Sanctions Pummel Neil Garfield Legal Theories

Neil Garfield’s frivolous filings and bogus legal theories have already cost at least one client, Zdislaw Maslanka, a wad of attorney fees in an utterly frivolous action to get his house free even though he remained current in his mortgage payments.  As the below docket entries show, the Florida 4th District appellate panel affirmed the 17th Circuit trial court’s dismissal of the case and ordered Maslanka to pay the attorney fees of the two mortgage creditors that he sued.

  • 4D14-3015-Zdzislaw E. Maslanka v. Wells Fargo Home Mortgage and Embrace Home Loans
05/12/2016 Affirmed ­ Per Curiam Affirmed  
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Embrace Home Loans Inc.’s September 2, 2015 motion for attorney’s fees is granted. On remand, the trial court shall set the amount of the attorney’s fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Wells Fargo Home Mortgage’s September 3, 2015 motion for attorneys’ fees is granted. On remand, the trial court shall set the amount of the attorneys’ fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee.

Federal Rules of Civil Procedure Rule 11 (See Below) allows the court to award attorney fees to the party against whom a litigant files frivolous (unsupported or nonsensical) motions.

34 States have embraced FRCivPro Rule 11 in their own rules of civil procedure, but Florida embraced it in Florida Statute 57.105 (See Below).  It requires the attorney propounding the unsupported motion to pay one half of the sanction cost and the attorney’s client to pay the other half.  That has raised the hackles of a lot of attorneys who claim it chills their willingness to mount an aggressive advocacy on behalf of the client.  Obviously, lawmakers see overaggressiveness as vexatious, and they decided, finally, to punish the lawyer for it.

Mortgage loan creditors have begun to get sick and tired of dealing with mindless litigation by idiotic practititoners like Neil Garfield.

Johnson v. BANK OF NEW YORK MELLON, Dist. Court, WD Washington 2016

I write now to show a case in point (full text of opinion below).  Lajuana Locklin Johnson, a TILA rescission mortgagor,  provoked the ire of a USDC judge in Washington State by filing a notice of rescission 10 (TEN!) years after consummation of the loan (obviously following Neil Garfield’s ridiculous strategy) when the TILA statute of repose window closes after 3 years.  She knew she had no case, but filed it anyway in a silly and misguided effort to get a free house.  So, the judge spanked her.

Oh, and she claimed she relied on the clear meaning of the SCOTUS Jesinoski opinion to do it. She claimed SCOTUS meant one can send notice of rescission after 3 years, but the high court actually meant the borrower with a valid TILA rescission claim may sue after 3 years.  Incidentally, the Minnesota USDC ruled in July 2016 that Jesinoski had no TILA rescission case because he and his wife had written an acknowledged receipt of the proper TILA disclosures. Jesinoski claimed he had invested over $800,000 in the case, much of which came from attorney fees.

Well, first Judge James L. Robart ordered Lajuana and her attorney Smith to show cause why he shouldn’t sanction them under Rule 11 for bringing an utterly hopeless TILA rescission action she knew would fail.  And in that order he berated attorney Jill J. Smith of Natural Resource Law Group, PLLC, for filing the action in spite of having filed and been sanctioned for one or more prior frivolous actions like Lajuana’s.  Smith idiotically claimed the table-funding meant the loan had never been consummated and so the statute of repose could not have tolled.  But she did not explain how Lajuana could rescind a non-consummated loan.

The judge said this about the essential argument Smith (taken directly from Garfield) propounded:

Excerpt from opinion

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

Then, Judge Robart ordered these sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

I would raise yet another point about this case.  The above excerpt provided that “Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property…  Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property.”

I fail to see how TILA rescission can apply at all to a purchase money loan.

12 CFR Part 1026.23(f) “Exempt transactions.  The right to rescind does not apply to the following:  1. A residential mortgage transaction.” (“Residential mortgage transaction means a transaction in which a mortgage, deed of trust, purchase money security interestarising under an installment sales contract, or equivalent consensual security interestis created or retained in the consumer‘s principal dwelling to finance the acquisition or initial construction of that dwelling.”)

See the whole opinion below.

And let this be a lesson to Neil Garfield Klingons (those who cling to his every utterance:

Heed Neil Garfield at your peril!

 

FRCivPro Rule 11. Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions

(a) Signature. Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney’s name—or by a party personally if the party is unrepresented. The paper must state the signer’s address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper unless the omission is promptly corrected after being called to the attorney’s or party’s attention.

(b) Representations to the Court. By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

(c) Sanctions.

(1) In General. If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation. Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.

(2) Motion for Sanctions. A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. If warranted, the court may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion.

(3) On the Court’s Initiative. On its own, the court may order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated Rule 11(b).

(4) Nature of a Sanction. A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated. The sanction may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.

(5) Limitations on Monetary Sanctions. The court must not impose a monetary sanction:

(A) against a represented party for violating Rule 11(b)(2); or

(B) on its own, unless it issued the show-cause order under Rule 11(c)(3)before voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.

(6) Requirements for an Order. An order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction.

(d) Inapplicability to Discovery. This rule does not apply to disclosures and discovery requests, responses, objections, and motions under Rules 26 through37.

 

Florida Statute
57.105 Attorney’s fee; sanctions for raising unsupported claims or defenses; exceptions; service of motions; damages for delay of litigation.

(1) Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

(a) Was not supported by the material facts necessary to establish the claim or defense; or
(b) Would not be supported by the application of then-existing law to those material facts.
(2) At any time in any civil proceeding or action in which the moving party proves by a preponderance of the evidence that any action taken by the opposing party, including, but not limited to, the filing of any pleading or part thereof, the assertion of or response to any discovery demand, the assertion of any claim or defense, or the response to any request by any other party, was taken primarily for the purpose of unreasonable delay, the court shall award damages to the moving party for its reasonable expenses incurred in obtaining the order, which may include attorney’s fees, and other loss resulting from the improper delay.

(3) Notwithstanding subsections (1) and (2), monetary sanctions may not be awarded:

(a) Under paragraph (1)(b) if the court determines that the claim or defense was initially presented to the court as a good faith argument for the extension, modification, or reversal of existing law or the establishment of new law, as it applied to the material facts, with a reasonable expectation of success.
(b) Under paragraph (1)(a) or paragraph (1)(b) against the losing party’s attorney if he or she has acted in good faith, based on the representations of his or her client as to the existence of those material facts.
(c) Under paragraph (1)(b) against a represented party.
(d) On the court’s initiative under subsections (1) and (2) unless sanctions are awarded before a voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.
(4) A motion by a party seeking sanctions under this section must be served but may not be filed with or presented to the court unless, within 21 days after service of the motion, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.
(5) In administrative proceedings under chapter 120, an administrative law judge shall award a reasonable attorney’s fee and damages to be paid to the prevailing party in equal amounts by the losing party and a losing party’s attorney or qualified representative in the same manner and upon the same basis as provided in subsections (1)-(4). Such award shall be a final order subject to judicial review pursuant to s. 120.68. If the losing party is an agency as defined in s. 120.52(1), the award to the prevailing party shall be against and paid by the agency. A voluntary dismissal by a nonprevailing party does not divest the administrative law judge of jurisdiction to make the award described in this subsection.
(6) The provisions of this section are supplemental to other sanctions or remedies available under law or under court rules.
(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.
History.s. 1, ch. 78-275; s. 61, ch. 86-160; ss. 1, 2, ch. 88-160; s. 1, ch. 90-300; s. 316, ch. 95-147; s. 4, ch. 99-225; s. 1, ch. 2002-77; s. 9, ch. 2003-94; s. 1, ch. 2010-129.

57.115 Execution on judgments; attorney’s fees and costs.

(1) The court may award against a judgment debtor reasonable costs and attorney’s fees incurred thereafter by a judgment creditor in connection with execution on a judgment.

(2) In determining the amount of costs, including attorney’s fees, if any, to be awarded under this section, the court shall consider:

(a) Whether the judgment debtor had attempted to avoid or evade the payment of the judgment; and
(b) Other factors as may be appropriate in determining the value of the services provided or the necessity for incurring costs in connection with the execution.
History.s. 13, ch. 87-145.

 

LAJUANA LOCKLIN JOHNSON, Plaintiff,
v.
BANK OF NEW YORK MELLON, et al., Defendants.

Case No. C16-0833JLR.United States District Court, W.D. Washington, Seattle.

August 10, 2016.Lajuana Locklin Johnson, Plaintiff, represented by Jill J. Smith, NATURAL RESOURCE LAW GROUP PLLC.

ORDER ISSUING SANCTIONS AND DISMISSING CASE

JAMES L. ROBART, District Judge.

I. INTRODUCTION

This matter comes before the court sua sponte. Previously, the court ordered Jill J. Smith of the Natural Resource Law Group, PLLC, counsel for Plaintiff Lajuana Locklin Johnson, to show cause why the court should not sanction her pursuant to Federal Rule of Civil Procedure 11. (OSC (Dkt. # 3); see alsoCompl. (Dkt. # 1).) The court then ordered Ms. Smith to appear, and she presented argument on July 28, 2016, on why the court should not issue sanctions. Having considered the written and oral arguments of counsel, the appropriate portions of the record, and the relevant law, and considering itself fully advised, the court DISMISSES this case WITH PREJUDICE and SANCTIONS Ms. Smith as described more fully herein.

II. BACKGROUND

On June 6, 2016, Ms. Smith filed a complaint on behalf of Ms. Johnson seeking to enforce and obtain damages pertaining to her purportedly rescinded loans. (Compl.) The rescission notices that Ms. Johnson attached to her complaint make clear that she sent those notices more than a decade after executing the loans. (See Rescission Notices (Dkt. # 1-1).) The Truth in Lending Act (hereinafter, “TILA”), 15 U.S.C. § 1635 et seq., permits rescission of certain loans but includes a three-year statute of repose. Jesinoski v. Countrywide Home Loans, Inc., ___ U.S. ___, 135 S. Ct. 790, 792-93 (2015)(“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated.”).

Having presided over several of Ms. Smith’s TILA rescission cases that feature substantially similar complaints to the one in this case, the court researched Ms. Smith’s other filings in this district. (See OSC at 5-6 (collecting cases).) Ms. Smith has filed a troubling series of such cases.[1] The Honorable Thomas S. Zilly sanctioned Ms. Smith $5,000.00 plus over $10,000.00 in attorneys’ fees after ordering Ms. Smith to show cause regarding how binding Supreme Court caselaw does not foreclose her claim and receiving no response.Johnson v. Nationstar Mortg. LLC, et al., No. C15-1754TSZ, Dkt. ## 35, 41. The claim in Johnson v. Nationstar strongly resembles Ms. Johnson’s untimely effort to rescind pursuant to TILA in this case.

In light of this backdrop, the court stayed this case and ordered Ms. Smith to show cause no later than July 7, 2016, why the court should not issue sanctions pursuant to Federal Rule of Civil Procedure 11. (OSC at 8-10.) The court indicated that it was specifically considering sanctioning Ms. Smith and Ms. Johnson by “dismissing this case, issuing monetary sanctions against Ms. Smith, and requiring Ms. Smith to file a copy of this order each time she files a new case in federal court.” (Id. at 9.) Ms. Smith failed to file a timely response to the court’s order to show cause. (See Dkt.) The court therefore ordered Ms. Smith to appear on July 28, 2016, for an in-court sanctions hearing. (7/18/16 Min. Ord. (Dkt. # 4) at 1-2.)

On July 27, 2016, almost three weeks after her response was due and the day before the sanctions hearing, Ms. Smith filed a response to the order to show cause. That response states the facts of the case as Ms. Smith sees them but without reference to any affidavit or other verified source. (OSC Resp. (Dkt. # 5) at 1-4.) In addition, Ms. Smith attempts to address some of the specific considerations the court ordered her to respond to in its prior order. (Id. at 5-6.) However, she makes no reference to any of the prior cases she has filed in this court or “the Ninth Circuit and Supreme Court cases cited” in the order to show cause. (See OSC at 9 (“Ms. Smith’s response to this order must address how Ms. Johnson’s claims, as stated in the complaint, comply with Rule 11(b)(2) in light of Nieuwejaar, Green Tree, the other cases in this District identified above, and the Ninth Circuit and Supreme Court cases cited therein. Finally, Ms. Smith must address what “information and belief” she has that Ms. Johnson’s loan in this case “was never consummated.”); see generally OSC Resp.)

Ms. Smith appeared in court on July 28, 2016, and defended the factual allegations and legal theory underpinning Ms. Johnson’s claim. (7/28/16 Min. Entry (Dkt. # 6).) In general terms, Ms. Smith argued that circumstances surrounding the loan, such as the manner in which it was funded, make it questionable whether the loan was ever consummated. If the loan was never consummated, she reasons, the three-year statute of repose never began and therefore never expired.

The matter of Rule 11 sanctions is now before the court.

III. ANALYSIS

A. Legal Standard

Federal Rule of Civil Procedure 11 governs sanctions of the type issued herein. Rule 11(b) provides in full:

By presenting to the court a pleading, written motion, or other paper— whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Fed. R. Civ. P. 11(b). In its June 22, 2016, order, the court placed Ms. Smith on notice and allowed her to respond regarding potential violations of Rules 11(b)(2) and 11(b)(3).

B. Violations of Rule 11

Ms. Johnson alleges that “[u]pon information and belief, the subject loan was never consummated.” (Compl. ¶ 13.) This conclusory allegation appears intended to circumvent TILA’s three-year statute of repose, which begins upon consummation of the loan.[2] See 15 U.S.C. § 1635(f) (“An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first. . . .”);Jesinoski, 135 S. Ct. at 792-93. At the hearing, Ms. Smith argued that if the loan was never consummated, the three-year statute of repose has not begun, has not expired, and therefore the rescission is timely.

In the numerous opportunities the court has afforded Ms. Smith to provide a factual basis for this allegation, she has provided none. Ms. Smith has also provided no evidence of any legal or factual “inquiry” that she performed, and accordingly the court can only determine whether the inquiry was “reasonable under the circumstances” based on the allegations and arguments that Ms. Smith has advanced in opposition to the frivolity of Ms. Johnson’s claim. Fed. R. Civ. P. 11(b).

Under TILA, “[c]onsummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13); see also Grimes v. New Century Mortg. Corp., 340 F.3d 1007, 1009 (9th Cir. 2003). “Under the Official Staff interpretation, state law determines when a borrower is contractually obliged.” Grimes, 340 F.3d at 1009 (citing 12 C.F.R. § 226, Supp. 1 (Official Staff Interpretations), cmt. 2(a)(13)); see also id. at 1010 (applying California law to determine whether a California loan was consummated for purposes of TILA). In Washington, “for a contract to form, the parties must objectively manifest their mutual assent” to “sufficiently definite” contractual terms. Keystone Land & Dev. Co. v. Xerox Corp., 94 P.3d 945, 949 (Wash. 2004). In addition, “the contract must be supported by consideration to be enforceable.” Id. (citing King v. Riveland, 886 P.2d 160, 164 (Wash. 1994)).

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

C. Appropriate Sanctions

Rule 11(d) limits sanctions to “what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Fed. R. Civ. P. 11(d). Ms. Smith’s actions in this case demonstrate that the previous sanctions she incurred—dismissal with prejudice, $11,972.50 in attorneys’ fees payable by her client, and a $5,000.00 sanction payable to the court—constituted insufficient specific deterrence. See Johnson v. Nationstar, No. C15-1754TSZ, Dkt. ## 35, 41-43. The court finds it appropriate to impose greater monetary sanctions payable by Ms. Smith and her law firm and dismiss the case with prejudice.[7] The court accordingly issues the following sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

IV. CONCLUSION

Based on the foregoing analysis, the court DISMISSES the case WITH PREJUDICE and SANCTIONS Ms. Smith as described above.

