Fontenot case from California Court of Appeals validates MERS role in the foreclosure process and makes it tougher to challenge wrongful foreclosure

Posted by on October 17, 2011 · Leave a Comment 

Fontenot v. Wells Fargo Bank, N.A. Court of Appeals of California, First District, Division One (2011).

Well we have been talking about wrongful foreclosure, the role of MERS and irregularities in the foreclosure process for years now.  The Fontenot case recently decided by the California Court of Appeals offers good language for lenders, servicers and MERS.  This case can be seen as another case in the lender foreclosure toolbox, along with the Gomes case, and the Ferguson case.

Facts of Fotenot v. Wells Fargo  (you can find the full set of facts here if you do not like my condensed version)

A homeowner who was in default, and who was promised a modification, (but ultimately was foreclosed on), brought a lawsuit alleging wrongful foreclosure based on irregularities in the chain of title and challenging MERS in various capacities.  The trial court upheld the foreclosure, and so did the court of appeal.

Specifically, the Plaintiff was challenging the Assignment of Deed of Trust from MERS to HSBC (the trustee of the securitized loan trust).  The Assignment of Deed of Trust states (as most do) that the Assignment of Deed of Trust is made together with “the notes therein.”  Plaintiff argued that MERS had no promissory note to transfer and as such, there was no transfer of the note, and a transfer of the ADOT by itself (without the note) was a meaningless act.  Case law was cited for this proposition.    As such, Plaintiff argued that HSBC never got the note, and was thus not in the position to foreclose on the property.  Also, Plaintiff argued this fact made the Substitution of Trustee (in favor of NDEX West, LLC), improper as only the beneficiary can substitute the trustee.  If the substitution of trustee was not proper, it appears Plaintiff was arguing that would also invalidate the Notice of Default.  At any rate, based upon this, Plaintiff asserted the eventual non-judicial foreclosure sale was invalid and must be set-aside.

California Court of Appeal Holding

The Court completely disagreed with Plaintiff and essentially stated that the borrower appoints MERS as beneficiary in a nominee capacity in the Deed of Trust.  And since the Deed of Trust empowers MERS to take any action the lender can take (when law or custom requires it) that MERS can assign the deed of trust and the “notes therein” even though MERS itself may hold no note at all.  This was based on the concept that MERS can transfer the note on behalf of the lender even if it does not have the note.  Which is strange because the note was supposed to be in the HSBC early on in the securitization process.  At any rate, the Court found nothing improper in this and said:

Second, the complaint alleges MERS lacked the authority to assign the note because it was merely a nominee of the lender and had no interest in the note. Contrary to plaintiff’s claim, the lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note. While it is true MERS had no power in its own right to assign the note, since it had no interest in the note to assign, MERS did not purport to act for its own interests in assigning the note. Rather, the assignment of deed of trust states that MERS was acting as nominee for the lender, which did possess an assignable interest. A “nominee” is a person or entity designated to act for another in a limited role—in effect, an agent. (Born v. Koop (1962) 528; Cisco v. Van Lew (1943) 60 Cal.App.2d 575, 583-584.) The extent of MERS’s authority as a nominee was defined by its agency agreement with the lender, and whether MERS had the authority to assign the lender’s interest in the note must be determined by reference to that agreement. (See, e.g., van’t Rood v. County of Santa Clara (2003), 571 [agency typically arises by express agreement]; Anderson v. Badger (1948) 84 Cal.App.2d 736, 743 [existence and extent of agent's duties are determined by the agreement between agent and principal]; Civ. Code, § 2315 [agent has such authority as principal confers upon agent].) Accordingly, the allegation that MERS was merely a nominee is insufficient to demonstrate that MERS lacked authority to make a valid assignment of the note on behalf of the original lender.
Plaintiff also argues any purported assignment by MERS was invalid under the common law of secured transactions. Her argument rests on the general principle that because the security for a debt is “a mere incident of the debt or obligation which it is given to secure” (Hayward Lbr. & Inv. Co. v. Naslund(1932) 125 Cal.App. 34, 39), the assignment of an interest in the security for a debt is a nullity in the absence of an assignment of the debt itself. (E.g., Kelley v. Upshaw (1952), 192; 4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 105, p. 899.) The assignment of the deed of trust, however, expressly stated that MERS assigned its interest in the deed of trust “[t]ogether with the note or notes therein described or referred to.” Accordingly, to plead a claim on this ground plaintiff was required to allege this assignment to HSBC was invalid. Because, as discussed above, plaintiff failed adequately to plead such invalidity, she failed to state a cause of action for wrongful foreclosure on the ground HSBC did not receive an assignment of both the note and its security.
There is a further, overriding basis for rejecting a claim based solely on the alleged invalidity of the MERS assignment. Plaintiff’s cause of action ultimately seeks to demonstrate that the nonjudicial foreclosure sale was invalid because HSBC lacked authority to foreclose, never having received a proper assignment of the debt. In order to allege such a claim, it was not enough for plaintiff to allege that MERS’s purported assignment of the note in the assignment of deed of trust was ineffective. Instead, plaintiff was required to allege that HSBC did not receive a valid assignment of the debt in any manner. Plaintiff rests her argument on the documents in the public record, but assignments of debt, as opposed to assignments of the security interest incident to the debt, are commonly not recorded. The lender could readily have assigned the promissory note to HSBC in an unrecorded document that was not disclosed to plaintiff. To state a claim, plaintiff was required to allege not only that the purported MERS assignment was invalid, but also that HSBC did not receive an assignment of the debt in any other manner. There is no such allegation.

