior court will not necessarily delay a servicer’s recovery of its security. The companion filings to such a suit (notice of pending action, injunction and/or motion to consolidate) however can delay a servicer’s ultimate recovery. Delay caused by a wrongful foreclosure action can be anywhere from forty-five days to two years.

A notice of pending action (“lis pendens”) is the most common companion to a wrongful foreclosure action. A lis pendens is recorded in the county in which the real property security is located at the time the wrongful foreclosure action is filed. The only requirement for a lis pendens to be recorded is an attorney’s signature that the action which is being noticed actually involves a real property claim. The purpose of the lis pendens is to put all third parties on notice that the borrower and the servicer are litigating over the real property security. Once a lis pendens is recorded, no title insurance company will issue a title insurance policy unless and until the lis pendens is removed. Although the servicer may “bond around” the lis pendens without title insurance, the real property security is virtually inalienable.

A summary procedure for removing a lis pendens is provided in the California Code of Civil Procedure Section 405.3 et seq. This section allows a “mini trial” on the merits of the borrower’s claim. At the “mini trial”, the borrower must establish the probable validity of his/her claim by a preponderance of the evidence. California Code of Civil Procedure Section 405.32. If the borrower cannot establish his or her claim by a preponderance of evidence, the lis pendens is expunged. The penalty for the borrower who wrongfully records a notice of pending action is that, in most cases, the court directs such a borrower to pay the servicer’s attorneys’ fees. California Code of Civil Procedure Section 405.38.

While a lis pendens can be filed at any time in the foreclosure process, a borrower applies for an injunction prior to the foreclosure sale with the intent of keeping the foreclosure sale at bay until issues in the lawsuit are resolved. The lawsuit can take anywhere from ten to twenty-four months. Generally, an injunction will only be issued if it appears to the court that: (1) the borrower is entitled to the injunction; and (2) that if the injunction is not granted, the borrower will be subject to irreparable harm. Like an action to expunge a lis pendens, a borrower’s application for an injunction is essentially a “mini-trial” on the merits. California Civil Code of Civil Procedure Section 526 et seq.

The issue at stake in nearly all injunctive relief action applications is the amount due and owing on the note and deed of trust. For the injunction hearing, it is imperative that the servicer provide a detailed analysis of the amount it contends is due and owing on the note and deed of trust at issue. If for some reason the servicer is unable to provide a breakdown of the amounts due and owing on the note and deed of trust at issue, or at least provide sufficient information to refute the borrower’s allegations, it is likely the injunction will be issued. In most cases, the injunction will be conditioned upon the borrower’s filing a significant bond and making timely debt payments. Upon occasion, judges who are not particularly enamoured with servicers and who are provided a heart wrenching tale in the borrower’s injunction application will issue minimal bonds and little or no debt service requirements. This worst case scenario translates into a servicer being unable to sell the security and receiving no payments on the underlying debt during the life of the lawsuit. Technically, modifications of injunctions are allowed for a change in law, a change in circumstances, or to prevent injustice. California Civil Code § 533. In reality, judges are loath to modify an injunction after it is issued and prior to a decision on the merits. Once an injunction with little or no debt service or bond is in place, the wrongful foreclosure suit will be a long and expensive process because the borrower has lost all incentive for a quick resolution of the action.

Another way borrowers delay a servicer’s recovery of its security through a wrongful foreclosure action is by consolidating their wrongful foreclosure action with their unlawful detainer action. Asuncion v. Superior Court (1980) 108 Cal. App. 3d 141. The Asuncion case which is usually relied upon by borrowers for consolidation contains an egregious fact scenario including clear fraud in the inducement of the loan. Judges however, do not limit the application of Asuncion to cases where fraud is alleged by the borrower. In applying Asuncion, a court can allow the unlawful detainer suit to be consolidated with the wrongful foreclosure action if there is a mere similarity of issues in the cases.

If the superior court allows consolidation, a servicer’s right to possession of the real property security will be stayed until a verdict for the servicer is obtained in the wrongful foreclosure action. Courts generally will condition such consolidation on borrower debt service payments. Again, though, the real property security will not be recovered until a final decision on the merits in the wrongful foreclosure action is reached. As discussed above, this can be anywhere from ten months to two years.

SELF-EXAMINATION: What to do when sued for a wrongful foreclosure?

The most important words in defending a wrongful foreclosure action are “critical self-examination”. Before determining strategy for the upcoming (possibly lengthy) lawsuit, it is critical to know if any of the borrower’s allegations of the servicers breach of duty are correct. If the borrower’s allegations are correct and the borrower wins the lawsuit, the servicer will have to unwind (or be precluded from conducting) the foreclosure sale, and pay the borrowers legal bill. Accordingly, the self-examination must be critical and comprehensive.

The necessary self-examination is much more than: Did we apply the payments correctly?… Yes… next question. In addition to reviewing proper payment application, the servicer should review all facets of servicing the loan in question. If we imposed force place insurance, did we have a right to do so? Did we inadvertently charge the escrow account (for excessive amount of taxes, for example)? Did we improperly account for a debtor with a confirmed bankruptcy plan? Did we adjust the interest rate correctly? Did we enter into a forbearance agreement to which we did not adhere? These are the types of questions a servicer needs to ask itself in preparing for a defense of a wrongful foreclosure action.

If, after a careful analysis of the borrower’s complaint, the servicer determines that an error was made, and given that the servicer may be required to pay for the borrower’s attorney, the question then becomes, what is the quickest way out of this lawsuit? For example, can the servicer rescind the sale, clarify negative credit information and get the borrower to dismiss the action? If the borrower appears intransigent and trial is likely, the servicer’s first concern should be to counter the “shifting” of attorney’s fees under the note.

“Offers in compromise” can counteract the shifting of the claims provided for in the note and deed of trust. Cal Code Civ. Proc. Section 998. An offer in compromise is a procedure which allows a servicer to determine the borrower’s likely damages and offer that sum to a borrower to settle the action. If the borrower refuses to settle and ultimately is awarded less than the servicer’s offer in compromise, the borrower will not recover his/her post-offer attorney fees and will be required to pay the servicer’s post-offer attorney fees. California Code Civil Procedure Section 998.

An offer in compromise is only appropriate if the borrower is “in it for the long haul,” is represented by an attorney and is likely to obtain a judgment in its favor. If the borrower is self-represented, an aggressive defense of significant discovery and early dispositive motions may be appropriate. Other areas of weakness in a borrower’s case may be lack of damages and lack of standing. As Munson v. Moore, supra indicates if there is no equity at the time of the alleged wrongful foreclosure sale, the borrower may not have suffered recoverable damages. The borrower’s standing to bring the action may be successfully attacked if the borrower has filed for chapter 7 bankruptcy protection to delay eviction or if the borrower can be declared a vexatious litigant. If a review of the borrower’s origination file uncovers material misrepresentations of fact, a counter-suit for mortgage fraud may be appropriate. The best strategy for defending a wrongful foreclosure action is never delay for delay’s sake.

If the servicer, after an exhaustive self-examination, determines that the borrower’s lawsuit is not justified, the goal shifts from control of damages to obtaining possession and clean title as soon as possible. Usually, the best method for this is the motion to expunge lis pendens. This procedure, as discussed above, is usually a mini-trial on the merits. Oftentimes, after the lis pendens is expunged and the real property security is sold, the borrower’s motivation to litigate is lost. The strategies previously discussed are also available when the borrower’s suit is likely non-meritorious, but they are usually not necessary. If no lis pendens was recorded by the borrower, early aggressive discovery followed by an early summary judgment motion is often the best route available to the servicer for the early resolution of the action.

Conclusion: Can wrongful foreclosure actions be avoided?

All of the preventive actions that an army of lawyers could recommend will not dissuade the borrower who feels wronged by his bank and wants the bank “to pay” from filing a wrongful foreclosure action. Many marginal wrongful foreclosure actions can be avoided, however, if the servicer reviews every communication sent to a borrower, (note adjustment letter, bankruptcy coupon letter, partial payment acceptance letter, etc.); with the following critical question: can this communication be misunderstood by the borrower or can its meaning be twisted by a clever debtor’s lawyer? If the answer to this question is yes, can this letter be written in a manner which more completely protects the servicer’s interest? Additionally, the servicer must truly understand the numbers which comprise the amount due stated on the notice of default and be certain of their accuracy.

California law provides many unique procedural remedies which may be employed in battling a wrongful foreclosure action. Judicious use of these procedures by counsel and close coordination between counsel and client can lessen the pain of defending a wrongful foreclosure action

Find Your Home’s Pooling And Servicing Agreement

Critical Information: How to Find Your Home’s Pooling And Servicing Agreement

February 28th, 2011 • Foreclosure

The pooling and servicing agreement (PSA) is a contract that should govern the terms under which trillions of dollars-worth of equity in the land of the United States of America was flung around the world. These contracts should govern how disputes over ownership and interest in the land that was the United States of America should be resolved. Pretty simple stuff, right? I mean if I’m a millionaire big shot New York Lawyer working for big shot billionaire Wall Street Investors and banks, then I’d do my job as a lawyer to make sure the contract was right and that all the i’s were dotted and the t’s were crossed right?

But that’s not at all what’s happened. In our scraggly street level offices, far below the big fancy marble encased towers of American law and finance, simple dirt lawyers defending homeowners started actually reading these contracts. We ask lots of questions about just what all those fancy words in their big shot contracts mean. Invariably, the big shot lawyers and the foreclosure mills tell us, “Don’t you worry about all them words you scraggly, simple dirt lawyer. Those words aren’t important to you.”

But increasingly judges recognize that the words really do mean something. Take note of the following statements from the recent Ibanez Ruling:

I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.

The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the under-lying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments.

The Ibanez decision underscores the fact that it is important for all of us to know and understand how the pooling and servicing agreements directly impact what is occurring in the courtroom. And for assistance with understanding the PSA and how to find it, more commentary from Michael Olenick at Legalprise:

Overview of PSA’s

Securitized loans are built into securities, which happen to look and function virtually identically to bonds but are categorized and called securities because of some legal restrictions on bonds that nobody seems to know about.

The securities start with one or more investment banks, called the Underwriter (should be called the Undertaker), that seems to disappear right after cashing in lots of fees. They create a prospectus that has different parts of the security that they are proposing. Each of these parts is called a tranche. There are anywhere from a half-dozen to a couple dozen tranches. Each one is considered riskier.

Each tranche is actually a separate sub-security, that can and is traded differently, but governed by the same PSA, listed in the Prospectus. Similar tranches from multiple loans were often bundled together into something called a Collateralized Debt Obligation, or CDO. So besides the MBS there might also be one or more CDO’s made up of, say, one middle tranche of each MBS. Each tranche is considered riskier, usually based a combination of the credit-scores of the people in the tranche and the type of loans (ex: full/partial/no doc, traditional/interest-only/neg am, first or secondary lien, etc…).

CDO’s were eligible for a type of “insurance” in case their price went down called a Credit Default Swap, or CDS (also known as “synthetic CDO’s”). There was actually no need to own the CDO to buy the
insurance and many companies purchased the insurance, that paid out handsomely. [That’s what the AIG bailout was for, because they didn’t keep adequate reserves to pay out the insurance policies.]

Later, investors could also purchase securities made up of multiple CDO’s, much the same way that CDO’s were made up of tranches of multiple MBS’s. These were called “CDO’s squared.” Not surprisingly,
there were also a few “CDO’s cubed,” CDO’s of CDO’s squared. CDO’s were virtually all written offshore so little is known about who owns them, except that they were premised on the idea that since there was
collateralized mortgage debt at their base they could not collapse. Their purpose was to spread the various of risks of mortgages which, back then, meant prepayment of high interest debt and default.

Investors were actually way more obsessed with prepayment because they thought the whole country could not default; to make sure of that MBS’s and all their gobbly gook were spread around the country; you
can see where in the prospectus. They were almost more concerned with geographic dispersion than credit dispersion.

After that it’s the servicers/trustee/document custodian scheme we’re all familiar with. OK .. with that too-strange-to-make-up explanation means let’s dive into how to find one’s loan:

1. Find the security name: it will be a year (usually the year of origination), a dash, two letters, then a number. It will be somewhere in one of your filings. For this we’ll use a random First Franklin loan, 2005-FF1. [Note; they would just sequentially number them, so the first security First Franklin floated in 2005 would be FF1, then FF2, etc…]
2. Go to the SEC’s new search engine: http://www.sec.gov/edgar/searchedgar/companysearch.html
3. Click the first link, Company or fund name…
4. Choose the radio button marked “contains” and type in the ticker; that is 2005-FF1
5. There will be multiple filings but one of them will be marked 424B5. Click that, it’s the prospectus.

If you really want to have fun, and want to know what happened after 2008 when these all disappeared, type the ticker (again, 2005-FF1) into the full text link from the first search page. There you’ll see lots and lots of filings as pieces and parts of the security are blasted everywhere. To track yours you have to find which tranche you ended up in. Sometimes it’s in the filing but, if not, you can usually figure it out from the prospectus if you know basic origination info (credit-score, type of loan, where the house is, etc…); some even list loan amounts.

One warning on those secondary filings, servicers and trusts both break them out as assets. How one loan can be reported as an asset in two places is a mystery, but considering this doesn’t even cover the CDO’s and CDS’s dual reporting doesn’t seem to strange. You’ll see your loan keep wandering through the financial system, with one exception (next paragraph), right up to the present day. You can even see how much the investment banks thinks that its worth over time since they report out both original amount and fair market value.

The exception — when your loan really does disappear — is when it was eaten up by the Federal Reserve’s Toxic Loan Asset Facility, TALF. But you can look that up to and see how the government purchased your
loan for full-price, when investors on the open market were only willing to pay a few cents on the dollar. If your loan went to TALF you can find it in the spreadsheet here: http://www.federalreserve.gov/newsevents/reform_talf.htm Your loan will be in the top spreadsheet and the genuine lender in the bottom.

mass joinder litigation complaint

And the first “meaty” part of the complaint….

