Glaski v.

Bank of
America, et al (Void
Assignments)

May 30

2014

This white paper reviews, from a layman's perspective, the

California Appellate Decision and its impact on homeowners fight
against corrupt and illegal foreclosure practices specific to VOID
assignments.

Homeowner
Victories
White Paper
Series

THIS MANUAL WAS CREATED FROM SELECTIONS OF PUBLISHED INFORMATION

FROM DIFFERENT SOURCES VIA BOOK AND/OR INTERNET WEBSITES. THIS BOOK
IS COVERED BY THE TERMS AND CONDITIONS OF
WWW.INFOTOFIGHTFORECLOSURE.COM

COPYRIGHT @ 2014 BY K. Simonee Cromwell and www.infotofightforeclosure.com

Reproduction and distribution is not allowed.

This book is not legal advice and should not be construed as legal advice.
We try to provide quality information, but we make no claims, promises or guarantees about
the accuracy, completeness, or adequacy of the information contained in this book. As legal
advice must be tailored to the specific circumstances of each case, and laws are constantly
changing, nothing provided herein should be used as a substitute for the advice of competent
legal counsel. Info to Fight Foreclosure is not a law firm and nothing contained in this site
should be deemed as legal advice. Use of the information contained within this manual is the
responsibility of the individual using the information and K. Simonee Cromwell and Info To Fight
Foreclosure takes no responsibility and does not assume liability for the use of the information
found in this manual. If you are a Reader or Pro Se Member please refer to the Terms of
Service for more details.

TABLE OF CONTENTS

PREFACE............................................................................................................................. 9
I. WHAT VICTORY DOES GLASKI PRESENT?............................................................... 10
II. KEY ISSUES AT STAKE IN GLASKI ........................................................................... 10
KEY ONE: Borrower CAN challenge the Assignment if it is VOID. ................... 13
Black's Law (thelawdictionary.org) goes into great detail when describing VOID:
(This is a cut/paste from its website)...................................................................... 14
KEY TWO: Determining if the Assignment is VOID ........................................... 16
A. New York Law Confirms Ultra Vires Act ................................................................17
B. Internal Revenue Codes Threaten Severe Tax Consequences ............................... 19
KEY THREE: Foreclosure Statutes Violated with VOID Assignment ................20
III. BANKS ARGUMENTS AGAINST GLASKI................................................................. 22
A. De-publication Efforts ..................................................................................... 22
B. Stare Decisis: Glaski is a PRECEDENT Opinion not a Minority Opinion! ... 23
Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (May 17, 2013) ...... 25
Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, (2011) ............... 26
Diunugala v. JP Morgan Chase Bank, N.A. (Case No. 12-cv-02106-WQH-NLS)
(October 3, 2013) ........................................................................................................ 27
IN RE SANDRI, Bankr. Court, ND California 2013 ................................................... 28
Patel v. Mortgage Electronic Registration Systems, Inc., 2013 WL 4029277
(N.D. Cal. Aug. 6, 2013) .......................................................................................... 29
Aniel v. GMAC Mortg., LLC, 2012 WL 5389706 at *4 (N.D. Cal. Nov. 2, 2012)
29
Ganesan v. GMAC Mortgage, LLC, 2012 WL 4901440 at *4 (N.D. Cal. Oct. 15,
2012) ........................................................................................................................ 29
Gilbert v. Chase Home Fin., LLC, 2013 WL 2318890 at *3 (E.D. Cal. May 28,
2013) ........................................................................................................................ 29
Siliga v. Mortgage Electronic Registrations Systems, Inc., 219 Cal. App. 4th
75, 161 Cal. Rptr. 3d 500 (Cal. App. 2d Cir. 2013) (decided on August 27, 2013) . 30
Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 156 Cal. Rptr.
3d 912 (Cal. App. 4th Dist. 2013) ............................................................................ 30
Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 272, 129 Cal. Rptr.
3d 467 (1st Dist. 2011) ............................................................................................. 30
Yvanova v. New Century Mortgage, et al. April 2014 ................................................ 31
C. Alleging Prejudice ............................................................................................ 32
IV. DELAWARE VERSUS NEW YORK LAW -Would the Glaski Decision have been
different? ........................................................................................................................... 34
3

V. FOLLOW THE LEADER .............................................................................................. 34

MERS Role ........................................................................................................... 34
Assignments from Mortgage Electronic Registration Systems, Inc. (MERS) as
Nominee for a bankrupt entity (or a bankrupt entity that has a liquidating trustee)
..................................................................................................................................... 36
Assignments from MERS in which MERS fails to identify the principal for whom it
is assigning.................................................................................................................. 37
Assignment of the Deed of Trust without the Note is a Nullity ................................. 38
V. PLEADING THE ELEMENTS OF GLASKI .................................................................. 39
Glaski Second Amended Complaint ................................................................................. 41
Glaski v. Bank of America, Inc., et al RULING (from Google Scholar) ........................... 42
THOMAS A. GLASKI, Plaintiff and Appellant, v. BANK OF AMERICA, NATIONAL
ASSOCIATION, et al., Defendants and Respondents. ............................................... 42
OPINION.............................................................................................................. 42
INTRODUCTION ................................................................................................. 42
FACTS .................................................................................................................. 43
The Loan .............................................................................................................. 43
Creation of the WaMu Securitized Trust ............................................................. 44
WaMu's Failure and Transfers of the Loan ......................................................... 44
Notice of Default and Sale of the Property .......................................................... 45
PROCEEDINGS ................................................................................................... 46
DISCUSSION ....................................................................................................... 49
I. Standard of Review ........................................................................................... 49
II. Fraud ............................................................................................................... 50
A. Rules for Pleading Fraud ................................................................................. 50
B. First Cause of Action for Fraud, Lack of Specific Allegations of Reliance...... 50
C. Second Fraud Cause of Action, Lack of Specific Allegations of Reliance ....... 51
III. Wrongful Foreclosure by Nonholder of the Deed of Trust ........................... 52
A. Glaski's Theory of Wrongful Foreclosure........................................................ 52
B. Wrongful Foreclosure by a Nonholder of the Deed of Trust .......................... 52
C. Borrower's Standing to Raise a Defect in an Assignment ............................... 53
D. Voidness of a Post-closing Date Transfers to a Securitized Trust .................. 54
E. Application of Gomes ...................................................................................... 56
F. Tender .............................................................................................................. 58
G. Remedy of Setting Aside Trustee's Sale .......................................................... 59
H. Causes of Action Stated ................................................................................... 59
4

IV. Judicial Notice................................................................................................ 59

A. Glaski's Request for Judicial Notice ................................................................ 59
B. Defendants' Request for Judicial Notice of Assignment ............................... 60
DISPOSITION ...................................................................................................... 61
APPENDIX of CASE RULINGS ........................................................................................ 65

In the appendix are the following rulings:

Saldivar v. JP Morgan Chase (Glaski cites to this case)
Wells Fargo, N.A. v Erobobo (Glaski cites to this case)
Vogan v. Wells Fargo, N.A. (frontrunner to Glaski)
Jenkins v. JP Morgan Chase
Diunugala v. JP Morgan Chase
Fontenot v. Wells Fargo, N.A
Sandri v. Capital One
Gomes v. Countrywide Home Loans, Inc.
Yvanova v. New Century Mortgage, et al

Cases
Alexander v. Nelson. 42 Ala. 462 ...................................................................................... 15
Allis v. Billings, 6 Mete. (Mass.) 415, 30 Am. Dec. 744 .................................................... 15
Allison & Ver Valen Co. v. McNee, 170 Misc. 144, 146 (N.Y. Sup. Ct. 1939) .................... 18
Angelo-American Mortgage Co. v. Lombard (1904) 132 Fed. 721 ................................... 13
Application of Muratori, 183 Misc. 967, 970 (N.Y. Sup. Ct. 1944) ............................ 19, 28
Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d. ................................................... 21
Bodell v. Walbrook (9th Cir. 1997) 119 F. 3d 1411, 1422 ................................................... 25
Boskowitz v. Held, 15 App.Div. 306, 310-311, 44 N.Y.S. 136, affd. 153 N.Y. 666, 48 N.E.
1104 ................................................................................................................................ 28
Bovard v. Dickenson, 131 Cal. 162 [63 P. 162]; Nakagawa v. Okamoto, 164 Cal. 718 [130
P. 707]). .......................................................................................................................... 38
Brown v. Brown, 50 N. II. 53S, 552 .................................................................................. 14
Cal. Pro-Life Council, Inc. v. Getman, 328 F.3d 1088, 1099 (9th Cir. 2003) .................. 24
California Bank v. Kennedy (1987) 167 U.S. 362 .............................................................. 13
California Golf v. Cooper, (2008) 163 Cal.App.4th 1053, 1070 ........................................ 13
Carpenter v. Longan, 83 U.S. 271, 275 (1872) .................................................................. 39
Cuccia v. Superior Court, 153 Cal. App. 4th 347, 353-354 (2007) ................................... 24
Culhane v. Aurora Loan Services of Nebraska, supra, 708 F.3d at p. 290....................... 16
Curtis v. Leavitt, 15 N. Y. 9, 90 .......................................................................................... 15
Deutsche Bank National Trust Company as Trustee under Pooling & Servicing
Agreement Series Index 2006-AR6 v. Maraj, 856 N.Y.S. 2d 497, WL 253926 ............ 37
Deutsche Bank Nat'l Trust Co. v. Adolfo, No. 12 C759, 2013 WL 4552407 * 3 (N.D. Ill.
Aug. 28, 2013) ................................................................................................................ 28
Dimrock v. Emerald Properties, 81 Cal.App.4th 868, 878 (2000) .................................. 21
Diunugala v. JP Morgan Chase Bank, N.A. (Case No. 12-cv-02106-WQH-NLS) (October
3, 2013)........................................................................................................................... 27
Dye v. Lewis, 67 Misc. 2d 426, 324 NYS2d 172 (1971)............................................... 19, 28
Fisher v. Salmon ................................................................................................................ 37
Ford v. Bushard, 116 Cal. 273 [48 P. 119]; ........................................................................ 38
Forte v. Nolfi (1972) 25 Cal.App.3d.656, 685-686 [102 Cal.Rptr. 455] ........................... 21
Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 [121 Cal.Rptr.3d
819]................................................................................................................................. 48
Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, (2011) ...................... 26
Gustafson v. Stockton etc. R. R. Co., 132 Cal. 619 [64 P. 995] ......................................... 38
Herrera, supra, 205 Cal.App.4th at p. 1507, 141 Cal.Rptr.3d 326 .................................... 26
In re Correia (1st Cir. BAP 2011) 452B.R. 319, 324325 .................................................. 26
In re IBJ Schroder Bank & Trust Co., 271 A.D.2d 322 (N.Y. App. Div. 1st Dept 2000 ... 19
In re New Century TRS Holdings, Inc. Case No. 07-10416 .............................................. 37
In re New Century TRS Holdings, Inc. v. New Century Liquidating Trust, 407 B.R. 576
(2009) ............................................................................................................................ 36
In re Osborne, 76 F. 3d 306, 309 (9th Cir. 1996) ............................................................. 23
In re Saldivar (Bankr. S.D.Tex., Jun. 5, 2013, No. 11-10689) 2013 WL 2452699, .......... 18
In re Veal (B.A.P. 9th Cir. 2011) 450 B.R. 897, 910 .......................................................... 33
Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (May 17, 2013) ............. 25
Johnson v. Frankell, 520 U.S. 911, 916 (1997) .................................................................. 24
Kachlon v. Markowitz , (2008) 168 Cal. App. 4th 316, 334. ............................................ 20
6

Kawamata Farms v. United Agri Products, 88 Hawaii 214 (1997) at [69] [70][ 71][72][
73][ 74] at 257-258......................................................................................................... 37
Kearney v. Vaugliau, 50 Mo. 2S4 ...................................................................................... 14
Kelley v. Howarth, 39 Cal. 2d 179, 192 (1952); Johnson v. Razy, 181 Cal. 342, 344 (1919)
........................................................................................................................................ 39
Kelley v. Upshaw (1952) 39 Cal.2d 179, 192 ..................................................................... 39
Knight v. Knight, 589 N.Y.S.2d 195, 197 (App.Div. 1992) ................................................ 28
LaSalle Bank Nat'l Ass'n v. Lamy, No. 030049/2005, 2006 NY Slip Op 51534U, slip op.
2 (N.Y. Sup. Ct. 2006) .................................................................................................... 35
MERS v. Saunders, 2 A.3d 289, 295 (Me. 2010) .............................................................. 35
National Surety Co. v. Manhattan Mortgage Co., 185 App.Div. 733, 736-737, 174 N.Y.S.9,
affd. 230 N.Y. 545, 130 N.E. 887 ................................................................................... 28
Ohlendorf v. American Home Mortg. Servicing (E.D. Cal. 2010) 279 F.R.D. 575 ........... 27
People v. Shall, 9 Cow. (N. Y.) 778, 7S4 ............................................................................ 15
Polhemus v. Trainer, 30 Cal. 686, 688 (1866) ................................................................. 39
Qualified Patients Ass'n v. City of Anaheim, 187 Cal. App. 4th 734, 764 (2010) ............ 25
Quan Wye v. Chin Lin Hee, 123 Cal. 185 [55 P. 783] ........................................................ 38
Read v. Buffum, supra, 79 Cal. 77 [21 P. 555, 12 Am.St.Rep. 131] .................................... 38
Reinagel v. Deutsche Bank National Trust Co. (5th Cir., July 11, 2013, No. 12-50569)
F.3d [2013 WL 3480207 ................................................................................................ 15
Shannon v. General Petroleum Corp., 47 Cal. App. 2d 651, 661 (1941) ........................... 35
Svoboda v. Bank of America, 2013 WL 4017904 (W.D. Tex.) .......................................... 28
System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr. 735 .. 21
United States Trust Co. v First Natl City Bank, 57 A.D.2d 285, 295-296, affd 45 NY2d
869 ................................................................................................................................. 18
Videau V. Griffin................................................................................................................ 37
Vogan v. Wells Fargo Bank, NA, 2011 W.L. 5826016 (2011) ............................................ 40
Wells Fargo Bank, N.A. v. Erobobo (N.Y.Sup.Ct. 2013) 39 Misc.3d 1220(A) [2013 WL
1831799, ......................................................................................................................... 18

Statutes

26 CFR 1.860F-2 - TRANSFERS TO A REMIC ................................................................ 20

2935 ................................................................................................................................... 39
Calif. Civil Code 47 ......................................................................................................... 21
Calif. Civil Code 2356 .................................................................................................... 36
Calif. Civil Code 2937 .................................................................................................... 39
Calif. Civil Code 2935 .................................................................................................... 39
Calif. Civil Code 2936 .................................................................................................... 39
Calif. Civil Code 2309 ..................................................................................................... 37
Calif. Civil Code 2924 ..................................................................................................... 21
Calif. Civil Code 2924(a)(1) ............................................................................................ 26
Calif. Civil Code 2924, subd. (a)(1) ................................................................................ 48
Calif. Civil Code 2924a(e) ............................................................................................... 21
Calif. Civil Code 2924h ................................................................................................... 21
Calif. Civil Code 2934a ................................................................................................... 21
Calif. Civil Code 3539 ..................................................................................................... 25
7

Calif. Civil Code 2936; 2924(a)(1)(c)............................................................................ 20

California Statute of Frauds 1624(a)(3) ......................................................................... 37
IRC 26 U.S.C. 860G ......................................................................................................... 19
New York Estate & Power Law (NYEPL) 7-2.4 .............................................................. 12
Sections 860A through 860G ............................................................................................17
Sections 860A to 860G ..................................................................................................... 19
UCC 3418(b). ................................................................................................................ 33

Other Authorities
California Mortgage and Deed of Trust Practice (Cont.Ed. Bar 1979) s 6.40, p. 295 ...... 21
Miller & Harrell, supra, 6.03[6][b][ii], .......................................................................... 33
Miller & Starr, Cal. Real Estate (3rd ed. 2000) ................................................................ 37
New York Estates Powers and Trust Law Section 7-2.4 ............................................. 19, 28
Restatement (3d) of Property (Mortgages) 5.4[[a] ...................................................... 39
Restatement [Second] of Trusts 186, comments a, d) ................................................... 18

Footnote 11
Los Angeles County Bar Association Newsletter, April 2008, Vol. 28 No. 4
.................................................................................................................. 25

PREFACE
This white paper seeks to break down, in layman's terms why the Glaski ruling was a huge
win for homeowners and how others can use the same logic, if applicable, in their own
battle against fraudulent and illegal foreclosure practices.
It requires that the reader have a fundamental, basic understanding of the key
issues presented in Glaski, which are:
1) Understanding the basics of litigation 101 - why Glaski, after winning the
Appeal on the Demurrer, has not won.
2) Understanding the title records that are recorded against the title, most
specifically an Assignment of Deed of Trust.
3) What a REMIC Trust is and how to source the REMIC Trust documents (if
public).
4) The difference between a Trustee of the Deed of Trust and the Trustee of the
REMIC Trust.
5) The servicer versus the beneficiary.
This victory was on the "pleading" stage of the litigation. Here, Glaski lost at the
Demurrer (California's version of a Motion to Dismiss) stage and the California Appellate
Court reversed the decision, remanding the case back to the trial court with the
instruction to overrule the Demurrer on the third, fourth, fifth, eighth and ninth causes
of action. This means Glaski is now back in court and his lawsuit is to proceed to trial (or
a Motion for Summary Judgment). This win is HUGE in that in Federal Courts almost
91% of foreclosure cases are being dismissed at the pleading stage1(the percentage in state
cases is unknown) and homeowners are getting turned out before there is any substantive
discovery or litigation of the actual foreclosure issues.
Finally the Courts are beginning to look a little deeper under the "hood" and beginning
to recognize that homeowners claims are not about delaying the inevitable but about
fighting against massive corruption and fraud being perpetrated by the Notorious Five 2
and their industry.
Go to http://infotofightforeclosure.com/?p=1703 to download a copy of the Motion to Dismiss
For Failure to State a Claim, Report to the Judicial Conference Advisory Committee, March
2011.
2
Notorious Five: Wells Fargo, N.A.; JP Morgan Chase Bank, N.A.; Bank of America, N.A.;
GMAC/Ally Bank; Citibank, N.A.
1

I. WHAT VICTORY DOES GLASKI PRESENT?

Glaski sought to bring 9 claims against Bank of America, Chase Home Finance, LLC;
California Reconveyance Corporation and Doe Defendants. The nine claims were for
fraud, quiet title, wrongful foreclosure, declaratory relief, injunctive relief, intentional
infliction of emotional distress, cancellation of instruments, and unfair business
practices. The original, first amended, and second amended complaints were met with
Demurrers, which eventually lead to a total dismissal from the State Court, without leave
to amend. In response to the dismissal, Glaski filed an appeal with the 5th District Court
of Appeals.
The Court of Appeals overturned the dismissal and remanded the matter back to the
trial court with instructions to overrule the Demurrer on the third, fourth, fifth, eighth
and ninth causes of actions. (Quiet Title, Wrongful Foreclosure, Declaratory Relief,
Cancellation of Instruments, and Unfair Business Practices under Bus. & Prof. Code
17200 et. seq.) Key to the reversal was the Court's finding that a borrower can challenge
an Assignment of Deed of Trust ("Assignment") as void if the borrower factually and
specifically pleads why the Assignment is void.
The Glaski win represents the first Appellate Court to recognize a borrower's right to
challenge, as a 3rd party3, a void contract which is the Assignment that was filed by the
defendants in the public county records and used as the basis to enter the statutory
framework of Calif. Civil Code 2924.

The battle forming is on the second key point of

the Glaski ruling, is the assignment actually void?

II. KEY ISSUES AT STAKE IN GLASKI

There are three key issue at stake in the Glaski ruling. The key issue in Glaski is
a borrower (homeowner) can challenge a VOID assignment. While Glaski deals

It is important to note that U.S. Bank has gone on record through their website that the
"borrower" IS a party to the Pooling & Servicing Agreement. See
https://www.usbank.com/pdf/community/Role-of-Trustee-Sept2013.pdf. Please email
simonee@infotofightforeclosure.com if you need assistance locating this document, or visit
website.
3

10

specifically with late assignments into REMIC Trusts, there are a variety of reasons why
an Assignment may be void ranging from MERS making assignments without the Note,
without subscribing the principal or assignment for entities that are defunct (most are
bankrupt), having 3rd party loan document firms sign as a servicer employee, or for
entities that are not members of MERS. Across the board, in almost ALL of the rulings
that are being proclaimed to not follow Glaski the Court AGREES with Glaski that
if the assignment is void, the borrower can challenge the assignment.
Where the battle lines are being drawn is what makes the assignment void. For the
past six or seven years, Banks have been recording Assignments to a "trustee" for a
REMIC4 trust years after the trust closed and for all intent and purposes, the trust was
not legally allowed to accept an Assignment after the trust closed. When homeowners
sought to challenge the Assignment, the oft heard refrain was the Assignment was a
contract between the parties on the Assignment (the assignee and the assignor) not the
homeowner; therefore the homeowner was a 3rd party and had no legal right to challenge
the assignment.
EXAMPLE:

Imagine homeowner 1 has a five year contract with a local gardening service that
homeowner 1 paid in full at the beginning of the five year term; the gardener is obligated
to continue the service through the end of the term. Homeowner 1 sells the house to
homeowner 2; and part of that sale includes assigning the gardening contract over to
homeowner 2. Now the gardening service doesn't want to continue the service so he
attacks the assignment between the two homeowners. Since the gardener is not a party
to that assignment, he can't challenge the assignment - homeowner 2 paid homeowner
1 for the contract; therefore the gardener is obligated to continue to fulfill the contract.
In essence, the Assignment is the original lender (or its successor or assign) selling the
loan to another bank (or entity), and assigning the deed of trust so if the payments are not
made, the property can be liquidated through a foreclosure and the bank can get the
money back through the trustee sale.
4

Real Estate Mortgage Investment Conduit governed by Internal Revenue Codes 860A - 860G.
11

None of this is rocket science; it is pretty basic contract law and usually, legal. Here is
where it gets sticky though; and this is where the Glaski Court recognized the problem
with late Assignments, most specifically into REMIC trusts and, again, is the second
KEY point (or step) of the Glaski decision. Usually a late assignment into the REMIC
Trust destroys any tax advantages it may have had and exposes the investors (the real
owners of the Trust) to substantial losses through taxation. And when you read the Glaski
ruling, you see the Court spent an interesting amount of time explaining this financial
impact and dilemma for the investors.
This of course, then lead the Court into examining why a Trustee could take an act that
would have such devastating consequences; and lo and behold, the Court found the
Trustee was prohibited from taking such an act! In fact, the act was what is called ultra
vires.
Investopedia describes ultra vires as:
Any act that lies beyond the authority of a corporation to perform.
Ultra Vires acts fall outside the powers that are specifically listed in a
corporate charter or state law.
They can also be any action that is
specifically prohibited by the corporate charter.
Legal Dictionary describes ultra vires as:
[Latin, Beyond the powers.] The doctrine in the law of corporations
that holds that if a corporation enters into a contract that is beyond
the scope of its corporate powers, the contract is illegal. (Emphasis
added)
Ultra vires acts cannot be legally defended in court; and if there is one state
that has thoroughly examined ultra vires acts, it is New York State! See New
York Estate & Power Law (NYEPL) 7-2.4 which states:
"If the trust is expressed in an instrument creating the estate of the
trustee, every sale, conveyance or other act of the trustee in
contravention of the trust, except as authorized by this article and by
any other provision of law, is void."

12

What the Glaski Court found is that an Assignment after closing was prohibited5 and
therefore the act itself was ultra vires. The United States Supreme Court in AngeloAmerican Mortgage Co. v. Lombard (1904) 132 Fed. 721, treated an ultra vires contract
as absolutely void. The reasoning is that an ultra vires contract is void not because it is
forbidden but because the corporation had no capacity to make it. (Banks claim the
Assignment is a contract between the assignee and assignor).
The act thus being void ab initio6 cannot be validated by any subsequent ratification,
and there can therefore be no ground for the operation of estoppel. California Bank v.
Kennedy (1987) 167 U.S. 362. In one of the letters requesting Glaski be depublished to
the California Supreme Court one of the bank's attorneys argued the act could be ratified.
That is laughable, what investor would ratify an act of the Trustee that would incur tax
consequences so severe it could wipe out the investors investment? Ratification also
requires 100% AGREEMENT of all investors; if just ONE investor disagrees the act cannot
be ratified. The Trustees, servicers and their attorneys are claiming the act can be ratified,
therefore the late assignment is voidable not void. (That is the argument used in the Ill.
Opinion Federal courts are relying on). Seems to me that should be a disputable fact but
the courts are finding that because it is possible that is all that is required. This is point
I would want to argue, some New York Cases (and US Supreme Court cases) state that an
ultra vires can NOT be ratified; so the claim to be able to ratify is one that should be hotly
disputed. (See Banks Arguments below).
Whenever a court becomes aware that a contract is illegal, it has a duty
to refrain from entertaining an action to enforce the contract." California
Golf v. Cooper, (2008) 163 Cal.App.4th 1053, 1070. (Emphasis added)

KEY ONE: Borrower CAN challenge the Assignment if it is VOID.

In my humble opinion, this is probably the most important element of this
ruling. Borrowers can challenge the Assignment if it is VOID. In the majority
5

Prohibited acts are detailed in the Pooling & Servicing Agreement for the REMIC

Trust.
6

Ab initio is a Latin term for "from the beginning".

13

of the rulings that have come out over the last six or seven years, the Courts have soundly
told Borrowers they are not parties to the Assignment and therefore have no right to
challenge the Assignment....because it is voidable.

In the majority of these rulings the

Courts never even investigated whether the assignment was void or merely voidable, the
Courts just assumed it was voidable or the borrower alleged the assignment was invalid
or voidable. (See below Bank's Arguments)
Legal Dictionary describes VOID as: That which is null and completely without
legal force or binding effect.

The term void has a precise meaning that has sometimes been confused
with the more liberal term voidable. Something that is voidable may
be avoided or declared void by one or more of the parties, but such an
agreement is not void per se.
Webster describes VOID as:
law : having no legal force or effect
Black's Law (thelawdictionary.org) goes into great detail when describing
VOID: (This is a cut/paste from its website)

Null; Ineffectual; nugatory; having no legal force or binding effect; unable,

in law, to support the purpose for which it was intended. Void does not
always imply entire nullity; but it is, in a legal sense, subject to
large qualifications in view of all the circumstances calling for
its application, and the rights and interests to be affected in a given case. Brown v. Brown,
50 N. II. 53S, 552. Void, as used in statutes and by the courts, does not usually mean
that the act or proceeding is in absolute nullity. Kearney v. Vaugliau, 50 Mo. 2S4.
There is this difference between the two words void and voidable; void means that
an instrument or transaction is so nugatory and ineffectual that nothing can cure it;
voidable, when an imperfection or defect can be cured by the act
or confirmation of him who could take advantage of it. Thus, while acceptance
of rent will make good a voidable lease, it will not alter in a void lease. Wharton. The true
distinction between void and voidable acts, orders, and judgments is that the former can
always be assailed in any proceeding, and the latter only in a direct proceeding. Alexander
14

v. Nelson. 42 Ala. 462. The term void as applicable to conveyances or other

agreements, has not at all times been used with technical precision, nor
restricted to its peculiar and limited sense, as contradistinguished from
voidable; it being frequently introduced, even by legal writers and jurists,
when the purpose is nothing further than to indicate that a contract was
invalid, and not binding in law. But the distinction between the terms void and
voidable, in their application to contracts, is often one of great practical importance;
and, whenever entire technical accuracy is required, the term void can only be properly
applied to those contracts that are of no effect whatsoever, such as are a mere nullity, and
incapable of confirmation or ratification. Allis v. Billings, 6 Mete. (Mass.) 415, 30 Am.
Dec. 744. Void in part, void in toto. Curtis v. Leavitt, 15 N. Y. 9, 90.
Void things are as no things. People v. Shall, 9 Cow. (N. Y.) 778, 7S4.
Law Dictionary: http://thelawdictionary.org/void/#ixzz2sTpq81TM
As you can see, if the Assignment is VOID it would mean that the WRONG PARTY is
foreclosing because no ownership rights were established via the Assignment. (See
Foreclosure Statutes Violated with VOID Assignment below); See Glaski at Section III,
Part C, below.
GLASKI at 1095:
California's version of the principle concerning a third party's ability to challenge an
assignment has been stated in a secondary authority as follows: "Where an assignment
is merely voidable at the election of the assignor, third parties, and particularly the
obligor, cannot ... successfully challenge the validity or effectiveness of the transfer." (7
Cal.Jur.3d (2012) Assignments, 43, p. 70.)
This statement implies that a borrower can challenge an assignment of his or her
note and deed of trust if the defect asserted would void the assignment. (See Reinagel
v. Deutsche Bank National Trust Co. (5th Cir., July 11, 2013, No. 12-50569) F.3d [2013
WL 3480207, p. *3] [following majority rule that an obligor may raise any ground that
renders the assignment void, rather than merely voidable].) We adopt this view of the

15

law and turn to the question whether Glaski's allegations have presented a theory under
which the challenged assignments are void, not merely voidable.
We reject the view that a borrower's challenge to an assignment must fail once it is
determined that the borrower was not a party to, or third party beneficiary of, the
assignment agreement. Cases adopting that position "paint with too broad a brush."
(Culhane v. Aurora Loan Services of Nebraska, supra, 708 F.3d at p. 290.) Instead,
courts should proceed to the question whether the assignment was void.
Here is where the Glaski distinction arises. First, Glaski specifically and factually
alleged the Assignment was VOID; this lead the Glaski Court to ponder the effect of the
VOID or voidable elements. Upon determining that if the Assignment is VOID the
borrower could challenge the assignment, then the next step is to investigate whether it
was void or voidable. This is where the MAJORITY of Courts stopped! (Mostly because
the borrower did not specifically and factually plead the Assignment as VOID). So when
you read cases that decline to follow Glaski, you need to read the ruling and see what the
borrower plead, and what the Court considered. ( See Banks Arguments below for details
on some of the Cases being argued as of May 2014.)

And keep in mind, that when you

read those rulings almost ALL OF THEM across the board agreed with the Glaski ruling
that IF the assignment IS void, it can be challenged; where they depart is whether a late
assignment is void.

KEY TWO: Determining if the Assignment is VOID

Once the Glaski Court decided that a borrower could challenge a VOID
assignment, the next step was determining IF the Assignment was indeed
VOID versus VOIDABLE. This is where Glaski gets a little confusing, but the reasoning
of the Court is still viable and sound.

16

The Plaintiff (Glaski) alleged and plead the REMIC Trust was governed by
New York law, and for some reason the Defendants (Bank of America, Chase)
never disputed this fact. This was what was in the record and what the Appeals
Court relied on in reviewing the record. The Court did NOT assume this, again
this was what was alleged/plead; the defendants had the opportunity to dispute
this but chose not to for some reason. The arguments and legal reasoning of the
Court is still sound because even if you apply Delaware law to the argument, the
outcome is the same. (See Delaware v. New York Law below)
Based on Glaski's specific and factual allegations the assignment was VOID, the Court
looked at several things in determining whether the Assignment was VOID or merely
voidable. The three key items investigated were the Pooling & Servicing Agreement
("PSA") which is the contract between the parties who established the REMIC Trust; the
Internal Revenue Codes ("IRC") Sections 860A through 860G, which governs the
formation and management of the REMIC Trust; and New York Law which the parties
had gone on record as being the governing law of the PSA. (See Glaski Second Amended
Complaint)

A. New York Law Confirms Ultra Vires Act

Glaski alleged Washington Mutual, F.A. never transferred the Note and Deed of Trust
to the Depositor (Sponsor) of the Securitized Trust. This is a very important distinction
in what Glaski alleged versus what other pleadings from homeowners (borrowers) tend
to say. Here Glaski claims the REMIC Trust never acquired the Note and Deed of
Trust; a lot of pleadings tend to plead the theory that transfer of the Note and /or Deed
of Trust into a REMIC Trust somehow renders the Deed of Trust unenforceable. Not sure
what that logic is but clearly one theory is conceding the transferred occurred but
invalidated the Deed of Trust in the process; while others, such as Glaski, are saying no
such transferred occurred. Where the invalidation theory appears to not be supported
by law; the FAILURE of the REMIC Trust to actually acquire the Note and Deed of Trust
is in fact, supported by law and is in fact, what happened.

The REMIC Trusts never

acquired the loans and therefore are not the owners.

17

In Glaski, JP Morgan Chase Bank, N.A., claiming to be a successor in interest to

Washington Mutual7, executed and recorded the Assignment directly from JP Morgan
Chase Bank, N.A. to Bank of America, N.A. as Trustee of the REMIC Trust. This
transfer was supposed to occur no later than December 21, 2005 or 90 days after (so
approximately March 21, 2006) but according to the Assignment, was occurring three
and half years (3 1/2) later.
Glaski specifically challenged the late transfer as VOID pursuant to New York law
which Glaski alleged (and the Defendants failed to dispute) was the governing law of the
REMIC Trust. (See Glaski SAC 7) The Glaski court decided to follow the New York
statute literally because in this matter (and any REMIC Trust matter) by following the
statute, the Court was protecting the interest of the investors from adverse tax
consequences that could, well, pretty much wipe out the entire investment for the
investors.
The Glaski Court relied on a couple of different rulings that are under attack, those
being Wells Wells Fargo Bank , N.A. v. Erobobo (N.Y.Sup.Ct. 2013) 39 Misc.3d 1220(A)
[2013 WL 1831799, p. *8 and In re Saldivar (Bankr. S.D.Tex., Jun. 5, 2013, No. 11-10689)
2013 WL 2452699, p. *4. You can review the Glaski ruling below and access those cases
and read in further detail the Court's reasoning. However, Erobobo and In re Saldivar
are hardly the first cases to address the void acts of a trustee; there are many cases in New
York that address the impact of a void act.
The failure to convey to a trust per the controlling trust document is not a matter that
may be cured by the breaching party. New York law is unflinchingly clear that a trustee has
only the authority granted by the instrument under which he holds, either deed or will. This
fundamental rule has existed from the beginning and is still law. Allison & Ver Valen Co. v.
McNee, 170 Misc. 144, 146 (N.Y. Sup. Ct. 1939).
It is settled that the duties and powers of a trustee are defined by the terms of the trust
agreement and are tempered only by the fiduciary obligation of loyalty to the beneficiaries.
See, United States Trust Co. v First Natl City Bank, 57 A.D.2d 285, 295-296, affd 45 NY2d
869; Restatement [Second] of Trusts 186, comments a, d). See In re IBJ Schroder Bank &
The claim by JP Morgan Chase Bank, N.A. to be a "successor in interest" is another hotly
disputed claim. While Chase relies on the purchase & assumption agreement; federal law doesn't
support that claim. See our white paper on "JP Morgan Bank's Purchase & Assumption Scam".
7

18

Trust Co., 271 A.D.2d 322 (N.Y. App. Div. 1st Dept 2000) New Yorks law is so well-settled
regarding the limitations of a trustees power to act that the New York Estates Powers and
Trust Law Section 7-2.4 states

"every sale, conveyance or other act of the trustee in

contravention of the trust.... is void. " See Application of Muratori, 183 Misc. 967, 970 (N.Y.
Sup. Ct. 1944) See also Dye v. Lewis, 67 Misc. 2d 426, 324 NYS2d 172 (1971), mod on other
grounds, 39 App. Div. 2d 828, 332 NYS2d 968 (1972, 4th Dept.) (finding the authority of a
trustee to whom a mortgage had been delivered under a trust indenture was subject to any
limitations imposed by the trust instrument, and every act in contravention of the trust was
void.)
Whether the act is void can also be further supported by taking a look at the
prohibited acts as detailed in the PSA of the REMIC Trust. Verbiage typically can be
found under the Trustee Section and often has its own section called "Prohibited
Transactions and Activities".

B. Internal Revenue Codes Threaten Severe Tax Consequences

The Internal Revenue Codes ("IRC") that govern a REMIC Trust are Sections 860A to
860G found under 26 U.S.C. and 26 C.F.R. Key in these codes is that a mortgage must be
a qualified mortgage; all of the mortgage loans, along with the supporting contracts (Note
and Deed of Trust) must be deposited (transferred) to the REMIC Trust by the closing
date, with a 90 day "clean up" time to wrap up the paper work; and the mortgage must
have be acquired and then transferred by the sponsor (or depositor) of the REMIC Trust.
IRC 26 U.S.C. 860G8
(a) (3) Qualified mortgage
The term qualified mortgage means
(A) any obligation (including any participation or certificate of beneficial
ownership therein) which is principally secured by an interest in real property
and which
(i) is transferred to the REMIC on the startup day in exchange for regular
or residual interests in the REMIC,
(ii) is purchased by the REMIC within the 3-month period beginning on
the startup day if, except as provided in regulations, such purchase is
pursuant to a fixed-price contract in effect on the startup day, or......
8

Information from Legal Information Institute at http://www.law.cornell.edu/uscode/text/26/860G

19

26 CFR 1.860F-2 - TRANSFERS TO A REMIC9

(a) Formation of a REMIC
(1) In general. For Federal income tax purposes, a REMIC formation is
characterized as the contribution of assets by a sponsor (as defined in paragraph
(b)(1) of this section) to a REMIC in exchange for REMIC regular and residual
interests. If, instead of exchanging its interest in mortgages and related assets for
regular and residual interests, the sponsor arranges to have the REMIC issue some
or all of the regular and residual interests for cash, after which the sponsor sells its
interests in mortgages and related assets to the REMIC, the transaction is,
nevertheless, viewed for Federal income tax purposes as the sponsor's exchange of
mortgages and related assets for regular and residual interests, followed by a sale
of some or all of those interests. The purpose of this rule is to ensure that the tax
consequences associated with the formation of a REMIC are not affected by the
actual sequence of steps taken by the sponsor.
(b) Treatment of sponsor
(1) Sponsor defined. A sponsor is a person who directly or indirectly exchanges
qualified mortgages and related assets for regular and residual interests in a
REMIC. A person indirectly exchanges interests in qualified mortgages and related
assets for regular and residual interests in a REMIC if the person transfers, other
than in a non-recognition transaction, the mortgages and related assets to another
person who acquires a transitory ownership interest in those assets before
exchanging them for interests in the REMIC, after which the transitory owner then
transfers some or all of the interests in the REMIC to the first person.

KEY THREE: Foreclosure Statutes Violated with VOID Assignment

Once an Assignment is determined void, all the rest of the foreclosure
crumbles.
A Notice of Default may only issue based on actual default incurred by the
beneficiary entitled to payments on the Note. See Calif. Civil Code 2936; 2924(a)(1)(c).
"When the trustor defaults on the debt secured by the deed of trust, the beneficiary may
declare a default and make a demand on the trustee to commence foreclosure." Kachlon
v. Markowitz , (2008) 168 Cal. App. 4th 316, 334. (emphasis added).
9

In Miller v.

Information from Legal Information Institute at http://www.law.cornell.edu/cfr/text/26/1.860F-2

20

Cote, 179 Cal.Rptr. 753, (Ct of App. Fourth Dist. Div. 2 1982), the Court, in calling the
notice of default fatally defective stated:
The procedure for foreclosing on security by a trustees sale pursuant to a deed of
trust is set forth in Civil Code section 2924, et seq. The statutory requirements must be
strictly complied with, and a trustees sale based on a statutorily deficient notice of
default is invalid. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153,
98 Cal.Rptr. 735; see California Mortgage and Deed of Trust Practice (Cont.Ed. Bar
1979) s 6.40, p. 295; see also Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d.
The Substitution of Trustee can only be done by the beneficiary of the Deed of
Trust pursuant to Calif. Civil Code 2934a. If a Substitution of Trustee is not valid, the
resulting sale is VOID with no requirement for tender. See Dimrock v. Emerald
Properties, 81 Cal.App.4th 868, 878 (2000)
An invalid SOT can also lead to the argument for Slander of Title. It can be argued that
any documents filed by that entity is not subject to privilege under Calif. Civil Code 47
or Calif. Civil Code 2924, but are in fact, slander of title. The recordation of an
instrument facially valid but without underlying merit will, of course, give rise to an action
for slander of title. See Forte v. Nolfi (1972) 25 Cal.App.3d.656, 685-686 [102 Cal.Rptr.
455]. ).
The Notice of Trustee Sale must identify the proper trustee pursuant to Calif. Civil
Code 2924a(e).
If you are fighting a wrongful foreclosure, and the alleged beneficiary credit bid, then
the Trustee Deed Upon Sale can be attacked as only the beneficiary may make a credit
bid. See Calif. Civil Code 2924h.
Since Bank of America's only claim to ownership was based on the Assignment, Bank
of America does not appear to be the proper party foreclosing, and certainly had no right
to credit bid at the Trustee Sale. Therefore not only is the Assignment void, but all
documents flowing from that Assignment are void including the Notice of Default, Notice
of Trustee, Substitution of Trustee and Trustee Deed Upon Sale.

21

III. BANKS ARGUMENTS AGAINST GLASKI

Now you don't really think the Notorious Five and their ilk will just
pack up and go away do you? Homeowners won this round but the
fight is far from being over. The Notorious Five are on a campaign to discredit Glaski
and attempted to minimize its impact on California law. Unfortunately they use skilled
lawyers who know how to parse the words and rely on Judges who don't really dig down
into the cites where the Banks are now claiming that Glaski is a minority opinion and
not in the majority. It is precedent; precedent is a guidea standard a model. Do
not get lost is this claim that Glaski is not being followed. Prove the assignment is VOID
for ANY reasonand your argument is supported.

A. De-publication Efforts
The first line of attack by the Notorious Five was their effort to de-publish Glaski.
Note when the ruling first released in August of 2013 it was unpublished; through the
efforts of some homeowner advocates, the Appellate Court published the ruling. In
response, the Notorious Five who had previously sought a rehearing with the Appellate
Court (which was denied) and failed to take the matter up with the Supreme Court, felt
their next best effort was to ask the Supreme Court to de-publish the ruling, rendering it
ineffective. On February 26, 2014 the Supreme Court denied the Notorious Five's
request. Glaski is and remains Case law.
De-publication is not a common day word or procedure, many people are not
even aware this is an option or what its impact is. California, in all its glory, is the ONLY
state that allows this end run around the appellate process. At its finest, the depublication process allows the Supreme Court to stop the impact of a bad ruling without
investing resources by simply de-publishing the opinion. It is a process that, again at its
finest, makes sense. For example, say an Appeals Court rules that December follows
October and there is no November this is such a blatantly bad ruling that it would be
silly to spend 1,000s of dollars in court resources explaining why this is a bad
ruling. Yet if left to stand, it could and would create chaos in the lower courts in which
22

other Appeals Courts would eventually have to spend money defeating the ruling in their
own districts. So rather than spend anyones time on the bad ruling, the Supreme Court
simply orders the ruling be de-published and therefore, preventing anyone from using it
as any form of authority in supporting their arguments. Again, at its finest it makes
sense.
The Glaski ruling is not a blatantly bad ruling it is in fact, a well-reasoned and fair
ruling. For details on the letters submitted by the banks, and by homeowner advocates
in opposition to the bank's letters, go to http://infotofightforeclosure.com/?p=1685 . At
the bottom of the blog you can access the letters, and access is free.

B. Stare Decisis: Glaski is a PRECEDENT Opinion not a Minority Opinion!

Glaski is a California Appellate Decision and therefore, based on Stare Decisis10 is
Case law in California. In simple terms, the decisions of higher courts are binding on
lower courts. Where this gets tricky is are the decisions of higher state court rulings
binding on lower federal courts; and vice versa? How does this cross over? This is
important in understanding how banks are starting to argue Glaski and attempt to
prevent homeowners from using the power of this ruling to advance their claims.
Most of the Court's have three levels - trial (called district in Federal Courts),
appellate, and supreme11.

State (California)

Federal

United States Supreme Court

California Supreme Court

Stare Decisis et non quieta movere, meaning to adhere to a precedent and not unsettle what is
established. See In re Osborne, 76 F. 3d 306, 309 (9th Cir. 1996)
11
For more detailed information on the hierarchy of the Courts, please go to
www.infotofightforeclosure.com and click on State and/or Federal Litigation Process and Tools.
10

23

9th Circuit (Covers Western States and

has different Courthouses for each
District)
Court of Appeals (Six Districts, each
district has divisions)
|

District Court (Northern California,

Southern California, Central California,

Superior Court (also referred to as

Eastern etc.)

"Trial")

Where the Federal 9th Circuit rulings only bind those District Court's within that
particular Appeals Court's geographic territory, California's Court of Appeals binds ALL
trial courts in California! (This is a common misperception in that some legal folks,
including judges, don't think they have to follow Stare Decisis in a Court of Appeals
Ruling that is not from their district/division). Every superior court must follow any
published decision from any district and any division of any court of appeal. Cuccia v.
Superior Court, 153 Cal. App. 4th 347, 353-354 (2007). [stare decisis requires a superior
court to follow a published court of appeal decision even if the trial judge believes the
appellate decision was wrongly decided.] However, if there are several different
decisions from different Appellate Courts, then the trial court is free to pick which of the
decisions to follow. (Ergo why there is a Supreme Court which decides issues that the
different Appeals Court are not agreeing on).
A federal court, when applying state law is bound by the highest state
court authority to have ruled. See Johnson v. Frankell, 520 U.S. 911, 916 (1997)
[federal courts must follow state's highest court on question of state law); Cal. Pro-Life
Council, Inc. v. Getman, 328 F.3d 1088, 1099 (9th Cir. 2003) [federal courts must
follow state's intermediate appellate courts absent convincing evidence that the state's
highest court would rule differently). However, federal court decisions on state law are

24

not binding on state courts. Qualified Patients Ass'n v. City of Anaheim, 187 Cal. App.
4th 734, 764 (2010); Bodell v. Walbrook (9th Cir. 1997) 119 F. 3d 1411, 1422.12

This concept is very important when you start

looking at how courts are not following Stare Decisis
and/or claiming Glaski is a minority opinion. Arguing
Stare Decisis may make the difference between success or
failure in your arguments!
As of February 8, 2014 the following are some Rulings that are being used to
persuade Courts that Glaski should not be followed. It is our opinion these arguments
are flawed and it is in your interest to understand the difference between what the
banks are saying and what the rulings actually say. As you get further into each of
these rulings you will see that these rulings rely on each other and they ALL FAIL to
recognize STARE DECISIS. (Each of the rulings are included in the appendix)

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497
(May 17, 2013)

This ruling came out three months before Glaski. Key to this ruling is Jenkins

did not plead or allege the Assignment was VOID, she alleged it was "invalid". Invalid
usually results in a discussion of voidable and a voidable assignment cannot be
challenged by a 3rd party; only a VOID Assignment can be challenged.
Time does not confirm a void act. See Calif. Civil Code 3539 This is not an easy
distinction to make with the Courts the judges tend to go with the flow and forgive
the banks whatever borrowers not so much. This appears to be a major point of
distinction that must be argued clearly and with an eye to establishing the argument for
appeal. Jenkins continues to gain momentum so busting through the Judges mindset
and shifting that paradigm requires creating some real chaos that has the judge
scratching their head and then actually doing some independent thinking. (It does

12

For more details on the different stare decisis please see the Los Angeles County Bar Association Newsletter,
April 2008, Vol. 28 No. 4.

25

happen!). It appears the Court also once again, claimed that the borrower did not allege
any prejudice from the wrong party foreclosing (common sense just doesnt play in
this argument for some reason.)
[15]Despite

these facts, Jenkinss first cause of action attempts to construct a dispute

between herself and Defendants with regard to the alleged improper transfer of the
promissory note during the securitization process. However, even if the asserted
improper securitization (or any other invalid assignments or transfers of the
promissory note subsequent to her execution *515 of the note on March 23, 2007)
occurred, the relevant parties to such a transaction were the holders (transferors) of the
promissory note and the third party acquirers (transferees) of the note. Because a
promissory note is a negotiable instrument, a borrower must anticipate it can and
might be transferred to another creditor. As to plaintiff, an assignment merely
substituted one creditor for another, without changing her obligations under the note.
(Herrera, supra, 205 Cal.App.4th at p. 1507, 141 Cal.Rptr.3d 326.) 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 trusts pooling and servicing agreement, relating
to such transactions. (See In re Correia (1st Cir. BAP 2011) 452B.R. 319, 324325
[debtors lacked standing to raise violations of pooling and service agreement].)

Keep in mind that Jenkins failed to allege with specific facts the Assignment was
VOID and attacked failure to comply with governing documents rather than by
operation of law-- this is a major distinction with Glaski who not only alleged it was
VOID, he used New York law in his arguments to support this claim that the Trust was
prohibited from accepting the late transfer; and therefore by law the act was void.

Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149,
(2011)
Gomes, a pre-foreclosure not post foreclosure complaint, held that Calif. Civil Code
2924(a)(1) does not provide for a judicial action to determine whether the person initiating
26

the foreclosure process is indeed authorized by the proper party. But the issue in Gomes
was not whether the wrong entity had ordered the foreclosure, Gomes involved whether
the party selling the foreclosed property (MERS as nominee of the Lender) was authorized
to do so by the owner of the promissory note, not whether there was some infirmity in the
assignment leading to the wrongful foreclosure. Id. at 1155 (rejecting the argument a
plaintiff may test whether the person initiating the foreclosure has the authority to do so).
Thus, Gomes explicitly avoided the scenario plead in Glaski, in which the "plaintiff's
complaint identified a specific factual basis for alleging that the foreclosure was not
initiated by the correct party (emp. in original)" Id at 1156. Gomes is therefore inapposite
when evaluating it against Glaski.
Similarity, in distinguishing the facts before the Court in Ohlendorf v. American Home
Mortg. Servicing (E.D. Cal. 2010) 279 F.R.D. 575, the Gomes court noted that its decision
did not involve facts concerning whether an "assignment[....] of the deed of trust had been
improperly backdated, and thus the wrong party had initiated the foreclosure process." Id.
at 1155. Importantly the Gomes Court held that "no such infirmity [was] alleged" by
plaintiff.
The fundamental difference was that Gomes questioned whether MERS (the nominee)
had the authority; where in Glaski he specifically and factually plead that Bank of America
was NOT the proper party, and provided the basis of those allegations. (i.e. the Assignment
was void, thereby showing that Bank of America was not the lender and Chase and
California Reconveyance Corp. as Bank of America's agents, had no authority).

Diunugala v. JP Morgan Chase Bank, N.A. (Case No. 12-cv02106-WQH-NLS) (October 3, 2013)
First, Diunugala is a federal district court ruling; go back to the above chart. It is
a lower court than the Court of Appeals. Any state court judge relying on Federal
District Court decisions should be respectfully reminded that stare decisis would render
any decision in contravention to Glaski an appealable error. If it is a Federal District
Court, then there are plenty of other cases demonstrating that the Illinois court ruling
this district court judge relied on ignored the higher New York State cases that find the
assignment void.

27

In this ruling, the district court relied on another federal district court's ruling,
Deutsche Bank Nat'l Trust Co. v. Adolfo, No. 12 C759, 2013 WL 4552407 * 3 (N.D. Ill.
Aug. 28, 2013) in which that Court held that a late transfer is voidable and not void.
Apparently, relying on yet another district court ruling, Svoboda v. Bank of America,
2013 WL 4017904 (W.D. Tex.) in which that federal district court held "[B]ecause New
York law permits a beneficiary to ratify a trustee's ultra vires transactions, 'such
transactions are, accordingly, voidable".
No. That is not true. It appears the Court was looking at a family trust; not a
business/investment trust. First, ultra vires acts are those acts that cannot be ratified.
New Yorks law is so well-settled regarding the limitations of a trustees power to act that
the New York Estates Powers and Trust Law Section 7-2.4 states "every sale, conveyance
or other act of the trustee in contravention of the trust.... is void. " See Application of
Muratori, 183 Misc. 967, 970 (N.Y. Sup. Ct. 1944) See also Dye v. Lewis, 67 Misc. 2d
426, 324 NYS2d 172 (1971), mod on other grounds, 39 App. Div. 2d 828, 332 NYS2d
968 (1972, 4th Dept.) (finding the authority of a trustee to whom a mortgage had been
delivered under a trust indenture was subject to any limitations imposed by the trust
instrument, and every act in contravention of the trust was void.) See Knight v. Knight,
589 N.Y.S.2d 195, 197 (App.Div. 1992) (suggesting that a "void assignment" cannot be
ratified); See also National Surety Co. v. Manhattan Mortgage Co., 185 App.Div. 733,
736-737, 174 N.Y.S.9, affd. 230 N.Y. 545, 130 N.E. 887; Boskowitz v. Held, 15 App.Div.
306, 310-311, 44 N.Y.S. 136, affd. 153 N.Y. 666, 48 N.E. 1104. (holding that the
conveyance made in contravention of the trust, the transaction is void).

IN RE SANDRI, Bankr. Court, ND California 2013

This is a case out of the United States District Court, Northern California. Judge
Montali (who also sits on the Bankruptcy Appellate Panel) rendered this ruling in
November of 2013, after Glaski. The Court first looked at the borrowers right to challenge
a void Assignment and agreed, based on state law, that Sandri could challenge an
Assignment on the basis that it was void. Where Montali departed from the Glaski ruling
was whether the Assignment was void.
First, Montali relied on the following cases in making his analysis:

28

Patel v. Mortgage Electronic Registration Systems, Inc., 2013 WL

4029277 (N.D. Cal. Aug. 6, 2013) ("[T]he securitization process did not break
the chain of title; MERs [sic] does have authority to assign the DOT . . .; Plaintiffs
have failed to plead breach of the DOT and do not have standing to assert a breach
of any PSA; and the robo-signing allegations have not been properly pled.")
(emphasis added).

(COMMENT: here it appears Patel argued the effect of

securitization; not that the REMIC failed to acquire the loan).

Aniel v. GMAC Mortg., LLC, 2012 WL 5389706 at *4 (N.D. Cal. Nov. 2,

2012) (plaintiffs lacked standing to challenge assignment of deed of trust based
on noncompliance with pooling and service agreements) (COMMENT: The ruling
is unclear if Aniel was factually stating the transfer as void but one would think the
argument should have been the assignment was void as a matter of law; not
voidable as a matter of equity and it is unclear if that argument was made. This
is also a concern with Ganesan below).

Ganesan v. GMAC Mortgage, LLC, 2012 WL 4901440 at *4 (N.D. Cal.

Oct. 15, 2012) (citing cases) ("[T]o the extent Plaintiff bases her claim on the
theory that Defendants allegedly failed to comply with the terms of a Pooling and
Servicing Agreement, the Court notes that she lacks standing to do so because she
is neither a party to, nor a third party beneficiary of, that agreement.")

Gilbert v. Chase Home Fin., LLC, 2013 WL 2318890 at *3 (E.D. Cal.

May 28, 2013) (listing numerous federal district cases holding that borrowers
lack standing to challenge their liability under a note and security instrument by
alleging that the assignment of such instruments did not comply with a PSA)
(COMMENT: This ruling appears to be one in which Gilbert may have been
arguing the effect of the securitization rather than the acquisition never took
place).

For starters, ALL of these are district courts (trial) - a California Court Appellate Ruling
has more authority than lower district court rulings; and all of the above cases were

29

decided pre - Glaski. Remember, stare decisis. But to justify his rationale, he then
looks to California Appellate Rulings:

Siliga v. Mortgage Electronic Registrations Systems, Inc., 219 Cal.

App. 4th 75, 161 Cal. Rptr. 3d 500 (Cal. App. 2d Cir. 2013) (decided on
August 27, 2013) (borrowers lacked standing to complain about loan servicer's
and assignee's alleged lack of authority to foreclose on deed of trust where
borrowers were in default under the note, absent evidence that the original lender
would have refrained from foreclosure) (COMMENT: I have to admit this
argument from the courts escapes my logic. It appears the Court is saying doesnt
matter who forecloses stranger or not, the borrower is in default so the
foreclosure can go forward?);

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 156
Cal. Rptr. 3d 912 (Cal. App. 4th Dist. 2013)(borrower does not have the
right to bring a preemptive judicial action to determine defendants' standing to
foreclose; foreclosing party need not have beneficial interest in promissory note
and deed of trust) (COMMENT: We know that Jenkins did not argue that the
REMIC Trust had failed to acquire it by operation of law; Jenkins argued failure
to comply with the governing documents this is a key difference between Glaski
and Jenkins see above);

Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 272, 129
Cal. Rptr. 3d 467 (1st Dist. 2011) (to recover on wrongful foreclosure claim,
borrower must demonstrate that the alleged imperfection in the foreclosure
process was prejudicial; no prejudice exists where borrower was in default and
the assignment of the loan did not interfere with the borrower's ability to pay).
(COMMENT: Prejudice must be alleged!)
Once again relying on pre- Glaski rulings, it appears that Montali is reviewing the

claim of the Assignment being voidable as a "technicality" rather than void as a matter of
law and the basis of fraud. Only the proven mortgagee may maintain a foreclosure action.
The requirement that a foreclosure action be brought only by the actual mortgagee is at the

30

heart of the issues with foreclosure irregularities. If the homeowner or the court challenges
the claim of the party bringing a foreclosure action that it is the mortgagee (and was when
the foreclosure was filed), then evidentiary issues arise as to whether the party bringing the
foreclosure can in fact prove that it is the mortgagee. The issues involved are highly complex
areas of law, but despite the complexity of these issues, they should not be dismissed as mere
technicalities. Rather, they are legal requirements that must be observed both as part of due
process and as part of the contractual bargain made between borrowers and lenders13. And
this is where I think Montali gets it wrong.
The Court relies on the fact the borrower is not denying she is in default; again, since the
homeowner will lose the house anyway, therefore anybody can steal the house? That is the
logic being propounded here.

Under these circumstances, she cannot show that the assignment of the note or DOT after
the effective date of the PSA interfered with her ability to pay or that the original lender
would not have foreclosed. She therefore cannot show prejudice from the purportedly
defective assignments.

Wrong! What the Court is not looking at (and perhaps because the borrower did not
allege it), if the real creditor WAS involved, there would be an effort to resolve the issues
surrounding the loan to get it back to a performing loan. Foreclosure is NOT the way of a
true creditor; it is the way of Walls Street thugs and the banks that collect on their behalf.
Not only that, this idiocy flies in the face of basic California law. (See below.)

Yvanova v. New Century Mortgage, et al. April 2014

Oh my. I am not sure what fascinates me more about this opinion the fact that it
drives home the point of how a pro se can hurt all of us by not understanding the basic
rules of civil procedure and law; or that the Court actually relies on lower federal district
court rulings to support its decision not to follow Glaski. This case is just simply wrong,

13

Restatement (Third) of Prop. (Mortgages) 5.4(c) (1997).

31

wrong, wrong. Not because it is not right in the reasoning, but because now the Banks
will use this in arguing against Glaski.
On page 8, the Court confirms the Glaski court finding that a borrower may
challenge a nonjudicial foreclosure based on allegations that one or more transfers in
the chain of title of a trust deed is void. She is correct. Point 1 of Glaski is once
again confirmed.
Point 2 what makes the assignment void is where once again, the Court refuses
to follow Glaski noncompliance with the terms of a pooling and servicing agreement
would render an assignment void. Citing to three lower federal rulings (so much for
stare Decisis!) the Court pointedly follows Jenkins (which never investigated the
assignment as void) and it appears that the borrower failed to allege the assignment
was void as a matter of law.
As a quick side note, because I see this time and time again, many pro ses appear to
misinterpret the rulings that state that pro se rulings are not to be held to the same
standard as that of an attorney. Being held to the same standard is NOT the same as
being responsible for following basic rules of civil procedure and law. The analogy that
comes to mind of that of a high school baseball team and a professional baseball team;
while the standards of performance for the high school team are lower than those of a
professional ball team, BOTH teams follow the SAME RULES and PROCEDURES for
playing the game.

C. Alleging Prejudice
One of the challenges in the Bank's argument is whether the homeowner /borrower
alleges prejudice. In fact, the Courts continue to make statements similar to the
following:
"The validity of the assignment does not affect whether the borrower owes its
obligations, but only to whom the borrower is obligated"
In other words, it appears the Courts are saying that the borrower is in default, and
would lose their house anyways. Who conducts the foreclosure does not change the fact
that the homeowner was subject to the foreclosure. Put another way, this would be like

32

your falling behind on your car payment; a thief steals your car and you sue the thief to
recover your car. The thief's defense, and court's reasoning to allow the thief to keep your
car is..." you were behind in your payments and would have lost the car anyways so how
were you prejudice?? "
Identifying the true lender, the true "creditor" entitled to the borrower's payments is
not only one of simple Article III standing; different REMIC Trusts have different
incentives and ability to settle issues. PSA terms, liquidity, capital requirements, credit
risk exposure, and compensation differ between servicers/trustees and portfolio lenders.
If the loans weren't properly transferred via the securitization, then they are still held in
portfolio by someone. This means borrowers have a strong interest in litigating against
the real party in interest. The parties, who may be foreclosing for the wrong entity, may
have more incentive to foreclose than to work towards having a performing loan. (Such
as pretending one party owns it because they really dont know who owns it.)
The other issue is if the entity that the banks are foreclosing for is the wrong entity,
who have they been sending the payments to? If, however, the maker pays someone other
than a person entitled to enforceeven if that person physically possesses the note the
maker signedthe payment generally has no effect on the obligations under the note. The
maker still owes the money to the person entitled to enforce, Miller & Harrell, supra,
6.03[6][b][ii], and, at best, has only an action in restitution to recover the mistaken
payment. See UCC 3418(b). In re Veal (B.A.P. 9th Cir. 2011) 450 B.R. 897, 910.
Borrowers are prejudiced and harmed in many different ways. Arguing the clouding
of title is a particular harm; as is the potential for duplicative claims. Whether other
claims have been made against the borrower is NOT the issue; the potential of duplicative
claims should be enough to argue harm;

both California and Federal law are clear a

borrower should only have to pay one satisfaction and therefore, clear and positive
evidence of the "creditors" claim must be without question.
So when you consider what the prejudice is from a void assignment, it would be
entirely appropriate to question the servicer's interest as being in direct conflict with both
the borrower and real creditors goal of a performing loan; and that any payments made
to date to the wrong entity leaves the borrower open to potential future claims and
potential is harm. "the trustor must pay the debt . . . according to its terms to protect the

33

property from loss by foreclosure." (4 Miller & Starr, Cal. Real Estate, supra, Deeds of
Trust and Mortgages, 10:71, pp. 216-217, fn. omitted.)

IV. DELAWARE VERSUS NEW YORK LAW -Would the Glaski

Decision have been different?
CHAPTER 38. TREATMENT OF DELAWARE
STATUTORY TRUSTS as referenced by the banks attorneys
falls under Chapter 12 Decedents Estates and Fiduciary Relations - Fiduciary
Relations as does CHAPTER 35. TRUSTS - Subchapter III. General
Provisions. Chapter 35. which incorporates Statutory Trusts states in 3536:
Every direct or indirect assignment, or act having the effect of an
assignment, whether voluntary or involuntary, by a beneficiary of a trust of
the beneficiarys interest in the trust or the trust property or the income or
other distribution therefrom that is unassignable by the terms of the
instrument that creates or defines the trust is void. [emphasis added]
Instrument as used here refers to governing instrument as used in 3801 which is
the PSA.