As you can see, part of the problem may have been insufficient allegations.  In addition to this, the Court also discussed a few other potential obstacles to a Plaintiff succeeding in a wrongful foreclosure case in California.  Specifically, the court cited to the Ferguson case which held that irregularities in the foreclosure process cannot be made unless the borrower pleads willingness and ability to “tender” the balance of the loan.  We have talked about the “tender rule” in many other blog posts.  To this point the Court stated:

We also note a plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests. (Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at p. 1258; Knapp v. Doherty, supra, 123 Cal.App.4th at p. 86, fn. 4 ["A nonjudicial foreclosure sale is presumed to have been conducted regularly and fairly; one attacking the sale must overcome this common law presumption `by pleading and proving an improper procedure and the resulting prejudice'"], italics added; Lo v. Jensen (2001), 1097-1098 [collusion resulted in inadequate sale price]; Angell v. Superior Court (1999), 700 [failure to comply with procedural requirements must cause prejudice to plaintiff].) Prejudice is not presumed from “mere irregularities” in the process. (Meux v. Trezevant (1901) 132 Cal. 487, 490.) Even if MERS lacked authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by MERS’s purported assignment, and there is no allegation to this effect. Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note. Plaintiff effectively concedes she was in default, and she does not allege that the transfer to HSBC interfered in any manner with her payment of the note (see, e.g., Munger v. Moore (1970)  7-8 [failure by lender to accept timely tender]), nor that the original lender would have refrained from foreclosure under the circumstances presented. If MERS indeed lacked authority to make the assignment, the true victim was not plaintiff but the original lender, which would have suffered the unauthorized loss of a $1 million promissory note.

Again, there were no allegations to help the Plaintiff.  Which sends a signal to Plaintiffs challenging a wrongful foreclosure – BE PREPARED TO EXPLAIN HOW YOU WERE PREJUDICED by irregularities in the process.  The Court also went on to discuss what Plaintiff argued was an ambiguity in the Deed of Trust in regard to the function MERS assumes – THE COURT DISAGREED:

Finally, plaintiff contends the deed of trust was ambiguous because it designated MERS as both the “`nominee for the beneficiary’ “and as the “beneficiary.” An entity cannot be, plaintiff argues, both an agent and a principal. The record does not support the claimed ambiguity. Contrary to plaintiff’s assertion, the deed of trust did not designate MERS as both beneficiary of the deed of trust and nominee for the beneficiary; rather, it states that MERS is the beneficiary, acting as a nominee for the lender. There is nothing inconsistent in MERS’s being designated both as the beneficiary and as a nominee, i.e., agent, for the lender. The legal implication of the designation is that MERS may exercise the rights and obligations of a beneficiary of the deed of trust, a role ordinarily afforded the lender, but it will exercise those rights and obligations only as an agent for the lender, not for its own interests. Other statements in the deed of trust regarding the role of MERS are consistent with this interpretation, and there is nothing ambiguous or unusual about the legal arrangement. Plaintiff’s argument appears to be premised on the unstated assumption that only the owner of the promissory note can be designated as the beneficiary of a deed of trust, but she cites no legal authority to support that premise.

The Court also discussed how the beneficiary of a loan is normally the “owner of the loan” but that MERS could still use the “beneficiary” designation in the Deed of Trust and act as the beneficiary:

Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust. (11 Thompson on Real Property (2d ed. 1998) § 94.02(b)(7)(i), p. 346.) Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as “nominee” for the lender, and granted the authority to exercise legal rights of the lender. This aspect of the system has come under attack in a number of state and federal decisions across the country, under a variety of legal theories. The decisions have generally, although by no means universally, found that the use of MERS does not invalidate a foreclosure  sale that is otherwise substantively and procedurally proper.

Interesting is the last section of this “sale that is otherwise substantively and procedurally proper.”  But under what grounds can someone raise a challenge to the substantive or procedure taken?  When you do, you face the “tender rule” which this Court also raised to firm up the opinion (citing the Ferguson case):

A different type of MERS challenge was addressed in Ferguson v. Avelo Mortgage, LLC (2011) (Ferguson ). The Fergusonplaintiffs were tenants in a home sold at a nonjudicial foreclosure sale. Originally, MERS was designated as a nominee and beneficiary in the deed of trust. On August 3, Quality Loan Service Corporation (Quality) recorded a notice of default, although there was no indication in the public record of Quality’s authority to act with respect to the property at the time. The defendant, Avelo Mortgage, LLC (Avelo), had executed a substitution of trustee designating Quality as trustee the prior day, August 2, but that substitution was not recorded until months later, on November 9. Further, at the time Avelo executed the substitution, there was similarly no indication in the public record of its authority to act. Only several weeks later, on August 22, did MERS assign its interest under the deed of trust to Avelo. Notice of the trustee’s sale was delivered on November 4 and recorded the same day as the substitution of trustee designating Quality, November 9. The trustee’s sale occurred in July of the following year. (Id. at p. 1621.)
Affirming the grant of a demurrer, the court initially addressed the issue of tender, concluding that the plaintiffs were required to allege tender of the amount due under the note when bringing an action to void a nonjudicial foreclosure sale. (Ferguson, supra, 195 Cal.App.4th at p. 1624.) It then turned to two arguments concerning MERS’s role: MERS lacked the power to foreclose because it was not the holder of the underlying promissory note, and the sale was invalid because the foreclosing parties did not have authority to proceed as a result of the irregularities in the documentation. Citing a series of federal district court decisions, the court first held that MERS was entitled to initiate foreclosure despite having no ownership interest in the promissory note because it was the beneficiary under the deed of trust. (Id. at pp. 1626-1627.) Turning to the second issue, the court agreed with the plaintiffs that the notice of default was defective because Avelo lacked legal authority to execute a substitution of trustee until it had been assigned MERS’s interest under the deed of trust. The court found the notice of sale valid under Civil Code section 2934a, subdivision (b), however, because the notice of sale was not recorded prior to the substitution of trustee. (Ferguson, at p. 1628 & fn. 5.) Given the three-month cure period between the recording of the notice of default and notice of sale and the long delay after the recordation of the substitution of trustee before the sale was concluded, the court declined to invalidate the foreclosure on the basis of the irregular documentation. (Ibid.).