[1] See Pelzel v. GMAC Mortg. Grp., LLC, No. C16-5643RBL, Dkt. # 1 (filing a complaint on July 20, 2016, which alleges that “[u]pon information and belief, the subject loan was never consummated” and appears to suffer the same legal and factual deficiencies as this case); Elder v. Pinnacle Capital Mortg. Corp., et al., No. C16-5355RBL, Dkt. ## 1, 1-1 (filing a complaint on May 13, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Velasco, et al. v. Mortg. Elec. Registration Sys., Inc., et al., No. C16-5022RBL, Dkt. # 30 (dismissing a claim for enforcement of TILA rescission filed more than six years after the date of the rescission notice on res judicata grounds); Maxfield v. Indymac Mortg. Servs., et al., No. C16-0564RSM, Dkt. # 3 (filing a complaint on April 19, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Jenkins, et al. v. Wells Fargo Bank, N.A., No. 16-0452TSZ, Dkt. # 1 (filing a complaint on March 31, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Burton, et al. v. Bank of Am., et al., No. C15-5769RBL, Dkt. # 20 at 5 (citing Jesinoski, 135 S. Ct. at 792) (“The Supreme Court’s Jesinoskidecision— quoted by the Burtons—reiterates that while the three year limitation period may not apply to the commencement of an action, it absolutely applies to the time frame for sending a rescission notice. . . . The Burtons’ loan was consummated in 2005. Their conditional right to rescind expired in 2008—seven years before they sent the notice upon which this action relies. . . .”);Johnson v. Green Tree Servicing, LLC, et al., No. C15-1685JLR, Dkt. # 22 at 8-9 (dismissing the case and rejecting the arguments that TILA “rescission is effective upon mailing, regardless of when mailing occurs” and that “the court cannot presume consummation until after discovery is conducted on the matter”); Stennes-Cox v. Nationstar Mortg., LLC, et al., No. C15-1682TSZ, Dkt. # 15 at 3-5 (rejecting the plaintiff’s arguments based on Jesinoski and Paatalo and dismissing with prejudice her claim seeking to rescind a loan eight years after consummation); Nieuwejaar, et al. v. Nationstar Mortg. LLC, et al., No. C15-1663JLR, Dkt. ## 22 at 6-7 (“Plaintiffs also attempt to address the timeliness issue by raising the possibility that the loan was never consummated. . . . Plaintiffs’ complaint contains no allegations regarding the failure to establish a contractual obligation. . . . Thus, Plaintiffs have not pleaded facts that allow the court to reasonably infer that Plaintiffs’ notice of rescission was effective. . . .” (internal citations omitted)), 28 at 7 (“Moreover, despite the court’s guidance that Plaintiffs must allege facts about the loan transaction before the court can infer a problem with consummation . . ., Plaintiffs’ second amended complaint does not contain a single factual allegation to suggest the subject loan was never consummated. . . . Thus, Plaintiffs again fail to allege facts from which the court can infer that their May 2015 notice of rescission was timely.” (internal citations omitted)).

[2] In Nieuwejaar, the plaintiffs—also represented by Ms. Smith—”attempt[ed] to address the timeliness issue by raising the possibility that the loan was never consummated.” Nieuwejaar, Dkt. # 22 at 6. However, the plaintiffs’ original complaint “contain[ed] no allegations regarding the failure to establish a contractual obligation,” and the court accordingly dismissed that complaint with leave to amend. Id. at 7-8. The plaintiffs’ amended complaint added the same conclusory allegation that Ms. Johnson alleges in this case—that “[u]pon information and belief, the subject loan was never consummated.” Id., Dkt. # 24 ¶ 12. In dismissing the amended complaint with prejudice, the court unequivocally indicated to the plaintiffs that this allegation is insufficient:

[L]ike their original complaint, Plaintiffs’ second amended complaint makes no factual allegations about consummation of the subject loan. . . . Plaintiffs’ only allegation about consummation is that “[u]pon information and belief, the subject loan was never consummated.” . . . That statement is a legal conclusion, which is not entitled to a presumption of truth. . . . At this stage, the court considers the factual allegations in the complaint in the light most favorable to Plaintiffs. . . . However, as the court explained in its previous order of dismissal, Plaintiffs must actually allege facts that, if true, would support their claims. . . . The court still cannot infer a problem with consummation because Plaintiffs still have not pleaded any facts to support such an inference.

Id., Dkt. # 28 at 7 (internal citations omitted).

These events occurred before Ms. Smith filed the instant case on behalf of Ms. Johnson. (SeeCompl.) Ms. Smith’s troubling inability or unwillingness to heed the court’s prior ruling further demonstrates that Ms. Smith is engaged in progressively more frivolous efforts at pleading around TILA’s period of repose despite lacking a factual basis for her allegations.

[3] This court has previously rejected this argument by Ms. Smith. See Johnson v. Green Tree Servicing, LLC, No. C15-1685JLR, 2016 WL 1408115, at *4 n.9 (W.D. Wash. Apr. 6, 2006) (“Ms. Johnson’s only challenge to consummation suggests that `if the loan was never actually funded, but was part of a hedge fund investing scheme . . . then the loan was never consummated, for example.’ This hypothetical fails to support a plausible inference that the subject loan was not consummated because Ms. Johnson does not connect her hypothetical situation with specific allegations about the subject loan.” (alteration in original) (internal citations omitted)).

[4] “In a table-funded loan, the originator closes the loan in its own name, but is acting as an intermediary for the true lender, which assumes the financial risk of the transaction.” Easter v. Am. W. Fin., 381 F.3d 948, 955 (9th Cir. 2004).

[5] Ms. Smith’s argument regarding consummation is also inconsistent with her theory of the case. If the subject loan was never consummated, Ms. Johnson need not bring “an enforcement action of the rescission notice.” (OSC Resp. at 1.)

[6] In previous cases before the court, Ms. Smith has advanced a different—but equally frivolous—legal theory in support of her clients’ untimely TILA rescission actions. In Nieuwejaar, Dkt. # 14 at 4-6, for instance, Ms. Smith argued that Jesinoski vitiates the three-year statute of repose imposed by TILA. According to this theory, irrespective of the timeliness or legal effect of an obligor’s notice of rescission, sending such notice triggers a 20-day period in which the lender must respond; otherwise the loan is deemed rescinded. Id. Ms. Smith supported that argument by taking out of context the Supreme Court’s statement that the right to rescind under TILA is effective upon providing notice to the creditor. Id. at 4 (“Justice Scalia made a point of repeating that the rescission was effective by operation of law on the date that it was mailed and pointed out that the statute makes no distinction between disputed and undisputed rescissions — they are all effective when mailed.”). However, as Judge Zilly made clear in sanctioning Ms. Smith, “because plaintiff’s attempt at rescission was void ab initio, there was no obligation for defendants to file a suit challenging the attempted rescission.” Johnson v. Nationstar Mortg., Dkt. # 35 at 4; see also Jesinoski, 135 S. Ct. at 791 (“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated. The question presented is whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.”).

When confronted with Jesinoski at the hearing, Ms. Smith fell back on the factually unsupported and legally frivolous consummation argument described above. The consummation argument represents only the most recent permutation of Ms. Smith’s futile efforts to maintain frivolous, untimely TILA rescission claims in federal court.

[7] The court liberally considers granting amendment. See Fed. R. Civ. P. 15(a). However, after affording Ms. Smith numerous opportunities to persuade the court otherwise, the court concludes that Ms. Johnson’s case is based on frivolous legal theories. Accordingly, the court finds that amendment would be futile. See Greenspan v. Admin. Office of the U.S. Courts, No. 14cv2396 JTM, 2014 WL 6847460, at *11 (N.D. Cal. Dec. 4, 2014) (citing Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991)) (“While leave to amend is to be freely given under [Federal Rule of Civil Procedure] 15(a), the court denies the motion [to amend] because . . . amendment is futile under the legal theories asserted in the proposed [amended complaint].”).

In addition, the court considered requiring Ms. Smith to file a copy of this order with each new TILA-based complaint she files in this District. (See OSC at 9.) However, because that sanction could prejudice Ms. Smith’s present and future clients, the court declines to impose that sanction at this time.

 

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Garfield Wrong – Jesinoski Loses

Neil Garfield Wrong – Jesinoski Loses, Big Time

Jesinoski v. Countrywide Home Loans, Inc., 134 S. Ct. 1935 – Supreme Court 2014

JESINOSKI v. Countrywide Home Loans, Inc., Dist. Court, Minnesota 2016

Neil Garfield and his minions and fellow incompetent “Lawyers who get it” across America have ballyhooed the January 2015 SCOTUS decision that Larry and Cheryle Jesinoski did not have to sue for TILA rescission within the 3 year period of repose after loan consummation for violation of the Truth In Lending Act by failing to give the necessary disclosures of the right to rescind. Well, the case went back to the US 8th Circuit Court of Appeals and thence back to the Minnesota District Court for trial of the question of rescission for the Jesinoskis.

A few days ago Judge Donovan Frank issued the below Order dashing Jesinoskis’ ill-founded hopes. The order granted summary judgment to the creditor because Jesinoskis had signed an acknowledgment of receipt of the disclosures, and because they did not have the money to tender as required by TILA for a rescission. It also denied statutory damages because no TILA violations occurred, even thought Jesinoskis claimed they spent $800,000, mostly in lawyer fees, prosecuting their case all the way up to the US Supreme Court and back.

It looks to me like they stupidly heeded some nonsense Garfield or one of his foreclosure pretense defense attorney buddies “who get it” had written. Ever since the 2015 SCOTUS Jesinoski opinon, Garfield has insisted that every mortgage loan borrower should send a notice of TILA rescission to the creditor. He has insisted that the creditor must terminate the lien immediately upon receipt of notice of rescission, AND tender return of what the borrower paid. The Jesinoski opinion shows with crystal clarity why Garfield was dead wrong – many borrowers have no just reason to rescind, and creditors would be idiots to go through the rescission trouble without just cause.

 

WARNING to Home Loan Borrowers:

Listen to foreclosure pretense defense lawyers at your peril.  Most will not diligently look for injuries you have suffered in your loan (TILA violations is one kind, but many other kinds are typical), and most litigate ONLY to delay the ultimate loss of your home.  Both delay and non-diligence violate bar rules, so you should file a bar complaint against your attorney if he did that.  And you should get a competent professional to examine your loan transaction comprehensively to dig out the valid causes of action you have against the appraiser, mortgage broker, loan officer, title company, lender, servicer, creditor, or other scalawag involved in your loan process.  The mortgage exam will give you the evidence of your injuries to show the judge, AND it will give you the basis for suing your incompetent, negligent, scamming attorney for legal malpractice.

Note to Borrowers Hoping for a Favorable Yvanova Decision

 

Yvanova v. New Century Mortgage Corp., 365 P. 3d 845 – Cal: Supreme Court 2016

Forget about it.  The California Supreme Court ruled in the Yvanova case that the borrower has the right to challenge the right of a creditor to foreclose a loan that the borrower breached. Yvanova had lost her house to foreclosure, and sued for wrongful foreclosure because New Century, instead of its bankruptcy liquidation trustee, sold Yvanova’s loan to a securitization trust sponsor.  Yvanova claimed New Century did not have the right to do that.  Now her case heads back to trial court like Jesinoskis’ did.  She will get a similar result.  After she has blown all that money of her husband’s on pointless litigation, probably at Garfield’s urging, she will now learn the hard way that the foreclosure was legitimate because she has no right to challenge the validity of New Century’s sale of her loan because she was not a party to it, did not get injured by it, and had no beneficial interest in it.  She has told me that I don’t understand her case.  Oh, yes I do.  And she will lose it.

TRENDING:  Creditors make Foreclosed Borrowers Pay Legal Fees

I have seen several cases recently where the foreclosing creditor has asked the court to award legal fees, which the borrower must pay, for litigation related to the foreclosure.  Most borrowers do not put up a fight.  But look at the Jesinoski and Yvanova cases.  They have dragged on for years, stupidly.  Creditors have grown sick and tired of the frivolous efforts by borrowers to challenge righteous foreclosures.  Jesinoski said he spent nearly $800,000 on his legal fees.  I imagine he padded the bill, but I imagine the creditor padded theirs even more.  Maybe they will ask the court to award legal fees and costs.  In my opinion, they should.

I shudder to contemplate the damage Neil Garfield has done to borrowers across America by encouraging them to fight pointless battles (hiring him as a consultant or attorney, of course) to defeat foreclosure.  You cannot win with his ridiculous methods.

If you want to win, and I mean win MONEY or its equivalent, get your mortgage examined (call me for a recommendation), and go on the attack.
Get more info at http://mortgageattack.com.

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JESINOSKI v. Countrywide Home Loans, Inc., Dist. Court, Minnesota 2016

Larry D. Jesinoski and Cheryle Jesinoski, individuals, Plaintiffs,
v.
Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, subsidiary of Bank of America N.A.; BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A., a Texas Limited Partnership f/k/a Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation; and John and Jane Does 1-10, Defendants.

Civil No. 11-474 (DWF/FLN).United States District Court, D. Minnesota.

July 21, 2016.Larry D. Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Cheryle Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Countrywide Home Loans, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

BAC Home Loans Servicing, LP, Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

Mortgage Electronic Registration Systems, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on a Motion for Summary Judgment brought by Defendants Countrywide Home Loans, Inc. (“Countrywide”), Bank of America, N.A. (“BANA”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (together, “Defendants”) (Doc. No. 51).[1] For the reasons set forth below, the Court grants Defendants’ motion.

BACKGROUND

I. Factual Background

This “Factual Background” section reiterates, in large part, the “Background” section included in the Court’s April 19, 2012 Memorandum Opinion and Order. (Doc. No. 23.)

On February 23, 2007, Plaintiffs Larry Jesinoski and Cheryle Jesinoski (collectively, “Plaintiffs”) refinanced their home in Eagan, Minnesota, by borrowing $611,000 from Countrywide, a predecessor-in-interest of BANA. (Doc. No. 7 (“Am. Compl.”) ¶¶ 7, 15, 16, 17; Doc. No. 55 (“Hanson Decl.”) ¶ 5, Ex. D (“L. Jesinoski Dep.”) at 125.) MERS also gained a mortgage interest in the property. (Am. Compl. ¶ 25.) Plaintiffs used the loan to pay off existing loan obligations on the property and other consumer debts. (L. Jesinoski Dep. at 114-15; Hanson Decl. ¶ 6, Ex. E (“C. Jesinoski Dep.”) at 49-50; Am. Compl. ¶ 22.)[2] The refinancing included an interest-only, adjustable-rate note. (L. Jesinoski Dep. at 137.) Plaintiffs wanted these terms because they intended to sell the property. (L. Jesinoski Dep. at 125-26, 137; C. Jesinoski Dep. at 38, 46-7.)

At the closing on February 23, 2007, Plaintiffs received and executed a Truth in Lending Act (“TILA”) Disclosure Statement and the Notice of Right to Cancel. (Doc. No. 56 (Jenkins Decl.) ¶¶ 5, 6, Exs. C & D; L. Jesinoski Dep. at 61, 67, 159; C. Jesinoski Dep. at 30-33; Hanson Decl. ¶¶ 2-3, Exs. A & B.) By signing the Notice of Right to Cancel, each Plaintiff acknowledged the “receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D.) Per the Notice of Right to Cancel, Plaintiffs had until midnight on February 27, 2007, to rescind. (Id.) Plaintiffs did not exercise their right to cancel, and the loan funded.

In February 2010, Plaintiffs paid $3,000 to a company named Modify My Loan USA to help them modify the loan. (L. Jesinoski Dep. at 79-81; C. Jesinoski Dep. at 94-95.) The company turned out to be a scam, and Plaintiffs lost $3,000. (L. Jesinoski Dep. at 79-81.) Plaintiffs then sought modification assistance from Mark Heinzman of Financial Integrity, who originally referred Plaintiffs to Modify My Loan USA. (Id. at 86.) Plaintiffs contend that Heinzman reviewed their loan file and told them that certain disclosure statements were missing from the closing documents, which entitled Plaintiffs to rescind the loan. (Id. at 88-91.)[3] Since then, and in connection with this litigation, Heinzman submitted a declaration stating that he has no documents relating to Plaintiffs and does not recall Plaintiffs’ file. (Hanson Decl. ¶ 4, Ex. C (“Heinzman Decl.”) ¶ 4.)[4]

On February 23, 2010, Plaintiffs purported to rescind the loan by mailing a letter to “all known parties in interest.” (Am. Compl. ¶ 30; L. Jesinoski Dep., Ex. 8.) On March 16, 2010, BANA denied Plaintiffs’ request to rescind because Plaintiffs had been provided the required disclosures, as evidenced by the acknowledgments Plaintiffs signed. (Am. Compl. ¶ 32; L. Jesinoski Dep., Ex. 9.)