V. FOLLOW THE LEADER

Glaski is a gem. Not only was Glaski clear and to the point in his
pleading; the Court did a through and well-reasoned investigation
into the VOID aspect of the assignment. So follow Glaski, not blindly but intelligently
and respectfully. Keep in mind that a late transfer into a REMIC Trust is not the only
reason why an assignment may be found void. Other Assignments we have looked at
which could be subject to an argument of being VOID include:

MERS Role

34

When MERS is involved in the Deed of Trust ("DOT") the DOT is a four party
instrument with the Borrower, the Lender, the trustee, and MERS as beneficiary as
nominee of the Lender. The Lender's rights regarding the Loan are pervasive. The Lender
is entitled to receive all payments under the Note, to control enforcement of the DOT
under its terms, and only the Lender is entitled to conduct a nonjudicial foreclosure. 14
MERS has none of these rights under the DOT and is not even mentioned in the Note.
MERS is not given any independent authority to enforce the DOT under its terms, and
its status as beneficiary under the DOT is only "nominal." While the borrower
acknowledged in the DOT that MERS can exercise the Lender's rights as "necessary to
comply with law or custom, 15 this acknowledgement is not accompanied by any actual
allocation of authority to non-judicially foreclose on the Property, nor is such authority
allocated in any other document in the record. See also, e.g., LaSalle Bank Nat'l Ass'n v.
Lamy, No. 030049/2005, 2006 NY Slip Op 51534U, slip op. 2 (N.Y. Sup. Ct.
2006); MERS v. Saunders, 2 A.3d 289, 295 (Me. 2010) ("MERS' only right is to record
the mortgage. Its designation as the `mortgagee of record' in the document does not
change or expand that right...."). Defendants' authority to foreclose cannot, therefore, be
derived from MERS because MERS never held such authority. Shannon v. General
Petroleum Corp., 47 Cal. App. 2d 651, 661 (1941) (assignment can only carry rights
owned by the assignor.)

Under the DOT, the Lender is secured the right to: "(i) the repayment of the Loan, and all
renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's
covenants and agreements under this Security Instrument and the Note." In addition, under the
covenants executed between the Lender and Plaintiff, the Lender is granted exclusive authority
to accelerate repayment, "give notice to Borrower prior to acceleration," "invoke the power of
sale" through written notice to the Trustee in the event of default, and appoint successor
trustees. Find this section in your DOT and quote its location here.
15
The DOT provides, "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 of 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
or cancelling this Security Instrument." Find this section in your DOT and quote its
location here (emphasis added).
14

35

Assignments from Mortgage Electronic Registration Systems, Inc. (MERS)

as Nominee for a bankrupt entity (or a bankrupt entity that has a
liquidating trustee)
By statute, Calif. Civil Code 2356, the "agency relationship" between the bankruptcy
entity and MERS is terminated.
2356. (a) Unless the power of an agent is coupled with an interest
in the subject of the agency, it is terminated by any of the
following:
(1) Its revocation by the principal.
(2) The death of the principal.
(3) The incapacity of the principal to contract.
(b) Notwithstanding subdivision (a), any bona fide transaction entered
into with an agent by any person acting without actual knowledge of the
revocation, death, or incapacity shall be binding upon the principal, his or
her heirs, devisees, legatees, and other successors in interest.
(c) Nothing in this section shall affect the provisions of Section
1216.
(d) With respect to a proxy given by a person to another person relating to
the exercise of voting rights, to the extent the provisions of this section
conflict with or contravene any other provisions of the statutes of California
pertaining to the proxy, the latter provisions shall prevail.
In the case of New Century Mortgage Company (and Homes123), the bankruptcy
court signed an order approving the rejection (termination) of executory contracts on
April 2 2007; MERS was notified on March 19, 2008 the contract was being terminated
(repudiated). The order took effect ten days later on March 29, 2008. So it can be argued
that the agency relationship was terminated both by statue ( 2356) and by notice.
When a bankruptcy is involved, the issues become even more problematic for MERS,
especially if the bankrupt company was liquated.

For example, Deutsche relies on

Assignments, via MERS for New Century Mortgage and Homes123 (part of New Century)
that are dated after April 2, 2007. The Assignment of Deed of Trust Deutsche relies on
for its alleged interest, is void for several reasons, including the fact that NCMC had no
assets to transfer after August 1, 2008.
August 1, 2008 is the effective date of the New Century Liquidating Trust in joint
bankruptcy. In re New Century TRS Holdings, Inc. v. New Century Liquidating Trust,
407 B.R. 576 (2009) at 585 all assets of NCMC and NC Capital were distributed to the
Liquidating Trustee. Deutsche, a major creditor in the In re New Century TRS Holdings,
36

Inc. Case No. 07-10416 (KJC) is aware that all assets were transferred to the Liquidating
Trustee; and therefore, MERS as a Nominee of NCMC had no assets to transfer on July
27, 2011.
Several judges have called Deutsche, and other trustees, on their fraud in using these
Assignments. Any entity claiming interest by this "Assignment" from a corporation
without assets on the date of the assignment and without express written authorization
from the Liquidating Trustee reflected on the assignment is a nullity, an unfair and
deceptive business practice and a fraud upon the Court. See Deutsche Bank National
Trust Company as Trustee under Pooling & Servicing Agreement Series Index 2006AR6 v. Maraj, 856 N.Y.S. 2d 497, WL 253926; Kawamata Farms v. United Agri
Products, 88 Hawaii 214 (1997) at [69] [70][ 71][72][ 73][ 74] at 257-258

Assignments from MERS in which MERS fails to identify the principal for
whom it is assigning.
Example:

In the above example, it appears that MERS violated the California Statute of Frauds
1624(a) (3) and Calif. Civil Code 2309 by failing to subscribe the principal for whom
it claimed to act and said assignment is void as a matter of law. See Calif. Civil Code
2309; ("In general, if some person executes a deed on behalf of the grantor, the grantor's
authorization must be in writing") See Miller & Starr, Cal. Real Estate (3rd ed. 2000)
Deeds, section 8.27, p. 52. Cases going back more than one hundred years have affirmed
this rule. Fisher v. Salmon, 1 Cal. 413 (1815) (holding an instrument conveying an interest
in real property executed by an agent in the agent's own name is void); Videau V. Griffin,
21 Cal. 389, 391 (1863) (where a deed is executed by an attorney without written authority,
37

no subsequent parole acknowledgement by the principal will make that conveyance

valid.)
It is important to look at the whole assignment and see if MERS lists the party to whom
it is acting the principal may be listed in the body of the assignment, but the signature
may be missing the principal.
The burden of proving an assignment falls upon the party asserting rights thereunder
(Read v. Buffum, supra, 79 Cal. 77 [21 P. 555, 12 Am.St.Rep. 131]; Ford v. Bushard, 116
Cal. 273 [48 P. 119]; Bovard v. Dickenson, 131 Cal. 162 [63 P. 162]; Nakagawa v.
Okamoto, 164 Cal. 718 [130 P. 707]). In an action by an assignee to enforce an assigned
right, the evidence must not only be sufficient to establish the fact of assignment when
that fact is in issue Quan Wye v. Chin Lin Hee, 123 Cal. 185 [55 P. 783] but the measure
of sufficiency requires that the evidence of assignment be clear and positive to protect an
obligor from any further claim by the primary obligee Gustafson v. Stockton etc. R. R.
Co., 132 Cal. 619 [64 P. 995].
Assignment of the Deed of Trust without the Note is a Nullity
Example:

Even if the Court were to come to the conclusion MERS' status as the nominal
beneficiary of the DOT may have allowed it to assign that limited status, this authority

38

does not convey a right to enforce the Loan. An assignment of a mortgage without
assignment of the corresponding debt is a nullity under controlling law. Carpenter v.
Longan, 83 U.S. 271, 275 (1872); Kelley v. Howarth, 39 Cal. 2d 179, 192 (1952); Johnson
v. Razy, 181 Cal. 342, 344 (1919)("A mortgage is mere security for the debt, and it cannot
pass without transfer of the debt."); Polhemus v. Trainer, 30 Cal. 686, 688
(1866) (interest in the collateral subject to the mortgage does not pass "unless the debt
itself [is] assigned."). See also Kelley v. Upshaw (1952) 39 Cal.2d 179, 192 (assignment
of only the deed without a transfer of the promissory note is completely ineffective); see
also Restatement (3d) of Property (Mortgages) 5.4[[a] mortgage may be enforced only
by, or in behalf of, a person who is entitled to enforce the obligation that the mortgage
secures.)
Within California's comprehensive statutory nonjudicial foreclosure scheme found at
Calif. Civil Code sections 2920-2955, three separate statutes corroborate that the secured
debt must be assigned with the deed of trust. These statutes are:
Calif. Civil Code 2935 (notice of an assignment of a mortgage does not change
the borrowers' obligation to make payments to the holder of the note)
Calif. Civil Code 2936 (transfer of a note carries with it an assignment of the
debt, not vice versa)
Calif. Civil Code

2937 (borrowers must be notified of transfers of servicing

rights).
There are many different ways in which an Assignment may be void; while Glaski
details a late assignment; the key here is a VOID Assignment can be challenged. The next
step is making sure you understand what makes the Assignment void and then factually
and specifically alleging those facts in your pleadings.

V. PLEADING THE ELEMENTS OF GLASKI

A void assignment could be the basis of numerous different claims (or causes of
action) - cancellation of instruments, wrongful foreclosure, fraud, unfair and deceptive
business practice, slander of title to name a few. These then become the basis of
39

additional claims. It is not within the scope of this paper to detail the elements of a claim
- consulting with an attorney who understands these issues is of paramount
importance. Each claim has different elements and you can't just cite the elements,
you have to state the facts and clearly allege the harm or prejudice. (Some require harm;
some prejudice, some both).
There is a lot of chatter reading that a Court declines to follow Glaski requires an
actual reading of that claim the real battle for the last five or six years has been that
borrowers could not challenge the assignment. Between Glaski, with Vogan v.
Wells Fargo Bank, NA, 2011 W.L. 5826016 (2011) as the front runner the courts DO
agree that if the assignment is void, it can be challenged.
Good luck and make sure to visit the website as we update with more of these
rulings and their impact on Glaski.

40

Glaski Second Amended Complaint16

16

(For the full document please go to www.infotofightforeclosure.com VICTORY page)

41

Page CITES have been removed; make sure to refer to the live version of Google
for page cites.
Glaski v. Bank of America, Inc., et al RULING (from Google Scholar)
218 Cal.App.4th 1079 (2013)
160 Cal. Rptr. 3d 449
THOMAS A. GLASKI, Plaintiff and Appellant,
v.
BANK OF AMERICA, NATIONAL ASSOCIATION, et al., Defendants and
Respondents.
No. F064556.
Court of Appeals of California, Fifth District.
July 31, 2013.
Law Offices of Richard L. Antognini, Richard L. Antognini; Law Offices of Catarina M.
Benitez and Catarina M. Benitez for Plaintiff and Appellant.
AlvaradoSmith, Theodore E. Bacon and Mikel A. Glavinovich for Defendants and
Respondents.
OPINION
FRANSON, J.
INTRODUCTION
Before Washington Mutual Bank, FA (WaMu), was seized by federal banking regulators
in 2008, it made many residential real estate loans and used those loans as collateral for
mortgage-backed securities.[1] Many of the loans went into default, which led to
nonjudicial foreclosure proceedings. Some of the foreclosures generated lawsuits, which
raised a wide variety of claims. The allegations that the instant case shares with some of
the other lawsuits are that (1) documents related to the foreclosure contained forged
signatures of Deborah Brignac and (2) the foreclosing entity was not the true owner of the
loan because its chain of ownership had been broken by a defective transfer of the loan to
the securitized trust established for the mortgage-backed securities. Here, the specific
42

defect alleged is that the attempted transfers were made after the closing date of the
securitized trust holding the pooled mortgages and therefore the transfers were
ineffective.
In this appeal, the borrower contends the trial court erred by sustaining defendants'
demurrer as to all of his causes of action attacking the nonjudicial foreclosure. We
conclude that, although the borrower's allegations are 1083*1083 somewhat confusing
and may contain contradictions, he nonetheless has stated a wrongful foreclosure claim
under the lenient standards applied to demurrers. We conclude that a borrower may
challenge the securitized trust's chain of ownership by alleging the attempts to transfer
the deed of trust to the securitized trust (which was formed under N.Y. law) occurred after
the trust's closing date. Transfers that violate the terms of the trust instrument are void
under New York trust law, and borrowers have standing to challenge void assignments of
their loans even though they are not a party to, or a third party beneficiary of, the
assignment agreement.
We therefore reverse the judgment of dismissal and remand for further proceedings.
FACTS
The Loan
Thomas A. Glaski, a resident of Fresno County, is the plaintiff and appellant in this
lawsuit. The operative second amended complaint (SAC) alleges the following: In July
2005, Glaski purchased a home in Fresno for $812,000 (the Property). To finance the
purchase, Glaski obtained a $650,000 loan from WaMu. Initial monthly payments were
approximately $1,700. Glaski executed a promissory note and a deed of trust that
granted WaMu a security interest in the Property (the Glaski deed of trust). Both
documents were dated July 6, 2005. The Glaski deed of trust identified WaMu as the
lender and the beneficiary, defendant California Reconveyance Company (California
Reconveyance) as the trustee, and Glaski as the borrower.
Paragraph 20 of the Glaski deed of trust contains the traditional terms of a deed of trust
and states that the note, together with the deed of trust, can be sold one or more times
without prior notice to the borrower. In this case, a number of transfers purportedly
occurred. The validity of attempts to transfer Glaski's note and deed of trust to a
securitized trust is a fundamental issue in this appeal.
Paragraph 22 another provision typical of deeds of trust sets forth the remedies
available to the lender in the event of a default. Those remedies include (1) the lender's
43

right to accelerate the debt after notice to the 1084*1084 borrower and (2) the lender's
right to "invoke the power of sale" after the borrower has been given written notice of
default and of the lender's election to cause the property to be sold. Thus, under
the Glaski deed of trust, it is the lender-beneficiary who decides whether to pursue
nonjudicial foreclosure in the event of an uncured default by the borrower. The trustee
implements the lender-beneficiary's decision by conducting the nonjudicial foreclosure.[2]
Glaski's loan had an adjustable interest rate, which caused his monthly loan payment to
increase to $1,900 in August 2006 and to $2,100 in August 2007. In August
2008, Glaski attempted to work with WaMu's loan modification department to obtain a
modification of the loan. There is no dispute that Glaski defaulted on the loan by failing
to make the monthly installment payments.
Creation of the WaMu Securitized Trust
In late 2005, the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust was
formed as a common law trust (WaMu Securitized Trust) under New York law. The corpus
of the trust consists of a pool of residential mortgage notes purportedly secured by liens
on residential real estate. LaSalle Bank, N.A., was the original trustee for the WaMu
Securitized Trust.[3] Glaski alleges that the WaMu Securitized Trust has no continuing
duties other than to hold assets and to issue various series of certificates of investment. A
description of the certificates of investment as well as the categories of mortgage loans is
included in the prospectus filed with the Securities and Exchange Commission (SEC) on
October 21, 2005. Glaski alleges that the investment certificates issued by the WaMu
Securitized Trust were duly registered with the SEC.
The closing date for the WaMu Securitized Trust was December 21, 2005, or 90 days
thereafter. Glaski alleges that the attempt to assign his note and deed of trust to the
WaMu Securitized Trust was made after the closing date and, therefore, the assignment
was ineffective. (See fn. 12, post.)
WaMu's Failure and Transfers of the Loan
In September 2008, WaMu was seized by the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation (FDIC) was appointed as a receiver for WaMu. That same
day, the FDIC, in its capacity as receiver, sold the assets and liabilities of WaMu to
defendant JPMorgan Chase Bank, N.A. (JP Morgan). This transaction was documented
by a "PURCHASE AND ASSUMPTION AGREEMENT WHOLE BANK" (boldface and
underscoring omitted) between the FDIC and JP Morgan dated as of September 25, 2008.
44

If Glaski's loan was not validly transferred to the WaMu Securitized Trust, it is possible,
though not certain, that JP Morgan acquired the Glaski deed of trust when it purchased
WaMu assets from the FDIC.[4] JP Morgan also might have acquired the right to service
the loans held by the WaMu Securitized Trust.
In September 2008, Glaski spoke to a representative of defendant Chase Home Finance
LLC (Chase), [5] which he believed was an agent of JP Morgan, and made an oral
agreement to start the loan modification process. Glaski believed that Chase had taken
over loan modification negotiations from WaMu.
On December 9, 2008, two documents related to the Glaski deed of trust were recorded
with the Fresno County Recorder: (1) an "ASSIGNMENT OF DEED OF TRUST" and (2)
a "NOTICE OF DEFAULT AND ELECTION TO SELL UNDER DEED OF TRUST"
(boldface omitted; hereinafter the NOD). The assignment stated that JP Morgan
transferred and assigned all beneficial interest under the Glaski deed of trust to
"LaSalle Bank NA as trustee for WaMu [Securitized Trust]" together with the note
described in and secured by the Glaski deed of trust.[6]
Notice of Default and Sale of the Property
The NOD informed Glaski that (1) the Property was in foreclosure because he was behind
in his payments [7] and (2) the Property could be sold without any court action. The NOD
also stated that "the present beneficiary under" the Glaski deed of trust had delivered to
the trustee a written declaration and demand for sale. According to the NOD, all sums
secured by the deed of trust had been declared immediately due and payable and that the
beneficiary elected to cause the Property to be sold to satisfy that obligation.
The NOD stated the amount of past due payments was $11,200.78 as of December 8,
2008.[8] It also stated: "To find out the amount you must pay, or to arrange for payment
to stop the foreclosure ... contact: JPMorgan Chase Bank, National Association, at 7301
BAYMEADOWS WAY, JACKSONVILLE, FL 32256, (877) 926-8937."
Approximately three months after the NOD was recorded and served, the next official step
in the nonjudicial foreclosure process occurred. On March 12, 2009, a "NOTICE OF
TRUSTEE'S SALE" was recorded by the Fresno County Recorder (notice of sale). The sale
was scheduled for April 1, 2009. The notice stated that Glaski was in default under his
deed of trust and estimated the amount owed at $734,115.10.

45

The notice of sale indicated it was signed on March 10, 2009, by Deborah Brignac, as vicepresident for California Reconveyance. Glaski alleges that Brignac's signature was
forged to effectuate a fraudulent foreclosure and trustee's sale of his primary residence.
Glaski alleges that from March until May 2009, he was led to believe by his negotiations
with Chase that a loan modification was in process with JP Morgan.
Despite these negotiations, a nonjudicial foreclosure sale of the Property was conducted
on May 27, 2009. Bank of America, as successor trustee for the WaMu Securitized
Trust and beneficiary under the Glaski deed of trust, was the highest bidder at the sale.
1087*1087 On June 15, 2009, another "ASSIGNMENT OF DEED OF TRUST" was
recorded with the Fresno County Recorder. This assignment, like the assignment
recorded in December 2008, identified JP Morgan as the assigning party. The entity
receiving all beneficial interest under the Glaski deed of trust was identified as Bank of
America, "as successor by merger to `LaSalle Bank NA as trustee for WaMu
[Securitized Trust]....'"[9] The assignment of deed of trust indicates it was signed by
Brignac, as vice-president for JP Morgan. Glaski alleges that Brignac's signature was
forged.
The very next document filed by the Fresno County Recorder on June 15, 2009, was a
"TRUSTEE'S DEED UPON SALE." (Boldface omitted.) The trustee's deed upon sale
stated that California Reconveyance, as the duly appointed trustee under the Glaski deed
of trust, granted and conveyed to Bank of America, as successor by merger to
LaSalle Bank as trustee for the WaMu Securitized Trust, all of its right, title and interest
to the Property. The trustee's deed upon sale stated that the amount of the unpaid debt
and costs was $738,238.04 and that the grantee, paid $339,150 at the trustee's sale, either
in lawful money or by credit bid.
PROCEEDINGS
In October 2009, Glaski filed his original complaint. In August 2011, Glaski filed the
SAC, which alleged the following numbered causes of action:
(1) Fraud against JPMorgan and California Reconveyance for the alleged forged
signatures of Deborah Brignac as vice-president for California Reconveyance and then as
vice-president of JPMorgan;

46

(2) Fraud against all defendants for their failure to timely and properly transfer the
Glaski loan to the WaMu Securitized Trust and their representations to the contrary;
(3) Quiet title against Bank of America, Chase, and California Reconveyance based on
the broken chain of title caused by the defective transfer of the loan to the WaMu
Securitized Trust;
(4) Wrongful foreclosure against all defendants, based on the forged signatures of
Deborah Brignac and the failure to timely and properly transfer the Glaski loan to the
WaMu Securitized Trust;
(5) Declaratory relief against all defendants, based on the above acts by defendants;
1088*1088 (8) Cancellation of various foreclosure documents against all defendants,
based on the above acts by the defendants; and
(9) Unfair practices under Business and Professions Code section 17200 et seq. against
all defendants.
Among other things, Glaski raised questions regarding the chain of ownership, by
contending that defendants were not the lenders or beneficiaries under his deed of trust
and, therefore, did not have the authority to foreclose.
In September 2011, defendants filed a demurrer that challenged each cause of action in
the SAC on the grounds that it failed to state facts sufficient to constitute a claim for relief.
With respect to the wrongful foreclosure cause of action, defendants argued
that Glaski failed to allege (1) any procedural irregularity that would justify setting aside
the presumptively valid trustee's sale and (2) that he could tender the amount owed if the
trustee's sale were set aside.
To support their demurrer to the SAC, defendants filed a request for judicial notice
concerning (1) order No. 2008-36 of the Office of Thrift Supervision, dated September
25, 2008, appointing the FDIC as receiver of Washington Mutual Bank and (2) the
Purchase and Assumption Agreement Whole Bank between the FDIC and JP Morgan
dated as of September 25, 2008, concerning the assets, deposits and liabilities of
Washington Mutual Bank.[10]
Glaski opposed the demurrer, arguing that breaks in the chain of ownership of his deed
of trust were sufficiently alleged. He asserted that Brignac's signature was forged and the
47

assignment bearing that forgery was void. His opposition also provided a more detailed
explanation of his argument that his deed of trust had not been effectively transferred to
the WaMu Securitized Trust that held the pool of mortgage loans. Thus,
in Glaski's view, Bank of America's claim as the successor trustee is flawed because
the trust never held his loan.
On November 15, 2011, the trial court heard argument from counsel regarding the
demurrer. Counsel for Glaski argued, among other things, that the possible ratification
of the allegedly forged signatures of Brignac presented an issue of fact that could not be
resolved at the pleading stage.
Later that day, the court filed a minute order adopting its tentative ruling. As background
for the issues presented in this appeal, we will describe the 1089*1089 trial court's ruling
on Glaski's two fraud causes of action and his wrongful foreclosure cause of action.
The ruling stated that the first cause of action for fraud was based on an allegation that
defendants misrepresented material information by causing a forged signature to be
placed on the June 2009 assignment of deed of trust. The ruling stated that if the
signature of Brignac was forged, California Reconveyance "ratified the signature by
treating it as valid." As an additional rationale, the ruling cited Gomes v. Countrywide
Home Loans, Inc. (2011) 192 Cal.App.4th 1149 [121 Cal.Rptr.3d 819] (Gomes) for the
proposition that the exhaustive nature of California's nonjudicial foreclosure scheme
prohibited the introduction of additional requirements challenging the authority of the
lender's nominee to initiate nonjudicial foreclosure.
As to the second cause of action for fraud, the ruling noted the allegation that the
Glaski deed of trust was transferred to the WaMu Securitized Trust after the trust's closing
date and summarized the claim as asserting that the Glaski deed of trust had been
improperly transferred and, therefore, the assignment was void ab initio. The ruling
rejected this claim, stating: "[T]o reiterate, Gomes v. Countrywide, supra holds that there
is no legal basis to challenge the authority of the trustee, mortgagee, beneficiary, or any
of their authorized agents to initiate the foreclosure process citing Calif. Civil Code 2924,
subd. (a)(1)."
The ruling stated that the fourth cause of action for wrongful foreclosure was "based upon
the invalidity of the foreclosure sale conducted on May 27, 2009 due to the `forged'
signature of Deborah Brignac and the failure of Defendants to `provide a chain of title of
the note and the mortgage.'" The ruling stated that, as explained earlier, "these

48

contentions are meritless" and sustained the general demurrer to the wrongful
foreclosure claim without leave to amend.
Subsequently, a judgment of dismissal was entered and Glaski filed a notice of appeal.
DISCUSSION
I. Standard of Review
The trial court sustained the demurrer to the SAC on the ground that it did "not state facts
sufficient to constitute a cause of action." (Code Civ. Proc., 430.10, subd. (e).) The
standard of review applicable to such an order is well settled. "[W]e examine the
complaint de novo to determine whether it alleges facts sufficient to state a cause of action
under any legal theory...." 1090*1090 (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th
412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189].)
When conducting this de novo review, "[w]e give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we
treat the demurrer as admitting all material facts properly pleaded, but do not assume the
truth of contentions, deductions or conclusions of law. [Citations.]" (City of Dinuba v.
County of Tulare (2007) 41 Cal.4th 859, 865 [62 Cal.Rptr.3d 614, 161 P.3d 1168].) Our
consideration of the facts alleged includes "those evidentiary facts found in recitals of
exhibits attached to a complaint." (Satten v. Webb (2002) 99 Cal.App.4th 365, 375 [121
Cal.Rptr.2d 234].) "We also consider matters which may be judicially noticed." (Serrano
v. Priest (1971) 5 Cal.3d 584, 591 [96 Cal.Rptr. 601, 487 P.2d 1241]; see Code Civ. Proc.,
430.30, subd. (a) [use of judicial notice with demurrer].) Courts can take judicial notice
of the existence, content and authenticity of public records and other specified
documents, but do not take judicial notice of the truth of the factual matters asserted in
those documents. (Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063 [31
Cal.Rptr.2d 358, 875 P.2d 73], overruled on other grounds in In re Tobacco Cases
II (2007) 41 Cal.4th 1257, 1262 [63 Cal.Rptr.3d 418, 163 P.3d 106].)
We note "in passing upon the question of the sufficiency or insufficiency of a complaint
to state a cause of action, it is wholly beyond the scope of the inquiry to ascertain whether
the facts stated are true or untrue" as "[t]hat is always the ultimate question to be
determined by the evidence upon a trial of the questions of fact." (Colm v. Francis (1916)
30 Cal.App. 742, 752 [159 P. 237].)

49

II. Fraud
A. Rules for Pleading Fraud
(1) The elements of a fraud cause of action are (1) misrepresentation, (2) knowledge of the
falsity or scienter, (3) intent to defraud that is, induce reliance, (4) justifiable reliance,
and (5) resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [49
Cal.Rptr.2d 377, 909 P.2d 981].) (2) These elements may not be pleaded in a general or
conclusory fashion. (Id. at p. 645.) Fraud must be pled specifically that is, a plaintiff
must plead facts that show with particularity the elements of the cause of action. (Ibid.)
In their demurrer, defendants contended facts establishing detrimental reliance were not
alleged.
B. First Cause of Action for Fraud, Lack of Specific Allegations of Reliance
Glaski's first cause of action, which alleges a fraud implemented through forged
documents, alleges that defendants' act "caused Plaintiff to rely on the recorded
documents and ultimately lose the property which served as his primary residence, and
caused Plaintiff further damage, proof of which will be made at trial."
This allegation is a general allegation of reliance and damage. It does not identify the
particular acts Glaski took because of the alleged forgeries. Similarly, it does not identify
any acts that Glaski did not take because of his reliance on the alleged forgeries. Therefore,
we conclude that Glaski's conclusory allegation of reliance is insufficient under the rules
of law that require fraud to be pled specifically. (Lazar v. Superior Court, supra, 12
Cal.4th at p. 645.)
The next question is whether the trial court abused its discretion in sustaining the
demurrer to the first fraud cause of action without leave to amend.
In March 2011, the trial court granted Glaski leave to amend when ruling on defendants'
motion for judgment on the pleadings. The court indicated that Glaski's complaint had
jumbled together many different statutes and theories of liability and directed Glaski to
avoid "chain letter" allegations in his amended pleading.
Glaski's first amended complaint set forth two fraud causes of action that are similar to
those included in the SAC.

50

Defendants demurred to the first amended complaint. The trial court's minute order
states: "Plaintiff is advised for the last time to plead each cause of action such that only
the essential elements for the claim are set forth without reincorporation of lengthy
`general allegations'. In other words, the `facts' to be pleaded are those upon which
liability depends (i.e., `the facts constituting the cause of action')."
After Glaski filed his SAC, defendants filed a demurrer. Glaski then filed an opposition
that asserted he had properly alleged detrimental reliance. He did not argue he could
amend to allege specifically the action he took or did not take because of his reliance on
the alleged forgeries.
Accordingly, Glaski failed to carry his burden of demonstrating he could allege with the
requisite specificity the elements of justifiable reliance and 1092*1092 damages resulting
from that reliance. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703
P.2d 58] [the burden of articulating how a defective pleading could be cured is squarely
on the plaintiff].) Therefore, we conclude that the trial court did not abuse its discretion
when it denied leave to amend as to the SAC's first cause of action for fraud.
C. Second Fraud Cause of Action, Lack of Specific Allegations of Reliance
Glaski's second cause of action for fraud alleged that WaMu failed to transfer his note
and deed of trust into the WaMu Securitized Trust back in 2005. Glaski further alleged,
in essence, that defendants attempted to rectify WaMu's failure by engaging in a
fraudulent scheme to assign his note and deed of trust into the WaMu Securitized Trust.
The scheme was implemented in 2008 and 2009 and its purpose was to enable
defendants to fraudulently foreclose against the Property.
The second cause of action for fraud attempts to allege detrimental reliance in the
following sentence: "Defendants, and each of them, also knew that the act of recording
the Assignment of Deed of trust without the authorization to do so would cause Plaintiff
to rely upon Defendants' actions by attempting to negotiate a loan modification with
representatives of Chase Home Finance, LLC, agents of JP MORGAN." The assignment
mentioned in this allegation is the assignment of deed of trust recorded in June 2009
no other assignment of deed of trust is referred to in the second cause of action.
The allegation of reliance does not withstand scrutiny. The act of recording the allegedly
fraudulent assignment occurred in June 2009, after the trustee's sale of the Property had
been conducted. If Glaski was induced to negotiate a loan modification at that time, it is
unclear how negotiations occurring after the May 2009 trustee's sale could have diverted
51

him from stopping the trustee's sale. Thus, Glaski's allegation of reliance is not
connected to any detriment or damage.
Because Glaski has not demonstrated how this defect in his fraud allegations could be
cured by amendment, we conclude that the trial court did not abuse its discretion in
denying leave to amend the second cause of action in the SAC.
III. Wrongful Foreclosure by Nonholder of the Deed of Trust
A. Glaski's Theory of Wrongful Foreclosure
Glaski's theory that the foreclosure was wrongful is based on (1) the position that
paragraph 22 of the Glaski deed of trust authorizes only the 1093*1093 lenderbeneficiary (or its assignee) to (a) accelerate the loan after a default and (b) elect to cause
the Property to be sold and (2) the allegation that a nonholder of the deed of trust, rather
than the true beneficiary, instructed California Reconveyance to initiate the
foreclosure.[11]
In particular, Glaski alleges that (1) the corpus of the WaMu Securitized Trust was a pool
of residential mortgage notes purportedly secured by liens on residential real estate; (2)
section 2.05 of "the Pooling and Servicing Agreement" required that all mortgage files
transferred to the WaMu Securitized Trust be delivered to the trustee or initial custodian
of the WaMu Securitized Trust before the closing date of the trust (which was allegedly
set for Dec. 21, 2005, or 90 days thereafter); (3) the trustee or initial custodian was
required to identify all such records as being held by or on behalf of the WaMu Securitized
Trust; (4) Glaski's note and loan were not transferred to the WaMu Securitized Trust
prior to its closing date; (5) the assignment of the Glaski deed of trust did not occur by the
closing date in December 2005; (6) the transfer to the trust attempted by the assignment
of deed of trust recorded on June 15, 2009, occurred long after the trust was closed; and
(7) the attempted assignment was ineffective as the WaMu Securitized Trust could not
have accepted the Glaski deed of trust after the closing date because of the pooling and
servicing agreement and the statutory requirements applicable to a real estate mortgage
investment conduit (REMIC) trust.[12]
B. Wrongful Foreclosure by a Nonholder of the Deed of Trust
(3) The theory that a foreclosure was wrongful because it was initiated by a nonholder of
the deed of trust has also been phrased as (1) the foreclosing party lacking standing to
foreclose or (2) the chain of title relied upon by the foreclosing party containing breaks or
defects. (See Scott v. JPMorgan Chase Bank, N.A.(2013) 214 Cal.App.4th 743, 764 [154
52

Cal.Rptr.3d 394]; Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th
1366 [Deutsche Bank not entitled to summary judgment on wrongful foreclosure
claim 1094*1094 because it failed to show a chain of ownership that would establish it
was the true beneficiary under the deed of trust]; Guerrero v. Greenpoint Mortgage
Funding, Inc. (9th Cir. 2010) 403 Fed.Appx. 154, 156 [rejecting a wrongful foreclosure
claim because, among other things, plaintiffs "have not pleaded any facts to rebut the
unbroken chain of title"].)
In Barrionuevo v. Chase Bank, N.A. (N.D.Cal. 2012) 885 F.Supp.2d 964, the district
court stated: "Several courts have recognized the existence of a valid cause of action for
wrongful foreclosure where a party alleged not to be the true beneficiary instructs the
trustee to file a Notice of Default and initiate nonjudicial foreclosure." (Id. at p. 973.) We
agree with this statement of law, but believe that properly alleging a cause of action under
this theory requires more than simply stating that the defendant who invoked the power
of sale was not the true beneficiary under the deed of trust. Rather, a plaintiff asserting
this theory must allege facts that show the defendant who invoked the power of sale was
not the true beneficiary. (See Herrera v. Federal National Mortgage Assn. (2012) 205
Cal.App.4th 1495, 1506 [141 Cal.Rptr.3d 326][plaintiff failed to plead specific facts
demonstrating the transfer of the note and deed of trust were invalid].)
C. Borrower's Standing to Raise a Defect in an Assignment
(4) One basis for claiming that a foreclosing party did not hold the deed of trust is that the
assignment relied upon by that party was ineffective. When a borrower asserts an
assignment was ineffective, a question often arises about the borrower's standing to
challenge the assignment of the loan (note and deed of trust) an assignment to which
the borrower is not a party. (E.g., Conlin v. Mortgage Electronic Registration Systems,
Inc. (6th Cir. 2013) 714 F.3d 355, 361 [third party may only challenge an assignment if
that challenge would render the assignment absolutely invalid or ineffective, or
void]; Culhane v. Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282,
291 [under Mass. law, mortgagor has standing to challenge a mortgage assignment as
invalid, ineffective or void]; Gilbert v. Chase Home Finance, LLC (E.D.Cal., May 28, 2013,
No. 1:13-CV-265 AWI SKO) 2013 WL 2318890.)[13]
California's version of the principle concerning a third party's ability to challenge an
assignment has been stated in a secondary authority as follows: "Where an assignment is
merely voidable at the election of the assignor, third 1095*1095 parties, and particularly
the obligor, cannot ... successfully challenge the validity or effectiveness of the transfer."
(7 Cal.Jur.3d (2012) Assignments, 43, p. 70.)
53

This statement implies that a borrower can challenge an assignment of his or her note
and deed of trust if the defect asserted would void the assignment. (See Reinagel v.
Deutsche Bank National Trust Co. (5th Cir., July 11, 2013, No. 12-50569) ___ F.3d ___
[2013 WL 3480207, p. *3] [following majority rule that an obligor may raise any ground
that renders the assignment void, rather than merely voidable].) We adopt this view of
the law and turn to the question whether Glaski's allegations have presented a theory
under which the challenged assignments are void, not merely voidable.
We reject the view that a borrower's challenge to an assignment must fail once it is
determined that the borrower was not a party to, or third party beneficiary of, the
assignment agreement. Cases adopting that position "paint with too broad a brush."
(Culhane v. Aurora Loan Services of Nebraska, supra, 708 F.3d at p. 290.) Instead,
courts should proceed to the question whether the assignment was void.
D. Voidness of a Post-closing Date Transfers to a Securitized Trust
Here, the SAC includes a broad allegation that the WaMu Securitized Trust "did not have
standing to foreclosure on the ... Property, as Defendants cannot provide the entire chain
of title of the note and the [deed of trust]."[14]
More specifically, the SAC identifies two possible chains of title under which Bank of
America, as trustee for the WaMu Securitized Trust, could claim to be the holder of
the Glaski deed of trust and alleges that each possible chain of title suffers from the same
defect a transfer that occurred after the closing date of the trust.
First, Glaski addresses the possibility that (1) Bank of America's chain of title is based
on its status as successor trustee for the WaMu Securitized Trust and (2) the Glaski deed
of trust became part of the WaMu Securitized Trust's property when the securitized trust
was created in 2005. The SAC alleges that WaMu did not transfer Glaski's note and deed
of trust into the WaMu Securitized Trust prior to the closing date established by the
pooling and 1096*1096 servicing agreement. If WaMu's attempted transfer was void,
then Bank of America could not claim to be the holder of the Glaski deed of trust simply
by virtue of being the successor trustee of the WaMu Securitized Trust.
Second, Glaski addresses the possibility that Bank of America acquired Glaski's deed
of trust from JP Morgan, which may have acquired it from the FDIC. Glaski contends this
alternate chain of title also is defective because JP Morgan's attempt to transfer the Glaski
deed of trust to Bank of America, as trustee for the WaMu Securitized Trust, occurred
after the trust's closing date. Glaski specifically alleges JP Morgan's attempted
54

assignment of the deed of trust to the WaMu Securitized Trust in June 2009 occurred
long after the WaMu Securitized Trust closed (i.e., 90 days after Dec. 21, 2005).
Based on these allegations, we will address whether a post-closing date transfer into a
securitized trust is the type of defect that would render the transfer void. Other allegations
relevant to this inquiry are that the WaMu Securitized Trust (1) was formed in 2005 under
New York law and (2) was subject to the requirements imposed on REMIC trusts (entities
that do not pay federal income tax) by the Internal Revenue Code.
The allegation that the WaMu Securitized Trust was formed under New York law supports
the conclusion that New York law governs the operation of the trust. McKinney's
Consolidated Laws of New York Annotated: Estates, Powers and Trusts Law section 7-2.4
provides: "If the trust is expressed in an instrument creating the estate of the trustee,
every sale, conveyance or other act of the trustee in contravention of the trust, except as
authorized by this article and by any other provision of law, is void."[15]
Because the WaMu Securitized Trust was created by the pooling and servicing agreement
and that agreement establishes a closing date after which the trust may no longer accept
loans, this statutory provision provides a legal basis for concluding that the trustee's
attempt to accept a loan after the closing date would be void as an act in contravention of
the trust document.
We are aware that some courts have considered the role of New York law and rejected the
post-closing date theory on the grounds that the New York statute is not interpreted
literally, but treats acts in contravention of the trust instrument as merely
voidable. (Calderon v. Bank of America, N.A. (W.D.Tex., Apr. 23, 2013, No. SA:12-CV00121-DAE) ___ F.Supp.2d ___ [2013 WL 1741951, p. *12] [transfer of plaintiffs' note, if
it violated a pooling and servicing agreement, would merely be voidable and therefore
plaintiffs do not 1097*1097 have standing to challenge it]; Bank of America National
Association v. Bassman FBT, L.L.C. (2012) 2012 ILApp(2d) 110729 [366 Ill.Dec. 936, 981
N.E.2d 1, 8] [following cases that treat ultra vires acts as merely voidable].)
(5) Despite the foregoing cases, we will join those courts that have read the New York
statute literally. We recognize that a literal reading and application of the statute may not
always be appropriate because, in some contexts, a literal reading might defeat the
statutory purpose by harming, rather than protecting, the beneficiaries of the trust. In this
case, however, we believe applying the statute to void the attempted transfer is justified
because it protects the beneficiaries of the WaMu Securitized Trust from the potential
adverse tax consequence of the trust losing its status as a REMIC trust under the Internal
55

Revenue Code. (6) Because the literal interpretation furthers the statutory purpose, we
join the position stated by a New York court approximately two months ago: "Under New
York Trust Law, every sale, conveyance or other act of the trustee in contravention of the
trust is void. EPTL 7-2.4. Therefore, the acceptance of the note and mortgage by the
trustee after the date the trust closed, would be void." (Wells Fargo Bank, N.A. v.
Erobobo (N.Y.Sup.Ct. 2013) 39 Misc.3d 1220(A) [2013 WL 1831799, p. *8]; see Levitin &
Twomey, Mortgage Servicing, supra, 28 Yale J. on Reg. at p. 14, fn. 35 [under N.Y. law,
any transfer to the trust in contravention of the trust documents is void].) Relying
on Erobobo, a bankruptcy court recently concluded "that under New York law,
assignment of the Saldivars' Note after the start up day is void ab initio. As such, none of
the Saldivars' claims will be dismissed for lack of standing." (In re Saldivar (Bankr.
S.D.Tex., Jun. 5, 2013, No. 11-10689) 2013 WL 2452699, p. *4.)
We conclude that Glaski's factual allegations regarding post-closing date attempts to
transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis
for concluding the attempted transfers were void. As a result, Glaski has a stated
cognizable claim for wrongful foreclosure under the theory that the entity invoking the
power of sale (i.e., Bank of America in its capacity as trustee for the WaMu Securitized
Trust) was not the holder of the Glaski deed of trust.[16]
1098*1098 We are aware that some federal district courts sitting in California have
rejected the post-closing date theory of invalidity on the grounds that the borrower does
not have standing to challenge an assignment between two other parties. (Aniel v. GMAC
Mortgage, LLC (N.D.Cal., Nov. 2, 2012, No. C 12-04201 SBA) 2012 WL 5389706 [joining
courts that held borrowers lack standing to assert the loan transfer occurred outside the
temporal bounds prescribed by the pooling and servicing agreement]; Almutarreb
v. Bank of New York Trust Co., N.A. (N.D.Cal., Sept. 24, 2012, No. C 12-3061 EMC) 2012
WL 4371410.) These cases are not persuasive because they do not address the principle
that a borrower may challenge an assignment that is void and they do not apply New York
trust law to the operation of the securitized trusts in question.
E. Application of Gomes
The next question we address is whether Glaski's wrongful foreclosure claim is
precluded by the principles set forth in Gomes, supra, 192 Cal.App.4th 1149, a case relied
upon by the trial court in sustaining the demurrer. Gomes was a pre foreclosure action
brought by a borrower against the lender, trustee under a deed and trust, and Mortgage
Electronic Registration Systems, Inc. (MERS), a national electronic registry that tracks
the transfer of ownership interests and servicing rights in mortgage loans in the secondary
56

mortgage market. (Id. at p. 1151.) The subject trust deed identified MERS as a nominee
for the lender and that MERS is the beneficiary under the trust deed. After initiation of a
nonjudicial foreclosure, borrower sued for wrongful initiation of foreclosure, alleging that
the current owner of the note did not authorize MERS, the nominee, to proceed with the
foreclosure. The appellate court held that California's nonjudicial foreclosure system,
outlined in Civil Code sections 2924 through 2924k, is a "`comprehensive framework for
the regulation of a nonjudicial foreclosure sale'" that did not allow for a challenge to the
authority of the person initiating the foreclosure. (Gomes, supra, at p. 1154.)
In Naranjo v. SBMC Mortgage (S.D.Cal., July 24, 2012, No. 11-CV-2229-L(WVG)) 2012
WL 3030370 (Naranjo), the district court addressed the scope of Gomes, stating:
"In Gomes, the California Court of Appeal held that a plaintiff does not have a right to
bring an action to determine the nominee's authorization to proceed with a nonjudicial
foreclosure on behalf of a noteholder. [Citation.] The nominee in Gomes was
MERS. 1099*1099 [Citation.] Here, Plaintiff is not seeking such a determination. The role
of the nominee is not central to this action as it was in Gomes. Rather, Plaintiff alleges
that the transfer of rights to the WAMU Trust is improper, thus Defendants consequently
lack the legal right to either collect on the debt or enforce the underlying security interest."
(Naranjo, supra, 2012 WL 3030370 at p. *3.)
Thus, the court in Naranjo did not interpret Gomes as barring a claim that was essentially
the same as the post-closing-date claim Glaski is asserting in this case.
Furthermore, the limited nature of the holding in Gomes is demonstrated by the
Gomes court's discussion of three federal cases relied upon by Mr. Gomes. The court
stated that the federal cases were not on point because none recognized a cause of action
requiring the note holders nominee to prove its authority to initiate a foreclosure
proceeding. (Gomes, supra, 192 Cal.App.4th at p. 1155.) The Gomes court described one
of the federal cases by stating that "the plaintiff alleged wrongful foreclosure on the
ground that assignments of the deed of trust had been improperly backdated, and thus
the wrong party had initiated the foreclosure process. [Citation.] No such infirmity is
alleged here." (Ibid.; see Lester v. J.P. Morgan Chase Bank (N.D.Cal., Feb. 20, 2013, No.
C 12-05491 LB) ___ F.Supp.2d ___ [2013 WL 633333, p. *7] [concluding Gomes did not
preclude the plaintiff from challenging JP Morgan's authority to foreclose].)
The Gomes court also stated it was significant that in each of the three federal cases, "the
plaintiff's complaint identified a specific factual basis for alleging that the foreclosure was
not initiated by the correct party." (Gomes, supra, at p. 1156.)

57

The instant case is distinguishable from Gomes on at least two grounds. First, like
Naranjo, Glaski has alleged that the entity claiming to be the noteholder was not the true
owner of the note. In contrast, the principle set forth in Gomes concerns the authority of
the note holders nominee, MERS. Second, Glaski has alleged specific grounds for his
theory that the foreclosure was not conducted at the direction of the correct party.
(7) In view of the limiting statements included in the Gomes opinion, we do not interpret
it as barring claims that challenge a foreclosure based on specific allegations that an
attempt to transfer the deed of trust was void. Our interpretation, which allows borrowers
to pursue questions regarding the chain of ownership, is compatible with Herrera v.
Deutsche Bank National Trust Co., supra, 196 Cal.App.4th 1366. In that case, the court
concluded that triable issues of material fact existed regarding alleged breaks in the chain
of ownership of the deed of trust in question. (Id. at p. 1378.) Those triable issues existed
because Deutsche Banks motion for summary judgment failed to establish it was the
beneficiary under that deed of trust. (Ibid.)
F. Tender
Defendants contend that Glaski's claims for wrongful foreclosure, cancellation of
instruments and quiet title are defective because Glaski failed to allege that he made a
valid and viable tender of payment of the indebtedness. (See Karlsen v. American Sav. &
Loan Assn. (1971) 15 Cal.App.3d 112, 117 [92 Cal.Rptr. 851] ["valid and viable tender of
payment of the indebtedness owing is essential to an action to cancel a voidable sale under
a deed of trust"].)
Glaski contends that he is not required to allege he tendered payment of the loan balance
because (1) there are many exceptions to the tender rule, (2) defendants have offered no
authority for the proposition that the absence of a tender bars a claim for damages,[17] and
(3) the tender rule is a principle of equity and its application should not be decided against
him at the pleading stage.
(8) Tender is not required where the foreclosure sale is void, rather than voidable, such
as when a plaintiff proves that the entity lacked the authority to foreclose on the property.
(Lester v. J.P. Morgan Chase Bank, supra, ___ F.Supp.2d ___ [2013 WL 633333, p.
*8]; 4 Miller & Starr, Cal. Real Estate (3d ed. 2003) Deeds of Trust, 10:212, p. 686.)
Accordingly, we cannot uphold the demurrer to the wrongful foreclosure claim based on
the absence of an allegation that Glaski tendered the amount due under his loan. Thus,
we need not address the other exceptions to the tender requirement. (See, e.g., Onofrio v.
58

Rice (1997) 55 Cal.App.4th 413, 424 [64 Cal.Rptr.2d 74] [tender may not be required
where it would be inequitable to do so].)
G. Remedy of Setting Aside Trustee's Sale
Defendants argue that the allegedly ineffective transfer to the WaMu Securitized Trust
was a mistake that occurred outside the confines of the statutory nonjudicial foreclosure
proceeding and, pursuant to Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 445 [129
Cal.Rptr.2d 436], that mistake does not provide a basis for invalidating the trustee's sale.
First, this argument does not negate the possibility that other types of relief, such as
damages, are available to Glaski. (See generally, Annot., 1101*1101 Recognition of Action
for Damages for Wrongful Foreclosure Types of Action, supra, 82 A.L.R.6th 43.)
Second, "where a plaintiff alleges that the entity lacked authority to foreclose on the
property, the foreclosure sale would be void. [Citation.]" (Lester v. J.P. Morgan
Chase Bank, supra, ___ F.Supp.2d ___ [2013 WL 633333, p. *8].)
Consequently, we conclude that Nguyen v. Calhoun, supra, 105 Cal.App.4th 428does not
deprive Glaski of the opportunity to prove the foreclosure sale was void based on a lack of
authority.
H. Causes of Action Stated
(9) Based on the foregoing, we conclude that Glaski's fourth cause of action has stated a
claim for wrongful foreclosure. It follows that Glaski also has stated claims for quiet title
(third cause of action), declaratory relief (fifth cause of action), cancellation of
instruments (eighth cause of action), and unfair business practices under Business and
Professions Code section 17200 (ninth cause of action). (See Susilo v. Wells Fargo Bank,
N.A. (C.D.Cal. 2011) 796 F.Supp.2d 1177, 1196[plaintiff's wrongful foreclosure claims
served as predicate violations for her UCL claim].)
IV. Judicial Notice
A. Glaski's Request for Judicial Notice
When Glaski filed his opening brief, he also filed a request for judicial notice of (1) a
consent judgment entered on April 4, 2012, by the United States District Court of the
District of Columbia in United States v. Bank of America Corp. (D.D.C. No. 12-CV00361); (2) the settlement term sheet attached to the consent judgment; and (3) the

59

federal and state release documents attached to the consent judgment as exhibits F and
G.
Defendants opposed the request for judicial notice on the ground that the request violated
the requirements in California Rules of Court, rule 8.252 because it was not filed with a
separate proposed order, did not state why the matter to be noticed was relevant to the
appeal, and did not state whether the matters were submitted to the trial court and, if so,
whether that court took judicial notice of the matters.
1102*1102 The documents included in Glaski's request for judicial notice may provide
background information and insight into "robo-signing"[18] and other problems that the
lending industry has had with the procedures used to foreclose on defaulted mortgages.
However, these documents do not directly affect whether the allegations in the SAC are
sufficient to state a cause of action. Therefore, we deny Glaski's request for judicial
notice.
B. Defendants' Request for Judicial Notice of Assignment
The "ASSIGNMENT OF DEED OF TRUST" recorded on December 9, 2008, that stated
JP Morgan transferred and assigned all beneficial interest under the Glaski deed of trust
to "LaSalle Bank NA as trustee for WaMu [Securitized Trust]" together with the note
described in and secured by the Glaski deed of trust was not attached to the SAC as an
exhibit. That document is part of the appellate record because the respondents' appendix
includes a copy of defendants' request for judicial notice that was filed in June 2011 to
support a motion for judgment on the pleadings.
In ruling on defendants' request for judicial notice, the trial court stated that it could only
take judicial notice that certain documents in the request, including the assignment of
deed of trust, had been recorded, but it could not take judicial notice of factual matters
stated in those documents. This ruling is correct and unchallenged on appeal. Therefore,
like the trial court, we will take judicial notice of the existence and recordation of the
December 2008 assignment, but we "do not take notice of the truth of matters stated
therein." (Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th at p.
1375.) As a result, the assignment of deed of trust does not establish that JP Morgan was,
in fact, the holder of the beneficial interest in the Glaski deed of trust that the assignment
states was transferred to LaSalle Bank. Similarly, it does not establish that
LaSalle Bank in fact became the owner or holder of that beneficial interest.

60

Because the document does not establish these facts for purposes of this demurrer, it does
not cure either of the breaks in the two alternate chains of ownership challenged in the
SAC. Therefore, the December 2008 assignment does not provide a basis for sustaining
the demurrer.
DISPOSITION
The judgment of dismissal is reversed. The trial court is directed to vacate its order
sustaining the general demurrer and to enter a new order overruling that demurrer as to
the third, fourth, fifth, eighth and ninth causes of action.
1103*1103 Glaski's request for judicial notice filed on September 25, 2012, is denied.
Glaski shall recover his costs on appeal.
Wiseman, Acting P.J., and Kane, J., concurred.
[1] Mortgage-backed securities are created through a complex process known as
"securitization." (See Levitin & Twomey, Mortgage Servicing (2011) 28 Yale J. on Reg. 1,
13 ["a mortgage securitization transaction is extremely complex..."].) In simplified terms,
"securitization" is the process where (1) many loans are bundled together and transferred
to a passive entity, such as a trust, and (2) the trust holds the loans and issues investment
securities that are repaid from the mortgage payments made on the loans. (Oppenheim &
Trask-Rahn, Deconstructing the Black Magic of Securitized Trusts: How the Mortgagebacked Securitization Process Is Hurting the Banking Industry's Ability to Foreclose and
Proving the Best Offense for a Foreclosure Defense (2012) 41 Stetson L.Rev. 745, 753-754
(hereinafter, Deconstructing Securitized Trusts).) Hence, the securities issued by the
trust are "mortgage-backed." For purposes of this opinion, we will refer to such a trust as
a "securitized trust."
[2] Civil Code section 2924, subdivision (a)(1) states that a "trustee, mortgagee, or
beneficiary, or any of their authorized agents" may initiate the nonjudicial foreclosure
process. This statute and the provision of the Glaski deed of trust are the basis
for Glaski's position that the nonjudicial foreclosure in this case was wrongful namely,
that the power of sale in the Glaski deed of trust was invoked by an entity that was not the
true beneficiary.
[3] Glaski's pleading does not allege that LaSalle Bank was the original trustee when
the WaMu Securitized Trust was formed in late 2005, but filings with the Securities and
Exchange Commission identify LaSalle Bank as the original trustee. We provide this
information for background purposes only and it plays no role in our decision in this
appeal.

61

[4] Another possibility, which was acknowledged by both sides at oral argument, is that
the true holder of the note and deed of trust cannot be determined at this stage of the
proceedings. This lack of certainty regarding who holds the deed of trust is not uncommon
when a securitized trust is involved. (See Mortgage and Asset Backed Securities Litigation
Handbook (2012) 5:114 [often difficult for securitized trust to prove ownership by
showing a chain of assignments of the loan from the originating lender].)
[5] It appears this company is no longer a separate entity. The certificate of interested
entities filed with the respondents' brief refers to "JPMorgan Chase Bank, N.A. as
successor by merger to Chase Home Finance, LLC."
[6] One controversy presented by this appeal is whether this court should consider the
December 9, 2008, assignment of deed of trust, which is not an exhibit to the SAC.
Because the trial court took judicial notice of the existence and recordation of the
assignment earlier in the litigation, we too will consider the assignment, but will not
presume the matters stated therein are true. (See pt. IV.B.,post.) For instance, we will not
assume that JP Morgan actually held any interests that it could assign to LaSalle Bank.
(See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375
[127 Cal.Rptr.3d 362] [taking judicial notice of a recorded assignment does not establish
assignee's ownership of deed of trust].)
[7] Specifically, the notice stated that his August 2008 installment payment and all
subsequent installment payments had not been made.
[8] The signature block at the end of the NOD indicated it was signed by Colleen Irby as
assistant secretary for California Reconveyance. The first page of the notice stated that
recording was requested by California Reconveyance. Affidavits of mailing attached to the
SAC stated that the declarant mailed copies of the NOD to Glaski at his home address and
to Bank of America, in care of Custom Recording Solutions, at an address in Santa Ana,
California. The affidavits of mailing are the earliest documents in the appellate record
indicating that Bank of America had any involvement with Glaski's loan.
[9] Bank of America took over LaSalle Bank by merger in 2007.
[10] The trial court did not explicitly rule on defendants' request for judicial notice of
these documents, but referred to matters set forth in these documents in its ruling.
Therefore, for purposes of this appeal, we will infer that the trial court granted the request.
[11] The claim that a foreclosure was conducted by or at the direction of a nonholder of
mortgage rights often arises where the mortgage has been securitized. (Buchwalter, Cause
of Action in Tort for Wrongful Foreclosure of Residential Mortgage, 52 Causes of Action
Second (2012) 119, 149 [ 11 addresses foreclosure by a nonholder of mortgage rights].)
[12] This allegation comports with the following view of pooling and servicing agreements
and the federal tax code provisions applicable to REMIC trusts. "Once the bundled
mortgages are given to a depositor, the [pooling and servicing agreement] and IRS tax
code provisions require that the mortgages be transferred to the trust within a certain
62

time frame, usually ninety dates from the date the trust is created. After such time, the
trust closes and any subsequent transfers are invalid. The reason for this is purely
economic for the trust. If the mortgages are properly transferred within the ninety-day
open period, and then the trust properly closes, the trust is allowed to maintain REMIC
tax status." (Deconstructing Securitized Trusts, supra, 41 Stetson L.Rev. at pp. 757-758.)
[13] "Although we may not rely on unpublished California cases, the California Rules of
Court do not prohibit citation to unpublished federal cases, which may properly be cited
as persuasive, although not binding, authority." (Landmark Screens, LLC v. Morgan,
Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 251, fn. 6 [107 Cal.Rptr.3d 373], citing
Cal. Rules of Court, rule 8.1115.)
[14] Although this allegation and the remainder of the SAC do not explicitly identify the
trustee of the WaMu Securitized Trust as the entity that invoked the power of sale, it is
reasonable to interpret the allegation in this manner. Such an interpretation is consistent
with the position taken by Glaski's attorney at the hearing on the demurrer, where she
argued that the WaMu Securitized Trust did not obtain Glaski's loan and thus was
precluded from proceeding with the foreclosure.
[15] The statutory purpose is "to protect trust beneficiaries from unauthorized actions by
the trustee." (Turano, Practice Commentaries, McKinney's Consolidated Laws of New
York Annotated (2002), Book 17B, Estates, Powers and Trusts Law, 7-2.4, p. 356.)
[16] Because Glaski has stated a claim for relief in his wrongful foreclosure action, we
need not address his alternate theory that the foreclosure was void because it was
implemented by forged documents. (Genesis Environmental Services v. San Joaquin
Valley Unified Air Pollution Control Dist. (2003) 113 Cal.App.4th 597, 603 [6 Cal.Rptr.3d
574] [appellate inquiry ends and reversal is required once court determines a cause of
action was stated under any legal theory].) We note, however, that California law provides
that ratification generally is an affirmative defense and must be specially pleaded by the
party asserting it. (See Reina v. Erassarret (1949) 90 Cal.App.2d 418, 424 [203 P.2d
72] [ratification is an affirmative defense and the defendant ordinarily bears the burden
of proof]; 49A Cal.Jur.3d (2010) Pleading, 186, p. 319 [defenses that must be specially
pleaded include waiver, estoppel and ratification].) Also, "[w]hether there has been
ratification of a forged signature is ordinarily a question of fact." (Common Wealth Ins.
Systems, Inc. v. Kersten (1974) 40 Cal.App.3d 1014, 1026 [115 Cal.Rptr. 653]; see Brock
v. Yale Mortgage Corp. (2010) 287 Ga. 849 [700 S.E.2d 583, 588] [ratification may be
expressed or implied from acts of principal and "is usually a fact question for the jury";
wife had forged husband's signature on quitclaim deed].)
[17] See generally, Annotation, Recognition of Action for Damages for Wrongful
Foreclosure Types of Action (2013) 82 A.L.R.6th 43 (claims that a foreclosure is
"wrongful" can be tort-based, statute-based, and contract-based).
[18] Claims of misrepresentation or fraud related to robo-signing of foreclosure
documents is addressed in Buchwalter, Cause of Action in Tort for Wrongful Foreclosure
of Residential Mortgage,52 Causes of Action Second, supra, at pages 147 to 149.
63

64

APPENDIX of CASE RULINGS

1. Saldivar v. JP Morgan Chase (Glaski cites to this case)
2. Wells Fargo, N.A. v Erobobo (Glaski cites to this case)
3. Vogan v. Wells Fargo, N.A. (frontrunner to Glaski)
4. Jenkins v. JP Morgan Chase
5. Diunugala v. JP Morgan Chase
6. Fontenot v. Wells Fargo, N.A
7. Sandri v. Capital One
8. Gomes v. Countrywide Home Loans, Inc.
9. Yvanova v. New Century Mortgage, et al

65

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 1 of 11

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE SOUTHERN DISTRICT OF TEXAS
BROWNSVILLE DIVISION
IN RE:
GILBERTO SALDIVAR, SANDRA
CANALES SALDIVAR,
Debtor(s).

GILBERTO T SALDIVAR, et al
Plaintiff(s),
vs.
JPMORGAN CHASE BANK, N.A., et al
Defendant(s).

ENTERED
06/05/2013

CASE NO: 11-10689

CHAPTER 13

JUDGE ISGUR

ADVERSARY NO. 12-01010

MEMORANDUM OPINION
Defendants, JPMorgan Chase Bank, N.A. (Chase) and Deutsche Bank National Trust
Companys (Deutsche Bank), Joint Motion to Dismiss Complaint, (ECF No. 9) is granted, in part,
and denied, in part.
Background
Plaintiffs are Debtors, Gilberto and Sandra Saldivar. The Saldivars filed a voluntary chapter
13 petition on November 12, 2011. Case No. 11-10689, ECF No. 1. The Saldivars filed this
adversary proceeding on September 26, 2012. ECF No. 1. Chase and Deutsche Bank filed their
Joint Motion to Dismiss Complaint on October 18, 2012. ECF No. 9. The Saldivars filed their
Response to Defendants Motion to Dismiss on November 29, 2012. ECF No. 13. The Saldivars
filed a Supplemental Response to Defendants Motion to Dismiss on December 4, 2012. ECF No. 14.
Chase and Deutsche Bank filed their Joint Reply to Plaintiffs Response to Motion to Dismiss
Complaint on December 13, 2012. ECF No. 15. The Saldivars filed their First Amended Complaint
1 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 2 of 11

on February 25, 2013. ECF No. 19. Chase and Deutsche Bank filed their Joint Conditional Answer
to Plaintiffs First Amended Complaint on March 11, 2013. ECF No. 22.
The Saldivars refinanced their home on August 24, 2004, and granted a security interest in
the property to Long Beach Mortgage Company. ECF No. 19 at 2. The Saldivars executed a Texas
Home Equity Note, (the Note), promising payments of $604.19 per month to Long Beach
Mortgage Company for principal and interest only. ECF No. 19 at 2. From 2004 until 2009, the
Saldivars paid property taxes and insurance directly. ECF No. 19 at 2. In 2010 and 2011, Chase
advanced funds for force-placed insurance and property taxes. ECF No. 19 at 2. The Saldivars did
not pay property taxes in 2010, but did pay taxes directly in 2011, and allege they are entitled to a
refund for amounts advanced by Chase in 2011. ECF No. 19 at 2.
On September 26, 2011, the Saldivars received a Notice of Default on behalf of Chase,
effective June 1, 2011, demanding $8,127.11 to cure the default. ECF No. 19 at 2-3. The Notice of
Default indicated that the cure amount included late charges, periodic adjustments to the payment
amount

(if

applicable),

legal

fees

and

expenses

of

collection.

ECF No. 19 at 2.

The Saldivars allege that the cure amount included unauthorized fees and charges. ECF No. 19 at 3.
The Saldivars contract payment was only $604.19 per month, therefore they argue that the cure
amount should have been no greater than $2,416.76 ($604.19 x 4 months). ECF No. 19 at 3. The
Saldivars allege that the $8,127.11 cure amount included amounts paid for 2011 taxes that were, in
fact paid directly by the Saldivars. ECF No. 19 at 3.
The Securitized Trust
The Notice of Default indicates that the original creditor is Deutsche Bank, as Trustee for
Long Beach Mortgage Loan Trust 2004-6. ECF No. 19 at 3. The Trust is a New York common law
trust created through a Pooling and Servicing Agreement (the PSA). ECF No. 19 at 4. Under the
PSA, loans were purportedly pooled into a trust and converted into mortgage-backed securities.

2 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 3 of 11

ECF No. 19 at 4.

The PSA provides a closing date for the Trust of October 25, 2004.