5. The fraud perpetrated by the Countrywide Defendants from 2003 through 2007, including by BofA starting no later than 2007, was willful and pervasive. It begin with simple greed and then accelerated when Countrywide founder and CEO Angelo Mozilo (“Mozilo”) discovered that Countrywide could not sustain its business, unless it used its size and large market share in California to systematically create false and inflated property appraisals throughout California. Countrywide then used these false property valuations to induce Plaintiffs and other borrowers into ever-larger loans on increasingly risky terms. As Mozilo knew from no later than 2004, these loans were unsustainable for Countrywide and the borrowers and to a certainty would result in a crash that would destroy the equity invested by Plaintiffs and other Countrywide borrowers.

In other words, Countrywide is alleged to not only have made bad loans, but also to have intentionally inflated appraisals.

6. Hand-in-hand with its fraudulently-obtained mortgages, Mozilo and others at Countrywide hatched a plan to “pool” the foregoing mortgages and sell the pools for inflated value. Rapidly, these two intertwined schemes grew into a brazen plan to disregard underwriting standards and fraudulently inflate property values – county-by-county, city-by-city, person-by-person – in order to take business from legitimate mortgage-providers, and moved on to massive securities fraud hand-in-hand with concealment from, and deception of, Plaintiffs and other mortgagees on an unprecedented scale.

Oh, that’s rich. So not only (it is alleged) did Countrywide bamboozle borrowers, they also bamboozled investors.

9. It is now all too clear that this was the ultimate high-stakes fraudulent investment scheme of the last decade. Couched in banking and securities jargon, the deceptive gamble with consumers’ primary assets – their homes – was nothing more than a financial fraud perpetrated by Defendants and others on a scale never before seen. This scheme led directly to a mortgage meltdown in California that was substantially worse than any economic problems facing the rest of the United States. From 2008 to the present, Californians’ home values decreased by considerably more than most other areas in the United States as a direct and proximate result of the Defendants’ scheme set forth herein. The Countrywide Defendants’ business premise was to leave the borrowers, including Plaintiffs, holding the bag once Countrywide and its executives had cashed in reaping huge salaries and bonuses and selling Countrywide’s shares based on their inside information, while investors were still buying the increasingly overpriced mortgage pools and before the inevitable dénouement. This massive fraudulent scheme was a disaster both foreseen by Countrywide and waiting to happen. Defendants knew it, and yet Defendants still induced the Plaintiffs into their scheme without telling them.

There’s the base of it all….

24. Defendants have gone to great lengths to avoid producing documents in this litigation because they know that such documents will establish all details of the massive fraud they perpetrated on Plaintiffs and other Californians. PennyMac, the Granada Network and Defendants’ overseas operations are used by Defendants to systematically hide documents. By delaying production of documents, the Defendants are buying time as they (a) accept the benefits of the scheme described herein, (b) cover up their fraud, and (c) make it materially more expensive and difficult for Plaintiffs and their counsel to obtain a just result.

Of course there’s the famous “let’s hide Waldo” game once the gig is pretty much up. After all, if we have to produce the documents, well, our goose might be cooked – and that would be bad.

So what else is presented in here? Oh, all sorts of good stuff. Here’s a sampling:

275. Defendant CT REAL ESTATE SERVICES, INC. is a California corporation – corporation number C0570795 – and is a resident of Ventura County, California. Defendant CT REAL ESTATE SERVICES has acted alongside and in concertwith BofA in carrying out the concealment described herein and in continuing to conceal from Plaintiffs, from the California general public, and from regulators the details of the securitization and sale of deeds of trust and mortgages (including those of Plaintiffs herein) that would expose all Defendants herein to liability for sale of mortgages of California citizens – including all Plaintiffs herein – for more than the actual value of the mortgage loans. The sale and particularly the undisclosed sale of mortgage loans in excess of actual value violates California Civil Code, §§ 1709 and 1710, and California Business and Professions Code § 17200 et seq., 15 U.S.C. §§ 1641 et seq. and other applicable laws.

That sounds like a problem to me……

290. At the time of entering into the notes and deeds of trust referenced herein with respect to each Plaintiff, the Countrywide Defendants were bound and obligated to fully and accurately disclose:

a. Who the true lender and mortgagee were.

b. That to induce a Plaintiff to enter into the mortgage, the Countrywide Defendants caused the appraised value of Plaintiff’s home to be overstated.

c. That to disguise the inflated value of Plaintiff’s home, Countrywide was orchestrating the over-valuation of homes throughout Plaintiff’s community.

d. That to induce a Plaintiff to enter into a mortgage, the Countrywide Defendants disregarded their underwriting requirements, thereby causing Plaintiff to falsely believe that Plaintiff was financially capable of performing Plaintiff’s obligations under the mortgage, when the Countrywide Defendants knew that was untrue. One way they systematically disregarded the underwriting requirements was through the use of the Granada Network, another fact which Defendants systematically failed to disclose to any California borrower.

Ding ding ding ding ding ding!

One of the keys to this mess is that the lenders knew full well that the borrowers could not pay “as agreed”, yet made the loans anyway.

i. The sales would include sales to nominees who were not authorized under law at the time to own a mortgage, including, among others, Mortgage Electronic Registration Systems Inc., a/k/a MERSCORP, Inc. (“MERS”), which according to its website was created by mortgage banking industry participants to be only a front or nominee to “streamline” the mortgage re-sale and securitization process;

ii. Plaintiff’s true financial condition and the true value of Plaintiff’s home and mortgage would not be disclosed to investors to whom the mortgage would be sold;

iii. Countrywide intended to sell the mortgage together with other mortgages as to which it also intended not to disclose the true financial condition of the borrowers or the true value of their homes or mortgages;

iv. The consideration to be sought from investors would be greater than the actual value of the said notes and deeds of trust;

and

v.The consideration to be sought from investors would be greater than the income stream that could be generated from the instruments even assuming a 0% default rate thereon;

You mean basically everything important about the loans, their quality, who they were going to be sold to, why and how was all bogus? And in addition, the price to be sought from investors exceeded the income stream that could be achieved even if nobody defaulted at all?

Heh, that’s a good gig if you can get it – and if you can find a way to do it legally.

Are there some facts behind this? Oh it appears there are…

The credit losses experienced by Countrywide in 2007 not only were foreseeable by the proposed defendants, they were in fact foreseen at least as early as September 2004. [¶ 33 (Emphasis in original)]

. . .

The credit risk described in the September 2004 warning worsened from September 2004 to August 2007. [¶ 35 (Emphasis in original)]

. . .

By no later than 2006, Mozilo and Sambol were on notice that Countrywide’s exotic loan products might not continue to be saleable into the secondary market, yet this material risk was not disclosed in Countrywide’s periodic filings. [¶ 45]

. . .

Mozilo and Sambol made affirmative misleading public statements in addition to those in the periodic filings that were designed to falsely reassure investors about the nature and quality of Countrywide’s underwriting. [¶ 91]

Oh my. 2004 eh? I seem to remember tAngelo on CNBS making multiple appearances talking about how his company was going to take market share from all these subprime lenders that collapsed, and this was going to be great for his company. Indeed, I remember chortling at the time that I believed he was a lying SOB, and of course the so-called “Fantastic Mainstream Media” lapped it up – and helped support his stock price.

It appears that the intrepid attorneys who filed this action remember that too…. and the pages surrounding 100 in the complaint document a whole bunch of them, including statements in 10Ks and 10Qs that, it is alleged, were flatly false.

And, of course, there’s this one, which I have referred to many times over the last three and a half years:

363. In the January 30, 2007 earnings conference call, Mozilo attempted to distinguish Countrywide from other lenders by stating “we backed away from the subprime area because of our concern over credit quality.” On March 13, 2007, in an interview with Maria Bartiromo on CNBC, Mozilo said that it would be a “mistake” to compare monoline subprime lenders to Countrywide. He then went on to state that the subprime market disruption in the first quarter of 2007 would “be great for Countrywide at the end of the day because all of the irrational competitors will be gone.”

I distinctly remember the cheesy suits and ties, not to mention the sprayed-on-looking tan.

370. In fact, the appraisals were inflated. Countrywide did not utilize quality underwriting processes. Countrywide’s financial condition was not sound, but was a house of cards ready to collapse, as Countrywide well knew, but Plaintiffs did not. Further, Plaintiffs’ mortgages were not refinanced with fixed rate mortgages and neither Agate nor Countrywide ever intended that they would be.

As I have repeatedly pointed out, the entire intent of these loans was not to be a mortgage at all. It was, I allege, more akin to an asset-stripping scheme where the borrower would be effectively forced to come back to the lender after a couple of years when the teaser expired or the inevitable reset or recast occurred and effectively hand over his accumulated “appreciation” in price through yet more fees to be paid to the “lender.”

I believe that for all intents and purposes, from the lender’s point of view, this was nothing more than renting the house, as passing of a clear title to the buyer was never part of what was contemplated by the lender – but of course the borrower wasn’t told this in advance – or at all.

There’s much more in the complaint, but this will do for a start.

Incidentally, the banks tried to get this removed to Federal Court and kill it, and were rebuffed, so it appears that it’s headed to trial. Plaintiff’s Bar 1, Banksters 0 thus far – I will be providing updates on this case as I become aware of them. Southern California (909)890-9192 begin_of_the_skype_highlighting (909)890-9192 end_of_the_skype_highlighting in Northern California(925)957-9797

getting a mod with a 998

Some folks have told me that they got their modification approved using a California Civil Code 998.

Now a 998 traditionally was used in personal injury cases to put pressure on the insurance companies to settle rather than incur both sides of the litigation cost. But it applies to all civil actions. I see the advantage of a 998 in that you don’t have to file litigation to use it. This could be a useful way to start negotiation without incurring the expense of a lawsuit. Once again it costs nothing to try. The other benefit is it may get your case transferred to legal rather than some loss mitigator hence a better result in a faster time frame.

1. What is a California Code of Civil Procedure Section 998 offer to compromise?
CCP Section 998 is a statute that gives litigants leverage to settle cases. The mechanism of Section 998 is for a party to make an offer to compromise and settle a case. The offer must be in writing and must offer something in consideration for settlement. This does not necessarily need to be a dollar amount but must be something of value, such as an offer to waive costs.

There can be significant consequences to failing to accept an offer to compromise and then not securing a judgment or award better than the offer. For plaintiffs who refuse a defendant’s offer and then either suffer a defense verdict or a judgment or award less than that offer, they do not recover their post-offer statutory costs normally allowed by CCP Sections 1032 and 1033.5, and they must pay the defendant’s same costs. Further, they may be required to pay the defendant’s “actually incurred and reasonably necessary” expert witness costs, including costs incurred pre-offer.1 For defendants who reject a plaintiff’s offer and then suffer a verdict or judgment in excess of the value of the offer, they may be required to pay the plaintiff’s statutory costs, as well as post-offer expert witness costs. In personal injury actions, defendants also will be liable for prejudgment interest.2

A statutory offer also can be a strategic tool to force a settlement. Applied with care and foresight, counsel can structure the value of an offer as a reasonable settlement amount, which then puts pressure on the other party to either accept the offer or risk having to reimburse the other side’s regular and expert witness costs.

Plan of engagement: what to do “let them foreclose” or “Do something about it” what to do

UPDATE: This is THE OUTLINE of a plan that is current in its evolution but by no means complete or the last word. It replaces the entry I made in February of this year. The assumption here is that even without taking mortgage foreclosure cases into consideration, the percentage of cases that actually go to trial is between 5%-15% depending upon how you categorize “cases.” On the other hand, if you are not prepared for trial and counting on settlement, your opposition will generally know it and have the upper hand in negotiating a settlement. They are going to play for keeps. You should too. Don’t assume that the note in front of you is the actual original. Close inspection often reveals it is a color copy.

And for heaven sake don’t stand there with your mouth hanging open when someone says you are looking for a free house. You are looking for justice. You had your purse snatched in this transaction, you know there is an obligation, but you also know that they didn’t perfect the security interest (not your fault) and they received multiple payments from multiple parties on these securitized loans. You want a FULL accounting of all such transactions to determine what balance is due after insurance payments, who is subrogated or substituted on claims, and an opportunity to negotiate a settlement or modification with someone who actually has advanced money on THIS transaction and can show it to be so.

WORD OF CAUTION: IF YOU ARE ALREADY IN PROCESS, YOU ARE REQUIRED TO ACT WITHIN THE TIMES SET FORTH BY STATE LAW, FEDERAL LAW, OR THE LAWS OF CIVIL PROCEDURE. FAILURE TO DO SO LEAVES YOU IN AN UPHILL BATTLE TO REVERSE ACTIONS ALREADY TAKEN. ON THE OTHER HAND ACTIONS ALREADY TAKEN “FIX” THE POSITION OF YOUR OPPOSITION, SINCE THEY CAN NO LONGER ASSERT CHANGES IN CREDITOR, LENDER OR TRUSTEE. THUS IT MIGHT BE EASIER, ACCORDING TO SOME SUCCESSFUL LITIGATORS OUT THERE, TO WAIT UNTIL THE SALE HAS OCCURRED AND THEN ATTACK IT AS A FRAUDULENT SALE, THAN TO TRY TO STOP IT WITH A TEMPORARY RESTRAINING ORDER ETC.

CONSIDER BANKRUPTCY, ESPECIALLY CHAPTER 13, WHERE THERE ARE MORE REMEDIES THAN YOU MIGHT THINK IF YOU FILL OUT YOUR SCHEDULES PROPERLY. WE ARE SEEING BETTER RESULTS IN SOME BANKRUPTCY COURTS THAN FEDERAL OR STATE CIVIL COURT PROCEEDINGS.