II. Procedural Background

On February 24, 2011, Plaintiffs filed the present action. (Doc. No. 1.) By agreement of the parties, Plaintiffs filed their Amended Complaint, in which Plaintiffs assert four causes of action: Count 1—Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Count 2—Rescission of Security Interest; Count 3—Servicing a Mortgage Loan in Violation of Standards of Conduct, Minn. Stat. § 58.13; and Count 4—Plaintiffs’ Cause of Action under Minn. Stat. § 8.31. At the heart of all of Plaintiffs’ claims is their request that the Court declare the mortgage transaction rescinded and order statutory damages related to Defendants’ purported failure to rescind.

Plaintiffs do not dispute that they had an opportunity to review the loan documents before closing. (L. Jesinoski Dep. at 152-58; C. Jesinoski Dep. at 56.) Although Plaintiffs each admit to signing the acknowledgement of receipt of two copies of the Notice of Right to Cancel, they now contend that they did not each receive the correct number of copies as required by TILA’s implementing regulation, Regulation Z. (Am. Compl. ¶ 47 (citing C.F.R. §§ 226.17(b) & (d), 226.23(b)).)

Earlier in this litigation, Defendants moved for judgment on the pleadings based on TILA’s three-year statute of repose. In April 2012, the Court issued an order granting Defendants’ motion, finding that TILA required a plaintiff to file a lawsuit within the 3-year repose period, and that Plaintiffs had filed this lawsuit outside of that period. (Doc. No. 23 at 6.) The Eighth Circuit affirmed. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period.Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants now move for summary judgment.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the light most favorable to the nonmoving party. Weitz Co. v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). A party opposing a properly supported motion for summary judgment “must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).

II. TILA

Defendants move for summary judgment with respect to Plaintiffs’ claims, all of which stem from Defendants’ alleged violation of TILA—namely, failing to give Plaintiffs the required number of disclosures and rescission notices at the closing.

The purpose of TILA is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit . . .” 15 U.S.C. § 1601(a). In transactions, like the one here, secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. 15 U.S.C. § 1635(a); see also id. § 1641(c) (extending rescission to assignees). The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs later. Id. § 1635(a). Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest” and must include two copies of a notice of the right to rescind. 12 C.F.R. § 226.23(a)-(b)(1). If the creditor fails to make the required disclosures or rescission notices, the borrower’s “right of rescission shall expire three years after the date of consummation of the transaction.” 15 U.S.C. § 1635(f); see 12 C.F.R. § 226.23(a)(3).

If a consumer acknowledges in writing that he or she received a required disclosure or notice, a rebuttable presumption of delivery is created:

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

15 U.S.C. §1635(c).

A. Number of Disclosure Statements

Plaintiffs claim that Defendants violated TILA by failing to provide them with a sufficient number of copies of the right to rescind and the disclosure statement at the closing of the loan. (Am. Compl. ¶ 47.) Defendants assert that Plaintiffs’ claims (both TILA and derivative state-law claims) fail as a matter of law because Plaintiffs signed an express acknowledgement that they received all required disclosures at closing, and they cannot rebut the legally controlling presumption of proper delivery of those disclosures.

It is undisputed that at the closing, each Plaintiff signed an acknowledgement that each received two copies of the Notice of Right to Cancel. Plaintiffs argue, however, that no presumption of proper delivery is created here because Plaintiffs acknowledged the receipt of two copies total, not the required four (two for each of the Plaintiffs). In particular, both Larry Jesinoski and Cheryle Jesinoski assert that they “read the acknowledgment . . . to mean that both” Larry and Cheryle “acknowledge receiving two notices total, not four.” (Doc. No. 60 (“L. Jesinoski Decl.”) ¶ 3; Doc. No. 61 (“C. Jesinoski Decl.”) ¶ 3.) Thus, Plaintiffs argue that they read the word “each” to mean “together,” and therefore that they collectively acknowledged the receipt of only two copies.

The Court finds this argument unavailing. The language in the Notice is unambiguous and clearly states that “[t]he undersigned each acknowledge receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D (italics added).) Plaintiffs’ asserted interpretation is inconsistent with the language of the acknowledgment. The Court instead finds that this acknowledgement gives rise to a rebuttable presumption of proper delivery of two copies of the notice to each Plaintiff. See, e.g., Kieran v. Home Cap., Inc., Civ. No. 10-4418, 2015 WL 5123258, at *1, 3 (D. Minn. Sept. 1, 2015) (finding the creation of a rebuttable presumption of proper delivery where each borrower signed an acknowledgment stating that they each received a copy of the disclosure statement—”each of [t]he undersigned acknowledge receipt of a complete copy of this disclosure”).[5]

The only evidence provided by Plaintiffs to rebut the presumption of receipt is their testimony that they did not receive the correct number of documents. As noted inKieran, this Court has consistently held that statements merely contradicting a prior signature are insufficient to overcome the presumption. Kieran, 2015 WL 5123258, at *3-4 (citing Gomez v. Market Home Mortg., LLC, Civ. No. 12-153, 2012 WL 1517260, at *3 (D. Minn. April 30, 2012) (agreeing with “the majority of courts that mere testimony to the contrary is insufficient to rebut the statutory presumption of proper delivery”)); see also Lee, 692 F.3d at 451 (explaining that a notice signed by both borrowers stating “[t]he undersigned each acknowledge receipt of two copies of [notice]” creates “a presumption of delivery that cannot be overcome without specific evidence demonstrating that the borrower did not receive the appropriate number of copies”); Golden v. Town & Country Credit, Civ. No. 02-3627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (finding deposition testimony insufficient to overcome presumption); Gaona v. Town & Country Credit, Civ. No. 01-44, 2001 WL 1640100, at *3 (D. Minn. Nov. 20, 2001)) (“[A]n allegation that the notices are now not contained in the closing folder is insufficient to rebut the presumption.”), aff’d in part, rev’d in part, 324 F.3d 1050 (8th Cir. 2003).

Plaintiffs, however, contend that their testimony is sufficient to rebut the presumption and create a factual issue for trial. Plaintiffs rely primarily on the Eighth Circuit’s decision in Bank of North America v. Peterson, 746 F.3d 357, 361 (8th Cir. 2014),cert. granted, judgment vacated, 135 S. Ct. 1153 (2015), and opinion vacated in part, reinstated in part, 782 F.3d 1049 (8th Cir. 2015). In Peterson, the plaintiffs acknowledged that they signed the TILA disclosure and rescission notice at their loan closing, but later submitted affidavit testimony that they had not received their TILA disclosure statements at closing. Peterson, 764 F.3d at 361. The Eighth Circuit determined that this testimony was sufficient to overcome the presumption of proper delivery. Id. The facts of this case, however, are distinguishable from those inPeterson. In particular, the plaintiffs in Peterson testified that at the closing, the agent took the documents after they had signed them and did not give them any copies. Id.Here, it is undisputed that Plaintiffs left with copies of their closing documents. (L. Jesinoski Dep. at 94-95.) In addition, Plaintiffs did not testify unequivocally that they did not each receive two copies of the rescission notice. Instead, they have testified that they do not know what they received. (See, e.g., id. at 161.) Moreover, Cheryle Jesinoski testified that she did not look through the closing documents at the time of closing, and therefore cannot attest to whether the required notices were included. (C. Jesinoski Dep. at 85.)[6]

Based on the evidence in the record, the Court determines that the facts of this case are more line with cases that have found that self-serving assertions of non-delivery do not defeat the presumption. Indeed, the Court agrees with the reasoning in Kieran,which granted summary judgment in favor of defendants under similar facts, and which was decided after the Eighth Circuit issued its decision in Peterson.Accordingly, Plaintiffs have not overcome the rebuttable presumption of proper delivery of TILA notices, and Defendants’ motion for summary judgment is granted as to the Plaintiffs’ TILA claims.

B. Ability to Tender

Defendants also argue that Plaintiffs’ claims fails as a matter of law on a second independent basis—Plaintiffs’ admission that they do not have the present ability to tender the amount of the loan proceeds. Rescission under TILA is conditioned on repayment of the amounts advanced by the lender. See Yamamoto v. Bank of N.Y.,329 F.3d 1167, 1170 (9th Cir. 2003). This Court has concluded that it is appropriate to dismiss rescission claims under TILA at the pleading stage based on a plaintiff’s failure to allege an ability to tender loan proceeds. See, e.g., Franz v. BAC Home Loans Servicing, LP, Civ. No. 10-2025, 2011 WL 846835, at *3 (D. Minn. Mar. 8, 2011); Hintz v. JP Morgan Chase Bank, Civ. No. 10-119, 2010 WL 4220486, at *4 (D. Minn. Oct. 20, 2010). In addition, courts have granted summary judgment in favor of defendants where the evidence shows that a TILA plaintiff cannot demonstrate an ability to tender the amount borrowed. See, e.g., Am. Mortg. Network, Inc. v. Shelton,486 F.3d 815, 822 (4th Cir. 2007) (affirming grant of summary judgment for defendants on TILA rescission claim “given the appellants’ inability to tender payment of the loan amount”); Taylor v. Deutsche Bank Nat’l Trust Co., Civ. No. 10-149, 2010 WL 4103305, at *5 (E.D. Va. Oct. 18, 2010) (granting summary judgment on TILA rescission claim where plaintiff could not show ability to tender funds aside from selling the house “as a last resort”).

Plaintiffs argue that the Supreme Court in Jesinoski eliminated tender as a requirement for rescission under TILA. The Court disagrees. In Jesinoski, the Supreme Court reached the narrow issue of whether Plaintiffs had to file a lawsuit to enforce a rescission under 15 U.S.C. § 1635, or merely deliver a rescission notice, within three years of the loan transaction. Jesinoski, 135 S. Ct. at 792-93. The Supreme Court determined that a borrower need only provide written notice to a lender in order to exercise a right to rescind. Id. The Court discerns nothing in the Supreme Court’s opinion that would override TILA’s tender requirement. Specifically, under 15 U.S.C. § 1635(b), a borrower must at some point tender the loan proceeds to the lender.[7] Plaintiffs testified that they do not presently have the ability to tender back the loan proceeds. (L. Jesinoski Dep. at 54, 202; C. Jesinoski Dep. at 118-119.) Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground.[8]

Plaintiffs argue that if the Court conditions rescission on Plaintiffs’ tender, the amount of tender would be exceeded, and therefore eliminated, by Plaintiffs’ damages. In particular, Plaintiffs claim over $800,000 in damages (namely, attorney fees), and contend that this amount would negate any amount tendered. Plaintiffs, however, have not cited to any legal authority that would allow Plaintiffs to rely on the potential recovery of fees to satisfy their tender obligation. Moreover, Plaintiffs’ argument presumes that they will prevail on their TILA claims, a presumption that this Order forecloses.

C. Damages

Next, Defendants argue that Plaintiffs are not entitled to TILA statutory damages allegedly flowing from Defendants’ decision not to rescind because there was no TILA violation in the first instance. Plaintiffs argue that their damages claim is separate and distinct from their TILA rescission claim.

For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan.

D. State-law Claims

Plaintiffs’ state-law claims under Minn. Stat. § 58.13 and Minnesota’s Private Attorney General statute, Minn. Stat. § 8.31, are derivative of Plaintiffs’ TILA rescission claim. Thus, because Plaintiffs’ TILA claim fails as a matter law, so do their state-law claims.

ORDER

Based upon the foregoing, IT IS HEREBY ORDERED that:

1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED.

2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

[1] According to Defendants, Countrywide was acquired by BANA in 2008, and became BAC Home Loans Servicing, LP (“BACHLS”), and in July 2011, BACHLS merged with BANA. (Doc. No. 15 at 1 n.1.) Thus, the only two defendants in this case are BANA and MERS.

[2] Larry Jesinoski testified that he had been involved in about a half a dozen mortgage loan closings, at least three of which were refinancing loans, and that he is familiar with the loan closing process. (L. Jesinoski Dep. at 150-51.)

[3] Plaintiffs claim that upon leaving the loan closing they were given a copy of the closing documents, and then brought the documents straight home and placed them in L. Jesinoski’s unlocked file drawer, where they remained until they brought the documents to Heinzman.

[4] At oral argument, counsel for Plaintiffs requested leave to depose Heinzman in the event that the Court views his testimony as determinative. The Court denies the request for two reasons. First, it appears that Plaintiffs had ample opportunity to notice Heinzman’s deposition during the discovery period, but did not do so. Second, Heinzman’s testimony will not affect the outcome of the pending motion, and therefore, the request is moot.

[5] See also, e.g., Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 451 (6th Cir. 2012) (rebuttable presumption arose where each party signed an acknowledgement of receipt of two copies);Hendricksen v. Countrywide Home Loans, Civ. No. 09-82, 2010 WL 2553589, at *4 (W.D. Va. June 24, 2010) (rebuttable presumption of delivery of two copies of TILA disclosure arose where plaintiffs each signed disclosure stating “[t]he undersigned further acknowledge receipt of a copy of this Disclosure for keeping prior to consummation”).

[6] This case is also distinguishable from Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir. 2005), a case in which a borrower’s assertion of non-delivery was sufficient to overcome the statutory presumption. In Stutzka, the plaintiffs signed acknowledgements that they received required disclosures but left the closing without any documents. Stutzka, 420 F.3d at 776.

[7] TILA follows a statutorily prescribed sequence of events for rescission that specifically discusses the lender performing before the borrower. See § 1635(b). However, TILA also states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.” Id.Considering the facts of this case, it is entirely appropriate to require Plaintiffs to tender the loan proceeds to Defendants before requiring Defendants to surrender their security interest in the loan.

[8] The Court acknowledges that there is disagreement in the District over whether a borrower asserting a rescission claim must tender, or allege an ability to tender, before seeking rescission. See, e.g. Tacheny v. M&I Marshall & Ilsley Bank, Civ. No. 10-2067, 2011 WL 1657877, at *4 (D. Minn. Apr. 29, 2011) (respectfully disagreeing with courts that have held that, in order to state a claim for rescission under TILA, a borrower must allege a present ability to tender). However, there is no dispute that to effect rescission under § 1635(b), a borrower must tender the loan proceeds. Here, the record demonstrates that Plaintiffs are unable to tender. Therefore, their rescission claim fails on summary judgment.

Fla Court Destroys Garfield Arguments in Maslanka

Zdzislaw Maslanka wrote paid in full on a mortgage payment check, and then sued for quiet title in 2011. He kept his loan payments current, though. He named as defendants his home loan creditor, Wells Fargo, and the loan originator Embrace, who had sold WF the loan soon after closing.  Maslanka didn’t fare well in the litigation, so he hired Neil Garfield to soup up and manage the case, and to show those bumpkins how a real pro handles things.

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Garfield hosed his client as you will read in the case documents, specifically, the court’s dismissal order to the 3rd amended complaint, the 5th amended complaint, the motions to dismiss it, the order to dismiss it, and the appellate docket. The complaints read like jibberish-filled lunacy.

In short, the creditors’ attorneys rightly called the effort an abuse of the judicial process.  The trial judge dismissed the complaints for failure to state a claim for which the court could grant relief.  In a 12 May 2016 decision, the appellate panel affirmed without comment, and it awarded unconditional attorney fees to the creditors.  Maslanka worries that he will have to pay it.  Maybe he should sue Garfield for it.

See the main case documents zipped here for easy download.  If you prefer more torture, access the rest of the trial docs here.

BozoIn fairness, maybe I’m too harsh on Neil Garfield.  Maybe he did his best for Maslanka, or maybe Maslanka forced him to lodge those inane arguments that I have complained against for years. And maybe Garfield has reformed since he wrote that 5th amended complaint.

But if Garfield did that on his own, he deserves severe discipline by the Florida Bar, in my humble opinion, for he just made Maslanka look like a fool. And that makes Garfield a Bozo in my book.