ECF No. 19 at 4. As set forth below, this was the date on which all assets were required to be
deposited into the Trust. The PSA provides that New York law governs the acquisition of mortgage
assets for the Trust. ECF No. 19 at 4
The Trust was formed as a REMIC trust.1 ECF No. 19 at 5. Under the REMIC provisions of
the Internal Revenue Code (IRC) the closing date of the Trust is also the startup day for the Trust.
ECF No. 19 at 5. The closing date/startup day is significant because all assets of the Trust were to be
transferred to the Trust on or before the closing date to ensure that the Trust received its REMIC
status. ECF No. 19 at 6. The IRC provides in pertinent part that:
Except as provided in section 860G(d)(2), if any amount is
contributed to a REMIC after the startup day, there is hereby imposed
a tax for the taxable year of the REMIC in which the contribution is
received equal to 100 percent of the amount of such contribution.
26 U.S.C. 860G(d)(1).
A trusts ability to transact is restricted to the actions authorized by its trust documents.
ECF No. 19 at 6. The Saldivars allege that here, the Trust documents permit only one specific
method of transfer to the Trust, set forth in 2.01 of the PSA. ECF No. 19 at 6. Section 2.01
requires the Depositor to provide the Trustee with the original Mortgage Note, endorsed in blank or
endorsed with the following: Pay to the order of Deutsche Bank, as Trustee under the applicable
agreement, without recourse. ECF No. 19 at 7. All prior and intervening endorsements must show
a complete chain of endorsement from the originator to the Trustee. ECF No. 19 at 7.
Under New York Estates Powers and Trusts Law 7-2.1(c), property must be registered in
the name of the trustee for a particular trust in order for transfer to the trustee to be effective.
1

The Internal Revenue Code provides that the terms real estate mortgage investment conduit and REMIC mean any
entity(1) to which an election to be treated as a REMIC applies for the taxable year and all prior taxable years, (2) all of
the interests in which are regular interests or residual interests, (3) which has 1 (and only 1) class of residual interests (and
all distributions, if any, with respect to such interests are pro rata), (4) as of the close of the 3rd month beginning after the
startup day and at all times thereafter, substantially all of the assets of which consist of qualified mortgages and permitted
investments. ECF No. 19 at 5.

3 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 4 of 11

ECF No. 19 at 7. Trust property cannot be held with incomplete endorsements and assignments that
do not indicate that the property is held in trust by a trustee for a specific beneficiary trust.
ECF No. 19 at 7.
The Saldivars allege that the Note was not transferred to the Trust until 2011, resulting in an
invalid assignment of the Note to the Trust. ECF No. 19 at 7. The Saldivars allege that this defect
means that Deutsche Bank and Chase are not valid Note Holders. ECF No. 19 at 3.
In its Motion to Dismiss, (ECF No. 9), Chase and Deutsche Bank argue that the Saldivars
lack standing to challenge the validity of the assignment to the trust. At the hearing on January 28,
2013, the Court stated that the law is well settled that the Saldivars do not have standing to complain
about the Trusts failure to follow its own internal procedures. However, if the assignment was void,
ab initio, because it occurred after the closing date, the Saldivars do have a valid argument that Chase
and Deutsche Bank are not valid Note Holders. The Court ordered additional briefing on whether
under New York law, failure to comply with the terms of the PSA rendered assignment to the trust
void, ab initio; or, merely voidable.
The Court also ordered supplemental briefing on whether Texas Local Government Code
192.007 requires an assignment of a note to be recorded.
The parties submitted contemporaneous supplemental briefs on February 28, 2013.
ECF Nos. 20 & 21.

Chase and Deutsche Bank submitted their reply on March 14, 2013.

ECF No. 23. The Saldivars submitted their reply on March 15, 2013. ECF No. 24.
Force-Placed Insurance
Chases

arrearage

claim

includes

$4,888.10

for

force-placed

hazard

insurance.

ECF No. 19 at 8. The Saldivars allege that the premiums charged for this force-placed insurance
were significantly higher than average premiums for similar coverage.

ECF No. 19 at 8.

The

Saldivars allege that the inflated premiums result from the fact that a portion of the premium is being

4 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 5 of 11

paid to Chase or an affiliated company in the form of a kickback. The Saldivars point to two articles,
one from the Chicago Tribune, Force-placed insurance, an unnecessary burden for trapped
mortgage borrowers; and, one from the New York Times, Big Banks Face Inquiries Over Home
Insurance, as evidence that Chase received kickbacks on force-placed insurance transactions.2
ECF No. 13 at 8.
Chases Proof of Claim
Chase filed Proof of Claim 14 on June 15, 2012, claiming six pre-petition monthly payments
of $1,476.13 were due for a total of $8,856.78. ECF No. 19 at 8. The Saldivars allege that their
monthly payments were only $604.19. ECF No. 19 at 8. They allege that Chases inflated proof of
claim is a result of improperly force-placed insurance; taxes for 2011 that Chase improperly paid;
and inflated inspection and appraisal fees. ECF No. 19 at 8. The Saldivars assert that Chases
escrow analysis attached to its proof of claim is incorrect because it includes property taxes for 2011.
Jurisdiction
The District Court has jurisdiction over this proceeding under 28 U.S.C. 1334(a). Pursuant
to 28 U.S.C. 157(a), this proceeding has been referred to the Bankruptcy Court by General Order
2012-6.
Analysis
Rule 12(b)(6) Standard
The Court reviews motions under Rule 12(b)(6) accepting all well-pleaded facts as true and
viewing those facts in the light most favorable to the plaintiffs. Stokes v. Gann, 498 F.3d 483, 484
(5th Cir. 2007) (per curiam). However, the Court will not strain to find inferences favorable to the

Of course, these newspaper articles do not constitute evidence. They may constitute a sufficient basis for considering
whether a plausible claim is being asserted for which discovery should be allowed.

5 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 6 of 11

plaintiff. Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 361 (5th Cir. 2004)
(internal quotations omitted).
To avoid dismissal for failure to state a claim, a plaintiff must meet Fed. R. Civ. P. 8(a)(2)s
pleading requirements. Rule 8(a)(2) requires a plaintiff to plead a short and plain statement of the
claim showing that the pleader is entitled to relief. In Ashcroft v. Iqbal, the Supreme Court held that
Rule 8(a)(2) requires that the well-pleaded facts must permit the court to infer more than the mere
possibility of misconduct. 556 U.S. 662, 679 (2009) (quoting Rule 8(a)(2)). Only a complaint that
states a plausible claim for relief survives a motion to dismiss. Id. (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 556 (2007)). [A] complaint does not need detailed factual allegations, but
must provide the Plaintiffs grounds for entitlement to reliefincluding factual allegations that when
assumed to be true raise a right to relief above the speculative level. Lormand v. US Unwired, Inc.,
565 F.3d 228, 232 (5th Cir. 2009) (internal quotation marks removed).
Standing
As a threshold matter, the Court must first address Chase and Deutsche Banks assertion that
the Saldivars lack standing to challenge the validity of the assignment of their mortgage to the Trust.
A. Under New York Trust Law, is an ultra vires act void or merely voidable?
A third party generally lacks standing to challenge the validity of an assignment. Bank of
American Natl Assoc. v. Bassman FBT, L.L.C., et al. 981 N.E.2d 1, 7 (Ill. App. Ct. 2012). A
borrower may however raise a defense to an assignment, if that defense renders the assignment void.
Id.
The parties agree that under New York Trust Law the relevant statute
provides the following: If the trust is expressed in the instrument
creating the estate of the trustee, every sale, conveyance or other act
of the trustee in contravention of the trust, except as authorized by
this article and by any other provision of law, is void.

6 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 7 of 11

N.Y. Est. Powers & Trusts Law 7-2.4.The Bassman court holds that despite the plain
language of 7-2.4, under various circumstances a trustees ultra vires acts are voidable and not
void.

Bassman, 981 N.E.2d. at 9.

The Bassman court cites New York cases that hold that

beneficiaries of a trust can ratify a trustees ultra vires acts. See Gregan v. Buchanan, et al, 37
N.Y.S. 83, 85 (N.Y. Sup. Ct. 1896); see also Hine v. Huntington, et al. 103 N.Y.S. 535, 540 (N.Y.
App. Div. 1907); Birnbaum v. Birnbaum, et al., 503 N.Y.S.2d 451 (N.Y. App. Div. 1986). The
Bassman court holds that the ability to ratify a trustees ultra vires act is equivalent to finding that a
trustees ultra vires act is merely voidable and not void.
Under 28 U.S.C. 1652, this Court has the duty to apply New York law in accordance with
the controlling decision of the highest state court. Royal Bank of Canada v. Trentham Corp., 665
F.2d 515, 516 (5th Cir. 1981). While the Court finds no applicable New York Court of Appeals
decision, a recent New York Supreme Court decision is factually similar to the case before the Court.
See Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799 (N.Y. Sup. Ct. April 29, 2013). In
Erobobo, defendants argued that plaintiff (a REMIC trust) was not the owner of the note because
plaintiff obtained the note and mortgage after the trust had closed in violation of the terms of the PSA
governing the trust, rendering plaintiffs acquisition of the note void. Id. at *2. The Erobobo court
held that under 7-2.4, any conveyance in contravention of the PSA is void; this meant that
acceptance of the note and mortgage by the trustee after the date the trust closed rendered the transfer
void. Id. at 8.
Based on the Erobobo decision and the plain language of N.Y. Est. Powers & Trusts Law
7-2.4, the Court finds that under New York law, assignment of the Saldivars Note after the start up
day is void ab initio. As such, none of the Saldivars claims will be dismissed for lack of standing.
The Court expresses no view on the effect of any subsequent ratification, if any. It is sufficient that a
claim has been stated.

7 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 8 of 11

The Saldivars have pled facts sufficient to withstand dismissal on whether the transfer to the
Trust was void ab initio. The Saldivars allege that assignment occurred in 2011several years after
the startup day. If this proves true, Chase may not be the owner of the Note.
B. Does Tex. Local Govt Code 192.007 require recordation of mortgage assignment?
Texas Local Government Code section 192.007 provides:
To release, transfer, assign, or take another action relating to an
instrument that is filed, registered, or recorded in the office of the
county clerk, a person must file, register, or record another instrument
relating to the action in the same manner as the original instrument as
required to be filed, registered or recorded.
Here the security instrument was filed and recorded with Cameron County on August 31,
2004. ECF No. 21-4. The Saldivars cite to Miller v. Homecomings Financial, LLC, et al., which
holds that a transfer or assignment of a recorded mortgage must also be recorded in the office of the
county clerk. 881 F.Supp.2d 825, 830 (S.D. Tex. 2012).
In Richard v. CIT Group, the court held that even assuming a violation of 192.007 in
assigning the deed-of-trust lien, the homeowner did not have standing to complain because she was
not a party to the assignment, nor was she injured by the assignment or a lack of recordation. 2012
WL 3030348, at *2. The parties to a land transaction are not obliged to record anything. Id. Notes
are transferred by endorsement not by a deed. Id. The power to foreclose does not arise from the
public record, but from holding the note. Id.
This Court has also found that under 192.007, the absence of recordation does not affect the
validity of the assigned deed of trust between the homeowner and the lender. Hill v. U.S. Bank, Natl
Assoc., et al. (In re Perry), 2013 WL 504859, at *3 (Bankr. S.D. Tex. Feb. 8, 2013).
In Perry the Court also cites In re Hamilton, where the Fifth Circuit held that a chapter 13
debtor, acting with trustee powers,3 seeking to avoid a prepetition, unrecorded transfer was charged

Here the Saldivars may act with trustee powers pursuant to 11 U.S.C. 522(h).

8 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 9 of 11

with inquiry notice of the transfer. Id. at *3. If the Saldivars were merely bringing a state-law suit
against Chase, Richard v. CIT Group would control. Because the Saldivars may act with trustee
powers, the issue is whether the Estate, as a hypothetical bona fide purchaser for value, would have
discovered the assignment following reasonable inquiry.

That is a factual issue that must be tried.

Causes of Action
A. Objection to Proof of Claim
Chase and Deutsche Banks motion to dismiss the Saldivars objection to Chases proof of
claim is granted, in part, and denied, in part. The Saldivars have asserted sufficient facts to support
the assertion that Chases claim is overstated. They assert that the proof of claim is overstated due to
forced-placed insurance. They allege that the premium on the force-placed insurance is inflated
because Chase, or an affiliated insurance company, receives a portion of the premium as a kickback.
The Saldivars cite to two articles containing the allegations, and these facts are sufficient to
withstand dismissal.4
The Saldivars allege that their monthly payments were only $604.19, not $1,476.13 as stated
in Chases Proof of Claim. They assert that the discrepancy is based on the fact that while they paid
property taxes in 2011, Chase still charged them for 2011 property taxes as reflected in the escrow
analysis attached to the proof of claim. The Saldivars Deed of Trust allows the lender to maintain
an escrow account with funds for taxes and insurance. The Loan History attached to Chases Proof
of Claim reflects that an escrow account was established pursuant to the Deed of Trust. The
Saldivars do not have a claim against Chase for property taxes paid in 2011 as such taxes were

The Court recognizes that these newspaper articles are inadmissible as hearsay. However reliance on the articles at the
12(b)(6) stage is acceptable because the hearsay is not being introduced to establish the truth of the Saldivars claim, but to
show the reasonableness of their belief, and provide justification for their request for additional information. See N.L.R.B.
v. PDK Investments, L.L.C., 433 Fed.Appx. 297, 302 (5th Cir. 2011).

9 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 10 of 11

properly escrowed.5 The Saldivars additionally provide no factual basis for the assertion that Chases
proof of claim includes inflated inspection and appraisal fees. These claims are dismissed for failure
to state a claim under Rule 12(b)(6).
B. Texas Debt Collection Act (TDCA)
Chase and Deutsche Banks motion to dismiss the Saldivars TDCA claim is granted, in part,
and denied, in part. The Saldivars claim that Chase and Deutsche Bank violated several provisions
of the TDCA, specifically the following sections of the Texas Finance Code:
1) 392.301(a)(8) was violated because in the Notice of Default, Chase and Deutsche Bank
threatened to accelerate and foreclose on the Saldivars homestead. They assert that this was
prohibited by law because the Notice of Default did not include the admonishment of the
Saldivars right to bring a court action to assert the non-existence of a default or any other
defense of the borrower to acceleration and sale, which was required by the Security
Instrument.

Additionally, the Saldivars assert that acceleration and foreclosure were

prohibited because Chase and Deutsche Bank are not holders or owners of the Note or
Security Instrument.
2) 392.303(a)(2) was violated because Chase and Deutsche Bank attempted to collect
attorneys fees, double property taxes, and other fees and charges that were not authorized.
3) 392.304(a)(4) was violated because the Notice of default lists Deutsche Bank as the
creditor, when it is not, in fact the creditor.
4) 392.304(a)(8) was violated because Chase and Deutsche Bank inflated the amount of the
debt by including unauthorized fees and expenses; and misstated the character of the debt by
misrepresenting that they were the owners or holders of the Note or Security Instrument.

If the Saldivars and Chase both paid the 2011 property taxes, one of the parties should be reimbursed. However this
double payment does not mean that the Saldivars have a claim against Chase for an inflated Proof of Claim.

10 / 11

Case 12-01010 Document 25 Filed in TXSB on 06/05/13 Page 11 of 11

5) 392.304(a)(13) was violated because since the Saldivars mortgage involved a home equity
loan, any attorneys fees could only be collected if included in a judicially approved
judgment.
Chase and Deutsche Banks motion to dismiss is denied with respect to all of the Saldivars
claims under the TDCA, except to the extent that their claims under 392.303(a)(2) and
392.304(a)(8) include claims for double property taxes and inflated inspection or appraisal fees,
which the Court found supra, are not sufficiently pled.
C. Real Estate Settlement Procedures Act (RESPA)
Chase and Deutsche Banks motion to dismiss the Saldivars claims under RESPA is granted.
The Saldivars allege that Chase and Deutsche Bank violated RESPA and its implementing
regulations by (1) charging sums in excess of the formula stated in the regulation, in violation of 12
C.F.R. 1024.17(c)(ii); and, (2) failing to use the appropriate method to analyze the Saldivars
escrow account, in violation of 12 C.F.R. 1024.17(d).
As discussed supra, the Saldivars assert that they directly paid property taxes in 2011 and
that Chases escrow analysis, attached to its Proof of Claim, is incorrect because it includes property
taxes for 2011. Because Chase maintained an escrow account pursuant to the Saldivars Deed of
Trust, the Saldivars do not have a claim against Chase for properly escrowed property taxes paid for
2011.
Conclusion
The Court will enter an order consistent with this Memorandum Opinion.
SIGNED June 5, 2013.

___________________________________
Marvin Isgur
UNITED STATES BANKRUPTCY JUDGE

11 / 11

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 1 of 13

[*1]
Wells Fargo Bank, N.A. v Erobobo
2013 NY Slip Op 50675(U)
Decided on April 29, 2013
Supreme Court, Kings County
Saitta, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law
431.
This opinion is uncorrected and will not be published in the printed Official
Reports.

Decided on April 29, 2013

Supreme Court, Kings County

Wells Fargo Bank, N.A., as Trustee for ABFC 2006-OPT3

TRUST, ABFC ASSET-BACKED CERTIFICATES, SERIES
2006-OPT3, Plaintiff,
against
Rotimi Erobobo, THE CITY OF NEW YORK
ENVIRONMENTAL CONTROL BOARD, "JOHN DOE"
AND "JANE DOE" said names being fictitious, it being the
intention of Plaintiff to designate any and all occupants of the
premises being foreclosed herein, Defendants.

31648/2009

Plaintiffs Attorney
Fein, Such & Crane, LLP.
28 East Main Street, Suite 1800

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 2 of 13

Rochester, New York 14614

(585) 232-7400
Defendants Attorney
Kenneth S. Pesinger, Esq.
3601 Hempstead Turnpike, Suite 305
Levittown, New York 11756
Wayne P. Saitta, J.

Plaintiff, WELLS FARGO BANK, N.A., as Trustee for ABFC 2006-OPT3 TRUST,
ABFC ASSET-BACKED CERTIFICATES, SERIES 2006-OPT3, (herein "Plaintiff"), moves
this Court for an Order for summary judgment pursuant to CPLR 3212.
Upon reading the Notice of Motion by V.S. Vilkhu, Esq., Attorney for Plaintiff, WELLS
[*2]FARGO BANK, N.A., as Trustee for ABFC 2006-OPT3 TRUST, ABFC ASSETBACKED CERTIFICATES, SERIES 2006-OPT3, dated May 11th, 2010, together with the
Attorney Affidavit of V.S. Vilkhu, Esq., dated May 11th, 2010, and all exhibits annexed
thereto; the Memorandum of Law by V.S. Vilkhu, Esq., undated; the Affirmation in
Opposition by Kenneth S. Pelsinger, Esq., Attorney for Defendant ROTIMI EROBOBO,
dated November 19th, 2010; the Supplemental Affirmation in Opposition by Kenneth S.
Pelsinger, Esq., dated August 3rd, 2011, and all exhibits annexed thereto; the Reply
Affirmation of V.S. Vilkhu, Esq., dated January 24th, 2011, and all exhibits annexed thereto;
the Memorandum of Law in Opposition to Plaintiff's Motion for Summary Judgment by
Kenneth S. Pelsinger, Esq., dated November 9th, 2011; the Pooling and Servicing Agreement
of WELLS FARGO BANK, N.A., as Trustee for ABFC 2006-OPT3 TRUST, ABFC
ASSET-BACKED CERTIFICATES, SERIES 2006-OPT3, dated October 1st, 2006; and
after argument of counsel and due deliberation thereon, Plaintiff's motion is denied for the
reasons set forth below.

FACTS

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 3 of 13

Plaintiff brings this action to foreclose on a mortgage, dated July 16, 2006, which secured a
loan of $420,000 issued to the Defendant by Alliance Mortgage Banking Corp., ("Alliance").
On July 17, 2006, Alliance assigned the note and mortgage to Option One Mortgage
Corporation, ("Option One"). Option One then assigned the note and mortgage to Plaintiff by
assignment executed July 15, 2008. Plaintiff is the trustee for a securitized trust entitled
ABFC 2006-OPT3 TRUST, ABFC, ASSET BACKED CERTIFICATES, SERIES 2006OPT3, ("the Trust").
The Trust was formed as a vehicle for purchasing mortgage backed securities. The Trust
is subject to the terms of a Pooling and Servicing Agreement, ("the PSA"). The PSA was
signed by the Depositor, Asset Backed Funding Corporation ("ABFC"), by the Servicer,
Option One, and by the Trustee, WELLS FARGO BANK, NA, and is dated October 1,
2006.The PSA set forth the manner in which mortgages would be purchased by the trust, as
well as the duties of the trustee.
Section 2.01, subsection 1 of the PSA requires that transfer and assignment of
mortgages must be effected by hand delivery, for deposit with the Trustee with the original
note endorsed in blank.
Section 2.05 of the PSA requires that the Depositor transfer all right, title, interest in the
mortgages to the Trustee, on behalf of the trust, as of the Closing Date. The Closing Date as
provided in the PSA is November 14, 2006.
Option One assigned Defendant's mortgage loan to the Plaintiff, as the Trustee, on July
15, 2008, approximately eighteen months after the trust had closed.
Plaintiff commenced this action on December 10, 2009, and alleged that it possessed the
Note with an allonge on the date that this foreclosure action was commenced. Defendant, pro
se, filed an answer containing a general denial.
Plaintiff filed a motion for summary judgment on May 11, 2010. After Defendant
answered, he obtained counsel and opposed Plaintiff's motion for summary judgment.
ARGUMENTS[*3]Plaintiff argues it is entitled to summary judgment to foreclose because it
was in possession of the note and mortgage at the time the action was filed.
Defendant argues that Plaintiff is not in fact the owner or holder of the note because it
obtained the note and mortgage after the trust had closed in violation of the terms of the PSA,

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 4 of 13

and therefore the acquisition of the note and mortgage is void. Defendant also argues
that Plaintiff obtained the mortgage and note without an intervening assignment, in violation
of the PSA.
Plaintiff argues that Defendant's claim that Plaintiff does not own the note and mortgage
amounts to a standing argument, and because Defendant failed to raise standing in his answer
as an affirmative defense or pre answer motion, he cannot do so now.
ANALYSIS
Defendant contested whether Plaintiff owns the mortgage and note by answering with a
general denial of the facts alleged in the complaint, which included Plaintiff's allegation that
it owns the note and mortgage.
Many decisions treat the question of whether the Plaintiff in a foreclosure action owns
the note and mortgage as if it were a question of standing and governed by CPLR 3211(e).
Citigroup Global Markets Realty Corp. v. Randolph Bowling, 25 Misc 3d 1244(A), 906
N.Y.S.2d 778 (Sup. Ct. Kings Cty 2009); Federal Natl. Mtge. Assn. v. Youkelsone, 303 AD2d
546, 546547 (2d Dept 2003); Nat'l Mtge. Consultants v. Elizaitis, 23 AD3d 630, 631 (2d
Dept 2005); Wells Fargo Bank, N.A. v. Marchione, 2009 NY Slip Op 7624, (2d Dept 2009).
However, Plaintiff's ownership of the note is not an issue of standing but an element of its
cause of action which it must plead and prove.
The term "standing" has been applied to two legally distinct concepts. The first is legal
capacity, or authority to sue. The second is whether a party has asserted a sufficient interest
in the outcome of a dispute.
Standing and capacity to sue are related, but distinguishable legal concepts. Capacity
requires an inquiry into the litigant's status, i.e., its "power to appear and bring its grievance
before the court", while standing requires an inquiry into whether the litigant has "an interest
in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for
determining the issue." Wells Fargo Bank Minnesota, Nat. Ass'n v Mastropaolo, 42 AD3d
239, 242 (2d Dept 2007) (internal citations omitted). Both concepts can result in dismissal on
a pre answer motion by the defendant and are waived if not raised in a timely manner.

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 5 of 13

Id.CPLR 3211(a)(3) provides that an action may be dismissed based on the grounds that
the Plaintiff lacks the legal capacity to sue. It governs no other basis for dismissal.CPLR
3211(e) provides that a motion to dismiss pursuant to CPLR 3211(a)(3) is waived if not
raised in a pre-answer motion or a responsive pleading.
There is a difference between the capacity to sue which gives the right to come into
court, and possession of a cause of action which gives the right to relief. Kittinger v Churchill
Evangelistic Assn Inc., 239 AD 253, 267 NYS 719 (4th Dept 1933). Incapacity to [*4]sue is
not the same as insufficiency of facts to sue upon. Ward v Petri, 157 NY3d 301 (1898).
In the case of Ohlstein v Hillcrest, a defendant moved to dismiss a complaint in part
based on lack of legal capacity to sue where plaintiff had assigned her stock. The Court
denied that branch of the motion holding that even if plaintiff had assigned her stock, "the
defect to be urged is that the complaint does not estate [sic] a cause of action in favor of the
one who is suing, the alleged assignor - not that the plaintiff does not have the legal capacity
to sue. Legal incapacity, as properly understood, generally envisages a defect in legal status,
not lack of a cause of action in one who is sui juris." Ohlstein v Hillcrest, 24 Misc 2d 212,
214, 195 NYS2d 920, 922 (Sup Ct NY Co 1959).
The difference was articulated by the Court in the case of Hebrew Home for Orphans v
Freund, 208 Misc. 658, 144 N.Y.S.2d 608 (Sup Ct Bx 1955). The plaintiff in that case sought
a judgment declaring that an assignment of a mortgage it held was valid. The defendants
moved to dismiss the complaint on the grounds that since the assignment was not
accompanied by delivery of the bond and mortgage to plaintiff, plaintiff did not own the bond
and mortgage and thus had no legal capacity to sue or standing to maintain the action. The
Court denied the motion, stating:
The application to dismiss the complaint on the alleged ground that the plaintiff lacks legal
capacity to sue rests upon a misapprehension of the meaning of the term. See Gargiulo v.
Gargiulo, 207 Misc. 427, 137 N.Y.S.2d 886. Rule 107(2) of the Rules of Civil Practice
relates to a plaintiff's right to come into Court, and not to his possessing a cause of action. Id
at 660-661, 610.
The Court then quotes Kittinger v Churchill for the principle that,

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 6 of 13

"The provision for dismissal of the complaint where the plaintiff has not the capacity to
sue (Rules of Civil Practice, rules 106, 107) has reference to some legal disability, such as
infancy, or lunacy, or want of title in the plaintiff to the character in which he sues. There is a
difference between capacity to sue, which gives the right to come into court, and possession
of a cause of action, which gives the right to relief in court. Ward v. Petrie, 157 NY 301, 51
N.E. 1002; Bank of Havana v. Magee, 20 NY 355; Ullman v. Cameron, 186 NY 339, 78 N.E.
1074. The plaintiff is an individual suing as such. He is under no disability, and sues in no
representative capacity. He is entitled to bring his suits before the court, and to cause a
summons to be issued, the service of which upon the defendants brings the defendants into
court. There is no lack of capacity to sue.'
Similarly here. By not receiving delivery of the bond and mortgage it may be urged that the
plaintiff did not get title to them under the assignmentbut that does not mean that it can be
asserted that the plaintiff is not sui juris and therefore has no capacity to sue." Id at 661, 610611.
The defense that Plaintiff herein does not own the note and mortgage is not one of
standing based on lack of legal capacity pursuant to CPLR 3211(a)(3). [*5]
The other meaning of standing involves whether the party bringing the suit has a
sufficient interest in the dispute. Some cases have held that in this context, standing is
jurisdictional, reasoning that where there is no aggrieved party, there is no genuine
controversy, and where there is no genuine controversy, there is no subject matter
jurisdiction. Stark v Goldberg, 297 AD2d 203, 204(1st Dept 2002); Axelrod v New York State
Teachers' Retirement Sys., 154 AD2d 827, 828 (3rd Dept 1989).
However, the Second Department has held that the jurisdiction of the court to hear the
controversy is not affected by whether the party pursuing the action is, in fact, a proper party.
They have held that if not raised in the answer or pre-answer motion to dismiss, the defense
that the a party lacks standing is waived. Wells Fargo Bank Minnesota, Nat. Ass'n v. Perez,
70 AD3d 817, 818, 894 N.Y.S.2d 509, 510 (2nd Dept 2010), Countrywide Home Loans, Inc.
v. Delphonse, 64 AD3d 624, 625, 883 N.Y.S.2d 135 (2nd Dept 2009), HSBC Bank, USA v.
Dammond, 59 AD3d 679, 680, 875 N.Y.S.2d 490 (2nd Dept 2009).
The issue of whether a Plaintiff owns the mortgage and note is a different question from

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 7 of 13

whether it has an interest in the dispute. Whether a party has a sufficient interest in the
dispute is determined by the facts alleged in the complaint, not whether Plaintiff can prove
the allegations. Wall St. Associates v. Brodsky, 257 AD2d 526, 684 N.Y.S.2d 244 (1st Dept
1999), Kempf v. Magida, 37 AD3d 763, 764, 832 N.Y.S.2d 47, 49 (2nd Dept 2007). For the
purpose of determining whether a party has sufficient interest in the case the allegations are
assumed to be true.
This issue is not analogous to the issue of whether citizens have standing to seek judicial
intervention in response to what they believe to be governmental actions which would impair
the rights of members of society, or a particular group of citizens, (e.g. Schulz v. State, 81
NY2d 336, 343, 615 N.E.2d 953, 954 (1993), or whether registered voters have standing to
challenge the denial of the right to vote in a referendum pursuant to Section 11 of Article VII
of the State Constitution, or whether commercial fishermen have standing to complain of the
pollution of the waters from which they derive their living, see also Leo v. Gen. Elec. Co.,
145 AD2d 291, 294, 538 N.Y.S.2d 844, 847 (2nd Dept 1989). The issue of standing in these
types of cases turn on whether the claimants have an interest sufficiently distinct from society
in general.
Foreclosure actions implicate a concrete interest specific to a plaintiff, and the determination
must be made as to whether it has been aggrieved and is therefore entitled to receive
monetary damages for the alleged breach of the law.
The Plaintiff herein pled that it owns the note and mortgage and asserts the right to
foreclose on the mortgage which it asserts is in default. If it is successful in proving its
claims, then it is entitled to receive the proceeds of the sale of the mortgaged property.The
objection that the Plaintiff in fact does not own the note and mortgage is not a defense based
on a lack of standing.Here Defendant does not say insufficient facts were alleged.
Defendant's argument is that the facts alleged are not true. It is not a question of whether the
Plaintiff has alleged a sufficient interest in the dispute, but of whether Plaintiff can prove its
prima facie case. [*6]
Unlike standing, denial of a Plaintiff's claim that it owns the note and mortgage is not an
affirmative defense because it is a denial of an allegation in the complaint that is an element
of Plaintiff's cause of action.

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 8 of 13

In a foreclosure case, the Plaintiff must plead and prove as part of its prima facie case
that it owns the note and mortgage and has the right to foreclose. Wells Fargo Bank, N.A., 80
AD3d 753, 915 N.Y.S.2d 569 (2d Dept 2011); Argent Mtge. Co., LLC v. Mentesana, 79
AD3d 1079, 915 N.Y.S.2d 591 (2d Dept 2010); Campaign v Barba, 23 AD3d 327, 805
NYS2d 86 (2nd Dept 2005).Defendant herein filed a pro se answer containing a general
denial, which is a denial of all of Plaintiff's allegations, including the allegation in paragraph
11 that it owns the note.
CPLR 3018(b) provides that an affirmative defense is any matter "which if not pleaded
would be likely to take the adverse party by surprise" or "would raise issues of fact not
appearing on the face of a prior pleading".
CPLR 3018(b) also lists some common affirmative defenses, although the list is not
exhaustive. The list of affirmative defenses in CPLR 3018(b) are those which raise issues
such as res judicata or statute of limitations which are based on facts not previously alleged in
the pleadings.
Affirmative defenses are those which posit that the adverse party is not entitled to relief,
by reason of excuse or exception, even assuming the truth of the allegations made in the
complaint.
"The defendant has the burden of proof of affirmative defenses, which in effect assume
the truth of the allegations of the complaint and present new matter in avoidance thereof." 57
NY Jur. 2d Evidence and Witnesses 165.
Defendant's general denial asserts that Plaintiff is not entitled to relief because the facts
alleged in the complaint are not true.
In Hoffstaedter v. Lichtenstein, 203 App.Div. 494, 496, 196 N.Y.S. 577 (1st Dept 1922),
the First Department held that the general denial put the allegations in the plaintiff's
complaint in issue. In that case, the defendant executed a note in favor of the plaintiff as a
promise to pay for certain goods. When plaintiff brought an action to recover on the note, the
defendant answered with a general denial. It went on to state that "[i]t is elementary that
under a general denial a defendant may disprove any fact which the plaintiff is required to
prove to establish a prima facie cause of action." Id., at 578.

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 9 of 13

The Court of Appeals cited Hoffstaedter v. Lichtenstein in holding that a general denial
puts in issue those matters already pled. Munson v. New York Seed Imp. Co-op., Inc., 64
NY2d 985, 987, 478 N.E.2d 180, 181 (1985).The general denials contained in the answer
enable defendant to controvert the facts upon which the plaintiff bases her right to recover.
Strook Plush Company v. Talcott, 129 AD 14, 113 NYS 214 (2nd Dept 1908). A general
denial is sufficient to challenge all of the allegations in a complaint. Bodine v. White, 98 NYS
232, 233 (App. Term 1906).The Second Department in Gulati v. Gulati, 60 AD3d 810, 81112, 876 N.Y.S.2d 430, 432-33 (2nd Dept 2009), held it was that where a claim would not
take the plaintiff by surprise and "does not raise issues of fact not [*7]appearing on the face
of the complaint", a denial of the allegations in the plaintiff's complaint was sufficient. It held
that where the plaintiff alleged as an element of her prima facie case that the defendant
abandoned the marital residence without cause or provocation, and the defendant denied
these allegations in his answer, defendant did not need to further allege abandonment as an
affirmative defense.
The Fourth Department in Stevens v. N. Lights Associates, 229 AD2d 1001, 645
N.Y.S.2d 193, 194 (4th Dept 1996), found that a denial by defendant that it was in control of
the premises where plaintiff fell did not need to be separately pled as a defense, as the denial
of control did not raise any issue of fact which had not already been pled in the complaint.
See also Scully v. Wolff, 56 Misc. 468, 107 N.Y.S. 181 (App. Term 1907), Bodine v. White,
98 N.Y.S. 232 (App. Term 1906).
In this case, Defendant's contesting Plaintiff's claim in the complaint that it owns the
note and mortgage could not take the Plaintiff by surprise as a general denial contests
Plaintiff's factual allegations in the complaint itself, and does not rely upon extrinsic
facts.Since ownership of the note was pled in the complaint and is an element of the
Plaintiff's cause of action, Defendant did not waive the defense that Plaintiff did not own the
note, because he made a general denial to the factual allegations contained in the complaint.
In fact, the identity of the owner of the note and mortgage is information that is often in
the exclusive possession of the party seeking to foreclose. Mortgages are routinely
transferred through MERS, without being recorded. The notes underlying the mortgages, as
negotiable instruments, are negotiated by mere delivery without a recorded assignment or
notice to the borrower. A defendant has no method to reliably ascertain who in fact owns the
note, within the narrow time frame allotted to file an answer. In light of these facts and the

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 10 of 13

fact that Defendant contested the factual allegations asserted in Plaintiff's pleading,
Defendant's general denial is sufficient to contest whether Plaintiff owns the note and
mortgage.
In response to Plaintiff's motion, Defendant contends that Plaintiff is not entitled to
summary judgment as it does not own the note and mortgage, because the purported transfer
to Plaintiff was void as it violated the terms of the PSA which governs acquisitions by the
Trust.
The Plaintiff in this case is Trustee of an asset backed certificate trust. The trust acquires
mortgages, pools them and then issues securities secured or backed by the mortgages it holds.
The investors receive interest or principle, or both, from the mortgages assigned to those
specific securities or obligations.
The manner in which the trust acquires the mortgages, issues the securities and pays the
income from the mortgages to investors, is governed by the trust's pooling and servicing
agreement (PSA).
The Plaintiff trust is organized as a Real Estate Mortgage Investment Conduit (REMIC).
As a REMIC, the trust's investors receive significant tax benefits, but to receive those
benefits, the trust must comply with the US Treasury regulations governing REMICS. [*8]26
USCA 860-D-1. The terms of the PSA require that the trust does not operate or take any
action that would jeopardize its REMIC status. Section 9.01(f) of the PSA.
Article 9 of the PSA, section 9.01(b) provides that the closing date is designated as the
"start up day" of each REMIC, and lists the closing date as November 14, 2006. Pursuant to
26 USCA 860-G-(b)(9), the "start up day" of a REMIC is the day upon which the REMIC
issues all of its regular and residual interests.
The PSA specifically requires the Depositor to have transferred all of the interest in the
mortgage notes to the Trustee on behalf of the trust as of the closing date. PSA Article II,
Section 2.05 (iii).
Plaintiff asserts that the transfer of the note herein is void because the note was acquired
after the closing date in violation of the terms of the PSA.

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 11 of 13

Mere recital of assignment, holding or receipt of an asset is insufficient to transfer an

asset to a trust. The grantor must actually transfer the asset. EPTL 7-1.18.
The assignment of the note and the mortgage which affected the transfer was dated July
16, 2008, however, pursuant to the terms of the PSA the trust closed on November 14, 2006.
Section 9.02 of the PSA specifically prohibits the acquisition of any asset for a REMIC
part of the fund after the closing date unless the party permitting the acquisition and the
NIMS (net interest margin securities) Insurer have received an Opinion letter from counsel, at
the party's expense, that the acceptance of the asset will not affect the REMIC's status. No
such letter has been provided to show compliance with the requirements of the PSA.Plaintiff
has provided no evidence that the trustee had authority to acquire the note and mortgage
herein after the trust had closed.
Since the trustee acquired the subject note and mortgage after the closing date, the
trustee's act in acquiring them exceeded its authority and violated the terms of the trust.The
acquisition of a mortgage after 90 days is not a mere technicality but a material violation of
the trust's terms, which jeopardizes the trust's REMIC status.
Section 9.01(f) of the PSA provides that neither the Trustee, the Servicer or Holder of
the Certificates shall cause any REMIC formed under the PSA, by action or omission, to
endanger the status of the REMIC or cause any imposition of tax upon the REMIC.
Since the trust was organized as a REMIC, the investors received certain tax benefits on
the income that passed through the trust to them. Section 26 U.S.C.A. 860D(a)(4) defines a
REMIC as an entity that
as of the close of the 3rd month beginning after the startup day and at all times thereafter,
substantially all of the assets of which consist of qualified mortgages and permitted
investments.
Section 26 U.S.C.A. 860G (a)(3)(i,ii) defines a qualified mortgage as [*9]
(A) any obligation (including any participation or certificate of beneficial ownership therein)
which is principally secured by an interest in real property and which (I) is transferred to the
REMIC on the startup day in exchange for regular or residual interests in the REMIC,

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 12 of 13

(ii) is purchased by the REMIC within the 3-month period beginning on the startup day if,
except as provided in regulations, such purchase is pursuant to a fixed-price contract in effect
on the startup day.
Thus to qualify for the REMIC tax benefits, the mortgages upon which the securities are
based must be acquired by the Trust within three months of its start up date.
While section 26 U.S.C.A. 860D(a)(4) permits a REMIC to contain some portion of
non qualified mortgages, it is unclear how many unqualified mortgages are permitted without
losing tax status. It is clear, however, that the late acquisition violates the terms of the PSA.
Under New York Trust Law, every sale, conveyance or other act of the trustee in
contravention of the trust is void. EPTL 7-2.4. Therefore, the acceptance of the note and
mortgage by the trustee after the date the trust closed, would be void.
Conveyance from the Depositor to the Trust
Defendant also argues that the Trustee violated the terms of the trust by acquiring the note
directly from the sponsor's successor in interest rather than from the Depositor, ABFC, as
required by the PSA.
In Article II, section 2.01 Conveyance of Mortgage Loans, the PSA requires that the
Depositor deliver and deposit with the Trustee the original note, the original mortgage and an
original assignment . The Trustee is then obligated to provide to the Depositor an
acknowledgment of receipt of the assets before the closing date. PSA Article II, Section 2.01.
The rationale behind this requirement is to provide at least two intermediate levels of
transfer to ensure the assets are protected from the possible bankruptcy by the originator
which permits the security to be provided with the rating required for the securitization to be
saleable. Deconstructing the Black Magic of Securitized Trusts, Roy D. Oppenheim
Jacquelyn K. Trask-Rahn 41 Stetson L. Rev. 745 Stetson Law Review (Spring 2012).
Here the note and mortgage were purportedly assigned from Option One to the Plaintiff,
without having been transferred to, and then from, the Depositor.

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

Wells Fargo Bank, N.A. v Erobobo (2013 NY Slip Op 50675(U))

Page 13 of 13

The assignment of the note and mortgage from Option One rather than from the
Depositor ABFC violates section 2.01of the PSA which requires that the Depositor deliver to
and deposit the original note, mortgage and assignments to the Trustee.
The assignment of the Defendant's note and mortgage, having not been assigned from
the Depositor to the Trust, is therefore void as in being in contravention of the PSA.The
evidence submitted by Defendant that the note was acquired after the closing date and that
assignment was not made by the Depositor, is sufficient to raise questions [*10]of fact as to
whether the Plaintiff owns the note and mortgage, and precludes granting Plaintiff summary
judgment.
WHEREFORE, Plaintiff's motion for summary judgment is denied. This shall constitute
the decision and Order of this Court.
ENTER,
__________________________
JSC
Return to Decision List

http://www.courts.state.ny.us/reporter/3dseries/2013/2013_50675.htm

5/2/2013

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

BILLI VOGAN and HAROLD TRAUPEL, Plaintiffs,

v.
WELLS FARGO BANK, N.A.; US BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR
WFMBS 2005-AR12; WELLS FARGO HOME MORTGAGE; and FIRST AMERICAN
TRUSTEE SERVING SOLUTIONS FORMERLY KNOWN AS FIRST AMERICAN
LOANSTAR TRUSTEE SERVICES, LLC; and Does 1-100, inclusive, Defendants.
Case No. 2:11-CV-02098-JAM-AC.
United States District Court, E.D. California.
May 7, 2013.
MARY KATE SULLIVAN (State Bar No. 180203), M. ELIZABETH HOLT (State Bar No. 263206),
meh@severson.com, SEVERSON & WERSON, A Professional Corporation, San Francisco, California,
Attorneys for Defendants, WELLS FARGO HOME MORTGAGE, a, division of WELLS FARGO BANK,
N.A.;, and US BANK, N.A., as Trustee for WFMBS, 2005-AR12.

ORDER GRANTING DEFENDANTS WELLS FARGO AND US

BANK'S MOTION FOR SUMMARY JUDGMENT
JOHN A. MENDEZ, District Judge.

ORDER GRANTING SUMMARY JUDGMENT

I. BACKGROUND
Defendants Wells Fargo Bank, N.A. ("Wells Fargo") and US Bank, N.A., as Trustee for WFMBS 2005AR12 ("U.S. Bank") move for summary judgment on Plaintiffs Billi Vogan and Harold Traupel's claims
against them.
Initially there were ten claims, all being against both Wells Fargo and U.S. Bank, except for the fifth
(violation of 15 U.S.C. Section 1641(g) of the Truth in Lending Act) and ninth (to void or cancel the
trustee's deed upon sale) claims, asserted against U.S. Bank only.
The first two claims, one for declaratory relief and one for negligence, were previously dismissed by the
Court. See Docket No. 30. A claim for accounting was also previously dismissed. See id. Plaintiffs'
remaining claims are for quasi-contract, violation of Business and Professions Code Section 17200,
violation of 15 U.S.C. Section 1641(g) of the Truth in Lending Act, constructive trust, wrongful
foreclosure and to set aside trustee's sale, void or cancel trustee's deed upon sale, and quiet title.
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

1/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

The case is based on a nonjudicial foreclosure sale of property located at 20066 Wildwood West Drive
in Penn Valley, California. The parties agree that plaintiffs executed an adjustable rate note with Wells
Fargo back in June of 2004 in order to purchase the property. They also executed a deed of trust as
security for that note in favor of Wells Fargo as the lender and beneficiary of the deed of trust. National
Title Insurance Company was listed as the trustee for the deed of trust. Defendants represent that
Wells Fargo was the servicer for the life of the loan, and plaintiffs agree that Wells Fargo purported to
be the servicer for life of the loan, although plaintiffs dispute Wells Fargo's authority to collect payments
on the mortgage.
The case survived defendants' motion to dismiss on a narrow theory that U.S. Bank violated TILA
Section 1641(g), which requires the assignee of a mortgage loan to give notice to a borrower that a
transfer of the loan occurred. The parties originally presented an Assignment of Deed of Trust that was
dated January 6, 2011, and recorded on January 11, 2011.
Defendants contended that the assignment showed that U.S. Bank owned plaintiffs' loan, and was
therefore the proper party to foreclose.
U.S. Bank's legal theory supporting its motion to dismiss was that it was exempt from Section 1641(g)
because it was a trustee. At the motion to dismiss stage, the Court rejected the argument that the law
exempts trustees of a deed of trust from Section 1641(g). In this case, U.S. Bank was the trustee of a
mortgaged backed security, meaning that it was the legal equivalent of the assignee of the loan. Based
on the date of the assignment in the January 6, 2011 document, and the allegation that U.S. Bank did
not comply with Section 1641(g)'s requirements, the Court denied the motion to dismiss that claim. The
Court limited the claim to statutory damages and attorneys' fees because plaintiffs did not plead that
the lack of notice caused their default.
The Court also found at the motion to dismiss stage that plaintiffs raised at least a plausible inference
that the January 2011 assignment was falsified because of the inconsistency of the dates. At the time of
the motion to dismiss, defendants were unable to explain why there was an assignment dated January
2011 that was made to U.S. Bank nearly five years after the closing date of the underlying mortgage
backed security.
For purposes of the summary judgment motion, defendants have come forward with evidence that
plaintiffs' loan was pooled into the Wells Fargo Asset Security Corporation Mortgage Backed Securities
Trust 2005-AR12 ("2005-AR12 Trust"), with Wachovia as trustee on June 16, 2005. Pooling and
Servicing Agreements were also submitted. In December 2005, Wachovia sold its corporate trust and
institutional custody business to U.S. Bank, which then took over as trustee of the 2005-AR12 Trust.
Defendants contend that this background information is sufficient to show that the January 2011
assignment was not fraudulent or improper.
Defendants argue that the January 2011 assignment of the deed of trust for plaintiffs' loan was only
executed and recorded to address an ambiguity in California law. Defendants argue that by operation
of law the deed of trust followed the note when it was sold to Wachovia and then later to U.S. Bank.
Plaintiffs dispute the validity of each transfer in the chain of title, as the Court will now discuss.
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

2/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

II. CHAIN OF TITLE

The chain of title is central to the claims in this lawsuit. Plaintiffs generally contend that the nonjudicial
foreclosure on the property is void because U.S. Bank, the entity supposedly authorizing foreclosure,
was not the owner of the loan, and therefore not entitled to order First American, as trustee, to
foreclose. Plaintiffs summarized their argument as follows: "Based on violations of the trust agreement
and failure to properly assign the mortgage . . . their note and mortgage was not, and is not, part of the
trust res," "and as a result U.S. Bank cannot be the owner of the note of mortgage." Opp'n, p. 7.
The note produced by defendants, and authenticated by Wells Fargo employee Kimberly
Mueggenberg, contains an endorsement on page five. The endorsement is made by a vice president of
Wells Fargo. It does not identify the assignee. Defendants contend that this endorsement was sufficient
to transfer the loan, and that the transaction was memorialized in an Assignment of Mortgage Deed of
Trust, attached to the note as page eight. Plaintiffs argue that the endorsement is insufficient because
it does not identify the assignee.
An endorsement on an instrument need not identify the assignee, and such an endorsement is known
as an endorsement in blank. See CAL. COMM. CODE 3205(b). Such an instrument is payable to the
bearer of the note. Under the statute, an instrument may be payable to the bearer by attaching an
endorsement in blank to the instrument, even if there is room on the instrument itself for the
endorsement. See CAL. COMM. CODE 3204.
Based on the foregoing, it was legally proper for Wells Fargo to endorse the note in blank, making the
note payable to the bearer, in order to transfer the note to another entity.
Plaintiffs argue that the chain of title is riddled with other problems and errors. For instance, they
contend that Wells Fargo claims it assigned the loan to Wachovia in July 2004, and then a year later
purported to assign it to Wells Fargo Asset Securities Corporation as a step in the creation of the 2005AR12 Trust.
Plaintiffs, however, do not have standing to challenge the agreements between these three entities, or
make claims that the contracts between them created in the securitization process are void. It is
sufficient that the current trustee for the 2005-AR12 Trust, which is U.S. Bank, along with the original
lender, contend that the assignment into the trust is valid. See Baldoza v. Bank of Am., N.A., 2013 WL
978268 (N.D. Cal. 2013) (holding that the majority position is that plaintiffs lacked standing to challenge
noncompliance with a Pooling and Servicing Agreement in securitization unless they are parties or third
party beneficiaries of the agreement).
The Court also notes that plaintiffs have not produced evidence that a nonparty has any actionable
interest in the mortgage. Plaintiffs' position is that defects in the securitization process make it
impossible to determine the true owner of their loan, and therefore no entity is entitled to foreclose or
collect on the loan. That is not the law. All possible owners of the loan are now before the Court, and
they all agree that the 2005-AF12 Trust, with U.S. Bank as trustee, owned the note during the
foreclosure process.
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

3/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

Plaintiffs' original theory that an unknown third party owns the loan, and U.S. Bank's foreclosure was
accordingly wrongful, is unsupported by any evidence. Plaintiffs therefore have no standing to
challenge the validity of the securitization process or its underlying agreements.
Defendants argue that the January 6, 201, assignment of the beneficial interest in the deed of trust was
legally superfluous because U.S. Bank already held the loan as trustee of the 2005-AR12 Trust.
Defendants maintain that the assignment was made simply to ensure compliance with California Civil
Code Section 2932.5, which at the time some courts construed as applicable to deeds of trust as well
as mortgage. The Court does not take account of that evidence because it is based on the speculation
of their expert.
Defendants further argue that under California law, the beneficial interest in a deed of trust follows
assignment of the note, meaning that the January 6, 2011 recorded assignment was not needed
because U.S. Bank was already the beneficiary of the deed of trust, even if the assignment was not
recorded. Plaintiffs respond that defendants' current justification is an after-the-fact explanation
unsupported by evidence.
Under California law, assignment of a debt automatically carries with it the beneficial interest in a
corresponding deed of trust. See Domarad v. Fisher & Burke, Inc., 270 Cal. App. 2d 543 (1969)
(holding that a deed of trust is a mere incident of the debt it secures, and an assignment of the debt
carries with it the security). U.S. Bank therefore became the assignee of both the note and security
when it became trustee of the 2005-AF12 Trust in December of 2005. The January 2011 assignment
was superfluous because the assignment of the beneficial interest in the deed of trust had already
occurred years before with the transfer of the note.
For these reasons, plaintiffs have no evidence to support their position that U.S. Bank lacked standing
to foreclose. Accordingly, summary judgment is granted in defendants' favor on plaintiffs' claims
involving wrongful foreclosure.
Plaintiffs do not explicitly argue that they can proceed with their wrongful foreclosure claims based on
irregularities in the foreclosure process, and they are barred from doing so because they failed to
allege tender in their complaint. See Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101 (1996).
Therefore, plaintiffs' Claim 8, wrongful foreclosure, Claim 9, to void the trustee's deed, and Claim 10,
quiet title, cannot go forward.
Plaintiffs cannot proceed on these claims on the theory that U.S. Bank lacks standing to foreclose.
There is, accordingly, no remaining basis upon which these claims can proceed, so judgment is granted
in defendants' favor on all three claims.

III. QUASI-CONTRACT CLAIMS

On the quasi-contract claim, defendants point out that plaintiffs do not necessarily respond to this
argument in their opposition. Defendants further argue that they are entitled to judgment on the quasicontract claim because Wells Fargo had a written contract with plaintiffs, and also because U.S. Bank
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

4/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

had almost no contact with plaintiffs. Plaintiffs have not responded to these arguments in their
opposition. This, in effect, is a concession.
"There cannot be a valid, express contract and an implied contract, each embracing the same subject
matter, existing at the same time." Wal-Noon Corp. v. Hill, 45 Cal. App. 3d 605, 613 (1975). The only
evidence of an agreement between plaintiffs and Wells Fargo consists of the deed of trust and the note
associated with plaintiffs' mortgage. Accordingly, Wells Fargo is entitled to judgment on plaintiffs' quasicontract claim.
With respect to U.S. Bank, defendants are also correct that there is no evidence that U.S. Bank had
any interaction with plaintiffs either before or during the foreclosure. Accordingly, there is no conduct
from which a contract can be implied, and U.S. Bank is entitled to judgment on this claim as well.

IV. CONSTRUCTIVE TRUST CLAIM

On the constructive trust claim, defendants argue they are entitled to summary judgment because a
constructive trust is a remedy, not a stand-alone cause of action. Defendants also argue that plaintiffs
have no evidence to support two of the three elements necessary for a constructive trust. Again,
plaintiffs do not respond specifically to these arguments.
A constructive trust may be imposed if three conditions are met: (1) the existence of a res; (2) the
plaintiff's right to that res; and (3) the defendant's gain of the res by fraud, accident, mistake, undue
influence, or other wrongful act.
Defendants are correct that plaintiffs have not produced any evidence to satisfy the second and third
elements of a constructive trust. There is no evidence that plaintiffs have a right to the res of any trust.
And there is no evidence that defendants gained a res by fraud or wrongful act. Accordingly,
defendants are entitled to judgment as a matter of law on plaintiffs' constructive trust claim.

V. TILA CLAIM
On the TILA Section 1641(g) claim against U.S. Bank, plaintiffs argue that U.S. Bank failed to comply
with this statute, which requires the assignee of a mortgage to notify the borrower that it has acquired
the loan. There is no dispute that U.S. Bank failed to notify plaintiffs when it acquired the loan, but
defendants argue that the requirement did not apply to U.S. Bank because it acquired the loan in 2005
when it purchased Wachovia's trust business, and this statute was not passed until 2009.
At the motion to dismiss stage, this Court declined to dismiss this claim because plaintiffs alleged that
U.S. Bank acquired the loan in 2011, and at that stage of the case, defendants, at least in the Court's
view, had not produced sufficient documentation to rebut the allegations.
Both parties agree, and it is clear as a matter of law, that Section 1641(g) does not apply retroactively,
as a number of case have held. Therefore, judgment is granted in U.S. Bank's favor on this claim
because the un-rebutted evidence shows that the assignment occurred in 2005, prior to the enactment
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

5/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

of Section 1641(g). As a result, U.S. Bank was not required to provide notice, and therefore this claim
cannot go forward.

VI. SECTION 17200 CLAIM

In terms of the Business and Professions Code Section 17200 claim, defendants argue that plaintiffs
lack standing due to a heightened standing requirement established by Proposition 64. Defendants
also argue that the foreclosure and any resulting damage was caused only by plaintiffs' own default,
and that they lack standing to bring a 17200 claim.
Plaintiffs counter that the claim should survive on two theories. The first is that the January 6, 2011
assignment of the deed of trust to U.S. Bank was fraudulent, illegal, and unfair. The Court rejects this
theory for the reasons already mentioned above.
Defendants have brought forward sufficient evidence to show that they intended to transfer plaintiffs'
note to U.S. Bank, and plaintiffs have not presented any evidence establishing a genuine dispute of
fact on this point. There is no evidence of fraud in connection with the transfer. And all the evidence
supports defendants' position that the loan was transferred to the 2005-AR12 Trust for which U.S. Bank
served as trustee.
Second, plaintiffs argue they should be allowed to proceed to trial on their Section 17200 claim based
on Plaintiff Vogan's testimony that Wells Fargo induced her to default on her loan, promised her a
modification, and then failed to follow through with the modification.
Defendants argue that this theory does not appear in the complaint. They contend that plaintiffs are
barred from asserting it now. Defendants also maintain there is no causal connection between plaintiffs'
damages and Wells Fargo's alleged statements regarding a modification. Finally, defendants assert
that plaintiffs lack standing on this theory as well.
The complaint actually does contain some factual allegations related to plaintiffs' attempt to modify their
loan, along with an allegation that Wells Fargo instructed them to stop paying the loan while a
modification was investigated. See Compl., 53. Plaintiffs also allege in the complaint that they were
unable to make payments without a modification. The Section 17200 claim, however, is predicated
entirely on the false recordation of documents. See Compl., 93-103. The only allegation in the
Section 17200 claim that does not deal with false recordation of documents is a general and conclusory
allegation in paragraph 97, in which plaintiffs allege, "other deceptive business practices as described
herein."
And in opposition to the motion to dismiss, plaintiffs only argued in support of their Section 17200 claim
on the false recordation theory and a theory that Wells Fargo was not legally entitled to collect plaintiffs'
mortgage payments.
Defendants' position that plaintiffs are raising a Section 17200 claim based on Wells Fargo's alleged
failure to modify their mortgage for the first time in opposition to this motion for summary judgment is
meritorious. Simply put, summary judgment is not a procedural second chance to flesh out inadequate
scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

6/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

pleadings. Plaintiffs cannot present a new theory for the Section 17200 claim in opposition to a motion
for summary judgment. Defendants' motion is granted for this reason.
Defendants additionally argue that the claim should not go forward because plaintiffs lack standing. To
satisfy the narrower standing requirements of Section 17200 imposed by California Proposition 64, a
party must now, establish a loss or deprivation of money or property sufficient to qualify as an economic
injury, and show that the economic injury was a result of, that is, it was caused by, the unfair business
practice. See Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310 (2011). Proposition 64 was designed to make
sure private attorneys were not able to bring Section 17200 claims on behalf of clients who had no
actual business dealings with a defendant.
Plaintiff Vogan testified in her declaration she defaulted on her mortgage because Wells Fargo told her
she would qualify for loan modification if she did so. In her declaration she said, "I was specifically told
by a Wells Fargo representative that with the income documentation we had submitted we were
qualified for a loan modification that would reduce our monthly loan payment commensurate with our
income. Although I was not told what the exact amount of the new monthly payment would be, I
understood it would be based on the percentage of our income on Wells Fargo's guidelines." Vogan
Decl., 7. Vogan testified in her declaration that she was told, after being in default for three months,
that she did not qualify for a modification because her loan was part of a mortgage backed security and
the investor did not permit modifications.
The problem with plaintiffs' position on this point is that the evidence shows that they defaulted because
they could not afford the payments on their loan, not because of Wells Fargo's representation. Plaintiff
Vogan initially contacted Wells Fargo to seek a reduction in her monthly loan payment due to
decreased family income. See Vogan Decl., 5. After plaintiffs were not approved for modification,
they were already three months behind on their payments, and they have never attempted to make the
outstanding payments. The evidence therefore demonstrates that plaintiffs were unable to make their
payments as agreed without some modification to the loan. As result, any damage that plaintiffs
experienced stemmed from their inevitable default, not defendants' alleged misrepresentations.
Therefore, plaintiffs lack standing under Section 17200 to pursue this theory.

VII. CONCLUSION
Plaintiffs' theory that U.S. Bank was not entitled to initiate foreclosure on their property is not supported
by any evidence. The evidence provided by defendants shows that Wells Fargo was the original lender,
it intended to securitize plaintiffs' mortgage, and that U.S. Bank was the intended trustee of the resulting
trust. Defendants are therefore entitled to summary judgment on all their claims against them. The
Court so orders. A separate judgment will be entered in favor of Wells Fargo and U.S. Bank. This case
will be closed.
IT IS SO ORDERED.

Save trees - read court opinions online on Google Scholar.

scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

7/8

8/19/13

Vogan v. WELLS FARGO BANK, NA, Dist. Court, ED California 2013 - Google Scholar

scholar.google.com/scholar_case?case=10890578489201694651&q=vogan&hl=en&as_sdt=4,5,72,73,78,79,80,86,88,93,114,129,134,135,141,142,143,149,151,1

8/8

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

216 Cal.App.4th 497

Court of Appeal,
Fourth District, Division 3, California.

West Headnotes (49)

[1]
Diane JENKINS, Plaintiff and Appellant,
v.
JP MORGAN CHASE BANK, N.A. et
al., Defendants and Respondents.

Mortgages
Form of instrument
Although there are no statutory provisions
dictating the form or stating the effect of deeds of
trust, deeds of trust are analogized to mortgages,
and the same rules are generally applied to deeds
of trust that are applied to mortgages.

G046121 | Filed May 17,

2013 | As Modified June 12, 2013
Synopsis
Background: Borrower under deed of trust brought action
against beneficiary, loan servicer, and trustee for unfair
business practices, breach of good faith and fair dealing,
and violations of Real Estate Settlement and Procedures Act
(RESPA) and the statute governing assignments of a power
to sell real property. The Superior Court, Orange County,
No. 30201100438159, William M. Monroe, J., sustained
demurrers without leave to amend. Borrower appealed.

Mortgages
What law governs

[2]

Mortgages
Reinstatement of mortgage
Mortgages
Nature of remedy
Mortgages
Deficiency and personal liability
Mortgages
Nature in general

Holdings: The Court of Appeal, O'Leary, P.J., held that:

Mortgages
Liability for Deficiency

[1] borrower did not have the right to bring a preemptive

judicial action to determine defendants' standing to
foreclose;

Mortgages
Right to Redeem in General
Both mortgages and deeds of trust are subject
to the same procedures and limitations on
judicial and nonjudicial foreclosure, redemption
provisions both prior to and after the foreclosure
sale, reinstatement provisions prior to the
foreclosure sale, and antideficiency limitations.
Cal. Civ. Code 2903 et seq., 2924 et seq.,
2924c; Cal. Civ. Proc. Code 580a et seq., 726,
729.010 et seq.

[2] foreclosing party need not have beneficial interest in

promissory note and deed of trust;
[3] servicer had standing to commence nonjudicial
foreclosure;
[4] borrower could not obtain declaratory judgment about
effect of Helping Families Save Their Homes Act; and
[5] beneficiary did not violate implied covenant of good faith
and fair dealing.

Affirmed.

[3]

Mortgages
Under trust deeds
Despite the existence and validity of the secured
interest created by a deed of trust, the trustordebtor retains all incidents of ownership with
regard to the real property, including the rights
of possession and sale.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

[4]

Mortgages
Rights, duties and liabilities of trustee in
general

[8]

A defaulting debtor is free to pursue a

judicial action for misconduct arising out of a
nonjudicial foreclosure sale when such a claim
is not inconsistent with the policies behind the
nonjudicial foreclosure statutes. Cal. Civ. Code
2924 et seq.

The trustee of a deed of trust is not a true trustee,

and owes no fiduciary obligations; he merely
acts as a common agent for the trustor and the
beneficiary of the deed of trust.

[5]

Mortgages
Rights, duties and liabilities of trustee in
general
An enforceable deed of trust requires the trustee
to execute only one of the following mutually
exclusive duties: (1) should the trustor-debtor
default on the debt, the trustee must initiate
foreclosure on the property for the benefit of the
beneficiary-creditor; or (2) should the trustordebtor satisfy the secured debt, the trustee must
reconvey title to the real property back to the
trustor-debtor, extinguishing the security device.

[6]

[9]

[10]

3 Cases that cite this headnote

[11]

Mortgages
Statutory provisions

1 Cases that cite this headnote

Mortgages
Under trust deed
Nonjudicial foreclosure statutes do not require
that the foreclosing party have an actual
beneficial interest in both the promissory note
and deed of trust to commence and execute a
nonjudicial foreclosure sale. Cal. Civ. Code
2924(a)(1).

Mortgages
Under trust deeds

Purposes of California's comprehensive

nonjudicial foreclosure statutory scheme are
threefold: (1) to provide the beneficiary-creditor
with a quick, inexpensive and efficient remedy
against a defaulting trustor-debtor; (2) to protect
the trustor-debtor from wrongful loss of the
property; and (3) to ensure that a properly
conducted sale is final between the parties and
conclusive as to a bona fide purchaser. Cal. Civ.
Code 2924 et seq.