1. Get your act together, stop fighting amongst the members of your household and make a decision as to what you want to do — fight or flight?
2. GET SOME HELP NO MATTER WHAT YOU DECIDE. GET THE LOAN SPECIFIC TITLE SEARCH, GET A SECURITIZATION SEARCH, AND GET A LAWYER LICENSED IN THE COUNTY WHERE YOUR PROPERTY IS LOCATED AND MAKE SURE HE/SHE IS NOT STUCK ON THE PROPOSITION THAT YOU SHOULD LOSE.
3. If you choose flight, then by all means try the short-sale or jingle mail strategies that have been discussed on this blog. Do not try to make money on the short-sale, since nobody is going to give it to you. You can make a few dollars by riding out the time in foreclosure without making payments (and hopefully saving the money you would have paid) and by negotiating as high a price (a few thousand dollars) as you can in a deal known as “cash for keys.” Even for this, you should employ the services of a local licensed attorney — at least for consultation. There are several short-sale options that have evolved. Google Edge Simonson or Prime financial. I’ve been working on a short-sale-leaseback option that seems to be picking up steam.
4. STRATEGIC DEFAULTS RISING: More and more people of all walks of life including those that have some considerable wealth, are walking away from these properties that were the subject of transactions in which the presumed value of the property was preposterous. This is an option that scare the hair off the pretender lenders because it pouts the power in your hands. They in turn are trying to scare the public with threats of deficiency judgments etc and collections. It is doubtful that many or indeed any deficiency judgments would be awarded, even if they were allowed. But in many cases, particularly in non-judicial states, deficiency judgments are NOT allowed. A version of the strategic default that many people like is to stay as long as possible without paying and then walk. If you are smart about it, you raise your own capital by socking away the payments you would have made.
5. If the decision is fight — then the second decision to make is to answer the question “fight for what?” If you want to buy time, there are many strategies that can be employed, which basically are the same strategies as those used if you are fighting for real. And you might be surprised by the result. Some people get a year or two or even more without payments. You are going to take a FICO hit anyway so why not put some cash in your pocket while you hold back payments.
6. AVOID crazy deals where you give your property or share your property with a stranger. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible.
7. AVOID mortgage modification firms. If you persist in engaging such people at least call references and make sure the references are real. Ask questions about their situation and how they feel it worked out to them. Get as much detail as possible. My opinion is that if they don’t pursue an aggressive litigation strategy the statistical probability of you accomplishing anything by going to them is near zero.
8. In all cases, if at all possible:

(a) Get all your information together along with a short executive summary of your “journal” (even if you create the journal now). That means all closing documents, any information you have on title, recording in the county recorder’s office, the names of all parties who were “at” closing (that means not just the actual people who were there, but he names of companies that were represented or mentioned at closing). Also, include in the file any notices of default(NOD) or notice of Trustee sale (NOTS) or summons from a court.

(b) Get a MORTGAGE ANALYSIS of the loan transaction itself. THIS INVOLVES THREE PARTS — (1) LOAN SPECIFIC TITLE SEARCH AND CHAIN OF TITLE, EXAMINATION OF THE DOCUMENTS, SIGNATURES, AND DATES OF DOCUMENTS PURPORTING TO BE REAL, (2) SECURITIZATION SEARCH THAT CHASES THE MONEY TRAIL AND WILL PROBABLY LEAD YOU TO SOME IMPORTANT ISSUES LIKE THE VERY EXISTENCE OF THE “TRUST” ASSERTING IT HAS THE RIGHT TO FORECLOSE AS WELL AS MONETARY ISSUES SUCH AS APPLICATION OR ALLOCATION OF PAYMENTS RECEIVED BY THE INVESTOR WHO ADVANCED THE FUNDS FOR THE LOAN AND (3) COMMENTARY AND ANALYSIS THAT IS USABLE BY AN ATTORNEY IN COURT SUCH THAT HE/SHE CAN ARGUE THAT THERE ARE QUESTIONS OF FACT ENTITLING YOU TO PURSUE DISCOVERY. IF YOU WIN THAT POINT YOU ARE ON YOUR WAY TO A SUCCESSFUL CONCLUSION. BUT NOBODY IS GOING TO MAKE IT EASY FOR YOU.

(c) Who is your creditor? The TILA Audit alone does nothing without taking further steps. The Trustee’s “Take-down” report should be demanded in non-judicial states and if the house is in foreclosure, your written objection should be sent to the Trustee.

(d) If someone tells you they are “pretty sure” or can “definitely” stop your foreclosure or promises a favorable outcome, and asks for money up front, then run like hell. This is a scam. IF THEY TELL YOU THEY WILL DO WHAT THEY CAN, AND THEY GIVE YOU SOME EXAMPLES OF WHAT THEY WILL BE DOING FOR YOU THEN LISTEN AND GET REFERENCES.

(e) Only a Court order stops foreclosure or a Trustee Sale. No letter of any form or substance will stop it unless the other side is intimidated into stopping the action, which sometimes happens when they know their paperwork is “out of order.”

(f) Get a Forensic Mortgage Analysis Report OR AN EXPERT DECLARATION that summarizes in a few pages the potential issues that you should be investigating AND WHICH LENDS SUPPORT TOY OUR DENIAL OF THE DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO CLAIM A DEFAULT, DENIAL OF THE RIGHT OF THE OPPOSING PARTY TO FORECLOSE.

(g) Get an Expert Declaration that uses the forensic report and the expert opinions of specific experts (like appraisers, title analysts) and which identifies the probable chain of securitization and the money trail. You’ll be surprised when you find out there were two yield spread premiums not disclosed to you and that they can total as much or more than the “loan” itself. GET EXPERT OPINION ON PROBABLE DAMAGES INCLUDING RETURN OF UNDISCLOSED FEES, INTEREST, ETC. (SEE LAWYER’S WORKBOOK FROM GARFIELD CONTINUUM).

(h) Send the Forensic Report and expert declaration to the known parties, with an instruction to forward it to all other parties known to them in the securitization chain. Include a Qualified Written Request(QWR) AND a Debt Validation Letter(DVL) (which is really a debt verification letter). Don’t be surprised if your pretender lenders will come back and tell you your QWR is defective or improper in some way, but that’s OK, you have followed statutory procedure and they didn’t. With the help of an attorney and with consultation with your experts decide on what resolution you will demand — damages, rescission, etc.

(i) Don’t believe a word about modification. Practically none of them go through. They are leading you into default so they can collect more service fees, and get money out of you that you think is stopping the foreclosure.

(j) Don’t believe a word that any pretender lender or representative says or represents, even if they are a lawyer, particularly verbal communications that they refuse to confirm in writing. Challenge everything.
(k) Don’t accept any document as authentic. Many documents are being fabricated or forged, including affidavits. This is why you need a lawyer and an expert and a Forensic mortgage analysis — to determine what documents and parties are suspect and what you should be asking for in discovery and in the QWR and DVL.

(l) YOUR FIRST STRATEGY IS TO RAISE NOT PROVE ISSUES OF FACT. BY PRODUCING A FORENSIC REPORT AND EXPERT DECLARATION, NEITHER YOU NOR YOUR LAWYER NEEDS TO ACQUIRE EXPERTISE IN SECURITIZED LOANS. YOU ONLY NEED TO RAISE THE ISSUE OF FACT BY SHOWING THE COURT THAT YOU HAVE EXPERTS WHO SAY THE PRETENDER LENDERS/TRUSTEES ETC. ARE NOT CREDITORS AND NOT AUTHORIZED AGENTS WORKING FOR THE CREDITORS. THEY SAY THEY ARE IN FACT THE CREDITORS OR HAVE SOME AUTHORITY GRANTED BY AN ALLEGED CREDITOR. IT IS NOT FOR THE COURT TO ACCEPT ONE VIEW OR THE OTHER, BUT RATHER TO ALLOW DISCOVERY AND AN EVIDENTIARY HEARING ON THE ISSUE OF STANDING (SEE MANY RECENT CASES REPORTED SINCE FEBRUARY ON THIS BLOG).

(m) Be very aggressive on discovery. They will argue that even if they are not the creditor and even if they refuse to disclose the identity of the creditor, they are still entitled to disclose because they are the holder of the note and/or mortgage. Your argument will probably be that they still have a duty to disclose the identity of the creditor and the source of the their authority to represent the creditor, along with proof that the creditor has received notice of these proceedings.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

62 MILLION HOMES ARE LEGALLY FORECLOSURE -PROOF

Posted 7 hours ago by Neil Garfield on Livinglies’s Weblog

EDITOR’S NOTE: YES IT MEANS WHAT IT SAYS — WHICH IS WHAT I HAVE BEEN SAYING FOR THREE YEARS. BUT JUST BECAUSE SOME JUDGES REALIZE THAT THIS IS THE ONLY CORRECT LEGAL INTERPRETATION DOESN’T MEAN ALL OF THEM WILL ABIDE BY THAT. QUITE THE REVERSE. MOST JUDGES REFUSE TO ACCEPT AND CAN’T WRAP THEIR BRAINS AROUND THE FACT THAT THE FINANCIAL INDUSTRY THAT SET THE LEGAL STANDARDS FOR PERFECTING A SECURITY INTEREST IN RESIDENTIAL HOME MORTGAGES COULD HAVE SCREWED UP LIKE THIS.

THE ANSWER OF COURSE IS THAT THEY DIDN’T — WALL STREET DID IT. I KNOW FOR A FACT AND HAVE SEEN THE INTERNAL MEMORANDUM WRITTEN IN 2003-2006 THAT LAWYERS WHO WERE PREPARING THE SECURITIZATION DOCUMENTS KNEW AND INFORMED THEIR CLIENTS THAT THIS COULD NOT WORK.

THIS DOES NOT MEAN YOU GET A FREE HOUSE. BUT IT DOES MEAN THAT AT THE MOMENT ANY HOUSE IN WHICH MERS WAS INVOLVED DOES NOT HAVE A PERFECTED SECURITY INTEREST AS AN ENCUMBRANCE. AND THAT MEANS THAT ANY FORECLOSURE BASED UPON DOCUMENTS OR PRESUMPTIONS REGARDING MERS ARE VOID. AND THAT MEANS THAT IF YOU FALL INTO THIS CLASS OF PEOPLE — AND MOST PEOPLE DO — IT IS POSSIBLE AND EVEN PROBABLE THAT YOU COULD BE AWARDED QUIET TITLE ON A HOME THAT WAS FORECLOSED AND SOLD EVEN YEARS AGO.

BUT BEWARE: JUST BECAUSE THEY SCREWED UP THE PAPERWORK AND THEY DON’T HAVE THE REMEDY OF FORECLOSURE IMMEDIATELY AVAILABLE DOESN’T MEAN THAT NOBODY LENT YOU MONEY NOR DOES IT MEAN THAT YOU DON’T OWE ANY MONEY NOR DOES IT MEAN THAT THEY COULD NOT CREATE AN EQUITABLE LIEN ON YOUR PROPERTY THAT COULD AMOUNT TO A MORTGAGE THAT COULD BE FORECLOSED. BUT THAT IS STRICTLY A JUDICIAL PROCESS EVEN IN SO-CALLED NON-JUDICIAL STATES.

WE ARE NOW CLOSING IN ON THE REALITY. THE INEVITABLE OUTCOME IS PRINCIPAL REDUCTION WHETHER THE BANKS LIKE IT OR NOT. EVEN IF THEIR LIEN WAS PERFECTED AND ENFORCEABLE THEY STILL CANNOT GET ANY MORE MONEY THAN THE HOUSE IS WORTH. WITHOUT THE ENCUMBRANCE, THEY ARE FORCED TO NEGOTIATE A WHOLE NEW PATH WITH ONLY THE PARTIES THAT ARE NOW LEFT HOLDING THE BAG ON THE LOSS ASSOCIATED WITH THE ORIGINAL LOAN ON YOUR PROPERTY, AFTER ADJUSTMENTS FOR PAYMENTS RECEIVED BUT NOT RECORDED OR ALLOCATED.

IN ORDER TO HOLD THEIR FEET TO THE FIRE, YOU HAVE TO KNOW THE ORIGINAL SECURITIZATION SCHEME AND INSIST ON PROOF OF WHAT HAPPENED AFTER THE INITIAL SECURITIZATION PLAN WAS PUT IN PLACE. REMEMBER THAT THIS IS NOT A FIXED EVENT. THIS IS SINGLE TRANSACTION BETWEEN THE BORROWER AND AN ONGOING PROCESSION OF SUCCESSORS EACH OF WHOM HAS QUESTIONABLE RIGHTS TO THE NOTE, MORTGAGE OR EVEN THE OBLIGATION SINCE THEY WERE ONLY ASSIGNED A RECEIVABLE FROM A PARTY WHO WAS NEITHER THE BORROWER NOR THE ORIGINATING LENDER.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

*
The Alex Jones Channel Alex Jones Show podcast Prison Planet TV Infowars.com Twitter Alex Jones’ Facebook Infowars store

Ellen Brown
Web of Debt
August 20, 2010

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?


Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or “whistle blower” to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for “wrongfully bypass[ing] the counties’ recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located.” The complaint notes that “MERS claims to have ‘saved’ at least $2.4 billion dollars in recording costs,” meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS’ Role in the Financial Crisis

MERS is, according to its website, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” Or as Karl Denninger puts it, “MERS’ own website claims that it exists for the purpose of circumventing assignments and documenting ownership!”

Fresh food that lasts from eFoods Direct (Ad)

MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept….

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible …. The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

Axing the Bankers’ Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko [pdf] decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step—a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a “people’s bank,” making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.

Securitized Mortgage: A Basic Roadmap

The Parties and Their Roles

The first issue in reviewing a structured residential mortgage transaction is to differentiate between a private-label deal and an “Agency” (or “GSE”) deal. An Agency (or GSE) deal is one involving Fannie Mae, Freddie Mac, or Ginnie Mae, the three Government Sponsored Enterprises (also known as the GSEs). This paper will review the parties, documents, and laws involved in a typical private-label securitization. We also address frequently-occurring practical considerations for counsel dealing with securitized mortgage loans that are applicable across-the-board to mortgages into both private-label and Agency securitizations.

The parties, in the order of their appearance are:

Originator. The “originator” is the lender that provided the funds to the borrower at the loan closing or close of escrow. Usually the originator is the lender named as “Lender” in the mortgage Note. Many originators securitize loans; many do not. The decision not to securitize loans may be due to lack of access to Wall Street capital markets, or this may simply reflect a business decision not to run the risks associated with future performance that necessarily go with sponsoring a securitization, or the originator obtains better return through another loan disposition strategy such as whole loan sales for cash.

Warehouse Lender. The Originator probably borrowed the funds on a line of credit from a short-term revolving warehouse credit facility (commonly referred to as a “warehouse lender”); nevertheless the money used to close the loan were technically and legally the Originator’s funds. Warehouse lenders are either “wet” funders or “dry” funders. A wet funder will advance the funds to close the loan upon the receipt of an electronic request from the originator. A dry funder, on the other hand, will not advance funds until it actually receives the original loan documents duly executed by the borrower.