Mort Gezzam photo
Mort Gezzam

Neil Garfield Recommends Mortgage Exam for Troubled Borrowers

In his LivingLies Blog entry of 2016-04-27, Foreclosure Pretender Defender and Kool-Aid Drinker Neil Garfield wrote this, correct for a change:

“… you need a thorough analysis of everything that happened with your alleged loan and a careful examination of the pleadings if you are already in court. We readily understand the reluctance to spend more money on what has been a frustrating experience, but the ONLY way you can select a strategy that will or might get traction is by having an experienced eye do a thorough review and report.”

Garfield FAILS to tell his readers that he and his crew don’t have a clue about doing mortgage examinations.  They only do securitization and forensic loan audits, not full-bore examinations.  And because Garfield has spouted bogus legal theories for years,  THOUSANDS of people have lost their homes to foreclosure by relying upon his advice.

So DON’T rely upon it.  Instead, rely upon the court opinions that I have cited in the Articles section of this site.  They prove nearly everything Garfield promotes is a band-aid, at best.

The ONLY reliable place to get a comprehensive mortgage examination that finds all the ways a borrower got injured in the loan is at Mortgage Attack.

Go to the Contact page in the MortgageAttack.com site menu and explain your situation.  Then submit the form.  The Mortgage Attack Maven will show you exactly how to get a comprehensive mortgage examination AND how to use it for best results.

If you feel time pressure, call 727 669 5511 RIGHT NOW.

Court Opinions Destroy Neil Garfield Bogus Legal Theories

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Courts Destroy Garfield’s Bozo Theories

For nearly a year and a half, Neil Garfield has expounded on the meaning of the US Supreme Court’s January 2015 Jesinoski opinion regarding TILA rescission.  By and large, he is dead wrong.  He has encouraged readers of his LivingLies blog to buy his apparently worthless TILA Rescission Package.  He has told readers to submit TILA rescission letters regarding purchase money loans (not qualified for TILA rescission),  He has told them to submit letters years after the expiration of the TILA statute of repose.  And his minions on his blog spread his nonsensical opinions in their comments.  And worst of all, he deletes dissenter postings from his blog and terminates their posting privilege because they post case law showing what an idiot or charlatan Garfield is.

Readers can now read court opinions, collected in one place, that utterly destroy Garfield’s ridiculous and nonsensical TILA rescission theories.

Take some of your valuable time and review the opinions so you will know first hand that Garfield is full of beans, and you won’t fall prey to his bogus legal theories.

Sick and tired of your nonsense, Garfield,

Mort Gezzam photo
Mort Gezzam

SATERBACK OPINION DESTROYS PSA/ASSIGNMENT ARGUMENTS POST-YVANOVA

Our Mortgage Examiner saw the California Yvanova case as much ado about nothing.  The borrower, Yvanova, sued for wrongful foreclosure because she discovered that the lender New Century Mortgage had, in bankruptcy, wrongfully assigned her note to a securitizer rather than allowing the bankruptcy liquidation trustee do it.  That meant the securitization trust had no rightful ownership of the note and therefore no authority to foreclose.  The California supremes supported her right to challenge the foreclosure for that reason.

Thus, despite expounding on the issues for 30 pages, the Yvanova opinion simply stands for the unremarkable  and largely undisputed proposition that a borrower can sue for wrongful foreclosure where the transaction by which the beneficiary acquired the loan became void from its inception.

The California Supreme Court clarified the only issue before it. The court opined that in a lawsuit for wrongful foreclosure on a deed of trust securing a home loan, the borrower has standing to challenge a creditor’s void assignment of the note and deed of trust to a successor creditor who successfully foreclosed the loan.

The Yvanova case has gone back to trial court to deal with the issue of the impact of the void assignment on the foreclosure.  Tsvetana Yvanova has assured me I don’t understand her case well enough to predict the outcome.  Nevertheless, I have predicted that in the end, the court will uphold the foreclosure sale of Yvanova’s property for failure to pay timely.

Likewise, borrowers’ counsel, and some in the financial industry, have misconstrued the Court’s narrow holding by reading more into it than it contains. They seem to think that the borrower ought to have standing to challenge a defective assignment or a violation of the Pooling and Servicing Agreement, even thought it does not injure or benefit the borrower, andthe borrower never became a party to it.

Recently, California’s 4th District Court of Appeals, in Saterbak v. JPMCB, addressed what the Yvanova courts did not.  It thereby put to rest many of the specious legal theories that borrowers use in an effort to welch on their home loan and get a free house.   Notice from the opinion, which I have shown below, how the Court keeps going back to the language of the contract .

The upshot:

Borrowers can win setoffs, settlements, and damage awards by attacking the contract, NOT by attacking the foreclosure.

Notice key text in bold typeface.

Court of Appeal, Fourth District, Division 1, California.

Laura SATERBAK, Plaintiff and Appellant, v. JPMORGAN CHASE BANK, N.A., as Trustee, etc., Defendant and Respondent.

D066636

    Decided: March 16, 2016

Law Offices of Richard L. Antognini and Richard L. Antognini, Lincoln, for Plaintiff and Appellant. Bryan Cave, Glenn J. Plattner and Richard P. Steelman, Jr., Santa Monica, for Defendant and Respondent.

Laura Saterbak appeals a judgment dismissing her first amended complaint (FAC) after the sustaining of a demurrer without leave to amend.  Saterbak claims the assignment of the deed of trust (DOT) to her home by Mortgage Electronic Registration Systems, Inc. (MERS) to Structured Asset Mortgage Investment II Trust 2007–AR7 Mortgage Pass–Through Certificates 2007–AR7 (2007–AR7 trust or Defendant) was invalid.  Arguing the assignment occurred after the closing date for the 2007–AR7 trust, and that the signature on the instrument was forged or robo-signed, she seeks to cancel the assignment and obtain declaratory relief.  We conclude Saterbak lacks standing and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In April 2007, Saterbak purchased real property on Mount Helix Drive, La Mesa, California through a grant deed.  She executed a promissory note (Note) in May 2007, in the amount of $1 million, secured by the DOT. The DOT named MERS as the beneficiary, “solely as nominee for Lender and Lender’s successors and assigns.”  It acknowledged MERS had the right “to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property.”

On December 27, 2011, MERS executed an assignment of the DOT to “Citibank, N.A. as Trustee for [2007–AR7 trust].”  The assignment was recorded nearly a year later, on December 17, 2012.  It is this assignment that Saterbak challenges.  The 2007–AR7 trust is a real estate mortgage investment conduit (REMIC) trust;  its terms are set forth in a pooling and servicing agreement (PSA) for the trust, which is governed under New York law.  Pursuant to the PSA, all loans had to be transferred to the 2007–AR7 trust on or before its September 18, 2007, closing date.

Saterbak fell behind on her payments.  On December 17, 2012, Citibank N.A. substituted and appointed National Default Servicing Corporation (NDS) as trustee under the DOT.  The substitution of trustee form was executed by JPMorgan Chase Bank, N.A. (hereafter Chase) as attorney-in-fact for Citibank N.A., trustee for the 2007–AR7 trust.  NDS recorded a notice of default on December 17, 2012.  By that point, Saterbak had fallen $346,113.99 behind in payments.  On March 19, 2013, NDS recorded a notice of trustee’s sale, scheduling a foreclosure sale for April 10, 2013.  By that point, Saterbak owed an estimated $1,600,219.13.1

Saterbak filed suit in January 2014.  She alleged the DOT was transferred to the 2007–AR7 trust four years after the closing date for the security, rendering the assignment invalid.  She further alleged the signature on the assignment document was robo-signed or a forgery.  She sought to cancel the assignment as a “cloud” on her title pursuant to Civil Code 2 section 3412.  She also sought declaratory relief that the same defects rendered the assignment void.

In May 2014, the trial court sustained Chase’s demurrer.  It held Saterbak lacked standing to sue based on alleged noncompliance with the PSA for 2007–AR7 trust because she did not allege she was a party to that agreement.  The court granted Saterbak leave to amend to plead a different theory for cancellation of the DOT.

Saterbak filed the FAC in May 2014.  The FAC asserted the same causes of action for cancellation of the assignment and declaratory relief premised on the same theories of untimely securitization of the DOT and robo-signing.  The FAC claimed it did not “seek to challenge ․ any Foreclosure Proceedings and or Trustee’s Sale.”

Chase demurred and requested judicial notice of the following instruments:  the DOT, the corporate assignment DOT, substitution of trustee, notice of default, and notice of trustee sale.  The trial court granted Chase’s request for judicial notice and sustained its demurrer.  The court held, “Despite the arguments made by Plaintiff, the FAC does, in fact, allege that the assignment is void because the loan was not moved into the securitized trust in a timely manner.”  As it had previously, the court held Saterbak lacked standing to sue based on alleged noncompliance with the PSA, as she was not a party to that agreement.  The court also rejected Saterbak’s robo-signing theory for lack of standing, stating she had not alleged that she “relied” on the assignment or sustained injury from it.  The court denied leave to amend, noting the FAC was Saterbak’s second attempt and concluding there was no possibility she could remedy her standing deficiencies through amendment.

The court entered judgment for Chase in August 2014, and Saterbak timely appealed.

DISCUSSION

“On appeal from a judgment of dismissal entered after a demurrer has been sustained, this court reviews the complaint de novo to determine whether it states a cause of action.  [Citation.]  We assume the truth of all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.”  (Folgelstrom v. Lamps Plus, Inc. (2011) 195 Cal.App.4th 986, 989–990.)  We may consider matters that are properly judicially noticed.  (Four Star Electric, Inc. v. F & H Construction (1992) 7 Cal.App.4th 1375, 1379.)

“If the trial court has sustained the demurrer, we determine whether the complaint states facts sufficient to state a cause of action.  If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment.  [Citation.]  If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse;  if not, no abuse of discretion has occurred.  [Citation.]  The plaintiff has the burden of proving that an amendment would cure the defect.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)

Central to this appeal is whether as a borrower, Saterbak has standing to challenge the assignment of the DOT on grounds that it does not comply with the PSA for the securitized instrument.  For the reasons discussed below, the trial court properly sustained Defendant’s demurrer to the FAC without leave to amend.

I. STANDING

A. Saterbak Bears the Burden to Demonstrate Standing

“Standing is a threshold issue, because without it no justiciable controversy exists.”  (Iglesia Evangelica Latina, Inc. v. Southern Pacific Latin American Dist. of the Assemblies of God (2009) 173 Cal.App.4th 420, 445.)  “Standing goes to the existence of a cause of action.”  (Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2006) 136 Cal.App.4th 119, 128.)  Pursuant to Code of Civil Procedure section 367, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.”

Saterbak contends the 2007–AR7 trust bears the burden of proving the assignment in question was valid.  This is incorrect.  As the party seeking to cancel the assignment through this action, Saterbak “must be able to demonstrate that ․ she has some such beneficial interest that is concrete and actual, and not conjectural or hypothetical.”  (Holmes v. California Nat. Guard (2001) 90 Cal.App.4th 297, 315.)

Saterbak’s authorities do not suggest otherwise.  She cites Fontenot, but that case actually held “MERS did not bear the burden of proving a valid assignment”—instead, “the burden rested with plaintiff affirmatively to plead facts demonstrating the impropriety.”  (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 270 (Fontenot ), disapproved on other grounds in Yvanova v. New Century Mortgage Corp. 62 Cal.4th 919, 939, fn. 13 (Yvanova ).)  Saterbak also cites Cockerell and Neptune, but those cases merely held that an assignee who files suit to enforce an assigned right bears the burden of proving a valid assignment.  (Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292;  Neptune Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233, 1242.)

B. Saterbak Lacks Standing to Challenge the Assignment

Saterbak alleges the DOT was assigned to the 2007–AR7 trust in an untimely manner under the PSA. Specifically, she contends the assignment was void under the PSA because MERS did not assign the DOT to the 2007–AR7 trust until years after the closing date.  Saterbak also alleges the signature of “Nicole M. Wicks” on the assignment document was forged or robo-signed.

Saterbak lacks standing to pursue these theories.  The crux of Saterbak’s argument is that she may bring a preemptive action to determine whether the 2007–AR7 trust may initiate a nonjudicial foreclosure.  She argues, “If the alleged ‘Lender’ is not the true ‘Lender,’ ” it “has no right to order a foreclosure sale.”  However, California courts do not allow such preemptive suits because they “would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.”  (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513 (Jenkins ), disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13;  see Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1156 (Gomes ) [“California’s nonjudicial foreclosure law does not provide for the filing of a lawsuit to determine whether MERS has been authorized by the holder of the Note to initiate a foreclosure”].)  As the court reasoned in Gomes:

“[The borrower] is not seeking a remedy for misconduct.  He is seeking to impose the additional requirement that MERS demonstrate in court that it is authorized to initiate a foreclosure․  [S]uch a requirement would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy.”  (Gomes, supra, at p. 1154, fn. 5.) 3

The California Supreme Court recently held that a borrower has standing to sue for wrongful foreclosure where an alleged defect in the assignment renders the assignment void.  (Yvanova, supra, 62 Cal.4th at pp. 942–943.)  However, Yvanova’s ruling is expressly limited to the post-foreclosure context.  (Id. at pp. 934–935 (“narrow question” under review was whether a borrower seeking remedies for wrongful foreclosure has standing, not whether a borrower could preempt a nonjudicial foreclosure).)  Because Saterbak brings a preforeclosure suit challenging Defendant’s ability to foreclose,Yvanova does not alter her standing obligations.4

Moreover, Yvanova recognizes borrower standing only where the defect in the assignment renders the assignment void, rather than voidable.  (Yvanova, supra, 62 Cal.4th at pp. 942–943.)  “Unlike a voidable transaction, a void one cannot be ratified or validated by the parties to it even if they so desire.”  (Id. at p. 936.)  Yvanova expressly offers no opinion as to whether, under New York law, an untimely assignment to a securitized trust made after the trust’s closing date is void or merely voidable.  (Id. at pp. 940–941.)  We conclude such an assignment is merely voidable.  (See Rajamin v. Deutsche Bank Nat’l Trust Co. (2d Cir.2014) 757 F.3d 79, 88–89 [“the weight of New York authority is contrary to plaintiffs’ contention that any failure to comply with the terms of the PSAs rendered defendants’ acquisition of plaintiffs’ loans and mortgages void as a matter of trust law”;  “an unauthorized act by the trustee is not void but merely voidable by the beneficiary”].) 5Consequently, Saterbak lacks standing to challenge alleged defects in the MERS assignment of the DOT to the 2007–AR7 trust.

C. The DOT Does Not Confer Standing

Saterbak argues “clear language” in the DOT and “the rules of adhesion contracts” confer standing.  We disagree.In signing the DOT, Saterbak agreed the Note and DOT could be sold “one or more times without prior notice.”  She further agreed:

“Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right:  to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property;  and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.” 6

The authority to exercise all of the rights and interests of the lender necessarily includes the authority to assign the deed of trust.”  (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 84, disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13;  see Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1504 [interpreting language identical to Saterbak’s DOT to give MERS “the right to assign the DOT”], disapproved on other grounds in Yvanova, at p. 939, fn. 13.)  The federal court adjudicating Saterbak’s parallel case against her loan servicer cited the above-quoted language in the DOT to reject the same securitization theory proffered here.  (Saterbak v. National Default Servicing Corp. (S.D.Cal. Oct. 1, 2015, Civ. No. 15–CV–956–WQH–NLS) 2015 WL 5794560, at *7.)

Saterbak nevertheless points to language in the DOT that only the “Lender” has the power to declare default and foreclose, while the “Borrower” has the right to sue prior to foreclosure in order to “ ‘assert the non-existence of a default or any other defense of Borrower to acceleration and sale.’ ”  But these provisions do not change her standing obligations under California law; they merely give Saterbak the power to argue any defense the borrower may have to avoid foreclosure.  As explained ante, Saterbak lacks standing to challenge the assignment as invalid under the PSA. (Jenkins, supra, 216 Cal.App.4th at p. 515.)