Declaratory Judgment
Mortgages and Trust Deeds
Borrower under deed of trust did not have
the right to bring a preemptive judicial action
for declaratory relief to determine whether
beneficiary, loan servicer, and trustee had the
authority to initiate nonjudicial foreclosure on
her home. Cal. Civ. Code 2924(a)(1).

Although a deed of trust technically conveys title

to the real property from the trustor-debtor to the
trustee, the extent of the trustee's interest in the
property is limited to what is necessary to enforce
the operative provisions of the deed of trust.

[7]

Mortgages
Between parties to mortgage or their privies

Declaratory Judgment
Necessity
Fundamental basis of declaratory relief is the
existence of an actual, present controversy over
a proper subject. Cal. Civ. Proc. Code 1060.

[12]

Declaratory Judgment
Statement of controversy
In order for a party to pursue an action for
declaratory relief, the actual, present controversy
must be pleaded specifically, and thus, a claim
must provide specific facts, as opposed to
conclusions of law, which show a controversy of
concrete actuality. Cal. Civ. Proc. Code 1060.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

1 Cases that cite this headnote

[13]

Declaratory Judgment
Scope and extent of review in general

[17]

Whether a claim presents an actual controversy

within the meaning of the declaratory judgment
statute is a question of law reviewed de novo.
Cal. Civ. Proc. Code 1060.

[14]

[15]

Borrower under deed of trust did not have the

right to bring an action against beneficiary, loan
servicer, and trustee for declaratory judgment
that their transfer of the promissory note to a
transferee that failed to comply with the notice
requirements of the Helping Families Save Their
Homes Act extinguished the secured interest
created by the deed of trust, even though the
servicer recorded a notice of trustee's sale, where
beneficiary, loan servicer, and trustee did not
violate any obligations under the Act. Truth in
Lending Act 131, 15 U.S.C.A. 1641(g).

Declaratory Judgment
Mortgages and Trust Deeds
No actual controversy existed between borrower
under deed of trust and the purported beneficiary,
trustee, and servicer as to whether beneficiary,
trustee, and servicer had an enforceable secured
interest in borrower's home, and thus declaratory
judgment was not authorized, even though the
servicer recorded a notice of trustee's sale, where
borrower conceded that she had defaulted on a
loan that was secured by her home and the debt
remained in arrears; even if any transfers of the
promissory note were invalid, borrower was not
the victim of such invalid transfers because her
obligations under the note remained unchanged.
Cal. Civ. Code 2924.

[18]

Mortgages
Liabilities of assignee
Mortgages
Rights and liabilities of assignor
The Helping Families Save Their Homes Act
obligation to notify the mortgage loan borrower
is only applicable to creditors who are the new
owners or assignees of a mortgage loan, and not
the transferors of the mortgage loan. Truth in
Lending Act 131, 15 U.S.C.A. 1641(g)

Mortgages
Actions by or against assignees
As an unrelated third party to the alleged
securitization of the deed of trust on her
home, and any other subsequent transfers of
the beneficial interest under the promissory
note, borrower lacked standing to enforce any
agreements, including the investment trust's
pooling and servicing agreement, relating to such
transactions.

Declaratory Judgment
Mortgages and Trust Deeds

[19]

Mortgages
Rights as to property mortgaged
Mortgages
Under trust deed
The statute governing assignments of a power to
sell real property is inapplicable to deeds of trust.
Cal. Civ. Code 2932.5.

2 Cases that cite this headnote

[16]

Mortgages
Under trust deed
Loan servicer had standing to commence
nonjudicial foreclosure as agent for beneficiary
of deed of trust, even though servicer had not
yet been substituted as trustee. Cal. Civ. Code
2924.

[20]

Mortgages
Nature of mortgage in general
Mortgages
Under trust deeds
The execution of a mortgage involves only two
parties, whereas the execution of a deed of trust
necessarily involves three parties because title

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

to the real property and the power of sale are

conveyed to the third party trustee, who holds
the interest for the benefit of the beneficiarycreditor.

[21]

Borrower under deed of trust did not suffer

injury in fact and loss of money or property
as a result of any alleged unfair competition by
beneficiary, loan servicer, and trustee after she
defaulted on her loan, and thus borrower lacked
standing to challenge such unfair competition
under Unfair Competition Law (UCL), since
borrower's default triggered a power of sale
clause in the deed of trust, and any unfair
competition after borrower's default was not
the cause of borrower's economic injury in the
impending foreclosure of her home. Cal. Bus. &
Prof. Code 17204.

Antitrust and Trade Regulation

Weight and sufficiency
A plaintiff must support each of the standing
elements under the Unfair Competition Law
(UCL) in the same way as any other matter on
which the plaintiff bears the burden of proof, i.e.,
with the manner and degree of evidence required
at the successive stages of the litigation. Cal.
Bus. & Prof. Code 17204.
[26]

[22]

[23]

Contracts
Terms implied as part of contract
Covenant of good faith and fair dealing prevents
the contracting parties from taking actions that
will deprive another party of the benefits of
the agreement, and requires each party to do
everything the contract presupposes the party
will do to accomplish the agreement's purposes.

[28]

Contracts
Terms implied as part of contract
The scope of conduct prohibited by the covenant
of good faith is circumscribed by the purposes
and express terms of the contract.

Antitrust and Trade Regulation

Reliance; causation; injury, loss, or damage
A plaintiff fails to satisfy the causation prong of
the Unfair Competition Law (UCL) if he or she
would have suffered the same harm whether or
not a defendant complied with the law. Cal. Bus.
& Prof. Code 17204.

[25]

[27]

Antitrust and Trade Regulation

Persons Entitled to Sue or Seek Remedy
The quantum of lost money or property
necessary to show Unfair Competition Law
(UCL) standing is only so much as would suffice
to establish injury in fact. Cal. Bus. & Prof. Code
17200.

[24]

The covenant of good faith and fair dealing is

imposed upon each party to a contract.

Antitrust and Trade Regulation

Pleading
An Unfair Competition Law (UCL) claim will
survive a demurrer if the plaintiff can plead
general factual allegations of injury resulting
from the defendant's conduct. Cal. Bus. & Prof.
Code 17200.

Contracts
Terms implied as part of contract

[29]

Contracts
Terms implied as part of contract
Because contracts differ, the nature and extent of
the duties owed under the implied covenant of
good faith are also variable and will depend on
the contractual purposes.

Antitrust and Trade Regulation

Private entities or individuals
[30]

Contracts

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

Terms implied as part of contract

Lender's alleged violation of the implied

covenant of good faith and fair dealing in
willfully placing borrower in a loan that she did
not qualify for by inflating her income did not
give rise to a claim against the transferee of
lender's assets including its interest in the deed
of trust on borrower's home, where the transfer
agreement stated that transferee did not assume
any liability associated with lender's lending and
loan servicing activities.

The implied covenant of good faith does not

extend so far as to impose enforceable duties that
are beyond the scope of the contract, nor does
the covenant prohibit actions that are expressly
authorized by the contract's terms.

[31]

Contracts
Grounds of action
A party's breach of the implied covenant of good
faith and fair dealing gives rise to a contract
claim.

[32]

[36]

Any violations of the Fair Debt Collection

Practice Act, the Real Estate Settlement and
Procedures Act (RESPA), and the statute
governing assignments of a power to sell real
property by the beneficiary of a deed of trust
did not establish a breach of implied covenant
of good faith and fair dealing, absent evidence
of how the violations deprived borrower of the
benefits she was due under a contract. Truth in
Lending Act 102, 15 U.S.C.A. 1601; Real
Estate Settlement Procedures Act of 1974 2 et
seq., 12 U.S.C.A. 2601 et seq.; Cal. Civ. Code
2932.5

Contracts
Terms implied as part of contract
Contracts
Grounds of action
The prerequisite for any action for breach of the
implied covenant of good faith and fair dealing
is the existence of a contractual relationship
between the parties, since the covenant is an
implied term in the contract.

[33]

Contracts
Grounds of action
Without a contractual underpinning, there is no
independent claim for breach of the implied
covenant of good faith.

[34]

Mortgages
Between parties to mortgage or their privies
Borrower failed to establish that loan servicer
breached the deed of trust's implied covenant
of good faith and fair dealing by initiating
foreclosure proceedings, absent evidence of how
servicer either deprived borrower of the right to
receive any benefits under the deed of trust, or
refused to perform a specific act presupposed by
the terms of the deed of trust.

[35]

Mortgages
Between parties to mortgage or their privies

Contracts
Loans and advances

[37]

Mortgages
Dealings and transactions between parties
Mortgages
Change in time or mode of payment
Beneficiary under deed of trust did not violate
the implied covenant of good faith and fair
dealing in deed of trust and promissory note
in allegedly willfully withholding numerous
disclosures, instructing borrower to default on
her payments to qualify for a loan modification
and then subsequently rejecting her payments,
forcing borrower to resubmit loan modification
documents over a dozen times, consistently
making claims that borrower was denied a loan
modification because she did not pay for a loan
appraisal, which she did, or that her paperwork
was not received, and intentionally setting up
its loan modification program to fail, since
beneficiary did not violate any express terms of

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

the promissory note or deed of trust, borrower

was provided with the benefits of the promissory
note, and beneficiary's actions in pursuit of its
secured interest were expressly authorized by the
deed of trust.

[38]

[43]

Consumer Credit
Regulations in general

[44]

Asserting a defendant's failure to respond to

a Qualified Written Request (QWR) and the
suffering of general damages is insufficient
to state a claim under Real Estate Settlement
and Procedures Act (RESPA). Real Estate
Settlement Procedures Act of 1974 6, 12
U.S.C.A. 2605(e)(1).

[41]

Consumer Credit
Regulations in general
Alleged violation of Real Estate Settlement
and Procedures Act (RESPA) by deed of trust
beneficiary in failing to respond to Qualified
Written Request (QWR) did not establish actual
damages and thus did not give rise to a cause
of action under RESPA, where borrower sent
the QWR months after her default and the
receipt of the notice of default. Real Estate
Settlement Procedures Act of 1974 6(e)(1), (f),
12 U.S.C.A. 2605(e)(1), (f)

Consumer Credit
Regulations in general
Borrower's reliance on deed of trust beneficiary's
failure to respond to one Qualified Written
Request (QWR) was insufficient to state a Real
Estate Settlement and Procedures Act (RESPA)
claim under RESPA's pattern or practice of
noncompliance prong. Real Estate Settlement
Procedures Act of 1974 6(f)(1), 12 U.S.C.A.
2605(f)(1).

Contracts
Grounds of action
A plaintiff raising a claim for the breach of the
implied covenant of good faith must allege a
reasonable relationship between the defendant's
allegedly wrongful conduct and the express
terms or underlying purposes of the contract.

[40]

Consumer Credit
Regulations in general
Almost as a matter of definition, a single
failure to respond to a Qualified Written Request
(QWR) does not state a claim for a pattern
or practice of doing so under Real Estate
Settlement and Procedures Act (RESPA). Real
Estate Settlement Procedures Act of 1974 6(f)
(1), 12 U.S.C.A. 2605(f)(1).

Contracts
Terms implied as part of contract
An action alleging a breach of the implied
covenant of good faith cannot be used by a
plaintiff to try to extend existing, or to create
new, obligations that were not contemplated by
the parties when the contract was executed.

[39]

[42]

Pleading
Amendment or Further Pleading After
Demurrer Sustained
A court's sustaining a demurrer without leave to
amend is appropriate when, based on the nature
of the complaint's defects and the plaintiff's
previous unsuccessful attempts to plead, it is
improbable the plaintiff can state a cause of
action.

[45]

Evidence
Nature and scope in general
Judicial notice is the recognition and
acceptance by the court, for use by the trier of
fact or by the court, of the existence of a matter of
law or fact that is relevant to an issue in the action
without requiring formal proof of the matter.

[46]

Pleading
Process, pleadings, and other documents

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

When a court is required to rule on a demurrer,

the court may take judicial notice of a fact
or proposition within a recorded document that
cannot reasonably be controverted, even if it
negates an express allegation of the pleading.
Cal. Evid. Code 452

Appeal from a judgment of the Superior Court of Orange

County, **918 William M. Monroe, Judge. Affirmed.
(Super.Ct. No. 30201100438159)
Attorneys and Law Firms

[47]

Evidence
Mode of ascertaining facts required to be
noticed; motions and notice of reliance
Borrower failed to establish that trial court took
judicial notice of the validity of the recorded
notice of default and substitution of trustee,
and thus failed to establish that it erred in
doing so, where there was no court order taking
judicial notice of the recorded documents and no
hearing in which the parties argued the merits
of loan servicer's request for judicial notice of
the documents, and the court's use of the phrase
recorded assignment of interest was a mistaken
reference to the recorded substitution of trustee.
Cal. Evid. Code 452, 455(a)

[48]

Evidence
Official proceedings and acts
A court may take judicial notice of numerous
facts that can be deduced from recorded
documents, including, among other things, their
existence, recordation, and date of recordation,
without overstepping the court's discretion. Cal.
Evid. Code 452.

[49]

Evidence
Official proceedings and acts
Trial court acted within its discretion in taking
judicial notice of recorded notice of default
and substitution of trustee, in borrower's action
against beneficiary under deed of trust, loan
servicer, and trustee challenging the nonjudicial
foreclosure on her home. Cal. Evid. Code 452.
See 4 Witkin, Summary of Cal. Law (10th ed.
2005) Security Transactions in Real Property,
144 et seq.

Law Offices of Patricia Rodriguez and Patricia Rodriguez for

Plaintiff and Appellant.
Bryan Cave, Stuart W. Price, Sean D. Muntz and Brett N.
Taylor for Defendants and Respondent JP Morgan Chase
Bank N.A. and Bank of America N.A.
McCarthy & Holthus, Matthew Podmenik and Melissa
Robbins Coutts for Defendant and Respondent Quality Loan
Service Corporation.
Opinion
OPINION
O'LEARY, P.J.
*503 Diane Jenkins (Jenkins) requests the reversal of the
trial court's dismissal of her lawsuit after it sustained the
two separate demurrers of (1) JPMorgan Chase Bank N.A.
(Chase) and Bank of America, N.A. (B of A) and (2)
Quality Loan Service Corporation (Quality). (These entities
will collectively be referred to as Defendants, unless the
context indicates otherwise.) In 2007, Jenkins executed a
promissory note and deed of trust in order to refinance her
condominium. After she failed to obtain refinancing for the
same loan in 2008 and 2009, she defaulted on the loan and
thereafter brought suit to avoid nonjudicial foreclosure and
collect monetary damages.
Jenkins voluntarily amended her initial complaint, which
she filed in propria persona, after she retained counsel. The
court sustained Defendants' demurrers to Jenkins's first
amended complaint (FAC) with leave to amend four of her
five causes of action. Jenkins's second amended complaint
(SAC) raised five causes of action. Two of the causes
of action relate to her overarching assertion the secured
interest created by her execution of the deed of trust in
2007 was extinguished by purportedly improper actions taken
by Defendants and, consequently, Defendants should be
prevented from foreclosing on her home. The other three
causes of action relate to her allegations Defendants violated

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

numerous state and federal laws with regard to the origination

and servicing of her loan and the initiation of nonjudicial
foreclosure. The court, finding Jenkins's SAC failed to allege
a valid cause of action, sustained Defendants' demurrers
without leave to amend. None of Jenkins's contentions have
merit and we affirm the judgment.

*504 FACTS
In March 2007, Jenkins obtained an adjustable rate loan in
the amount of $375,500 from Washington Mutual Bank, F.A.
(WaMu). She executed a promissory note for this amount.
The loan was secured by a deed of trust, which encumbered
her residence located in Laguna Niguel, California. The deed
of trust identified WaMu as the beneficiary and California
Reconveyance Company as the trustee. In January 2008,
Jenkins requested WaMu refinance the loan. She alleges
Chris Rogella, a WaMu loan officer, gave her the run
around for nearly two years and failed to assist her with
refinancing her loan.
Meanwhile, in September 2008, WaMu financially collapsed
and the United States Office of Thrift Supervision (OTS)
seized the defunct bank and placed it into the receivership
of the Federal Deposit Insurance Corporation (FDIC). FDIC
succeeded to all rights, titles, powers, and privileges of
the bank. (12 U.S.C. 1821(d)(2)(A)(i).) Soon thereafter,
FDIC, by way of a purchase and assumption agreement
executed on September 25, 2008, transferred certain assets
and liabilities of WaMu, including the defunct bank's loan
portfolio, to Chase. Under the terms **919 of the purchase
and assumption agreement, Chase did not assume any liability
for WaMu's lending or loan purchasing activities prior to
September 25, 2008.
Jenkins alleges Rogella advised her, sometime after
September 2009, to cease making payments on her loan to
qualify for a loan modification and to obtain a more favorable
interest rate. Subsequently, Jenkins defaulted on her loan, and
on April 30, 2010, Quality recorded a notice of default. At this
point in time, Jenkins was more than $9,199 in arrears. Her
extensive efforts to negotiate a reduction of her loan payments
were unsuccessful.
On June 11, 2010, Chase, acting as the present Beneficiary
of the deed of trust, recorded a substitution of trustee
designating Quality as trustee. Two months later, Quality
recorded a notice of trustee's sale, seeking the unpaid balance

of $392,314.77. The foreclosure sale was subsequently

postponed and has not been rescheduled.
On January 5, 2011, Jenkins, acting in propria persona, filed
her initial complaint against Chase, WaMu, and Quality.
Chase, on behalf of itself and as the acquirer of WaMu,
responded by filing a demurrer. Before the matter could be
heard, Jenkins hired an attorney and filed her FAC on April
20, 2011. The FAC alleged five causes of action: (1) lack of
standing to foreclose; (2) unfair business practices in violation
of Business and Professions Code section 17200 et seq., and
Penal Code section 115.5 [fraudulently procured documents]
(hereafter unfair business practices); (3) *505 contractual
breach of good faith and fair dealing; (4) violation of the Truth
in Lending Act, 15 U.S.C. section 16.01 et seq. (TILA); and
(5) violations of the Real Estate Settlement and Procedures
Act, 12 U.S.C. section 2601 et seq. (RESPA).
The crux of Jenkins's lawsuit is based on her theory her loan
was pooled with other home loans in a securitized investment
trust, which is purportedly now managed by B of A, as the
acting trustee, without proper compliance with the investment
trust's pooling and servicing agreement. Her FAC alleged the
failure to comply with the pooling and servicing agreement
extinguished the security interest created by her execution of
the deed of trust in 2007 and, therefore, Defendants now have
no secured interest to foreclose upon. Additionally, Jenkins's
FAC alleged Defendants violated numerous state and federal
laws with regard to the servicing of her loan and the initiation
of nonjudicial foreclosure.
Chase demurred to the FAC, asserting Jenkins had not stated
a valid claim as a matter of law. The court sustained the
demurrers to the first, second, third, and fifth causes of
action, but gave Jenkins leave to amend these four claims.
The court also sustained the demurrer to the TILA cause of
action without leave to amend.
Jenkins filed her SAC on July 20, 2011, which again alleged
causes of action for: (1) unfair business practices; (2) breach
of good faith and fair dealing; and(3) violations of RESPA.
She replaced the cause of action for lack of standing to
foreclose in her FAC with claims for declaratory relief and a
violation of Civil Code section 2932.5. 1
1

All further statutory references are to the Civil Code,

unless otherwise indicated.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

Jenkins's SAC, like her FAC, focused on the alleged improper

securitization and lack of compliance with the securitized
investment trust's pooling and servicing agreement. Chase
and B of A filed a joint demurrer and Quality filed its own
separate **920 demurrer to the SAC. The court sustained
both demurrers without leave to amend.
The court offered several reasons for its ruling. It explained
Jenkins failed to state a basis for declaratory relief because:
(1) production of the note is not required to perfect
foreclosure; (2) Jenkins was not a party or a third party
beneficiary to the securitized investment trust's pooling and
servicing agreement; and (3) California does not recognize
a preemptive suit challenging a foreclosing party's right or
ability to foreclose.
The court reasoned Jenkins's claim for violation of section
2932.5 lacked merit because the statute applies only to a
mortgage and not to a deed of *506 trust. In light of Jenkins's
admission the note was secured by a deed of trust on her
property and not a mortgage, the court concluded the statute
was inapplicable.
The court determined Jenkins's claim for breach of the
implied covenant of good faith and fair dealing lacked merit
because Jenkins failed to allege the existence of a contract.
Moreover, the court found there is generally no implied
covenant relating to the decision to extend or not to extend
(i.e., refinance) a loan. And to the extent the alleged breach
related to underwriting, lending, and/or servicing errors by
WaMu, those alleged liabilities were never assumed by Chase
or Quality.
The court rejected Jenkins's Business and Professions Code
section 17200 cause of action on the grounds she failed
to allege facts to support her claim Defendants prepared
and publicly recorded false documents. Finally, the court
sustained the demurrer to Jenkins's RESPA claim because
she failed to allege damages from Chase's delayed response,
or a pattern or practice of noncompliance to support the
statutory de minimus penalty.

When reviewing a court's dismissal of a lawsuit following

an order sustaining a demurrer without leave to amend, we
initially review the complaint de novo to determine whether,
as a matter of law, the complaint alleges a valid cause of
action. (Gomes v. Countrywide Home Loans, Inc. (2011) 192
Cal.App.4th 1149, 1153, 121 Cal.Rptr.3d 819 (Gomes ).)
We assume the truth of all properly pleaded and judicially
noticeable material facts within the complaint, but we do not
assume contentions, deductions or conclusions of fact
or law. ' (Herrera v. Federal National Mortgage Assn.
(2012) 205 Cal.App.4th 1495, 1501, 141 Cal.Rptr.3d 326
(Herrera ).) We must read the complaint as a whole and
its parts in their context ' in order to ensure that we
give the complaint a reasonable interpretation. ' (Ibid.)
If we conclude the complaint fails on any grounds stated
in the demurrer, we must then consider whether there is a
reasonable possibility the complaint's defect(s) can be
cured by an amendment. (Gomes, supra, 192 Cal.App.4th at
p. 1153, 121 Cal.Rptr.3d 819.) If it is apparent the complaint's
defects can be cured, the trial court has abused its discretion
and we will reverse the judgment. *507 Ibid.) Alternatively,
if it is apparent the complaint's defects cannot be cured,
no abuse of discretion has occurred and we will affirm
the judgment. (Ibid.) The burden of proving the reasonable
possibility of such a curative amendment falls squarely on
the plaintiff. [Citation.] [Citations.] (Herrera, supra, 205
Cal.App.4th at p. 1501, 141 Cal.Rptr.3d 326.)
**921 Furthermore, where the plaintiff requests leave to
amend the complaint, but the record fails to suggest how
the plaintiff could cure the complaint's defects, the question
as to whether or not [the] court abused its discretion [in
denying the plaintiff's request] is open on appeal.... (Code
Civ. Proc., 472c, subd. (a).) Because the trial court's
discretion is at issue, we are limited to determining whether
the trial court's discretion was abused as a matter of law.
(Herrera, supra, 205 Cal.App.4th at p. 1501, 141 Cal.Rptr.3d
326.) Absent an effective request for leave to amend the
complaint in specified ways, an abuse of discretion can be
found only if a potentially effective amendment were
both apparent and consistent with the plaintiff's theory of the
case. [Citation.] (Ibid.)

DISCUSSION
A. Defendants' Demurrers were Properly Sustained
Without Leave to Amend.

2. Applicable Law
[1]
[2] The financing or refinancing of real property
in California is generally accomplished by the use of

1. Standard of Review

a deed of trust. 2 (Calvo v. HSBC Bank USA, N.A.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

(2011) 199Cal.App.4th 118, 125, 130 Cal.Rptr.3d 815.) The

California Civil Code does not provide a statutory form for
a deed of trust, nor do the statutes set forth the provisions
such an instrument must include to be effective. However,
the validity of trust deeds as real property security devices
is clearly implied by the nonjudicial foreclosure statutes
regulating their enforcement. ( 2924 et seq.) Also, despite
the absence of express statutory provisions setting forth the
requirements of trust deeds, it is beyond dispute a deed of
trust must be in writing to be valid, as any conveyance of real
property must *508 fulfill the statute of frauds requirement.
(Secrest v. Security National Mortgage Loan Trust 20022
(2008) 167Cal.App.4th 544, 552, 84 Cal.Rptr.3d 275.)
2

The deed of trust surpassed the common-law mortgage

as the generally accepted and preferred security device
in California during the 19th and early 20th Century,
before the California Legislature eliminated most of the
legal and economic distinctions between a mortgage that
contains a power of sale and a deed of trust. (4 Cal.
Real Est. 10:1 (3d ed.).) [I]n California there is little
practical difference between mortgages and deeds of
trust, ... they perform the same basic function, and ...
a deed of trust is practically and substantially only a
mortgage with power of sale. ... [A]lthough there are
no statutory provisions dictating the form or stating the
effect of deeds of trust [citation omitted], deeds of trust
are analogized to mortgages[,] and the same rules are
generally applied to deeds of trust that are applied to
mortgages. [Citations.] (Domarad v. Fisher & Burke,
Inc. (1969) 270 Cal.App.2d 543, 553, 76 Cal.Rptr. 529
(Domarad ).) Both mortgages and deeds of trust are
subject to the same: (1) procedures and limitations on
judicial and nonjudicial foreclosure ( 2924 et seq. &
2931); (2) redemption provisions both prior to and after
the foreclosure sale ( 29032906; Code Civ. Proc.,
729.010729.090);
(3) reinstatement provisions prior to the foreclosure
sale ( 2924c); and (4) antideficiency limitations
(Code Civ. Proc., 580a580d, 726).

A deed of trust, by way of a written instrument, conveys title

to real property from the trustor-debtor to a third party trustee
to secure the payment of a debt owed to the beneficiarycreditor under a promissory note. (See 13 Am.Jur. Legal
Forms 2d (2013) Mortgages and Trust Deeds, 179:69
[sample deed of trust form used in California]; 3 Miller &
Starr, Cal. Real Estate Forms (3d ed. 2012) 3:8 [sample
California deed of trust].) The customary provisions of a valid
deed of trust include a power of sale clause, which empowers
the beneficiary-creditor to foreclosure on the real property

security if the trustor-debtor fails to pay back the debt owed

under the promissory note. (Ibid.)
[3]
[4]
[5] Despite the existence and validity of the
secured interest created by a deed of trust, the trustor-debtor
retains all **922 incidents of ownership with regard to the
real property, including the rights of possession and sale.
(Hagge v. Drew (1945) 27 Cal.2d 368, 376, 165 P.2d 461.)
The trustee of a deed of trust is not a true trustee, and
owes no fiduciary obligations; he merely acts as a common
agent for the trustor and the beneficiary of the deed of trust.
[Citation.] (Vournas v. Fidelity Nat. Tit. Ins. Co. (1999)
73 Cal.App.4th, 677, 86 Cal.Rptr.2d 490.) Furthermore, an
enforceable deed of trust requires the trustee to execute only
one of the following mutually exclusive duties: (1) should
the trustor-debtor default on the debt, the trustee must initiate
foreclosure on the property for the benefit of the beneficiarycreditor; or (2) should the trustor-debtor satisfy the secured
debt, the trustee must reconvey title to the real property back
to the trustor-debtor, extinguishing the security device. (Ibid.)
[6] Interestingly, although the deed of trust technically
conveys title to the real property from the trustor-debtor to
the trustee, the extent of the trustee's interest in the property
is limited to what is necessary to enforce the operative
provisions of the deed of trust. (Monterey S.P. Partnership v.
W.L. Bangham, Inc. (1989) 49 Cal.3d 454, 460, 261 Cal.Rptr.
587, 777 P.2d 623.) Consequently, California courts have
described the security interest created by a deed of trust as the
functional equivalent of a lien on the property. (Ibid.)
Upon a trustor-debtor's default on a debt secured by a deed
of trust, the beneficiary-creditor may elect to judicially or
nonjudicially foreclose on the real property security. Sections
2924 through 2924k set forth a comprehensive framework
for the regulation of a nonjudicial foreclosure sale pursuant to
a power of sale contained in a deed of trust. (Moeller v. Lien
(1994) 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777, italics
added (Moeller ).)
*509 Pursuant to this statutory scheme, the beneficiarycreditor under a deed of trust may declare a default and
proceed with a foreclosure sale if the trustor-debtor defaults
on the secured loan. ( 2924.) To initiate the nonjudicial
foreclosure process, the trustee, mortgagee, or beneficiary,
or any of their authorized agents, must record a notice of
default and election to sell. ( 2924, subd. (a)(1).) Except for
one limited exception, the notice of default must be recorded
for at least three months before the next step in the foreclosure

2013 Thomson Reuters. No claim to original U.S. Government Works.

10

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

process may proceed, presumably to make sure the debtor

has notice of the impending sale and has time to pursue
opportunities to cure the default. ( 2924, subd. (a)(2).) After
the three-month period has elapsed, a notice of sale must be
published, posted, recorded and mailed 20 days before the
foreclosure sale. ( 2924, subd. (a)(3), 2924f.)
Notably, as has occurred in the present case, the foreclosure
sale may be postponed at any time before the sale is
completed. ( 2924g.) If the foreclosure sale is postponed, the
statutes require that proper notice be given before the sale may
be conducted at a later date. ( 2924g, subd. (d).) Should the
foreclosure sale occur after proper notice has been provided,
the statute requires the foreclosed property be sold at public
auction to the highest bidder. ( 2924g, subd. (a); Homestead
Savings v. Darmiento (1991) 230 Cal.App.3d 424, 433, 281
Cal.Rptr. 367.)
The statutory scheme also provides the debtor with several
opportunities throughout the foreclosure process to cure the
default and avoid the sale of the property. First, the debtor
is entitled to a period of reinstatement, during which the
trustor-debtor may bring the loan payments up to date and
have the terms of the loan reinstated. **923 ( 2924c,
subd. (a)(1); Napue v. GorMey West, Inc. (1985) 175
Cal.App.3d 608, 614, 220 Cal.Rptr. 799.) This period of
reinstatement continues until five business days prior to the
date of the foreclosure sale, and takes into account any
postponements in the sale. ( 2924c, subd. (e).) In addition to
the right of reinstatement, the debtor may invoke the equity
of redemption, which allows the debtor to avoid foreclosure
by paying the total outstanding debt prior to the sale of the
property. ( 2903, 2905.)
[7] Importantly, the provisions setting forth California's
nonjudicial foreclosure scheme ( 29242924k) cover
every aspect of [the] exercise of [a] power of sale contained
in a deed of trust. [Citation.] The purposes of this
comprehensive scheme are threefold: (1) to provide the
[beneficiary-creditor] with a quick, inexpensive and efficient
remedy against a defaulting [trustor-debtor]; (2) to protect
the [trustor-debtor] from wrongful loss of the property;
*510 and (3) to ensure that a properly conducted sale is
final between the parties and conclusive as to a bona fide
purchaser. [Citation.] (Gomes, supra, 192 Cal.App.4th at
p. 1154, 121 Cal.Rptr.3d 819.) Significantly, [n]onjudicial
foreclosure is less expensive and more quickly concluded
than judicial foreclosure, since there is no oversight by a
court, [n]either appraisal nor judicial determination of fair

value is required, and the debtor has no postsale right of

redemption. [Citation.] (Id. at p. 1155, 121 Cal.Rptr.3d
819.)
[8] Although a defaulting debtor is free to pursue a
judicial action for misconduct arising out of a nonjudicial
foreclosure sale when [such a claim is] not inconsistent
with the policies behind the statutes (California Golf,
L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070, 78
Cal.Rptr.3d 153, italics added), due to the exhaustive
nature of this scheme, California appellate courts
have refused to read any additional requirements into the
nonjudicial foreclosure statute. [Citations.] (Gomes, supra,
192 Cal.App.4th at p. 1154, 121 Cal.Rptr.3d 819, fn. omitted.)
As one appellate court stated: It would be inconsistent
with the comprehensive and exhaustive statutory scheme
regulating nonjudicial foreclosures to incorporate another
unrelated cure provision into statutory nonjudicial foreclosure
proceedings. (Moeller, supra, 25 Cal.App.4th at p. 834, 30
Cal.Rptr.2d 777.)

3. First Cause of ActionDeclaratory Relief

Jenkins's first cause of action in her SAC requests declaratory
relief on the issue of whether Defendants have the
authority to initiate nonjudicial foreclosure on her home.
Jenkins asserts Defendants do not have the right to initiate
nonjudicial foreclose because they do not have a secured
interest in her home to foreclose upon. Based on information
and belief, Jenkins contends Defendants do not have a
secured interest in her home, despite her admitted execution
of the deed of trust in 2007, because the terms of the
investment trust's pooling and servicing agreement were not
complied with when her loan was pooled with other home
loans and securitized. More specifically, Jenkins asserts the
terms of the pooling and serving agreement were violated
because: (1) the promissory note was not transferred into
the investment trust with a complete and unbroken chain
of endorsements and transfers; and (2) the trustee of the
investment trust did not have actual physical possession of the
note and deed of trust **924 prior to the closing date of the
investment trust.
In an attempt to allege facts to support her contentions,
Jenkins's SAC states her assertions are evidenced by: (1)
her contention Defendants cannot produce any evidence
that the promissory note has been transferred; (2) the fact
the recorded Notice of Default does not establish that
endorsements [of the promissory note] were made; and (3)
her contention there [are not] any *511 other notices which

2013 Thomson Reuters. No claim to original U.S. Government Works.

11

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

establish that the original lender endorsed and sold the note
to another party. Furthermore, in her opening brief, Jenkins
says she will allege additional facts regarding Defendants'
involvement in the improper securitization of this mortgage
if given the opportunity to amend her complaint; however,
her opening brief does not explain or suggest what those
additional facts may be.
Jenkins's first cause of action also allegesbased on her
above assertion Defendants do not have a secured interest to
foreclose uponthe notice of default, substitution of trustee,
and additional documents recorded by Defendants after she
defaulted on her loan were falsely or fraudulently prepared
by Defendants. Moreover, Jenkins alleges Quality did not
have standing to commence nonjudicial foreclosure by filing
the notice of default on April 30, 2010, because Quality was
not the trustee under the deed of trust until the substitution of
trustee was recorded on June 11, 2010. Also, for the first time
in her opening brief, Jenkins alleges Defendants violated
15 U.S.C. section 1641(g), when the promissory note was
allegedly transferred to Freddie Mac.
Based on these contentions, Jenkins's SAC requests: (1)
a court order stating there is no enforceable secured
or unsecured claim against the Home; (2) a court
order declaring any assignment(s) of the promissory note
subsequent to the closing date of the investment trust void
and a legal nullity, in willful violation of New York trust law
and of relevant portions of the [investment trust's pooling and
servicing agreement]; (3) a [p]reliminary and [p]ermanent
[i]njunction enjoining any and all [t]rustee [s]ales which
may be scheduled by the Defendants; (4) a court order
prohibiting the filing [of] an unlawful detainer action or
any other action against Jenkins by Defendants; and(5) the
[c]ancelation of the [d]eed of [t]rust pursuant to [section]
3412. In essence, Jenkins's first cause of action seeks a
judicial order directing Defendants to prove they possess the
promissory note, with endorsements, before they are allowed
to proceed with the nonjudicial foreclosure on her home.

a. Jenkins cannot identify a legal basis for an action to

challenge Defendants' authority to initiate nonjudicial
foreclosure.
California courts have refused to delay the nonjudicial
foreclosure process by allowing trustor-debtors to pursue
preemptive judicial actions to challenge the right, power,
and authority of a foreclosing beneficiary or beneficiary's
agent to initiate and pursue foreclosure. (See Debrunner

v. Deutsche Bank National Trust Co. (2012) 204Cal.App.4th

433, 440442, 138 Cal.Rptr.3d 830 (Debrunner ); *512
Gomes, supra, 192 Cal.App.4th at pp. 11541157, 121
Cal.Rptr.3d 819.) In Gomes, our colleagues in Division
One considered whether California's nonjudicial foreclosure
statutes allow a defaulting trustor-debtor, before his or her
property is sold, to bring a preemptive judicial action to
challenge whether the person initiating the foreclosure is, or
is duly authorized to do so by, the person who possesses
a secured interest in the property. ( **925 Gomes, supra,
192 Cal.App.4th at p. 1152, 121 Cal.Rptr.3d 819.) Much
like Jenkins's first cause of action, the appellant in Gomes
alleged, on information and belief, the entity who initiated
the nonjudicial foreclosure process did not have the authority
to do so because (1) the entity was not the owner of the
promissory note that was secured by the deed of trust and (2)
the entity was not an authorized agent of the owner of the
promissory note. (Ibid.)
In the Gomes court's analysis of the validity of the appellant's
claim, it made the important point that such a preemptive
action does not seek a remedy for a foreclosing party's
misconduct with regards to the initiation and processing of the
nonjudicial foreclosure, which, as we noted above, may serve
as the basis for a valid cause of action. (Gomes, supra, 192
Cal.App.4th at p. 1154, fn. 5, 121 Cal.Rptr.3d 819.) Instead,
the Gomes court found that such a preemptive action seeks to
create the additional requirement that the foreclosing entity
must demonstrate in court that it is authorized to initiate a
foreclosure before the foreclosure can proceed. (Ibid. italics
added.) After examining the nonjudicial foreclosure statutes
and considering the well-established purposes of nonjudicial
foreclosure, the Gomes court found no express or implied
grounds for allowing such a preemptive action. (Id. at p.
1156, 121 Cal.Rptr.3d 819.) Consequently, the Gomes court
concluded that allowing a trustor-debtor to pursue such an
action, absent a specific factual basis for alleging that the
foreclosure was not initiated by the correct party would
unnecessarily interject the courts into [the] comprehensive
nonjudicial scheme created by the Legislature, and would
be inconsistent with the policy behind nonjudicial foreclosure
of providing a quick, inexpensive and efficient remedy.
[Citation.] (Id. at pp. 11541156, 121 Cal.Rptr.3d 819.)
In Debrunner, supra, 204 Cal.App.4th 433, 138 Cal.Rptr.3d
830, our Sixth District colleagues answered the more specific
question of whether the foreclosing party must have actual
possession of the promissory note and be able to produce it
in order to pursue nonjudicial foreclosure. The Debrunner

2013 Thomson Reuters. No claim to original U.S. Government Works.

12

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

court, based on much of the same reasoning found in the

Gomes decision, particularly the absence of any express
requirement in the nonjudicial foreclosure statutes, concluded
the foreclosing beneficiary-creditor need not produce the
promissory note or otherwise prove it holds the note to
nonjudicially foreclosure on a real property security. (Id. at
pp. 440442, 138 Cal.Rptr.3d 830.)
[9] Jenkins's first cause of action, like the claim brought
by the appellant in Gomes, asserts she has a right to
bring a preemptive judicial action to *513 determine
whether Defendants have the authority to initiate nonjudicial
foreclosure on her home; however, like the appellant in
Gomes, she fails to identify legal authority for such a
preemptive action in the statutory provisions setting forth the
nonjudicial foreclosure scheme. After our own examination
of the nonjudicial foreclosure statutes, we agree with the
Gomes court that the provisions do not contain express
authority for such a preemptive action. Also, even if
the statutes are interpreted broadly, it cannot be said the
provisions imply the authority for such a preemptive action
exists, because doing so would result in the impermissible
interjection of the courts into a nonjudicial scheme enacted
by the California Legislature. (See Lu v. Hawaiian Gardens
Casino, Inc. (2010) 50 Cal.4th 592, 596, 113 Cal.Rptr.3d
498, 236 P.3d 346 [legislative intent to create cause of action
revealed through interpretation of statute and legislative
history]; City of Cotati v. Cashman (2002) 29 Cal.4th 69, 80,
124 Cal.Rptr.2d 519, 52 P.3d 695 ( **926 City of Cotati
) [plaintiff may not use claim for declaratory relief to
create a cause of action that otherwise does not exist ].)
The recognition of the right to bring a lawsuit to determine
a nominee's authorization to proceed with foreclosure on
behalf of the note holder would fundamentally undermine the
nonjudicial nature of the process and introduce the possibility
of lawsuits filed solely for the purpose of delaying valid
foreclosures. (Gomes, supra, 192 Cal.App.4th at p. 1155,
121 Cal.Rptr.3d 819.)
[10] Moreover, we find the statutory provisions, because
they broadly authorize a trustee, mortgagee, or beneficiary,
or any of their authorized agents to initiate a nonjudicial
foreclosure ( 2924, subd. (a)(1), italics added), do not require
that the foreclosing party have an actual beneficial interest in
both the promissory note and deed of trust to commence and
execute a nonjudicial foreclosure sale. Thus, we conclude the
court properly sustained Defendants' demurrers to the first
cause of action in Jenkins's SAC.

b. Jenkins fails to show an actual controversy exists

between herself and Defendants.
[11] [12] [13] Alternatively, even if we found a proper
legal basis for such a preemptive suit existed, Jenkins's first
cause of action fails to set forth a valid claim for declaratory
relief because she cannot show an actual controversy exists
between herself and Defendants. Code of Civil Procedure
section 1060 authorizes [a]ny person ... who desires a
declaration of his or her rights or duties with respect
to another ... in cases of actual controversy relating to
the legal rights and duties of the respective parties, [to]
bring an original action ... for a declaration of his or
her rights and duties.... (Code Civ. Proc., 1060, italics
added.) The fundamental basis of declaratory relief is the
existence of an actual, present controversy over a proper
subject. [Citation.] (City of Cotati, supra, 29 Cal.4th at
p. 79, 124 Cal.Rptr.2d 519, 52 P.3d 695.) In order for a
party to *514 pursue an action for declaratory relief, the
actual, present controversy must be pleaded specifically.
(Id. at p. 80, 124 Cal.Rptr.2d 519, 52 P.3d 695, italics
added.) Thus, a claim must provide specific facts, as opposed
to conclusions of law, which show a controversy of concrete
actuality. (Jessin v. County of Shasta (1969) 274 Cal.App.2d
737, 743, 79 Cal.Rptr. 359 (Jessin ).) Whether a claim
presents an actual controversy within the meaning of
Code of Civil Procedure section 1060 is a question of law
that we review de novo. [Citation.] (County of San Diego
v. State of California (2008) 164 Cal.App.4th 580, 606, 79
Cal.Rptr.3d 489.)
[14] As we summarized in more detail above, Jenkins's cause
of action for declaratory relief is grounded on her assertion
Defendants do not have a secured interest in her home
to foreclose upon because of alleged non-compliance with
the terms of the investment trust's pooling and servicing
agreement when her loan was purportedly pooled with other
home loans and securitized. In her complaint, and again in her
opening brief, Jenkins asserts that an actual controversy exists
between herself and Defendants as to whether Defendants
have an enforceable secured interest in her home. We
disagree.
Jenkins acknowledges in both her SAC and opening brief
that she executed both a promissory note in the amount of
$375,500, and a deed of trust securing her debt on March
23, 2007, and she attached copies of these documents to her
SAC as exhibits A and B. Consequently, there is no dispute
between the parties as to the existence of the secured home

2013 Thomson Reuters. No claim to original U.S. Government Works.

13

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

loan debt. There is also no dispute the deed of trust contains:

(1) **927 an explicit power of sale clause in favor of
the beneficiary-creditor; (2) provisions setting forth Jenkins's
obligations with regard to repaying the loan and maintaining
the property; and (3) provisions stating the beneficiarycreditor may transfer the promissory note at any time without
providing notice of the transfer to Jenkins.
Furthermore, Jenkins acknowledges in both her SAC and
opening brief that she defaulted on the secured debt and the
debt remains in arrears. Indisputably, Jenkins's default on the
secured debt triggered the beneficiary-creditor's option under
the deed of trust's power of sale clause, and section 2924
allows the trustee, mortgagee, or beneficiary, or any of their
authorized agents to record a notice of default and election to
sell the real property security, thus initiating the nonjudicial
foreclosure process.
[15] Despite these facts, Jenkins's first cause of action
attempts to construct a dispute between herself and
Defendants with regard to the alleged improper transfer
of the promissory note during the securitization process.
However, even if the asserted improper securitization (or any
other invalid assignments or transfers of the promissory note
subsequent to her execution *515 of the note on March
23, 2007) occurred, the relevant parties to such a transaction
were the holders (transferors) of the promissory note and
the third party acquirers (transferees) of the note. Because
a promissory note is a negotiable instrument, a borrower
must anticipate it can and might be transferred to another
creditor. As to plaintiff, an assignment merely substituted one
creditor for another, without changing her obligations under
the note. (Herrera, supra, 205 Cal.App.4th at p. 1507, 141
Cal.Rptr.3d 326.) 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. (See In re Correia (1st Cir. BAP 2011) 452B.R.
319, 324325 [debtors lacked standing to raise violations of
pooling and service agreement].)
Furthermore, even if any subsequent transfers of the
promissory note were invalid, Jenkins is not the victim of
such invalid transfers because her obligations under the note
remained unchanged. Instead, the true victim may be an entity
or individual who believes it has a present beneficial interest
in the promissory note and may suffer the unauthorized loss
of their interest in the note. It is also possible to imagine one

or many invalid transfers of the promissory note may cause

a string of civil lawsuits between transferors and transferees.
Jenkins, however, may not assume the theoretical claims
of hypothetical transferors and transferees for the purposes
of showing a controversy of concrete actuality. (See
Jessin, supra, 274 Cal.App.2d at p. 743, 79 Cal.Rptr. 359.)
Consequently, we conclude Jenkins's first cause of action
lacks merit for the independent reason she cannot show the
existence of an actual, present controversy between herself
and Defendants. (See City of Cotati, supra, 29 Cal.4th at
p. 79, 124 Cal.Rptr.2d 519, 52 P.3d 695; Jessin, supra, 274
Cal.App.2d at pp. 743744, 79 Cal.Rptr. 359.)

c. Jenkins fails to state a valid claim relating to Quality's

filing of the notice of default.
[16] As a separate ground for her first cause of action
for declaratory relief, Jenkins's SAC asserts Quality
impermissibly recorded the notice of default on April 30,
2010, because Quality was not yet the [t]rustee or an
authorized agent. Jenkins **928 contends Quality did not
have standing to commence nonjudicial foreclosure when the
notice of default was recorded on April 30, 2010, because
Quality was not the trustee under the deed of trust as of that
date. According to Jenkins, Quality did not have standing to
commence nonjudicial foreclosure as the trustee until after
(1) the original trustee received notice of the substitution
of trustee by mail and (2) the substitution of trustee was
recorded, which occurred on June 11, 2010.
This argument fails to recognize Quality recorded the notice
of default on April 30, 2010 as agent for beneficiary, rather
than as the trustee under the *516 deed of trust. Jenkins
attached the notice of default to her SAC as exhibit C, and the
signature line of that document states Quality was initiating
the nonjudicial foreclosure as agent for beneficiary. The
nonjudicial foreclosure scheme enacted by the Legislature
authorizes the trustee, mortgagee, or beneficiary, or any
of their authorized agents to record a notice of default
and election to sell upon the trustor-debtors default on the
secured debt. ( 2924, subd. (a)(1), italics added.) Thus,
because an agent for the beneficiary may record a notice of
default, Jenkins's assertion Quality lacked standing to initiate
the nonjudicial foreclosure of her home is without merit and
cannot serve as the basis for her declaratory relief claim.

d. Jenkins cannot bring a claim against Defendants for

Freddie Mac's alleged violation of 15 U.S.C. section
1641(g).

2013 Thomson Reuters. No claim to original U.S. Government Works.

14

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

[17] For the first time in her opening brief, Jenkins asserts,
as a separate grounds for her declaratory relief claim,
Defendants transferred the promissory note to Freddie Mac
in violation of 15 U.S.C. section 1641(g). Although Jenkins's
opening brief is not clear on this point, our liberal reading
of her brief leads us to believe she is asserting the alleged
violation of 15 U.S.C. section 1641(g) extinguished the
secured interest created by the deed of trust.
Title 15 United States Code section 1641(g), which was
added by the enactment of the Helping Families Save
Their Homes Act, became effective on May 20, 2009. The
provisions of 15 U.S.C. section 1641(g) require the new
owner or assignee (i.e., transferee) of a mortgage loan (e.g.,
a promissory note) to provide the mortgage borrower (e.g.,
trustor-debtor) with written notice of the sale, transfer, or
assignment in which the mortgage loan was acquired. (15
U.S.C. 1641(g).) The notice must be provided not later
than 30 days after the date on which [the] mortgage loan
is sold or otherwise transferred or assigned to [the new
owner or assignee]. (15 U.S.C. 1641(g).) The notice must
include: (1) the identity, address, telephone number of the
new creditor; (2) the date of transfer; (3) how to reach
an agent or party having authority to act on behalf of the
new creditor; (4) the location of the place where transfer
of ownership of the debt is recorded; and (5) any other
relevant information regarding the new creditor. (15 U.S.C.
1641(g).)
[18] Jenkins's claim for violation of 15 U.S.C. section
1641(g) must fail because the statutory obligation to notify
the mortgage loan borrower is only applicable to creditors
who are **929 the new owners or assignees of a mortgage
loan, and not the transferors of the mortgage loan. ( *517
Jara v. Aurora Loan Servs. (N.D.Cal.2012) 852 F.Supp.2d
1204, 12081209.) In the present case, Jenkins clearly alleges
the violation of 15 U.S.C. section 1641(g) occurred when the
promissory note was transferred from Defendants to Freddie
Mac. Because Jenkins does not allege Defendants were
the new owners or assignees of the promissory note when
the alleged statutory violation occurred, she cannot claim
Defendants violated any obligations under 15 U.S.C. section
1641(g). Thus, Jenkins cannot proceed with a declaratory
relief action grounded on an unfeasible statutory claim.

e. Jenkins cannot cure the defects in her first cause of

action.

We must also consider whether Jenkins has shown there is

a reasonable possibility she could cure the defects we have
identified in her first cause of action by way of an amendment
to her SAC. (Herrera, supra, 205 Cal.App.4th at p. 1501, 141
Cal.Rptr.3d 326; Gomes, supra, 192 Cal.App.4th at p. 1153,
121 Cal.Rptr.3d 819.) With regard to this question, Jenkins,
in her opening brief, states she could amend her first cause
of action to plead additional facts regarding Defendants'
involvement in the improper securitization of this mortgage.
As we discussed in great detail above, the flaws in
Jenkins's first cause of action are: (1) the statutory
nonjudicial foreclosure scheme does not permit a preemptive
judicial action to challenge Defendants' authority to initiate
nonjudicial foreclosure on her home; (2) even if such a
preemptive lawsuit were permissible, Jenkins cannot show
an actual controversy exists between herself and Defendants
because she lacks standing to sue for the enforcement of
the investment trust's pooling and servicing agreement; (3)
Jenkins cannot base a claim for declaratory relief against
Defendants for Freddie Mac's alleged violation of 15 U.S.C.
section 1641(g); and (4) because the nonjudicial foreclosure
statutes expressly permit the recording of a notice of default
by an agent for the beneficiary, Jenkins cannot base her claim
for declaratory relief on Quality's recording of the notice
of default. These flaws cannot be cured by the pleading of
additional facts relating to Defendants' actions with regard to
the securitization of the promissory note. They are incurable
errors, unrelated to the sufficiency of the facts pleaded
by Jenkins that cannot be repaired or reconstructed by an
amendment. Therefore, we concluded the court properly
sustained the demurrer without leave to amend to Jenkins's
first cause of action.

4. Second Cause of ActionViolation of Section 2932.5

[19] Jenkins's second cause of action, like her first cause
of action, tries to refute the existence of Defendants'
secured interest in the home and, consequently, their
power to nonjudicially foreclose on the home. She attacks
the *518 validity of Defendants' secured interest by
asserting the transfers of the promissory note during the
alleged securitization process did not conform with the
provisions of section 2932.5. Her claim contends the invalid
transfers rendered the promissory note non-negotiable,
extinguishing the secured interest that was created when she
executed the deed of trust in 2007. The claim fails because
Section 2932.5 is inapplicable to deeds of trust.

2013 Thomson Reuters. No claim to original U.S. Government Works.

15

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

Section 2932.5 states: Where a power to sell real property

is given to a mortgagee, or other encumbrancer, in an
instrument intended to secure the payment of money, the
power is part of the security and vests in any person
which by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may
be exercised by the assignee if the assignment is duly
acknowledged and recorded. (Italics added.)
[20] As we noted at the outset of this opinion, the Legislature
has eliminated most of the legal and economic distinctions
between a mortgage containing a power of sale and a deed
of trust. ( **930 Domarad, supra, 270 Cal.App.2d at p.
553, 76 Cal.Rptr. 529 [holding same rules are generally
applied to mortgages and deeds of trust because there is
little practical difference between the two instruments].)
However, some distinctions between the two security devices
endure. Probably the most significant distinction is the
execution of a mortgage involves only two parties (i.e., the
mortgagor and mortgagee); whereas the execution of a deed
of trust necessarily involves three parties (i.e., the trustordebtor, beneficiary-creditor, and trustee) because title to the
real property and the power of sale are conveyed to the third
party trustee, who holds the interest for the benefit of the
beneficiary-creditor. (See Herrera, supra, 205 Cal.App.4th at
p. 1510, 141 Cal.Rptr.3d 326.)
It is well settled California law that this distinction makes
the provisions of section 2932.5 inapplicable to trust deeds.
(Herrera, supra, 205 Cal.App.4th at pp. 15091510, 141
Cal.Rptr.3d 326; Haynes v. EMC Mortgage Corp. (2012)
205 Cal.App.4th 329, 332337, 140 Cal.Rptr.3d 32 (Haynes
).) California appellate courts have explained that, because
a deed of trust does not convey a power of sale directly
to the beneficiary-creditor, it is immaterial whether an
assignment of a promissory note was properly acknowledged
and recorded when a deed of trust is used to secure a debt.
(Herrera, supra, 205 Cal.App.4th at pp. 15091510, 141
Cal.Rptr.3d 326; Haynes, supra, 205 Cal.App.4th at pp. 332
333, 140 Cal.Rptr.3d 32.)
As the Haynes court explained, section 2932.5 's purpose
is not to ensure that borrowers can identify who is holding
their loans. Section 2932.5 requires the recorded assignment
of a mortgage so that a prospective purchaser knows that the
mortgagee has the authority to exercise the power of sale.
This is not necessary when a deed of trust is involved, as
the trustee conducts the sale and transfers title. [Citation.] It
is the trustee's holding and *519 transferring of title that

underlies the application of different recording requirements

than those required of mortgagees under section 2932.5....
[T]he literal application of section 2932.5 to deeds of trust
would effectively require the power of sale to be transferred
to the lender, contrary to the terms of the trust deed and of
section 2934a which provides detailed requirements for the
transfer of the power of sale to another trustee. (Haynes,
supra, 205 Cal.App.4th at p. 336, 140 Cal.Rptr.3d 32, fn.
omitted.) We agree with the Haynes court that the transferee
of a promissory note secured by a deed of trust is not a
mortgagee, or other encumbrancer to whom a power of sale
is given within the meaning of section 2932.5, and such a
transferee need not have a duly acknowledged and recorded
interest in the promissory note before exercising the power
of sale. (Haynes, supra, 205 Cal.App.4th at p. 333, 140
Cal.Rptr.3d 32.)
In light of Jenkins's repeated acknowledgment her promissory
note was secured by a deed of trust, it would be impossible
for her to cure the fundamental defects in her second cause
of action by way of an amendment. Accordingly, the court's
sustainment of Defendants' demurrer without leave to
amend to Jenkins's second cause of action was proper.

5. Third Cause of ActionViolations of Business and

Professions Code Section 17200 et seq.
Jenkins's third cause of action asserts Defendants engaged in
numerous unlawful, unfair, and fraudulent business practices
in violation of Business and Professions Code section 17200.
First, Jenkins's SAC asserts Defendants violated Penal
Code section 115.5, subsection (a), by recording **931
allegedly fraudulent documents Defendants purportedly
procured to fill the missing gaps in the chain of title
or to falsely demonstrate compliance with the investment
trust's pooling and servicing agreement and California's
nonjudicial foreclosure statutes. Second, Jenkins's SAC
alleges Chase violated provisions of RESPA by failing
to timely acknowledge receipt of her Qualified Written
Request (QWR) and by failing to provide an adequate
response to her QWR. Third, Jenkins's SAC alleges Quality
breached California's nonjudicial foreclosure statutes ( 2924
et seq.) by executing and recording the notice of default,
which initiated the nonjudicial foreclosure process before
Quality was substituted in as trustee under the deed of trust.
Fourth, Jenkins's SAC alleges Chase violated Penal Code
section 115.5, subdivision (b), by making misrepresentations,
including false sworn statements, to a notary public to cause
the notary public to perform an improper notarizing act. Fifth,

2013 Thomson Reuters. No claim to original U.S. Government Works.

16

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

Jenkins's SAC alleges Chase committed an unlawful business

practice by using an alleged Robo-[s]igner to execute the
purportedly fraudulent substitution of trustee. Sixth, in her
opening brief, Jenkins asserts Defendants' alleged violation
of section 2932.5 was an unlawful business practice.
*520 Jenkins SAC asserts these alleged unlawful, unfair,
and fraudulent business practices caused her to incur the
following damages: (1) her home is subject to foreclosure;
and (2) monetary damages totaling at least the sum of
the jurisdictional amount ... plus interest, attorney's fees
and costs, and additional amounts. (Italics added.) Jenkins
also asserts these alleged unfair business practices entitle
her to a preliminary injunction prohibiting Defendants from
foreclosing on her home.
Sections 17200 through 17210 of the Business and
Professions Code do not have a specific statutory title;
however, California courts have referred to these statutes
as the Unfair Competition Law (UCL). (See CelTech
Communications, Inc. v. Los Angeles Cellular Telephone Co.
(1999) 20 Cal.4th 163, 169, 83 Cal.Rptr.2d 548, 973 P.2d
527 (CelTech ).) In order to protect both consumers and
competitors by promoting fair competition in commercial
markets for goods and services (Kasky v. Nike, Inc. (2002)
27 Cal.4th 939, 949, 119 Cal.Rptr.2d 296, 45 P.3d 243),
the UCL prohibits, and provides civil remedies for, unfair
competition. (Kwikset Corp. v. Superior Court (2011) 51
Cal.4th 310, 320, 120 Cal.Rptr.3d 741, 246 P.3d 877 (Kwikset
Corp. ).) Under the UCL, any person or entity that has
engaged, is engaging or threatens to engage in unfair
competition may be enjoined in any court of competent
jurisdiction. (Bus. & Prof.Code, 17201 & 17203.) Unfair
competition includes any unlawful, unfair or fraudulent
business act or practice and unfair, deceptive, untrue or
misleading advertising. (Bus. & Prof.Code, 17200.) A
plaintiff may pursue a UCL action in order to obtain either
(1) injunctive relief, the primary form of relief available
under the UCL, or (2) restitution as may be necessary
to restore to any person in interest any money or property,
real or personal, which may have been acquired by means of
such unfair competition. [Citation.] (In re Tobacco II Cases
(2009) 46 Cal.4th 298, 319, 93 Cal.Rptr.3d 559, 207 P.3d 20.)
The California Supreme Court has held the UCL's coverage
is sweeping, embracing anything that can properly be
called a business practice and that at the same time is
forbidden by law. ' [Citations.] (CelTech, supra, 20
Cal.4th at p. 180, 83 Cal.Rptr.2d 548, 973 P.2d 527.)

Furthermore, the UCL creates three varieties of unfair

competitionacts or practices which are unlawful, or unfair,
or **932 fraudulent. (Ibid. italics added.) The UCL's
unlawful prong borrows violations of other laws and
treats them as unlawful practices' that the unfair competition
law makes independently actionable. [Citations.] (Ibid.)

a. Jenkins lacks standing under Business and Professions

Code section 17204.
Although the UCL's substantive reach ... remains
expansive, the approval of Proposition 64 by the California
electorate in November 2004 *521 substantially revised
the UCL's standing requirement for private individuals.
(Kwikset Corp., supra, 51 Cal.4th at p. 320, 120 Cal.Rptr.3d
741, 246 P.3d 877 [finding voters materially curtailed the
universe of those who may enforce the UCL's provisions].)
Before the approval of Proposition 64, Business and
Professions Code section 17204 authorized any person
acting for the interests of itself, its members or the general
public to bring a UCL action. (Former Bus. & Prof.Code,
17204, as amended by Stats. 1993, ch. 926, 2, p. 5198.)
Today, in light of the amendments enacted by Proposition 64,
Business and Professions Code section 17204 restricts private
standing to bring a UCL action to a person who has suffered
injury in fact and has lost money or property as a result of
unfair competition. (Bus. & Prof.Code, 17204, as amended
by Prop. 64, as approved by voters, Gen. Elec. (Nov. 2, 2004)
3, italics added.)
The California Supreme Court has explained the intent of
Proposition 64's change was to confine standing to those
actually injured by a defendant's business practices and to
curtail the prior practice of filing suits on behalf of clients
who have not used the defendant's product or service,
viewed the defendant's advertising, or had any other business
dealing with the defendant.... [Citations.] (Clayworth v.
Pfizer, Inc. (2010) 49 Cal.4th 758, 788, 111 Cal.Rptr.3d 666,
233 P.3d 1066.) However, despite Proposition 64's stricter
standing requirements, the Supreme Court has been careful
to note the initiative plainly preserved standing for those
who had had business dealings with a defendant and had
lost money or property as a result of the defendant's unfair
business practices. (Ibid. italics added.)
[21] [22] In Kwikset Corp., the California Supreme Court
considered the private standing requirements of Business and
Professions Code section 17204, as amended by Proposition
64, and set forth a simple test to determine whether a

2013 Thomson Reuters. No claim to original U.S. Government Works.

17

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

plaintiff has standing to bring a private UCL action. (Kwikset

Corp., supra, 51 Cal.4th at p. 322, 120 Cal.Rptr.3d 741, 246
P.3d 877.) To satisfy the narrower standing requirements
imposed by Proposition 64, a party must now(1) establish
a loss or deprivation of money or property sufficient to
qualify as injury in fact, i.e., economic injury, and (2) show
that the economic injury was the result of, i.e., caused by,
the unfair business practice or false advertising that is the
gravamen of the claim. (Ibid.) A plaintiff must support each
of the standing elements under Business and Professions
Code section 17204 in the same way as any other matter
on which the plaintiff bears the burden of proof, i.e., with
the manner and degree of evidence required at the successive
stages of the litigation. [Citations.] (Kwikset Corp., supra,
51 Cal.4th at p. 327, 120 Cal.Rptr.3d 741, 246 P.3d 877.)
A UCL claim will survive a demurrer if the plaintiff can
plead general factual allegations of injury resulting from the
defendant's conduct. (Ibid.)
[23] The Kwikset Corp. court held a plaintiff can satisfy
the economic injury prong of the standing requirements
under **933 *522 Business and Professions Code section
17204i.e., show the plaintiff personally suffered an
economic injuryin innumerable ways because [n]either
the text of Proposition 64 nor the ballot arguments in support
of it purport to define or limit the concept of lost money
or property. (Kwikset Corp., supra, 51 Cal.4th at p. 323,
120 Cal.Rptr.3d 741, 246 P.3d 877.) To aid lower courts
with determining whether a plaintiff has properly alleged
an economic injury under Business and Professions Code
section 17204, the Kwikset Corp. court listed four injuries
that would certainly qualify under the statute: (1) the plaintiff
surrendering more or acquiring less in a transaction than
the plaintiff otherwise would have; (2) the plaintiff suffering
the diminishment of a present or future property interest;
(3) the plaintiff being deprived of money or property to
which the plaintiff has a cognizable claim; or (4) the plaintiff
being required to enter into a transaction, costing money or
property, that would otherwise have been unnecessary. (Ibid.)
These four injuries are not an exhaustive list of the injuries
a plaintiff may allege to properly plead an economic injury
under Business and Professions Code section 17204, and
the quantum of lost money or property necessary to show
standing is only so much as would suffice to establish injury
in fact. (Kwikset Corp., supra, 51 Cal.4th at pp. 323-324, 120
Cal.Rptr.3d 741, 246 P.3d 877.)
[24] Additionally, the Kwikset Corp. court held a plaintiff
can satisfy the causation prong of the standing requirements

under Business and Professions Code section 17204

i.e., show the plaintiff's economic injury [occurred] as a
result of the unfair competitionby showing a causal
connection between the economic injury and the alleged
unfair conduct. (Kwikset Corp., supra, 51 Cal.4th at p. 326,
120 Cal.Rptr.3d 741, 246 P.3d 877.) A plaintiff fails to
satisfy the causation prong of the statute if he or she would
have suffered the same harm whether or not a defendant
complied with the law. (Daro v. Superior Court (2007) 151
Cal.App.4th 1079, 1099, 61 Cal.Rptr.3d 716.)
[25] In the present case, Jenkins's third cause of action
asserts the economic injury she has suffered is the impending
foreclosure of her home. It is undisputed nonjudicial
foreclosure proceedings have been initiated on Jenkins's
home. If such proceedings are pursued to their completion,
Jenkins's interest in her property will be extinguished. Thus,
in light of the minimal pleading requirements with regard
to the economic injury prong of Business and Professions
Code section 17204, and the Kwikset Corp. court's affirmation
of an alleged diminishment of a future property interest
as a sufficiently pled economic injury under the statute
(Kwikset Corp., supra, 51 Cal.4th at p. 323, 120 Cal.Rptr.3d
741, 246 P.3d 877), we conclude Jenkins's third cause of
action satisfies the economic injury prong of Business and
Professions Code section 17204.
However, Jenkins's third cause of action must also satisfy
the second prong of the standing requirements under
*523 Business and Professions Code section 17204 (i.e.,
causation), which required her to plead a causal link between
her economic injury, the impending nonjudicial foreclosure
of her home, and the six unfair or unlawful acts allegedly
committed by Defendants. (Bus. & Prof.Code, 17204.)
Importantly, Jenkins admits in both her SAC and opening
brief that she defaulted on her loan. It is also indisputable
Jenkins's default triggered the lawful enforcement of the
power of sale clause in the deed of trust, and it was the
triggering of the power of sale clause that subjected Jenkins's
home to nonjudicial foreclosure. Moreover, Jenkins's **934
SAC and opening brief acknowledge her default occurred
prior to the six unlawful or unfair acts she alleges as the
basis of her UCL action. As Jenkins's home was subject to
nonjudicial foreclosure because of Jenkins's default on her
loan, which occurred before Defendants' alleged wrongful
acts, Jenkins cannot assert the impending foreclosure of
her home (i.e., her alleged economic injury) was caused
by Defendants' wrongful actions. Thus, even if we assume
Jenkins's third cause of action alleges facts indicating

2013 Thomson Reuters. No claim to original U.S. Government Works.

18

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

Defendants' actions violated at least one of the UCL's three

unfair competition prongs (unlawful, unfair, or fraudulent),
Jenkins's SAC cannot show any of the alleged violations have
a causal link to her economic injury. In light of these facts,
we conclude the demurrer to Jenkins's third cause of action
was proper.

b. Jenkins cannot cure the defect in her third cause of

action.
We now consider whether Jenkins has shown there is a
reasonable possibility she could cure the standing defect
by way of an amendment to her SAC. (Gomes, supra, 192
Cal.App.4th at p. 1153, 121 Cal.Rptr.3d 819.) To cure the
standing defect in her third cause of action, Jenkins would
have to show she can plead facts indicating a causal link
between her economic injury and Defendants' allegedly
wrongful actions. In other words, Jenkins would have to
amend her third cause of action to show she suffered her
economic injury as a result of the defendant's unfair
business practices. (Kwikset Corp., supra, 51 Cal.4th at p.
321, 120 Cal.Rptr.3d 741, 246 P.3d 877, italics added.)
In her opening brief, Jenkins states that if she were permitted
to amend her third cause of action she would allege the
facts with more specificity to illustrate the ways [Defendants]
engaged in deceptive, unfair, and fraudulent conduct under
both the unlawful and unfairness' prongs of [the UCL].
She also lists additional unlawful acts allegedly committed
by Defendants, which she would amend her third cause of
action to allege.
Jenkins's purposed amendments would fail to cure her
Business and Professions Code section 17204 standing
defect. Amending the SAC to plead the previously asserted
wrongful acts with more specificity will not change the fact
these purported actions occurred after Jenkins's default on
her loan. Likewise, amending the complaint to allege new
wrongful acts, also occurring after her default, would not
assist her. Because Jenkins cannot plead *524 facts that
would cure the standing defect in her complaint, we conclude
the court properly sustained the demurrer without leave to
amend as to the third cause of action.