Taking these internal citations at face value, when can the substance or procedure of a foreclosure be challenged?  Only if you can tender the full loan balance, and were prejudiced by the recorded documents appears to be this Court’s answer.  If true, what incentive is there for any lender or loan servicer, or MERS to follow any of the non-judicial foreclosure laws if there is no way to challenge bona fide irregularities that may arise (or can we call it failure to strictly follow the California non-judicial foreclosure laws)?  In other words, how does this holding square up with other holdings in California?

  In Miller v. Cote, 179 Cal.Rptr. 753, (Ct of App. Fourth Dist. Div. 2 1982), the Court, in calling the notice of default fatally defective stated: “The procedure for foreclosing on security by a trustee’s sale pursuant to a deed of trust is set forth in Civil Code section 2924, et seq. The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr. 735; see California Mortgage and Deed of Trust Practice (Cont.Ed. Bar 1979) s 6.40, p. 295; see also Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d.

At any rate, I understand if you have a borrower in default, with no ability to ever repay the loan, bring it current, etc., and you can never count on a loan modification, but what about those California homeowners who DO have the ability to make their loan payments, but were told to miss their payments if they wanted help in a loan modification, and who were forced into default.  If these people want to try to bring their loans current or challenge the foreclosure process they will have a tough time doing so.  Of course they can just pay up and bring the loan current, but what happens alot of times is the house is sold when the homeowner is told they are in review.  In this case, the house is sold and the tender rule cited in this case can be arguably used against the borrower.  This is not far fetched.  We get calls all the time from people who were told not to pay and then their house was sold.  This case makes it tougher to set these sales aside where irregularities in the sale can be properly alleged.  Here, it does not appear the Court was buying the irregularity arguments raised by Plaintiff which focused on the role of MERS.   To provide extra emphasis, the Court cited tot he recently decided Gomes case which also validated the role of MERS in that case:

In Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App. 4th(Gomes), the plaintiff sought to prevent foreclosure on his home. He sued MERS, among others, alleging he was unaware of the identity of the owner of his promissory note, but believed the owner had not authorized MERS to proceed with the foreclosure. The plaintiff sought to enjoin foreclosure in the absence of proof that MERS was authorized by the note’s owner to proceed. (Id. at p. 1152.) The court rejected the claim on both procedural and substantive grounds. With respect to the former, the court concluded the “`comprehensive’” statutory framework regulating nonjudicial foreclosure, Civil Code sections 2924 through 2924k, did not require the agent of a beneficial owner, such as MERS, to demonstrate that it was authorized by the owner before proceeding with foreclosure, at least in the absence of a factual allegation suggesting the agent lacked authority. (Gomes, at pp. 1155-1156.) As the court reasoned, Civil Code section 2924, subdivision (a)(1), which states that a trustee, mortgagee or beneficiary, or an agent of any of them, may initiate foreclosure, does not include a requirement that an agent demonstrate authorization by its principal. (Gomes, at pp. 1155-1156.) The court also found no substantive basis for the challenge, noting, as here, the plaintiff had agreed in the deed of trust that MERS could proceed with foreclosure and nonjudicial sale in the event of a default. Because the deed of trust did not require MERS to provide further assurances of its authorization prior to proceeding with foreclosure, the plaintiff was not entitled to demand such assurances. (Id. at p. 1157.)

As you can see, the lender toolbox will have some cases ready for the California homeowner who wishes to challenge a trustee sale on wrongful foreclosure grounds.  Fontenot, Gomes, and Ferguson.

For more information see our ForeclosureWarrior.com website.

 

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Nrthern District of California Court says foreclosure following promised modification not cool! Preliminary Injunction granted!

Posted by on September 5, 2011 · 1 Comment 

IS YOUR LENDER OR LOAN SERVICER DANGLING THE HAMP PERMANENT MODIFICATION CARROT IN FRONT OF YOUR NOSE?

HAMP TRIAL PLAN SCHEME – Saying they “will” modify the loan if trial payments are made proves crucial.

We have talked about this many times before on our website Trial Plan Fraud.  That is, Banks and loan servicers promising to modify your loan if you make your HAMP trial plan payments on time.

We get this scenario over and over.  The HAMP modification agreement itself will normally promise the modification if all payments are made (but the contract is subject to a bunch of little trap-holes put in place so the loan servicer can always try to back out of the modification without having to perform).  Sometimes this is also buttressed over the phone by statements from some “loss mitigation specialist” or “foreclosure specialist” who promises you that you qualify for the loan modification and if you just make the trial payments “you will be good” or “we won’t foreclose.”   This is going on left and right in my honest opinion.  After all, it is a “clever” way to get people who may not be making their mortgage payment (potential strategic defaulters) into making some payments and that is with the false promise of loan mod assistance.  So yes, trying to get a loan modification can often turn into a game of poker with your lender.  You both end up telling each other certain things, some of which may or may not be true.  That’s what happens when money is on the line, monthly payments versus the return on investment to investors in mortgage backed securities.