Responsible Party. Sometimes you may see another intermediate entity called a “Responsible Party,” often a sister company to the lender. Loans appear to be transferred to this entity, typically named XXX Asset Corporation.

Sponsor. The Sponsor is the lender that securitizes the pool of mortgage loans. This means that it was the final aggregator of the loan pool and then sold the loans directly to the Depositor, which it turn sold them to the securitization Trust. In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, the Sponsor normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

Depositor. The Depositor exists for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. The Depositor purchases the loans from the Sponsor, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the Sponsor for the Depositor’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that the Depositor owns the loans has been described as “one nanosecond.”

The Depositor has no other functions, so it needs no more than a handful of employees and officers. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/“FDIC-remote” analysis that the Depositor maintains its own corporate existence separate from the Sponsor and the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans on behalf of the certificate holders at the end of the securitization transaction. Like any trust, the Trustee’s powers, rights, and duties are defined by the terms of the transactional documents that create the trust, and are subject to the terms of the trust laws of some particular state, as specified by the “Governing Law” provisions of the transaction document that created the trust. The vast majority of the residential mortgage backed securitized trusts are subject to the applicable trust laws of Delaware or New York. The “Pooling and Servicing Agreement” (or, in “Owner Trust” transactions as described below, the “Trust Indenture”) is the legal document that creates these common law trusts and the rights and legal authority granted to the Trustee is no greater than the rights and duties specified in this Agreement. The Trustee is paid based on the terms of each structure. For example, the Trustee may be paid out of interest collections at a specified rate based on the outstanding balance of mortgage loans in the securitized pool; the Master Servicer may pay the Trustee out of funds designated for the Master Servicer; the Trustee may receive some on the interest earned on collections invested each month before the investor remittance date; or the Securities Administrator may pay the Trustee out of their fee with no charges assessed against the Trust earnings. Fee amounts ranger for as low as .0025% to as high as .009%.

Indenture Trustee and Owner Trustee. Most private-label securitizations are structured to meet the Internal Revenue Code requirements for tax treatment as a “Real Estate Mortgage Investment Conduit (“REMIC”). However some securitizations (both private-label and GSE) have a different, non-REMIC structure usually called an “Owner Trust.” In an Owner Trust structure the Trustee roles are divided between an Owner Trustee and an Indenture Trustee. As the names suggest, the Owner Trustee owns the loans; the Indenture Trustee has the responsibility of making sure that all of the funds received by the Trust are properly disbursed to the investors (bond holders) and all other parties who have a financial interest in the securitized structure. These are usually Delaware statutory trusts, in which case the Owner Trustee must be domiciled in Delaware.

Primary Servicer. The Primary Servicer services the loans on behalf of the Trust. Its rights and obligations are defined by a loan servicing contract, usually located in the Pooling and Servicing Agreement in a private-label (non-GSE) deal. The trust may have more than one servicer servicing portions of the total pool, or there may be “Secondary Servicers,” “Default Servicers,” and/or “Sub-Servicers” that service loans in particular categories (e.g., loans in default). Any or all of the Primary, Secondary, or Sub-Servicers may be a division or affiliate of the Sponsor; however under the servicing contract the Servicer is solely responsible to the Trust and the Master Servicer (see next paragraph). The Servicers are the legal entities that do all the day-to-day “heavy lifting” for the Trustee such as sending monthly bills to borrowers, collecting payments, keeping records of payments, liquidating assets for the Trustee, and remitting net payments to the Trustee.

The Servicers are normally paid based on the type of loans in the Trust. For example, a typical annual servicing fee structure may be: .25% annually for a prime mortgage; .375% for an Alt-A or Option ARM; and .5% for a subprime loan. In this example, a subprime loan with an average balance over a given year of $120,000 would generate a servicing fee of $600.00 for that year. The Servicers are normally permitted to retain all “ancillary fees” such as late charges, check by phone fees, and the interest earned from investing all funds on hand in overnight US Treasury certificates (sometimes called “interest earned on the float”).

Master Servicer. The Master Servicer is the Trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. For trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the Sponsor but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, based on the average balance of all loans in the Trust.

Custodian. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

• This is done for safekeeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.
• Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.
• There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“GSE”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.
• The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.
• In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.”
• This does not necessarily require the Custodian to find assignments or endorsements naming the Depositor or the Trustee. The wording in the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” may technically allow the Custodian to approve files in which the last endorsement is from the Sponsor in blank, and no assignment to either the Depositor or the Trustee has been recorded in the local land records.
• In many private-label securitizations a single institution fulfills all of the functions related to document custody for the entire pool of loans. In these cases, the institution might be referred to simply as the “Custodian” and the governing document as the “Custodial Agreement.”

Typical transaction steps and documents (in private-label, non-GSE securitizations)

1. The Originator sells loans (one-by-one or in bundles) to the Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly-named document. The purpose of the MLPSA is to sell all right, title, claims, legal, equitable and any and all other interest in the loans to the Securitizer-Sponsor. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Frequently a form is prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.

The MLPSA will contain representations, attestations and warranties as to the enforceability and marketability of each loan, and specify the purchaser’s remedies for a breach of any “rep” or “warrant.” The primary remedy is the purchaser’s right to require the seller to repurchase any loan materially and adversely affected by a breach. Among the defects and events covered by “reps” and “warrants” are “Early Payment Defaults,” commonly referred to as “EPD’s.” An EDP occurs if a loan becomes seriously (usually, 60 or more days) delinquent within a specified period of time after it has been sold to the Trust. The EDP covenants are always limited in time and normally only cover EDPs that occur within 12 to 18 months of the original sale. If an EDP occurs, then the Trust can force the originator to repurchase the EPD note and replace it with a note of similar static qualities (amount, term, type, etc.)

2. The Securitizer-Sponsor sells the loans to the Depositor. This takes place in another MLPSA very similar to the first one and the same documents are created and exchange with the same or similar terms. These are typically included as exhibits to the PSA.

3. Depositor, Trustee, Master Servicer and Servicer enter into a Pooling and Servicing Agreement (“PSA”) in which:

— the Depositor sells all right, title, legal, equitable and any other interest in the mortgage loans to the Trustee, with requirements for acceptance and delivery receipts, often including the prescribed form as an exhibit, in similar fashion to the MLPSA’s;

— the PSA creates the trust, appoints the Trustee, and defines the classes of securities (often called “Certificates”) that the trust will issue to investors and establishes the order of priority between classes of Certificates as to distributions of cash collected and losses realized with respect to the underlying loans (the highest rated Certificates are paid first and the lowest rated Certificates suffer the first losses-thus the basis for the term “structured finance”); and

— the Servicer, Master Servicer and Trustee establish the Servicer’s rights and duties, including limits and extent of a Servicer’s right to deal with default, foreclosure, and Note modifications. Some PSA’s include detailed loss mitigation or modification rules, and others limit any substantive modifications (such as changing the interest rate, reducing the principal debt, waiving default debt, extending the repayment term, etc.)

4. All parties including the Custodian enter into the Custodial Agreement in which:

• the Depositor agrees to cause the Notes and other specified key loan documents (usually including an unrecorded, recordable Assignment “in blank”)(NB that several recent courts have raised serious legal questions about the assignment of a real estate instrument in blank under such theories as the statute of frauds and whether or not an assignment in blank is in fact a “recordable” legal real estate document) to be delivered to the Custodian (with the Securitizer to do the actual physical shipment);
• the Custodian agrees to inspect the Notes and other documents and to certify in designated written documents to the Trustee that the documents meet the required specifications and are in the Custodian’s possession; and
• establishes a (supposedly exclusive) procedure and specified forms whereby the Servicer can obtain possession of any Note, Mortgage, Deed of Trust or other custodial document for foreclosure or payoff purposes.

Finding Documents on the S.E.C.’s website (the EDGAR filing system):

• If you know the name of the Depositor and the name of the Trust (e.g. “Time Bomb Mortgage Trust 2006-2”) that contains the loan in question, then the PSA and Custodial Agreement probably can be found on the SEC’s website (www.sec.gov):
• On the SEC home page look for a link to “Search for Company Filings” and then choose to search by “Company Name,” using the name of the Depositor. (Alternatively, click on the “Contains” button on the search page and then search by the series, i.e. 2006-2 in the above example.)
• Hopefully, this will enable you to find the Trust in question. If so, the PSA and the Custodial Agreement should be available as attachments to one or more of the earliest-filed forms (normally the 8-K) shown on the list of available documents. Sometimes the PSA is listed as a named document but other times you just look for the largest document in terms of megabytes filed with the 8-K form.
• The available documents also should include the Prospectus and/or Prospectus Supplement (Form 424B5) and the Free Writing Prospectus (“FWP”). The latter documents (at least the sections written in English, as opposed to the many tables of financial data) can be very helpful in providing a concise and straightforward description of the parties, documents, and transaction steps and detailed transactional graphs and charts in the particular deal. And because these are SEC documents, the information serves as highly credible evidence on these points, and the Court can take judicial notice of any document filed with the SEC.
• For securitizations created after January 1, 2006, SEC “Regulation AB” requires the parties to file a considerable amount of detailed information about the individual loans included in the Trust. This information may be filed as an Exhibit to the PSA or to a Form 8-K. This loan-level data typically includes loan numbers, interest rates, principal amount of loan, origination date and (sometimes) property addresses and thus can be very useful in proving that a particular loan is in a particular Trust.

Dealing with Notes and Assignments:

There are two basic documents involved in a residential mortgage loan: the promissory note and the mortgage (or deed of trust). For brevity’s sake these are referred to simply as the Note and the Mortgage.

A Note is: a contract to repay borrowed money. It is a negotiable instrument governed by Article 3 of the Uniform Commercial Code (UCC). The Note, by itself, is an unsecured debt. Notes are personal property. Notes are negotiated by endorsement or by transfer and delivery as provided for by the UCC. Notes are separate legal documents from the real estate instruments that secure the loans evidenced by the Notes by liens on real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a security agreement. It creates a lien on the real estate as collateral for a debt, but it does not create the debt itself. The rights created by a Mortgage are classified as real property and these instruments are governed by local real estate law in each jurisdiction. The UCC has nothing to do with the creation, drafting, recording or assignment of these real estate instruments.

A Note can only be transferred by: an “Endorsement” if the Note is payable to a particular party; or by transfer of possession of the Note, if the Note is endorsed “in blank.” Endorsements must be written or stamped on the face of the Note or on a piece of paper physically attached to the Note (the Allonge). See UCC §3-210 through §3-205. The UCC does not recognize an Assignment as a valid means of transferring a Note such that the transferee becomes a “holder”, which is what the owners of securitized mortgage notes universally claim to be.

In most states, an Allonge cannot be used to endorse a note if there is sufficient room at the “foot of the note” for such endorsements. The “foot of the note” refers to the space immediately below the signatures of the borrowers. Also, if an Allonge is properly used, then it must describe the terms of the note and most importantly must be “permanently affixed” to the Note. Most jurisdictions hold that “staples” and “tape” do not constitute a “permanent” attachment. And, the Master Document Custodial Agreement may specify when an Allonge can be used and how it must be attached to the original Note.

Mortgage rights can only be transferred by: an Assignment recorded in the local land records. Mortgage rights are “estates in land” and therefore governed by the state’s real property laws. These vary from state to state but in general Mortgage rights can only be transferred by a recorded instrument (the Assignment) in order to be effective against third parties without notice.

In discussions of exactly what documents are required to transfer a “mortgage loan” confusion often arises between Notes versus Mortgages and the respective documents necessary to accomplish transfers of each. The issue often arises from the standpoint of proof: Has Party A proven that a transfer has occurred to it from Party B? Does Party A need to have an Assignment? The answer often depends on exactly what Party A is trying to prove.

Scenario 1: Party A is trying to prove that the Trustee “owns the loan.” Here the likely questions are, did the transaction steps actually occur as required by the PSA and as represented in the Prospectus Supplement, and are the Trustee’s ownership rights subject to challenge in a bankruptcy case?

The answers lie in the UCC and in documents such as:

• the MLPSA’s;
• conveyancing rules of the PSA (normally Section 2.01);
• transfer and delivery receipts (look for these to be described in the “Conditions to Closing” or similarly named section of MLPSA’s and the PSA);
• funds transfer records (canceled checks, wire transfers, etc);
• compliance and exception reports provided by the Custodian pursuant to the Master Document Custodial Agreement; and
• the “true sale” legal opinions.

Some of these documents may or may not be available on the SEC’s EDGAR system; some may be obtainable only through discovery in litigation. The primary inquiry is whether or not the documents, money and records that were required to have been produced and change hands actually do so as required, and at the times required, by the terms of the transaction documents.

Another question sometimes asked when examining the “validity” of a securitization (or in other words, the rights of a securitization Trustee versus a bankruptcy trustee) is, must the Note be endorsed to the Trustee at the time of the securitization? Here are some points to consider:

• Frequently the only endorsement on the Note is from the Securitizer-Sponsor “in blank” and the only Assignment that exists, pre-foreclosure, is from the Securitizer-Sponsor “in blank” (in other words, the name of the transferee is not inserted in the instrument and this space is blank).
• The concept widely accepted in the securitization world (the issuers and ratings agencies, and the law firms advising them) is that this form of documentation was sufficient for a valid and unbroken chain of transfers of the Notes and assignments of the Mortgages as long as everything was done consistently with the terms of the securitization documents. This article is not intended to validate or defend either this concept or this practice, nor is it intended to represent in any way that the terms of the securitization documents were actually followed to the letter in every real-world case. In fact, and unfortunately for the certificate holders and the securitized mortgage markets, there are many instances in many reported cases where these mandatory rules of the securitization documents have not been followed but in fact, completely ignored.
• Often shortly before foreclosure (or in some cases afterwards) a mortgage assignment is produced from the Originator to the Trustee years after the Trust has closed out for the receipt of all mortgage loans. Such assignments are inconsistent with the mandatory conveyancing rules of the Trust Documents and are also inconsistent with the special tax rules that apply to these special trust structures. Most state law requires the chain of title not to include any mortgage assignments in blank, but assignments from A to B to C to D. Under most state statutes, an assignment in blank would be deemed an “incomplete real estate instrument.” Even more frequent than A to D assignments are MERS to D assignments, which suffer from the same transfer problems noted herein plus what is commonly referred to as the “MERS problem.”