Saterbak also points to the presuit notice provisions in the DOT to argue the DOT contemplates her action.  She quotes language in the DOT requiring the Borrower and Lender to provide notice and a reasonable opportunity to repair before “any judicial action that arises from the other party’s actions pursuant to this Security Instrument.”  However, by Saterbak’s own theory, her action does not arise “pursuant to this Security Instrument”;  it is premised instead on a violation of the PSA.  The presuit notice provisions in the DOT do not contemplate her action.

Finally, Saterbak contends the deed of trust is an adhesion contract, and, therefore, restrictive language that “deprives a borrower of the right to argue her loan has been invalidly assigned” must be “conspicuous and clear.”  She claims, “If the assignment clause was intended by the drafter to cutoff the borrower’s right to challenge the assignment, it should have used clear language to that effect.  It did not.”  As a rule, “contracts of adhesion are generally enforceable according to their terms, [but] a provision contained in such a contract cannot be enforced if it does not fall within the reasonable expectations of the weaker or ‘adhering’ party.”  (Fischer v. First Internat. Bank (2003) 109 Cal.App.4th 1433, 1446 (Fischer ).)  However, “[b]ecause a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor” (Fontenot, supra, 198 Cal.App.4th at p. 272), together with the deed of trust securing it.Saterbak “irrevocably grant[ed] and convey[ed]” the Mount Helix property to the Lender; recognized that MERS (as nominee) had the right “to exercise any or all” of the interests of the Lender; and agreed that the Note, together with the DOT, could be sold one or more times without notice to her.  There is no reasonable expectation from this language that the parties intended to allow Saterbak to challenge future assignments made to unrelated third parties.  (Cf. Fischer, supra, at pp. 1448–1449 [holding there was a triable issue of fact “as to whether the parties mutually intended to permit cross-collateralization” on two separate loans, given ambiguity between the broadly worded dragnet clause and a “ ‘Related Document[ ]’ ” incorporated by reference into the loan agreement as to whether the parties mutually intended it].) 7

D. The Homeowner Bill of Rights Does Not Confer Standing

For the first time on appeal, Saterbak relies on the California Homeowner Bill of Rights (HBOR) to claim standing.  She argues sections 2924.17 and 2924.12 allow her to challenge the alleged defects in MERS’s assignment of the DOT to the 2007–AR7 trust.  In relevant part, section 2924.17, subdivision (a), provides an “assignment of a deed of trust ․ shall be accurate and complete and supported by competent and reliable evidence.”  Section 2924.12, subdivisions (a) and (b) allow borrowers to bring an action for damages or injunctive relief for “a material violation of Section ․ 2924.17.”

As Saterbak acknowledges, the HBOR went into effect on January 1, 2013. (§ 2923.4.) The FAC alleges the DOT was assigned on December 27, 2011, and recorded on December 17, 2012.  Saterbak fails to point to any provision suggesting that the California Legislature intended the HBOR to apply retroactively.  (Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828, 841 [“California courts comply with the legal principle that unless there is an ‘express retroactivity provision, a statute will not be applied retroactively unless it is very clear from extrinsic sources that the Legislature ․ must have intended a retroactive application’ ”].) Therefore, the HBOR does not grant Saterbak new rights on appeal.8

In summary, for the reasons discussed above, we conclude Saterbak lacks standing to challenge MERS’s assignment of the DOT to the 2007–AR7 trust.

II. SECTION 3412

Saterbak seeks to cancel the assignment of the DOT pursuant to section 3412.  She argues that to withstand a demurrer, she merely needs to allege the assignment was void or voidable and that it could cause serious injury.  We disagree.

To state a cause of action under section 3412, Saterbak must allege the assignment was void or voidable against her.  (§ 3412 [“A written instrument, in respect to which there is reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled” (italics added) ];  see also Johnson v. PNC Mortg. (N.D.Cal.2015) 80 F.Supp.3d 980, 990 (Johnson ) [section 3412 requires “the challenged instrument be void or voidable against the party seeking to cancel it”].)  Johnson dismissed a similar cause of action under section 3412 because the plaintiffs, borrowers like Saterbak, failed to “allege a plausible case that the assignment is ‘void or voidable’ against them.”  (Johnson, supra, at p. 990.)  Here, Saterbak fails to state a cause of action under section 3412 because she cannot allege that MERS’s assignment of the DOT to the 2007–AR7 trust was void or voidable against her.

Saterbak also fails to allege “serious injury.”  She argues she “faces the prospect of losing her home due to the actions of an entity that has no power to foreclose because it does not own her [DOT].”  However, even if the assignment was invalid, it could not “cause serious injury” under the statute because her obligations on the Note remained unchanged. (§ 3412, italics added.)  For example, in Johnson, supra, 80 F.Supp.3d 980, borrowers sought to cancel the assignment of their deed of trust, claiming alleged infirmities in the assignment cast a shadow on their title and continued to ruin their credit.  The court rejected this theory because the alleged defects did not change the borrowers’ payment obligations, and the borrowers did not deny they had defaulted.  The court concluded: “It is not really the assignment, then, or its challenged provenance, that has stained their credit report.It is the fact that they defaulted.”  (Id. at p. 989.)  Likewise, here, the allegedly defective assignment did not alter Saterbak’s payment obligations under the Note. Saterbak does not deny she defaulted or that her debt remains in arrears.  Consequently, she cannot demonstrate how the allegedly invalid assignment could “cause serious injury” within the meaning of section 3412 if left outstanding. (§ 3412, italics added.)

Finally, because a cause of action to cancel a written instrument under section 3412 sounds in equity, a debtor must generally allege tender or offer of tender of the amounts borrowed as a prerequisite to such claims.  The tender requirement “is based on the theory that one who is relying upon equity in overcoming a voidable sale must show that he is able to perform his obligations under the contract so that equity will not have been employed for an idle purpose.”  (Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868, 878, italics omitted.)  The tender rule is not absolute; tender is not required to cancel a written instrument that is void and not merely voidable.  (Id. at p. 876;  Smith v. Williams (1961) 55 Cal.2d 617, 620–621;  Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 11.)  As discussed ante, we conclude the alleged defects merely rendered MERS’s assignment of the DOT to the 2007–AR7 trust voidable under New York law.  In any event, because we affirm the judgment on standing grounds, we do not decide whether Saterbak was required to plead the ability or willingness to tender to cancel the assignment pursuant to section 3412.

III. LEAVE TO AMEND

We must consider whether Saterbak has demonstrated a reasonable probability that she could cure the defects that we have identified.  (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.)  Saterbak contends she could amend her complaint to “argue that the language in her [DOT] gives her the right to attack a void assignment of her loan.”  As discussed in detail above, we conclude the DOT does not confer this right.  Because Saterbak has not shown how she could remedy her lack of standing to challenge MERS’s assignment of the DOT to the 2007–AR7 trust, we conclude the trial court properly sustained Defendant’s demurrer to the FAC without leave to amend.

DISPOSITION

The judgment is affirmed.  Respondent 2007–AR7 trust shall recover its costs on appeal.

FOOTNOTES

  1.    The parties do not dispute Saterbak is in arrears on her debt obligations and a foreclosure sale has yet to take place.
  2.    All further statutory references are to the Civil Code unless otherwise specified.
  3.     Saterbak is mistaken in claiming Gomes holds “a borrower can challenge the power of an alleged loan purchaser to foreclose if [the borrower] can allege specific facts showing the assignment is invalid.”  As discussed, Gomes holds that under California law, plaintiffs may not bring preemptive actions to challenge a defendant’s power to foreclose.  (Gomes, supra, 192 Cal.App.4th at p. 1156.)
  4.     The Supreme Court has granted review in Keshtgar v. U.S. Bank, N.A., review granted October 1, 2014, S220012, a case involving a preforeclosure challenge based on alleged deficiencies in the assignment of the deed of trust.
  5.     Saterbak cites Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, but the New York case upon which Glaski relied has been overturned.  (Wells Fargo Bank, N.A. v. Erobobo (N.Y. App. Div.2015) 127 A.D.3d 1176, 1178; see Rajamin, supra, 757 F.3d at p. 90 [rejecting Glaski’s interpretation of New York law].)  We decline to follow Glaski and conclude the alleged defects here merely render the assignment voidable.
  6.     As the court explained in Fontenot: “MERS is a private corporation that administers a national registry of real estate debt interest transactions.  Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments, but the members retain the promissory notes and mortgage servicing rights.  The notes may thereafter be transferred among members without requiring recordation in the public records.  [Citation.]  [¶] Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust.  [Citation.]  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.”  (Fontenot, supra, 198 Cal.App.4th at p. 267.)
  7.     Saterbak also cites Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, which involved a dispute over auto insurance coverage.  The court stated the general rule that “to be enforceable, any [insurance] provision that takes away or limits coverage reasonably expected by an insured must be ‘conspicuous, plain and clear.’ ”  (Id. at p. 1204, italics added.)  Even if Haynes were relevant to the current context, there is no reasonable expectation created in the DOT that Saterbak would have the power to challenge assignments made to unrelated third parties.  (Fontenot, supra, 198 Cal.App.4th at p. 272.)
  8.     Saterbak contends the notice of trustee’s sale was recorded after the HBOR went into effect.  However, the FAC challenges MERS’s assignment of the DOT to the 2007–AR7 trust, not the notice of trustee’s sale.  We further reject Saterbak’s argument that the HBOR “overruled” Jenkins and cases citing it:  Jenkins was decided after the HBOR went into effect.  (Jenkins, supra, 216 Cal.App.4th 497 [decided May 17, 2013].)

McCONNELL, P.J.

WE CONCUR:HALLER, J.McINTYRE, J.

Mort Gezzam photo
Mort Gezzam

Cal. Supremes Opine Yvanova May Sue on Void Assignment

Cal. Supremes Opine Yvanova May Sue on Void Assignment

http://appellatecases.courtinfo.ca.gov/search/case/mainCaseScreen.cfm?dist=0&doc_id=2078551&doc_no=S218973

The Myth Mongers will come out in force saying this opinion means assignment snafus can void an otherwise perfectly just non-judicial foreclosure.

Yvanova photo
Tsvetana Yvanova

In fact, it says that Yvanova may sue to undo a non-judicial foreclosure on the basis that the foreclosing party did not own beneficial interest in the note because of a flawed (void) assignment of the note.

The court specifically denied suggesting the borrower may preemptively sue to prevent the foreclosure because of a questionable assignment.

Other courts in California have repeatedly held that the borrower has no standing to sue regarding the wrongful assignment of the note or a breach of the pooling and servicing agreement because the borrower did not suffer an injury from it, does not receive benefits from it, and never became a party to it.

The opinion cited numerous other opinions, including Glaski, showing that a VOID assignment deprives an alleged creditor of the “standing” (right) to order a foreclosure in a non-judicial foreclosure situation.   The court made the point that a borrower needs such a protection in a non-judicial foreclosure.  Otherwise, anybody could order a foreclosure and force a sale of the property for borrowers NOT in default.

This means the trial court might award damages to Yvanova for the wrongful foreclosure. It does appear that a non-existent entity made a void assignment to Deutschebank NTC as trustee for a Morgan Stanley securitization trust after the bankruptcy and asset transfer for New Century Mortgage Corporation.

Yvanova’s case will now go back to trial where she might decide to renew her effort to undo the foreclosure because of a faulty assignment, and to get the court to award her damages.  The court might deny her as other courts have others who challenged an allegedly faulty assignment.  But she will most likely collect damages for the wrongful foreclosure and loss of her house.

What’s the bottom line issue here?

Plain and simple – the assignment has NOTHING to do with whether the borrower owes the debt and must ultimately forfeit the property to foreclosure sale for breaching the note.

This is such a HARD CORE OBLIGATION that numerous states allow the non–judicial foreclosure process to become the equivalent of repossessing a car on which the borrower fails to make timely payments.  The principle:  creditors should not have to bear the expense of slogging through lengthy litigation in order to force a recalcitrant borrower to give up the collateral for the loan in default.  Creditors do NOT owe borrowers a free house.

However, a VOID assignment makes proper foreclosure impossible, and a court should punish the trustee and creditor who execute a foreclosure, even for a borrower in default.

And in that case, the right creditor will straighten out ownership of the note (possibly by a blank indorsement), and order the foreclosure anew.  This time the borrower in default will lose the house for good.

Is there another issue of importance here?

Yes.  upwards of 95% of all home loan borrowers have suffered injuries in the form of appraisal fraud, mortgage fraud, legal errors, contract breaches, and/or regulatory law breaches.  To discover these, the borrower must hire a competent professional to conduct a comprehensive examination of all documents related to the loan transaction.  With an examination report in hand to prove the injuries, the borrower may negotiate a favorable settlement or sue for damages.  Only such an examination, and artfully presenting the causes of action revealed in the exam report, can provide a reliable way for the borrower to end up with cash in hand or other financial compensation for the injuries.

If you need or want such a mortgage examination, or want to discuss your case, fill in the contact form at http://mortgageattack.com

Filed 2/18/16

IN THE SUPREME COURT OF CALIFORNIA

TSVETANA YVANOVA,                                 )

Plaintiff and Appellant,             )

)                                 S218973

  1. )

)                      Ct.App. 2/1 B247188

NEW CENTURY MORTGAGE                        )
CORPORATION et al.,                                      )

)                       Los Angeles County

Defendants and Respondents.  )                   Super. Ct. No. LC097218

__________________________________ )

The collapse in 2008 of the housing bubble and its accompanying system of home loan securitization led, among other consequences, to a great national wave of loan defaults and foreclosures.  One key legal issue arising out of the collapse was whether and how defaulting homeowners could challenge the validity of the chain of assignments involved in securitization of their loans.  We granted review in this case to decide one aspect of that question:  whether the borrower on a home loan secured by a deed of trust may base an action for wrongful foreclosure on allegations a purported assignment of the note and deed of trust to the foreclosing party bore defects rendering the assignment void.

The Court of Appeal held plaintiff Tsvetana Yvanova could not state a cause of action for wrongful foreclosure based on an allegedly void assignment because she lacked standing to assert defects in the assignment, to which she was not a party.  We conclude, to the contrary, that because in a nonjudicial foreclosure only the original beneficiary of a deed of trust or its assignee or agent may direct the trustee to sell the property, an allegation that the assignment was void, and not merely voidable at the behest of the parties to the assignment, will support an action for wrongful foreclosure.

Our ruling in this case is a narrow one.  We hold only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment. We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed.  Nor do we hold or suggest that plaintiff in this case has alleged facts showing the assignment is void or that, to the extent she has, she will be able to prove those facts.  Nor, finally, in rejecting defendants’ arguments on standing do we address any of the substantive elements of the wrongful foreclosure tort or the factual showing necessary to meet those elements.

Factual and Procedural Background

This case comes to us on appeal from the trial court’s sustaining of a demurrer.  For purposes of reviewing a demurrer, we accept the truth of material facts properly pleaded in the operative complaint, but not contentions, deductions, or conclusions of fact or law.  We may also consider matters subject to judicial notice.  (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)[1]  To determine whether the trial court should, in sustaining the demurrer, have granted the plaintiff leave to amend, we consider whether on the pleaded and noticeable facts there is a reasonable possibility of an amendment that would cure the complaint’s legal defect or defects.  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)

In 2006, plaintiff executed a deed of trust securing a note for $483,000 on a residential property in Woodland Hills, Los Angeles County.  The lender, and beneficiary of the trust deed, was defendant New Century Mortgage Corporation (New Century). New Century filed for bankruptcy on April 2, 2007, and on August 1, 2008, it was liquidated and its assets were transferred to a liquidation trust.

On December 19, 2011, according to the operative complaint, New Century (despite its earlier dissolution) executed a purported assignment of the deed of trust to Deutsche Bank National Trust, as trustee of an investment loan trust the complaint identifies as “Msac-2007 Trust‑He‑1 Pass Thru Certificates.”  We take notice of the recorded assignment, which is in the appellate record.  (See fn. 1, ante.)  As assignor the recorded document lists New Century; as assignee it lists Deutsche Bank National Trust Company (Deutsche Bank) “as trustee for the registered holder of Morgan Stanley ABS Capital I Inc. Trust 2007‑HE1 Mortgage Pass-Through Certificates, Series 2007‑HE1” (the Morgan Stanley investment trust).  The assignment states it was prepared by Ocwen Loan Servicing, LLC, which is also listed as the contact for both assignor and assignee and as the attorney in fact for New Century.  The assignment is dated December 19, 2011, and bears a notation that it was recorded December 30, 2011.