At any rate, in the case of Jackmon v. America’s Servicing Company, Case No. C 11-03884 CRB, (CA Northern District 2011) the Court did not go for this approach.  The fact that the servicer refused to return the signed agreement to the borrower was not enough to allow the servicer to get out of the hot water.  The borrower made more than the required trial plan payments, and although she faced eviction following the foreclosure sale, the court issued an injunction preventing the eviction from taking place, based on the allegations that the borrower was entitled to, and promised a final HAMP modification.  So, when the Servicers are not playing fair, it may just so happen that you have some legal rights.

NOTE:  The Court required a bond be posted and required $2,648 monthly protection payments.  Something you should always consider before filing a predatory lending lawsuit or wrongful foreclosure lawsuit seeking a TRO and Injunction.

We can be reached at (877) 276-5084.

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FORECLOSURE CASE CHECKLIST – TOP TEN TIPS TO ATTORNEYS HANDLING TRO / PRELIMINARY INJUNCTION APPLICATION.

Posted by on September 5, 2011 · 1 Comment 

The following are general guidelines I consider when filing for a TRO / Injunction in a California Foreclosure civil.  This information is for California real estate, foreclosure and bankruptcy attorneys only.

 A couple of quick things:  First, make sure you have good legal grounds to file the lawsuit that you are basing your TRO on.  You cannot file a lawsuit for the sole purpose of delay, and realize it is doubtful you will file a civil suit and get immediate results.   So, you need a realistic client that can afford to pay to support and ongoing litigation (often against several named large financial institutions who will usually hire a medium to large law firm to assist them).  That firm will likely want to bill a lot of hours, so you have to be cognizant of that.  You also need a game plan for settling the case and to me, a realistic client who does not want their house for free.  Courts are reluctant to go there and you should probably ask a lot of questions to make sure your client does not have this mindset, or objective in mind.

So, the first thing you might want to do is go to the intake process, ask a lot of questions, and decide if filing a lawsuit is the best course of action.  Bankruptcy may be a better option in a good number of cases, assuming there are valid legal debts worth discharging.

THE FOLLOWING ARE THE GENERAL STEPS I LOOK TO.   REMEMBER YOU HAVE TO CHECK YOUR LOCAL RULES, AND MAKE SURE THERE ARE NO SPECIAL REQUIREMENTS.  WITH TIME OF THE ESSENCE, THERE IS LITTLE ROOM FOR ERRORS.

CALL AND GET A COURT DATE AND FIND OUT IF THEY HAVE ANY SPECIAL PROCEDURES.  If you are filing for an ex parte hearing, you need to find out where the lawsuit will be filed, and see whether or not there are certain days the court will hear your ex parte motion.  Is there a particular judge?  A special process that must be followed (I have seen this vary so it makes sense to call the Court and tell them what you are trying to do and ask for their help in informing you of their times, dates, and procedures).

The rest of this valuable checklist can be downloaded at our new website Foreclosure Warrior which is an online education site for California lawyers looking for foreclosure training insights.

 

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Whoops we forgot to substitute the trustee and record the substitution

Posted by on August 10, 2011 · 1 Comment 

The following is general information only and is not intended to serve as legal advice or a substitute for legal advice.  These are only my opinions and the case law and theories presented below may not be current or valid.  For specific legal advice pertaining to your foreclosure case please consult a real estate or foreclosure lawyer in your area.

SUBSTITUTION OF TRUSTEE LEGAL REQUIREMENTS UNDER CALIFORNIA LAW

In the Deed of Trust a “trustee” is appointed.   The trustee has the power of sale under most deeds of trust.  Usually your deed of trust will indicate that the “lender” has the authority to substitute the trustee.  But what happens if your house is sold and you check the chain of title at your local county recorder’s office and you do not see a “Substitution of Trustee” document recorded prior to the sale?  Do you have any rights to set aside the sale?  Maybe.

Let’s take a look at these points I would argue if that happened and my client wanted to try to set aside the sale.  Note, whether or not the house was sold to a third party (bona fide purchaser for value) or went back to the bank may make a big difference in this situation.

(i) The Foreclosure laws in California must be STRICTLY FOLLOWED or the Foreclosure Sale is Void.

In Miller v. Cote, 179 Cal.Rptr. 753, (Ct of App. Fourth Dist. Div. 2 1982), the Court, in calling the notice of default fatally defective stated:

“The procedure for foreclosing on security by a trustee’s sale pursuant to a deed of trust is set forth in Civil Code section 2924, et seq. The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr. 735; see California Mortgage and Deed of Trust Practice (Cont.Ed. Bar 1979) s 6.40, p. 295; see also Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d.

(ii) 2934a(1)(A) says “all beneficiaries” must execute the Substitution of Trustee (the applicable California law when a lender seeks to substitute the trustee and pursue a foreclosure sale), and the substitution of trustee document must be RECORDED to be effective, if not, the resulting sale is VOID.

(a) Only the beneficiary can substitute a Trustee under California Civil Code Section 2934a(a)(1), and such document must be recorded:

This section states:

“(a) (1) The trustee under a trust deed upon real property or an estate for years therein given to secure an obligation to pay money and conferring no other duties upon the trustee than those which are incidental to the exercise of the power of sale therein conferred, may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors in interest….” (emphasis added).

Thus, it is clear, there can be no valid non-judicial foreclosure where the trustee under the original deed of trust is not properly substituted with a “recorded” document.

(iii) If there is no valid recorded substitution of Trustee, then the resulting foreclosure is VOID, and there is no obligation under California law to “ tender” the loan balance to set aside the sale based on this technical violation to failure to strictly comply with 2934a(1)(A).
Again, California courts have spoken loud and clear on this issue. If a Substitution of Trustee is not valid, the resulting sale is VOID with no requirement for “tender”. See Dimrock v. Emerald Properties, 81 Cal.App.4th 868, 878 (2000), which held:

“In particular, contrary to the defendants’ argument, he was not required to tender any of the amounts due under the note” in order to attack a void trustee sale.