6. Fourth Cause of ActionContractual Breach of the

Implied Covenant of Good Faith and Fair Dealing
Jenkins's fourth cause of action alleges Defendants breached
the implied covenant of good faith and fair dealing. Jenkins's
SAC alleges Quality breached its duty to act in good faith

by initiating unlawful disclosure proceedings. As to Chase,

Jenkins's SAC asserts the bank violated the implied covenant
of good faith and fair dealing by: (1) willfully withholding
numerous disclosures; (2) willfully withholding notices of
excessive fees, finance changes, underwriting standards, good
faith estimates, and the dissemination of negative credit
scores; (3) willfully inflating Jenkins's income to qualify
her for a loan she would not have otherwise qualified for;
(4) instructing Jenkins to default on her payments to qualify
for a loan modification, then subsequently rejecting her
payments; (5) forcing [Jenkins] to **935 resubmit loan
modification documents over a dozen times in 2010; (6)
[c]onsistently making claims that [Jenkins] was denied a
loan modification because she did not pay [for a] loan
appraisal, which she did, or that her paperwork was not
received, when she had in fact sent over [80] pages of
documents to Chase numerous times; (7) violating the Fair
Debt Collection Practice Act, 15 U.S.C. 1601; (8) making
false claims in recorded documents; (9) violating RESPA; and
(10) [i]ntentionally setting up its loan modification program
to fail. Moreover, Jenkins's opening brief ostensibly argues
Chase breached its contractual duty of good faith by violating
section 2923.5.
[26] [27] The covenant of good faith and fair dealing is
imposed upon each party to a contract. (Carma Developers
(Cal.), Inc. v. Marathon Development California, Inc. (1992)
2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710
(Carma Developers ).) This fundamental covenant prevents
the contracting parties from taking actions that will deprive
another party of the benefits of the agreement. (Id. at p. 372,
6 Cal.Rptr.2d 467, 826 P.2d 710.) The covenant also requires
each party to do everything the contract presupposes the party
will do to accomplish the agreement's purposes. (Harm v.
Frasher (1960) 181 Cal.App.2d 405, 417, 5 Cal.Rptr. 367
(Harm ).)
[28]
[29]
[30] It is universally recognized the scope
of conduct prohibited by the covenant of good faith is
circumscribed by the purposes and express terms of the
contract. (Carma Developers, supra, 2 Cal.4th at p. 373, 6
Cal.Rptr.2d 467, 826 P.2d 710.) Because contracts differ,
the nature and extent of the duties owed under the implied
covenant are also variable and will depend on the contractual
purposes. *525 [Citation.] (Love v. Fire Ins. Exchange
(1990) 221 Cal.App.3d 1136, 1147, 271 Cal.Rptr. 246.) Thus,
it is well settled the implied covenant does not extend so far
as to impose enforceable duties that are beyond the scope
of the contract, nor does the covenant prohibit actions that

2013 Thomson Reuters. No claim to original U.S. Government Works.

19

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

are expressly authorized by the contract's terms. (Carma

Developers, supra, 2 Cal.4th at p. 374, 6 Cal.Rptr.2d 467, 826
P.2d 710.)

execute a written notice of the trustor-creditor's default and

the beneficiary-creditor's election to sell the property; (2)
record the notice; and (3) mail copies of the notice to the
trustor-debtor. Second, should the nonjudicial foreclosure
[31] [32] [33] A party's breach of the implied covenant proceed, the trustee is required to: (1) sell the property to the
of good faith and fair dealing gives rise to a contract claim.
highest bidder at an *526 appropriate public auction; (2)
(See Storek & Storek, Inc. v. Citicorp Real Estate, Inc.
deliver the trustee's deed to the purchaser without any express
(2002) 100 Cal.App.4th 44, 5556, 122 Cal.Rptr.2d 267.)
or implied covenants or warranties; and (3) apply the proceeds
Importantly, it is also well settled [t]he prerequisite for any
of the sale in a particular order set forth in the deed of trust.
action for breach of the implied covenant of good faith and
Finally, if the trustor-debtor pays the entire debt secured by
fair dealing is the existence of a contractual relationship
the property, the deed of trust requires the trustee to reconvey
between the parties, since the covenant is an implied term
the property to the trustor-debtor and surrender the deed of
in the contract. (Smith v. City and County of San Francisco
trust.
(1990) 225Cal.App.3d 38, 49, 275 Cal.Rptr. 17 (Smith ).)
Without a contractual underpinning, there is no independent
It is undisputed Jenkins defaulted on her loan and, thereafter,
claim for breach of the implied covenant. (Fireman's Fund
Chase invoked the power of sale clause in the deed of
Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th
trust. The undisputed facts also show Quality, acting as
1586, 1599, 26 Cal.Rptr.2d 762.)
an authorized agent for the beneficiary-creditor, executed,
recorded, and mailed the notice of default and election to
sell. Moreover, Defendants have postponed the sale of the
a. Jenkins fails to plead facts to assert a claim against
property.
Quality.
[34] We first address the allegation Jenkins raises Nowhere in Jenkins's SAC are facts alleged as to how
against Quality. Jenkins's SAC and opening brief fail
Quality's actions violated an express or implied duty under the
to unambiguously identify a contract Quality allegedly
deed of trust. Furthermore, given these undisputed facts, we
breached, which is a prerequisite for any action for breach of
cannot identify any plausible allegations as to how Quality's
the implied covenant of good faith and fair dealing. (Smith,
actions, which were expressly authorized or mandated by
supra, 225 Cal.App.3d at p. 49, 275 Cal.Rptr. 17.) However,
the deed of trust, may have violated the deed of trust's
for the purposes of our present analysis, we assume Jenkins's
implied covenant of good faith and fair dealing. It is well
fourth cause of action asserts Quality breached the terms of
established the scope of the implied covenant of good
the deed of trust, as it is the only instrument referenced in
faith and fair dealing in any contract cannot be interpreted
Jenkins's SAC in which both Quality and Jenkins may be held
so broadly as to prohibit a party from taking an action
to enforceable duties. **936 Consequently, we interpret
that is expressly authorized by the agreement. (See Carma
Jenkins's fourth cause of action to allege Quality breached the
Developers, supra, 2 Cal.4th at p. 374, 6 Cal.Rptr.2d 467, 826
deed of trust's implied covenant of good faith and fair dealing
P.2d 710.) Accordingly, sustaining the demurrer without
by purportedly initiating unlawful foreclosure proceedings.
leave to amend as to Jenkins's claims against Quality was
proper.
This vague contention is insufficient to state a cause of action
for breach of the implied covenant because Jenkins fails to
plead facts describing how Quality either (1) deprived Jenkins
of the right to receive any benefits under the deed of trust,
or (2) refused to perform a specific act presupposed by the
terms of the deed of trust. (Carma Developers, supra, 2
Cal.4th at p. 371, 6 Cal.Rptr.2d 467, 826 P.2d 710; Harm,
supra, 181 Cal.App.2d at p. 417, 5 Cal.Rptr. 367.) The terms
of the deed of trust, which Jenkins attached to her SAC as
exhibit B, specifically set forth the trustee's limited duties.
First, should the beneficiary-creditor invoke the power of
sale clause, the deed of trust requires the trustee to: (1)

b. Jenkins cannot assert claims against Chase for WaMu's

lending and loan servicing activities prior to WaMu's
financial collapse.
[35] We now turn to the allegations relating to Chase.
Included amongst Jenkins's numerous claims against Chase
for allegedly violating the implied covenant of good faith and
fair dealing is the claim Chase [w]illfully placed [Jenkins]
in a loan that she did not qualify for by inflating her
income. Jenkins, however, acknowledges in both her SAC
and opening brief she originated her loan with WaMu on

2013 Thomson Reuters. No claim to original U.S. Government Works.

20

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

March 23, 2007, more than one year before Chase acquired
the defunct bank's assets from the FDIC. Furthermore, the
terms of the Purchase and Assumption Agreement executed
by Chase and the FDIC on September 25, 2008, specifically
**937 states that Chase's acquisition of WaMu's assets did
not include the assumption of any liability associated
with the defunct bank's lending and loan servicing activities
prior to its financial collapse. As there is no dispute as to
the authenticity of the Purchase and Assumption Agreement
found in the record, it is obvious Jenkins cannot pursue a
claim against Chase for WaMu's alleged inflation of her
income when she applied for her loan prior to March 23, 2007.
Thus, sustaining the demurrer without leave to amend as to
this allegation was proper.

*527 c. Jenkins cannot base her claim on alleged

statutory violations.
[36] Jenkins also asserts Chase breached the implied
covenant of good faith and fair dealing by violating the
provisions of three statutes. Jenkins's SAC asserts Chase
breached the implied covenant by violating the provisions of
two federal statutes (15 U.S.C. 1601 and RESPA). And
in her opening brief, Jenkins asserts for the first time Chase
breached the implied covenant by violating section 2923.5.
Even if we assume Jenkins's SAC pled sufficient facts to
pursue these statutory claims, Jenkins's broader assertion
these alleged statutory violations provide a proper basis
for her breach of contract claim is without merit. As a
necessary prerequisite for a contract claim asserting a breach
of the implied covenant of good faith and fair dealing, a
plaintiff must relate the alleged breach to the express terms
or underlying purposes of an identified contract. (See Carma
Developers, supra, 2 Cal.4th at pp. 371374, 6 Cal.Rptr.2d
467, 826 P.2d 710.) The California Supreme Court noted
in Carma Developers, that a contract action to enforce
the implied covenant cannot be brought to protect some
general public policy interest not directly tied to the contract's
purpose. (Id. at p. 373, 6 Cal.Rptr.2d 467, 826 P.2d 710.)
Jenkins cannot assert statutory violations, which provide
independent grounds for possible claims, under the rubric of
a breach of contract claim, especially when she makes no
effort to link the actions that allegedly violated the statutes
to the express terms or underlying purposes of a specific
contract between the parties. Jenkins's fourth cause of action
fails to make any attempt to allege these purported statutory
violations somehow deprived her of the benefits she was
due under a contract. Accordingly, sustaining the demurrer

without leave to amend as to the claims relating to these

alleged statutory violations was proper.

d. Jenkins fails to plead facts to assert a claim against

Chase.
[37] In addition to the allegations discussed immediately
above, Jenkins's fourth cause of action asserts Chase breached
the implied covenant of good faith and fair dealing by
committing a multitude of wrongful acts. We summarized all
these alleged acts at the outset of our present discussion, so we
will not repeat them again here. As with her breach of contract
claim against Quality, Jenkins fails to unambiguously assert
a contract in which the implied covenant was breached
by Chase. However, for the purposes of our analysis, we
interpret Jenkins's SAC as asserting Chase violated the
implied covenants found in the deed of trust and promissory
note she executed in 2007.
[38] [39] As we noted above, because the purpose of the
implied covenant of good faith and fair dealing is limited
to assuring the parties' compliance with the *528 contract
at issue, the scope of conduct prohibited by the implied
covenant is confined by the purposes and express terms of
the agreement. ( **938 Carma Developers, supra, 2 Cal.4th
at p. 373, 6 Cal.Rptr.2d 467, 826 P.2d 710.) Consequently,
an action alleging a breach of the implied covenant cannot be
used by a plaintiff to try to extend existing, or to create new,
obligations that were not contemplated by the parties when
the contract was executed. (Ibid.) In light of this fundamental
principal of contract law, a plaintiff raising a claim for the
breach of the implied covenant must allege a reasonable
relationship between the defendant's allegedly wrongful
conduct and the express terms or underlying purposes of the
contract. (Ibid.)
Jenkins's fourth cause of action simply asserts Chase breached
the implied covenants of the deed of trust and promissory
note, and then lists conclusory and vague allegations of
wrongful conduct by Chase. Nowhere in her SAC or opening
brief does Jenkins identify an express term or underlying
purpose of the two contracts that was breached or frustrated
by Chase's alleged actions, and she fails to assert any actions
Chase failed to perform that were reasonably contemplated
by the terms of the contract in order to accomplish the
agreement's purposes. For these reasons, Jenkins fourth cause
of action fails to satisfy the fundamental prerequisite for a
claim asserting a breach of the implied covenant of good faith
and fair dealinga specific allegation Chase's actions did

2013 Thomson Reuters. No claim to original U.S. Government Works.

21

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

something to interfere with her right to receive the benefits

of the agreement.
Furthermore, at the outset of her fourth cause of action,
Jenkins makes a broad assertion Chase was under a
contractual duty as the loan servicer to attempt to reach a
workout plan to allow [Jenkins] to avoid the foreclosure.
However, she again fails to point to any provision in the
promissory note or deed of trust in which such a duty is
expressly set forth or from which we can reasonably infer
such a contractual duty exists. For all of the foregoing reasons,
we conclude sustaining the demurrer as to Jenkins's fourth
cause of action was proper.

e. Jenkins cannot cure the defects in her fourth cause of

action.
We now consider whether Jenkins has shown there is a
reasonable possibility she could cure the defects we have
identified in her fourth cause of action by way of an
amendment. (Herrera, supra, 205 Cal.App.4th at p. 1501,
141 Cal.Rptr.3d 326.) Notably, Jenkins's opening brief fails
to state how she could amend her fourth cause of action
to cure the defects identified by the court. So we review
the record to determine if a curative amendment is both
apparent and consistent with the plaintiff's theory of the
case. [Citation.] (Ibid.)
As we discussed in great detail above, Jenkins's fourth cause
of action suffers from four distinct flaws. The first three
flaws we have identified *529 cannot be cured by way of
an amendment because, as we noted in our prior discussions
of each of these flaws, they are incurable errors that cannot
be repaired or reconstructed. Jenkins cannot assert a breach
of contract claim against Quality because Quality's actions,
including its initiation of nonjudicial foreclosure proceedings,
were either expressly authorized or permitted by the deed of
trust. It would not be possible for Jenkins to allege permissible
or authorized actions somehow prohibited her from receiving
the benefits of the agreement. Jenkins also cannot assert a
breach of contract claim against Chase for the lending or
loan servicing activities of WaMu prior to Chase's acquisition
of the defunct bank's assets. The Purchase and Assumption
Agreement executed by Chase and the FDIC in September
2008 expressly states that Chase did not assume any liability
for WaMu's lending and loan servicing activities **939
prior to its collapse. Moreover, Jenkins cannot assert a breach
of contract claim against Chase for its alleged violations of
three statutes15 U.S.C. section 1601, 12 U.S.C. section

2601, and section 2923.5. These statutes provide independent

grounds for any claims resulting from their violation, and
Jenkins cannot use a breach of contract claim to pursue a
statutory claim that is not related to the contract at issue.
For these reasons, Jenkins cannot amend her fourth cause of
action to cure these defects.
To determine whether Jenkins may cure the fourth flawthat
she failed to plead facts to state a valid claim against Chase
we must review the express terms and underlying purposes
of the deed of trust and promissory note. To cure this defect,
Jenkins would have to amend her SAC to identify an express
term or underlying purpose that was breached or frustrated
by Chase's alleged wrongful actions. Alternatively, Jenkins
would have to amend her SAC to allege a specific action
Chase failed to perform that resulted in an impermissible
interference with her right to receive a benefit under the
contract.
Our own review of the promissory note and deed of trust,
which Jenkins attached to her SAC as exhibits A and B,
fails to identify any express terms that were violated by the
purported wrongful acts Jenkins's alleges Chase committed.
Furthermore, the underlying purposes of the promissory note
and deed of trust are (1) that Jenkins shall be able to use the
loaned funds on the terms and at the interest rate specified in
the promissory note, and (2) that Chase shall have the security
provided by the deed of trust. (See Milstein v. Security Pac.
Nat. Bank (1972) 27 Cal.App.3d 482, 487, 103 Cal.Rptr. 16.)
The undisputed facts indicate Jenkins was provided with the
benefits of the promissory note and Chase's actions in pursuit
of its secured interest are expressly authorized by the deed of
trust. Accordingly, we concluded the court properly sustained
the demurrer without leave to amend to Jenkins's fourth
cause of action.

*530 7. Fifth Cause of ActionViolations of RESPA

Jenkins's fifth cause of action alleges Chase violated RESPA
by: (1) failing to timely acknowledge receipt of the QWR she
sent Chase on November 29, 2010; (2) failing to completely
respond to the QWR; (3) failing to investigate or explain why
the information requested in the QWR would not be provided;
and (4) providing information to consumer reporting agencies
regarding Jenkins's delinquent loan payments. 3 As a result
of Chase's alleged noncompliance with RESPA, Jenkins
fourth cause of action alleges she has suffered actual
damages, including but not limited to devastation of her
credit, monetary damages, and emotional distress related to

2013 Thomson Reuters. No claim to original U.S. Government Works.

22

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

the threatened foreclosure of her [H]ome. Furthermore, in

her opposition to Chase's demurrer, Jenkins attempted to
describe her actual damages in more detail by stating she
has suffered late fees and reduction in credit rating resulting
from Defendants' reporting delinquency on her account;
the extensive amount of time [she] has spent attempting to
resolve this matter, including communications with Chase
and litigation; extreme and continued frustration attempting
to obtain information **940 from her servicer so that she
can seek a loan modification; and constant worrying about the
loss of her [H]ome.
3

Jenkins's SAC specifically states she is raising the

RESPA claim only against Chase. However, in her
opposition to the Defendants' demurrer and her
opening brief to this court, Jenkins seems to suggest she
is also raising this claim against Quality. As her SAC
specifically raises the claim against Chase and contains
no facts that would suggest she is raising this claim
against Quality, we assume Jenkins's later reference to
Quality as to this cause of action was in error.

Jenkins also contends Chase has engaged in a broader

pattern and practice of failing to comply with RESPA by
not responding to qualified written requests. As support for
this contention, Jenkins points to Chase's failure to respond to
her QWR. For the harm she has purportedly suffered due to
this pattern and practice, Jenkins asserts she is entitled to
statutory damages in the amount of $2,000 per violation.
RESPA regulates the settlement process for real estate
disputes (Hardy v. Regions Mortg., Inc. (11th Cir.2006) 449
F.3d 1357, 1359), as well as banks' servicing of mortgage
loans regulated by the federal government (MorEquity,
Inc. v. Naeem (N.D.Ill.2000) 118 F.Supp.2d 885, 900).
Any mortgage loans secured by a first or subordinate lien
on residential real property are regulated by the federal
government. (12 U.S.C. 2602(1)(A).)
Section 2605 of RESPA sets forth requirements for the
servicing of mortgage loans. Among other things, this section
requires a loan servicer to respond to a QWR for information
from the borrower. (12 U.S.C. 2605(e)(1).) RESPA defines
a QWR as a written correspondence that (i) *531 includes,
or otherwise enables the servicer to identify, the name and
account of the borrower; and [] (ii) includes a statement
of the reasons for the belief of the borrower, to the extent
applicable, that the account is in error or provides sufficient
detail to the servicer regarding other information sought
by the borrower. (12 U.S.C. 2605(e)(1)(B).) The loan

servicer must provide the borrower with a written response

acknowledging receipt of the correspondence within 20
days. (12 U.S.C. 2605(e)(1)(A).) Also, [n]ot later than 60
days ... after the receipt from any borrower of any qualified
written request, the loan servicer is required to correct the
borrower's account, provide the borrower with the requested
information relating to the servicing of the loan, or provide
the borrower with an explanation as to why the requested
information is unavailable. (12 U.S.C. 2605(e)(2).)
During the 60day period after the borrower has transmitted
his or her QWR, RESPA expressly shields the borrower
from unfavorable reports being sent to a consumer reporting
agency. The relevant provision states as follows: During the
60day period beginning on the date of the servicer's receipt
from any borrower of a qualified written request relating to a
dispute regarding the borrower's payments, a servicer may not
provide information regarding any overdue payment, owed
by such borrower and relating to such period or qualified
written request, to any consumer reporting agency.... (12
U.S.C. 2605(e)(3).)
Importantly, RESPA empowers borrowers to pursue damage
remedies in the event a loan servicer fails to comply with
RESPA's provisions. (12 U.S.C. 2605(f).) An individual
borrower asserting a RESPA claim may recover any actual
damages to the borrower as a result of the failure and any
additional damages, as the court may allow, in the case of a
pattern or practice of noncompliance with the requirements
of [RESPA], in an amount not to exceed $1,000. (12 U.S.C.
2605(f)(1), italics added.) Also, the statutes authorize an
individual borrower to recover the costs, including attorneys
fees, incurred in connection with a successful action under the
statute. (12 U.S.C. 2605(f)(3).)

a. Jenkins fails to plead facts to show the alleged RESPA

violation resulted in actual damages.
[40] Asserting a defendant's failure to respond to a QWR
and the suffering of **941 general damages is insufficient
to state a claim under RESPA. (Sullivan v. JP Morgan Chase
Bank, N.A. (E.D.Cal.2010) 725 F.Supp.2d 1087, 1095.)
Instead, federal courts have read 12 U.S.C. section 2605 as
requiring a plaintiff to plead specific facts showing both the
defendant's failure to respond and the plaintiff's suffering of
pecuniary *532 damages in order to avoid the dismissal
of his or her RESPA claim. (Allen v. United Fin. Mortg.
Corp. (N.D.Cal.2009) 660 F.Supp.2d 1089, 1097 (Allen );
Hutchinson v. Delaware Sav. Bank FSB (D.N.J.2006) 410

2013 Thomson Reuters. No claim to original U.S. Government Works.

23

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

F.Supp.2d 374, 383 (Hutchinson ).) In effect, this pleading

requirement has limited RESPA claims to circumstances in
which a plaintiff can allege specific facts to show causation
'actual damages to the borrower as a result of the failure
[to comply with RESPA requirements].' (Lal v. Am. Home
Servicing, Inc. (E.D.Cal.2010) 680 F.Supp.2d 1218, 1223
(Lal ).)
Federal district courts have found sufficiently pled actual
damages include the assertion of concrete harms caused by
the RESPA violation itself, not harms generally resulting
from a plaintiff's default and the foreclosure of his or her
home. For example, in Johnson v. HSBC Bank USA, Nat.
Ass'n (S.D.Cal. Mar. 19, 2012, No. 3:11CV2091JM
WVG) 2012 WL 928433, plaintiff alleged a loan servicer
refused to honor a loan modification plan adopted by
the previous servicer, failed to correctly credit plaintiff's
mortgage payments, incorrectly calculated interest, and failed
to provide a substantive response to plaintiff's QWR
request attempting to verify the debt owed pursuant to the
new loan modification plan. The district court held that,
given the uncertainty over how much plaintiff actually owed
under those circumstances, defendant's failure to adequately
respond to plaintiff's qualified written request conceivably
caused harm. (Id.at p. *6.)
Similarly, in Hutchinson, supra, 410 F.Supp.2d at pages
382383, plaintiffs' complaint alleged actual damages under
RESPA by asserting defendants continued to report late
payments to credit bureaus and failed to respond to plaintiffs'
multiple qualified written requests, even after the debt at
issue had been discharged in bankruptcy. Thus, the district
court found it was plausible defendants' RESPA violations
caused damage to plaintiffs' credit and precluded them from
obtaining other loans. (Ibid.; see also Yulaeva v. Greenpoint
Mortg. Funding, Inc. (E.D.Cal. Sept. 3, 2009, No. CIV. S09
1504 LKK/KJM) 2009 WL 2880393, at *15 [finding plaintiff
adequately plead damages where she alleged she was made to
pay referral fee that was prohibited by RESPA].)
[41] Unlike the plaintiffs in the above cases, Jenkins's fifth
cause of action does not allege facts to show a harm that
specifically derived from Chase's failure to respond to the
QWR. Instead, the harms Jenkins allegesdevastation of
her credit, emotional distress related to the threatened
foreclosure of her [h]ome, late fees, and time spent
attempting to avoid foreclosureresult from her admitted
default on her loan and/or her attempts to dispute the validity
of the promissory note and the security interest created by

the deed of trust. (See Allen, supra, 660 F.Supp.2d at p. 1097

[dismissing RESPA claim where plaintiff had not actually
attempted to show that the alleged *533 RESPA violations
caused any kind of pecuniary loss (indeed, his loss of property
appears to have been caused by his default)].)
Indeed, Jenkins cannot assert these harms were the result of
Chase's failure to respond to the QWR because she admits
she sent the QWR months after her default and the receipt
of the notice of default. Because Jenkins concedes she sent
the QWR following her default, the facts **942 asserted
in Jenkins's fifth cause of action fail to show her claimed
damages for fees, negative credit reports, and emotional
distress were plausibly incurred because of the alleged
RESPA violation, and were not the consequences of her
earlier default. (See Obot v. Wells Fargo Bank, N.A. (N.D.Cal.
Nov. 2, 2011, No. C1100566 HRL) 2011 WL 5243773,
at p. *3 [dismissing RESPA claim because the undisputed
facts indicated QWR was sent following plaintiff's default, so
plaintiff could not show facts indicating the alleged damages
were not incurred because of the default].) Therefore, we find
Jenkins's fifth cause of action is deficient because she fails to
allege actual damages with respect to Chase's alleged RESPA
violation.

b. Jenkins fails to plead facts to show a pattern or practice

of noncompliance.
[42] [43] Jenkins's separate contention that Chase's failure
to respond to the QWR she sent on November 29, 2010, on
its own sets forth sufficient facts to state a RESPA claim
under the statute's a pattern or practice of noncompliance
prong is without merit. (See Garcia v. Wachovia Mortg.
Corp. (C.D.Cal.2009) 676 F.Supp.2d 895, 909 (Garcia ).)
[A]lmost as a matter of definition, a single failure to respond
to a Qualified Written Request does not state a claim for
a pattern or practice of doing so. (Ibid.) Thus, we find
Jenkins's fifth cause of action is also flawed because she
fails to allege facts to support her contention of a pattern or
practice of noncompliance with the provisions of RESPA.
Accordingly, the sustainment of Defendant's demurrer to
Jenkins's fifth cause of action was proper.

c. Jenkins cannot cure the defects in her fifth cause of

action with an amendment.
We now consider whether there is a reasonable possibility
the defects in Jenkins's fifth cause of action may be cured
by an amendment. (See Herrera, supra,205Cal.App.4th at p.
1501, 141 Cal.Rptr.3d 326.) As we have noted above, Jenkins

2013 Thomson Reuters. No claim to original U.S. Government Works.

24

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

has the burden of proving the reasonable possibility of such

a curative amendment. (Ibid.)
In her opening brief, Jenkins asserts she can amend the second
defect in her fifth cause of action by further document[ing]
the pattern of non-compliance by setting forth the efforts she
made to obtain information. *534 Jenkins, however, fails
to address the first shortcomings in her fifth cause of action
her failure to allege actual damages she has incurred because
of Chase's failure to respond to the QWR.
Moreover, to cure her failure to allege a pattern or practice
of noncompliance, Jenkins would have to amend her SAC to
allege multiple instances in which Chase failed to respond
to QWRs. (See Garcia, supra, 676 F.Supp.2d at p. 909.)
As Jenkins's proposed amendment fails to set forth facts she
could add to her complaint to show Chase failed to respond to
numerous QWRs she sent the bank, we conclude her proposed
amendment would not cure this defect in her fifth cause of
action.
Furthermore, to cure her failure to allege actual damages
resulting from Chase's failure to respond to the QWRs,
Jenkins's would have to allege facts that show a direct link
between her alleged harms and Chase's violation of the
statute. (See Allen, supra, 660 F.Supp.2d at p. 1097; Lal,
supra, 680 F.Supp.2d at p. 1223.) Jenkins's failure to address
this shortcoming in her opening brief limits our review of
this issue to the facts she has already set forth in her SAC,
and we do not identify a potentially curative amendment that
would be consistent with her theory of the case. Accordingly,
we conclude **943 the court did not abuse its discretion
by sustaining Chase's demurrer as to Jenkins's fifth cause of
action without leave to amend.

B. The Court did not Abuse its Discretion by Denying

Jenkins the Opportunity to Amend her SAC.
On appeal, Jenkins argues that, even if the claims in her SAC
were insufficiently plead, the court abused its discretion by
denying her leave to amend her SAC to clarify her claims.
Furthermore, Jenkins's opening brief broadly asserts her SAC
sets forth facts to support separate causes of action for
promissory estoppel, injunctive relief, and violations of 15
U.S.C. section 1641(g).
[44] A court's sustaining a demurrer without leave to
amend is appropriate when, based on the nature
of the [complaint's] defects and [the plaintiff's] previous

unsuccessful attempts to plead, it is improbable the

plaintiff can state a cause of action. (Krawitz v. Rusch (1989)
209 Cal.App.3d 957, 967, 257 Cal.Rptr. 610.) We analyzed
and discussed whether it was possible for Jenkins to cure
the flaws in her SAC with curative amendments as we
proceeded through our analysis of her various claims. As to
each claim, Jenkins failed to provide the court with any reason
to believe she could cure the defects in her SAC by way of
an amendment. Furthermore, Jenkins makes no attempt to
explain how the facts in her SAC support new causes of action
for promissory estoppel, injunctive relief, and violations of
*535 15 U.S.C. section 1641(g). When an appellant fails to
raise a point, or asserts it but fails to support it with reasoned
argument and citations to authority, we treat the point as
waived. [Citations.] (Badie v. Bank of America (1998) 67
Cal.App.4th 779, 784785, 79 Cal.Rptr.2d 273.)
Although she has filed three complaints and has been
provided with the opportunity to explain how she could cure
the flaws in her SAC on appeal, Jenkins has yet to articulate a
cause of action against Defendants. Leave to amend should
be denied where the facts are not in dispute and the nature
of the claim is clear, but no liability exists under substantive
law. (Lawrence v. Bank of America (1985) 163 Cal.App.3d
431, 436, 209 Cal.Rptr. 541.) The demurrer was therefore
properly sustained without leave to amend. (Smith, supra,
225 Cal.App.3d at p. 55, 275 Cal.Rptr. 17.)

C. We Need Not Decide the Tender Issue.

Jenkins also challenges the court's alternative ground of lack
of tender for sustaining Defendants' demurrers. As we
uphold the court's ruling on the ground Jenkins's SAC fails
to state a cause of action, we need not and do not consider
whether Jenkins's SAC fails on the alternative ground that she
has not pled she is prepared to tender the amount owing on the
note. (See Arnolds Management Corp. v. Eischen (1984) 158
Cal.App.3d 575, 578, 205 Cal.Rptr. 15 [plaintiff must offer to
pay full amount of outstanding debt when raising an action to
set aside trustee's sale for irregularities in notice or procedure
of the sale].)

D. The Court Did Not Improperly Take Judicial Notice

of the Validity of the Recorded Notice of Default and
Substitution of Trustee.
Finally, Jenkins contends the court erred by taking judicial
notice of the validity of the recorded notice of default
and substitution of trustee. Although she concedes it was
permissible for the court to take judicial notice of the

2013 Thomson Reuters. No claim to original U.S. Government Works.

25

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

existence of the recorded documents, she argues the court

**944 overstepped its discretion by assuming the truth and
validity of the two documents.
Jenkins attempts to support her contention by directing
our attention to a statement made by the court during the
demurrer hearing on September 27, 2011. Jenkins contends
the court's reference to the dates the notice of default and
substitution of trustee were recorded, as well as the court's
misuse of the phrase recorded assignment of interest,
somehow evidences the court's purported adoption of the
validity of the documents. Furthermore, Jenkins contends
the court necessarily relied upon its alleged impermissible
adoption of the validity of the documents when it decided
to sustain Defendants' demurrers to her SAC without leave
to amend because [t]he court provided *536 no other
reasoning in its order to contradict [her] allegation that
[Defendants] do not have a valid interest in [her] loan.
[45] Judicial notice is the recognition and acceptance
by the court, for use by the trier of fact or by the court,
of the existence of a matter of law or fact that is relevant
to an issue in the action without requiring formal proof of
the matter. [Citation.] (Lockley v. Law Office of Cantrell,
Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th
875, 882, 110 Cal.Rptr.2d 877.) Evidence Code section
452, subdivision (h), authorizes a court to take judicial
notice of [f]acts and propositions that are not reasonably
subject to dispute and are capable of immediate and accurate
determination by resort to sources of reasonably indisputable
accuracy. When a court decides to exercises its discretion
under Evidence Code section 452 with regards to a recorded
document, the court may only take judicial notice of [f]acts
and propositions within the document, not the document as
a whole. (Evid.Code, 452, subd. (h).)
[46] When a court is required to rule on a demurrer, the
discretion provided by Evidence Code section 452 allows
the court to take judicial notice of a fact or proposition
within a recorded document that cannot reasonably be
controverted, even if it negates an express allegation of
the pleading. [Citation.] (Fontenot v. Wells Fargo Bank,
N.A. (2011) 198 Cal.App.4th 256, 264, 129 Cal.Rptr.3d 467
(Fontenot ).) [T]he propriety of the court's action depends
upon the nature of the facts of which the court takes notice
from the document. (Id. at p. 265, 129 Cal.Rptr.3d 467.) We
review the court's purported decision to take judicial notice
of the notice of default and substitution of trustee for abuse of
discretion. (Id. at p. 264, 129 Cal.Rptr.3d 467.)

[47] Jenkins's contentions are without merit for several

reasons. First, the record does not indicate the court
took judicial notice of the recorded notice of default and
substitution of trustee. Jenkins attached seven exhibits to
her SAC, including the notice of default, substitution of
trustee, and notice of trustee's sale as exhibits C, D, and
E. Quality also requested the court take judicial notice of
four recorded documents, including the notice of default,
substitution of trustee, and notice of trustee's sale, in support
of its demurrer to Jenkins's SAC. The court, however, never
ruled on Quality's request for judicial notice, nor did the
court issue an order during the proceedings that indicated
it was taking judicial notice of any recorded documents.
Furthermore, before a court may take judicial notice of a fact
or proposition pursuant to Evidence Code section 452, the
court shall afford each party reasonable opportunity ... to
present to the court information relevant to (1) the propriety
of taking judicial notice of the matter and (2) the tenor of
the matter to be noticed. (Evid.Code, 455, subd. (a).)
**945 Nothing in the record suggests the court afforded
the parties an opportunity to argue the merits of whether it
*537 should take judicial notice of the recorded documents.
In the absence of both a court order taking judicial notice of
the recorded documents and a hearing in which the parties
argued the merits of Quality's request, we find no reason
to believe the court took judicial notice of the recorded
documents. Consequently, Jenkins's contention the court
abused its discretion under Evidence Code section 452 by
taking judicial notice of the recorded documents is without
merit.
[48] [49] Second, even if we assume the court's statement
during the demurrer hearing indicates the court took judicial
notice of the recorded documents, the hearing transcript
does not indicate the court overstepped its discretion under
Evidence Code section 452. As we noted above, a court may
take judicial notice of numerous facts that can be deduced
from recorded documents, including, among other things,
their existence, recordation, and date of recordation, without
overstepping the court's discretion under Evidence Code
section 452. (Fontenot, supra, 198 Cal.App.4th at pp. 264
265, 129 Cal.Rptr.3d 467.)
For example, the court in Poseidon Development, Inc. v.
Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106,
11171118, 62 Cal.Rptr.3d 59, held a trial court, when ruling
on a demurrer, may take judicial notice of the parties, dates,
and legal significance of recorded documents relating to a

2013 Thomson Reuters. No claim to original U.S. Government Works.

26

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013)

156 Cal.Rptr.3d 912, 13 Cal. Daily Op. Serv. 5061, 2013 Daily Journal D.A.R. 6295

real estate transaction. The Poseidon court was careful to

distinguish the taking of judicial notice as to the obvious legal
significance of recorded documents' terms, a permissible
action under Evidence Code section 452, from the taking of
judicial notice of the truth and validity of multiple factual
representations within the recorded documents, which would
be impermissible under the statute. (Ibid.)
Likewise, in McElroy v. Chase Manhattan Mortgage Corp.
(2005) 134Cal.App.4th 388, 36 Cal.Rptr.3d 176 (McElroy ),
the appellate court affirmed the trial court's decision to take
judicial notice of the recording of a notice of default, the date
the notice was recorded, and the amount the notice stated
was owed to show plaintiffs had proper notice of the total
outstanding debt and their option to cure the default. (Id. at
pp. 394395, 36 Cal.Rptr.3d 176.)
In the present case, the court simply stated it had reviewed
the dates the notice of default, substitution of trustee, and
notice of trustee's sale were recorded by referencing the
exhibits attached to Jenkins's SAC. Importantly, there is no
dispute between the parties as to whether the three documents
were actually recorded on these dates. Furthermore, when
the court's statement is read in its proper context, it is
clear the court referred to the dates *538 these documents
were recorded, as well as the fact the foreclosure sale had
yet to occur, in order to explain to Jenkins's attorney that,
even if Quality believed it was acting as trustee when it
executed and recorded the notice of default prior to Chase's
substitution of Quality as the new trustee, 4 Jenkins could not
show this technical irregularity somehow caused sufficient
prejudice to allow her to bring an action to impede the
nonjudicial foreclosure of her home. In no way was the
court referring to the existence or nonexistence of Chase's
beneficial interest in the promissory note and deed of trust.
The record of the demurrer hearing makes **946 clear
the court, unlike Jenkins's attorney, understood the statutory
scheme for nonjudicial foreclosure only allows a plaintiff to
halt the foreclosure process if (1) a plaintiff can show the
defendant has failed to comply with the statute's operative
provisions and (2) the defendant's noncompliance somehow
prejudiced the plaintiff. In this light, it is clear the court was
simply trying to explain to Jenkins's attorney the facts alleged
in Jenkins's SAC were insufficient to allow her to pursue a
cause of action to forestall the nonjudicial foreclosure of her
home.
End of Document

As we discussed above during our review of the first

cause of action in Jenkins's SAC, Quality, in fact,
executed and recorded the notice of default as agent for
beneficiary, not as the trustee under the deed of trust.

Moreover, reading the record of the demurrer hearing in its

correct context reveals the court mistakenly used the phrase
recorded assignment of interest when it intended to refer
to the recorded substitution of trustee. This misstatement
was not a legally significant error. Jenkins cannot use the
court's unintentional mislabeling of the recorded substitution
of trustee during the demurrer hearing as sufficient support
for her contention the court was using judicial notice to
determine the validity of the recorded documents.
Lastly, Jenkins is mistaken to contend the court necessarily
relied upon the validity of the recorded documents when
it decided to sustain Defendants' demurrers to her SAC
without leave to amend. As we discussed at length during our
analysis of Jenkins's first cause of action, the court did not
need to decide against her contention Chase did not have a
beneficial interest in the promissory note and deed of trust to
sustain Defendants' demurrers and deny her leave to amend.
Jenkins's lack of standing to bring a preemptive action under
the statutory scheme setting forth nonjudicial foreclosure, as
well as her inability to plead an actual controversy existed
between herself and Defendants, independent of the validity
of her contention as to whether Chase possessed a beneficial
interest in the loan, was sufficient grounds for the court to
sustain Defendants' demurrers without leave to amend. For
all the reasons stated above, we find the court did not abuse
its discretion under Evidence Code section 452.

*539 DISPOSITION
The judgment is affirmed. Respondents shall recover their
costs on appeal.

WE CONCUR: RYLAARSDAM, J. THOMPSON, J.

Parallel Citations
216 Cal.App.4th 497, 13 Cal. Daily Op. Serv. 5061, 2013
Daily Journal D.A.R. 6295
2013 Thomson Reuters. No claim to original U.S. Government Works.

2013 Thomson Reuters. No claim to original U.S. Government Works.

27

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 1 of 20

1
2
3
4
5
6
7
8
9

UNITED STATES DISTRICT COURT

10

SOUTHERN DISTRICT OF CALIFORNIA

11
12

NIMAL SUSANTHA DIUNUGALA,

an individual, on behalf of himself and
all others similarly situated,

13

vs.

14
15
16
17
18

CASE NO. 12cv2106-WQHNLS

ORDER

Plaintiff,

JP MORGAN CHASE BANK, N.A.;

THE BANK OF NEW YORK
MELLON TRUST COMPANY, N.A;
AMERICAN HOME MORTGAGE
SERVICING, INC.; POWER
DEFAULT SERVICES, INC.; and
DOES 1 through 10, inclusive,
Defendants.

19
20 HAYES, Judge:
21

The matter before the Court is the Motion to Dismiss Plaintiffs First Amended

22 Complaint for Failure to State a Claim filed by all Defendants. (ECF No. 20).
23 I.

Background

24

On July 25, 2012, Plaintiff Nimal Sustantha Diunugala initiated this action by

25 filing a Complaint in San Diego County Superior Court. (ECF No. 1-2). On August
26 24, 2012, all Defendants jointly filed a Notice of Removal to this Court, alleging
27 diversity jurisdiction.

(ECF No. 1).

On January 18, 2013, the Court granted

28 Defendants motion to dismiss the Complaint. (ECF No. 15).

-1-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 2 of 20

On May 19, 2013, Plaintiff filed the First Amended Complaint. (ECF No. 19).

2 On June 6, 2013, Defendants filed the Motion to Dismiss Plaintiffs First Amended
3 Complaint for Failure to State a Claim (Motion to Dismiss). (ECF No. 20). On July
4 2, 2013, Plaintiff filed an opposition and evidentiary objections.1 (ECF Nos. 21, 22).
5 On July 8, 2013, Defendants filed a reply. (ECF No. 24). On August 12, 2013 and
6 August 27, 2013, Plaintiff filed Notices of New Legal Authority. (ECF Nos. 25, 28).
7 On August 21, 2013, Defendants filed a response to Plaintiffs August 12, 2013 Notice
8 of New Legal Authority. (ECF No. 27).
9 II.
10

Allegations of the First Amended Complaint

In early 2006, Plaintiff purchased real property at 987 Merced River Road in

11 Chula Vista, California, 91913 for use as his personal residence. (ECF No. 19 12).
12 Plaintiff paid $206,458.33 in cash as a down payment on the property to be secured by
13 a conventional loan from American Broker Conduit. Id. 13. Plaintiffs initial
14 monthly payments on the loan were $1,752.06. Id. 14.
15

In late 2010, Plaintiff sent a Qualified Written Request to Defendant American

16 Home Mortgage Servicing (AHMSI), who responded on January 11, 2011 with a
17 letter informing Plaintiff that the owner/creditor of his loan was Structured Asset
18 Mortgage Investments II Trust 2006-AR5 Pass Though Certificates, Series 2006-AR5
19 (MBS trust) .... [and that] The Bank of New York Mellon Corporation was the
20 trustee of the MBS trust. Id. 17-18.
21

The MBS trust required that all loans being transferred to the trust had to be

22 funded according to the terms of the pooling and servicing agreement.... The four
23 corners of the [pooling and servicing agreement] bind the trust to the only actions which
24 can lawfully be taken with respect to the administration of its assets.... Id. 23-24.
25 Defendant [Bank of New York Mellon Corporation (BONY)] was not made a
26 successor trustee of the MBS trust as set forth in the [pooling and servicing]
27
1

Plaintiff objects to Defendants request for judicial notice, filed in conjunction

28 with the Motion to Dismiss. (ECF No. 20-2). In deciding the Motion to Dismiss, the
Court has not relied upon the materials attached to the request for judicial notice.
-2-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 3 of 20

1 Agreement.... Yet, defendant AHMSI continued to use BONYs underwriting standards

2 when evaluating plaintiff for a loan modification which failed and plaintiffs home was
3 taken at foreclosure auction on April 9, 2012. Id. 27-28.
4

Six months after AHMSI represented that BONY was the trustee of the MBS

5 trust and as such was the creditor of Plaintiffs loan, on June 15, 2011, [Defendant]
6 Power Default [Services, Inc.] caused a Notice of Default and Election to Sell Under
7 Deed of Trust ... to be recorded which stated it was for the benefit of ... JP Morgan
8 Chase Bank, National Association [JP Morgan], Not Individually But Solely As
9 Trustee For The Holders Of Structured Asset Mortgage Investments II Inc., Mortgage
10 Pass-Through Certificates, Series 2006-AR5. Id. 83. The [Notice of Default] stated
11 Plaintiff was in default in the amount of $27,388.55 as of June 21, 2011, and the
12 Beneficiary was named JP Morgan Chase Bank, National Association as trustee of
13 the MBS trust. Id. 84-85.
14

On September 12, 2011, a Notice of Sale was executed which represented the

15 outstanding obligation was $684,361.54. Id. 90-91. On April 13, 2012, contrary
16 to the Chain of Title, a Trustees Deed Upon Sale ... was recorded representing that the
17 beneficiary who was the grantee taking by credit bid was ... The Bank of New York
18 Mellon.... Id. 92. The Trustees Deed Upon Sale stated the property was taken by
19 credit bid by defendant The Bank of New York Mellon as trustee for the MBS trust on
20 April 19, 2012 for the sum of $425,000.00.... Id. 94.
21

The Trustees Deed Upon Sale is fraudulent, void and conveyed no interest in

22 the Property because:

23
24
25
26

a.

Defendant BONY did not receive a valid assignment of the debt in any
manner.

b.

On June 15, 2011, a [Notice of Default] was recorded which clearly stated
[Defendant JP Morgan] was the beneficiary.

c.

The MBS trust is a publicly recorded document created in 2006 and the
[pooling and servicing agreement] ... show[s] that JP Morgan Chase Bank
is the trustee of the MBS trust.

d.

The [Trustees Deed Upon Sale] depends solely and entirely on the
[Notice of Default], to substantiate its validity and the fact these

27
28

-3-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 4 of 20

1
2
3

documents are inconsistent on their face establishes the invalidity of the

[Trustees Deed Upon Sale].
e.

And the Lender as later identified to the IRS was in fact, neither JP
Morgan nor BONY but was Homeward Residential, Inc.

4 Id. 101. BONY then proceeded to evict plaintiff based on the false and fraudulent
5 [Trustees Deed Upon Sale]. Id. 105.
6

Under the strict rules of this [pooling and servicing agreement] to this MBS

7 trust, the Sponsor ... was required to provide a substitute mortgage loan or purchase the
8 related mortgage loan within 180 days if the Note or other required assignments were
9 not effectuated within 90 days of the closing date. Id. 119. The note on [Plaintiff]s
10 loan was not transferred within 90 days or repurchased ... within 180 days as required
11 by the [pooling and servicing agreement] of the MBS trust. Id. 123.
12

The First Amended Complaint asserts the following causes of action: (1)

13 negligence; (2) violation of Real Estate Settlement Procedures Act (RESPA), 12

14 U.S.C. 2605; (3) violation of Truth in Lending Act (TILA), 15 U.S.C. 1641g; (4)
15 cancellation of documents to set aside the foreclosure sale; (5) fraud; and (6) violation
16 of California Business & Professions Code 17200. The First Amended Complaint
17 purports to assert a class action pursuant to California Business & Professions Code
18 17203 on behalf of the following putative class: All ... borrowers who received
19 conflicting notifications from defendant AHMSI, BONY or JP Morgan of the identity
20 of their investor, or creditor as required under 15 USC 1641g after May 5, 2009; and
21 All ... borrowers who received conflicting notifications from defendant AHMSI of the
22 identity of their investor, or creditor as required under 12 USC 2605 within the past
23 two years. (ECF No. 19 39).
24 III.

Standard of Review

25

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for failure to state

26 a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A pleading that
27 states a claim for relief must contain ... a short and plain statement of the claim showing
28 that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). Dismissal under Rule
-4-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 5 of 20

1 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient
2 facts to support a cognizable legal theory. See Balistreri v. Pac. Police Depot, 901 F.2d
3 696, 699 (9th Cir. 1990).
4

[A] plaintiffs obligation to provide the grounds of his entitle[ment] to relief

5 requires more than labels and conclusions, and a formulaic recitation of the elements
6 of a cause of action will not do. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
7 (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must
8 accept as true all well-pleaded factual allegations. Ashcroft v. Iqbal, 556 U.S. 662,
9 679 (2009). However, a court is not required to accept as true allegations that are
10 merely conclusory, unwarranted deductions of fact, or unreasonable inferences.
11 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). In sum, for a
12 complaint to survive a motion to dismiss, the non-conclusory factual content, and
13 reasonable inferences from that content, must be plausibly suggestive of a claim
14 entitling the plaintiff to relief. Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.
15 2009) (quotations omitted).
16 IV.

Discussion

17

A.

18

The first cause of action for negligence alleges that JP Morgan and/or BONY

Negligence

19 breached a duty of care owed to Plaintiff to provide notice pursuant to TILA; AHMSI
20 erroneously continued to use BONYs underwriting standards when reviewing
21 Plaintiffs loan for a modification; and, [a]s a consequence of defendants actions
22 and/or failure to act, plaintiff has not been given a meaningful opportunity to modify
23 his loan in order to save his home from foreclosure. (ECF No. 19 60-61).
24 Defendants contend that the negligence cause of action must be dismissed because
25 Plaintiff has not alleged any special circumstances that would impose a duty of care
26 on Defendants. (ECF No. 20-1 at 12). Plaintiff contends that AHMSI is a loan
27 servicer rather than a lender, and AHMSI, BONY and JP Morgan all owed Plaintiff a
28 duty of care because they had an ongoing relationship with the borrower while the
-5-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 6 of 20

1 borrower was attempting to modify the loan. (ECF No. 21 at 11).

2

The elements of a cause of action for negligence are (1) a legal duty to use

3 reasonable care, (2) breach of that duty, and (3) proximate cause between the breach
4 and (4) the plaintiffs injury. Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333,
5 1339 (1998) (citation omitted). The existence of a legal duty to use reasonable care
6 in a particular factual situation is a question of law for the court to decide. Vasquez
7 v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (2004). A court may consider
8 various factors, among which are the extent to which the transaction was intended to
9 affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the
10 plaintiff suffered injury, the closeness of the connection between the defendants
11 conduct and the injury suffered, the moral blame attached to the defendants conduct,
12 and the policy of preventing future harm. Biakanja v. Irving, 49 Cal. 2d 647, 650
13 (1958).
14

[F]or purposes of a negligence claim, as a general rule, a financial institution

15 owes no duty of care to a borrower when the institutions involvement in the loan
16 transaction does not exceed the scope of its conventional role as a mere lender of
17 money. Das v. Bank of Am., N.A., 186 Cal. App. 4th 727, 740 (2010) (quoting
18 Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991)); see
19 also Wagner v. Benson, 101 Cal. App. 3d 27, 34-35 (1980).

Absent special

20 circumstances ... a loan transaction is at arms length and there is no fiduciary

21 relationship between the borrower and lender. Oaks Mgmt. Corp. v. Superior Court,
22 145 Cal. App. 4th 453, 466 (2006). Likewise, a loan servicer generally does not owe
23 a duty to the borrower of the loan it is servicing. See Castaneda v. Saxon Mortg. Servs.,
24 687 F. Supp. 2d 1191, 1198 (E.D. Cal. 2009). Absent special circumstances, there is
25 no duty for a servicer to modify a loan. See Bunce v. Ocwen Loan Servicing, LLC, No.
26 13-00976, 2013 WL 3773950, at *5-*6 (E.D. Cal. July 17, 2013) (collecting cases);
27 Gonzalez v. Wells Fargo Bank, No. 12cv3842, 2012 WL 5350035 *6 (N.D. Cal. Oct.
28 29, 2012) (A loan modification, which is nothing more than a renegotiation of loan
-6-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 7 of 20

1 terms, falls well within a[n] institutions conventional money-lending role.) (citations
2 omitted).
3

Plaintiff relies upon Jolley v. Chase Home Finance, 213 Cal. App. 4th 872

4 (2013), which held that a bank had a duty to a borrower under a construction loan that
5 obligated the bank to disburse funds as the construction progressed. The lender
6 allegedly breached its obligation to disburse funds when the lender lost the loan
7 documents, resulting in an eight month delay of construction. See id. at 878. The court
8 held that there was a triable issue of fact as to whether the lender was negligent. The
9 court stated: We note that we deal with a construction loan, not a residential home loan
10 where, save for possible loan servicing issues, the relationship ends when the loan is
11 funded. By contrast, in a construction loan the relationship between lender and
12 borrower is ongoing, in the sense that the parties are working together over a period of
13 time, with disbursements made throughout the construction period, depending upon the
14 state of progress towards completion. Id. at 901. The Court finds Jolley to be
15 inapposite to this case, which involves a residential home loan and related loan
16 servicing issues.
17

The Court finds that the First Amended Complaint fails to adequately allege that

18 any Defendant exceeded the scope of its conventional role as a mere lender of money.
19 Nymark, 231 Cal. App. 3d at 1096. The allegations related to the negligence cause of
20 action are conclusory and fail to indicate that the Biakanja factors weigh in favor of
21 finding a duty. See Bunce, 2013 WL 3773950, at *5 (same). The allegations of the
22 First Amended Complaint are insufficient to plausibly suggest that any Defendant owed
23 Plaintiff a duty of care. The Motion to Dismiss the first cause of action for negligence
24 is granted.
25

B.

RESPA

26

The second cause of action for violation of RESPA alleges that, [i]f AHMSI had

27 properly conducted an investigation with any diligence in determining the true identity
28 of the creditor, AHMSI would have realized that the trustee for the MBS trust it stated
-7-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 8 of 20

1 in the response to the QWR [i.e, Qualified Written Request] was JP Morgan and not
2 BONY. As a result, AHMSI is strictly liable for violating 12 U.S.C. 2605 entitling
3 plaintiff to damages. (ECF No. 19 71-72). Defendants contend that this claim is
4 defective because it fails to allege actual damage caused by the alleged failure to
5 respond to the purported QWR. (ECF No. 20-1 at 13). Plaintiff contends that
6 defendants are strictly liable for their failure to promptly make an accurate disclosure
7 after a reasonable investigation and statutory damages are awarded if there are no actual
8 damages, and Plaintiff suffered damage because he lost the opportunity to modify his
9 home [loan] after paying tens of thousands of dollars to the servicer. (ECF No. 21 at
10 14-15).
11

If any servicer of a federally related mortgage loan receives a qualified written

12 request from the borrower (or an agent of the borrower) for information relating to the
13 servicing of such loan, the servicer shall provide a written response acknowledging
14 receipt of the correspondence within 20 days ... unless the action requested is taken
15 within such period. 12 U.S.C. 2605(e)(1)(A). Section 2605 specifies the contents
16 of a proper QWR and the required response to a borrowers QWR. If a loan servicer
17 fails to comply with the provisions of 12 U.S.C. 2605, a borrower is entitled to any
18 actual damages to the borrower as a result of the failure and any additional damages,
19 as the court may allow, in the case of a pattern or practice of noncompliance with the
20 requirements of [12 U.S.C. 2605]. 12 U.S.C. 2605(f)(1).
21

Numerous courts have read Section 2605 as requiring a showing of pecuniary

22 damages to state a claim. Molina v. Wash. Mut. Bank, No. 09-CV-894, 2010 WL
23 431439 at *7 (S.D. Cal. Jan. 29, 2010). This pleading requirement has the effect of
24 limiting the cause of action to circumstances in which plaintiff can show that a failure
25 to respond or give notice has caused them actual harm. Shepherd v. Am. Home Mortg.
26 Servs., Inc., No. 2:09-1916, 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009)
27 (citation omitted). A plaintiff is entitled to recover for the loss that relates to the
28 RESPA violation, not for all losses related to foreclosure activity. See Lal v. Am. Home
-8-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 9 of 20

1 Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E.D. Cal. 2010) ([T]he loss alleged must
2 be related to the RESPA violation itself.); Torres v. Wells Fargo Home Mortg., Inc.,
3 No. 10-4761, 2011 WL 11506, at *8 (N.D. Cal. Jan. 4, 2011) (The plaintiff must ...
4 allege a causal relationship between the alleged damages and the RESPA violation.);
5 cf. Lawther v. OneWest Bank, No. C-10-54, 2010 WL 4936797, at *7 (N.D. Cal. Nov.
6 30, 2010) (granting motion to dismiss RESPA claim for failure to adequately allege
7 actual damages because [w]hat remains unexplained ... is how the QWR failure itself
8 is causally connected to the claimed distress of Lawther or his family).
9

The First Amended Complaint fails to allege facts plausibly suggestive of a

10 causal connection between the alleged RESPA violation and any alleged damages. The
11 First Amended Complaint fails to allege facts indicating how the alleged failure to
12 adequately respond to the QWR caused Plaintiff to lose the opportunity to modify his
13 home [loan] after paying tens of thousands of dollars to the servicer. (ECF No. 21 at
14 14-15). The First Amended Complaint also fails to allege a pattern or practice of
15 noncompliance with the requirements of [12 U.S.C. 2605]. 12 U.S.C. 2605(f)(1)
16 (allowing any additional damages, as the court may allow, in the case of a pattern or
17 practice of noncompliance with the requirements of [12 U.S.C. 2605]). The Court
18 concludes that Plaintiff has not alleged sufficient facts to support a cause of action for
19 violation of RESPA. See Twombly, 550 U.S. at 555. The Motion to Dismiss the second
20 cause of action for violation of RESPA is granted.
21

C.

TILA

22

The third cause of action for violation of TILA alleges that, [a]fter May 20,

23 2009, JP Morgan and BONY were required to notify the plaintiff in writing of the
24 transfer of the loan from lender to new creditor or assignee pursuant to 15 U.S.C.
25 1641.... Both JP Morgan and BONY failed to notify Plaintiff and those similarly
26 situated within 30 days of the purported assignment or transfer of Plaintiffs loan when
27 it believed it became the new creditor or assignee after May 20, 2009 and failed to give
28 proper notice as described in 15 USC 1641g.... Although [Plaintiff] was attempting
-9-

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 10 of 20

1 to get a loan modification approved by his new creditor after May 20, 2009, it was
2 never a settled matter who the trustee of the MBS trust was or what the underwriting
3 guidelines were while he was facing imminent foreclosure. (ECF No. 19 75, 77,
4 79). The third cause of action for violation of TILA is brought against JP Morgan and
5 BONY only.
6

Defendants contend that the TILA claim fails because (1) Plaintiff does not

7 allege who was required to provide him notice; (2) the claim is barred by the one-year
8 statute of limitations; and (3) Plaintiff fails to plead actual damages sustained by
9 Plaintiff as a result of the alleged failure to give notice. (ECF No. 20-1 at 14-15).
10 Plaintiff contends that the First Amended Complaint alleges transfers occurred within
11 the statute of limitations, and Plaintiff alleged that he was entitled to actual damages
12 for the failure of the servicer to use the correct underwriting standard when attempting
13 to modify the loan as well as statutory damages. (ECF No. 21 at 19).
14

TILA provides that, not later than 30 days after the date on which a mortgage

15 loan is sold or otherwise transferred or assigned to a third party, the creditor that is the
16 new owner or assignee of the debt shall notify the borrower in writing of such transfer,
17 including (A) the identity, address, telephone number of the new creditor; (B) the date
18 of transfer; (C) how to reach an agent or party having authority to act on behalf of the
19 new creditor; (D) the location of the place where transfer of ownership of the debt is
20 recorded; and (E) any other relevant information regarding the new creditor. 15
21 U.S.C. 1641(g). A creditor that fails to comply with any requirement imposed under
22 1641(g) faces liability in an amount equal to the sum of any actual damage
23 sustained by such a person as a result of the failure, and in the case of an individual
24 action twice the amount of any finance charge in connection with the transaction, and
25 in the case of a class action, such amount as the court may allow.... 15 U.S.C.
26 1640(a)(1)-(2). The TILA statute of limitations provision states that any action under
27 this section may be brought ... within one year from the date of the occurrence of the
28 violation. 15 U.S.C. 1640(e).
- 10 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 11 of 20

The Complaint was filed on July 25, 2012. (ECF No.1-2). The First Amended

2 Complaint alleges that Defendant Power Default represented JP Morgan was the
3 creditor/assignee in the Notice of Default recorded on June 15, 2011.... Defendant
4 Power Default also represented BONY was plaintiffs creditor/assignee in the Trustees
5 Deed Upon Sale on April 13, 2012.... Defendant Power Default was acting as defendant
6 BONY and defendant JP Morgans authorized agent at the time each of these
7 representations were made. (ECF No. 19 56-58). Viewing reasonable inferences
8 in Plaintiffs favor, see Moss, 572 F.3d at 969, these allegations are sufficient to allege
9 that BONY was required to provide notice pursuant to 15 U.S.C. 1641(g) within the
10 one-year statute of limitations period.
11

The Court does not decide whether the First Amended Complaint adequately

12 pleads actual damages, because Plaintiff adequately pleads entitlement to statutory

13 damages pursuant to 15 U.S.C. 1640(a) (providing that damages are recoverable in
14 the case of an individual action twice the amount of any finance charge in connection
15 with the transaction, and in the case of a class action, such amount as the court may
16 allow....). See Vogan v. Wells Fargo Bank, N.A., No. 11cv2098, 2011 WL 5826016,
17 at *5 (E.D. Cal. Nov. 17, 2011) (Even if plaintiffs are not entitled to actual damages
18 based on the allegations in their Complaint [for violation of 15 U.S.C. 1641(g)], they
19 did adequately plead that they are entitled to attorneys fees and statutory damages.);
20 cf. Gutierrez v. U.S. Bank, NA, No. CV-12-4713, 2013 WL 399140, at *3 n.3 (C.D. Cal.
21 Feb. 1, 2013) (requiring plausible allegations of actual damages because plaintiff fails
22 to identify any statutory damages to which she would be entitled and the statutory
23 damages provision at 16 U.S.C. 1640(a)(2)(A) does not apply in the circumstances
24 of this case).
25

The Motion to Dismiss the third cause of action for violation of TILA is denied.