According to the complaint, the Morgan Stanley investment trust to which the deed of trust on plaintiff’s property was purportedly assigned on December 19, 2011, had a closing date (the date by which all loans and mortgages or trust deeds must be transferred to the investment pool) of January 27, 2007.

On August 20, 2012, according to the complaint, Western Progressive, LLC, recorded two documents:  one substituting itself

for Deutsche Bank as trustee, the other giving notice of a trustee’s sale.  We take notice of a substitution of trustee, dated February 28, 2012, and recorded August 20, 2012, replacing Deutsche Bank with Western Progressive, LLC, as trustee on the deed of trust, and of a notice of trustee’s sale dated August 16, 2012, and recorded August 20, 2012.

A recorded trustee’s deed upon sale dated December 24, 2012, states that plaintiff’s Woodland Hills property was sold at public auction on September 14, 2012.  The deed conveys the property from Western Progressive, LLC, as trustee, to the purchaser at auction, THR California LLC, a Delaware limited liability company.

Plaintiff’s second amended complaint, to which defendants demurred,  pleaded a single count for quiet title against numerous defendants including New Century, Ocwen Loan Servicing, LLC, Western Progressive, LLC, Deutsche Bank, Morgan Stanley Mortgage Capital, Inc., and the Morgan Stanley investment trust.  Plaintiff alleged the December 19, 2011, assignment of the deed of trust from New Century to the Morgan Stanley investment trust was void for two reasons:  New Century’s assets had previously, in 2008, been transferred to a bankruptcy trustee; and the Morgan Stanley investment trust had closed to new loans in 2007.  (The demurrer, of course, does not admit the truth of this legal conclusion; we recite it here only to help explain how the substantive issues in this case were framed.)  The superior court sustained defendants’ demurrer without leave to amend, concluding on several grounds that plaintiff could not state a cause of action for quiet title.

The Court of Appeal affirmed the judgment for defendants on their demurrer.  The pleaded cause of action for quiet title failed fatally, the court held, because plaintiff did not allege she had tendered payment of her debt.  The court went on to discuss the question, on which it had sought and received briefing, of whether plaintiff could, on the facts alleged, amend her complaint to plead a cause of action for wrongful foreclosure.

On the wrongful foreclosure question, the Court of Appeal concluded leave to amend was not warranted.  Relying on Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 (Jenkins), the court held plaintiff’s allegations of improprieties in the assignment of her deed of trust to Deutsche Bank were of no avail because, as an unrelated third party to that assignment, she was unaffected by such deficiencies and had no standing to enforce the terms of the agreements allegedly violated.  The court acknowledged that plaintiff’s authority, Glaski v. Bank of America, supra, 218 Cal.App.4th 1079 (Glaski), conflicted with Jenkins on the standing issue, but the court agreed with the reasoning of Jenkins and declined to follow Glaski.

We granted plaintiff’s petition for review, limiting the issue to be briefed and argued to the following:  “In an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void?”

Discussion

I.  Deeds of Trust and Nonjudicial Foreclosure

A deed of trust to real property acting as security for a loan typically has three parties:  the trustor (borrower), the beneficiary (lender), and the trustee.  “The trustee holds a power of sale.  If the debtor defaults on the loan, the beneficiary may demand that the trustee conduct a nonjudicial foreclosure sale.”  (Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813.)  The nonjudicial foreclosure system is designed to provide the lender-beneficiary with an inexpensive and efficient remedy against a defaulting borrower, while protecting the borrower from wrongful loss of the property and ensuring that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.  (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830.)

The trustee starts the nonjudicial foreclosure process by recording a notice of default and election to sell.  (Civ. Code, § 2924, subd. (a)(1).)[2]  After a three‑month waiting period, and at least 20 days before the scheduled sale, the trustee may publish, post, and record a notice of sale.  (§§ 2924, subd. (a)(2), 2924f, subd. (b).)  If the sale is not postponed and the borrower does not exercise his or her rights of reinstatement or redemption, the property is sold at auction to the highest bidder.  (§ 2924g, subd. (a); Jenkins, supra, 216 Cal.App.4th at p. 509; Moeller v. Lien, supra, 25 Cal.App.4th at pp. 830–831.)  Generally speaking, the foreclosure sale extinguishes the borrower’s debt; the lender may recover no deficiency.  (Code Civ. Proc., § 580d; Dreyfuss v. Union Bank of California (2000) 24 Cal.4th 400, 411.)

The trustee of a deed of trust is not a true trustee with fiduciary obligations, but acts merely as an agent for the borrower-trustor and lender-beneficiary.  (Biancalana v. T.D. Service Co., supra, 56 Cal.4th at p. 819; Vournas v. Fidelity Nat. Tit. Ins. Co. (1999) 73 Cal.App.4th 668, 677.)  While it is the trustee who formally initiates the nonjudicial foreclosure, by recording first a notice of default and then a notice of sale, the trustee may take these steps only at the direction of the person or entity that currently holds the note and the beneficial interest under the deed of trust—the original beneficiary or its assignee—or that entity’s agent.  (§ 2924, subd. (a)(1) [notice of default may be filed for record only by “[t]he trustee, mortgagee, or beneficiary”]; Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 334 [when borrower defaults on the debt, “the beneficiary may declare a default and make a demand on the trustee to commence foreclosure”]; Santens v. Los Angeles Finance Co. (1949) 91 Cal.App.2d 197, 202 [only a person entitled to enforce the note can foreclose on the deed of trust].)

Defendants emphasize, correctly, that a borrower can generally raise no objection to assignment of the note and deed of trust.  A promissory note is a negotiable instrument the lender may sell without notice to the borrower.  (Creative Ventures, LLC v. Jim Ward & Associates (2011) 195 Cal.App.4th 1430, 1445–1446.)  The deed of trust, moreover, is inseparable from the note it secures, and follows it even without a separate assignment.  (§ 2936; Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 291; U.S. v. Thornburg (9th Cir. 1996) 82 F.3d 886, 892.)  In accordance with this general law, the note and deed of trust in this case provided for their possible assignment.

A deed of trust may thus be assigned one or multiple times over the life of the loan it secures.  But if the borrower defaults on the loan, only the current beneficiary may direct the trustee to undertake the nonjudicial foreclosure process.  “[O]nly the ‘true owner’ or ‘beneficial holder’ of a Deed of Trust can bring to completion a nonjudicial foreclosure under California law.”  (Barrionuevo v. Chase Bank, N.A. (N.D.Cal. 2012) 885 F.Supp.2d 964, 972; see Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1378 [bank and reconveyance company failed to establish they were current beneficiary and trustee, respectively, and therefore failed to show they “had authority to conduct the foreclosure sale”]; cf. U.S. Bank Nat. Assn. v. Ibanez (Mass. 2011) 941 N.E.2d 40, 51 [under Mass. law, only the original mortgagee or its assignee may conduct nonjudicial foreclosure sale].)

In itself, the principle that only the entity currently entitled to enforce a debt may foreclose on the mortgage or deed of trust securing that debt is not, or at least should not be, controversial.  It is a “straightforward application[] of well-established commercial and real-property law:  a party cannot foreclose on a mortgage unless it is the mortgagee (or its agent).”  (Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title (2013) 63 Duke L.J. 637, 640.)  Describing the copious litigation arising out of the recent foreclosure crisis, a pair of commentators explained:  “While plenty of uncertainty existed, one concept clearly emerged from litigation during the 2008‑2012 period:  in order to foreclose a mortgage by judicial action, one had to have the right to enforce the debt that the mortgage secured.  It is hard to imagine how this notion could be controversial.”  (Whitman & Milner, Foreclosing on Nothing: The Curious Problem of the Deed of Trust Foreclosure Without Entitlement to Enforce the Note (2013) 66 Ark. L.Rev. 21, 23, fn. omitted.)

More subject to dispute is the question presented here:  under what circumstances, if any, may the borrower challenge a nonjudicial foreclosure on the ground that the foreclosing party is not a valid assignee of the original lender?  Put another way, does the borrower have standing to challenge the validity of an assignment to which he or she was not a party?[3]  We proceed to that issue.

II.  Borrower Standing to Challenge an Assignment as Void

A beneficiary or trustee under a deed of trust who conducts an illegal, fraudulent or willfully oppressive sale of property may be liable to the borrower for wrongful foreclosure.  (Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062; Munger v. Moore (1970) 11 Cal.App.3d 1, 7.)[4]  A foreclosure initiated by one with no authority to do so is wrongful for purposes of such an action.  (Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at pp. 973–974; Ohlendorf v. American Home Mortgage Servicing (E.D.Cal. 2010) 279 F.R.D. 575, 582–583.)  As explained in part I, ante, only the original beneficiary, its assignee or an agent of one of these has the authority to instruct the trustee to initiate and complete a nonjudicial foreclosure sale.  The question is whether and when a wrongful foreclosure plaintiff may challenge the authority of one who claims it by assignment.

In Glaski, supra, 218 Cal.App.4th 1079, 1094–1095, the court held a borrower may base a wrongful foreclosure claim on allegations that the foreclosing party acted without authority because the assignment by which it purportedly became beneficiary under the deed of trust was not merely voidable but void.  Before discussing Glaski’s holdings and rationale, we review the distinction between void and voidable transactions.

A void contract is without legal effect.  (Rest.2d Contracts, § 7, com. a.)  “It binds no one and is a mere nullity.”  (Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1362.)  “Such a contract has no existence whatever.  It has no legal entity for any purpose and neither action nor inaction of a party to it can validate it . . . .”  (Colby v. Title Ins. and Trust Co. (1911) 160 Cal. 632, 644.)  As we said of a fraudulent real property transfer in First Nat. Bank of L. A. v. Maxwell (1899) 123 Cal. 360, 371, “ ‘A void thing is as no thing.’ ”

A voidable transaction, in contrast, “is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.”  (Rest.2d Contracts, § 7.)  It may be declared void but is not void in itself.  (Little v. CFS Service Corp., supra, 188 Cal.App.3d at p. 1358.)  Despite its defects, a voidable transaction, unlike a void one, is subject to ratification by the parties.  (Rest.2d Contracts, § 7; Aronoff v. Albanese (N.Y.App.Div. 1982) 446 N.Y.S.2d 368, 370.)

In Glaski, the foreclosing entity purportedly acted for the current beneficiary, the trustee of a securitized mortgage investment trust.[5]  The plaintiff, seeking relief from the allegedly wrongful foreclosure, claimed his note and deed of trust had never been validly assigned to the securitized trust because the purported assignments were made after the trust’s closing date.  (Glaski, supra, 218 Cal.App.4th at pp. 1082–1087.)

The Glaski court began its analysis of wrongful foreclosure by agreeing with a federal district court that such a cause of action could be made out “ ‘where a party alleged not to be the true beneficiary instructs the trustee to file a Notice of Default and initiate nonjudicial foreclosure.’ ”  (Glaski, supra, 218 Cal.App.4th at p. 1094, quoting Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at p. 973.)  But the wrongful foreclosure plaintiff, Glaski cautioned, must do more than assert a lack of authority to foreclose; the plaintiff must allege facts “show[ing] the defendant who invoked the power of sale was not the true beneficiary.”  (Glaski, at p. 1094.)

Acknowledging that a borrower’s assertion that an assignment of the note and deed of trust is invalid raises the question of the borrower’s standing to challenge an assignment to which the borrower is not a party, the Glaski court cited several federal court decisions for the proposition that a borrower has standing to challenge such an assignment as void, though not as voidable.  (Glaski, supra, 218 Cal.App.4th at pp. 1094–1095.)  Two of these decisions, Culhane v. Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282 (Culhane) and Reinagel v. Deutsche Bank Nat. Trust Co. (5th Cir. 2013) 735 F.3d 220 (Reinagel),[6] discussed standing at some length; we will examine them in detail in a moment.

Glaski adopted from the federal decisions and a California treatise the view that “a borrower can challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment” not merely render it voidable.  (Glaski, supra, 218 Cal.App.4th at p. 1095.)  Cases holding that a borrower may never challenge an assignment because the borrower was neither a party to nor a third party beneficiary of the assignment agreement “ ‘paint with too broad a brush’ ” by failing to distinguish between void and voidable agreements.  (Ibid., quoting Culhane, supra, 708 F.3d at p. 290.)

The Glaski court went on to resolve the question of whether the plaintiff had pled a defect in the chain of assignments leading to the foreclosing party that would, if true, render one of the necessary assignments void rather than voidable.  (Glaski, supra, 218 Cal.App.4th at p. 1095.)  On this point, Glaski held allegations that the plaintiff’s note and deed of trust were purportedly transferred into the trust after the trust’s closing date were sufficient to plead a void assignment and hence to establish standing.  (Glaski, at pp. 1096–1098.)  This last holding of Glaski is not before us.  On granting plaintiff’s petition for review, we limited the scope of our review to whether “the borrower [has] standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void.”  We did not include in our order the question of whether a postclosing date transfer into a New York securitized trust is void or merely voidable, and though the parties’ briefs address it, we express no opinion on the question here.

Returning to the question that is before us, we consider in more detail the authority Glaski relied on for its standing holding.  In Culhane, a Massachusetts home loan borrower sought relief from her nonjudicial foreclosure on the ground that the assignment by which Aurora Loan Services of Nebraska (Aurora) claimed authority to foreclose—a transfer of the mortgage from Mortgage Electronic Registration Systems, Inc. (MERS),[7] to Aurora—was void because MERS never properly held the mortgage.  (Culhane, supra, 708 F.3d at pp. 286–288, 291.)

Before addressing the merits of the plaintiff’s allegations, the Culhane court considered Aurora’s contention the plaintiff lacked standing to challenge the assignment of her mortgage from MERS to Aurora.  On this question, the court first concluded the plaintiff had a sufficient personal stake in the outcome, having shown a concrete and personalized injury resulting from the challenged assignment:  “The action challenged here relates to Aurora’s right to foreclose by virtue of the assignment from MERS.  The identified harm—the foreclosure—can be traced directly to Aurora’s exercise of the authority purportedly delegated by the assignment.”  (Culhane, supra, 708 F.3d at pp. 289–290.)

Culhane next considered whether the prudential principle that a litigant should not be permitted to assert the rights and interest of another dictates that borrowers lack standing to challenge mortgage assignments as to which they are neither parties nor third party beneficiaries.  (Culhane, supra, 708 F.3d at p. 290.)  Two aspects of Massachusetts law on nonjudicial foreclosure persuaded the court such a broad rule is unwarranted.  First, only the mortgagee (that is, the original lender or its assignee) may exercise the power of sale,[8] and the borrower is entitled to relief from foreclosure by an unauthorized party.  (Culhane, at p. 290.)  Second, in a nonjudicial foreclosure the borrower has no direct opportunity to challenge the foreclosing entity’s authority in court.  Without standing to sue for relief from a wrongful foreclosure, “a Massachusetts mortgagor would be deprived of a means to assert her legal protections . . . .”  (Ibid.)  These considerations led the Culhane court to conclude “a mortgagor has standing to challenge the assignment of a mortgage on her home to the extent that such a challenge is necessary to contest a foreclosing entity’s status qua mortgagee.”  (Id. at p. 291.)

The court immediately cautioned that its holding was limited to allegations of a void transfer.  If, for example, the assignor had no interest to assign or had no authority to make the particular assignment, “a challenge of this sort would be sufficient to refute an assignee’s status qua mortgagee.”  (Culhane, supra, 708 F.3d at p. 291.)  But where the alleged defect in an assignment would “render it merely voidable at the election of one party but otherwise effective to pass legal title,” the borrower has no standing to challenge the assignment on that basis.  (Ibid.)[9]

In Reinagel, upon which the Glaski court also relied, the federal court held that under Texas law borrowers defending against a judicial foreclosure have standing to “ ‘challenge the chain of assignments by which a party claims a right to foreclose.’ ”  (Reinagel, supra, 735 F.3d at p. 224.)  Though Texas law does not allow a nonparty to a contract to enforce the contract unless he or she is an intended third-party beneficiary, the borrowers in this situation “are not attempting to enforce the terms of the instruments of assignment; to the contrary, they urge that the assignments are void ab initio.”  (Id. at p. 225.)