The Court in Dimrock further stated:

“To avoid confusion and litigation, there cannot be at any given time more than one person with the power to conduct a sale under a deed of trust” (emphasis added).

See also Pro Value Properties Quality Loan Service Corp., 170 Cal.App.4th 579 (2009).

Other California courts have also been willing to set aside foreclosure sales that violate the law or otherwise have serious irregularities without the requirement of tender. In the case of Whitman v. Translate Title Company, 165 Cal.App.3d 312, 211 Cal. Rptr. 582 (1985) the Court dispensed with a tender requirement where a “substantial statutory right” was violated (the Trustor’s one day right to extend the non-judicial foreclosure one business day pursuant to Cal. Civ. Code Section 2924g(c)(1)) and thus the Court essentially treated the sale as “void” requiring no tender.

This is in line with the holding in the Little v. CFS Service Corp. 233 Cal.Rptr. 923, (1987) which discussed the difference between “substantially defective sales” (which are VOID and of no legal effect, - where no tender rule should apply), versus minor defects and irregularity, which are “voidable” and where arguably the tender rule might apply). There, a Notice of Sale defect was deemed substantial and prejudicial and thus the sale was declared void even as to a bona fide purchaser for value.

Here, failure to execute or record a Substitution of Trustee, is a substantial defect and impacts a right afforded to borrowers to know who the trustee is that will sell their property at a foreclosure sale. As such, the sale is VOID and not merely VOIDABLE, and no tender is required to seek to file a lawsuit to set aside the sale.

(iv.) DAMAGES: where a sale fails to strictly comply with 2934a(1)(A) the sale violates the law and should be deemed an “illegal” sale under Munger v. Moore and all damages flowing from the illegal sale may be properly recovered.

The landmark case in wrongful foreclosure is the case of Munger v. Moore, 89 Cal.Rptr. 323 (1970), in this case the Court held:

“We are inclined however, to believe that with respect to real property the Murphy case was articulating a rule that has been applied in other jurisdictions. That rule is that a trustee or mortgagee may be liable to the trustor or mortgagor for damages sustained where there has been an illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust.…..this rule of liability is also applicable in California, we believe, upon the basic principle of tort liability declared in the Civil Code that every person is bound by law not to injure the person or property of another or infringe on any of his rights.”

In assessing damages for the wrongful foreclosure, the Munger Court held:

“Civil Code Section 3333 provides that the measure of damages for a wrong other than breach of contract will be an amount sufficient to compensate the plaintiff for all detriment, foreseeable or otherwise, proximately occasioned by the defendant’s wrong.”

These are just a few cases that come to mind.  There are probably other arguments that can be made, but the lenders are required to follow the law just like everybody else.  If they don’t properly substitute the trustee, you may have rights.  Again, keep in mind that litigation is expensive so you have to consult with an attorney to see if it even makes sense to attack the sale, and if the sale is set aside you have your old loan back and you need to have a plan to deal with that which does not COUNT ON and RELY ON getting a modification.  No lender or servicer is required to give a loan modification.

In this situation, some people have discussed setting aside the sale and going in Chapter 13 to bring the loan current over 60 months.  Others have looked into bringing the loan current.  Remember, sometimes people are only late on their mortgage because the lender or servicer told them “you have to be late if you want to try to get a loan modification.”  Where you have a solid game plan, it may be worth looking into whether or not you have technical grounds to try to set aside your foreclosure sale.  In another article, we will discuss what it means when it says the “beneficiary” must execute and record the Substitution of Trustee.

 

 

 


 

 

 

 

 

 

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Does anyone have signatures of Krystal Hall, Idaho Notary, or Vicki Sorg signatures?

Posted by on May 15, 2011 · 2 Comments 

If so, please email them to us at steve@vondranlaw.com.  We are conducting a foreclosure chain of title analysis and have this notary and signor on the assignment of deed of trust.  You may also find them on the substitution of trustee document.  Either way, whether you have notarized documents or not, we would appreciate obtaining copies of these known signatures for comparison purposes.  All parties are presumed innocent and in compliance with the law.

We are willing to exchange what we have for yours.

 

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i am so encouraged to hear that the lawsuits are flying against Indymac / Onewest bank……..take the battle to them…..

Posted by on April 6, 2010 · 4 Comments 

It is music to my ears to learn I am not the only attorney suing Indymac and OneWest bank.  These guys are amazing.  Indymac goes out of business because it originates loans that cannot be repaid (yet, supposedly this is all the borrowers fault and not theirs).  Then, the FDIC comes in like superman to SAVER THE DAY (receivership) and forms “Indymac Federal” (yeah, whatever the heck that means).  Then OneWest sees a HUGE OPPORTUNITY to buy all of Indymacs junk loans and enters into a loan sale agreement with the FDIC.  You can find the contact on the internet.

Then, OneWest says “we are not liable for any predatory lending……we are just investors who bought the good stuff.”  I have a legal pleading (demurer) to show this is their position.  All OneWest wants to do is to buy loans for cheap (get title from MERS – this is what the loan sale agreement says OneWest must do), and then start foreclosing on people.  Okay, maybe they modify a few loans in the process, let’s be fair.  But at the end of the day there is a “Loss-share agreement” with the FDIC that compensates OneWest for their “losses.”