Scenario 2: Party B seeks to prove standing to foreclose or to appear in court with the rights of a secured creditor under the Bankruptcy Code. OK, granted the UCC (§3-301) does provide that a negotiable instrument can be enforced either by “(i) the holder of the instrument, or (ii) a non-holder in possession of the instrument who has the rights of a holder.”

• Servicers and foreclosure counsel have been known to contend that this is the end of the story and that the servicer can therefore do anything that the holder of the Note could do, anywhere, anytime.

• The Fannie Mae and Freddie Mac Guides contain many sections that appear to lend superficial support to this contention and frequently will be cited by Servicers and foreclosure counsel as though the Guides have the force of law, which of course they do not.

• There are many serious problems with this legal position, as recognized by an increasing number of reported court decisions.

Authors’ General Conclusions and Observations:

• Servicers and foreclosure firms are either wrong, or at least not being cautious, if they attempt to foreclose, or appear in court, without having a valid pre-complaint or pre-motion Assignment of the Mortgage. Yet at the same time, Servicers and note holders place themselves at risk of preference and avoidable transfer issues in bankruptcy cases if, for example, endorsements and Assignments that they rely upon to support claims to secured status occur or are recorded after or soon before bankruptcy filing.

• In addition any Servicer, Lender, or Securitization Trustee is either wrong, or at least not being cautious, if it ever: (1) claims in any communications to a consumer or to the Court in a judicial proceeding that it is the Note holder unless they are, at the relevant point in time, actually the holder and owner of the Note as determined under UCC law; or (2) undertakes to enforce rights under a Mortgage without having and recording a valid Assignment.
• The UCC deals only with enforcing the Note. Enforcing the Mortgage on the other hand is governed by the state’s real property and foreclosure laws, which generally contain crucial provisions regarding actions required to be taken by the “note holder” or “beneficiary.” State law may or may not authorize particular actions to be taken by servicers or agents of the holder of the Note.

• For the Servicer to have “the rights of the holder” under the UCC it must be acting in accordance with its contract. For example, if the Servicer claims to have possession of the Note, did it follow the procedures contained in the “Release of Documents” section of the Custodial Agreement in obtaining possession? Does the Servicer really have “constitutional” standing under either Federal or State law to enforce the Note even if it is a “holder” if it does not have any “pecuniary” or economic interest in the Note? In short, the concept of constitutional standing involves some injury in fact and it is hard to see how a mere “place-holder” or “Nominee” could ever over-come such a hurdle unless it actually owned the Note or some real interest in the same.

• The Servicer should have the burden of explaining the legal reasons supporting its standing and authority to act. Sometimes Servicers have difficulty maintaining a consistent story in this regard. Is the Servicer claiming to be the actual holder, or the holder and the owner, or merely an authorized agent of the true holder? If it is claiming some agency, what proof does it have to support such a claim? What proof is required? Sometimes this is just academic legal hair-splitting but many times it involves serious issues of fact. For example, what if the attorney for the Servicer asserts to the court that his or her client actually owns the Note, but the Fannie Mae website reports that Fannie is the owner? What if the MERS website reports that the Plaintiff is just the “Servicer?” What if the pre-complaint correspondence to the borrower names some entirely different party as the holder and indicated that the current plaintiff is only the Servicer?

• Finally, the Servicer always has an obligation to be factually accurate in borrower communications and legal proceedings, and to supervise employees and vendors and attorneys to assure that Note endorsements, Assignments of Mortgage, and affidavits are executed by persons with valid corporate authority, and not falsified nor offered for any improper purpose.

The focus of the default servicing industry must move from “how fast we can get things done” to “how honestly and accurately can we be in presenting the proper documentation to the courts and to the borrowers”. Judicial proceedings are not like NASCAR races where the fastest lawyer always wins. Judicial proceedings are all about finding the truth no matter how long it takes and regardless of the time and difficulties involved.

JP Morgan 18,000 affidavids per month

Posted 3 days ago by Neil Garfield on Livinglies’s Weblog

The bottom line is that none of these signors of affidavits have ANY personal knowledge regarding any document, event, or transaction relating to any of the loans they are “processing.” It’s all a lie.

In a 35 hour workweek, 18,000 affidavits per month computes as 74.23 affidavits per JPM signor per hour and 1.23 per minute. Try that. See if you can review a file, verify the accounting, execute the affidavit and get it notarized in one minute. It isn’t possible. It can only be done with a system that incorporates automation, fabrication and forgery.
Editor’s Note: Besides the entertaining writing, there is a message here. And then a hidden message. The deponent is quoted as saying she has personal knowledge of what her fellow workers have as personal knowledge. That means the witness is NOT competent in ANY court of law to give testimony that is allowed to be received as evidence. Here is the kicker: None of these loans were originated by JPM. Most of them were the subject of complex transactions. The bottom line is that none of these signors of affidavits have ANY personal knowledge regarding any document, event, or transaction relating to any of the loans they are “processing.” It’s all a lie.
In these transactions, even though the investors were the owners of the loan, the servicing and other rights were rights were transferred acquired from WAMU et al and then redistributed to still other entities. This was an exercise in obfuscation. By doing this, JPM was able to control the distribution of profits from third party payments on loan pools like insurance contracts, credit defaults swaps and other credit enhancements.
Having that control enabled JPM to avoid allocating such payments to the investors who put up the bad money and thus keep the good money for itself. You see, the Countrywide settlement with the FTC focuses on the pennies while billions of dollars are flying over head.

The simple refusal to allocate third party payments achieves the following:

* Denial of any hope of repayment to the investors
* Denial of any proper accounting for all receipts and disbursements that are allocable to each loan account
* 97% success rate in sustaining Claims of default that are fatally defective being both wrong and undocumented.
* 97% success rate on Claims for balances that don’t exist
* 97% success rate in getting a home in which JPM has no investment

(THE DEPONENT’S NAME IS COTRELL NOT CANTREL)

JPM: Cantrel deposiition reveals 18,000 affidavits signed per month
HEY, CHASE! YEAH, YOU… JPMORGAN CHASE! One of Your Customers Asked Me to Give You a Message…

Hi JPMorgan Chase People!

Thanks for taking a moment to read this… I promise to be brief, which is so unlike me… ask anyone.

My friend, Max Gardner, the famous bankruptcy attorney from North Carolina, sent me the excerpt from the deposition of one Beth Ann Cottrell, shown below. Don’t you just love the way he keeps up on stuff… always thinking of people like me who live to expose people like you? Apparently, she’s your team’s Operations Manager at Chase Home Finance, and she’s, obviously, quite a gal.

Just to make it interesting… and fun… I’m going to do my best to really paint a picture of the situation, so the reader can feel like he or she is there… in the picture at the time of the actual deposition of Ms. Cottrell… like it’s a John Grisham novel…

FADE IN:

SFX: Sound of creaking door opening, not to slowly… There’s a ceiling fan turning slowly…

It’s Monday morning, May 17th in this year of our Lord, two thousand and ten, and as we enter the courtroom, the plaintiff’s attorney, representing a Florida homeowner, is asking Beth Ann a few questions… We’re in the Circuit Court of the Fifteenth Judicial Circuit, Palm Beach County, Florida.

Deposition of Beth Ann Cottrell – Operations Manager of Chase Home Finance LLC

Q. So if you did not review any books or records or electronic records before signing this affidavit of payments default, how is it that you had personal knowledge of all of the matters stated in this sworn document?

A. Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge. That is how our process works.

Q. So, when signing an affidavit, you stated you have personal knowledge of the matters contained therein of Chase’s business records yet you never looked at the data bases or anything else that would contain those records; is that correct?

A. That is correct. I rely on my staff to do that part.

Q. And can you tell me in a given week how many of these affidavits you might sing?

A. Amongst all the management on my team we sign about 18,000 a month.

Q. And how many folks are on what you call the management?

A. Let’s see, eight.

And… SCENE.

Isn’t that just irresistibly cute? The way she sees absolutely nothing wrong with the way she’s answering the questions? It’s really quite marvelous. Truth be told, although I hadn’t realized it prior to reading Beth Ann’s deposition transcript, I had never actually seen obtuse before.

In fact, if Beth’s response that follows with in a movie… well, this is the kind of stuff that wins Oscars for screenwriting. I may never forget it. She actually said:

“Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge. That is how our process works.”

No you didn’t.

Isn’t she just fabulous? Does she live in a situation comedy on ABC or something?

ANYWAY… BACK TO WHY I ASKED YOU JPMORGAN CHASE PEOPLE OVER…

Well, I know a homeowner who lives in Scottsdale, Arizona… lovely couple… wouldn’t want to embarrass them by using their real names, so I’ll just refer to them as the Campbell’s.

So, just the other evening Mr. Campbell calls me to say hello, and to tell me that he and his wife decided to strategically default on their mortgage. Have you heard about this… this strategic default thing that’s become so hip this past year?

It’s when a homeowner who could probably pay the mortgage payment, decides that watching any further incompetence on the part of the government and the banks, along with more home equity, is just more than he or she can bear. They called you guys at Chase about a hundred times to talk to you about modifying their loan, but you know how you guys are, so nothing went anywhere.

Then one day someone sent Mr. Campbell a link to an article on my blog, and I happened to be going on about the topic of strategic default. So… funny story… they had been thinking about strategically defaulting anyway and wouldn’t you know it… after reading my column, they decided to go ahead and commence defaulting strategically.

So, after about 30 years as a homeowner, and making plenty of money to handle the mortgage payment, he and his wife stop making their mortgage payment… they toast the decision with champagne.

You see, they owe $865,000 on their home, which was just appraised at $310,000, and interestingly enough, also from reading my column, they came to understand the fact that they hadn’t done anything to cause this situation, nothing at all. It was the banks that caused this mess, and now they were expecting homeowners like he and his wife, to pick up the tab. So, they finally said… no, no thank you.

Luckily, she’s not on the loan, so she already went out and bought their new place, right across the street from the old one, as it turns out, and they figure they’ve got at least a year to move, since they plan to do everything possible to delay you guys from foreclosing. They’re my heroes…

Okay, so here’s the message I promised I’d pass on to as many JPMorgan Chase people as possible… so, Mr. Campbell calls me one evening, and tells me he’s sorry to bother… knows I’m busy… I tell him it’s no problem and ask how he’s been holding up…

He says just fine, and he sounds truly happy… strategic defaulters are always happy, in fact they’re the only happy people that ever call me… everyone else is about to pop cyanide pills, or pop a cap in Jamie Dimon’s ass… one or the other… okay, sorry… I’m getting to my message…

He tells me, “Martin, we just wanted to tell you that we stopped making our payments, and couldn’t be happier. Like a giant burden has been lifted.”

I said, “Glad to hear it, you sound great!”

And he said, “I just wanted to call you because Chase called me this evening, and I wanted to know if you could pass a message along to them on your blog.”

I said, “Sure thing, what would you like me to tell them?”

He said, “Well, like I was saying, we stopped making our payments as of April…”

“Right…” I said.

“So, Chase called me this evening after dinner.”

“Yes…” I replied.

He went on… “The woman said: Mr. Campbell, we haven’t received your last payment. So, I said… OH YES YOU HAVE!”

Hey, JPMorgan Chase People… LMAO. Keep up the great work over there.

non-judicial sale is NOT an available election for a securitized loan

Posted 6 days ago by Neil Garfield on Livinglies’s Weblog
NON-JUDICIAL STATES: THE DIFFERENCE BETWEEN FORECLOSURE AND SALE:

FORECLOSURE is a judicial process herein the “lender” files a lawsuit seeking to (a) enforce the note and get a judgment in the amount owed to them (b) asking the court to order the sale of the property to satisfy the Judgment. If the sale price is lower than the Judgment, then they will ask for a deficiency Judgment and the Judge will enter that Judgment. If the proceeds of sale is over the amount of the judgment, the borrower is entitled to the overage. Of course they usually tack on a number of fees and costs that may or may not be allowable. It is very rare that there is an overage. THE POINT IS that when they sue to foreclose they must make allegations which state a cause of action for enforcement of the note and for an order setting a date for sale. Those allegations include a description of the transaction with copies attached, and a claim of non-payment, together with allegations that the payments are owed to the Plaintiff BECAUSE they would suffer financial damage as a result of the non-payment. IN THE PROOF of the case the Plaintiff would be required to prove each and EVERY element of their claim which means proof that each allegation they made and each exhibit they rely upon is proven with live witnesses who are competent — i.e., they take an oath, they have PERSONAL KNOWLEDGE (not what someone else told them),personal recall and the ability to communicate what they know. This applies to documents they wish to use as well. That is called authentication and foundation.

SALE: Means what it says. In non-judicial sale they just want to sell your property without showing any court that they can credibly make the necessary allegations for a judicial foreclosure and without showing the court proof of the allegations they would be required to make if they filed a judicial foreclosure. In a non-judicial state what they want is to SELL and what they don’t want is to foreclose. Keep in mind that every state that allows non-judicial sale treats the sale as private and NOT a judicial event by definition. In Arizona and many other states there is no election for non-judicial sale of commercial property because of the usual complexity of commercial transactions. THE POINT is that a securitized loan presents as much or more complexity than commercial real property loan transactions. Thus your argument might be that the non-judicial sale is NOT an available election for a securitized loan.

When you bring a lawsuit challenging the non-judicial sale, it would probably be a good idea to allege that the other party has ELECTED NON-JUDICIAL sale when the required elements of such an election do not exist. Your prima facie case is simply to establish that the borrower objects the sale, denies that they pretender lender has any right to sell the property, denies the default and that the securitization documents show a complexity far beyond the complexity of even highly complex commercial real estate transactions which the legislature has mandated be resolved ONLY by judicial foreclosure.

THEREFORE in my opinion I think in your argument you do NOT want to concede that they wish to foreclose. What they want to do is execute on the power of sale in the deed of trust WITHOUT going through the judicial foreclosure process as provided in State statutes. You must understand and argue that the opposition is seeking to go around normal legal process which requires a foreclosure lawsuit.

THAT would require them to make allegations about the obligation, note and mortgage that they cannot make (we are the lender, the defendant owes us money, we are the holder of the note, the note is payable to us, he hasn’t paid, the unpaid balance of the note is xxx etc.) and they would have to prove those allegations before you had to say anything. In addition they would be subject to discovery in which you could test their assertions before an evidentiary hearing. That is how lawsuits work.