Like Culhane, Reinagel distinguished between defects that render a transaction void and those that merely make it voidable at a party’s behest.  “Though ‘the law is settled’ in Texas that an obligor cannot defend against an assignee’s efforts to enforce the obligation on a ground that merely renders the assignment voidable at the election of the assignor, Texas courts follow the majority rule that the obligor may defend ‘on any ground which renders the assignment void.’ ”  (Reinagel, supra, 735 F.3d at p. 225.)  The contrary rule would allow an institution to foreclose on a borrower’s property “though it is not a valid party to the deed of trust or promissory note . . . .”  (Ibid.)[10]

Jenkins, on which the Court of Appeal below relied, was decided close in time to Glaski (neither decision discusses the other) but reaches the opposite conclusion on standing.  In Jenkins, the plaintiff sued to prevent a foreclosure sale that had not yet occurred, alleging the purported beneficiary who sought the sale held no security interest because a purported transfer of the loan into a securitized trust was made in violation of the pooling and servicing agreement that governed the investment trust.  (Jenkins, supra, 216 Cal.App.4th at pp. 504–505.)

The appellate court held a demurrer to the plaintiff’s cause of action for declaratory relief was properly sustained for two reasons.  First, Jenkins held California law did not permit a “preemptive judicial action[] to challenge the right, power, and authority of a foreclosing ‘beneficiary’ or beneficiary’s ‘agent’ to initiate and pursue foreclosure.”  (Jenkins, supra, 216 Cal.App.4th at p. 511.)  Relying primarily on Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, Jenkins reasoned that such preemptive suits are inconsistent with California’s comprehensive statutory scheme for nonjudicial foreclosure; allowing such a lawsuit “ ‘would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.’ ”  (Jenkins, at p. 513, quoting Gomes at p. 1155.)

This aspect of Jenkins, disallowing the use of a lawsuit to preempt a nonjudicial foreclosure, is not within the scope of our review, which is limited to a borrower’s standing to challenge an assignment in an action seeking remedies for wrongful foreclosure.  As framed by the proceedings below, the concrete question in the present case is whether plaintiff should be permitted to amend her complaint to seek redress, in a wrongful foreclosure count, for the trustee’s sale that has already taken place.  We do not address the distinct question of whether, or under what circumstances, a borrower may bring an action for injunctive or declaratory relief to prevent a foreclosure sale from going forward.

Second, as an alternative ground, Jenkins held a demurrer to the declaratory relief claim was proper because the plaintiff had failed to allege an actual controversy as required by Code of Civil Procedure section 1060.  (Jenkins, supra, 216 Cal.App.4th at p. 513.)  The plaintiff did not dispute that her loan could be assigned or that she had defaulted on it and remained in arrears.  (Id. at p. 514.)  Even if one of the assignments of the note and deed of trust was improper in some respect, the appellate court reasoned, “Jenkins is not the victim of such invalid transfer[] because her obligations under the note remained unchanged.  Instead, the true victim may be an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.”  (Id. at p. 515.)  In particular, the plaintiff could not complain about violations of the securitized trust’s transfer rules:  “As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, Jenkins lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions.”  (Ibid.)

For its conclusion on standing, Jenkins cited In re Correia (Bankr. 1st Cir. 2011) 452 B.R. 319.  The borrowers in that case challenged a foreclosure on the ground that the assignment of their mortgage into a securitized trust had not been made in accordance with the trust’s pooling and servicing agreement (PSA).  (Id. at pp. 321–322.)  The appellate court held the borrowers “lacked standing to challenge the mortgage’s chain of title under the PSA.”  (Id. at p. 324.)  Being neither parties nor third party beneficiaries of the pooling agreement, they could not complain of a failure to abide by its terms.  (Ibid.)

Jenkins also cited Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, which primarily addressed the merits of a foreclosure challenge, concluding the borrowers had adduced no facts on which they could allege an assignment from MERS to another beneficiary was invalid.  (Id. at pp. 1502–1506.)  In reaching the merits, the court did not explicitly discuss the plaintiffs’ standing to challenge the assignment.  In a passage cited in Jenkins, however, the court observed that the plaintiffs, in order to state a wrongful foreclosure claim, needed to show prejudice, and they could not do so because the challenged assignment did not change their obligations under the note.  (Herrera, at pp. 1507–1508.)  Even if MERS lacked the authority to assign the deed of trust, “the true victims were not plaintiffs but the lender.”  (Id. at p. 1508.)

On the narrow question before us—whether a wrongful foreclosure plaintiff may challenge an assignment to the foreclosing entity as void—we conclude Glaski provides a more logical answer than Jenkins.  As explained in part I, ante, only the entity holding the beneficial interest under the deed of trust—the original lender, its assignee, or an agent of one of these—may instruct the trustee to commence and complete a nonjudicial foreclosure.  (§ 2924, subd. (a)(1); Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at p. 972.)  If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever (Colby v. Title Ins. and Trust Co., supra, 160 Cal. at p. 644; Rest.2d Contracts, § 7, com. a), the foreclosing entity has acted without legal authority by pursuing a trustee’s sale, and such an unauthorized sale constitutes a wrongful foreclosure.  (Barrionuevo v. Chase Bank, N.A., at pp. 973–974.)

Like the Massachusetts borrowers considered in Culhane, whose mortgages contained a power of sale allowing for nonjudicial foreclosure, California borrowers whose loans are secured by a deed of trust with a power of sale may suffer foreclosure without judicial process and thus “would be deprived of a means to assert [their] legal protections” if not permitted to challenge the foreclosing entity’s authority through an action for wrongful foreclosure.  (Culhane, supra, 708 F.3d at p. 290.)  A borrower therefore “has standing to challenge the assignment of a mortgage on her home to the extent that such a challenge is necessary to contest a foreclosing entity’s status qua mortgagee” (id. at p. 291)—that is, as the current holder of the beneficial interest under the deed of trust.  (Accord, Wilson v. HSBC Mortgage Servs., Inc. (1st Cir. 2014) 744 F.3d 1, 9 [“A homeowner in Massachusetts—even when not a party to or third party beneficiary of a mortgage assignment—has standing to challenge that assignment as void because success on the merits would prove the purported assignee is not, in fact, the mortgagee and therefore lacks any right to foreclose on the mortgage.”].)[11]

Jenkins and other courts denying standing have done so partly out of concern with allowing a borrower to enforce terms of a transfer agreement to which the borrower was not a party.  In general, California law does not give a party personal standing to assert rights or interests belonging solely to others.[12]  (See Code Civ. Proc., § 367 [action must be brought by or on behalf of the real party in interest]; Jasmine Networks, Inc. v. Superior Court (2009) 180 Cal.App.4th 980, 992.)  When an assignment is merely voidable, the power to ratify or avoid the transaction lies solely with the parties to the assignment; the transaction is not void unless and until one of the parties takes steps to make it so.  A borrower who challenges a foreclosure on the ground that an assignment to the foreclosing party bore defects rendering it voidable could thus be said to assert an interest belonging solely to the parties to the assignment rather than to herself.

When the plaintiff alleges a void assignment, however, the Jenkins court’s concern with enforcement of a third party’s interests is misplaced.  Borrowers who challenge the foreclosing party’s authority on the grounds of a void assignment “are not attempting to enforce the terms of the instruments of assignment; to the contrary, they urge that the assignments are void ab initio.”  (Reinagel, supra, 735 F.3d at p. 225; accord, Mruk v. Mortgage Elec. Registration Sys., Inc. (R.I. 2013) 82 A.3d 527, 536 [borrowers challenging an assignment as void “are not attempting to assert the rights of one of the contracting parties; instead, the homeowners are asserting their own rights not to have their homes unlawfully foreclosed upon”].)

Unlike a voidable transaction, a void one cannot be ratified or validated by the parties to it even if they so desire.  (Colby v. Title Ins. and Trust Co., supra, 160 Cal. at p. 644; Aronoff v. Albanese, supra, 446 N.Y.S.2d at p. 370.)  Parties to a securitization or other transfer agreement may well wish to ratify the transfer agreement despite any defects, but no ratification is possible if the assignment is void ab initio.  In seeking a finding that an assignment agreement was void, therefore, a plaintiff in Yvanova’s position is not asserting the interests of parties to the assignment; she is asserting her own interest in limiting foreclosure on her property to those with legal authority to order a foreclosure sale.  This, then, is not a situation in which standing to sue is lacking because its “sole object . . . is to settle rights of third persons who are not parties.”  (Golden Gate Bridge etc. Dist. v. Felt (1931) 214 Cal. 308, 316.)

Defendants argue a borrower who is in default on his or her loan suffers no prejudice from foreclosure by an unauthorized party, since the actual holder of the beneficial interest on the deed of trust could equally well have foreclosed on the property.  As the Jenkins court put it, when an invalid transfer of a note and deed of trust leads to foreclosure by an unauthorized party, the “victim” is not the borrower, whose obligations under the note are unaffected by the transfer, but “an individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.”  (Jenkins, supra, 216 Cal.App.4th at p. 515; see also Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 85 [borrowers had no standing to challenge assignment by MERS where they do not dispute they are in default and “there is no reason to believe . . . the original lender would have refrained from foreclosure in these circumstances”]; Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 272 [wrongful foreclosure plaintiff could not show prejudice from allegedly invalid assignment by MERS as the assignment “merely substituted one creditor for another, without changing her obligations under the note”].)

In deciding the limited question on review, we are concerned only with prejudice in the sense of an injury sufficiently concrete and personal to provide standing, not with prejudice as a possible element of the wrongful foreclosure tort.  (See fn. 4, ante.)  As it relates to standing, we disagree with defendants’ analysis of prejudice from an illegal foreclosure.  A foreclosed-upon borrower clearly meets the general standard for standing to sue by showing an invasion of his or her legally protected interests (Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 175)—the borrower has lost ownership to the home in an allegedly illegal trustee’s sale.  (See Culhane, supra, 708 F.3d at p. 289 [foreclosed-upon borrower has sufficient personal stake in action against foreclosing entity to meet federal standing requirement].)  Moreover, the bank or other entity that ordered the foreclosure would not have done so absent the allegedly void assignment.  Thus “[t]he identified harm—the foreclosure—can be traced directly to [the foreclosing entity’s] exercise of the authority purportedly delegated by the assignment.”  (Culhane, at p. 290.)

Nor is it correct that the borrower has no cognizable interest in the identity of the party enforcing his or her debt.  Though the borrower is not entitled to object to an assignment of the promissory note, he or she is obligated to pay the debt, or suffer loss of the security, only to a person or entity that has actually been assigned the debt.  (See Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d at p. 292 [party claiming under an assignment must prove fact of assignment].)  The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.

It is no mere “procedural nicety,” from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so.  (Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title, supra, 63 Duke L.J. at p. 650.)  “Such a view fundamentally misunderstands the mortgage contract.  The mortgage contract is not simply an agreement that the home may be sold upon a default on the loan.  Instead, it is an agreement that if the homeowner defaults on the loan, the mortgagee may sell the property pursuant to the requisite legal procedure.”  (Ibid., italics added and omitted.)

The logic of defendants’ no-prejudice argument implies that anyone, even a stranger to the debt, could declare a default and order a trustee’s sale—and the borrower would be left with no recourse because, after all, he or she owed the debt to someone, though not to the foreclosing entity.  This would be an “odd result” indeed.  (Reinagel, supra, 735 F.3d at p. 225.)  As a district court observed in rejecting the no-prejudice argument, “[b]anks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank’s deed of trust.”  (Miller v. Homecomings Financial, LLC (S.D.Tex. 2012) 881 F.Supp.2d 825, 832.)

Defendants note correctly that a plaintiff in Yvanova’s position, having suffered an allegedly unauthorized nonjudicial foreclosure of her home, need not now fear another creditor coming forward to collect the debt.  The home can only be foreclosed once, and the trustee’s sale extinguishes the debt.  (Code Civ. Proc., § 580d; Dreyfuss v. Union Bank of California, supra, 24 Cal.4th at p. 411.)  But as the Attorney General points out in her amicus curiae brief, a holding that anyone may foreclose on a defaulting home loan borrower would multiply the risk for homeowners that they might face a foreclosure at some point in the life of their loans.  The possibility that multiple parties could each foreclose at some time, that is, increases the borrower’s overall risk of foreclosure.

Defendants suggest that to establish prejudice the plaintiff must allege and prove that the true beneficiary under the deed of trust would have refrained from foreclosing on the plaintiff’s property.  Whatever merit this rule would have as to prejudice as an element of the wrongful foreclosure tort, it misstates the type of injury required for standing.  A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity’s hands.  No more is required for standing to sue.  (Angelucci v. Century Supper Club, supra, 41 Cal.4th at p. 175.)

Neither Caulfield v. Sanders (1861) 17 Cal. 569 nor Seidell v. Tuxedo Land Co. (1932) 216 Cal. 165, upon which defendants rely, holds or implies a home loan borrower may not challenge a foreclosure by alleging a void assignment.  In the first of these cases, we held a debtor on a contract for printing and advertising could not defend against collection of the debt on the ground it had been assigned without proper consultation among the assigning partners and for nominal consideration:  “It is of no consequence to the defendant, as it in no respect affects his liability, whether the transfer was made at one time or another, or with or without consideration, or by one or by all the members of the firm.”  (Caulfield v. Sanders, at p. 572.)  In the second, we held landowners seeking to enjoin a foreclosure on a deed of trust to their land could not do so by challenging the validity of an assignment of the promissory note the deed of trust secured.  (Seidell v. Tuxedo Land Co., at pp. 166, 169–170.)  We explained that the assignment was made by an agent of the beneficiary, and that despite the landowner’s claim the agent lacked authority for the assignment, the beneficiary “is not now complaining.”  (Id. at p. 170.)  Neither decision discusses the distinction between allegedly void and merely voidable, and neither negates a borrower’s ability to challenge an assignment of his or her debt as void.

For these reasons, we conclude Glaski, supra, 218 Cal.App.4th 1079, was correct to hold a wrongful foreclosure plaintiff has standing to claim the foreclosing entity’s purported authority to order a trustee’s sale was based on a void assignment of the note and deed of trust.  Jenkins, supra, 216 Cal.App.4th 497, spoke too broadly in holding a borrower lacks standing to challenge an assignment of the note and deed of trust to which the borrower was neither a party nor a third party beneficiary.  Jenkins’s rule may hold as to claimed defects that would make the assignment merely voidable, but not as to alleged defects rendering the assignment absolutely void.[13]

In embracing Glaski’s rule that borrowers have standing to challenge assignments as void, but not as voidable, we join several courts around the nation.  (Wilson v. HSBC Mortgage Servs., Inc., supra, 744 F.3d at p. 9; Reinagel, supra, 735 F.3d at pp. 224–225; Woods v. Wells Fargo Bank, N.A. (1st Cir. 2013) 733 F.3d 349, 354; Culhane, supra, 708 F.3d at pp. 289–291; Miller v. Homecomings Financial, LLC, supra, 881 F.Supp.2d at pp. 831–832; Bank of America Nat. Assn. v. Bassman FBT, LLC, supra, 981 N.E.2d at pp. 7–8; Pike v. Deutsche Bank Nat. Trust Co. (N.H. 2015) 121 A.3d 279, 281; Mruk v. Mortgage Elec. Registration Sys., Inc., supra, 82 A.3d at pp. 534–536; Dernier v. Mortgage Network, Inc. (Vt. 2013) 87 A.3d 465, 473.)  Indeed, as commentators on the issue have stated:  “[C]ourts generally permit challenges to assignments if such challenges would prove that the assignments were void as opposed to voidable.”  (Zacks & Zacks, Not a Party:  Challenging Mortgage Assignments (2014) 59 St. Louis U. L.J. 175, 180.)