Wow, to be a billionaire investment club in America…..must be nice.  To have most of the banking laws on your side…..must be nice.  To get the bailout……must be nice.  Even though OneWest bank was apparently “born” in March, 2009, my records indicate they even had a share a bailout pie set aside for them.  I know, it is hard o believe.  Folks, this foreclosure process is a war on lenders.  They are not your friends, and honestly, I do not think they care about anything other than racking up massive profits despite the financial crises they should take 3/4 credit in creating.

Maybe I am being cynical, but I have heard too many stories, and seen too many things, including some comical arguments by the lawyers hired by OneWest bank.  I am not going to name any names, but there are some real interesting pleadings that come across my desk.  At any rate, I could go on.   Suffice it to say that I AM ECSTATIC TO LEARN THESE PREDATORY LENDING AND BAILOUT BOZOS ARE BEING EXPOSED FOR WHAT THEY ARE AND GETTING THEIR PANTS SUED OFF.  AT THE END OF THE DAY, THIS IS JUSTICE FIGHTING BACK.

We are getting tired of all the nonsense in regard to loan modifications trial plan nonsense (see our website at www.trialplanfraud.com), short sales that don’t happen (yes, HAFA will likely be a flop like all the other programs) only to yield far less money in a private sale, deed-in-lieu of foreclosure that doesn’t happen, MERS nonsense (see our website at www.producethenoteattorney.com), substitution of trustee nonsense, false affidavits, false declarations, callous indifference to foreclosure laws.   I wish I could say I was making all this up just to get business……unfortunately as too many of you know, I am telling it like it is.

We have sued major lenders such as IndyFlack, SWells Fargo, OneWest Stank, Aurora Loan Services and others.  We will not stop fighting them where valid grounds exist.  We have seen too many people crushed and destroyed in this process.  We fight for people and call these banks out for their shennanigans.  We perform forensic loan audits, send qualified written requests, send debt validation letters, we demand they identify the holder of the loan, we perform TILA audits and assert loan rescission rights, we do everything within our power to force these slug banks to DO SOMETHING FOR THE PEOPLE.

Oour neighborhoods are being destroyed, our values are being lost, we are watching our economy sink while watching their profits rise.   What good is bailing out the banks so they can pay their big bonuses to each other (bonuses that are clearly not earned – they should have been forced to file bankruptcy) when the average person on main street has bad credit, suspect employment opportunities, no down payment, etc.  What the heck is going on here.

At any rate, yes I am happy to see more foreclosure defense lawyers and predatory lending law firms calling these guys out the same way our firm is calling them out.  They must answer and take accountability for the mess they have at least partially created.  But if you asked a CEO at any major bank (Wells, Bank of America, Chase, etc.) none of them will take any accountability.  Till that day, we keep fighting for every inch in the war on foreclosure.

Steve Vondran can be reached at (877) 276-50874.  We appreciate your comments and questions.  We can be emailed at steve@vondranlaw.com

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CAN A CALIFORNIA HOMEOWNER DEMAND THAT THE LENDER OR LOAN SERVICER PRODUCE THE NOTE AS A FORECLOSURE DEFENSE STRATEGY?

Posted by on March 6, 2010 · 30 Comments 

There is no guarantee the following is correct. Law changes all the time. This is for attorneys only and you should assume the information is not correct. This is general legal information only.
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Unfortunately, court says “no way” and declares THERE IS NO REQUIREMENT THAT THE ANYONE PRODUCE THE ORIGINAL PROMISSORY NOTE AS A PRE-REQUISITE TO PURSUING A PRIVATE TRUSTEE SALE. Here are a few snipets from the case:

MY COMMENTS ARE IN BOLD AND MERELY REPRESENT MY OPINION.

Chilton v. Federal Nat. Mortg. Ass’n, Slip Copy, 2009 WL 5197869 (E.D.Cal.)



ORDER RE PROPOSED ORDER TO SHOW CAUSE AND MOTION FOR TEMPORARY RESTRAINING ORDER



Plaintiff filed a complaint on December 16, 2009, alleging that Defendant, Federal National Mortgage Association, violated unspecified provisions of federal law within “Title 15 U.S.C. and/or Title 18 U.S.C.” because Defendant initiated non-judicial foreclosure on her property, located in Clovis, California, without possessing the genuine original note.” She advances no other bases for relief.

Plaintiff has also filed an “order to show cause and motion for temporary restraining order,” in an attempt to block the foreclosure process.
To obtain temporary or permanent injunctive relief, a plaintiff must demonstrate likelihood of success on the merits. Here, Plaintiff’s only legal theory has been resoundingly rejected as a basis for relief. It is well-established that non-judicial foreclosures can be commenced without producing the original promissory note.

THAT’S THE PART THAT HURTS. I SUPPOSE ANYONE WHO SHOWS UP ON FORECLOSURE DAY CLAIMING TO BE THE HOLDER OF THE LOAN (WHETHER IT IS MERS PRETENDING TO BE THE BENEFICIARY OR THE NOMINEE OF THE LENDER, THE LOAN SERVICER PRETENDING TO BE THE HOLDER OF THE LOAN OR SOME OTHER THIRD PARTY, LIKE WALLMART FOR EXAMPLE, CLAIMING TO BE THE HOLDER OF THE LOAN) GETS AN UNFETTERED RIGHT TO FORECLOSE, AND A FREE PASS FROM ANY JUDICIAL SCRUTINY WHATSOEVER.

The Court went on to state:

“Non-judicial foreclosure under a deed of trust is governed by California Civil Code Section 2924 which relevant section provides that a “trustee, mortgagee or beneficiary or any of their authorized agents” may conduct the foreclosure process.” California courts have held that the Civil Code provisions “cover every aspect” of the foreclosure process, (case cited), and are “intended to be exhaustive,”(another case cited). There is no requirement that the party initiating foreclosure be in possession of the original note.