The power of sale given to the trustee is a hail Mary pass over the requirements of due process. But it allows for you to object. The question which nobody has asked and nobody has answered, is on the burden of proof, once you object to the sale, why shouldn’t the would-be forecloser be required to plead and prove its case? If the court takes the position that in non-judicial states the private power of sale is to be treated as a judicial event, then that is a denial of due process required by Federal and state constitutions. The only reason it is allowed, is because it is private and “non-judicial.” The quirk comes in because in practice the homeowner must file suit. Usually the party filing suit must allege facts and prove a prima facie case before the burden shifts to the other side. So the Judge is looking at you to do that when you file to prevent the sale.

Legally, though, your case should be limited to proving that they are trying to sell your property, that you object, that you deny what would be the allegations in a judicial foreclosure and that you have meritorious defenses. That SHOULD trigger the requirement of re-orienting the parties and making the would-be forecloser file a complaint (lawsuit) for foreclosure. Then the burden of proof would be properly aligned with the party seeking affirmative relief (i.e., the party who wants to enforce the deed of trust (mortgage), note and obligation) required to file the complaint with all the necessary elements of an action for foreclosure and attach the necessary exhibits. They don’t want to do that because they don’t have the exhibits and the note is not payable to them and they cannot actually prove standing (which is a jurisdictional question). The problem is that a statute passed for judicial economy is now being used to force the burden of proof onto the borrower in the foreclosure of their own home. This is not being addressed yet but it will be addressed soon.

MERS and civil code 2932.5 and Bankruptcy code 547 here is how it comes together

CA Civil Code 2932.5 – Assignment”Where a power to sell real property is
given to a mortgagee, or other encumbrancer, in an instrument intended
to secure the payment of money, the power is part of the security and
vests in any person who by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may be exercised by
the assignee if the assignment is duly acknowledged and recorded.”

Landmark vs Kesler – While this is a matter of first impression in
Kansas, other jurisdictions have issued opinions on similar and related
issues, and, while we do not consider those opinions binding in the
current litigation, we find them to be useful guideposts in our analysis
of the issues before us.”

“Black’s Law Dictionary defines a nominee as “[a] person designated to
act in place of another, usu. in a very limited way” and as “[a] party
who holds bare legal title for the benefit of others or who receives and
distributes funds for the benefit of others.” Black’s Law Dictionary
1076 (8th ed. 2004). This definition suggests that a nominee possesses
few or no legally enforceable rights beyond those of a principal whom
the nominee serves……..The legal status of a nominee, then, depends
on the context of the relationship of the nominee to its principal.
Various courts have interpreted the relationship of MERS and the lender
as an agency relationship.”

“LaSalle Bank Nat. Ass’n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup.
2006) (unpublished opinion) (“A nominee of the owner of a note and
mortgage may not effectively assign the note and mortgage to another for
want of an ownership interest in said note and mortgage by the
nominee.”)”

The law generally understands that a mortgagee is not distinct from a
lender: a mortgagee is “[o]ne to whom property is mortgaged: the
mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed.
2004). By statute, assignment of the mortgage carries with it the
assignment of the debt. K.S.A. 58-2323. Although MERS asserts that,
under some situations, the mortgage document purports to give it the
same rights as the lender, the document consistently refers only to
rights of the lender, including rights to receive notice of litigation,
to collect payments, and to enforce the debt obligation. The document
consistently limits MERS to acting “solely” as the nominee of the
lender.

Indeed, in the event that a mortgage loan somehow separates interests of
the note and the deed of trust, with the deed of trust lying with some
independent entity, the mortgage may become unenforceable.

“The practical effect of splitting the deed of trust from the promissory
note is to make it impossible for the holder of the note to foreclose,
unless the holder of the deed of trust is the agent of the holder of the
note. [Citation omitted.] Without the agency relationship, the person
holding only the note lacks the power to foreclose in the event of
default. The person holding only the deed of trust will never experience
default because only the holder of the note is entitled to payment of
the underlying obligation. [Citation omitted.] The mortgage loan becomes
ineffectual when the note holder did not also hold the deed of trust.”
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App.
2009).

“MERS never held the promissory note,thus its assignment of the deed of
trust to Ocwen separate from the note had no force.” 284 S.W.3d at 624;
see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard
mortgage note language does not expressly or implicitly authorize MERS
to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal.
2008) (“[I]f FHM has transferred the note, MERS is no longer an
authorized agent of the holder unless it has a separate agency contract
with the new undisclosed principal. MERS presents no evidence as to who
owns the note, or of any authorization to act on behalf of the present
owner.”); Saxon Mortgage Services, Inc. v. Hillery, 2008 WL 5170180
(N.D. Cal. 2008) (unpublished opinion) (“[F]or there to be a valid
assignment, there must be more than just assignment of the deed alone;
the note must also be assigned. . . . MERS purportedly assigned both the
deed of trust and the promissory note. . . . However, there is no
evidence of record that establishes that MERS either held the promissory
note or was given the authority . . . to assign the note.”).

What stake in the outcome of an independent action for foreclosure could
MERS have? It did not lend the money to Kesler or to anyone else
involved in this case. Neither Kesler nor anyone else involved in the
case was required by statute or contract to pay money to MERS on the
mortgage. See Sheridan, ___ B.R. at ___ (“MERS is not an economic
‘beneficiary’ under the Deed of Trust. It is owed and will collect no
money from Debtors under the Note, nor will it realize the value of the
Property through foreclosure of the Deed of Trust in the event the Note
is not paid.”). If MERS is only the mortgagee, without ownership of the
mortgage instrument, it does not have an enforceable right. See Vargas,
396 B.R. 517 (“[w]hile the note is ‘essential,’ the mortgage is only ‘an
incident’ to the note” [quoting Carpenter v. Longan, 16 Wall. 271, 83
U.S. 271, 275, 21 L. Ed 313 (1872)]).

* MERS had no Beneficial Interest in the Note,
* MERS and the limited agency authority it has under the dot does
not continue with the assignment of the mortgage or dot absent a
ratification or a separate agency agreement between mers and the
assignee.
* The Note and the Deed of Trust were separated at or shortly
after origination upon endorsement and negotiation of the note rendering
the dot a nullity
* MERS never has any power or legal authority to transfer the note
to any entity;
* mers never has a beneficial interest in the note and pays
nothing of value for the note.

Bankr. Code 547 provides, among other things, that an unsecured
creditor who had won a race to an interest in the debtor’s property
using the state remedies system within 90 days of the filing of the
bankruptcy petition may have to forfeit its winnings (without
compensation for any expenses it may have incurred in winning the race)
for the benefit of all unsecured creditors. The section therefore
prevents certain creditors from being preferred over others (hence,
section 547 of the Bankruptcy Code is titled “Preferences).” An
additional effect of the section (and one of its stated purposes) may be
to discourage some unsecured creditors from aggressively pursuing the
debtor under the state remedies system, thus affording the debtor more
breathing space outside bankruptcy, for fear that money spent using the
state remedies system will be wasted if the debtor files a bankruptcy
petition.

. Bankr. Code 547(c) provides several important exceptions to the
preference avoidance power.

Bankr. Code 547 permits avoidance of liens obtained within the 90 day
(or one year) period: the creation of a lien on property of the debtor,
whether voluntary, such as through a consensual lien, or involuntary,
such as through a judicial lien, would, absent avoidance, have the same
preferential impact as a transfer of money from a debtor to a creditor
in payment of a debt. If the security interest was created in the
creditor within the 90 day window, and if other requirements of section
547(b) are satisfied, the security interest can be avoided and the real
property sold by the trustee free of the security interest (subject to
homestead exemption). All unsecured creditors of the debtor, including
the creditor whose lien has been avoided, will share, pro rata, in the
distribution of assets of the debtor, including the proceeds of the sale
of the real estate

How to Use MERS on Deed of Trust or Mortgage

It is time to use the presence of MERS on the originating loan paperwork as an OFFENSIVE TACTIC. Most states have some version of the statute below. It is simply common sense. A creditor is not a creditor unless they are owed something. A beneficiary is not a beneficiary unless they are a creditor. In the case of a mortgage note, a beneficiary is not a creditor unless it is the obligee on the note (i.e., the one to whom the note directs payment). There is no escaping this logic.

The point is that designating MERS as beneficiary or mortgagee is the same as designating nobody at all. The range of options for the Judge include several possibilities. But the one I think we should concentrate on is that an ambiguity has been raised on the face of every Deed of Trust or Mortgage Deed naming MERS as the beneficiary or mortgagee. That being the case, it MUST BE JUDICIALLY DETERMINED by a trier of fact (Judge or Jury)in judicial foreclosure states.

In California there is legislation being proposed that would require mandatory mediation before a foreclosure can be initiated. The provisions the California Foreclosure prevention act of 2008 are just not working. Judges don’t uphold what the law says civil code 2023.6 and 2923.6 when the attorneys for the publicly funded Banks (our tax dollars 17.1 Trillion before it all over) oppose individual debtors and claim federal preemption. Our legal system is a rigged game favoring the capital of a capitalist system. In California a nonjudicial state a foreclosure can occur on the mere word of a lender without the original note or assignment of the original deed of trust. A then former homeowner can then be evicted by giving notice to vacate constructively (without notice) have a summons “Posted and Mailed” (again no actual notice) a default judgment taken (no trial) and a writ issued and the Sheriff’s instruction to evict issued and enforced.

In Non Judicial an action should be filed for declaratory relief that the foreclosure is invalid and void this is the problem in the non Judicial states. See state bar president article No Lawyer No Law Without having a beneficiary or mortgagee identified, there obviously can be no enforcement. The power off sale is contained in Civil 2932 and in California there must be a valid assignment civil code 2932.5 to have the power to foreclose.

So the strategy here would be to force the would-be forecloser (pretender lender) to file a lawsuit establishing the note and mortgage (or deed of trust) by identifying the beneficiary or mortgagee. It would also enable you, in the face of a reluctant judge, to press for expedited discovery for information that the would-be foreclosing trustee or attorney should have had before they started. And this leads to a request for an evidentiary hearing — the kiss of death for pretender lenders unless you don’t know your rules of evidence

California Mortgage and Deed of Trust Practice § 1.39 (3d ed Cal CEB 2008)

§ 1.39 (1) Must Be Obligee

The beneficiary must be an obligee of the secured obligation (usually the payee of a note), because otherwise the deed of trust in its favor is meaningless. Watkins v Bryant (1891) 91 C 492, 27 P 775; Nagle v Macy (1858) 9 C 426. See §§ 1.8-1.19 on the need for an obligation. The deed of trust is merely an incident of the obligation and has no existence apart from it. Goodfellow v Goodfellow (1933) 219 C 548, 27 P2d 898; Adler v Sargent (1895) 109 C 42, 41
P 799; Turner v Gosden (1932) 121 CA 20, 8 P2d 505. The holder of the note, however, can enforce the deed of trust
whether or not named as beneficiary or mortgagee. CC § 2936;

SB 94 and its interferance with the practice

CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10

The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.

SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.

SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.

Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?

To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:

We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.

I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.

Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.

Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.

Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.

Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.

One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”

“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”

Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.

While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.

The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.

Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.

As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.

At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.

Looking Ahead…

California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.

Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.

There are a couple of things about the latest version of SB 94 that I found interesting:

1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.

2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.

3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.

4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.

Conclusion…

Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.

I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

News Release
July 15, 2009
For Immediate Release
Contact: (916) 324-5500
Print Version
Attachments

Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.

Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):

– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.

U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.

For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.

At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.

When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.

Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;

– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.

Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.

In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.

Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;

– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;

– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;

– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.

Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.

Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.

Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.

Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.

In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.

Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.

Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.

The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.

For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.

Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.

Brown’s suit contends that the defendants violated:

– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.

These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.

Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.

After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.

Brown’s lawsuit contends that Noe, Roth and United First:

– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945

– Inserted unconscionable terms in contracts;

– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and

– Violated 17500 of the California Business and Professions Code.

Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or http://www.hud.gov.

If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.
# # #

Ex-parte aplication for TRO and injunction

EX PARTE APPLICATION FOR OSC TRO

Pretender Lenders

— read and weep. Game Over. Over the next 6-12 months the entire foreclosure mess is going to be turned on its head as it becomes apparent to even the most skeptical that the mortgage mess is just that — a mess. From the time the deed was recorded to the time the assignments, powers of attorneys, notarization and other documents were fabricated and executed there is an 18 minute Nixonian gap in the record that cannot be cured. Just because you produce documents, however real they appear, does not mean you can shift the burden of proof onto the borrower. In California our legislator have attempted to slow this train wreck but the pretender lenders just go on with the foreclosure by declaring to the foreclosure trustee the borrower is in default and they have all the documents the trustee then records a false document. A notice of default filed pursuant to Section 2924 shall include a declaration from the mortgagee, beneficiary, or authorized agent that it has contacted the borrower, tried with due diligence to contact the borrower as required by this section, or the borrower has surrendered the property to the mortgagee, trustee, beneficiary, or authorized agent.
Invalid Declaration on Notice of Default and/or Notice of Trustee’s Sale.

The purpose of permitting a declaration under penalty of perjury, in lieu of a sworn statement, is to help ensure that declarations contain a truthful factual representation and are made in good faith. (In re Marriage of Reese & Guy, 73 Cal. App. 4th 1214, 87 Cal. Rptr. 2d 339 (4th Dist. 1999).
In addition to California Civil Code §2923.5, California Code of Civil Procedure §2015.5 states:
Whenever, under any law of this state or under any rule, regulation, order or requirement made pursuant to the law of this state, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn statement, declaration, verification, certificate, oath, or affidavit, in writing of the person making the same, such matter may with like force and effect be supported, evidenced, established or proved by the unsworn statement, declaration, verification, or certificate, in writing of such person which recites that is certified or declared by him or her to be true under penalty of perjury, is subscribed by him or her, and (1), if executed within this state, states the date and place of execution; (2) if executed at any place, within or without this state, states the date of execution and that is so certified or declared under the laws of the State of California. The certification or declaration must be in substantially the following form:
(a) If executed within this state:
“I certify (or declare) under penalty of perjury that the foregoing is true and correct”:
_____________________ _______________________
(Date and Place) (Signature)

For our purposes we need not look any farther than the Notice of Default to find the declaration is not signed under penalty of perjury; as mandated by new Civil Code §2923.5(c). (Blum v. Superior Court (Copley Press Inc.) (2006) 141 Cal App 4th 418, 45 Cal. Reptr. 3d 902 ). The Declaration is merely a form declaration with a check box.