That several federal courts applying California law have, largely in unreported decisions, agreed with Jenkins and declined to follow Glaski does not alter our conclusion.  Neither Khan v. Recontrust Co. (N.D.Cal. 2015) 81 F.Supp.3d 867 nor Flores v. EMC Mort. Co. (E.D.Cal. 2014) 997 F.Supp.2d 1088 adds much to the discussion.  In Khan, the district court found the borrower, as a nonparty to the pooling and servicing agreement, lacked standing to challenge a foreclosure on the basis of an unspecified flaw in the loan’s securitization; the court’s opinion does not discuss the distinction between a void assignment and a merely voidable one.  (Khan v. Recontrust Co., supra, 81 F.Supp.3d at pp. 872–873.)  In Flores, the district court, considering a wrongful foreclosure complaint that lacked sufficient clarity in its allegations including identification of the assignment or assignments challenged, the district court quoted and followed Jenkins’s reasoning on the borrower’s lack of standing to enforce an agreement to which he or she is not a party, without addressing the application of this reasoning to allegedly void assignments.  (Flores v. EMC Mort. Co., supra, at pp. 1103–1105.)

Similarly, the unreported federal decisions applying California law largely fail to grapple with Glaski’s distinction between void and voidable assignments and tend merely to repeat Jenkins’s arguments that a borrower, as a nonparty to an assignment, may not enforce its terms and cannot show prejudice when in default on the loan, arguments we have found insufficient with regard to allegations of void assignments.  While unreported federal court decisions may be cited in California as persuasive authority (Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 744, fn. 3), in this instance they lack persuasive value.

Defendants cite the decision in Rajamin v. Deutsche Bank Nat. Trust Co. (2nd Cir. 2014) 757 F.3d 79 (Rajamin), as a “rebuke” of GlaskiRajamin’s expressed disagreement with Glaski, however, was on the question whether, under New York law, an assignment to a securitized trust made after the trust’s closing date is void or merely voidable.  (Rajamin, at p. 90.)  As explained earlier, that question is outside the scope of our review and we express no opinion as to Glaski’s correctness on the point.

The Rajamin court did, in an earlier discussion, state generally that borrowers lack standing to challenge an assignment as violative of the securitized trust’s pooling and servicing agreement (Rajamin, supra, 757 F.3d at pp. 85–86), but the court in that portion of its analysis did not distinguish between void and voidable assignments.  In a later portion of its analysis, the court “assum[ed] that ‘standing exists for challenges that contend that the assigning party never possessed legal title,’ ” a defect the plaintiffs claimed made the assignments void (id. at p. 90), but concluded the plaintiffs had not properly alleged facts to support their voidness theory (id. at pp. 90–91).

Nor do Kan v. Guild Mortgage Co., supra, 230 Cal.App.4th 736, and Siliga v. Mortgage Electronic Registration Systems, Inc., supra, 219 Cal.App.4th 75 (Siliga), which defendants also cite, persuade us Glaski erred in finding borrower standing to challenge an assignment as void.  The Kan court distinguished Glaski as involving a postsale wrongful foreclosure claim, as opposed to the preemptive suits involved in Jenkins and Kan itself.  (Kan, at pp. 743–744.)  On standing, the Kan court noted the federal criticism of Glaski and our grant of review in the present case, but found “no reason to wade into the issue of whether Glaski was correctly decided, because the opinion has no direct applicability to this preforeclosure action.”  (Kan, at p. 745.)

Siliga, similarly, followed Jenkins in disapproving a preemptive lawsuit. (Siliga, supra, 219 Cal.App.4th at p. 82.)  Without discussing Glaski, the Siliga court also held the borrower plaintiffs failed to show any prejudice from, and therefore lacked standing to challenge, the assignment of their deed of trust to the foreclosing entity.  (Siliga, at p. 85.)  As already explained, this prejudice analysis misses the mark in the wrongful foreclosure context.  When a property has been sold at a trustee’s sale at the direction of an entity with no legal authority to do so, the borrower has suffered a cognizable injury.

In further support of a borrower’s standing to challenge the foreclosing party’s authority, plaintiff points to provisions of the recent legislation known as the California Homeowner Bill of Rights, enacted in 2012 and effective only after the trustee’s sale in this case.  (See Leuras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86, fn. 14.)[14]  Having concluded without reference to this legislation that borrowers do have standing to challenge an assignment as void, we need not decide whether the new provisions provide additional support for that holding.

Plaintiff has alleged that her deed of trust was assigned to the Morgan Stanley investment trust in December 2011, several years after both the securitized trust’s closing date and New Century’s liquidation in bankruptcy, a defect plaintiff claims renders the assignment void.   Beyond their general claim a borrower has no standing to challenge an assignment of the deed of trust, defendants make several arguments against allowing plaintiff to plead a cause of action for wrongful foreclosure based on this allegedly void assignment.

Principally, defendants argue the December 2011 assignment of the deed of trust to Deutsche Bank, as trustee for the investment trust, was merely “confirmatory” of a 2007 assignment that had been executed in blank (i.e., without designation of assignee) when the loan was added to the trust’s investment pool.  The purpose of the 2011 recorded assignment, defendants assert, was merely to comply with a requirement in the trust’s pooling and servicing agreement that documents be recorded before foreclosures are initiated.  An amicus curiae supporting defendants’ position asserts that the general practice in home loan securitization is to initially execute assignments of loans and mortgages or deeds of trust to the trustee in blank and not to record them; the mortgage or deed of trust is subsequently endorsed by the trustee and recorded if and when state law requires.  (See Rajamin, supra, 757 F.3d at p. 91.)  This claim, which goes not to the legal issue of a borrower’s standing to sue for wrongful foreclosure based on a void assignment, but rather to the factual question of when the assignment in this case was actually made, is outside the limited scope of our review.  The same is true of defendants’ remaining factual claims, including that the text of the investment trust’s pooling and servicing agreement demonstrates plaintiff’s deed of trust was assigned to the trust before it closed.

Conclusion

We conclude a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee’s sale.  The Court of Appeal took the opposite view and, solely on that basis, concluded plaintiff could not amend her operative complaint to plead a cause of action for wrongful foreclosure.  We must therefore reverse the Court of Appeal’s judgment and allow that court to reconsider the question of an amendment to plead wrongful foreclosure.  We express no opinion on whether plaintiff has alleged facts showing a void assignment, or on any other issue relevant to her ability to state a claim for wrongful foreclosure.

Disposition

The judgment of the Court of Appeal is reversed and the matter is remanded to that court for further proceedings consistent with our opinion.

                                                                        Werdegar, J.

We Concur:

Cantil-Sakauye, C. J.

Corrigan, J.

Liu, J.

Cuéllar, J.

Kruger, J.

Huffman, J.*

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

 

Name of Opinion Yvanova v. New Century Mortgage Corporation

__________________________________________________________________________________

 

Unpublished Opinion

Original Appeal

Original Proceeding

Review Granted XXX 226 Cal.App.4th 495

Rehearing Granted

__________________________________________________________________________________

 

Opinion No. S218973

Date Filed: February 18, 2016

__________________________________________________________________________________

 

Court: Superior

County: Los Angeles

Judge: Russell S. Kussman

__________________________________________________________________________________

 

Counsel:

 

Tsvetana Yvanova, in pro. per.; Law Offices of Richard L. Antognini and Richard L. Antognini for Plaintiff and Appellant.

Law Office of Mark F. Didak and Mark F. Didak as Amici Curiae on behalf of Plaintiff and Appellant.

Kamala D. Harris, Attorney General, Nicklas A. Akers, Assistant Attorney General, Michele Van Gelderen and Sanna R. Singer, Deputy Attorneys General, for Attorney General of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Lisa R. Jaskol; Kent Qian; and Hunter Landerholm for Public Counsel, National Housing Law Project and Neighborhood Legal Services of Los Angeles County as Amici Curiae on behalf of Plaintiff and Appellant.

The Sturdevant Law Firm and James C. Sturdevant for National Association of Consumer Advocates and National Consumer Law Center as Amici Curiae on behalf of Plaintiff and Appellant.

The Arkin Law Firm, Sharon J. Arkin; Arbogast Law and David M. Arbogast for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Houser & Allison, Eric D. Houser, Robert W. Norman, Jr., Patrick S. Ludeman; Bryan Cave, Kenneth Lee Marshall, Nafiz Cekirge, Andrea N. Winternitz and Sarah Samuelson for Defendants and Respondents.

 

Pfeifer & De La Mora and Michael R. Pfeifer for California Mortgage Bankers Association as Amicus Curiae on behalf of Defendants and Respondents.

 

Denton US and Sonia Martin for Structured Finance Industry Group, Inc., as Amicus Curiae on behalf of Defendants and Respondents.

Goodwin Proctor, Steven A. Ellis and Nicole S. Tate-Naghi for California Bankers Association as Amicus Curiae on behalf of Defendants and Respondents.

Wright, Finlay & Zak and Jonathan D. Fink for American Legal & Financial Network and United Trustees Association as Amici Curiae on behalf of Defendants and Respondents.

 

 

 

 

Counsel who argued in Supreme Court (not intended for publication with opinion):

 

Richard L. Antognini

Law Offices of Richard L. Antognini

2036 Nevada City Highway, Suite 636

Grass Valley, CA  95945-7700

(916) 295-4896

Kenneth Lee Marshall

Bryan Cave

560 Mission Street, Suite 2500

San Francisco, CA  94105

(415) 675-3400

 

[1]          The superior court granted defendants’ request for judicial notice of the recorded deed of trust, assignment of the deed of trust, substitution of trustee, notices of default and of trustee’s sale, and trustee’s deed upon sale.  The existence and facial contents of these recorded documents were properly noticed in the trial court under Evidence Code sections 452, subdivisions (c) and (h), and 453.  (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264–266.)  Under Evidence Code section 459, subdivision (a), notice by this court is therefore mandatory.  We therefore take notice of their existence and contents, though not of disputed or disputable facts stated therein.  (See Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1102.)

[2]          All further unspecified statutory references are to the Civil Code.

[3]          Somewhat confusingly, both the purported assignee’s authority to foreclose and the borrower’s ability to challenge that authority have been framed as questions of “standing.”  (See, e.g., Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title, supra, 63 Duke L.J. at p. 644 [discussing purported assignee’s “standing to foreclose”]; Jenkins, supra, 216 Cal.App.4th at p. 515 [borrower lacks “standing to enforce [assignment] agreements” to which he or she is not a party]; Bank of America Nat. Assn. v. Bassman FBT, LLC (Ill.App. Ct. 2012) 981 N.E.2d 1, 7 [“Each party contends that the other lacks standing.”].)  We use the term here in the latter sense of a borrower’s legal authority to challenge the validity of an assignment.
[4]          It has been held that, at least when seeking to set aside the foreclosure sale, the plaintiff must also show prejudice and a tender of the amount of the secured indebtedness, or an excuse of tender.  (Chavez v. Indymac Mortgage Services, supra, 219 Cal.App.4th at p. 1062.)  Tender has been excused when, among other circumstances, the plaintiff alleges the foreclosure deed is facially void, as arguably is the case when the entity that initiated the sale lacked authority to do so.  (Ibid.; In re Cedano (Bankr. 9th Cir. 2012) 470 B.R. 522, 529–530; Lester v. J.P. Morgan Chase Bank (N.D.Cal. 2013) 926 F.Supp.2d 1081, 1093; Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d 964, 969–970.)  Our review being limited to the standing question, we express no opinion as to whether plaintiff Yvanova must allege tender to state a cause of action for wrongful foreclosure under the circumstances of this case.  Nor do we discuss potential remedies for a plaintiff in Yvanova’s circumstances; at oral argument, plaintiff’s counsel conceded she seeks only damages.  As to prejudice, we do not address it as an element of wrongful foreclosure.  We do, however, discuss whether plaintiff has suffered a cognizable injury for standing purposes.

[5]          The mortgage securitization process has been concisely described as follows:  “To raise funds for new mortgages, a mortgage lender sells pools of mortgages into trusts created to receive the stream of interest and principal payments from the mortgage borrowers.  The right to receive trust income is parceled into certificates and sold to investors, called certificateholders.  The trustee hires a mortgage servicer to administer the mortgages by enforcing the mortgage terms and administering the payments.  The terms of the securitization trusts as well as the rights, duties, and obligations of the trustee, seller, and servicer are set forth in a Pooling and Servicing Agreement (‘PSA’).”  (BlackRock Financial Mgmt. v. Ambac Assur. Corp. (2d Cir. 2012) 673 F.3d 169, 173.)

[6]          The version of Reinagel cited in Glaski, published at 722 F.3d 700, was amended on rehearing and superseded by Reinagel, supra, 735 F.3d 220.

[7]          As the Culhane court explained, MERS was formed by a consortium of residential mortgage lenders and investors to streamline the transfer of mortgage loans and thereby facilitate their securitization.  A member lender may name MERS as mortgagee on a loan the member originates or owns; MERS acts solely as the lender’s “nominee,” having legal title but no beneficial interest in the loan.  When a loan is assigned to another MERS member, MERS can execute the transfer by amending its electronic database.  When the loan is assigned to a nonmember, MERS executes the assignment and ends its involvement.  (Culhane, supra, 708 F.3d at p. 287.)

[8]          Massachusetts General Laws chapter 183, section 21, similarly to our Civil Code section 2924, provides that the power of sale in a mortgage may be exercised by “the mortgagee or his executors, administrators, successors or assigns.”

[9]          On the merits, the Culhane court rejected the plaintiff’s claim that MERS never properly held her mortgage, giving her standing to challenge the assignment from MERS to Aurora as void (Culhane, supra, 708 F.3d at p. 291); the court held MERS’s role as the lender’s nominee allowed it to hold and assign the mortgage under Massachusetts law.  (Id. at pp. 291–293.)

[10]         The Reinagel court nonetheless rejected the plaintiffs’ claim of an invalid assignment after the closing date of a securitized trust, observing they could not enforce the terms of trust because they were not intended third-party beneficiaries.  The court’s holding appears, however, to rest at least in part on its conclusion that a violation of the closing date “would not render the assignments void” but merely allow them to be avoided at the behest of a party or third-party beneficiary.  (Reinagel, supra, 735 F.3d at p. 228.)  As discussed above in relation to Glaski, that question is not within the scope of our review.

[11]         We cite decisions on federal court standing only for their persuasive value in determining what California standing law should be, without any assumption that standing in the two systems is identical.  The California Constitution does not impose the same “ ‘case-or-controversy’ ” limit on state courts’ jurisdiction as article III of the United States Constitution does on federal courts.  (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1117, fn. 13.)

[12]         In speaking of personal standing to sue, we set aside such doctrines as taxpayer standing to seek injunctive relief (see Code Civ. Proc., § 526a) and “ ‘ “public right/public duty” ’ ” standing to seek a writ of mandate (see Save the Plastic Bag Coalition v. City of Manhattan Beach (2011) 52 Cal.4th 155, 166).

[13]         We disapprove Jenkins v. JPMorgan Chase Bank, N.A., supra, 216 Cal.App.4th 497, Siliga v. Mortgage Electronic Registration Systems, Inc., supra, 219 Cal.App.4th 75, Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th 256, and Herrera v. Federal National Mortgage Assn., supra, 205 Cal.App.4th 1495, to the extent they held borrowers lack standing to challenge an assignment of the deed of trust as void.

[14]         Plaintiff cites newly added provisions that prohibit any entity from initiating a foreclosure process “unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original trustee or the substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest” (§ 2924, subd. (a)(6)); require the loan servicer to inform the borrower, before a notice of default is filed, of the borrower’s right to request copies of any assignments of the deed of trust “required to demonstrate the right of the mortgage servicer to foreclose” (§ 2923.55, subd. (b)(1)(B)(iii)); and require the servicer to ensure the documentation substantiates the right to foreclose (§ 2924.17, subd. (b)).  The legislative history indicates the addition of these provisions was prompted in part by reports that nonjudicial foreclosure proceedings were being initiated on behalf of companies with no authority to foreclose.  (See Sen. Rules Com., Conference Rep. on Sen. Bill No. 900 (2011–2012 Reg. Sess.) as amended June 27, 2012, p. 26.)

*          Associate Justice of the Court of Appeal, Fourth Appellate District, Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.