AFTER LEVELING THIS BLOW THE COURT CITED A FEW OTHER CASES THAT RESULTED IN THE SAME OUTCOME FOR PLAINTIFFS ASSERTING THE “PRODUCE THE NOTE” FORECLOSURE DEFENSE STRATEGY (OBVIOUSLY IN AN ATTEMPT TO TELL FUTURE LITIGANTS IN CALIFORNIA “GIVE UP TRYING TO VERIFY ANYONES CREDENTIALS”):

(1) See, e.g., Nool v. HomeQ Servicing, — F.Supp.2d —-, 2009 WL 2905745 (Sep. 4 2009) (“There is no requirement that the party initiating foreclosure be in possession of the original note.”);

(2) Candelo v. NDEX West, LLC, 2008 WL 5382259, at *4 (E.D.Cal. Dec.23, 2008) (“No requirement exists under statutory framework to produce the original note to initiate non-judicial foreclosure.”);

(3) Putkkuri v. ReconTrust Co., 2009 WL 32567, *2 (S.D.Cal. Jan.5, 2009) (“Production of the original note is not required to proceed with a non-judicial foreclosure.”);

(4) Phillips v. MERS Mortgage Electronic Registration Systems, 2009 WL 3233865, 9 (E.D.Cal.2009); Vargas v. Reconstruction Co., 2008 U.S. Dist. LEXIS 100115, at *8-9 (E.D.Cal. Dec. 1, 2008).


WE HAVE PREVIOUSLY DISCUSSED THE KANSAS SUPREME COURT CASE THAT DISCUSSED THE ROLE OF MERS IN WHICH THE COURT SEEMED TO SUGGEST THAT MERS WAS NOT A BENEFICIARY UNDER THE DEED OF TRUST JUST BECAUSE THEY SAY THEY ARE IN THE DOCUMENT. THE COURT ADDRESSED PLAINTIFF’S RELIANCE ON THAT CASE:

“Plaintiff’s reliance on Landmark National Bank v. Kessler, 216 P.3d 158, 2009 Kan. LEXIS 834 (Kan.2009), is misplaced. That case concerned a company, Mortgage Electronic Registration Systems, Inc. (“MERS”), that acted on behalf of a lender to finalize a second mortgage on Kessler’s home. For procedural reasons not relevant to the present case, it became necessary for the Kansas court to determine whether MERS possessed an interest in the second mortgage, eventually concluding that under the specific facts of that case, MERS was more like an agent than a buyer/owner of the note.”

THE COURT CONTINUED:

“In reaching this conclusion, the Landmark court noted: 
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).”


THE COURT CHIMED IN ON THIS LEGAL REQUIREMENT:

“This language merely stands for the proposition that one possessing the deed of trust cannot foreclose on a mortgage without (1) also possessing some interest in the promissory note, or (2) obtaining permission to act as agent of the note-holder. This has nothing whatsoever to do with possession of the “original” promissory note document, i.e., the original piece of paper with original signatures, etc., the possession of which is not required to initiate non-judicial foreclosure in California. Because Plaintiff cannot possibly establish any likelihood of success on her current claim for relief, it is not necessary to set her motion for temporary injunctive relief for hearing. Her motion is DENIED. IT IS SO ORDERED.”


There you have it friends, as we have been telling callers to our office seeking foreclosure defense, DO NOT RELY ON “PRODUCE THE NOTE” AS A SILVER BULLET FORECLOSURE DEFENSE THAT IS GOING TO STOP YOUR FORECLOSURE WITH AN INJUNCTION AND GET YOUR HOUSE FOR FREE. IF THERE ARE GLARING IRREGULARITIES, AND OTHER LEGAL GROUNDS TO GET YOU INTO COURT VALIDLY, THEN YOU MAY WANT TO TAG ON THIS CLAIM AND SEE IF YOU CAN GET A DIFFERENT OUTCOME FROM A DIFFERENT JUDGE, BUT SUFFICE IT TO SAY AS A STAND-ALONE LEGAL THEORY, THERE IS SIMPLY NOT MUCH TEETH TO THE THEORY. MOST OF THE CASES WHERE YOU HEAR OF SOME SUCCESS COME FROM FLORIDA AND OHIO AND OTHER “JUDICIAL FORECLOSURE” STATES WHERE THE LENDER IS FORCED TO FILE IN COURT TO START THE FORECLOSURE PROCESS. IN THESE CASES, THE ISSUE BECOMES A QUESTION OF “STANDING” AND “REAL PARTY IN INTEREST.” THERE IS ALSO THE BANKRUPTCY ANGLE THAT WE WILL BE EXPLORING IN GREATER DETAIL IN FUTURE POSTS.

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In a similar case, NEWBECK v. WASHINGTON MUTUAL BANK, Slip Copy, 2010 WL 291821 (N.D.Cal.), the Court essentially held the same way when a Plaintiff tried to argue “produce the original note” as a strategy to set aside a foreclosure sale that had already occurred. In this case the Court first discussed the dreaded issue of challenging a foreclosure sale that had already been finalized, and the Court’s comments shed light on how one-sided the laws are when you dare take on a “lender” in Court

“Plaintiffs ask the Court to set aside Washington Mutual’s foreclosure sale of their property. They assert that Washington Mutual did not have possession of the original mortgage note or the deed of trust under which it was secured and, as a result, it was not entitled to foreclose. A plaintiff seeking to set aside a foreclosure sale must first allege tender of the amount of the secured indebtedness. Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1109, 51 Cal.Rptr.2d 286 (1996) (citing FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021-22, 255 Cal.Rptr. 157 (1989)); Smith v. Wachovia, 2009 WL 1948829, at *3 (N.D.Cal.). Without pleading tender or the ability to offer tender, a plaintiff cannot state a cause of action to set aside a foreclosure sale. Karlsen v. Am. Savings & Loan Ass’n, 15 Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971) (citing Copsey v. Sacramento Bank, 133 Cal. 659, 662 (1901)); Smith, 2009 WL 1948829, at * 3 (citing Karlsen ). Plaintiffs allege neither tender nor their ability to offer tender. Thus, they do not state a claim to set aside the foreclosure sale.