No Personal Knowledge of Declarant
According to Giles v. Friendly Finance Co. of Biloxi, Inc., 199 So. 2nd 265 (Miss. 1967), “an affidavit on behalf of a corporation must show that it was made by an authorized officer or agent, and the officer him or herself must swear to the facts.” Furthermore, in Giles v. County Dep’t of Public Welfare of Marion County (Ind.App. 1 Dist.1991) 579 N.E.2d 653, 654-655 states in pertinent part, “a person who verified a pleading to have personal knowledge or reasonable cause to believe the existence of the facts stated therein.” Here, the Declaration for the Notice of Default by the agent does not state if the agent has personal knowledge and how he obtained this knowledge.
The proper function of an affidavit is to state facts, not conclusions, ¹ and affidavits that merely state conclusions rather than facts are insufficient. ² An affidavit must set forth facts and show affirmatively how the affiant obtained personal knowledge of those facts. ³
Here, The Notice of Default does not have the required agent’s personal knowledge of facts and if the Plaintiff borrower was affirmatively contacted in person or by telephone
to assess the Plaintiff’s financial situation and explore options for the Plaintiff to avoid foreclosure. A simple check box next to the “facts” does not suffice.
Furthermore, “it has been said that personal knowledge of facts asserted in an affidavit is not presumed from the mere positive averment of facts, but rather, a court should be shown how the affiant knew or could have known such facts, and, if there is no evidence from which the inference of personal knowledge can be drawn, then it is
¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬____________________________________________________________________________
¹ Lindley v. Midwest Pulmonary Consultants, P.C., 55 S.W.3d 906 (Mo. Ct. App. W.D. 2001).
² Jaime v. St. Joseph Hosp. Foundation, 853 S.W.2d 604 (Tex. App. Houston 1st Dist. 1993).
³ M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403 (Tex. App. Corpus Chrisit 1999).

presumed that from which the inference of personal knowledge can be drawn, then it is presumed that such does not exist.” ¹ The declaration signed by agent does not state anywhere how he knew or could have known if Plaintiff was contacted in person or by telephone to explore different financial options. It is vague and ambiguous if he himself called plaintiff.
This defendant did not adhere to the mandates laid out by congress before a foreclosure can be considered duly perfected. The Notice of Default states,

“That by reason thereof, the present beneficiary under such deed of trust, has executed and delivered to said agent, a written Declaration of Default and Demand for same, and has deposited with said agent such Deed of Trust and all documents evidencing obligations secured thereby, and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the trust property to be sold to satisfy the obligations secured thereby.”

However, Defendants do not have and assignment of the deed of trust nor have they complied with 2923.5 or 2923.6 or 2924 the Deed of Trust, nor do they provide any documents evidencing obligations secured thereby. For the aforementioned reasons, the Notice of Default will be void as a matter of law. The pretender lenders a banking on the “tender defense” to save them ie. yes we did not follow the law so sue us and when you do we will claim “tender” Check Mate but that’s not the law.

Recording a False Document
Furthermore, according to California Penal Code § 115 in pertinent part:
(a) Every person who knowingly procures or offers any false or forged instrument to be filed, registered, or recorded in any public office within this state, which instrument, if genuine, might be filed, registered, or recorded under any law of this state or of the United States, is guilty of a felony.

If you say you have a claim, you must prove it. If you say you are the lender, you must prove it. Legislators take notice: Just because bankers give you money doesn’t mean they can change 1000 years of common law, statutory law and constitutional law. It just won’t fly. And if you are a legislator looking to get elected or re-elected, your failure to act on what is now an obvious need to clear title and restore the wealth of your citizens who were cheated and defrauded, will be punished by the votes of your constituents.

The doan deal 3

California Civil Code 2923.6: California Courts’ Negative Rulings to Homeowners.

By Michael Doan on Apr 26, 2009 in Foreclosure Defense, Foreclosure News, Mortgage Servicer Abuses

In September, 2008, I wrote about the new effects of California Civil Code 2923.6 and how it would appear that home loans in California would require modifications to fair market value in certain situations.

Since then, many decisions have come down from local judges attempting to decipher exactly what it means. Unfortunately, most judges are of the opinion that newly enacted California Civil Code 2923.6 has no teeth, and is a meaningless statute.

Time and time again, California Courts are ruling that the new statute does not create any new duty for servicers of mortgages or that such duties do not apply to borrowers. These Courts then immediately dismiss the case, and usually do not even require the Defendant to file an Answer in Court, eliminating the Plaintiff’s right to any trial.

Notwithstanding some of these decisions, the statute was in fact specifically created to address the foreclosure crisis and help borrowers, as Noted in Section 1 of the Legislative Intent behind the Statute:

SECTION 1. The Legislature finds and declares all of the following:

(a) California is facing an unprecedented threat to its state economy and local economies because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007. In 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.

(b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance, the number of completed California foreclosure sales in 2007 increased almost threefold from 1,902 in the first quarter to 5,574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.

(c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.

(d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.

(e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternatives to help them avoid foreclosure.

(f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.

(g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.

SEC. 7. Nothing in this act is intended to affect any local just-cause eviction ordinance. This act does not, and shall not be construed to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction.

SEC. 8. The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

The forgoing clearly illustrates that the California Legislature was specifically looking to curb foreclosures and provide modifications to homeowners in their statement of intent. Moreover, Section (a) of 2923.6 specifically references a new DUTY OWED TO ALL PARTIES in the loan pool:

(a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties,…..

California Civil Code 2923.6(a) specifically creates to a NEW DUTY not previously addressed in pooling and servicing agreements. It then states that such a DUTY not only applies to the particular parties of the loan pool, but ALL PARTIES. So here we have the clear black and white text of the law stating that if a duty exists in the pooling and servicing agreement to maximize net present value between particular parties of that pool(and by the way, every pooling and servicing agreement I have ever read have such duties), then those same duties extend to all parties in the pool.

So how do these Courts still decide that NO DUTY EXISTS??? How do these Courts dismiss cases by finding that the thousands of borrowers of the loan pool that FUND the entire loan pool are not parties to that pool?

Hmm, if they are really not parties to the loan pool, then why are they even required to make payments on the loans to the loan pools? As you can see, the logic from these courts that there is no duty or that such a duty does not extend to the borrower is nothing short of absurd.

To date, there are no appellate decision on point, but many are in the works. Perhaps these courts skip the DUTY provisions in clause (a) and focus on the fact that no remedy section exists in the statute (notwithstanding the violation of any statute is “Tort in Se”). Perhaps their dockets are too full to fully read the legislative history of the statute (yes, when printed out is about 6 inches thick!) Whatever the reason, it seems a great injustice is occurring to defaulting homeowners, and the housing crisis is only worsening by these decisions.

Yet the reality is that much of the current housing crisis has a solution in 2923.6, and is precisely why the legislature created this EMERGENCY LEGISLATION. Its very simple: Modify mortgages, keep people in their homes, foreclosures and housing supplies goes down, and prices stabilize. More importantly, to the Servicers and Lenders, is the fact that they are now better off since THEY GENERALLY SAVE $50,000 OR MORE in foreclosure costs when modifying a loan(yes, go ahead and google the general costs of foreclosure and you will see that a minimum of $50,000.00 in losses is the average). Thus it is strange why most Courts are ruling that the California Legislature spent a lot of time and money writing a MEANINGLESS STATUTE with no application or remedy to those in need of loan modification.

Well, at least one Judge recently got it right. On April 6, 2009, in Ventura, California, in Superior Court case number 56-2008-00333790-CU-OR-VTA, Judge Fred Bysshe denied Metrocities Mortgage’ motion to dismiss a lawsuit brought under 2923.6. Judge Bysshe ruled that 2923.6 is not a matter of law that can be decided in the beginning of a lawsuit to dismiss it, but is instead a matter of fact that needs to be decided later:

THE COURT: Well, at this juncture in this case the Court holds that section 2923.6 was the legislature’s attempt to deal with a collapsing mortgage industry, and also to stabilize the market. And the Court’s ruling is to overrule the demurrer. Require the defendant to file an answer on or before April 27, 2009. And at this juncture with regard to the defendant’s request to set aside the Lis Pendens, that request is denied without prejudice.

Hopefully, more judges will now follow suit and appeals courts will have the same rulings. To read the actual transcript of the forgoing case, please click to my other blog here.

Written by Michael Doan

Countrywide complaint

countrywide_fin_class_action_defense_mdl

Homecomings TILA complaint GMAC

homecomingstila

Leman Tila complaint

Lemantilacomp

Lender class action

Mortgageinvestorgroupclass

Option One Complaint Pick a payment lawsuit

optionone

Win the eviction by Summary judgement

When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case2nd amended complaint (e) manuel
BAKER original complaint (b)
Countrywide Complaint Form
FRAUDULENT OMISSIONS FORM FINAL
sample-bank-final-complaint1-2.docx