26

D.

27

In the fourth cause of action for cancellation of documents, the First Amended

Cancellation of Documents

28 Complaint alleges that the actions by JP Morgan ... and BONY purporting that either
- 11 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 12 of 20

1 had standing as Trustee of the MBS trust to foreclose or assign this mortgage loan to
2 the Trust in 2012 were in contravention of the trust and were void. (ECF No. 19
3 127). The fourth cause of action requests an order cancelling the fraudulent ... [Notice
4 of Default], [Trustees Deed Upon Sale], [Notice of Sale] and Substitution of Trustee
5 pursuant to California Civil Code 3412. Id. 131. Defendants contend that Plaintiff
6 cannot challenge the foreclosing entities standing to foreclose on the Property;
7 Plaintiff cannot predicate a viable claim on an allegedly invalid assignment of deed
8 of trust because assignments of a deed of trust need never be recorded in order to
9 nonjudicially foreclose; Plaintiff lacks standing to challenge any assignments; and
10 Plaintiff fails to tender. (ECF No. 20-1 at 15, 18-19, 21). Plaintiff contends that
11 BONY Mellon has no right to use JP Morgan Chases [Notice of Default] to initiate
12 nonjudicial foreclosure proceedings, and Cal. Civ. Code 3412 does not require
13 tender. (ECF No. 21 at 21).
14

Californias nonjudicial foreclosure scheme does not provide for a judicial

15 action to determine whether the person initiating the foreclosure process is indeed
16 authorized. Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1155
17 (2011) (The recognition of the right to bring a lawsuit to determine a nominees
18 authorization to proceed with foreclosure on behalf of the noteholder would
19 fundamentally undermine the nonjudicial nature of the process and introduce the
20 possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.).
21 [D]istrict courts have held that borrowers who were not parties to the assignment of
22 their deedand whose rights were not affected by itlacked standing to challenge the
23 assignments validity because they had not alleged a concrete and particularized injury
24 that is fairly traceable to the challenged assignment. Marques v. Fed. Home Loan
25 Mortg. Corp., No. 12-cv-1873, 2012 WL 6091412, at *4 (S.D. Cal. Dec. 6, 2012)
26 (citations omitted); see id. at *5 ([T]he validity of the assignment does not affect
27 whether [the] borrower owes its obligations, but only to whom [the] borrower is
28 obliged.) (quotation omitted). To the extent [a] Plaintiff bases her claims on the
- 12 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 13 of 20

1 theory that [Defendant] allegedly failed to comply with the terms of the [pooling and
2 servicing agreement], the court finds that she lacks standing to do so because she is
3 neither a party to, nor a third party beneficiary of, that agreement. McLaughlin v.
4 Wells Fargo Bank, N.A., No. 12-1114, 2012 WL 5994924, at *6 (C.D. Cal. Nov. 30,
5 2012) (citing Sami v. Wells Fargo Bank, No. 12-108, 2012 WL 967051, at *5 (N.D.
6 Cal. Mar. 21, 2012)); see also Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App.
7 4th 497, 514-15 (2013) (As an unrelated third party to the alleged securitization, and
8 any other subsequent transfers of the beneficial interest under the promissory note,
9 [plaintiff] lacks standing to enforce any agreements, including the investment trusts
10 pooling and servicing agreement, relating to such transactions. Furthermore, even if
11 any subsequent transfers of the promissory note were invalid, [plaintiff] is not the
12 victim of such invalid transfers because her obligations under the note remained
13 unchanged.) (citations omitted); cf. Murphy v. Allstate Ins. Co., 17 Cal. 3d 937, 944
14 (1976) (A third party should not be permitted to enforce covenants made not for his
15 benefit, but rather for others.... As to any provision made not for his benefit but for the
16 benefit of the contracting parties or for other third parties, he becomes an
17 intermeddler.).
18

Plaintiff relies upon Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079

19 (2013). (ECF No. 25). In Glaski, the California Court of Appeal held that, under New
20 York trust law, a transfer of a deed of trust in contravention of the trust documents is
21 void, not merely voidable, and, under California law, a borrower can challenge an
22 assignment of his or her note and deed of trust if the defect asserted would void the
23 assignment. Id. at 461 (citation omitted). This Court finds the reasoning in the above24 cited caselaw to be more persuasive than that in Glaski. See Deutsche Bank Natl Trust
25 Co. v. Adolfo, No. 12 C 759, 2013 WL 4552407, at *3 (N.D. Ill. Aug. 28, 2013) ([W]e
26 are persuaded by the courts that have held that a transfer that does not comply with a
27 PSA is voidable, not void.) (expressly disagreeing with Glaski) (citations omitted).
28 Moreover, even if Glaski was correctly decided, California courts have held that in
- 13 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 14 of 20

1 order to state a claim challenging a foreclosure sale, it [is] not enough for plaintiff to
2 allege that [the] purported assignment of the note in the assignment of deed of trust was
3 ineffective. Instead, plaintiff [is] required to allege that [defendant] did not receive a
4 valid assignment of the debt in any manner. Fontenot v. Wells Fargo Bank, N.A., 198
5 Cal. App. 4th 256, 271-72 (2011); see also Herrera v. Fed. Natl Mortg. Assn, 205 Cal.
6 App. 4th 1495, 1506 (2012) (same). And even if Glaski were correctly decided, and
7 Plaintiff alleged that the foreclosing Defendant did not receive a valid assignment of the
8 debt in any manner, the California Court of Appeal has held that plaintiffs must allege
9 ... facts showing that they suffered prejudice as a result of any lack of authority of the
10 parties participating in the foreclosure process. Siliga v. Mortg. Elec. Reg. Sys., Inc.,
11 --- Cal. Rptr. 3d ----, 2013 WL 4522474, at *5 (Cal. Ct. App. Aug. 27, 2013) (The
12 Siligas do not dispute that they are in default under the note. The assignment of the
13 deed of trust and the note did not change the Siligas obligations under the note, and
14 there is no reason to believe that Accredited as the original lender would have refrained
15 from foreclosure in these circumstances. Absent any prejudice, the Siligas have no
16 standing to complain about any alleged lack of authority or defective assignment.).
17

The First Amended Complaint alleges that the purported assignments of the loan

18 did not comply with the rules of the relevant pooling and servicing agreement and/or
19 the MBS trust. The Court concludes that the First Amended Complaint fails to
20 adequately allege that Plaintiff has standing to challenge the assignments. The First
21 Amended Complaint also fails to allege sufficient facts indicating that Defendant did
22 not receive a valid assignment of the debt in any manner. Fontenot, 198 Cal.App. 4th
23 at 272. The First Amended Complaint does not allege that Plaintiff was current on his
24 mortgage obligations, or that more than one entity concurrently attempted to collect
25 mortgage payments from him or foreclose on the property. Although Plaintiff alleges
26 that the loan servicer failed to use the correct underwriting standards when offering
27 Plaintiff a loan modification, Plaintiff fails to plausibly allege that the loan modification
28 offer would have been materially different had a different companys underwriting
- 14 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 15 of 20

1 standards been used. The First Amended Complaint fails to adequately allege that
2 Plaintiff suffered prejudice from the allegedly invalid assignments. The Motion to
3 Dismiss the fourth cause of action for cancellation of documents is granted.
4

E.

Fraud

The fifth cause of action for fraud alleges that Plaintiff was fraudulently thrown

6 into foreclosure by a Servicer Driven Default from AHMSI. (ECF No. 19 133).
7 Defendants contend that the fraud claim is not pled with the requisite specificity
8 required by Federal Rule of Civil Procedure 9(b); Plaintiff does not allege how the[]
9 statements were false; Plaintiff alleges no damages resulting from the alleged
10 misstatements, nor could he, given his allegation that he was actually offered a loan
11 modification; and to the extent Plaintiffs claim is based upon misrepresentations
12 which were allegedly made in 2007 and 2008, the claim is barred by the three-year
13 statute of limitations. (ECF No. 20-1 at 23). Plaintiff contends that the fraud claim
14 against AHMSI is pled with the requisite specificity. (ECF No. 21 at 21).
15
16

1.

Allegations Supporting the Claim for Fraud

Sometime between June 2007 and November 2007, Plaintiff contacted AHMSI

17 at phone number 1-877-304-3100 where he was directed to the Loan Administration

18 Research Department and explained that he wanted to modify his loan. (ECF No. 19
19 140). The AHMSI representative on the telephone, who did not disclose his name,
20 told Plaintiff he could obtain a fixed rate loan with payments similar to the monthly
21 payment he was now making at $1,752.06 per month if he sent in an additional
22 $31,752.06 to pay towards his principal. Id. 141. [T]his representation was false.
23 Id. 143. [O]n November 27, 2007 plaintiff withdrew $30,000 from his IRA account
24 and sent AHMSI an additional $31,752.06 to be applied to his loan toward principal in
25 reliance on the statements made to him by AHMSI on the phone and based on the belief
26 that he could obtain a loan with similar monthly payments at a fixed interest rate. Id.
27 142. AHMSI accepted and cashed the check, but AHMSI did not then offer Plaintiff
28 the refinancing of his loan as promised. Id. 144.
- 15 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 16 of 20

Plaintiff called AHMSI at 1-877-304-3100 on or about August 7, 2008 and

2 asked for a modification of his loan. Id. 149. AHMSIs employee ... reached at this
3 number, who did not disclose his name, told Plaintiff that he appeared to qualify for a
4 modification but he had to first default on three of his monthly mortgage payments
5 before AHMSI would consider him for a modification (aka a Servicer Driven Default).
6 Id. 150. Plaintiff stopped making his payments, submitted paperwork, and, on
7 April 1, 2010, AHMSI sent Plaintiff an offer to modify his loan that was worse than
8 [Plaintiffs] regular monthly terms. Id. 155. After futile discussions with an
9 AHMSI representative, Plaintiff signed the modification offer and began making the
10 agreed monthly payments. Id. 159; see also id. 161.
11

On January 11, 2011, AHMSI responded to Plaintiffs QWR and represented that

12 BONY was the trustee AHMSI was dealing with, with regard to modification
13 requests. Id. 163. Plaintiff sent a loan modification package to AHMSI on August
14 2, 2011, and AHMSI responded by way of letter dated September 26, 2011 incorrectly
15 asserting that the package was incomplete. Id. 167. Plaintiff sent a letter to an
16 AHMSI representative on January 6, 2012, and AHMSI responded by way of letter on
17 February 14, 2012 stating his loan modification was being reviewed. There was no
18 mention that any documents were missing.

Id. 169.

Plaintiff received a

19 modification denial letter dated March 1, 2012 stating that his loan modification was
20 denied due to missing paperwork. Id. 171. Plaintiffs property was sold at
21 foreclosure auction on April 9, 2012. Id. 172.
22
23

2.

Analysis

The elements of a claim for fraud are: (1) a misrepresentation, which includes

24 a concealment or nondisclosure; (2) knowledge of the falsity of the misrepresentation,

25 i.e., scienter; (3) intent to induce reliance on the misrepresentation; (4) justifiable
26 reliance; and (5) resulting damages. Cadlo v. Owens-Illinois, Inc., 125 Cal. App. 4th
27 513, 519 (2004) (citing Small v. Fritz Cos., Inc., 30 Cal. 4th 167, 173 (2003)). It is
28 well-established in the Ninth Circuit that ... claims for fraud ... must meet Rule 9(b)s
- 16 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 17 of 20

1 particularity requirement. Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101,
2 1141 (C.D. Cal. 2003); see also Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1103
3 (9th Cir. 2003) (Rule 9(b)s particularity requirement applies to state-law causes of
4 action.). Pursuant to Federal Rule of Civil Procedure 9(b), a party alleging fraud must
5 satisfy a heightened pleading standard by stating with particularity the circumstances
6 constituting fraud. See Fed. R. Civ. P. 9(b). Rule 9(b) demands that, when averments
7 of fraud are made, the circumstances constituting the alleged fraud be specific enough
8 to give defendants notice of the particular misconduct so that they can defend against
9 the charge and not just deny that they have done anything wrong. Vess, 317 F.3d at
10 1106 (quotations omitted). Averments of fraud must be accompanied by the who,
11 what, when, where and how of the misconduct charged. Id. (quoting Cooper v.
12 Pickett, 137 F.3d 616, 627 (9th Cir. 1994)).
13

Claims of fraud must be filed within three years of the discovery by the aggrieved

14 party of the facts constituting the fraud. See Cal. Code Civ. P. 338(d). The
15 Complaint was filed on July 25, 2012. (ECF No.1-2). With respect to the allegedly
16 false representation made by an AHMSI representative in 2007, the First Amended
17 Complaint alleges that, in November of 2007, AHMSI accepted and cashed
18 [Plaintiffs] check, but AHMSI did not then offer Plaintiff the refinancing of his loan
19 as promised. (ECF No. 19 144). Based upon the allegations of the First Amended
20 Complaint, it is not plausible that Plaintiff failed to discover the facts constituting the
21 fraud concerning the alleged 2007 false representation prior to July 25, 2009 (i.e., three
22 years prior to the filing of the Complaint). Cal. Code Civ. P. 338(d). Accordingly,
23 to the extent the claim for fraud is based upon the alleged 2007 false representation, the
24 claim is barred by the applicable statute of limitations.
25

With respect to the alleged August 7, 2008 representation that Plaintiff appeared

26 to qualify for a modification but he had to first default on three of his monthly mortgage
27 payments before AHMSI would consider him for a modification, ECF No. 19 150,
28 Plaintiff fails to adequately allege that this representation was false. Plaintiff alleges
- 17 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 18 of 20

1 that he was offered a loan modification as a result of this inquiry. Id. 153. Although
2 Plaintiff was not satisfied with the terms of the modification offer, Plaintiff does not
3 allege that the AHMSI representative made any representations on August 7, 2008
4 concerning the terms of the forthcoming offer.
5

With respect to the alleged representation in the January 11, 2011 QWR that

6 BONY was the trustee, Plaintiff fails to allege that he relied on this alleged
7 misrepresentation and then suffered damages as a result. For instance, Plaintiff fails to
8 plausibly allege that Plaintiff would have responded differently had AHMSI informed
9 Plaintiff that another entity was the trustee.

With respect to the alleged

10 misrepresentation that Plaintiffs loan modification application package was incomplete

11 on September 26, 2011, Plaintiff fails to allege that he justifiably relied on this
12 representation. Instead, Plaintiff alleges that he believed that representation to be untrue
13 at the time. See id. 168. With respect to the alleged representation in the February
14 14, 2012 letter that Plaintiffs loan modification was being reviewed, id. 169,
15 Plaintiff fails to adequately allege that this representation was false. Plaintiffs
16 application was denied on March 1, 2012. Id. 171. Plaintiff does not allege that the
17 February 14, 2012 letter represented that Plaintiffs loan modification application was
18 complete and not missing any required paperwork.
19

Accordingly the Motion to Dismiss the fifth cause of action for fraud is granted.

20

F.

21

The sixth cause of action alleges that Defendants violated Californias Unfair

Unfair Competition Law

22 Competition Law (UCL), California Business and Professions Code 17200.

23

Defendants contend that Plaintiff lacks standing to bring a UCL claim against

24 Defendants; Plaintiff has not pled the violation of any law on which he could hinge
25 his UCL claim; and the UCL claim is otherwise inadequately pled. (ECF No. 20-1 at
26 24-25). Plaintiff contends that the UCL claim is adequately pled. (ECF No. 21 at 2327 25).
28

The UCL prohibits any unlawful, unfair or fraudulent business act or practice.
- 18 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 19 of 20

1 Cal. Bus. & Prof. Code 17200. A plaintiff alleging a UCL claim must satisfy UCL
2 standing requirements. See Birdsong v. Apple, Inc., 590 F.3d 955, 960 n.4 (9th Cir.
3 2009). Private standing under the UCL is limited to a person who has suffered injury
4 in fact and has lost money or property as a result of the unfair competition. Cal. Bus.
5 & Prof. Code 17204; see also Degelmann v. Advanced Med. Optics, Inc., 659 F.3d
6 835, 839 (9th Cir. 2011). The intent of section 17204 is to confine standing to those
7 actually injured by a defendants business practices. Kwikset Corp. v. Superior Court,
8 51 Cal. 4th 310, 321 (2011). Several courts have found that a plaintiff has not suffered
9 an injury in fact when the loss suffered is a result of a plaintiffs default on the loan.
10 See, e.g., Bernardi v. JPMorgan Chase Bank, N.A., No. 11-cv-4212, 2012 WL 2343679,
11 at *5 (N.D. Cal. June 20, 2012); Serna v. Bank of Am., N.A., No. 11-10598, 2012 WL
12 2030705, at *5 (C.D. Cal. June 4, 2012); DeLeon v. Wells Fargo Bank, N.A., No. 10-cv13 1390, 2011 WL 311376, at *7 (N.D. Cal. Jan. 28, 2011).
14

Plaintiff concedes that he was in default on his mortgage obligation. (ECF No.

15 21 at 20). As discussed above with respect to the causes of action for violation of
16 RESPA and cancellation of documents, the First Amended Complaint fails to
17 adequately allege that Plaintiff lost his property as a result of the alleged unlawful,
18 unfair or fraudulent business acts or practices. For example, Plaintiff fails to plausibly
19 allege that the loan modification offer he received would have been materially different
20 had AHMSI used a different companys underwriting standards. The First Amended
21 Complaint fails to adequately allege that Plaintiff has standing to assert a claim pursuant
22 to the UCL. See, e.g., Bernardi, 2012 WL 2343679, at *5. The Motion to Dismiss the
23 sixth cause of action for violation of California Business and Professions Code 17200
24 is granted.
25 V.

Conclusion

26

IT IS HEREBY ORDERED that the Motion to Dismiss Plaintiffs First Amended

27 Complaint is GRANTED in part and DENIED in part. (ECF No. 20). The Motion to
28 Dismiss the third cause of action for violation of TILA is denied. In all other respects,
- 19 -

12cv2106-WQH-NLS

Case 3:12-cv-02106-WQH-KSC Document 29 Filed 10/03/13 Page 20 of 20

1 the Motion to Dismiss is granted, and the remaining causes of action are dismissed
2 without prejudice.
3 DATED: October 3, 2013
4
5

WILLIAM Q. HAYES
United States District Judge

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- 20 -

12cv2106-WQH-NLS

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

KeyCite Yellow Flag - Negative Treatment

Distinguished by U.S. Bank, N.A. v. Cantartzoglou, Cal.Super.A.D.,
February 1, 2013

198 Cal.App.4th 256

Court of Appeal, First District, Division 1, California.
Arlene FONTENOT, Plaintiff and Appellant,
v.
WELLS FARGO BANK, N.A., et
al., Defendants and Respondents.
No. A130478.

Affirmed.

West Headnotes (27)

[1]

Appeal and Error

Cases Triable in Appellate Court
On review from an order sustaining a demurrer,
the Court of Appeal examines the complaint
de novo to determine whether it alleges facts
sufficient to state a cause of action under any
legal theory, such facts being assumed true for
this purpose; the Court may also consider matters
that have been judicially noticed.

Aug. 11, 2011.

Synopsis
Background: Borrower brought action against bank, lender's
nominee, and others alleging wrongful foreclosure on deed
of trust. Bank and nominee filed demurrers, based in part on
recorded documents. The Superior Court, Alameda County,
No. RG09433189, Ronni MacLaren, J., took judicial notice
of the documents and sustained the demurrers without leave
to amend, and borrower appealed.

2 Cases that cite this headnote

[2]

[1] court could take judicial notice of fact that lender's

nominee was the beneficiary under deed of trust;
[2] nominee did not have the burden of proving a valid
assignment of deed of trust;

17 Cases that cite this headnote

[3]

[5] court could require borrower to attach to third amended

complaint a copy of letter which purportedly amended
forbearance agreement with bank;

[7] borrower lacked claim for promissory estoppel.

Evidence
Nature and scope in general
Judicial notice is the recognition and
acceptance by the court, for use by the trier of
fact or by the court, of the existence of a matter of
law or fact that is relevant to an issue in the action
without requiring formal proof of the matter.

[4] alleged invalidity of assignment of deed of trust was

insufficient to demonstrate total lack of authority to foreclose;

[6] borrower was not entitled to leave to amend complaint in

order to attach copy of letter; and

Evidence
Nature and scope in general
Trial court could take judicial notice in
foreclosure action of fact that lender's nominee
was the beneficiary under deed of trust, as
nominee was designated as the beneficiary in the
legally operative document, and that status did
not exist apart from the deed of trust itself.

Holdings: The Court of Appeal, Margulies, J., held that:

[3] allegation lender's nominee was merely a nominee was

insufficient to demonstrate that nominee lacked authority to
make a valid assignment;

Appeal and Error

Matters or Evidence Considered in
Determining Question

1 Cases that cite this headnote

[4]

Pleading
Scope of Inquiry and Matters Considered
on Demurrer in General

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

When ruling on a demurrer, a court may

take judicial notice of something that cannot
reasonably be controverted, even if it negates an
express allegation of the pleading.

Litigation, 4:104; Greenwald & Asimov, Cal.

Practice Guide: Real Property Transactions
(The Rutter Group 2011) 6:521 (CAPROP Ch.
6-I); 4 Witkin, Summary of Cal. Law (10th ed.
2005) Security Transactions in Real Property,
165.

8 Cases that cite this headnote

[5]

6 Cases that cite this headnote

Evidence
Nature and scope in general
When a court is asked to take judicial notice of
a document, the propriety of the court's action
depends upon the nature of the facts of which
the court takes notice from the document. West's
Ann.Cal.Evid.Code 452.

[8]

The nonjudicial foreclosure statutes are

a comprehensive scheme designed: (1) to
provide the creditor/beneficiary with a quick,
inexpensive and efficient remedy against a
defaulting debtor/trustor, (2) to protect the
debtor/trustor from wrongful loss of the
property, and (3) to ensure that a properly
conducted sale is final between the parties and
conclusive as to a bona fide purchaser. West's
Ann.Cal.Civ.Code 2924.

26 Cases that cite this headnote

[6]

Evidence
Nature and scope in general
A court may take judicial notice of the fact of
a document's recordation, the date the document
was recorded and executed, the parties to the
transaction reflected in a recorded document,
and the document's legally operative language,
assuming there is no genuine dispute regarding
the document's authenticity; from this, the court
may deduce and rely upon the legal effect of
the recorded document, when that effect is clear
from its face. West's Ann.Cal.Evid.Code 452.

Mortgages
Statutory provisions

8 Cases that cite this headnote

[9]

Mortgages
Operation and effect
A nonjudicial foreclosure sale is presumed to
have been conducted regularly, and the burden
of proof rests with the party attempting to rebut
this presumption.

16 Cases that cite this headnote

16 Cases that cite this headnote
[7]

Mortgages
Wrongful Foreclosure
Lender's nominee did not have the burden
of proving a valid assignment of deed of
trust, in wrongful foreclosure action; rather,
given the presumption of regularity, if debtor
contended that foreclosure sale was invalid
because assignee had no authority to conduct the
sale, the burden rested with debtor affirmatively
to plead facts demonstrating the impropriety.
West's Ann.Cal.Civ.Code 2924.
See 4 Miller & Starr, Cal. Real Estate (3d
ed. 2001) 10:4, 10:38 et seq.; Cal. Jur.
3d, Deeds of Trust, 110, 118; Cal. Civil
Practice (Thomson Reuters 2011) Real Property

[10]

Mortgages
Parties who may make assignment
Allegation, in wrongful foreclosure action
involving deed of trust, that lender's nominee
was merely a nominee was insufficient to
demonstrate that it lacked authority to make
a valid assignment of note on behalf of the
original lender; while nominee had no power
in its own right to assign note, as it had no
interest in the note, assignment of deed of trust
stated that it was acting as nominee for lender,
which did possess an assignable interest. West's
Ann.Cal.Civ.Code 2315.
30 Cases that cite this headnote

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

[11]

to demonstrate that bank lacked authority to

foreclose absent any allegation that bank did not
receive a valid assignment of the debt in any
manner.

Principal and Agent

Nature of the relation in general
A nominee is a person or entity designated to
act for another in a limited rolein effect, an
agent.
5 Cases that cite this headnote

[12]

8 Cases that cite this headnote

[16]

Principal and Agent

Authority Conferred as Between Principal
and Agent

Mortgages
Parties secured
Record did not support borrower's contention
that deed of trust was ambiguous because
it designated lender's nominee as both the
nominee for the beneficiary and as the
beneficiary; rather, it stated that nominee was
the beneficiary, acting as a nominee for the
lender.

In general terms, an agent can be authorized

to do any act the principal may do. West's
Ann.Cal.Civ.Code 2304, 2305.
1 Cases that cite this headnote

8 Cases that cite this headnote

[13]

Mortgages
Necessity of delivery of evidence of
indebtedness secured

[17]

Purported assignment of deed of trust by

lender's nominee was not invalid under the
common law of secured transactions and theory
that an assignment of the security is a nullity in
the absence of an assignment of the debt itself,
where assignment of the deed of trust expressly
stated that nominee assigned its interest in the
deed of trust [t]ogether with the note or notes
therein described or referred to.
9 Cases that cite this headnote
[14]

Secured Transactions
Requisites and validity in general
The general principle is that because the security
for a debt is a mere incident of the debt
or obligation which it is given to secure, the
assignment of an interest in the security for a debt
is a nullity in the absence of an assignment of the
debt itself.
2 Cases that cite this headnote

[15]

Mortgages
Under trust deed
Alleged invalidity of assignment of deed of trust
from lender's nominee to bank was insufficient

Mortgages
Scope and mode of review
Borrower failed in opening brief on appeal to
argue that lender's nominee failed to demonstrate
it had the authority to foreclose because it did not
show the foreclosure was necessary to comply
with law or custom as provided in the deed of
trust, and thus waived that contention on appeal.
8 Cases that cite this headnote

[18]

Mortgages
Wrongful Foreclosure
Trial court could, in wrongful foreclosure
action, require borrower to attach to third
amended complaint a copy of letter which
purportedly amended forbearance agreement
with bank; court conditioned leave to amend
complaint on attachment of the agreement, as
borrower had already filed three unsuccessful
versions of the complaint, court's decision placed
little burden on borrower, and borrower had
conceded she did not comply with terms of
original forbearance agreement and thus she
was relying on the terms of the letter. West's
Ann.Cal.C.C.P. 472a(c).
1 Cases that cite this headnote

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

[19]

Borrower was not entitled to leave to amend

wrongful foreclosure complaint in order to
attach copy of letter allegedly amending
forbearance agreement, as, in light of borrower's
failure to attach letter to complaint or to
opposition to bank's demurrer, there was no
reason to believe that letter constituted an
amendment to the agreement and thus borrower
failed to carry her burden to demonstrate
reasonable possibility that she could cure the
defect in the complaint.

[20]

that an amendment would cure the defect in the

complaint.

Mortgages
Wrongful Foreclosure
[23]

Mortgages
Wrongful Foreclosure
Borrower lacked claim for promissory estoppel
in wrongful foreclosure action against bank,
as promise not to foreclose was made in
agreement given for proper consideration in the
form of borrower's agreement to resume making
payments on promissory note secured by deed of
trust.

Appeal and Error

Additional or supplemental pleadings and
withdrawal and pleading anew
For purposes of deciding whether the trial court
abused its discretion in denying leave to amend,
a showing that the complaint can be amended to
state a cause of action need not be made in the
trial court so long as it is made to the reviewing
court.

7 Cases that cite this headnote

[24]

Appeal and Error

Additional or supplemental pleadings and
withdrawal and pleading anew
In deciding whether the trial court abused
its discretion in denying leave to amend, the
appellate court must decide whether there is a
reasonable possibility the plaintiff could cure the
defect with an amendment; if the court finds that
an amendment could cure the defect, it concludes
that the trial court abused its discretion and
reverses, but if not, no abuse of discretion has
occurred.

5 Cases that cite this headnote

[25]

[22]

Appeal and Error

Burden of showing error
On appeal from a judgment denying leave to
amend, the plaintiff has the burden of proving

Estoppel
Future events; promissory estoppel
Promissory estoppel is a doctrine which employs
equitable principles to satisfy the requirement
that consideration must be given in exchange for
the promise sought to be enforced.
4 Cases that cite this headnote

[26]
1 Cases that cite this headnote

Estoppel
Future events; promissory estoppel
In California, under the doctrine of promissory
estoppel, a promise which the promisor
should reasonably expect to induce action or
forbearance on the part of the promisee or a third
person and which does induce such action or
forbearance is binding if injustice can be avoided
only by enforcement of the promise.

1 Cases that cite this headnote

[21]

Estoppel
Future events; promissory estoppel

Estoppel
Future events; promissory estoppel
The purpose of the doctrine of promissory
estoppel is to make a promise binding, under
certain circumstances, without consideration in
the usual sense of something bargained for and
given in exchange; if the promisee's performance
was requested at the time the promisor made his

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

promise and that performance was bargained for,

the doctrine is inapplicable.
7 Cases that cite this headnote
[27]

Estoppel
Future events; promissory estoppel
A plaintiff cannot state a claim for promissory
estoppel when the promise was given in return
for proper consideration; the claim instead must
be pleaded as one for breach of the bargained-for
contract.

2006, plaintiff gave defendant Alliance Bancorp a $1

million promissory note, secured by a deed of trust in the
purchased real property (property). MERS was identified
as the nominee of the lender in the deed of trust. In
November 2007, plaintiff was served with a notice of default
by defendant NDEx West, LLC (NDEx), although NDEx was
not substituted as trustee of the deed of trust until two months
later. In December 2007, MERS assigned the deed of trust to
defendant HSBC Bank USA, N.A. (HSBC). Several months
later, Wells Fargo was alleged to have foreclosed on the
*261 property and sold it, although the complaint otherwise
contained no explanation of Wells Fargo's relationship to the
secured transaction. 2

12 Cases that cite this headnote

Attorneys and Law Firms

The three other defendants were eventually dismissed

and do not figure in this appeal.

Defendants' brief states, without citation to the record,

that Wells Fargo [took] over the servicing of [plaintiff's]
loan. A substitution of trustee recorded with respect to
the property designated Wells Fargo as the attorney in
fact for HSBC.

**471 Holland Law Firm, Oakland, George Holland, Jr. for

Plaintiff and Appellant.
Severson & Werson, San Francisco, Jan T. Chilton for
Defendants and Respondents.
Opinion
MARGULIES, J.
*260 Plaintiff Arlene Fontenot sued Wells Fargo Bank, N.A.
(Wells Fargo), Mortgage Electronic Registration Systems,
Inc. (MERS), and three other entities after she defaulted
on a secured real estate loan and lost the property to
foreclosure. In the fourth amended complaint, plaintiff
alleged the foreclosure was unlawful because Wells Fargo
had breached an agreement to forbear from foreclosure, and
MERS made an invalid assignment of an interest in the
promissory note relating to the property. Wells Fargo and
MERS filed demurrers, based in part on recorded documents
they contended demonstrated plaintiff's claims to be without
factual foundation. The trial court took judicial notice of the
requested documents and sustained the demurrers without
leave to amend. We affirm.

The complaint asserted a single cause of action against all

defendants for Wrongful Foreclosure [Negligence per Se].
Within that cause of action, plaintiff alleged several different
imperfections in the foreclosure process, including improper
or ineffective transfers of the promissory note and security.
Plaintiff sought an award of damages, as well as an order
voiding the foreclosure sale and her debt.
The trial court had earlier sustained a demurrer to the third
amended complaint. 3 In sustaining the demurrer without
leave to amend as to three of four causes of **472
action, the court found allegations concerning improper or
ineffective assignments to be inconsistent with recorded
instruments or ... with the law governing assignments.
The court allowed amendment of the remaining cause of
action, ruling [p]laintiff has alleged the germ of a cause of
action for wrongful foreclosure by alleging that she had a
written forbearance agreement with [Wells Fargo]. Since the
agreement is only effective if in writing, Plaintiff must attach
the written agreement....
3

I. BACKGROUND
On April 30, 2010, plaintiff filed her fourth amended
complaint (complaint) against Wells Fargo, MERS, and
three other defendants. 1 The complaint alleged that in

The appellate record contains rulings by the trial court

sustaining demurrers to the second and third amended
complaints, but it does not include any pleadings filed in
connection with these earlier proceedings.

Responding to the latter portion of the court's

order, the complaint alleged that in February 2008

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

plaintiff entered into a SPECIAL FORBEARANCE

AGREEMENT (forbearance agreement) with Wells Fargo.
Mindful of the court's instruction, plaintiff attached a copy to
the complaint. The forbearance agreement stated that Wells
Fargo would suspend further debt enforcement proceedings
in return for plaintiff's making a series of five monthly
payments, beginning in February 2008. The first four
payments were between $8,000 and $8,500, while the last
payment was a balloon payment of over $59,000. If plaintiff
failed to make the required payments, Wells Fargo was
entitled to terminate the forbearance agreement and reinstitute
foreclosure proceedings.
Plaintiff alleged she made the first payment under the
forbearance agreement as scheduled. Soon thereafter, on
March 10, 2008, she received a letter from Wells Fargo
(March letter) stating that the monthly mortgage payments
were being reduced effective May 1, 2008 from $7,395.82
to $4,895.82 for the next six months. The complaint
alleged plaintiff made two more of the payments required
by the forbearance agreement, but in May 2008, she *262
accepted the offer contained in the March letter and
submitted a payment of $4,895.82. Wells Fargo refused to
accept the payment as satisfaction of plaintiff's obligations
and foreclosed in August 2008. 4 Plaintiff did not attach a
copy of the March letter to the complaint.
4

Wells Fargo speculates the March letter was a

standard letter announcing a periodic adjustment in the
interest rate of the underlying promissory note, sent
independently of the forbearance agreement and not
intended as an offer to modify that agreement. Plaintiff's
own allegations raise a question about her claim the
March letter was intended as an offer to amend the
forbearance agreement, since she quotes the letter as
reducing her monthly payments from $7,395.82 to
$4,895.82. None of monthly amounts due under the
forbearance agreement was $7,395.82. For our purposes,
it does not matter. We accept the truth of the complaint's
allegations in reviewing the court's order sustaining the
Wells Fargo demurrer. (Committee for Green Foothills v.
Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th
32, 42, 105 Cal.Rptr.3d 181, 224 P.3d 920.)

Wells Fargo filed a demurrer, arguing the complaint failed

to state a claim and was uncertain. The court sustained
the demurrer without leave to amend because it failed
to demonstrate plaintiff complied with the forbearance
agreement. The court rejected any reliance by plaintiff on the
March letter as an amendment of the forbearance agreement
because plaintiff had not attached a copy of the letter to the

complaint. The court noted it had already rejected plaintiff's

other alleged grounds for her cause of action against Wells
Fargo and reaffirmed those rulings.
MERS also filed a demurrer. With respect to MERS, the
complaint alleged MERS was not the true beneficiary under
the deed of trust, never had ownership of the promissory
note, and never held an assignable interest in the note or deed
of trust. As a result, any assignment of the note by MERS to
HSBC was invalid. In addition, plaintiff alleged the trustee
substitution **473 was invalid due to the fact that the
transmission of any interest in Plaintiff's note from MERS is
void. In its demurrer, MERS argued plaintiff's allegations
were contradicted by the judicially noticeable documents or
otherwise legally flawed.
The MERS request for judicial notice attached a series of
recorded documents related to the property, such as two deeds
of trust, an assignment of a deed of trust, and documents
required by the nonjudicial foreclosure procedure, each
bearing notarized signatures and the recorder's stamp of
Alameda County. The first deed of trust, securing a debt
of $1 million, contained a paragraph stating: MERS' is
Mortgage Electronic Registration Systems, Inc. MERS is a
separate corporation that is acting solely as a nominee for
Lender and Lender's successors and assigns. MERS is the
beneficiary under this Security Instrument. A later paragraph
entitled, TRANSFER OF RIGHTS IN THE PROPERTY,
confirms, The beneficiary of this Security Instrument is
MERS (solely as nominee for Lender and *263 Lender's
successors and assigns) and the successors and assigns of
MERS.... [] ... [] ... 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. 5
5

A second deed of trust, entered into simultaneously

with the first and securing a debt of $187,500, contained
similar language. The second deed of trust is not at issue
here.

A notice of default was recorded on November 9, 2007,

by NDEx West, LLC, as Agent for Beneficiary. Nearly
two months later, on December 27, 2007, MERS recorded
an assignment of the first deed of trust to HSBC

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

BANK USA ... AS TRUSTEE FOR NOMURA ASSET

ACCEPTANCE CORPORATION MORTGAGE PASS
THROUGH CERTIFICATES. This assignment purported
to assign all beneficial interest under the first deed of trust
as well as the note and all monies due under the note. Several
weeks later, HSBC, listing Wells Fargo as its attorney in
fact, recorded a substitution of trustee under the first deed
of trust, naming NDEx as the new trustee. NDEx recorded
a notice of trustee's sale on February 15, 2008, and the deed
reflecting the sale of the property was recorded in August.
Although she opposed the taking of judicial notice, plaintiff
did not contest the authenticity of these documents.
The court granted MERS's request for judicial notice and
sustained its demurrer without leave to amend, noting, The
only apparent grounds for suing MERS are the allegations
that the deed of trust improperly named MERS as nominee
and beneficiary, and that there was no physical delivery of the
note to HSBC.... Those claims do not state a cause of action
against MERS as a matter of law.

II. DISCUSSION
Plaintiff raises four primary grounds for reversing the trial
court's rulings sustaining the two demurrers. With respect
to MERS, she argues the trial court erred in taking judicial
notice of the various recorded documents and the purported
assignment of the note by MERS to HSBC in the assignment
of deed of trust was invalid because MERS did not possess
an interest **474 in the note. Because the assignment of the
note to HSBC was invalid, plaintiff argues, Wells Fargo had
no authority to foreclosure. With respect to Wells Fargo, she
argues the trial court erred because she stated a claim either
for breach of the forbearance agreement, as amended by the
March letter, or promissory estoppel.
[1] *264 On review from an order sustaining a demurrer,
we examine the complaint de novo to determine whether
it alleges facts sufficient to state a cause of action under
any legal theory, such facts being assumed true for this
purpose. [Citations.] [Citation.] We may also consider
matters that have been judicially noticed. (Committee for
Green Foothills v. Santa Clara County Bd. of Supervisors,
supra, 48 Cal.4th at p. 42, 105 Cal.Rptr.3d 181, 224 P.3d
920.)

A. The Claim Against MERS

1. Judicial Notice
[2] The trial court's ruling sustaining the MERS demurrer
was based on recorded documents that clarified and, to a
degree, contradicted plaintiff's allegations regarding MERS's
role in the foreclosure. Plaintiff contends the trial court erred
in taking judicial notice of these documents. We review the
trial court's ruling on the request for judicial notice for abuse
of discretion. (Evans v. California Trailer Court, Inc. (1994)
28 Cal.App.4th 540, 549, 33 Cal.Rptr.2d 646.)
[3] [4] Judicial notice is the recognition and acceptance
by the court, for use by the trier of fact or by the court, of the
existence of a matter of law or fact that is relevant to an issue
in the action without requiring formal proof of the matter.
(Poseidon Development, Inc. v. Woodland Lane Estates,
LLC (2007) 152 Cal.App.4th 1106, 1117, 62 Cal.Rptr.3d 59
(Poseidon ).) When ruling on a demurrer, [a] court may
take judicial notice of something that cannot reasonably be
controverted, even if it negates an express allegation of the
pleading. (Ibid.) Accordingly, Evidence Code section 452,
subdivisions (c) and (h), respectively, permit a court, in its
discretion, to take judicial notice of [o]fficial acts ... of
any state of the United States and [f]acts and propositions
that are not reasonably subject to dispute and are capable of
immediate and accurate determination by resort to sources of
reasonably indisputable accuracy.
Pursuant to these provisions, courts have taken judicial
notice of the existence and recordation of real property
records, including deeds of trust, when the authenticity of
the documents is not challenged. (E.g., Alfaro v. Community
Housing Improvement System & Planning Assn., Inc. (2009)
171 Cal.App.4th 1356, 1367, fn. 8, 1382, 124 Cal.Rptr.3d
271; Evans v. California Trailer Court, Inc., supra, 28
Cal.App.4th at p. 549, 33 Cal.Rptr.2d 646; CalAmerican
Income Property Fund II v. County of Los Angeles (1989) 208
Cal.App.3d 109, 112, fn. 2, 256 Cal.Rptr. 21.) The official act
of recordation and the common use of a notary public in the
execution of such documents *265 assures their reliability,
and the maintenance of the documents in the recorder's office
makes their existence and text capable of ready confirmation,
thereby placing such documents beyond reasonable dispute.
In addition, courts have taken judicial notice not only of
the existence and recordation of recorded documents but
also of a variety of matters that can be deduced from the
documents. In Poseidon, for example, the court affirmed the
trial court's taking judicial notice, in sustaining a demurrer,
of the parties, dates, and legal consequences of a series

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

of recorded documents relating to a real estate transaction.

**475 (Poseidon, supra, 152 Cal.App.4th at pp. 11171118,
62 Cal.Rptr.3d 59.) Although the court recognized that it
would have been improper to take judicial notice of the truth
of statements of fact recited within the documents, the trial
court was permitted to take judicial notice of the legal effect
of the documents' language when that effect was clear. (Ibid.)
Similarly, in McElroy v. Chase Manhattan Mortgage Corp.
(2005) 134 Cal.App.4th 388, 36 Cal.Rptr.3d 176, the court
took judicial notice of the recordation of a notice of default
under a deed of trust, the date of the notice's recording, and
the amount stated as owing in the notice for the purpose of
demonstrating the plaintiffs had notice of the amount claimed
to be owing and the opportunity to cure a defective tender.
(Id. at p. 394, 36 Cal.Rptr.3d 176.) Judicial notice of the
boundaries of a parcel of land on the basis of the property
description in a recorded grant deed has also been approved.
(Lockhart v. MVM, Inc. (2009) 175 Cal.App.4th 1452, 1460,
97 Cal.Rptr.3d 206.)

Cases II (2007) 41 Cal.4th 1257, 1276, 63 Cal.Rptr.3d 418,

163 P.3d 106). In Mangini, the court held that while it could
take judicial notice of the issuance of a report by the United
States Surgeon General regarding the health consequences
of smoking, it could not take judicial notice of the truth
of the conclusions stated in the report. (Id. at pp. 1063
1064, 31 Cal.Rptr.2d 358, 875 P.2d 73.) Similarly, the
court refused to take judicial notice of the truth of matters
reported in newspaper articles. (Id. at p. 1065, 31 Cal.Rptr.2d
358, 875 P.2d 73.) As is evident from this summary, the
documents considered in Mangini were not the type of
legally operative documents featured here. Rather, they were
fundamentally informative documents, and the parties sought
judicial notice of the facts contained in the documents without
demonstrating the facts were not reasonably subject to
dispute. (Evid.Code, 452, subd. (h).) The other cases cited
by plaintiff, such as In re Noreen G. (2010) 181 Cal.App.4th
1359, 1389, footnote 13, 105 Cal.Rptr.3d 521 and **476
C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094,
11031104, 87 Cal.Rptr.3d 424, are not different. 6

[5] [6] Strictly speaking, a court takes judicial notice of

facts, not documents. (Evid.Code, 452, subds. (g), (h).)
When a court is asked to take judicial notice of a document,
the propriety of the court's action depends upon the nature of
the facts of which the court takes notice from the document.
As noted in Poseidon, for example, it was proper for the trial
court to take judicial notice of the dates, parties, and legally
operative language of a series of recorded documents, but it
would have been improper to take judicial notice of the truth
of various factual representations made in the documents.
(Poseidon, supra, 152 Cal.App.4th at pp. 11171118, 62
Cal.Rptr.3d 59; see similarly Herrera v. Deutsche Bank
National Trust Co. (2011) 196 Cal.App.4th 1366, 1375, 127
Cal.Rptr.3d 362 (Herrera ).) Taken together, the decisions
discussed above establish that a court may take judicial notice
of the fact of a document's recordation, the date the document
was recorded and executed, the parties to the transaction
reflected in a recorded document, and the document's legally
operative language, assuming there is no genuine dispute
regarding the document's authenticity. From this, the court
may deduce and rely upon the legal effect of the recorded
document, when that effect is clear from its face.
*266 Plaintiff concedes the trial court could take judicial
notice of recorded documents, but she argues the court
improperly took judicial notice of the truth of matters stated
in the documents, citing Mangini v. R.J. Reynolds Tobacco
Co. (1994) 7 Cal.4th 1057, 31 Cal.Rptr.2d 358, 875 P.2d
73 (Mangini ) (overruled on other grounds in In re Tobacco

One case cited by plaintiff, Abernathy Valley, Inc.

v. County of Solano (2009) 173 Cal.App.4th 42, 54,
footnote 6, 92 Cal.Rptr.3d 459, appears to differ with the
weight of California authority. That case declined to take
judicial notice of deeds, judgments, and indentures as
evidence of actual conveyances because such use would
require accepting the truth of the facts stated therein.
(Ibid.) Because its holding is stated in a conclusory
manner, the exact reasoning of the decision is unclear,
and we do not find it to be persuasive authority in this
context.

Despite her general objection, plaintiff contests the taking

of judicial notice of only one specific factthat MERS was
the beneficiary of the first deed of trust, which the court
noticed on the basis of MERS's designation as beneficiary
in the document. Contrary to plaintiff's argument, MERS's
status as beneficiary was not the type of fact that is generally
an improper subject of judicial notice under Mangini, since
its status was not a matter of fact existing apart from the
document itself. Rather, MERS was the beneficiary under the
deed of trust because, as a legally operative document, the
deed of trust designated MERS as the beneficiary. Given
this designation, MERS's status was not reasonably subject to
dispute. The other matters noticed by the trial court similarly
could be inferred from the text or legal effect of the documents
themselves, needing no outside confirmation. We find no
abuse of discretion.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

Just prior to argument, plaintiff forwarded the recently

published decision, Herrera, supra, 196 Cal.App.4th 1366,
127 Cal.Rptr.3d 362, in which the court reversed a grant of
summary judgment on the ground the trial court improperly
took judicial *267 notice of statements made within
recorded documents. (Id. at pp. 13751376, 127 Cal.Rptr.3d
362.) Herrera is not inconsistent with our decision. In
Herrera, the defendants sought judicial notice of the truth of
recited facts within the recorded documentsfor example,
that a particular party is the present beneficiary under
a particular deed of trust. (Id. at p. 1375, 127 Cal.Rptr.3d
362.) As the court noted, this is the type of statement found
in Poseidon to be ineligible for judicial notice. (Herrera, at p.
1375, 127 Cal.Rptr.3d 362.) In contrast, the facts of which the
trial court here took judicial notice arose from the legal effect
of the documents, rather than any statements of fact within
7

them. (Ibid.)
7

Herrera also found the trial court improperly took

judicial notice of the legal effect of an assignment of
a particular deed of trust, but the basis of its holding
was the lack of proof in the record that the party
making the assignment had the authority to do soin
other words, that the record did not contain evidence
of the entire chain of title of the mortgage. (Herrera,
supra, 196 Cal.App.4th at p. 1375, 127 Cal.Rptr.3d
362.) Because the original deed of trust demonstrating
MERS's authority is present in this appellate record, that
issue could not arise here.

2. Plaintiff's Claim
a. Background
Plaintiff's claim against MERS challenges an aspect of the
MERS System, a method devised by the mortgage banking
industry to facilitate the securitization of real property
debt instruments. As described in Mortgage Electronic
Registration Systems v. Nebraska Dept. of Banking &
Finance (2005) 270 Neb. 529, 704 N.W.2d 784, 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 **477 and mortgage servicing rights. The notes may
thereafter be transferred among members without requiring
recordation in the public records. (Id. at p. 785.)

Ordinarily, the owner of a promissory note secured by a deed

of trust is designated as the beneficiary of the deed of trust.
(11 Thompson on Real Property (2d ed. 1998) 94.02(b)
(7)(i), p. 346.) Under the MERS System, however, MERS
is designated as the beneficiary in deeds of trust, acting as
nominee for the lender, and granted the authority to exercise
legal rights of the lender. This aspect of the system has come
under attack in a number of state and federal decisions across
the country, under a variety of legal theories. The decisions
have generally, although by no means universally, found that
the use of MERS does not invalidate a foreclosure sale that
is otherwise substantively and procedurally proper.
*268 Our Courts of Appeal have only recently addressed
MERS's role, but both published decisions have come down
on the side of MERS. 8 In Gomes v. Countrywide Home
Loans, Inc. (2011) 192 Cal.App.4th 1149, 121 Cal.Rptr.3d
819 (Gomes ), the plaintiff sought to prevent foreclosure
on his home. He sued MERS, among others, alleging he
was unaware of the identity of the owner of his promissory
note, but believed the owner had not authorized MERS
to proceed with the foreclosure. The plaintiff sought to
enjoin foreclosure in the absence of proof that MERS
was authorized by the note's owner to proceed. (Id. at p.
1152, 121 Cal.Rptr.3d 819.) The court rejected the claim
on both procedural and substantive grounds. With respect
to the former, the court concluded the comprehensive
statutory framework regulating nonjudicial foreclosure,
Civil Code sections 2924 through 2924k, did not require the
agent of a beneficial owner, such as MERS, to demonstrate
that it was authorized by the owner before proceeding with
foreclosure, at least in the absence of a factual allegation
suggesting the agent lacked authority. (Gomes, at pp. 1155
1156, 121 Cal.Rptr.3d 819.) As the court reasoned, Civil
Code section 2924, subdivision (a)(1), which states that a
trustee, mortgagee, or beneficiary, or an agent of any of them,
may initiate foreclosure, does not include a requirement that
an agent demonstrate authorization by its principal. (Gomes,
at pp. 11551156, 121 Cal.Rptr.3d 819.) The court also found
no substantive basis for the challenge, noting, as here, the
plaintiff had agreed in the deed of trust that MERS could
proceed with foreclosure and nonjudicial sale in the event of
a default. Because the deed of trust did not require MERS
to provide further assurances of its authorization prior to
proceeding with foreclosure, the plaintiff was not entitled
to demand such assurances. (Id. at p. 1157, 121 Cal.Rptr.3d
819.)

2013 Thomson Reuters. No claim to original U.S. Government Works.

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

There are a large number of decisions from federal

district and bankruptcy courts in California addressing
claims based on MERS's role in residential foreclosures,
which have reached conflicting conclusions. (See, e.g.,
Sacchi v. Mortgage Electronic Registration Systems, Inc.
(C.D.Cal. June 24, 2011, No. CV 111658 AHM (CWx))
2011 WL 2533029, 2011 U.S.Dist. Lexis 68007; In re
Doble (Bankr.S.D.Cal. Apr. 14, 2011, No. 1011296
MM13) 2011 WL 1465559, 2011 Bankr.Lexis 1449;
Marks v. Green Tree Servicing (N.D.Cal. Oct. 27, 2010,
No. C 1003593 SI) 2010 WL 4347943, 2010 U.S.Dist.
Lexis 119979; Castillo v. Skoba (S.D.Cal. Oct. 8, 2010,
Case No. 10cv1838 BTM) 2010 WL 3986953, 2010
U.S.Dist. Lexis 108432; Ohlendorf v. American Home
Mortgage Servicing (E.D.Cal. Mar. 31, 2010, No. CIV.
S092081 LKK/EFB) 2010 U.S.Dist. Lexis 31098.)
Plaintiff does not cite, and we are unaware of, any federal
decision addressing precisely the issue raised here.

A different type of MERS challenge was addressed in

Ferguson v. Avelo Mortgage, **478 LLC (2011) 195
Cal.App.4th 1618, 126 Cal.Rptr.3d 586 (Ferguson ). The
Ferguson plaintiffs were tenants in a home sold at
a nonjudicial foreclosure sale. Originally, MERS was
designated as a nominee and beneficiary in the deed of
trust. On August 3, Quality Loan Service Corporation
(Quality) recorded a notice of default, although there was
no indication in the public record of Quality's authority to
act with respect to the property at the time. The defendant,
Avelo Mortgage, LLC (Avelo), had executed a substitution
of trustee designating Quality as trustee the prior day, *269
August 2, but that substitution was not recorded until months
later, on November 9. Further, at the time Avelo executed the
substitution, there was similarly no indication in the public
record of its authority to act. Only several weeks later, on
August 22, did MERS assign its interest under the deed of
trust to Avelo. Notice of the trustee's sale was delivered on
November 4 and recorded the same day as the substitution of
trustee designating Quality, November 9. The trustee's sale
occurred in July of the following year. (Id. at p. 1621, 126
Cal.Rptr.3d 586.)
Affirming the grant of a demurrer, the court initially
addressed the issue of tender, concluding that the plaintiffs
were required to allege tender of the amount due under
the note when bringing an action to void a nonjudicial
foreclosure sale. (Ferguson, supra, 195 Cal.App.4th at
p. 1624, 126 Cal.Rptr.3d 586.) It then turned to two
arguments concerning MERS's role: MERS lacked the power
to foreclose because it was not the holder of the underlying
promissory note, and the sale was invalid because the

foreclosing parties did not have authority to proceed as a

result of the irregularities in the documentation. Citing a
series of federal district court decisions, the court first held
that MERS was entitled to initiate foreclosure despite having
no ownership interest in the promissory note because it was
the beneficiary under the deed of trust. (Id. at pp. 1626
1627, 126 Cal.Rptr.3d 586.) Turning to the second issue, the
court agreed with the plaintiffs that the notice of default was
defective because Avelo lacked legal authority to execute
a substitution of trustee until it had been assigned MERS's
interest under the deed of trust. The court found the notice
of sale valid under Civil Code section 2934a, subdivision (b),
however, because the notice of sale was not recorded prior to
the substitution of trustee. (Ferguson, at p. 1628 & fn. 5, 126
Cal.Rptr.3d 586.) Given the three-month cure period between
the recording of the notice of default and notice of sale and the
long delay after the recordation of the substitution of trustee
before the sale was concluded, the court declined to invalidate
the foreclosure on the basis of the irregular documentation.
(Ibid.)

b. Plaintiff's Allegations
[7] With that background, we address plaintiff's claims.
Referring to the fact that the assignment of the deed of trust
purported to assign to HSBC both MERS's interest in the
deed of trust and the underlying note, plaintiff explains
the gravamen of [her] claim against MERS was that it
had wrongfully assigned the Note and Deed of Trust to
Defendant HSBC because MERS lacked the authority to
make an assignment of the underlying promissory note.
[8] [9] The complaint contains two allegations regarding
the MERS's purported lack of authority to assign the note.
First, the complaint alleges defendants bear the burden of
proving a proper assignment occurred, and *270 they
lack evidence sufficient to prove a valid assignment. As so
stated, the claim fails because MERS did not bear the burden
of **479 proving a valid assignment. The nonjudicial
foreclosure statutes are a comprehensive scheme designed
(1) to provide the creditor/ beneficiary with a quick,
inexpensive and efficient remedy against a defaulting debtor/
trustor; (2) to protect the debtor/trustor from wrongful loss of
the property; and (3) to ensure 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,
30 Cal.Rptr.2d 777.) As a result, a nonjudicial foreclosure
sale is presumed to have been conducted regularly, and the

2013 Thomson Reuters. No claim to original U.S. Government Works.

10

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

burden of proof rests with the party attempting to rebut this

presumption. (Melendrez v. D & I Investment, Inc. (2005)
127 Cal.App.4th 1238, 1258, 26 Cal.Rptr.3d 413 [It is the
burden of the party challenging the trustee's sale to prove such
irregularity and thereby overcome the presumption of the
sale's regularity]; Knapp v. Doherty (2004) 123 Cal.App.4th
76, 86, fn. 4, 20 Cal.Rptr.3d 1; Wolfe v. Lipsy (1985) 163
Cal.App.3d 633, 639, 209 Cal.Rptr. 801, disapproved on
other grounds in Droeger v. Friedman, Sloan & Ross (1991)
54 Cal.3d 26, 36, 283 Cal.Rptr. 584, 812 P.2d 931.) Given the
presumption of regularity, if plaintiff contended the sale was
invalid because HSBC had no authority to conduct the sale,
the burden rested with plaintiff affirmatively to plead facts
demonstrating the impropriety.
In contending the burden rested with MERS to demonstrate
a valid assignment, plaintiff cites such cases as Neptune
Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233,
240 Cal.Rptr. 117, which stands for the general principle that
the party asserting a right under an assigned instrument bears
the burden of demonstrating the assignment. (Id. at p. 1242,
240 Cal.Rptr. 117.) While this may be a correct statement of
law in an action to collect on an assigned debt, such actions
are not subject to the presumption of regularity afforded the
nonjudicial foreclosure process. As a result, these decisions
are not persuasive authority in this context.

[existence and extent of agent's duties are determined by the

agreement between agent and principal]; Civ.Code, 2315
[agent has such authority as principal confers upon agent].)
Accordingly, the allegation that MERS was merely a nominee
is insufficient to demonstrate that MERS lacked authority
**480 to make a valid assignment of the note on behalf of
the original lender. 9
9

Plaintiff cites no authority suggesting the lender was

legally precluded from granting MERS the authority,
acting as its agent, to assign the lender's interest in
the note, and we aware of none. In general terms, an
agent can be authorized to do any act the principal
may do. (Civ.Code, 2304, 2305; Heiman v. Workers'
Compensation Appeals Board (2007) 149 Cal.App.4th
724, 738, 57 Cal.Rptr.3d 56; Preis v. American
Indemnity Co. (1990) 220 Cal.App.3d 752, 761, 269
Cal.Rptr. 617.)

[13] [14] Plaintiff also argues any purported assignment

by MERS was invalid under the common law of secured
transactions. Her argument rests on the general principle that
because the security for a debt is a mere incident of the
debt or obligation which it is given to secure (Hayward
Lbr. & Inv. Co. v. Naslund (1932) 125 Cal.App. 34, 39, 13
P.2d 775), the assignment of an interest in the security for
a debt is a nullity in the absence of an assignment of the
debt itself. (E.g., Kelley v. Upshaw (1952) 39 Cal.2d 179,
[10]
[11]
[12] Second, the complaint alleges MERS 192, 246 P.2d 23; 4 Witkin, Summary of Cal. Law (10th ed.
lacked the authority to assign the note because it was merely a
2005) Security Transactions in Real Property, 105, p. 899.)
nominee of the lender and had no interest in the note. Contrary
The assignment of the deed of trust, however, expressly
to plaintiff's claim, the lack of a possessory interest in the note
stated that MERS assigned its interest in the deed of trust
did not necessarily prevent MERS from having the authority
[t]ogether with the note or notes therein described or referred
to assign the note. While it is true MERS had no power in its
to. 10 Accordingly, to plead a claim on this ground plaintiff
own right to assign the note, since it had no interest in the note
was required to allege this assignment to HSBC was invalid.
to assign, MERS did not purport to act for its own interests
Because, as discussed above, plaintiff failed adequately to
in assigning the note. Rather, the assignment of deed of trust
plead such invalidity, she failed to state a cause of action for
states that MERS was acting as nominee for the lender, which
wrongful foreclosure on the ground HSBC did not receive an
did possess an assignable interest. A nominee is a person or
assignment of both the note and its security.
entity designated to act for another in a limited rolein effect,
an agent. (Born v. Koop (1962) 200 Cal.App.2d 519, 528, 19
10
Although the complaint contained an allegation that
Cal.Rptr. 379; Cisco v. Van Lew (1943) 60 Cal.App.2d 575,
MERS assigned an interest in the deed of trust alone,
583584, 141 P.2d 433.) The extent of MERS's authority as a
the trial court was entitled to take judicial notice of the
nominee was defined by its agency agreement with the lender,
assignment of deed of trust and rely on it in disregarding
and *271 whether MERS had the authority to assign the
the contradictory allegation in the complaint. (Poseidon,
lender's interest in the note must be determined by reference
supra, 152 Cal.App.4th at p. 1117, 62 Cal.Rptr.3d 59.)
to that agreement. (See, e.g., Van't Rood v. County of Santa
[15] There is a further, overriding basis for rejecting a
Clara (2003) 113 Cal.App.4th 549, 571, 6 Cal.Rptr.3d 746
claim based solely on the alleged invalidity of the MERS
[agency typically arises by express agreement]; Anderson
assignment. Plaintiff's cause of action ultimately seeks to
v. Badger (1948) 84 Cal.App.2d 736, 743, 191 P.2d 768
demonstrate that the nonjudicial foreclosure sale was invalid

2013 Thomson Reuters. No claim to original U.S. Government Works.

11

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

because HSBC lacked authority to foreclose, never having

received a proper assignment of the debt. In order to allege
such a claim, it was not enough for plaintiff to allege that
MERS's purported assignment of the note in the assignment
of deed of trust was ineffective. Instead, plaintiff was
*272 required to allege that HSBC did not receive a
valid assignment of the debt in any manner. Plaintiff rests
her argument on the documents in the public record, but
assignments of debt, as opposed to assignments of the security
interest incident to the debt, are commonly not recorded. The
lender could readily have assigned the promissory note to
HSBC in an unrecorded document that was not disclosed to
plaintiff. 11 To state a claim, plaintiff was required to allege
not only that the purported MERS assignment was invalid,
but also that HSBC did not receive an assignment of the debt
in any other manner. There is no such allegation.
11

The first deed of trust states: The Note or a

partial interest in the Note (together with this Security
Instrument) can be sold one or more times without prior
notice to Borrower. A sale might result in a change in the
entity ... that collects Periodic Payments due under the
Note and this Security Instrument....