THIS MEANS, IF YOU ARE CHALLENGING A FORECLOSURE SALE AND SEEK TO SET IT ASIDE (ON WHATEVER PROPER GROUNDS YOU MAY HAVE) YOU NEED TO AT LEAST ALLEGE A WILLINGNESS AND ABILITY TO TENDER. IF ALL ELSE FAILS, YOU MAY WANT TO TELL THE JUDGE THAT YOU WILL TENDER THE FULL BALANCE DUE AFTER YOU COLLECT ON YOUR FRAUD JUDGEMENT. SOMETIMES THIS MAY BE ALL YOU HAVE WHEN YOU ARE WAY UPSIDE DOWN ON YOUR PROPERTY.

THE COURT THEN WENT ON TO DISCUSS WHAT MIGHT HAPPEN EVEN IF YOU COULD TENDER:

“Even if they alleged tender, the basis on which they appear to seek relief does not support their claim. In California, there is no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure sale. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D.Cal.2009); Smith, 2009 WL 1948829, at *3; Neal v. Juarez,2007 WL 2140640, *8 (S.D.Cal.) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97, 21 P.2d 413 (1933); Cal. Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 435, 44 P.2d 624 (1935)).California Civil Code Sections 2924 through 2924k “provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” Knapp v. Doherty, 123 Cal.App.4th 76, 86, 20 Cal.Rptr.3d 1 (2004) (quoting Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994)). Knapp explains the non-judicial foreclosure process as follows: Upon default by the trustor [under a deed of trust containing a power of sale], the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. Knapp, 123 Cal.App.4th at 86, 20 Cal.Rptr.3d 1 (citation omitted).

I SUPPOSE YOU ARE NEVER ALLOWED TO ASK WHO THE “BENEFICIARY” IS OR MAKE ANYONE PROVE THAT POINT BEFORE THEY TAKE YOUR HOUSE. ARE YOU ALSO ALLOWED TO ASK WHO THE BENEFICIARY IS FOR PURPOSES OF COMPLIANCE WITH CALIFORNIA CIVIL CODE SECTION 2923.5 AND THE DECLARATION THAT IS MADE UNDER THIS SECTION? WE WILL DISCUSS THIS ISSUE IN ANOTHER BLOG POST.

ANYWAY, I DIGRESS, THE COURT CONTINUED:

“A properly conducted nonjudicial foreclosure sale constitutes a final 13 adjudication of the rights of the borrower and lender.” Plaintiffs have not pointed to controlling authority to show that this statutory scheme requires production of the original promissory note or deed of trust. Thus, even if they alleged tender, to the extent that they allege irregularities in the foreclosure sale based on Washington Mutual’s failure to produce the original promissory note or deed of trust, they do not state a claim.

AS DISCUSSED ABOVE, ONLY OUT OF STATE CLAIMS FOR PRODUCE THE NOTE WERE CITED (THESE COME FROM THE JUDICIAL FORECLOSURE STATES).

“Plaintiffs cite various out-of-state cases, which apply non-California law to judicial foreclosure actions. See In re Foreclosure Actions, 2007 WL 4034554 (N.D.Ohio); In re Foreclosure Cases, 2007 WL 3232430 (N.D.Ohio); Landmark Nat’l Bank v. Kessler, 289 Kan. 528, 216 P.3d 158 (2009); U.S. Bank Nat’l Ass’n v. Ibanez, 2009 WL 3297551 (Mass.Land Ct.). Because these cases do not apply California’s non-judicial foreclosure sale statutes, they do not support Plaintiffs’ position.”
SO THERE YOU HAVE IT, MORE PROOF OF THE MOUNTAIN YOU MUST CLIMB TO GET TO THE PROMISED LAND. AS WE TELL OUR CLIENTS, FORECLOSURE DEFENSE IS NOT AN EASY BUSINESS.

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KEYWORDS: CALIFORNIA FORECLOSURE DEFENSE LAWYER / PHOENIX FORECLOSURE DEFENSE LAWYER / ARIZONA LOAN MODIFICATION LAWYER / PRODUCE THE NOTE FORECLOSURE DEFENSE STRATEGY / SCOTTSDALE LOAN MODIFICATION / PHOENIX BANKRUPTCY LAWYER / PHOENIX BK ATTORNEY / NEWPORT BEACH FORECLOSURE LAWYER / INJUNCTION TO STOP FORECLOSURE / TRO / LIS PENDENS / SB1137 / FILE CHAPTER 7 BANKRUPTCY / MERS / SECURITIZED LOANS / QWR.

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AUTHORS NOTE: IF THE CALIFORNIA FORECLOSURE STATUTES GOVERN THE FORECLOSURE SALE PROCESS, AND IF NOTHING ELSE REALLY MATTERS, THEN YOU NEED TO TAKE A CLOSE LOOK AT WHETHER THAT STATUTE IS BEING COMPLIED WITH WHEN LOOKING TO OBTAIN AN INJUNCTION TO HALT FORECLOSURE.

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