CALIFORNIA CODES
CODE OF CIVIL PROCEDURE
SECTION 437c-438

437c. (a) Any party may move for summary judgment in any action or
proceeding if it is contended that the action has no merit or that
there is no defense to the action or proceeding. The motion may be
made at any time after 60 days have elapsed since the general
appearance in the action or proceeding of each party against whom the
motion is directed or at any earlier time after the general
appearance that the court, with or without notice and upon good cause
shown, may direct. Notice of the motion and supporting papers shall
be served on all other parties to the action at least 75 days before
the time appointed for hearing. However, if the notice is served by
mail, the required 75-day period of notice shall be increased by five
days if the place of address is within the State of California, 10
days if the place of address is outside the State of California but
within the United States, and 20 days if the place of address is
outside the United States, and if the notice is served by facsimile
transmission, Express Mail, or another method of delivery providing
for overnight delivery, the required 75-day period of notice shall be
increased by two court days. The motion shall be heard no later than
30 days before the date of trial, unless the court for good cause
orders otherwise. The filing of the motion shall not extend the time
within which a party must otherwise file a responsive pleading.
(b) (1) The motion shall be supported by affidavits, declarations,
admissions, answers to interrogatories, depositions, and matters of
which judicial notice shall or may be taken. The supporting papers
shall include a separate statement setting forth plainly and
concisely all material facts which the moving party contends are
undisputed. Each of the material facts stated shall be followed by a
reference to the supporting evidence. The failure to comply with this
requirement of a separate statement may in the court’s discretion
constitute a sufficient ground for denial of the motion.
(2) Any opposition to the motion shall be served and filed not
less than 14 days preceding the noticed or continued date of hearing,
unless the court for good cause orders otherwise. The opposition,
where appropriate, shall consist of affidavits, declarations,
admissions, answers to interrogatories, depositions, and matters of
which judicial notice shall or may be taken.
(3) The opposition papers shall include a separate statement that
responds to each of the material facts contended by the moving party
to be undisputed, indicating whether the opposing party agrees or
disagrees that those facts are undisputed. The statement also shall
set forth plainly and concisely any other material facts that the
opposing party contends are disputed. Each material fact contended by
the opposing party to be disputed shall be followed by a reference
to the supporting evidence. Failure to comply with this requirement
of a separate statement may constitute a sufficient ground, in the
court’s discretion, for granting the motion.
(4) Any reply to the opposition shall be served and filed by the
moving party not less than five days preceding the noticed or
continued date of hearing, unless the court for good cause orders
otherwise.
(5) Evidentiary objections not made at the hearing shall be deemed
waived.
(6) Except for subdivision (c) of Section 1005 relating to the
method of service of opposition and reply papers, Sections 1005 and
1013, extending the time within which a right may be exercised or an
act may be done, do not apply to this section.
(7) Any incorporation by reference of matter in the court’s file
shall set forth with specificity the exact matter to which reference
is being made and shall not incorporate the entire file.
(c) The motion for summary judgment shall be granted if all the
papers submitted show that there is no triable issue as to any
material fact and that the moving party is entitled to a judgment as
a matter of law. In determining whether the papers show that there is
no triable issue as to any material fact the court shall consider
all of the evidence set forth in the papers, except that to which
objections have been made and sustained by the court, and all
inferences reasonably deducible from the evidence, except summary
judgment may not be granted by the court based on inferences
reasonably deducible from the evidence, if contradicted by other
inferences or evidence, which raise a triable issue as to any
material fact.
(d) Supporting and opposing affidavits or declarations shall be
made by any person on personal knowledge, shall set forth admissible
evidence, and shall show affirmatively that the affiant is competent
to testify to the matters stated in the affidavits or declarations.
Any objections based on the failure to comply with the requirements
of this subdivision shall be made at the hearing or shall be deemed
waived.
(e) If a party is otherwise entitled to a summary judgment
pursuant to this section, summary judgment may not be denied on
grounds of credibility or for want of cross-examination of witnesses
furnishing affidavits or declarations in support of the summary
judgment, except that summary judgment may be denied in the
discretion of the court, where the only proof of a material fact
offered in support of the summary judgment is an affidavit or
declaration made by an individual who was the sole witness to that
fact; or where a material fact is an individual’s state of mind, or
lack thereof, and that fact is sought to be established solely by the
individual’s affirmation thereof.
(f) (1) A party may move for summary adjudication as to one or
more causes of action within an action, one or more affirmative
defenses, one or more claims for damages, or one or more issues of
duty, if that party contends that the cause of action has no merit or
that there is no affirmative defense thereto, or that there is no
merit to an affirmative defense as to any cause of action, or both,
or that there is no merit to a claim for damages, as specified in
Section 3294 of the Civil Code, or that one or more defendants either
owed or did not owe a duty to the plaintiff or plaintiffs. A motion
for summary adjudication shall be granted only if it completely
disposes of a cause of action, an affirmative defense, a claim for
damages, or an issue of duty.
(2) A motion for summary adjudication may be made by itself or as
an alternative to a motion for summary judgment and shall proceed in
all procedural respects as a motion for summary judgment. However, a
party may not move for summary judgment based on issues asserted in a
prior motion for summary adjudication and denied by the court,
unless that party establishes to the satisfaction of the court, newly
discovered facts or circumstances or a change of law supporting the
issues reasserted in the summary judgment motion.
(g) Upon the denial of a motion for summary judgment, on the
ground that there is a triable issue as to one or more material
facts, the court shall, by written or oral order, specify one or more
material facts raised by the motion as to which the court has
determined there exists a triable controversy. This determination
shall specifically refer to the evidence proffered in support of and
in opposition to the motion which indicates that a triable
controversy exists. Upon the grant of a motion for summary judgment,
on the ground that there is no triable issue of material fact, the
court shall, by written or oral order, specify the reasons for its
determination. The order shall specifically refer to the evidence
proffered in support of, and if applicable in opposition to, the
motion which indicates that no triable issue exists. The court shall
also state its reasons for any other determination. The court shall
record its determination by court reporter or written order.
(h) If it appears from the affidavits submitted in opposition to a
motion for summary judgment or summary adjudication or both that
facts essential to justify opposition may exist but cannot, for
reasons stated, then be presented, the court shall deny the motion,
or order a continuance to permit affidavits to be obtained or
discovery to be had or may make any other order as may be just. The
application to continue the motion to obtain necessary discovery may
also be made by ex parte motion at any time on or before the date the
opposition response to the motion is due.
(i) If, after granting a continuance to allow specified additional
discovery, the court determines that the party seeking summary
judgment has unreasonably failed to allow the discovery to be
conducted, the court shall grant a continuance to permit the
discovery to go forward or deny the motion for summary judgment or
summary adjudication. This section does not affect or limit the
ability of any party to compel discovery under the Civil Discovery
Act (Title 4 (commencing with Section 2016.010) of Part 4).
(j) If the court determines at any time that any of the affidavits
are presented in bad faith or solely for purposes of delay, the
court shall order the party presenting the affidavits to pay the
other party the amount of the reasonable expenses which the filing of
the affidavits caused the other party to incur. Sanctions may not be
imposed pursuant to this subdivision, except on notice contained in
a party’s papers, or on the court’s own noticed motion, and after an
opportunity to be heard.
(k) Except when a separate judgment may properly be awarded in the
action, no final judgment may be entered on a motion for summary
judgment prior to the termination of the action, but the final
judgment shall, in addition to any matters determined in the action,
award judgment as established by the summary proceeding herein
provided for.
(l) In actions which arise out of an injury to the person or to
property, if a motion for summary judgment was granted on the basis
that the defendant was without fault, no other defendant during
trial, over plaintiff’s objection, may attempt to attribute fault to
or comment on the absence or involvement of the defendant who was
granted the motion.
(m) (1) A summary judgment entered under this section is an
appealable judgment as in other cases. Upon entry of any order
pursuant to this section, except the entry of summary judgment, a
party may, within 20 days after service upon him or her of a written
notice of entry of the order, petition an appropriate reviewing court
for a peremptory writ. If the notice is served by mail, the initial
period within which to file the petition shall be increased by five
days if the place of address is within the State of California, 10
days if the place of address is outside the State of California but
within the United States, and 20 days if the place of address is
outside the United States. If the notice is served by facsimile
transmission, Express Mail, or another method of delivery providing
for overnight delivery, the initial period within which to file the
petition shall be increased by two court days. The superior court
may, for good cause, and prior to the expiration of the initial
period, extend the time for one additional period not to exceed 10
days.
(2) Before a reviewing court affirms an order granting summary
judgment or summary adjudication on a ground not relied upon by the
trial court, the reviewing court shall afford the parties an
opportunity to present their views on the issue by submitting
supplemental briefs. The supplemental briefing may include an
argument that additional evidence relating to that ground exists, but
that the party has not had an adequate opportunity to present the
evidence or to conduct discovery on the issue. The court may reverse
or remand based upon the supplemental briefing to allow the parties
to present additional evidence or to conduct discovery on the issue.
If the court fails to allow supplemental briefing, a rehearing shall
be ordered upon timely petition of any party.
(n) (1) If a motion for summary adjudication is granted, at the
trial of the action, the cause or causes of action within the action,
affirmative defense or defenses, claim for damages, or issue or
issues of duty as to the motion which has been granted shall be
deemed to be established and the action shall proceed as to the cause
or causes of action, affirmative defense or defenses, claim for
damages, or issue or issues of duty remaining.
(2) In the trial of the action, the fact that a motion for summary
adjudication is granted as to one or more causes of action,
affirmative defenses, claims for damages, or issues of duty within
the action shall not operate to bar any cause of action, affirmative
defense, claim for damages, or issue of duty as to which summary
adjudication was either not sought or denied.
(3) In the trial of an action, neither a party, nor a witness, nor
the court shall comment upon the grant or denial of a motion for
summary adjudication to a jury.
(o) A cause of action has no merit if either of the following
exists:
(1) One or more of the elements of the cause of action cannot be
separately established, even if that element is separately pleaded.
(2) A defendant establishes an affirmative defense to that cause
of action.
(p) For purposes of motions for summary judgment and summary
adjudication:
(1) A plaintiff or cross-complainant has met his or her burden of
showing that there is no defense to a cause of action if that party
has proved each element of the cause of action entitling the party to
judgment on that cause of action. Once the plaintiff or
cross-complainant has met that burden, the burden shifts to the
defendant or cross-defendant to show that a triable issue of one or
more material facts exists as to that cause of action or a defense
thereto. The defendant or cross-defendant may not rely upon the mere
allegations or denials of its pleadings to show that a triable issue
of material fact exists but, instead, shall set forth the specific
facts showing that a triable issue of material fact exists as to that
cause of action or a defense thereto.
(2) A defendant or cross-defendant has met his or her burden of
showing that a cause of action has no merit if that party has shown
that one or more elements of the cause of action, even if not
separately pleaded, cannot be established, or that there is a
complete defense to that cause of action. Once the defendant or
cross-defendant has met that burden, the burden shifts to the
plaintiff or cross-complainant to show that a triable issue of one or
more material facts exists as to that cause of action or a defense
thereto. The plaintiff or cross-complainant may not rely upon the
mere allegations or denials of its pleadings to show that a triable
issue of material fact exists but, instead, shall set forth the
specific facts showing that a triable issue of material fact exists
as to that cause of action or a defense thereto.
(q) This section does not extend the period for trial provided by
Section 1170.5.
(r) Subdivisions (a) and (b) do not apply to actions brought
pursuant to Chapter 4 (commencing with Section 1159) of Title 3 of
Part 3.
(s) For the purposes of this section, a change in law does not
include a later enacted statute without retroactive application.

438. (a) As used in this section:
(1) “Complaint” includes a cross-complaint.
(2) “Plaintiff” includes a cross-complainant.
(3) “Defendant” includes a cross-defendant.
(b) (1) A party may move for judgment on the pleadings.
(2) The court may upon its own motion grant a motion for judgment
on the pleadings.
(c) (1) The motion provided for in this section may only be made
on one of the following grounds:
(A) If the moving party is a plaintiff, that the complaint states
facts sufficient to constitute a cause or causes of action against
the defendant and the answer does not state facts sufficient to
constitute a defense to the complaint.
(B) If the moving party is a defendant, that either of the
following conditions exist:
(i) The court has no jurisdiction of the subject of the cause of
action alleged in the complaint.
(ii) The complaint does not state facts sufficient to constitute a
cause of action against that defendant.
(2) The motion provided for in this section may be made as to
either of the following:
(A) The entire complaint or cross-complaint or as to any of the
causes of action stated therein.
(B) The entire answer or one or more of the affirmative defenses
set forth in the answer.
(3) If the court on its own motion grants the motion for judgment
on the pleadings, it shall be on one of the following bases:
(A) If the motion is granted in favor of the plaintiff, it shall
be based on the grounds that the complaint states facts sufficient to
constitute a cause or causes of action against the defendant and the
answer does not state facts sufficient to constitute a defense to
the complaint.
(B) If the motion is granted in favor of the defendant, that
either of the following conditions exist:
(i) The court has no jurisdiction of the subject of the cause of
action alleged in the complaint.
(ii) The complaint does not state facts sufficient to constitute a
cause of action against that defendant.
(d) The grounds for motion provided for in this section shall
appear on the face of the challenged pleading or from any matter of
which the court is required to take judicial notice. Where the motion
is based on a matter of which the court may take judicial notice
pursuant to Section 452 or 453 of the Evidence Code, the matter shall
be specified in the notice of motion, or in the supporting points
and authorities, except as the court may otherwise permit.
(e) No motion may be made pursuant to this section if a pretrial
conference order has been entered pursuant to Section 575, or within
30 days of the date the action is initially set for trial, whichever
is later, unless the court otherwise permits.
(f) The motion provided for in this section may be made only after
one of the following conditions has occurred:
(1) If the moving party is a plaintiff, and the defendant has
already filed his or her answer to the complaint and the time for the
plaintiff to demur to the answer has expired.
(2) If the moving party is a defendant, and the defendant has
already filed his or her answer to the complaint and the time for the
defendant to demur to the complaint has expired.
(g) The motion provided for in this section may be made even
though either of the following conditions exist:
(1) The moving party has already demurred to the complaint or
answer, as the case may be, on the same grounds as is the basis for
the motion provided for in this section and the demurrer has been
overruled, provided that there has been a material change in
applicable case law or statute since the ruling on the demurrer.
(2) The moving party did not demur to the complaint or answer, as
the case may be, on the same grounds as is the basis for the motion
provided for in this section.
(h) (1) The motion provided for in this section may be granted
with or without leave to file an amended complaint or answer, as the
case may be.
(2) Where a motion is granted pursuant to this section with leave
to file an amended complaint or answer, as the case may be, then the
court shall grant 30 days to the party against whom the motion was
granted to file an amended complaint or answer, as the case may be.
(3) If the motion is granted with respect to the entire complaint
or answer without leave to file an amended complaint or answer, as
the case may be, then judgment shall be entered forthwith in
accordance with the motion granting judgment to the moving party.
(4) If the motion is granted with leave to file an amended
complaint or answer, as the case may be, then the following
procedures shall be followed:
(A) If an amended complaint is filed after the time to file an
amended complaint has expired, then the court may strike the
complaint pursuant to Section 436 and enter judgment in favor of that
defendant against that plaintiff or a plaintiff.
(B) If an amended answer is filed after the time to file an
amended answer has expired, then the court may strike the answer
pursuant to Section 436 and proceed to enter judgment in favor of
that plaintiff and against that defendant or a defendant.
(C) Except where subparagraphs (A) and (B) apply, if the motion is
granted with respect to the entire complaint or answer with leave to
file an amended complaint or answer, as the case may be, but an
amended complaint or answer is not filed, then after the time to file
an amended complaint or answer, as the case may be, has expired,
judgment shall be entered forthwith in favor of the moving party.
(i) (1) Where a motion for judgment on the pleadings is granted
with leave to amend, the court shall not enter a judgment in favor of
a party until the following proceedings are had:
(A) If an amended pleading is filed and the moving party contends
that pleading is filed after the time to file an amended pleading has
expired or that the pleading is in violation of the court’s prior
ruling on the motion, then that party shall move to strike the
pleading and enter judgment in its favor.
(B) If no amended pleading is filed, then the party shall move for
entry of judgment in its favor.
(2) All motions made pursuant to this subdivision shall be made
pursuant to Section 1010.
(3) At the hearing on the motion provided for in this subdivision,
the court shall determine whether to enter judgment in favor of a
particular party.

What is worse bankruptcy or foreclosure?

So what is worse, bankruptcy or foreclosure? Which will have the biggest impact on my credit score? Both bankruptcy and foreclosure will have serious negative affects on your personal credit report and your credit score as well. With re-established credit after a bankruptcy and/or foreclosure you can possibly qualify for a good mortgage once again in as little as 24 months. Therefore, it is very difficult to say one is worse than the other, but the bottom line is that they are both very bad for you and should be avoided if all possible.

Foreclosure is worse then bankruptcy because you are actually losing something of value, your home. Once you are in foreclosure you will lose any and all equity in your home. If there is no equity in the home you will be responsible for the remaining balance after the property auction. With chapter 7 bankruptcy all of your unsecured debts are erased and you start over and in most cases you will not lose anything other then your credit rating.

Many times qualifying for a mortgage after a foreclosure is more difficult than applying for a home after a bankruptcy. With that said, that could possibly lead you to believe that foreclosure is worse than bankruptcy. Most people who have a home foreclosed upon end up filing bankruptcy as well.

Bankruptcy and Foreclosure filings are public records, however no one would know about your proceedings under normal circumstances. The Credit Bureaus will record your bankruptcy and a foreclosure. Bankruptcies will remain on your credit record for 10 years while foreclosures can stay on your report for up to 7 years.

In some cases, one can refinance out of a Chapter 13 Bankruptcy with a 12 month trustee payment history and a timely mortgage history. It is much more difficult to obtain financing with a foreclosure on your record.

Foreclosure is worse because of the loss of value. You will not receive any compensation for the equity in your home if it proceeds to foreclosure.

Standing argument

judge-youngs-decision-on-nosek

Ameriquest’s final argument, that the sanctions are a
criminal penalty, is bereft of authority. Ameriquest cites F.J.
Hanshaw Enterprises, Inc. v. Emerald River Development, Inc., 244
F.3d 1128 (9th Cir. 2001), a case about inherent powers – not
Rule 11 –

This is an excerpt from the decision just this bloggers note the Hanshaw Case was my case. I argued this case at the 9th circuit court of appeals

http://openjurist.org/244/f3d/1128/fj-v-emeraldfj-v-emerald

If you will grasp the implications of this judge-youngs-decision-on-nosekdecision all or most all the evictions and  foreclosures are being litigated by the wrong parties that is to say parties who have no real stake in the outcome. they are merely servicers not the real investors. They do not have the right to foreclose or evict. No assignment No note No security interest No standing They do not want to be listed anywhere. They (the lenders) have caused the greatest damage to the American Citizen since the great depression and they do not want to be exposed or named in countless lawsuits. Time and time again I get from the judges in demurer hearings ” I see what you are saying counsel but your claim does not appear to be against this defendant” the unnamed investment pool of the Lehman Brothers shared High yield equity Fund trustee does not exist and so far can’t be sued.