We also note a plaintiff in a suit for wrongful foreclosure

has generally been required to demonstrate the alleged
imperfection in the foreclosure process was prejudicial
to the plaintiff's interests. **481 (Melendrez v. D & I
Investment, Inc., supra, 127 Cal.App.4th at p. 1258, 26
Cal.Rptr.3d 413; Knapp v. Doherty, supra, 123 Cal.App.4th
at p. 86, fn. 4, 20 Cal.Rptr.3d 1 [A nonjudicial foreclosure
sale is presumed to have been conducted regularly and
fairly; one attacking the sale must overcome this common
law presumption by pleading and proving an improper
procedure and the resulting prejudice ], italics added;
Lo v. Jensen (2001) 88 Cal.App.4th 1093, 10971098,
106 Cal.Rptr.2d 443 [collusion resulted in inadequate sale
price]; Angell v. Superior Court (1999) 73 Cal.App.4th 691,
700, 86 Cal.Rptr.2d 657 [failure to comply with procedural
requirements must cause prejudice to plaintiff].) Prejudice is
not presumed from mere irregularities in the process. (Meux
v. Trezevant (1901) 132 Cal. 487, 490, 64 P. 848.) Even if
MERS lacked authority to transfer the note, it is difficult to
conceive how plaintiff was prejudiced by MERS's purported
assignment, and there is no allegation to this effect. Because
a promissory note is a negotiable instrument, a borrower must
anticipate it can and might be transferred to another creditor.
As to plaintiff, an assignment merely substituted one creditor
for another, without changing her obligations under the note.
Plaintiff effectively concedes she was in default, and she

does not allege that the transfer to HSBC interfered in any

manner with her payment of the note (see, e.g., Munger v.
Moore (1970) 11 Cal.App.3d 1, 78, 89 Cal.Rptr. 323 [failure
by lender to accept timely tender] ), nor that the original
lender would have refrained from foreclosure under the
circumstances presented. If MERS indeed lacked authority to
make the assignment, the true victim was not plaintiff but the
original lender, which would have suffered the unauthorized
loss of a $1 million promissory note.
[16]
[17] Finally, plaintiff contends the deed of trust
was ambiguous because it designated MERS as both the
nominee for the beneficiary and as the *273
beneficiary. An entity cannot be, plaintiff argues, both an
agent and a principal. The record does not support the claimed
ambiguity. Contrary to plaintiff's assertion, the deed of trust
did not designate MERS as both beneficiary of the deed of
trust and nominee for the beneficiary; rather, it states that
MERS is the beneficiary, acting as a nominee for the lender.
There is nothing inconsistent in MERS's being designated
both as the beneficiary and as a nominee, i.e., agent, for the
lender. The legal implication of the designation is that MERS
may exercise the rights and obligations of a beneficiary of
the deed of trust, a role ordinarily afforded the lender, but it
will exercise those rights and obligations only as an agent for
the lender, not for its own interests. Other statements in the
deed of trust regarding the role of MERS are consistent with
this interpretation, and there is nothing ambiguous or unusual
about the legal arrangement. Plaintiff's argument appears to
be premised on the unstated assumption that only the owner
of the promissory note can be designated as the beneficiary
of a deed of trust, but she cites no legal authority to support
that premise. 12
12

In her reply brief, plaintiff also contends MERS failed to

demonstrate it had the authority to foreclose because it
did not show the foreclosure was necessary to comply
with law or custom, as provided in the deed of trust.
Because this argument was not raised in the opening
brief, it was waived. (E.g., Chicago Title Ins. Co. v. AMZ
Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 427428,
115 Cal.Rptr.3d 707.)

B. The Claim Against Wells Fargo

Plaintiff contends the trial court erred in sustaining Wells
Fargo's demurrer because she adequately alleged either a
claim for wrongful foreclosure, based on Wells **482
Fargo's refusal to accept performance under the forbearance
agreement as amended by the March letter, or a claim for

2013 Thomson Reuters. No claim to original U.S. Government Works.

12

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253
governing amendment after the close of pleadings, rather
than section 472a. Further, we find no useful parallel
in the very different condition, submission to discovery,
attached to amendment in Armenta.

promissory estoppel. The trial court declined to consider the

allegations regarding the March letter because plaintiff did
not attach a copy of the letter to the complaint.
[18] Plaintiff argues that under the ordinary rules of
pleading, she was entitled to plead the legal effect of the
March letter without attaching a copy to the complaint. (E.g.,
Construction Protective Services, Inc. v. TIG Specialty Ins.
Co. (2002) 29 Cal.4th 189, 198199, 126 Cal.Rptr.2d 908,
57 P.3d 372.) While this is true as a general principle, the
argument fails to take account of the trial court's ruling on
the demurrer to the third amended complaint, which expressly
granted plaintiff leave to amend on condition she attach a
copy of the forbearance agreement to the amended pleading.
Because a trial court is entitled to grant leave to amend upon
any terms as may be just (Code Civ. Proc., 472a, subd.
(c)), the ordinary rules of pleading did not apply in these
circumstances.
Whether to grant leave to amend under Code of Civil
Procedure, section 472a is entrusted to the sound discretion of
the trial court, and we *274 review the trial court's decision
for abuse of discretion. (CAMSI IV v. Hunter Technology
Corp. (1991) 230 Cal.App.3d 1525, 1538, 282 Cal.Rptr. 80.)
While plaintiff argues the trial court was without power to
impose a higher pleading standard, we find no abuse of
discretion in the trial court's conditioning leave to amend
on attachment of the forbearance agreement. Plaintiff had
already filed three versions of the complaint at the time
the trial court entered its order, each one unsuccessful in
stating a cause of action. Despite the obvious nature of a
claim for breach of a forbearance agreement, it was not until
the third iteration that plaintiff suggested the possibility of
such a cause of action. Under those circumstances, the trial
court was justified in requiring plaintiff to attach a copy of
the agreement, thereby allowing the legal adequacy of the
purported agreement to be tested on demurrer and avoiding
further delay and unnecessary motion practice. The ruling
placed little burden on plaintiff, since she presumably had
access to the written agreement on which she purported to
premise her claim. 13
13

Plaintiff relies on Armenta ex rel. City of Burbank v.

Mueller Co. (2006) 142 Cal.App.4th 636, 47 Cal.Rptr.3d
832, which held it an abuse of discretion for the trial
court to permit the addition of new plaintiffs only on
condition the new parties respond to discovery. (Id. at
p. 642, 47 Cal.Rptr.3d 832.) Armenta was decided under
Code of Civil Procedure section 473, subdivision (a),

Plaintiff also argues the court's order sustaining the demurrer

to the third amended complaint did not require her to
attach a copy of the March letter because it called only for
attachment of the forbearance agreement. By claiming the
March letter constituted a written amendment to the terms
of the forbearance agreement, however, plaintiff effectively
made it a part of the forbearance agreement. Further, because
plaintiff conceded she did not comply with the terms of the
forbearance agreement itself, attaching only that document
served little purpose. The trial court did not abuse its
discretion in concluding its order requiring attachment of the
forbearance agreement included any written amendments on
which plaintiff intended to rely.
[19]
[20]
[21]
[22] Plaintiff argues she should have
been granted leave to amend, presumably **483 to attach
a copy of the March letter. In deciding whether the trial
court abused its discretion in denying leave to amend, 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. [Citation.] (Schifando v. City of Los
Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457,
79 P.3d 569.) We find no abuse because, notwithstanding
the allegations of the complaint and her present argument,
plaintiff provided the trial court with no reason to *275
believe the March letter constituted an amendment to the
forbearance agreement. To do so, it was necessary only
for plaintiff to submit a copy of the March letter with her
opposition to Wells Fargo's demurrer, thereby permitting the
court to evaluate the text of the purported amendment and
determine whether it could possibly provide a foundation for
her allegations. By declining to submit a copy to the trial
court, plaintiff failed in carrying her burden to demonstrate a
reasonable possibility she could cure the defect in her cause
of action. 14
14

Plaintiff could even have provided a copy of the March

letter to this court. A showing that the complaint can be
amended to state a cause of action need not be made in
the trial court so long as it is made to the reviewing court.
(Kong v. City of Hawaiian Gardens Redevelopment

2013 Thomson Reuters. No claim to original U.S. Government Works.

13

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (2011)

129 Cal.Rptr.3d 467, 11 Cal. Daily Op. Serv. 10,304, 2011 Daily Journal D.A.R. 12,253

state a claim for promissory estoppel when the promise was

given in return for proper consideration. The claim instead
must be pleaded as one for breach of the bargained-for
contract. (Raedeke v. Gibraltar Savings & Loan Assn. (1974)
10 Cal.3d 665, 672673, 111 Cal.Rptr. 693, 517 P.2d 1157;
see Garcia v. World Savings, FSB (2010) 183 Cal.App.4th
[23] [24] [25] [26] [27] Finally, plaintiff contends she
1031, 10401041, 107 Cal.Rptr.3d 683 [promissory estoppel
adequately pleaded a claim for promissory estoppel, based
appropriate only where no consideration for promise].) Here,
on an alleged promise by Wells Fargo not to foreclose. In
the only alleged promise not to foreclose is contained in the
California, under the doctrine of promissory estoppel, A
forbearance agreement. Because Wells Fargo's promise not to
promise which the promisor should reasonably expect to
foreclose in the forbearance agreement was given for proper
induce action or forbearance on the part of the promisee or a
consideration, in the form of plaintiff's agreement **484
third person and which does induce such action or forbearance
to resume making payments on the promissory note, the
is binding if injustice can be avoided only by enforcement
complaint cannot state a claim for promissory estoppel.
of the promise.... [Citations.] Promissory estoppel is a
Agency (2002) 108 Cal.App.4th 1028, 10411042, 134
Cal.Rptr.2d 260.) Because no copy has been presented,
we have no more basis than the trial court for finding a
reasonable possibility plaintiff can state a viable cause of
action.

doctrine which employs equitable principles to satisfy the

requirement that consideration must be given in exchange for
the promise sought to be enforced. (Kajima/Ray Wilson v.
Los Angeles County Metropolitan Transportation Authority
(2000) 23 Cal.4th 305, 310, 96 Cal.Rptr.2d 747, 1 P.3d
63.) The purpose of this doctrine is to make a promise
binding, under certain circumstances, without consideration
in the usual sense of something bargained for and given in
exchange. If the promisee's performance was requested at the
time the promisor made his promise and that performance
was bargained for, the doctrine is inapplicable. (Youngman
v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 249, 74
Cal.Rptr. 398, 449 P.2d 462.) Accordingly, a plaintiff cannot
End of Document

*276 III. DISPOSITION

The judgment of the trial court is affirmed.

We concur: MARCHIANO, P.J., and BANKE, J.

Parallel Citations
198 Cal.App.4th 256, 11 Cal. Daily Op. Serv. 10,304, 2011
Daily Journal D.A.R. 12,253

2013 Thomson Reuters. No claim to original U.S. Government Works.

2013 Thomson Reuters. No claim to original U.S. Government Works.

14

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

501 B.R. 369

In reCheryl Sandri, Debtor.
Cheryl Sandri, Plaintiff,
v.
Capital One, N.A.; U.S. Bank, as Trustee for Chevy Chase Mortgage Funding LLC MortgageBacked
Certificates, Series 20061 Trust; T.D. Service Company; Quality Loan Service Corp.; and Mortgage
Electronic Registration Systems, Inc., Defendants.
Bankruptcy Case No. 1231854DM
Adversary Proceeding No. 133165DM
United States Bankruptcy Court, N.D. California.
Filed: 11/04/2013
Entered: 11/05/2013

James S. Knopf, Law Offices of James S. Knopf, San

Mateo, CA, Michael J. Yesk, Law Offices of Michael
J. Yesk, Pleasant Hill, CA, for Debtor.
Brisa C. Ramirez, David Burchard Chapter 13
Trustee Ofc., Foster City, CA, for Trustee.
Chapter 13MEMORANDUM DECISION ON
THE MOTION OF CAPITAL ONE AND MERS
TO DISMISS ADVERSARY PROCEEDING
UNDER RULE 7012
DENNIS MONTALI, U.S. Bankruptcy Judge
On August 30, 2013, the court held a hearing on
the motion of Capital One, N.A. (Capital One),
U.S. Bank, as Trustee for Chevy Chase Mortgage
Funding LLC MortgageBacked Certificates, Series
20061 Trust (U.S. Bank), and Mortgage
Electronic Registration Systems, Inc. (MERS)
(collectively, Defendants) to dismiss the adversary
complaint (MTD) filed against them by plaintiff
Cheryl Sandri (Debtor). The parties each filed
supplemental briefs on September 9, 2013, and the
court took the MTD under advisement. For the
reasons set forth below, the court is GRANTING the
MTD.1
[501 B.R. 371]
I. BACKGROUND2
To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its
face. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129
S.Ct. 1937, 173 L.Ed.2d 868 (2009) ( quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct.
1955, 167 L.Ed.2d 929 (2007)). When deciding a
motion to dismiss, the court considers only
allegations contained in the pleadings, exhibits

attached to the complaint, and matters properly

subject to judicial notice. Swartz v. KPMG LLP, 476
F.3d 756, 763 (9th Cir.2007) (per curiam).
Even though the court may not consider any
material outside of the pleadings when ruling on a
Rule 12(b)(6) motion, two exceptions exist. Lee v.
City of Los Angeles, 250 F.3d 668, 688 (9th
Cir.2001). First, the court may consider material that
a plaintiff properly submits as part of the complaint
or, even if not physically attached to the complaint,
material that is not contested as to authenticity and
that is necessarily relied upon by the plaintiff's
complaint. Id. Second, under Federal Rule of
Evidence 201, the court may take judicial notice of
matters of public record. Id. at 689. Here, the court is
considering the allegations of the complaint, the
documents referenced in the complaint (although not
attached), and documents filed by Debtor in her main
bankruptcy case. Pursuant to Federal Rule of
Evidence 201, the court takes judicial notice of
Debtor's bankruptcy filings as these are matters of
public record.
Debtor has asserted five causes of action in her
complaint: (1) Slander of Title; (2) Wrongful
Foreclosure; (3) Express and Implied Breach of
Agreement; (4) Violation of California Civil Code
2923.5; and (5) Violation of the Unfair Business
Practices Act ( [Cal. Bus. & Prof.Code] 17200).
With the exception of the fourth cause of action, all
of the claims arise out of the securitization of her
note and deed of trust.
In December 2005, Debtor executed a
promissory note (Note) in favor of Chevy Chase
Bank, F.S.B. (Chevy Chase). To secure repayment
of the Note, Debtor also executed a first priority deed
of trust (DOT) against property located in
Redwood City, California (the Property) in favor of
Chevy Chase. Chevy Chase was identified as the
Lender and Trustee, and MERS was identified as the

-1-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

beneficiary and nominee for the lender and lender's

successors and assigns. See paragraphs 67 of the
complaint; see also Debtor's
[501 B.R. 372]
Motion to Value Security and Avoid Lien and to
Declare Lien as Wholly Unsecured (with
accompanying memorandum of points and
authorities, Debtor's supporting declaration and
exhibits) filed by Debtor in her main case (1231854)
(collectively referred to as the Lien Strip Motion)
on August 21, 2012 at Docket Nos. 18, 181, 182
and 183. In her declaration in support of the Lien
Strip Motion, Debtor stated that as of the petition
date, the balance due on the Note was approximately
$346,875.
The DOT expressly provides that Debtor
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, releasing and canceling this Security
Instrument. See DOT at page 3 (Docket No. 183 in
Debtor's main case). In addition, the DOT provides:
The Note or a partial interest in the Note
(together with this Security Instrument) can be sold
one or more times without prior notice to Borrower.
A sale might result in a change in the entity (known
as the Loan Servicer) that collects Periodic
Payments due under the Note and this Security
Instrument and performs other mortgage loan
servicing obligations under the Note, this Security
Instrument, and Applicable Law. There also might be
one or more changes of the Loan Servicer unrelated
to a sale of the Note. If there is a change of the Loan
Servicer, Borrower will be given written notice of the
change which will state the name and address of the
new Loan Servicer, the address to which payments
should be made and any other information RESPA
requires in connection with a notice of transfer of
servicing. If the Note is sold and thereafter the Loan
is serviced by a Loan Servicer other than the
purchaser of the Note, the mortgage loan servicing
obligations to Borrower will remain with the Loan
Servicer or be transferred to a successor Loan
Servicer and are not assumed by the Note purchaser
unless otherwise provided by the Note purchaser.
Seeid. at page 11 (paragraph 20).

In paragraph 7 of the complaint, Debtor alleges

that in 2006 Chevy Chase bundled and sold her
mortgage (which became securitized pursuant to a
pooling and service agreement (PSA)) to Chevy
Chase Mortgage Funding LLC MortgageBacked
Certificates, Series 20061 Trust (CCFM 20061
Trust), with U.S. Bank acting as Trustee.3 The
closing date of the PSA was March 17, 2007. See
paragraph 23 of the complaint. Debtor also alleges in
paragraph 8 that in 2008, she entered into a mortgage
loan modification with Chevy Chase and MERS.
Debtor admits in paragraph 9 of the complaint that in
September 2010, Chevy Chase fully merged with
Capital One Bank and ceased conducting business
under the name Chevy Chase.
[501 B.R. 373]
Debtor alleges in paragraph 12 of the complaint
that on September 13, 2011, an assignment of her
DOT was recorded; through this assignment, MERS
purports to transfer the beneficial interest in
Plaintiff's Deed of Trust to Capital One. Debtor
avers that the assignment was signed by Charity
Henson as an Assistant Secretary of MERS. On the
same day, a notice of default was recorded. On
October 11, 2011, Capital One recorded a
Substitution of Trustee, naming T.D. Service as the
trustee. Charity Henson signed that substitution as a
vice president of Capital One. See paragraphs 1213
of the complaint.
Debtor does not dispute her liability under the
Note and DOT. Instead, she alleges in the complaint
that Capital One and its trustee (now Quality Loan
Services Corporation) or assignees cannot enforce the
Note and DOT, because (1) MERS did not have the
legal right to assign or transfer any interest in the
DOT, (2) Charity Henson was a robo-signer without
authority to sign documents on behalf of MERS; (3)
any assignment occurring after the closing date of the
PSA (March 17, 2007) is invalid. See paragraphs 18
32 of the complaint.
No foreclosure sale has occurred, although an
unrescinded notice of default was recorded on June 7,
2012. See paragraph 15 of the Complaint. Debtor
filed her chapter 13 case fifteen days later.
II. DISCUSSION
Approximately three weeks prior to the hearing
on the MTD the Bankruptcy Appellate Panel for the

-2-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

Ninth Circuit (BAP) and the California Court of

Appeals for the Fifth District issued two cases
involving similar facts and claims, but reaching
disparate conclusions. In Nordeen v. Bank of
America, N.A. (In re Nordeen), 495 B.R. 468 (9th
Cir. BAP2013), BAP affirmed the dismissal of an
action for monetary and declaratory relief, holding
that the securitization of a deed of trust loan did not
in any way alter or affect standing to enforce the deed
of trust, and that debtors did not state a plausible
cause of action for misleading communications
regarding the identity of the note holder and deed of
trust beneficiary/trustee. In contrast, in Glaski v.
Bank of America, 218 Cal.App.4th 1079, 160
Cal.Rptr.3d 449 (Cal.App. 5th Dist.2013), the court
held that borrowers have standing to challenge
foreclosure on the basis that assignments of loan
were void, as they occurred after the closing date of
the securitized trust agreement to which borrowers
were not the parties.
At the hearing on the MTD, the court directed
the parties to provide supplemental briefing regarding
these two cases (neither of which is binding on the
court). Having considered both supplemental briefs
and other case law regarding the standing of
borrowers to assert claims arising out of
securitizations (including other California Court of
Appeals decisions rejecting claims similar to those of
Debtor), the court does not believe that Debtor has
stated any cognizable claim arising from the
securitization and assignments of the Note and DOT.
The court will address each of Debtor's arguments in
turn.
A. The Purported RoboSigning Does Not Give
Rise to a Claim For Relief
Debtor contends that Charity Henson is a robosigner who was not authorized to act on behalf of
MERS,4 but this
[501 B.R. 374]
contention does not give rise to a claim of fraud
where borrowers (like the Debtor here) do not dispute
that they defaulted on the loan. As to the robo-signer
allegations, there does not appear to be anything
about robo-signing the notice of default or the
notice of substitution that makes them invalid or
ineffective. Even if true, robo-signing does not have
any bearing on the validity of the foreclosure process
here. Elliott v. Mortgage Electronic Registration
Systems, Inc., 2013 WL 1820904 at *2 (N.D.Cal.
Apr. 30, 2013), citing Orzoff v. Bank of America,

N.A., 2011 WL 1539897 at *23 (D.Nev. Apr. 22,

2011) (holding that plaintiff failed to state a claim
that trustee breached its duty by robosigning
documents related to loan where plaintiff did not
dispute that she defaulted on her mortgage or that she
received required notices); Bucy v. Aurora Loan
Servs., LLC, 2011 WL 1044045 at *6 (S.D.Ohio Mar.
18, 2011) (plaintiff failed to state a claim for fraud
based on purported robo-signing where Plaintiff
d[id] not dispute the accuracy of any of the salient
facts, such as the amount owed or the amount in
default.). Debtor here does not dispute that she is in
default.
B. Debtor Cannot Assert a Claim for Breach of the
PSA
Debtor relies on Glaski in asserting that any
assignment of the Note that occurred after the closing
date of the PSA is ineffective and thus Defendants
cannot enforce the Note and DOT. The court
disagrees, as Glaski is inconsistent with the majority
line of cases and is based on a questionable analysis
of New York trust law.
1. The Weight of Authority is Against Glaski
While Glaski allowed a borrower to challenge
foreclosure on the basis that a securitized mortgage
trustee's attempt to accept the loan after a trust's
closing date was void under New York law (the law
governing the pooling and servicing agreement), it is
an outlier. A majority of district courts in California
have held that borrowers do not have standing to
challenge the assignment of a loan because borrowers
are not party to the assignment agreement. SeePatel
v. Mortgage Electronic Registration Systems, Inc.,
2013 WL 4029277 (N.D.Cal. Aug. 6, 2013) ([T]he
securitization process did not break the chain of title;
MERs [sic] does have authority to assign the DOT ...;
Plaintiffs have failed to plead breach of the DOT and
do not have standing to assert a breach of any PSA;
and the robo-signing allegations have not been
properly pled.) (emphasis added); Aniel v. GMAC
Mortg., LLC, 2012 WL 5389706 at *4 (N.D.Cal.
Nov. 2, 2012) (plaintiffs lacked standing to challenge
assignment of deed of trust
[501 B.R. 375]
based on noncompliance with pooling and service
agreements); Ganesan v. GMAC Mortgage, LLC,
2012 WL 4901440 at *4 (N.D.Cal. Oct. 15, 2012)
(citing cases) ([T]o the extent Plaintiff bases her
claim on the theory that Defendants allegedly failed

-3-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

to comply with the terms of a Pooling and Servicing

Agreement, the Court notes that she lacks standing to
do so because she is neither a party to, nor a third
party beneficiary of, that agreement.); see
alsoGilbert v. Chase Home Fin., LLC, 2013 WL
2318890 at *3 (E.D.Cal. May 28, 2013) (listing
numerous federal district cases holding that
borrowers lack standing to challenge their liability
under a note and security instrument by alleging that
the assignment of such instruments did not comply
with a PSA).5
More importantly, other California Courts of
Appeal have rejected claims similar to those asserted
in Glaski and by Debtor here. See, e.g.Siliga v.
Mortgage Electronic Registration Systems, Inc., 219
Cal.App.4th 75, 161 Cal.Rptr.3d 500 (Cal. App.2d
Cir.2013) (decided on August 27, 2013) (borrowers
lacked standing to complain about loan servicer's and
assignee's alleged lack of authority to foreclose on
deed of trust where borrowers were in default under
the note, absent evidence that the original lender
would have refrained from foreclosure); Jenkins v. JP
Morgan Chase Bank, N.A., 216 Cal.App.4th 497, 156
Cal.Rptr.3d 912 (Cal.App.4th Dist.2013) (borrower
does not have the right to bring a preemptive judicial
action to determine defendants' standing to foreclose;
foreclosing party need not have beneficial interest in
promissory note and deed of trust); Fontenot v. Wells
Fargo Bank, N.A., 198 Cal.App.4th 256, 272, 129
Cal.Rptr.3d 467 (1st Dist.2011) (to recover on
wrongful foreclosure claim, borrower must
demonstrate that the alleged imperfection in the
foreclosure process was prejudicial; no prejudice
exists where borrower was in default and the
assignment of the loan did not interfere with the
borrower's ability to pay).

agreement is void under New York state law and thus

subject to challenge by non-parties.
New York intermediate appellate courts have
repeatedly and consistently found
[501 B.R. 376]
that an act in violation of a trust agreement is
voidable, not void. SeeMooney v. Madden, 193
A.D.2d 933, 597 N.Y.S.2d 775, 776 (1993); Leasing
Serv. Corp. v. Vita Italian Rest., Inc., 171 A.D.2d
926, 927, 566 N.Y.S.2d 796, 797 (1991); Hine v.
Huntington, 118 A.D. 585, 592, 103 N.Y.S. 535, 540
(1907); In re Levy, 69 A.D.3d 630, 632, 893
N.Y.S.2d 142, 144 (2010). In rejecting claims similar
to those asserted here and in Glaski, the court in
Calderon v. Bank of Am. N.A., 941 F.Supp.2d 753,
75556, 2013 WL 1741951 at *11 (W.D.Tex. Apr.
23, 2013), applied New York trust law:
Even assuming, as Plaintiffs insist, that New
York law governs interpretation of the PSA, and
assuming that the transfer of Plaintiffs' loan to the
Trust violated the terms of the PSA, that after-thedeadline transaction would merely be voidable at the
election of one or more of the partiesnot void.
Accordingly, Plaintiffs, who were not parties to the
PSA, do not have standing to challenge it. [E]ven if it
is true that the Note was transferred to the Trust in
violation of the PSA, that transaction could be
ratified by the beneficiaries of the Trust and is merely
voidable.
Calderon, 941 F.Supp.2d at 76667, 2013 WL
1741951 at **1011 (emphasis added) (analyzing
New York statutory and case law on trusts).

2. Glaski's Reasoning is Not Persuasive

In determining that the borrower had standing to
challenge the validity of assignments that occurred
after a trust document's closing date, the Glaski court
held that under New York law, a transfer made in
violation of the terms of the trust document was void,
not voidable. The Glaski court acknowledged that
under California law, a third party and particularly
the obligor cannot successfully challenge the
validity or effectiveness of the transfer when the
assignment is merely voidable, not void. Glaski, 218
Cal.App.4th at 1094, 160 Cal.Rptr.3d 449. This court
agrees. This court, however, does not agree with the
next prong of the Glaski analysis: that an assignment
violating the trust agreement or pooling service

The Glaski court cited only two cases in support

of its determination that acts by a trustee in
contravention of a trust were void. The first, Wells
Fargo Bank, N.A. v. Erobobo, 39 Misc.3d 1220(A),
972 N.Y.S.2d 147 (N.Y.Sup.Ct.2013), was issued by
a New York trial court. Its reasoning and holding has
been called into doubt. SeeKoufos v. U.S. Bank,
N.A.,939 F.Supp.2d 40 (D.Mass.2013); Orellana v.
Deutsche Bank Nat. Trust Co., 2013 WL 5348596
(D. Mass. Aug. 30, 2013). The second is an
unpublished opinion by the Bankruptcy Court for the
Southern District of Texas that relies on Erobobo and
that is inconsistent with a district court decision from
that district issued just days earlier. In re Saldivar,
2013 WL 2452699, at *4 (Bankr.S.D. Tex. June 5,

-4-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

2013) (transfer was void); compare toSigaran v. U.S.

Bank Nat. Ass'n, 2013 WL 2368336 at *3 (S.D.Tex.
May 29, 2013) (holding that assignments made after
the Trust's closing date are voidable, rather than
void).
3. PostGlaski Authority is Persuasive
In Dick v. Am. Home Mortg. Servicing, Inc.,
2013 WL 5299180 at *45 (E.D.Cal. Sept. 18, 2013),
the plaintiffs relied on Glaski to challenge a DOT
assignment as void. Observing that a majority of
California courts have held that borrowers do not
have standing to challenge the assignment of a loan
because borrowers are not party to the assignment
agreement, the Dick court noted that it did not even
have to reach the issue because the plaintiffs could
not establish prejudice. [A] plaintiff in a suit for
wrongful foreclosure has generally been required to
demonstrate the alleged imperfection in the
foreclosure process was prejudicial to the plaintiff's
interests. Id. (citation omitted). California courts
find a lack of prejudice when a borrower is in default
and cannot show that the allegedly improper
assignment interfered with the borrower's ability to
pay or that the original lender would not have
foreclosed under the circumstances. Id. at *3
(emphasis added).
Debtor here was in default when the notice of
default was recorded; no notice of sale has been
recorded and no foreclosure sale has occurred.
Shortly after the notice of default was recorded,
Debtor filed her chapter 13 petition. Debtor resolved
Capitol One's motion for relief from stay by entering
into an adequate protection stipulation, by which she
[501 B.R. 377]
agreed to cure her nonpayment of at least seven postpetition monthly payments. Debtor obtained an order
valuing the junior lien on the Property at zero,
asserting that the amount she owed on this note and
DOT exceeded the value of the property. Under these
circumstances, she cannot show that the assignment
of the note or DOT after the effective date of the PSA
interfered with her ability to pay or that the original
lender would not have foreclosed. She therefore
cannot show prejudice from the purportedly defective
assignments.
4. Nordeen is Persuasive
While Nordeen involved mortgage instruments
governed by Nevada law, its analysis is instructive

and persuasive. The BAP affirmed an order

dismissing without leave to amend a pro se complaint
filed against the alleged successor beneficiary on a
deed of trust and against the servicer. The BAP
adopted the majority line of cases rejecting
borrowers' theories that securitization and violations
of the securitization trust agreement render DOTs
unenforceable. Since the securitization merely
creates a separate contract, distinct from [plaintiffs']
debt obligations under the note, and does not change
the relationship of the parties in any way, plaintiffs'
claims arising out of the securitization fail. Nordeen,
495 B.R. at 480.
In reaching this holding, the BAP observed:
[H]ome loan borrowers are not purchasing an
investment when they enter into a loan agreement to
purchase or refinance a home. When they sign a
promissory note and mortgage or trust deed secured
by their real property, they are entering into a
contract for a loan transaction on fixed terms, and
any upside or investment incentive to enter into the
transaction is based on a prospective increase in the
value of the subject real property. Accordingly, the
borrower's loan contract (the Note and Trust Deed in
this appeal) is distinct and separate from any
securities transaction in the secondary market
encompassing assignment of the contract.
Id. at 47980. The panel then noted that in the trust
deed, the borrowers had agreed that the note (or a
partial interest in the note) and the mortgage
instrument could be transferred without prior notice.
The deed of trust here contains the identical
language. Thus, like the borrowers in Nordeen,
Debtor consented to the securitization by explicitly
agreeing that she understood that the lender may
transfer the note.

The BAP also rejected the borrowers' fraud

claims arising from confusing and misleading
communications as to who held the note and who
were the beneficiary and trustee under the mortgage.
Whatever confusion may have resulted from the
alleged communications, the borrowers did not rely
on those communications when they signed the note
and trust deed. Id. at 484. And since they had
defaulted [in their loan payments], they can assert no
damages from the alleged communications. Id. In
the present case, Debtor similarly did not rely on any
alleged misrepresentations by Defendants, all of
which purportedly occurred prior to the petition date.

-5-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

To the contrary, as late as 2012 (after such

communications purportedly occurred), she obtained
a benefit by acknowledging her obligations to under
the note and DOT: an order valuing the second lien at
zero dollars.
C. Debtor Has No Remedy for Violation of Civil
Code Section 2923.5
Debtor alleges in 4143 of the complaint that
Capital One and Quality violated
[501 B.R. 378]
California Civil Code section 2923.5 because they
failed to contact her, in person or by telephone, at
least 30 days prior to recording the Notice of Default
on June 7, 2012. Even if Defendants failed to contact
Debtor as stated, the court cannot grant any effective
remedy. Civil Code section 2923.5 requires, before a
notice of default may be filed, that a lender contact
the borrower in person or by phone to assess the
borrower's financial situation and explore options
to prevent foreclosure. The only remedy afforded by
section 2923.5 is, however, a one-time postponement
of the foreclosure sale before it happens. Cedano,
470 B.R. at 533 (The sole remedy for a failure to
comply with Cal. Civ.Code 2923.5 is limited to
postponement of an impending foreclosure. )
(citing multiple cases). In the seventeen months since
the June 2012 recording of the notice of default, no
notice of sale has been recorded. There is no pending
foreclosure sale to postpone.
III. CONCLUSION
Debtor's complaint does not state a cognizable
claim for several reasons. First, as the District Court
for the Northern District has held in Patel and
Ganesan, borrowers do not have standing to enforce
a pooling and servicing agreement. As Debtor is
neither a party to or a third party beneficiary of the
PSA, she cannot invalidate her contractual
obligations under the note and DOT because the
assignments occurred after the closing date of the
PSA. Second, as in Dick, Herrera, and Siliga, Debtor
cannot demonstrate any prejudice from the
purportedly improper assignment. Third, even if the
claims were cognizable, they are premature. No
foreclosure sale has occurred and preemptive relief
would result in the impermissible interjection of the
courts into a nonjudicial [foreclosure] scheme
enacted by the California Legislature. Jenkins, 216
Cal.App.4th at 513, 156 Cal.Rptr.3d 912,
citingGomes v. Countrywide Home Loans, Inc., 192

Cal.App.4th 1149, 121 Cal.Rptr.3d 819 (Cal.App.4th

Dist.2011). Finally, as in Nordeen, the DOT contains
an express consent by Debtor to the assignment of the
note and DOT.
With the exception of the claim for violation of
California Civil Code section 2923.5 (upon which the
court cannot grant effective relief, as discussed
above), all of the claims asserted by Debtor arise
from the purported improper assignment of the note
and deed of trust.6 Therefore, for the foregoing
reasons, the court will DISMISS Debtor's claims
against the moving Defendants without leave to
amend. Defendants' counsel should serve (in
accordance with B.L.R. 90211) and upload an order
granting the motion for the reasons set forth in this
memorandum decision.7
-------Notes:
1.
Debtor named two other defendants, T.D.
Service Company (T.D.) and Quality Loan Service
Corporation (Quality). Neither T.D. nor Quality
joined the motion to dismiss, although Quality has
filed a declaration of non-monetary status pursuant to
California Civil Code section 2924l. The Ninth
Circuit has not ruled on whether a 2924l declaration
is recognized in federal court, although the District
Court for the Northern District of California has
repeatedly held that this procedural mechanism is not
included in Federal Rule of Civil Procedures 7 and
12, and thus is inapplicable under the Erie doctrine to
actions commenced in federal court. See, e.g.,Iniguez
v. Vantium Capital, Inc., 2013 WL 1208750 at *2
(N.D.Cal. Mar. 25, 2013); Vann v. Wells Fargo Bank,
2012 WL 1910032 (N.D.Cal. May 24, 2012);
Kennedy v. PLM Lender Servs., Inc., 2012 WL
1038632 at *2 (N.D.Cal. Mar. 27, 2012). This court
need not decide the issue in the context of the MTD,
but will limit the relief granted to the movants only.
That said, given the nature of the court's reasoning,
there are no viable claims assertable against T.D. and
Quality in the complaint.
2.
The following narrative is taken from the
complaint and other court documents that provide
uncontested facts. For the purposes of the MTD, the
court assumes the allegations of the complaint to be
true. SeeTellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179
(2007).

-6-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

3.

Defendants state in their memorandum of

points and authorities in support of their MTD that
Chevy Chase was retained as servicer of the loan, but
do not provide any independent evidence of a
servicing agreement. Nonetheless, Debtor did execute
a loan modification with Chevy Chase in 2008, and
did enter into an adequate protection agreement with
Capital One, N.A. (successor-in-interest to Chevy
Chase, as admitted in paragraph 9 of the complaint)
after Capital One filed a motion for relief from stay
because Debtor had purportedly failed to make seven
post-petition payments. See Motion for Relief From
Stay at Docket No. 49 and Adequate Protection Order
at Docket No. 54, both filed in the main case (No.
1231854).
4.

Debtor indicates in her supplemental brief that

she is not challenging the authority of a nominee to
initiate foreclosure proceedings but is instead
pursuing questions regarding the chain of title. The
court thus assumes that Debtor is abandoning her
position in paragraphs 1620 of the complaint, in
which she alleges that any purported assignment of
the [DOT] from MERS to any entity is false and
wrongful as MERS does not own the beneficial
interest in the deeds of trust maintained in its
database and that MERS could not validly assign
any interest in the DOT because it is not and was not
a pecuniary beneficiary. Even if Debtor had not
abandoned these contentions, they would not have
survived the MTD. Courts have repeatedly addressed
and rejected the contention that MERS lacked
authority to assign mortgage instruments or to
appoint successor trustees, even after the original
promissory note has been assigned to a trust pool.
See, e.g.,Cervantes v. Countrywide Home Loans,
Inc., 656 F.3d 1034 (9th Cir.2011) (MERS does have
the authority to split the note and DOT and assign
the DOT and note to other entities); Cedano v.
Aurora Loan Servs., LLC (In re Cedano), 470 B.R.
522, 531 (9th Cir. BAP2012) (The transfer of the
Note as part of the securitization process [does] not
affect MERS' right as a nominee under the Deed of
Trust.); see also Benham v. Aurora Loan Servs.,

2009 WL 2880232 (N.D.Cal.2009) (Other courts in

this district have summarily rejected the argument
that companies like MERS lose their power of sale
pursuant to the Deed of Trust when the original
promissory note is assigned to a trust pool.).
5.

Courts have similarly rejected other theories

that securitization of a loan somehow diminishes the
underlying power of sale that can be exercised upon a
trustor's breach. Zadrozny v. Bank of N.Y. Mellon,
720 F.3d 1163 (9th Cir.2013) (applying Arizona law,
the Ninth Circuit held that the terms of the mortgage
instrument precluded borrowers' claims that assignee
lacked standing to foreclose nonjudicially); Hafiz v.
Greenpoint Mortg. Funding, Inc., 652 F.Supp.2d
1039, 104243 (N.D.Cal.2009) (rejecting as both
unsupported and incorrect the theory that all
defendants lost their power of sale pursuant to the
deed of trust when the original promissory note was
assigned to a trust pool); Chavez v. California
Reconveyance Co., 2010 WL 2545006 (D. Nev. June
18, 2010) (The alleged securitization of Plaintiffs'
Loan did not invalidate the Deed of Trust, create a
requirement of judicial foreclosure, or prevent
Defendants from being holders in due course.).
6.

Debtor conceded in paragraph 36 of the

complaint that her claim for violation of California
Business and Professions Code section 17200 is a
derivative cause of action and that her ability to
pursue this cause of action depends on the success or
failure of [her] substantive causes of action.
7.

The court will not dismiss the action against

the non-moving defendants (Quality and T.D.) in the
absence of a motion to dismiss by them or a
voluntary dismissal by Debtor. If Debtor believes that
she has independent grounds for claims against
Quality and T.D. notwithstanding the holdings in this
memorandum decision, she should file and serve a
30day (at a minimum) notice that a status
conference is scheduled for January 31, 2014, at 1:30
p.m.

-7-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

501 B.R. 369

In reCheryl Sandri, Debtor.
Cheryl Sandri, Plaintiff,
v.
Capital One, N.A.; U.S. Bank, as Trustee for Chevy Chase Mortgage Funding LLC MortgageBacked
Certificates, Series 20061 Trust; T.D. Service Company; Quality Loan Service Corp.; and Mortgage
Electronic Registration Systems, Inc., Defendants.
Bankruptcy Case No. 1231854DM
Adversary Proceeding No. 133165DM
United States Bankruptcy Court, N.D. California.
Filed: 11/04/2013
Entered: 11/05/2013

James S. Knopf, Law Offices of James S. Knopf, San

Mateo, CA, Michael J. Yesk, Law Offices of Michael
J. Yesk, Pleasant Hill, CA, for Debtor.
Brisa C. Ramirez, David Burchard Chapter 13
Trustee Ofc., Foster City, CA, for Trustee.
Chapter 13MEMORANDUM DECISION ON
THE MOTION OF CAPITAL ONE AND MERS
TO DISMISS ADVERSARY PROCEEDING
UNDER RULE 7012
DENNIS MONTALI, U.S. Bankruptcy Judge
On August 30, 2013, the court held a hearing on
the motion of Capital One, N.A. (Capital One),
U.S. Bank, as Trustee for Chevy Chase Mortgage
Funding LLC MortgageBacked Certificates, Series
20061 Trust (U.S. Bank), and Mortgage
Electronic Registration Systems, Inc. (MERS)
(collectively, Defendants) to dismiss the adversary
complaint (MTD) filed against them by plaintiff
Cheryl Sandri (Debtor). The parties each filed
supplemental briefs on September 9, 2013, and the
court took the MTD under advisement. For the
reasons set forth below, the court is GRANTING the
MTD.1
[501 B.R. 371]
I. BACKGROUND2
To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its
face. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129
S.Ct. 1937, 173 L.Ed.2d 868 (2009) ( quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct.
1955, 167 L.Ed.2d 929 (2007)). When deciding a
motion to dismiss, the court considers only
allegations contained in the pleadings, exhibits

attached to the complaint, and matters properly

subject to judicial notice. Swartz v. KPMG LLP, 476
F.3d 756, 763 (9th Cir.2007) (per curiam).
Even though the court may not consider any
material outside of the pleadings when ruling on a
Rule 12(b)(6) motion, two exceptions exist. Lee v.
City of Los Angeles, 250 F.3d 668, 688 (9th
Cir.2001). First, the court may consider material that
a plaintiff properly submits as part of the complaint
or, even if not physically attached to the complaint,
material that is not contested as to authenticity and
that is necessarily relied upon by the plaintiff's
complaint. Id. Second, under Federal Rule of
Evidence 201, the court may take judicial notice of
matters of public record. Id. at 689. Here, the court is
considering the allegations of the complaint, the
documents referenced in the complaint (although not
attached), and documents filed by Debtor in her main
bankruptcy case. Pursuant to Federal Rule of
Evidence 201, the court takes judicial notice of
Debtor's bankruptcy filings as these are matters of
public record.
Debtor has asserted five causes of action in her
complaint: (1) Slander of Title; (2) Wrongful
Foreclosure; (3) Express and Implied Breach of
Agreement; (4) Violation of California Civil Code
2923.5; and (5) Violation of the Unfair Business
Practices Act ( [Cal. Bus. & Prof.Code] 17200).
With the exception of the fourth cause of action, all
of the claims arise out of the securitization of her
note and deed of trust.
In December 2005, Debtor executed a
promissory note (Note) in favor of Chevy Chase
Bank, F.S.B. (Chevy Chase). To secure repayment
of the Note, Debtor also executed a first priority deed
of trust (DOT) against property located in
Redwood City, California (the Property) in favor of
Chevy Chase. Chevy Chase was identified as the
Lender and Trustee, and MERS was identified as the

-1-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

beneficiary and nominee for the lender and lender's

successors and assigns. See paragraphs 67 of the
complaint; see also Debtor's
[501 B.R. 372]
Motion to Value Security and Avoid Lien and to
Declare Lien as Wholly Unsecured (with
accompanying memorandum of points and
authorities, Debtor's supporting declaration and
exhibits) filed by Debtor in her main case (1231854)
(collectively referred to as the Lien Strip Motion)
on August 21, 2012 at Docket Nos. 18, 181, 182
and 183. In her declaration in support of the Lien
Strip Motion, Debtor stated that as of the petition
date, the balance due on the Note was approximately
$346,875.
The DOT expressly provides that Debtor
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, releasing and canceling this Security
Instrument. See DOT at page 3 (Docket No. 183 in
Debtor's main case). In addition, the DOT provides:
The Note or a partial interest in the Note
(together with this Security Instrument) can be sold
one or more times without prior notice to Borrower.
A sale might result in a change in the entity (known
as the Loan Servicer) that collects Periodic
Payments due under the Note and this Security
Instrument and performs other mortgage loan
servicing obligations under the Note, this Security
Instrument, and Applicable Law. There also might be
one or more changes of the Loan Servicer unrelated
to a sale of the Note. If there is a change of the Loan
Servicer, Borrower will be given written notice of the
change which will state the name and address of the
new Loan Servicer, the address to which payments
should be made and any other information RESPA
requires in connection with a notice of transfer of
servicing. If the Note is sold and thereafter the Loan
is serviced by a Loan Servicer other than the
purchaser of the Note, the mortgage loan servicing
obligations to Borrower will remain with the Loan
Servicer or be transferred to a successor Loan
Servicer and are not assumed by the Note purchaser
unless otherwise provided by the Note purchaser.
Seeid. at page 11 (paragraph 20).

In paragraph 7 of the complaint, Debtor alleges

that in 2006 Chevy Chase bundled and sold her
mortgage (which became securitized pursuant to a
pooling and service agreement (PSA)) to Chevy
Chase Mortgage Funding LLC MortgageBacked
Certificates, Series 20061 Trust (CCFM 20061
Trust), with U.S. Bank acting as Trustee.3 The
closing date of the PSA was March 17, 2007. See
paragraph 23 of the complaint. Debtor also alleges in
paragraph 8 that in 2008, she entered into a mortgage
loan modification with Chevy Chase and MERS.
Debtor admits in paragraph 9 of the complaint that in
September 2010, Chevy Chase fully merged with
Capital One Bank and ceased conducting business
under the name Chevy Chase.
[501 B.R. 373]
Debtor alleges in paragraph 12 of the complaint
that on September 13, 2011, an assignment of her
DOT was recorded; through this assignment, MERS
purports to transfer the beneficial interest in
Plaintiff's Deed of Trust to Capital One. Debtor
avers that the assignment was signed by Charity
Henson as an Assistant Secretary of MERS. On the
same day, a notice of default was recorded. On
October 11, 2011, Capital One recorded a
Substitution of Trustee, naming T.D. Service as the
trustee. Charity Henson signed that substitution as a
vice president of Capital One. See paragraphs 1213
of the complaint.
Debtor does not dispute her liability under the
Note and DOT. Instead, she alleges in the complaint
that Capital One and its trustee (now Quality Loan
Services Corporation) or assignees cannot enforce the
Note and DOT, because (1) MERS did not have the
legal right to assign or transfer any interest in the
DOT, (2) Charity Henson was a robo-signer without
authority to sign documents on behalf of MERS; (3)
any assignment occurring after the closing date of the
PSA (March 17, 2007) is invalid. See paragraphs 18
32 of the complaint.
No foreclosure sale has occurred, although an
unrescinded notice of default was recorded on June 7,
2012. See paragraph 15 of the Complaint. Debtor
filed her chapter 13 case fifteen days later.
II. DISCUSSION
Approximately three weeks prior to the hearing
on the MTD the Bankruptcy Appellate Panel for the

-2-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

Ninth Circuit (BAP) and the California Court of

Appeals for the Fifth District issued two cases
involving similar facts and claims, but reaching
disparate conclusions. In Nordeen v. Bank of
America, N.A. (In re Nordeen), 495 B.R. 468 (9th
Cir. BAP2013), BAP affirmed the dismissal of an
action for monetary and declaratory relief, holding
that the securitization of a deed of trust loan did not
in any way alter or affect standing to enforce the deed
of trust, and that debtors did not state a plausible
cause of action for misleading communications
regarding the identity of the note holder and deed of
trust beneficiary/trustee. In contrast, in Glaski v.
Bank of America, 218 Cal.App.4th 1079, 160
Cal.Rptr.3d 449 (Cal.App. 5th Dist.2013), the court
held that borrowers have standing to challenge
foreclosure on the basis that assignments of loan
were void, as they occurred after the closing date of
the securitized trust agreement to which borrowers
were not the parties.
At the hearing on the MTD, the court directed
the parties to provide supplemental briefing regarding
these two cases (neither of which is binding on the
court). Having considered both supplemental briefs
and other case law regarding the standing of
borrowers to assert claims arising out of
securitizations (including other California Court of
Appeals decisions rejecting claims similar to those of
Debtor), the court does not believe that Debtor has
stated any cognizable claim arising from the
securitization and assignments of the Note and DOT.
The court will address each of Debtor's arguments in
turn.
A. The Purported RoboSigning Does Not Give
Rise to a Claim For Relief
Debtor contends that Charity Henson is a robosigner who was not authorized to act on behalf of
MERS,4 but this
[501 B.R. 374]
contention does not give rise to a claim of fraud
where borrowers (like the Debtor here) do not dispute
that they defaulted on the loan. As to the robo-signer
allegations, there does not appear to be anything
about robo-signing the notice of default or the
notice of substitution that makes them invalid or
ineffective. Even if true, robo-signing does not have
any bearing on the validity of the foreclosure process
here. Elliott v. Mortgage Electronic Registration
Systems, Inc., 2013 WL 1820904 at *2 (N.D.Cal.
Apr. 30, 2013), citing Orzoff v. Bank of America,

N.A., 2011 WL 1539897 at *23 (D.Nev. Apr. 22,

2011) (holding that plaintiff failed to state a claim
that trustee breached its duty by robosigning
documents related to loan where plaintiff did not
dispute that she defaulted on her mortgage or that she
received required notices); Bucy v. Aurora Loan
Servs., LLC, 2011 WL 1044045 at *6 (S.D.Ohio Mar.
18, 2011) (plaintiff failed to state a claim for fraud
based on purported robo-signing where Plaintiff
d[id] not dispute the accuracy of any of the salient
facts, such as the amount owed or the amount in
default.). Debtor here does not dispute that she is in
default.
B. Debtor Cannot Assert a Claim for Breach of the
PSA
Debtor relies on Glaski in asserting that any
assignment of the Note that occurred after the closing
date of the PSA is ineffective and thus Defendants
cannot enforce the Note and DOT. The court
disagrees, as Glaski is inconsistent with the majority
line of cases and is based on a questionable analysis
of New York trust law.
1. The Weight of Authority is Against Glaski
While Glaski allowed a borrower to challenge
foreclosure on the basis that a securitized mortgage
trustee's attempt to accept the loan after a trust's
closing date was void under New York law (the law
governing the pooling and servicing agreement), it is
an outlier. A majority of district courts in California
have held that borrowers do not have standing to
challenge the assignment of a loan because borrowers
are not party to the assignment agreement. SeePatel
v. Mortgage Electronic Registration Systems, Inc.,
2013 WL 4029277 (N.D.Cal. Aug. 6, 2013) ([T]he
securitization process did not break the chain of title;
MERs [sic] does have authority to assign the DOT ...;
Plaintiffs have failed to plead breach of the DOT and
do not have standing to assert a breach of any PSA;
and the robo-signing allegations have not been
properly pled.) (emphasis added); Aniel v. GMAC
Mortg., LLC, 2012 WL 5389706 at *4 (N.D.Cal.
Nov. 2, 2012) (plaintiffs lacked standing to challenge
assignment of deed of trust
[501 B.R. 375]
based on noncompliance with pooling and service
agreements); Ganesan v. GMAC Mortgage, LLC,
2012 WL 4901440 at *4 (N.D.Cal. Oct. 15, 2012)
(citing cases) ([T]o the extent Plaintiff bases her
claim on the theory that Defendants allegedly failed

-3-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

to comply with the terms of a Pooling and Servicing

Agreement, the Court notes that she lacks standing to
do so because she is neither a party to, nor a third
party beneficiary of, that agreement.); see
alsoGilbert v. Chase Home Fin., LLC, 2013 WL
2318890 at *3 (E.D.Cal. May 28, 2013) (listing
numerous federal district cases holding that
borrowers lack standing to challenge their liability
under a note and security instrument by alleging that
the assignment of such instruments did not comply
with a PSA).5
More importantly, other California Courts of
Appeal have rejected claims similar to those asserted
in Glaski and by Debtor here. See, e.g.Siliga v.
Mortgage Electronic Registration Systems, Inc., 219
Cal.App.4th 75, 161 Cal.Rptr.3d 500 (Cal. App.2d
Cir.2013) (decided on August 27, 2013) (borrowers
lacked standing to complain about loan servicer's and
assignee's alleged lack of authority to foreclose on
deed of trust where borrowers were in default under
the note, absent evidence that the original lender
would have refrained from foreclosure); Jenkins v. JP
Morgan Chase Bank, N.A., 216 Cal.App.4th 497, 156
Cal.Rptr.3d 912 (Cal.App.4th Dist.2013) (borrower
does not have the right to bring a preemptive judicial
action to determine defendants' standing to foreclose;
foreclosing party need not have beneficial interest in
promissory note and deed of trust); Fontenot v. Wells
Fargo Bank, N.A., 198 Cal.App.4th 256, 272, 129
Cal.Rptr.3d 467 (1st Dist.2011) (to recover on
wrongful foreclosure claim, borrower must
demonstrate that the alleged imperfection in the
foreclosure process was prejudicial; no prejudice
exists where borrower was in default and the
assignment of the loan did not interfere with the
borrower's ability to pay).

agreement is void under New York state law and thus

subject to challenge by non-parties.
New York intermediate appellate courts have
repeatedly and consistently found
[501 B.R. 376]
that an act in violation of a trust agreement is
voidable, not void. SeeMooney v. Madden, 193
A.D.2d 933, 597 N.Y.S.2d 775, 776 (1993); Leasing
Serv. Corp. v. Vita Italian Rest., Inc., 171 A.D.2d
926, 927, 566 N.Y.S.2d 796, 797 (1991); Hine v.
Huntington, 118 A.D. 585, 592, 103 N.Y.S. 535, 540
(1907); In re Levy, 69 A.D.3d 630, 632, 893
N.Y.S.2d 142, 144 (2010). In rejecting claims similar
to those asserted here and in Glaski, the court in
Calderon v. Bank of Am. N.A., 941 F.Supp.2d 753,
75556, 2013 WL 1741951 at *11 (W.D.Tex. Apr.
23, 2013), applied New York trust law:
Even assuming, as Plaintiffs insist, that New
York law governs interpretation of the PSA, and
assuming that the transfer of Plaintiffs' loan to the
Trust violated the terms of the PSA, that after-thedeadline transaction would merely be voidable at the
election of one or more of the partiesnot void.
Accordingly, Plaintiffs, who were not parties to the
PSA, do not have standing to challenge it. [E]ven if it
is true that the Note was transferred to the Trust in
violation of the PSA, that transaction could be
ratified by the beneficiaries of the Trust and is merely
voidable.
Calderon, 941 F.Supp.2d at 76667, 2013 WL
1741951 at **1011 (emphasis added) (analyzing
New York statutory and case law on trusts).

2. Glaski's Reasoning is Not Persuasive

In determining that the borrower had standing to
challenge the validity of assignments that occurred
after a trust document's closing date, the Glaski court
held that under New York law, a transfer made in
violation of the terms of the trust document was void,
not voidable. The Glaski court acknowledged that
under California law, a third party and particularly
the obligor cannot successfully challenge the
validity or effectiveness of the transfer when the
assignment is merely voidable, not void. Glaski, 218
Cal.App.4th at 1094, 160 Cal.Rptr.3d 449. This court
agrees. This court, however, does not agree with the
next prong of the Glaski analysis: that an assignment
violating the trust agreement or pooling service

The Glaski court cited only two cases in support

of its determination that acts by a trustee in
contravention of a trust were void. The first, Wells
Fargo Bank, N.A. v. Erobobo, 39 Misc.3d 1220(A),
972 N.Y.S.2d 147 (N.Y.Sup.Ct.2013), was issued by
a New York trial court. Its reasoning and holding has
been called into doubt. SeeKoufos v. U.S. Bank,
N.A.,939 F.Supp.2d 40 (D.Mass.2013); Orellana v.
Deutsche Bank Nat. Trust Co., 2013 WL 5348596
(D. Mass. Aug. 30, 2013). The second is an
unpublished opinion by the Bankruptcy Court for the
Southern District of Texas that relies on Erobobo and
that is inconsistent with a district court decision from
that district issued just days earlier. In re Saldivar,
2013 WL 2452699, at *4 (Bankr.S.D. Tex. June 5,

-4-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

2013) (transfer was void); compare toSigaran v. U.S.

Bank Nat. Ass'n, 2013 WL 2368336 at *3 (S.D.Tex.
May 29, 2013) (holding that assignments made after
the Trust's closing date are voidable, rather than
void).
3. PostGlaski Authority is Persuasive
In Dick v. Am. Home Mortg. Servicing, Inc.,
2013 WL 5299180 at *45 (E.D.Cal. Sept. 18, 2013),
the plaintiffs relied on Glaski to challenge a DOT
assignment as void. Observing that a majority of
California courts have held that borrowers do not
have standing to challenge the assignment of a loan
because borrowers are not party to the assignment
agreement, the Dick court noted that it did not even
have to reach the issue because the plaintiffs could
not establish prejudice. [A] plaintiff in a suit for
wrongful foreclosure has generally been required to
demonstrate the alleged imperfection in the
foreclosure process was prejudicial to the plaintiff's
interests. Id. (citation omitted). California courts
find a lack of prejudice when a borrower is in default
and cannot show that the allegedly improper
assignment interfered with the borrower's ability to
pay or that the original lender would not have
foreclosed under the circumstances. Id. at *3
(emphasis added).
Debtor here was in default when the notice of
default was recorded; no notice of sale has been
recorded and no foreclosure sale has occurred.
Shortly after the notice of default was recorded,
Debtor filed her chapter 13 petition. Debtor resolved
Capitol One's motion for relief from stay by entering
into an adequate protection stipulation, by which she
[501 B.R. 377]
agreed to cure her nonpayment of at least seven postpetition monthly payments. Debtor obtained an order
valuing the junior lien on the Property at zero,
asserting that the amount she owed on this note and
DOT exceeded the value of the property. Under these
circumstances, she cannot show that the assignment
of the note or DOT after the effective date of the PSA
interfered with her ability to pay or that the original
lender would not have foreclosed. She therefore
cannot show prejudice from the purportedly defective
assignments.
4. Nordeen is Persuasive
While Nordeen involved mortgage instruments
governed by Nevada law, its analysis is instructive

and persuasive. The BAP affirmed an order

dismissing without leave to amend a pro se complaint
filed against the alleged successor beneficiary on a
deed of trust and against the servicer. The BAP
adopted the majority line of cases rejecting
borrowers' theories that securitization and violations
of the securitization trust agreement render DOTs
unenforceable. Since the securitization merely
creates a separate contract, distinct from [plaintiffs']
debt obligations under the note, and does not change
the relationship of the parties in any way, plaintiffs'
claims arising out of the securitization fail. Nordeen,
495 B.R. at 480.
In reaching this holding, the BAP observed:
[H]ome loan borrowers are not purchasing an
investment when they enter into a loan agreement to
purchase or refinance a home. When they sign a
promissory note and mortgage or trust deed secured
by their real property, they are entering into a
contract for a loan transaction on fixed terms, and
any upside or investment incentive to enter into the
transaction is based on a prospective increase in the
value of the subject real property. Accordingly, the
borrower's loan contract (the Note and Trust Deed in
this appeal) is distinct and separate from any
securities transaction in the secondary market
encompassing assignment of the contract.
Id. at 47980. The panel then noted that in the trust
deed, the borrowers had agreed that the note (or a
partial interest in the note) and the mortgage
instrument could be transferred without prior notice.
The deed of trust here contains the identical
language. Thus, like the borrowers in Nordeen,
Debtor consented to the securitization by explicitly
agreeing that she understood that the lender may
transfer the note.

The BAP also rejected the borrowers' fraud

claims arising from confusing and misleading
communications as to who held the note and who
were the beneficiary and trustee under the mortgage.
Whatever confusion may have resulted from the
alleged communications, the borrowers did not rely
on those communications when they signed the note
and trust deed. Id. at 484. And since they had
defaulted [in their loan payments], they can assert no
damages from the alleged communications. Id. In
the present case, Debtor similarly did not rely on any
alleged misrepresentations by Defendants, all of
which purportedly occurred prior to the petition date.

-5-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

To the contrary, as late as 2012 (after such

communications purportedly occurred), she obtained
a benefit by acknowledging her obligations to under
the note and DOT: an order valuing the second lien at
zero dollars.
C. Debtor Has No Remedy for Violation of Civil
Code Section 2923.5
Debtor alleges in 4143 of the complaint that
Capital One and Quality violated
[501 B.R. 378]
California Civil Code section 2923.5 because they
failed to contact her, in person or by telephone, at
least 30 days prior to recording the Notice of Default
on June 7, 2012. Even if Defendants failed to contact
Debtor as stated, the court cannot grant any effective
remedy. Civil Code section 2923.5 requires, before a
notice of default may be filed, that a lender contact
the borrower in person or by phone to assess the
borrower's financial situation and explore options
to prevent foreclosure. The only remedy afforded by
section 2923.5 is, however, a one-time postponement
of the foreclosure sale before it happens. Cedano,
470 B.R. at 533 (The sole remedy for a failure to
comply with Cal. Civ.Code 2923.5 is limited to
postponement of an impending foreclosure. )
(citing multiple cases). In the seventeen months since
the June 2012 recording of the notice of default, no
notice of sale has been recorded. There is no pending
foreclosure sale to postpone.
III. CONCLUSION
Debtor's complaint does not state a cognizable
claim for several reasons. First, as the District Court
for the Northern District has held in Patel and
Ganesan, borrowers do not have standing to enforce
a pooling and servicing agreement. As Debtor is
neither a party to or a third party beneficiary of the
PSA, she cannot invalidate her contractual
obligations under the note and DOT because the
assignments occurred after the closing date of the
PSA. Second, as in Dick, Herrera, and Siliga, Debtor
cannot demonstrate any prejudice from the
purportedly improper assignment. Third, even if the
claims were cognizable, they are premature. No
foreclosure sale has occurred and preemptive relief
would result in the impermissible interjection of the
courts into a nonjudicial [foreclosure] scheme
enacted by the California Legislature. Jenkins, 216
Cal.App.4th at 513, 156 Cal.Rptr.3d 912,
citingGomes v. Countrywide Home Loans, Inc., 192

Cal.App.4th 1149, 121 Cal.Rptr.3d 819 (Cal.App.4th

Dist.2011). Finally, as in Nordeen, the DOT contains
an express consent by Debtor to the assignment of the
note and DOT.
With the exception of the claim for violation of
California Civil Code section 2923.5 (upon which the
court cannot grant effective relief, as discussed
above), all of the claims asserted by Debtor arise
from the purported improper assignment of the note
and deed of trust.6 Therefore, for the foregoing
reasons, the court will DISMISS Debtor's claims
against the moving Defendants without leave to
amend. Defendants' counsel should serve (in
accordance with B.L.R. 90211) and upload an order
granting the motion for the reasons set forth in this
memorandum decision.7
-------Notes:
1.
Debtor named two other defendants, T.D.
Service Company (T.D.) and Quality Loan Service
Corporation (Quality). Neither T.D. nor Quality
joined the motion to dismiss, although Quality has
filed a declaration of non-monetary status pursuant to
California Civil Code section 2924l. The Ninth
Circuit has not ruled on whether a 2924l declaration
is recognized in federal court, although the District
Court for the Northern District of California has
repeatedly held that this procedural mechanism is not
included in Federal Rule of Civil Procedures 7 and
12, and thus is inapplicable under the Erie doctrine to
actions commenced in federal court. See, e.g.,Iniguez
v. Vantium Capital, Inc., 2013 WL 1208750 at *2
(N.D.Cal. Mar. 25, 2013); Vann v. Wells Fargo Bank,
2012 WL 1910032 (N.D.Cal. May 24, 2012);
Kennedy v. PLM Lender Servs., Inc., 2012 WL
1038632 at *2 (N.D.Cal. Mar. 27, 2012). This court
need not decide the issue in the context of the MTD,
but will limit the relief granted to the movants only.
That said, given the nature of the court's reasoning,
there are no viable claims assertable against T.D. and
Quality in the complaint.
2.
The following narrative is taken from the
complaint and other court documents that provide
uncontested facts. For the purposes of the MTD, the
court assumes the allegations of the complaint to be
true. SeeTellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179
(2007).

-6-

Sandri v. Capital One, N.A. (In re Sandri), 501 B.R. 369 (Bankr. N.D. Cal., 2013)

3.

Defendants state in their memorandum of

points and authorities in support of their MTD that
Chevy Chase was retained as servicer of the loan, but
do not provide any independent evidence of a
servicing agreement. Nonetheless, Debtor did execute
a loan modification with Chevy Chase in 2008, and
did enter into an adequate protection agreement with
Capital One, N.A. (successor-in-interest to Chevy
Chase, as admitted in paragraph 9 of the complaint)
after Capital One filed a motion for relief from stay
because Debtor had purportedly failed to make seven
post-petition payments. See Motion for Relief From
Stay at Docket No. 49 and Adequate Protection Order
at Docket No. 54, both filed in the main case (No.
1231854).
4.

Debtor indicates in her supplemental brief that

she is not challenging the authority of a nominee to
initiate foreclosure proceedings but is instead
pursuing questions regarding the chain of title. The
court thus assumes that Debtor is abandoning her
position in paragraphs 1620 of the complaint, in
which she alleges that any purported assignment of
the [DOT] from MERS to any entity is false and
wrongful as MERS does not own the beneficial
interest in the deeds of trust maintained in its
database and that MERS could not validly assign
any interest in the DOT because it is not and was not
a pecuniary beneficiary. Even if Debtor had not
abandoned these contentions, they would not have
survived the MTD. Courts have repeatedly addressed
and rejected the contention that MERS lacked
authority to assign mortgage instruments or to
appoint successor trustees, even after the original
promissory note has been assigned to a trust pool.
See, e.g.,Cervantes v. Countrywide Home Loans,
Inc., 656 F.3d 1034 (9th Cir.2011) (MERS does have
the authority to split the note and DOT and assign
the DOT and note to other entities); Cedano v.
Aurora Loan Servs., LLC (In re Cedano), 470 B.R.
522, 531 (9th Cir. BAP2012) (The transfer of the
Note as part of the securitization process [does] not
affect MERS' right as a nominee under the Deed of
Trust.); see also Benham v. Aurora Loan Servs.,

2009 WL 2880232 (N.D.Cal.2009) (Other courts in

this district have summarily rejected the argument
that companies like MERS lose their power of sale
pursuant to the Deed of Trust when the original
promissory note is assigned to a trust pool.).
5.

Courts have similarly rejected other theories

that securitization of a loan somehow diminishes the
underlying power of sale that can be exercised upon a
trustor's breach. Zadrozny v. Bank of N.Y. Mellon,
720 F.3d 1163 (9th Cir.2013) (applying Arizona law,
the Ninth Circuit held that the terms of the mortgage
instrument precluded borrowers' claims that assignee
lacked standing to foreclose nonjudicially); Hafiz v.
Greenpoint Mortg. Funding, Inc., 652 F.Supp.2d
1039, 104243 (N.D.Cal.2009) (rejecting as both
unsupported and incorrect the theory that all
defendants lost their power of sale pursuant to the
deed of trust when the original promissory note was
assigned to a trust pool); Chavez v. California
Reconveyance Co., 2010 WL 2545006 (D. Nev. June
18, 2010) (The alleged securitization of Plaintiffs'
Loan did not invalidate the Deed of Trust, create a
requirement of judicial foreclosure, or prevent
Defendants from being holders in due course.).
6.

Debtor conceded in paragraph 36 of the

complaint that her claim for violation of California
Business and Professions Code section 17200 is a
derivative cause of action and that her ability to
pursue this cause of action depends on the success or
failure of [her] substantive causes of action.
7.

The court will not dismiss the action against

the non-moving defendants (Quality and T.D.) in the
absence of a motion to dismiss by them or a
voluntary dismissal by Debtor. If Debtor believes that
she has independent grounds for claims against
Quality and T.D. notwithstanding the holdings in this
memorandum decision, she should file and serve a
30day (at a minimum) notice that a status
conference is scheduled for January 31, 2014, at 1:30
p.m.

-7-

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

In re CHERYL SANDRI, Chapter 13, Debtor.

CHERYL SANDRI, Plaintiff,
v.
CAPITAL ONE, N.A.; U.S. BANK, as Trustee for Chevy Chase Mortgage Funding LLC MortgageBacked Certificates, Series 2006-1 Trust; T.D. SERVICE COMPANY; QUALITY LOAN SERVICE
CORP.; and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants.
Bankruptcy Case No. 12-31854DM, Adversary Proceeding No. 13-3165DM.
United States Bankruptcy Court, N.D. California.
November 4, 2013.

MEMORANDUM DECISION ON THE MOTION OF CAPITAL ONE AND MERS

TO DISMISS ADVERSARY PROCEEDING UNDER RULE 7012
DENNIS MONTALI, Bankruptcy Judge.
On August 30, 2013, the court held a hearing on the motion of Capital One, N.A. ("Capital One"), U.S. Bank, as Trustee
for Chevy Chase Mortgage Funding LLC Mortgage-Backed Certificates, Series 2006-1 Trust ("U.S. Bank"), and Mortgage
Electronic Registration Systems, Inc. ("MERS") (collectively, "Defendants") to dismiss the adversary complaint ("MTD")
filed against them by plaintiff Cheryl Sandri ("Debtor"). The parties each filed supplemental briefs on September 9,
2013, and the court took the MTD under advisement. For the reasons set forth below, the court is GRANTING the MTD.[1]

I. BACKGROUND[2]
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to
relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). When deciding a motion to dismiss, the court considers "only allegations contained in the
pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476
F.3d 756, 763 (9th Cir. 2007) (per curiam).
Even though the court may not consider any material outside of the pleadings when ruling on a Rule 12(b)(6) motion,
two exceptions exist. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). First, the court may consider material
that a plaintiff properly submits as part of the complaint or, even if not physically attached to the complaint, material that
is not contested as to authenticity and that is necessarily relied upon by the plaintiff's complaint. Id. Second, under
Federal Rule of Evidence 201, the court may take judicial notice of matters of public record. Id. at 689. Here, the court is
considering the allegations of the complaint, the documents referenced in the complaint (although not attached), and
documents filed by Debtor in her main bankruptcy case. Pursuant to Federal Rule of Evidence 201, the court takes
judicial notice of Debtor's bankruptcy filings as these are matters of public record.
Debtor has asserted five causes of action in her complaint: (1) Slander of Title; (2) Wrongful Foreclosure; (3) Express
and Implied Breach of Agreement; (4) Violation of California Civil Code 2923.5; and (5) Violation of the Unfair Business
Practices Act ([Cal. Bus. & Prof. Code] 17200). With the exception of the fourth cause of action, all of the claims arise
out of the securitization of her note and deed of trust.
In December 2005, Debtor executed a promissory note ("Note") in favor of Chevy Chase Bank, F.S.B. ("Chevy Chase").
To secure repayment of the Note, Debtor also executed a first priority deed of trust ("DOT") against property located in
http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

1/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

Redwood City, California (the "Property") in favor of Chevy Chase. Chevy Chase was identified as the Lender and
Trustee, and MERS was identified as the "beneficiary" and nominee for the lender and lender's successors and
assigns. See paragraphs 6-7 of the complaint; see also Debtor's Motion to Value Security and Avoid Lien and to
Declare Lien as Wholly Unsecured (with accompanying memorandum of points and authorities, Debtor's supporting
declaration and exhibits) filed by Debtor in her main case (12-31854) (collectively referred to as the "Lien Strip Motion")
on August 21, 2012 at Docket Nos. 18, 18-1, 18-2 and 18-3. In her declaration in support of the Lien Strip Motion, Debtor
stated that as of the petition date, the balance due on the Note was approximately $346,875.
The DOT expressly provides that Debtor "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, releasing and canceling this Security Instrument." See DOT at page 3 (Docket No. 18-3 in Debtor's main
case). In addition, the DOT provides:
The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more
times without prior notice to Borrower. A sale might result in a change in the entity (known as the "Loan
Servicer") that collects Periodic Payments due under the Note and this Security Instrument and performs
other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law.
There also might be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is
a change of the Loan Servicer, Borrower will be given written notice of the change which will state the
name and address of the new Loan Servicer, the address to which payments should be made and any
other information RESPA requires in connection with a notice of transfer of servicing. If the Note is sold
and thereafter the Loan is serviced by a Loan Servicer other than the purchaser of the Note, the mortgage
loan servicing obligations to Borrower will remain with the Loan Servicer or be transferred to a successor
Loan Servicer and are not assumed by the Note purchaser unless otherwise provided by the Note
purchaser.
See id. at page 11 (paragraph 20).
In paragraph 7 of the complaint, Debtor alleges that in 2006 Chevy Chase bundled and sold her mortgage (which
became securitized pursuant to a pooling and service agreement ("PSA")) to Chevy Chase Mortgage Funding LLC
Mortgage-Backed Certificates, Series 2006-1 Trust ("CCFM 2006-1 Trust"), with U.S. Bank acting as Trustee.[3] The
closing date of the PSA was March 17, 2007. See paragraph 23 of the complaint. Debtor also alleges in paragraph 8
that in 2008, she entered into a mortgage loan modification with Chevy Chase and MERS. Debtor admits in paragraph 9
of the complaint that in September 2010, Chevy Chase "fully merged with Capital One Bank and ceased conducting
business under the name Chevy Chase."
Debtor alleges in paragraph 12 of the complaint that on September 13, 2011, an assignment of her DOT was recorded;
through this assignment, MERS "purports to transfer the beneficial interest in Plaintiff's Deed of Trust to Capital One."
Debtor avers that the assignment was signed by Charity Henson as an "Assistant Secretary of MERS." On the same
day, a notice of default was recorded. On October 11, 2011, Capital One recorded a Substitution of Trustee, naming T.D.
Service as the trustee. Charity Henson signed that substitution as a vice president of Capital One. See paragraphs 1213 of the complaint.
Debtor does not dispute her liability under the Note and DOT. Instead, she alleges in the complaint that Capital One
and its trustee (now Quality Loan Services Corporation) or assignees cannot enforce the Note and DOT, because (1)
MERS did not have the legal right to assign or transfer any interest in the DOT, (2) Charity Henson was a robo-signer
without authority to sign documents on behalf of MERS; (3) any assignment occurring after the closing date of the PSA
(March 17, 2007) is invalid. See paragraphs 18-32 of the complaint.
No foreclosure sale has occurred, although an unrescinded notice of default was recorded on June 7, 2012. See
paragraph 15 of the Complaint. Debtor filed her chapter 13 case fifteen days later.
http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

2/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

II. DISCUSSION
Approximately three weeks prior to the hearing on the MTD the Bankruptcy Appellate Panel for the Ninth Circuit (BAP)
and the California Court of Appeals for the Fifth District issued two cases involving similar facts and claims, but
reaching disparate conclusions. In Nordeen v. Bank of America, N.A. (In re Nordeen), 495 B.R. 468 (9th Cir. BAP 2013),
BAP affirmed the dismissal of an action for monetary and declaratory relief, holding that the securitization of a deed of
trust loan did not in any way alter or affect standing to enforce the deed of trust, and that debtors did not state a plausible
cause of action for misleading communications regarding the identity of the note holder and deed of trust
beneficiary/trustee. In contrast, in Glaski v. Bank of America, 218 Cal. App. 4th 1079 (Cal. App. 5th Dist. 2013), the court
held that borrowers have standing to challenge foreclosure on the basis that assignments of loan were void, as they
occurred after the closing date of the securitized trust agreement to which borrowers were not the parties.
At the hearing on the MTD, the court directed the parties to provide supplemental briefing regarding these two cases
(neither of which is binding on the court). Having considered both supplemental briefs and other case law regarding the
standing of borrowers to assert claims arising out of securitizations (including other California Court of Appeals
decisions rejecting claims similar to those of Debtor), the court does not believe that Debtor has stated any cognizable
claim arising from the securitization and assignments of the Note and DOT. The court will address each of Debtor's
arguments in turn.

A. The Purported Robo-Signing Does Not Give Rise to a Claim For Relief
Debtor contends that Charity Henson is a robo-signer who was not authorized to act on behalf of MERS,[4] but this
contention does not give rise to a claim of fraud where borrowers (like the Debtor here) do not dispute that they
defaulted on the loan. "As to the robo-signer allegations, there does not appear to be anything about `robo-signing' the
notice of default or the notice of substitution that makes them invalid or ineffective. Even if true, `robo-signing' does not
have any bearing on the validity of the foreclosure process here." Elliott v. Mortgage Electronic Registration Systems,
Inc., 2013 WL 1820904 at *2 (N.D. Cal. Apr. 30, 2013), citing Orzoff v. Bank of America, N.A., 2011 WL 1539897 at *2-3
(D. Nev. Apr. 22, 2011) (holding that plaintiff failed to state a claim that trustee breached its duty by "robosigning"
documents related to loan where plaintiff did not dispute that she defaulted on her mortgage or that she received
required notices); Bucy v. Aurora Loan Servs., LLC, 2011 WL 1044045 at *6 (S.D. Ohio Mar. 18, 2011) (plaintiff failed to
state a claim for fraud based on purported "robo-signing" where "Plaintiff d[id] not dispute the accuracy of any of the
salient facts, such as the amount owed or the amount in default."). Debtor here does not dispute that she is in default.

B. Debtor Cannot Assert a Claim for Breach of the PSA

Debtor relies on Glaski in asserting that any assignment of the Note that occurred after the closing date of the PSA is
ineffective and thus Defendants cannot enforce the Note and DOT. The court disagrees, as Glaski is inconsistent with
the majority line of cases and is based on a questionable analysis of New York trust law.

1. The Weight of Authority is Against Glaski

While Glaski allowed a borrower to challenge foreclosure on the basis that a securitized mortgage trustee's attempt to
accept the loan after a trust's closing date was void under New York law (the law governing the pooling and servicing
agreement), it is an outlier. A majority of district courts in California have held that borrowers do not have standing to
challenge the assignment of a loan because borrowers are not party to the assignment agreement. See Patel v.
Mortgage Electronic Registration Systems, Inc., 2013 WL 4029277 (N.D. Cal. Aug. 6, 2013) ("[T]he securitization
process did not break the chain of title; MERs [sic] does have authority to assign the DOT . . .; Plaintiffs have failed to
plead breach of the DOT and do not have standing to assert a b reach of any PSA; and the robo-signing allegations have
not been properly pled.") (emphasis added); Aniel v. GMAC Mortg., LLC, 2012 WL 5389706 at *4 (N.D. Cal. Nov. 2, 2012)
http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

3/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

(plaintiffs lacked standing to challenge assignment of deed of trust based on noncompliance with pooling and service
agreements)); Ganesan v. GMAC Mortgage, LLC, 2012 WL 4901440 at *4 (N.D. Cal. Oct. 15, 2012) (citing cases) ("[T]o
the extent Plaintiff bases her claim on the theory that Defendants allegedly failed to comply with the terms of a Pooling
and Servicing Agreement, the Court notes that she lacks standing to do so because she is neither a party to, nor a third
party beneficiary of, that agreement."); see also Gilbert v. Chase Home Fin., LLC, 2013 WL 2318890 at *3 (E.D. Cal. May
28, 2013) (listing numerous federal district cases holding that borrowers lack standing to challenge their liability under
a note and security instrument by alleging that the assignment of such instruments did not comply with a PSA).[5]
More importantly, other California Courts of Appeal have rejected claims similar to those asserted in Glaski and by
Debtor here. See, e.g. Siliga v. Mortgage Electronic Registrations Systems, Inc., 219 Cal. App. 4th 75, 161 Cal. Rptr. 3d
500 (Cal. App. 2d Cir. 2013) (decided on August 27, 2013) (borrowers lacked standing to complain about loan servicer's
and assignee's alleged lack of authority to foreclose on deed of trust where borrowers were in default under the note,
absent evidence that the original lender would have refrained from foreclosure); Jenkins v. JP Morgan Chase Bank,
N.A., 216 Cal. App. 4th 497, 156 Cal. Rptr. 3d 912 (Cal. App. 4th Dist. 2013) (borrower does not have the right to bring a
preemptive judicial action to determine defendants' standing to foreclose; foreclosing party need not have beneficial
interest in promissory note and deed of trust); Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 272, 129 Cal.
Rptr. 3d 467 (1st Dist. 2011) (to recover on wrongful foreclosure claim, borrower must demonstrate that the alleged
imperfection in the foreclosure process was prejudicial; no prejudice exists where borrower was in default and the
assignment of the loan did not interfere with the borrower's ability to pay).

2. Glaski's Reasoning is Not Persuasive

In determining that the borrower had standing to challenge the validity of assignments that occurred after a trust
document's closing date, the Glaski court held that under New York law, a transfer made in violation of the terms of the
trust document was void, not voidable. The Glaski court acknowledged that under California law, a third party "and
particularly the obligor" cannot successfully challenge the validity or effectiveness of the transfer when the assignment
is merely voidable, not void. Glaski, 218 Cal. App. 4th at 1094. This court agrees. This court, however, does not agree
with the next prong of the Glaski analysis: that an assignment violating the trust agreement or pooling service
agreement is void under New York state law and thus subject to challenge by non-parties.
New York intermediate appellate courts have repeatedly and consistently found that an act in violation of a trust
agreement is voidable, not void. See Mooney v. Madden, 193 A.D.2d 933, 597 N.Y.S.2d 775, 776 (1993); Leasing Serv.
Corp. v. Vita Italian Rest., Inc., 171 A.D.2d 926, 927, 566 N.Y.S.2d 796, 797 (1991); Hine v. Huntington, 118 A.D. 585,
592, 103 N.Y.S. 535, 540 (1907); In re Levy, 69 A.D.3d 630, 632, 893 N.Y.S.2d 142, 144 (2010). In rejecting claims
similar to those asserted here and in Glaski, the court in Calderon v. Bank of Am. N.A., 2013 WL 1741951 at *11 (W.D.
Tex. Apr. 23, 2013), applied New York trust law:
Even assuming, as Plaintiffs insist, that New York law governs interpretation of the PSA, and assuming
that the transfer of Plaintiffs' loan to the Trust violated the terms of the PSA, that after-the-deadline
transaction would merely be voidable at the election of one or more of the parties not void. Accordingly,
Plaintiffs, who were not parties to the PSA, do not have standing to challenge it. [E]ven if it is true that the
Note was transferred to the Trust in violation of the PSA, that transaction could be ratified by the
beneficiaries of the Trust and is merely voidable.
Calderon, 2013 WL 1741951 at **10-11 (emphasis added) (analyzing New York statutory and case law on trusts).
The Glaski court cited only two cases in support of its determination that acts by a trustee in contravention of a trust
were void. The first, Wells Fargo Bank, N.A. v. Erobobo, 39 Misc. 3d 1220(A) (N.Y. Sup. Ct. 2013), was issued by a New
York trial court. Its reasoning and holding has been called into doubt. See Koufos v. U.S. Bank, N.A., 2013 WL 1189502
(D. Mass. March 21, 2013); Orellana v. Deutsche Bank Nat. Trust Co., 2013 WL 5348596 D. Mass. Aug. 30, 2013). The
second is an unpublished opinion by the Bankruptcy Court for the Southern District of Texas that relies on Erobobo and
http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

4/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

that is inconsistent with a district court decision from that district issued just days earlier. In re Saldivar, 2013 WL
2452699, at *4 (Bankr. S.D. Tex. June 5, 2013) (transfer was void); compare to Sigaran v. U.S. Bank Nat. Ass'n, 2013 WL
2368336 at *3 (S.D. Tex. May 29, 2013) (holding that "assignments made after the Trust's closing date are voidable,
rather than void").

3. Post-Glaski Authority is Persuasive

In Dick v. Am. Home Mortg. Servicing, Inc., 2013 WL 5299180 at *4-5 (E.D. Cal. Sept. 18, 2013), the plaintiffs relied on
Glaski to challenge a DOT assignment as void. Observing that a majority of California courts have held that "borrowers
do not have standing to challenge the assignment of a loan because borrowers are not party to the assignment
agreement," the Dick court noted that it did not even have to reach the issue because the plaintiffs could not establish
prejudice. "[A] plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate the alleged
imperfection in the foreclosure process was prejudicial to the plaintiff's interests." Id. (citation omitted). "California
courts find a lack of prejudice when a borrower is in default and cannot show that the allegedly improper assignment
interfered with the borrower's ability to pay or that the original lender would not have foreclosed under the
circumstances." Id. at *3 (emphasis added).
Debtor here was in default when the notice of default was recorded; no notice of sale has been recorded and no
foreclosure sale has occurred. Shortly after the notice of default was recorded, Debtor filed her chapter 13 petition.
Debtor resolved Capitol One's motion for relief from stay by entering into an adequate protection stipulation, by which
she agreed to cure her nonpayment of at least seven post-petition monthly payments. Debtor obtained an order valuing
the junior lien on the Property at zero, asserting that the amount she owed on this note and DOT exceeded the value of
the property. Under these circumstances, she cannot show that the assignment of the note or DOT after the effective
date of the PSA interfered with her ability to pay or that the original lender would not have foreclosed. She therefore
cannot show prejudice from the purportedly defective assignments.

4. Nordeen is Persuasive
While Nordeen involved mortgage instruments governed by Nevada law, its analysis is instructive and persuasive. The
BAP affirmed an order dismissing without leave to amend a pro se complaint filed against the alleged successor
beneficiary on a deed of trust and against the servicer. The BAP adopted the majority line of cases rejecting borrowers'
theories that securitization and violations of the securitization trust agreement render DOTs unenforceable. "Since the
securitization merely creates a separate contract, distinct from [plaintiffs'] debt obligations under the note, and does not
change the relationship of the parties in any way, plaintiffs' claims arising out of the securitization fail." Nordeen, 495
B.R. at 480.
In reaching this holding, the BAP observed:
[H]ome loan borrowers are not purchasing an investment when they enter into a loan agreement to
purchase or refinance a home. When they sign a promissory note and mortgage or trust deed secured
by their real property, they are entering into a contract for a loan transaction on fixed terms, and any
"upside" or investment incentive to enter into the transaction is based on a prospective increase in the
value of the subject real property. Accordingly, the borrower's loan contract (the Note and Trust Deed in
this appeal) is distinct and separate from any securities transaction in the "secondary market"
encompassing assignment of the contract.
Id. at 479-80. The panel then noted that in the trust deed, the borrowers had agreed that the note (or a partial interest in
the note) and the mortgage instrument could be transferred without prior notice. The deed of trust here contains the
identical language. Thus, like the borrowers in Nordeen, Debtor consented to the securitization by explicitly agreeing
that she understood that the lender may transfer the note.

http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

5/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

The BAP also rejected the borrowers' fraud claims arising from confusing and misleading communications as to who
held the note and who were the beneficiary and trustee under the mortgage. "Whatever confusion may have resulted
from the alleged communications," the borrowers did not rely on those communications when they signed the note and
trust deed. Id. at 484. "And since they had defaulted [in their loan payments], they can assert no damages from the
alleged communications." Id. In the present case, Debtor similarly did not rely on any alleged misrepresentations by
Defendants, all of which purportedly occurred prior to the petition date. To the contrary, as late as 2012 (after such
communications purportedly occurred), she obtained a benefit by acknowledging her obligations to under the note and
DOT: an order valuing the second lien at zero dollars.

C. Debtor Has No Remedy for Violation of Civil Code Section 2923.5

Debtor alleges in 41-43 of the complaint that Capital One and Quality violated California Civil Code section 2923.5
because they failed to contact her, in person or by telephone, at least 30 days prior to recording the Notice of Default on
June 7, 2012. Even if Defendants failed to contact Debtor as stated, the court cannot grant any effective remedy. Civil
Code section 2923.5 requires, before a notice of default may be filed, that a lender contact the borrower in person or by
phone to "assess" the borrower's financial situation and "explore" options to prevent foreclosure. The only remedy
afforded by section 2923.5 is, however, a one-time postponement of the foreclosure sale before it happens. Cedano,
470 B.R. at 533 ("The sole remedy for a failure to comply with Cal. Civ. Code 2923.5 is `limited to postponement of an
impending foreclosure.'") (citing multiple cases). In the seventeen months since the June 2012 recording of the notice
of default, no notice of sale has been recorded. There is no pending foreclosure sale to postpone.

III. CONCLUSION
Debtor's complaint does not state a cognizable claim for several reasons. First, as the District Court for the Northern
District has held in Patel and Ganesan, borrowers do not have standing to enforce a pooling and servicing agreement.
As Debtor is neither a party to or a third party beneficiary of the PSA, she cannot invalidate her contractual obligations
under the note and DOT because the assignments occurred after the closing date of the PSA. Second, as in Dick,
Herrera, and Siliga, Debtor cannot demonstrate any prejudice from the purportedly improper assignment. Third, even if
the claims were cognizable, they are premature. No foreclosure sale has occurred and preemptive relief "would result
in the impermissible interjection of the courts into a nonjudicial [foreclosure] scheme enacted by the California
Legislature." Jenkins, 216 Cal.App.4th at 513, citing Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149,
121 Cal. Rptr. 3d 819 (Cal. App. 4th Dist. 2011). Finally, as in Nordeen, the DOT contains an express consent by Debtor
to the assignment of the note and DOT.
With the exception of the claim for violation of California Civil Code section 2923.5 (upon which the court cannot grant
effective relief, as discussed above), all of the claims asserted by Debtor arise from the purported improper assignment
of the note and deed of trust.[6] Therefore, for the foregoing reasons, the court will DISMISS Debtor's claims against the
moving Defendants without leave to amend. Defendants' counsel should serve (in accordance with B.L.R. 9021-1) and
upload an order granting the motion for the reasons set forth in this memorandum decision.[7]
[1] Debtor named tw o other defendants, T.D. Service Company ("T.D.") and Quality Loan Service Corporation ("Quality"). Neither T.D.
nor Quality joined the motion to dismiss, although Quality has filed a declaration of non-monetary status pursuant to California Civil Code
section 2924l. The Ninth Circuit has not ruled on w hether a 2924l declaration is recognized in federal court, although the District Court
for the Northern District of California has repeatedly held that this procedural mechanism is not included in Federal Rule of Civil
Procedures 7 and 12, and thus is inapplicable under the Erie doctrine to actions commenced in federal court. See, e.g., Iniguez v.
Vantium Capital, Inc., 2013 WL 1208750 at *2 (N.D. Cal. Mar. 25, 2013); Vann v. Wells Fargo Bank, 2012 WL 1910032 (N.D. Cal. May 24,
2012); Kennedy v. PLM Lender Servs., Inc., 2012 WL 1038632 at *2 (N.D. Cal. Mar. 27, 2012). This court need not decide the issue in
the context of the MTD, but w ill limit the relief granted to the movants only. That said, given the nature of the court's reasoning, there
are no viable claims assertable against T.D. and Quality in the complaint.
[2] The follow ing narrative is taken from the complaint and other court documents that provide uncontested facts. For the purposes of
http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

6/7

6/16/2014

IN RE SANDRI, Bankr. Court, ND California 2013 - Google Scholar

the MTD, the court assumes the allegations of the complaint to be true. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,
322 (2007).
[3] Defendants state in their memorandum of points and authorities in support of their MTD that Chevy Chase w as retained as servicer
of the loan, but do not provide any independent evidence of a servicing agreement. Nonetheless, Debtor did execute a loan
modification w ith Chevy Chase in 2008, and did enter into an adequate protection agreement w ith Capital One, N.A. (successor-ininterest to Chevy Chase, as admitted in paragraph 9 of the complaint) after Capital One filed a motion for relief from stay because
Debtor had purportedly failed to make seven post-petition payments. See Motion for Relief From Stay at Docket No. 49 and Adequate
Protection Order at Docket No. 54, both filed in the main case (No. 12-31854).
[4] Debtor indicates in her supplemental brief that she is not challenging the authority of a nominee to initiate foreclosure proceedings
but is instead pursuing questions regarding the chain of title. The court thus assumes that Debtor is abandoning her position in
paragraphs 16-20 of the complaint, in w hich she alleges that "any purported assignment of the [DOT] from MERS to any entity is false
and w rongful as MERS does not ow n the beneficial interest in the deeds of trust maintained in its database" and that MERS could not
validly assign any interest in the DOT "because it is not and w as not a pecuniary beneficiary." Even if Debtor had not abandoned these
contentions, they w ould not have survived the MTD. Courts have repeatedly addressed and rejected the contention that MERS lacked
authority to assign mortgage instruments or to appoint successor trustees, even after the original promissory note has been assigned
to a trust pool. See, e.g., Cervantes v. Countryw ide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011) (MERS does have the authority to
"split" the note and DOT and assign the DOT and note to other entities); Cedano v. Aurora Loan Servs., LLC (In re Cedano), 470 B.R.
522, 531 (9th Cir. BAP 2012) ("The transfer of the Note as part of the securitization process [does] not affect MERS' right as a nominee
under the Deed of Trust."); see also Benham v. Aurora Loan Servs., 2009 WL 2880232 (N.D. Cal. 2009) ("Other courts in this district
have summarily rejected the argument that companies like MERS lose their pow er of sale pursuant to the Deed of Trust w hen the
original promissory note is assigned to a trust pool.").
[5] Courts have similarly rejected other theories that securitization of a loan somehow diminishes the underlying pow er of sale that can
be exercised upon a trustor's breach. Zadrozny v. Bank of NY Mellon, 720 F.3d 1163 (9th Cir. 2013) (applying Arizona law , the Ninth
Circuit held that the terms of the mortgage instrument precluded borrow ers' claims that assignee lacked standing to foreclose
nonjudicially); Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1042-43 (N.D. Cal. 2009) (rejecting as "both unsupported
and incorrect" the "theory that all defendants lost their pow er of sale pursuant to the deed of trust w hen the original promissory note
w as assigned to a trust pool"); Chavez v. California Reconveyance Co., 2010 WL 2545006 (D. Nev. June 18, 2010) ("The alleged
securitization of Plaintiffs' Loan did not invalidate the Deed of Trust, create a requirement of judicial foreclosure, or prevent Defendants
from being holders in due course.")).
[6] Debtor conceded in paragraph 36 of the complaint that her claim for violation of California Business and Professions Code section
17200 "is a derivative cause of action" and that her "ability to pursue this cause of action depends on the success or failure of [her]
substantive causes of action."
[7] The court w ill not dismiss the action against the non-moving defendants (Quality and T.D.) in the absence of a motion to dismiss by
them or a voluntary dismissal by Debtor. If Debtor believes that she has independent grounds for claims against Quality and T.D.
notw ithstanding the holdings in this memorandum decision, she should file and serve a 30-day (at a minimum) notice that a status
conference is scheduled for January 31, 2014, at 1:30 p.m.

Save trees - read court opinions online on Google Scholar.

http://scholar.google.com/scholar_case?q=in+re+sandri&hl=en&as_sdt=2006&case=15745191810800243160&scilh=0

7/7

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

to initiate the nonjudicial foreclosure process

under a deed of trust does not authorize the
borrower to bring a court action to determine
whether the owner of the note has authorized
its nominee to initiate the foreclosure process.
West's Ann.Cal.Civ.Code 2924(a)(1).

KeyCite Yellow Flag - Negative Treatment

Declined to Follow by Bain v. Metropolitan Mortg. Group, Inc., Wash.,
August 16, 2012

192 Cal.App.4th 1149

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

See Greenwald & Asimov, Cal. Practice Guide:

Real Property Transactions (The Rutter Group
2010) 6:535.15 (CAPROP Ch. 6-I); 4 Miller &
Starr, Cal. Real Estate (3d ed. 2001) 10:179,
10:210; 4 Witkin, Summary of Cal. Law (10th ed.
2005) Security Transactions in Real Property,
164, 165; Cal. Jur. 3d, Deeds of Trust, 258.

Jose GOMES, Plaintiff and Appellant,

v.
COUNTRYWIDE HOME LOANS, INC.,
et al., Defendants and Respondents.
No. D057005. | Feb. 18, 2011. |
Review Denied May 18, 2011. | Certiorari
Denied Oct. 11, 2011. | See 132 S.Ct. 419.
Synopsis
Background: Borrower brought action against lender,
mortgage registry company, and registry company's agent
for wrongful foreclosure and declaratory relief. The Superior
Court, San Diego County, No. 37-2009-00090347-CU-ORCTL, Steven R. Denton, J., sustained demurrer without leave
to amend. Borrower appealed.

121 Cases that cite this headnote

[2]

Courts
Operation and effect in general
Court of Appeal may not rely on unpublished
California cases.
2 Cases that cite this headnote

[3]

Courts
Operation and effect in general
The California Rules of Court do not prohibit
citation to unpublished federal cases, which may
properly be cited as persuasive, although not
binding, authority.

Holdings: The Court of Appeal, Irion, J., held that:

[1] a borrower may not bring an action to determine whether
the owner of a note has authorized nonjudicial foreclosure;

3 Cases that cite this headnote

[2] mortgage registry company was authorized to initiate
foreclosure under deed of trust; and
[4]
[3] borrower could not allege on information and belief that
purported trustee lacked authorization to initiate foreclosure.

Mortgages
Persons Entitled to Execute Power
Under California law, a private corporation that
administers a national electronic registry that
tracks the transfer of ownership interests and
servicing rights in mortgage loans may initiate
a foreclosure as the nominee, or agent, of the
noteholder. West's Ann.Cal.Civ.Code 2924(a)
(1).

Affirmed.

West Headnotes (8)

23 Cases that cite this headnote

[1]

Mortgages
Under trust deed
The statute authorizing the trustee, mortgagee,
or beneficiary, or any of their authorized agents

[5]

Mortgages
Under trust deed

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

Provision in deed of trust stating that mortgage

registry company had the authority to initiate a
foreclosure was valid, even if registry company
did not hold a beneficial interest in the deed of
trust, where registry company was designated as
nominee for lender and lender's successors and
assigns. West's Ann.Cal.Civ.Code 2924.
49 Cases that cite this headnote
[6]

Mortgages
Under trust deed
Borrower under deed of trust could not allege on
information and belief that a trustee who initiated
a foreclosure proceeding was not actually the
trustee at the time because assignments of the
deed of trust were improperly backdated, where
the deed of trust designated a mortgage registry
company as the beneficiary and the lender's
nominee, and neither the registry company nor
the loan servicer had recorded any assignments
or provided any descriptions of assignments.

Attorneys and Law Firms

**821 Gersten Law Group and Ehud Gersten, San Diego,
for Plaintiff and Appellant.
Severson & Werson, Jan T. Chilton, Philip Barilovits and Jon
D. Ives, San Francisco, for Defendants and Respondents.
Opinion
IRION, J.
*1150 Jose Gomes appeals from a judgment entered
following the trial court's order sustaining, without leave
to amend, a demurrer filed by defendants Countrywide
Home Loans, Inc. (Countrywide); Mortgage Electronic
Registration Systems, Inc. (MERS); and ReconTrust
Company, N.A. (ReconTrust) (collectively Defendants).
As we will explain, we conclude that the trial court properly
sustained the demurrer without leave to amend.

*1151 I

52 Cases that cite this headnote

[7]

Pleading
Allegations on knowledge, or on
information and belief
A plaintiff may allege on information and belief
any matters that are not within his personal
knowledge, if he has information leading him to
believe that the allegations are true.

[8]

Pleading
Allegations on knowledge, or on
information and belief
A pleading made on information and belief
is insufficient if it merely asserts the facts so
alleged without alleging such information that
leads the plaintiff to believe that the allegations
are true.

FACTUAL AND PROCEDURAL BACKGROUND

In February 2004 Gomes borrowed $331,000 from lender
KB Home Mortgage Company to finance the purchase of
real estate. In connection with that transaction, he executed
a promissory note (the Note), which was secured by a deed
of trust. The deed of trust identifies KB Home Mortgage
Company as the Lender and identifies MERS as acting
solely as a nominee for Lender and Lender's successors and
assigns, and states that MERS is the beneficiary under this
Security Instrument. 1
1

Similarly, the deed of trust states: The beneficiary of

this Security Instrument is MERS (solely as nominee
for Lender and Lender's successor and assigns) and the
successors and assigns of MERS.

The role of MERS is central to the issues in this appeal.

As case law explains, MERS is a private corporation that
administers the MERS System, a national electronic registry
that tracks the transfer of ownership interests and servicing
rights in mortgage loans. Through the MERS System,
MERS becomes the mortgagee of record for participating
members through assignment of the members' interests to
MERS. MERS is listed as the grantee in the official records

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

maintained at county register of deeds offices. The lenders

retain the promissory notes, as well as the servicing rights
to the mortgages. The lenders can then sell these interests
to investors without having to record the transaction in the
public record. MERS is compensated for its services through
fees charged to participating MERS members. (Mortgage
Elec. Registration Sys. v. Nebraska Dept. of Banking and Fin.
(2005) 270 Neb. 529, 530, 704 N.W.2d 784, 785.) A side
effect of the MERS system is that a transfer of an interest in
a mortgage loan between two MERS members is unknown to
those outside the MERS system. (Jackson v. Mortgage Elec.
Registration Sys., Inc. (Minn.2009) 770 N.W.2d 487, 491.)
The deed of trust that Gomes signed states that Borrower
[i.e., Gomes] 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....
**822 Gomes defaulted on his loan payments, and he was
mailed a notice of default and election to sellrecorded on
March 10, 2009which initiated a nonjudicial foreclosure
process. The notice of default was sent to Gomes by
ReconTrust, which identified itself as an agent for MERS.
Accompanying the *1152 notice of default was a declaration
signed by an employee of Countrywide, which apparently
was acting as the loan servicer. 2
2

The deed of trust states that a loan servicer is the entity

that collects Periodic Payments due under the Note and
this Security Instrument and performs other mortgage
loan servicing obligations.

In May 2009 Gomes filed a lawsuit against Countrywide,

MERS and ReconTrust, alleging several causes of action and
attaching as exhibits the deed of trust and the notice of default.
The only causes of action at issue in this appeal are the first
and second causes of action, which are asserted against all
Defendants. 3
3

The remaining causes of action were for (1) quiet title

against Defendants; (2) violation of the Rosenthal Fair
Debt Collection Practices Act (Civ.Code, 1788.10 et
seq.) against Countrywide; (3) violation of Civil Code
section 2943, subdivision (b)(1) against Countrywide;
and (4) unfair competition against Countrywide and

MERS (Bus.Prof.Code, 17200). These causes of action

were all disposed of in connection with the demurrer.

The first cause of action is titled Wrongful Initiation of

Foreclosure. In that cause of action, Gomes states that he
does not know the identity of the Note's beneficial owner
as he believes that KB Home Mortgage Company sold it on
the secondary mortgage market. He alleges on information
and belief that the person or entity who directed the initiation
of the foreclosure process, whether through an agent of
MERS or otherwise, was neither the Note's rightful owner nor
acting with the rightful owner's authority. In short, the first
cause of action alleges, on information and belief, that MERS
did not have authority to initiate the foreclosure because the
current owner of the Note did not authorize MERS to proceed
with the foreclosure. As a remedy, the first cause of action
states that Gomes seeks damages in an amount not less than
$25,000. 4
4

The complaint's general prayer for relief also seeks an

order rescinding the notice of default, along with other
relief, but it is not clear whether those remedies are
sought for the first cause of action.

The second cause of action seeks declaratory relief on the

issue of whether [Civil Code section 2924, subdivision (a) ]
allows a borrower, before his or her property is sold, to bring
a civil action in order to test whether the person electing to
sell the property is, or is duly authorized to do by, the owner
of a beneficial interest in it. Although designated a cause
of action for declaratory relief, the second cause of action
appears to serve simply as a legal argument in support of the
first cause of action. Specifically, the second cause of action
alleges that section 2924, subdivision (a) provides the legal
authority for Gomes to assert the claim he has made in the
first cause of action, namely that MERS lacks the authority to
initiate the foreclosure process because it was not authorized
to do so by the owner of the Note.
*1153 Defendants filed a demurrer. Demurring to the first
cause of action, Defendants argued, among other things, that
(1) to maintain a cause of action for wrongful foreclosure,
Gomes must allege that he is able to tender the full amount
due under the loan; (2) California's nonjudicial foreclosure
statute sets forth an exhaustive framework that does not
provide for the type of relief that Gomes seeks; (3) the terms
of the deed of trust authorize **823 MERS to initiate a
foreclosure proceeding; and (4) if Gomes is arguing that
he is entitled to avoid foreclosure until a defendant has
produced the note, such a claim has been uniformly rejected.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

Demurring to the second cause of action for declaratory relief,

Defendants argued that it was nothing more than a repeat
of the legal theory asserted in the first cause of action and
should be rejected on the same basis.
The trial court sustained the demurrer, without leave to
amend, and entered judgment in favor of Defendants.

II
DISCUSSION
A. Standard of Review
On appeal from an order of dismissal after an order
sustaining a demurrer, our standard of review is de novo,
i.e., we exercise our independent judgment about whether
the complaint states a cause of action as a matter of law.
(Los Altos El Granada Investors v. City of Capitola (2006)
139 Cal.App.4th 629, 650, 43 Cal.Rptr.3d 434.) A judgment
of dismissal after a demurrer has been sustained without
leave to amend will be affirmed if proper on any grounds
stated in the demurrer, whether or not the court acted on that
ground. (Carman v. Alvord (1982) 31 Cal.3d 318, 324, 182
Cal.Rptr. 506, 644 P.2d 192.) In reviewing the complaint,
we must assume the truth of all facts properly pleaded by
the plaintiffs, as well as those that are judicially noticeable.
(Howard Jarvis Taxpayers Assn. v. City of La Habra (2001)
25 Cal.4th 809, 814, 107 Cal.Rptr.2d 369, 23 P.3d 601.)
Further, [i]f 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.... 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....
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, 6 Cal.Rptr.3d 457, 79 P.3d
569, citations omitted (Schifando ).) [S]uch a showing can
be *1154 made for the first time to the reviewing court....
(Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93
Cal.App.4th 700, 711, 113 Cal.Rptr.2d 399, citation omitted.)

B. The Demurrer Was Properly Sustained

1. Gomes Has Not Identified a Legal Basis for an Action

to Determine Whether MERS Has Authority to Initiate a
Foreclosure Proceeding
California's nonjudicial foreclosure scheme is set forth in
Civil Code sections 2924 through 2924k, which provide a
comprehensive framework for the regulation of a nonjudicial
foreclosure sale pursuant to a power of sale contained in
a deed of trust. (Moeller v. Lien (1994) 25 Cal.App.4th
822, 830, 30 Cal.Rptr.2d 777 (Moeller ).) These provisions
cover every aspect of exercise of the power of sale contained
in a deed of trust. (I.E. Associates v. Safeco Title Ins.
Co. (1985) 39 Cal.3d 281, 285, 216 Cal.Rptr. 438, 702
P.2d 596.) The purposes of this comprehensive scheme
are threefold: (1) to provide the creditor/beneficiary with a
quick, inexpensive and efficient remedy against a defaulting
debtor/trustor; (2) to protect the debtor/trustor from wrongful
loss of the property; and (3) to ensure that a properly
conducted sale is final between the parties and conclusive
as to a bona fide purchaser. (Moeller, at p. 830, 30
Cal.Rptr.2d 777.) Because of the exhaustive nature of this
scheme, California appellate **824 courts have refused
to read any additional requirements into the non-judicial
foreclosure statute. (Lane v. Vitek Real Estate Industries
Group (E.D.Cal.2010) 713 F.Supp.2d 1092, 1098; see also
Moeller, at p. 834, 30 Cal.Rptr.2d 777 [It would be
inconsistent with the comprehensive and exhaustive statutory
scheme regulating nonjudicial foreclosures to incorporate
another unrelated cure provision into statutory nonjudicial
foreclosure proceedings.].) 5
5

Although California courts have repeatedly allowed

parties to pursue additional remedies for misconduct
arising out of a nonjudicial foreclosure sale when
not inconsistent with the policies behind the statutes
(California Golf, L.L.C. v. Cooper (2008) 163
Cal.App.4th 1053, 1070, 78 Cal.Rptr.3d 153), Gomes
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. As we will explain, such a requirement
would be inconsistent with the policy behind nonjudicial
foreclosure of providing a quick, inexpensive and
efficient remedy. (See Moeller, supra, 25 Cal.App.4th at
p. 830, 30 Cal.Rptr.2d 777.)

By asserting a right to bring a court action to determine

whether the owner of the Note has authorized its nominee
to initiate the foreclosure process, Gomes is attempting
to interject the courts into this comprehensive nonjudicial
scheme. As Defendants correctly point out, Gomes has

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

identified no legal authority for such a lawsuit. Nothing in the

statutory provisions establishing the nonjudicial foreclosure
process suggests that such a judicial proceeding is permitted
or contemplated.
[1] *1155 In his declaratory relief cause of action, Gomes
sets forth the purported legal authority for his first cause of
action, alleging that Civil Code section 2924, subdivision
(a), by necessary implication, allows for an action to test
whether the person initiating the foreclosure has the authority
to do so. We reject this argument. Section 2924, subdivision
(a)(1) states that a trustee, mortgagee, or beneficiary, or
any of their authorized agents may initiate the foreclosure
process. However, nowhere does the statute provide for a
judicial action to determine whether the person initiating
the foreclosure process is indeed authorized, and we see no
ground for implying such an action. (See Lu v. Hawaiian
Gardens Casino, Inc. (2010) 50 Cal.4th 592, 596, 113
Cal.Rptr.3d 498, 236 P.3d 346 [legislative intent, if any,
to create a private cause of action is revealed through
the language of the statute and its legislative history].)
Significantly, [n]onjudicial foreclosure is less expensive and
more quickly concluded than judicial foreclosure, since there
is no oversight by a court, [n]either appraisal nor judicial
determination of fair value is required, and the debtor has
no postsale right of redemption. (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1236, 44 Cal.Rptr.2d 352,
900 P.2d 601.) The recognition of the right to bring a lawsuit
to determine a nominee's authorization to proceed with
foreclosure on behalf of the noteholder would fundamentally
undermine the nonjudicial nature of the process and introduce
the possibility of lawsuits filed solely for the purpose of
delaying valid foreclosures.

wrongful foreclosure on the ground that assignments of the

deed of trust had been improperly backdated, and thus the
wrong party had initiated the foreclosure process. (Ohlendorf,
supra, 2010 U.S. Dist. Lexis at *2223.) No such infirmity
is alleged here. Moreover, the district court cases from
outside of California are *1156 inapposite because they do
not apply California nonjudicial foreclosure law. The court
in Weingartner, supra, 702 F.Supp.2d 1276, 12821283,
allowed a plaintiff's claim for injunctive relief to proceed
when he produced evidence that the trustee that initiated the
foreclosure was not in fact the trustee at the time and thus
could not proceed under Nevada law. In Castro, supra, 2009
WL 438683, 2009 U.S. Dist. Lexis 14134, the court allowed
a claim for declaratory relief to proceed to determine whether
the defendants were entitled to enforce a promissory note
through nonjudicial foreclosure when the documents before
the court indicated that the entities initiating the foreclosure
process may not have had the rights of the holder of the note
as required by Arizona law. (Id., 2009 WL 438683 at *5, 2009
U.S. Dist. Lexis 14134 at *1516.) It is also significant that
in each of these cases, the plaintiff's complaint identified a
specific factual basis for alleging that the foreclosure was not
initiated by the correct party. Gomes has not asserted any
factual basis to suspect that MERS lacks authority to proceed
with the foreclosure. He simply seeks the right to bring a
lawsuit to find out whether MERS has such authority. No case
law or statute authorizes such a speculative suit. 7
6

[2] [3] [4] Gomes cites three federal district court cases
two of which are unpublishedwhich he says recognize
a right to bring a legal challenge to an entity's authority
7
to initiate a foreclosure process. (Weingartner v. Chase
Home Finance, LLC (D.Nev.2010) 702 F.Supp.2d 1276
(Weingartner ); Castro v. Executive Trustee Services, LLC
(D.Ariz.2009, Feb. 23, 2009, No. CV082156PHXLOA)
2009 WL 438683, 2009 U.S. Dist. Lexis 14134 (Castro );
**825 Ohlendorf v. Am. Home Mortgage Servicing (E.D.
Cal.2010, Mar. 31, 2010, No. CIV. S092081 LKK/EFB)
2010 U.S. Dist. Lexis 31098 (Ohlendorf ).) 6 The cases are
not controlling on us and, in any event, they are not on point,
as none recognize a cause of action requiring the noteholder's
nominee to prove its authority to initiate a foreclosure
proceeding. For instance, in Ohlendorf, the plaintiff alleged

Although we may not rely on unpublished California

cases, the California Rules of Court do not prohibit
citation to unpublished federal cases, which may
properly be cited as persuasive, although not binding,
authority. (Landmark Screens, LLC v. Morgan, Lewis
Bockius, LLP (2010) 183 Cal.App.4th 238, 251, fn. 6,
107 Cal.Rptr.3d 373, citing Cal. Rules of Court, rule
8.1115.)
As we understand Gomes's first and second causes
of action, he is alleging that MERS might not have
been authorized by the current holder of the Note
to initiate foreclosure proceedings, and he is entitled
to bring a lawsuit to determine whether MERS was
in fact authorized. Although we focus on this legal
theory in addressing whether the demurrer was properly
sustained, we note that certain portions of Gomes's
appellate briefing suggest he may be arguing that even
if MERS was authorized by the noteholder to initiate
a foreclosure, MERS would not have standing to do
so. For example, Gomes cites a Kansas case holding
that MERS did not have standing to intervene in a
judicial foreclosure case. (Landmark Nat'l Bank v. Kesler

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681
(2009) 289 Kan. 528, 216 P.3d 158, 166.) Gomes also
contends that other out-of-state cases have found that
MERS' limited role means it lacks independent standing
to foreclose, or independent power to convey standing
by transferring a note. If, by citing these cases, Gomes
means to argue that MERS lacks standing in California
to initiate a nonjudicial foreclosure, the argument is
without merit because under California law MERS may
initiate a foreclosure as the nominee, or agent, of the
noteholder. As we have explained, Civil Code section
2924, subdivision (a)(1) states that a trustee, mortgagee,
or beneficiary, or any of their authorized agents may
initiate the foreclosure process. (Italics added.)

Gomes appears to acknowledge that 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. He argues, however,
that we should nevertheless interpret the statute to provide
for such a right because the Legislature may not have
**826 contemplated or had time to fully respond to the
present situation. That argument should be addressed in
the first instance to the Legislature, not the courts. Because
California's nonjudicial foreclosure statute is unambiguously
silent on any right to bring the type of action identified by
Gomes, there is no basis for the courts to create such a right.
We therefore conclude that the trial court *1157 properly
sustained Defendants' demurrer to the first and second causes
of action in Gomes's complaint. 8
8

As we upheld the sustaining of the demurrer on another

ground, we need not and do not consider whether, as
the trial court ruled, the first cause of action fails on
the ground that Gomes has not pled that he is prepared
to tender the amount owing on the Note. (See Arnolds
Management Corp. v. Eischen (1984) 158 Cal.App.3d
575, 578, 205 Cal.Rptr. 15 [It is settled that an action
to set aside a trustee's sale for irregularities in sale notice
or procedure should be accompanied by an offer to pay
the full amount of the debt for which the property was
security.].)

2. Gomes Agreed in the Deed of Trust That MERS Is

Authorized to Initiate a Foreclosure Proceeding
[5] As an independent ground for affirming the order
sustaining the demurrer, we conclude that even if there was
a legal basis for an action to determine whether MERS
has authority to initiate a foreclosure proceeding, the deed
of trustwhich Gomes has attached to his complaint
establishes as a factual matter that his claims lack merit.
As stated in the deed of trust, Gomes agreed by executing

that document that MERS has the authority to initiate a

foreclosure. Specifically, Gomes agreed that MERS (as
nominee for Lender and Lender's successors and assigns)
has ... the right to foreclose and sell the Property. The deed
of trust contains no suggestion that the lender or its successors
and assigns must provide Gomes with assurances that MERS
is authorized to proceed with a foreclosure at the time it is
initiated. 9 Gomes's agreement that MERS has the authority
to foreclose thus precludes him from pursuing a cause of
action premised on the allegation that MERS does not have
the authority to do so.
9

The parties debate in their briefing whether MERS

should be considered a beneficiary of the deed of trust
and thus authorized to initiate a foreclosure proceeding,
regardless of whether it is authorized by the holder
of the note, under the statutory provision stating that
the beneficiary is entitled to initiate a foreclosure.
(Civ.Code, 2924, subd. (a)(1).) As the parties discuss,
some federal district courts have observed that although
identified as a beneficiary in a deed of trust, MERS
is not acting in the role of a beneficiary as that term
is commonly used, and that MERS in fact acts as a
nominee, and thus an agent of the beneficiary. (See,
e.g., Roybal v. Countrywide Home Loans, Inc. (D.Nev.,
Dec. 9, 2010, No. 2:10CV750ECRPAL) 2010 WL
5136013, *4, 2010 U.S. Dist. Lexis 131287, *11 [there
is a near consensus among district courts in this circuit
that while MERS does not have standing to foreclose as
a beneficiary, because it is not one, it does have standing
as an agent of the beneficiary where it is the nominee of
the lender, who is the true beneficiary]; Weingartner,
supra, 702 F.Supp.2d at p. 1280 [Calling MERS a
beneficiary is both incorrect and unnecessary ..., and
[c]ourts often hold that MERS does not have standing
as a beneficiary because it is not one, regardless of what
a deed of trust says, but that it does have standing as
an agent of the beneficiary where it is the nominee of
the lender (who is the true beneficiary).].) However,
because Civil Code section 2924, subdivision (a)(1) and
the deed of trust permit MERS to initiate foreclosure as a
nominee (i.e., agent) of the noteholder, we need not, and
do not, decide whether MERS is also a beneficiary as
that term is used in California's nonjudicial foreclosure
statute.

Relying on the terms of the applicable deeds of trust, courts

have rejected similar challenges to MERS's authority to
foreclose. In **827 Pantoja v. *1158 Countrywide Home
Loans, Inc. (N.D.Cal.2009) 640 F.Supp.2d 1177, the federal
district court pointed out that in the deed of trust, the plaintiff
distinctly granted MERS the right to foreclose through the

2013 Thomson Reuters. No claim to original U.S. Government Works.

Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011)

121 Cal.Rptr.3d 819, 11 Cal. Daily Op. Serv. 2322, 2011 Daily Journal D.A.R. 2681

power of sale provision, giving MERS the right to conduct

the foreclosure process under [Civil Code s]ection 2924,
and therefore [s]ince Plaintiff granted MERS the right to
foreclose in his contract, his argument that MERS cannot
initiate foreclosure proceedings is meritless. (Id. at pp. 1189,
1190.) Similarly, another court pointed out that [u]nder the
mortgage contract, MERS has the legal right to foreclose
on the debtor's property.... MERS is the owner and holder
of the note as nominee for the lender, and thus MERS
can enforce the note on the lender's behalf. (Morgera v.
Countrywide Home Loans, Inc. (E.D.Cal., Jan. 11, 2010, No.
2:09cv01476MCEGGH) 2010 WL 160348, *8, 2010
U.S. Dist. Lexis 2037, *22, citation omitted.) Following this
same approach, we conclude that Gomes's first and second
causes of action lack merit for the independent reason that by
entering into the deed of trust, Gomes agreed that MERS had
the authority to initiate a foreclosure.

3. Gomes Has Not Established That He Can Cure the

Defects in His Complaint by Amending
We must also consider whether Gomes has shown that there
is a reasonable probability that he could cure the defects
that we have identified in the first and second causes of
action. (Schifando, supra, 31 Cal.4th at p. 1081, 6 Cal.Rptr.3d
457, 79 P.3d 569.) Gomes contends that he could amend his
complaint to plead more specific theories ... on information
and belief such as those theories discussed in Ohlendorf,
supra, 2010 U.S. Dist. Lexis 31098, and Weingartner, supra,
702 F.Supp.2d 1276.

Lexis 31098 at *2223.) To conform to the theory pled

in Weingartner, Gomes would have to plead that a trustee
initiated the foreclosure proceeding but was not actually the
trustee at the time. (Weingartner, supra, 702 F.Supp.2d at p.
1282.) However, Gomes has conceded that he cannot plead
facts meeting those scenarios because respondents have
not recorded any assignments or provided any descriptions
of assignments. A [p]laintiff may allege on information
and belief any matters that are not within his personal
knowledge, if he has information leading him to believe that
the allegations are true (Doe v. City of Los Angeles
(2007) 42 Cal.4th 531, 550, 67 Cal.Rptr.3d 330, 169 P.3d
559, italics added), and thus a pleading made on information
and belief is insufficient if it merely assert[s] the facts so
alleged without alleging such information that lead[s] [the
plaintiff] to believe that the *1159 allegations are true. (Id.
at p. 551, fn. 5, 67 Cal.Rptr.3d 330, 169 P.3d 559.) Because
Gomes has conceded that he has no specific information
about assignments of the Note, he would not be able to
plead on information and belief, based on facts leading him
to believe they were true, the theories alleged in Ohlendorf
and Weingartner. We therefore conclude that the trial court
properly sustained the demurrer without leave to amend.

DISPOSITION
The judgment is affirmed.

WE CONCUR: NARES, Acting P.J., and McINTYRE, J.

[6] [7] [8] To attempt to state a claim as in Ohlendorf,
Gomes would have to plead that the specific party who
Parallel Citations
initiated the foreclosure process was not the proper party
192 Cal.App.4th 1149, 11 Cal. Daily Op. Serv. 2322, 2011
to do so because assignments of the deed of trust were
Daily Journal D.A.R. 2681
improperly backdated. (Ohlendorf, supra, 2010 U.S. Dist.
End of Document

2013 Thomson Reuters. No claim to original U.S. Government Works.

2013 Thomson Reuters. No claim to original U.S. Government Works.

Filed 4/25/14

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

COURT OF APPEAL SECOND DIST.

DIVISION ONE

Apr 25, 2014

JOSEPH A. LANE, Clerk

TSVETANA YVANOVA,
Plaintiff and Appellant,
v.

No. B247188

 sstahl

Deputy Clerk

(Los Angeles County

Super. Ct. No. LC097218)

NEW CENTURY MORTGAGE

CORPORATION et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of Los Angeles County. Russell
Kussman, Judge. Affirmed.
Tsvetana Yvanova, in pro. per., for Plaintiff and Appellant.
Houser & Allison, Robert W. Norman, Jr., Patrick S. Ludeman, for Defendants
and Respondents.

___________________________________

Plaintiff Tsvetana Yvanova, in pro. per., brought an action against numerous

financial institutions, alleging the mortgage and deed of trust on her residence were
improperly securitized and assigned from the original lender to several successive
mortgagees and trustees, and ultimately improperly sold at foreclosure. Plaintiff alleged
instances of transfer fraud, claimed several assignments were ineffective, and denied that
the ultimate trustee possessed a valid interest in the property. Although the only cause of
the action in the operative complaint was entitled To Quiet Title, plaintiff also sought
restitution, damages, and declaratory relief. Defendants demurred to the complaint on the
ground that plaintiff failed to state a cause of action for quiet title in that she failed to
allege she tendered the loan balance. The trial court sustained the demurrer without leave
to amend on that ground.
We affirm.
Background
Complaint
Plaintiffs original and first amended complaints, defendants demurrers thereto
and the rulings on those demurrers are not in the record on appeal. We take the facts
from the second amended complaint, which is operative, for now accepting them as true,
and from matters properly subject to judicial notice. The complaint is somewhat difficult
to understand, as it includes plaintiffs questions, arguments and evidence, citations to
authority, references to civil pleadings in other jurisdictions, and an unclear timeline.
From a close reading, however, we glean the following facts.
In 2006, plaintiff executed a promissory note in the amount of $483,000 secured
by a deed of trust on her residence in Woodland Hills, California. The lender and
beneficiary was New Century Mortgage Corporation. The trustee was Stewart Title
Company. The deed of trust entitled the lender to substitute the trustee without notice to
the borrower, assign the note to third parties without notice, and sell the property in case
of default.

According to recorded documents, in August 2008 the trustee served plaintiff with
a notice of default and election to sell, alleging plaintiff was in default on the note in the
amount of $14,711.79. In 2007, when New Century Mortgage was in bankruptcy, the
deed of trust was assigned by means of a Pooling and Servicing Agreement to Deutsche
Bank National Trust Company as trustee for the Morgan Stanley ABS Capital I Inc. Trust
2007-HE1 Mortgage Pass Through Certificates, Series 2007-HE1, a mortgage-backed
security (MBS), i.e., a collection or pool of mortgages packaged together into a security
that is then sold to investors. We will hereafter refer to the security as the Morgan
Stanley MBS.
In January 2012, Deutsche Bank served plaintiff with a second notice of default
and election to sell, claiming she was in default on the note in the amount of $63,960.80.
In February 2013, Western Progressive, LLC, was substituted in as trustee. In August
2012, Western Progressive executed a notice of trustees sale, claiming plaintiff had an
unpaid loan balance in the amount of $537,934.03. On September 14, 2012, Western
Progressive sold the property to THR California, LLC for $355,000.01 and recorded a
trustees deed upon sale.
Plaintiff continues to live in the Woodland Hills residence.
Plaintiff filed suit on May 14, 2012. After two rounds of demurrer, plaintiff filed
the second amended complaint. The complaint, entitled Action to Quiet Title,
contained one cause of action, captioned, To Quiet Title. In it, plaintiff made three
substantive allegations: (1) The assignment of the deed of trust to Deutsche Bank was
ante-dated, misrepresents material facts and entities, that render the instrument void;
(2) the substitution of Western Progressive as trustee is void, due to ante dating,
violating procedural trust rules and using entities, which do not have authority to act;
and (3) Western Progressive conducted unlawful defective auction sale (in violation of
California Secretary of State regulations and Civ Code 1812.6) and subsequently
executed a Trustees Deed that is invalid, since its validity entirely depends on the
previously recorded security instruments.
3

Plaintiff alleged the 2006 deed was void due to Notary fraud, Robo-signed
instruments, misidentification of entities, ante-dating of instruments, misrepresentation of
material fact within the recorded public documents, void ab initio Deed of Trust and
Assignment of Deed, due to the use of non-existent business entities, officially out of
business or without authority to act.
Plaintiff also alleged the 2011 transfer to Deutsche Bank was invalid because New
Century Mortgage had entered into bankruptcy in August 2008, and the purported
assignment to Deutsche Bank after liquidation was made without the authorization of the
bankruptcy trustee and was irregular in several respects. Although several of the
purported irregularities are specious (for example, plaintiff queries why an entity
incorporated under the laws of one state might list its address in another state), the
essence of plaintiffs allegations is that recorded documents, without more, do not
establish chain of title running to Deutsche Bank. Ultimately, plaintiff alleged, Deutsche
Bank never possessed the trust deed, and all downstream transfers were therefore void.
She further alleged that transfer of the promissory note in blank from New Century
Mortgage to Morgan Stanley terminated the security interest in her property.
On February 7, 2012, defendants demurred to the second amended complaint on
the ground that plaintiff failed to state a cause of action for quiet title because she failed
to allege tender to cure her default on the promissory note. Defendants argued plaintiffs
allegations in the complaint were irrelevant without an allegation of tender, or fraud at
the time the deed of trust was entered into. On February 8, 2013, the trial court sustained
defendants demurrer without leave to amend for the reasons stated in defendants
moving papers. The court noted that at the hearing plaintiff represented she had not
attempted to discharge the debt or tender the amount owed, and therefore could not quiet
title in herself.
Defendants represent that the trial court entered judgment in their favor on
February 8, 2013, but no such judgment has been included in the record on appeal.
Neither does the record contain plaintiffs notice of appeal.
4

After an initial round of briefing on appeal we requested further briefing on

whether plaintiffs allegations might support a cause of action for wrongful foreclosure.
In response, both parties submitted extensive letter briefs, which we have considered.
DISCUSSION
A.

Standard of review
In reviewing an order sustaining a demurrer without leave to amend, we accept as

true the properly pleaded factual allegations of the complaint. (McCall v. PacifiCare of
California, Inc. (2001) 25 Cal.4th 412, 415.) Where, as here, the complaint references
the terms of a contract, we consider those terms as part of the pleading. Furthermore, the
allegations of the complaint must be liberally construed with a view to attaining
substantial justice among the parties. (Code Civ. Proc., 452; King v. Central Bank
(1977) 18 Cal.3d 840, 843.) We review the complaint de novo to determine whether the
trial court properly sustained the demurrer. (Cantu v. Resolution Trust Corp. (1992) 4
Cal.App.4th 857, 879.)
B.

Procedural Defects
Plaintiffs appeal is defective in several respects. Most immediately, plaintiff has

provided us with no notice of appeal. But as defendants represent that judgment has been
entered and do not complain the appeal is untimely, we will presume the appeal is proper.
Plaintiffs submissions on appeal disregard many rules of court. Her opening brief
is improperly formatted and contains no statement of appealability, certificate of
interested parties, table of contents, table of authorities, or certificate of word count.
(Cal. Rules of Court, rules 8.204, subd. (a)(2)(A-B), 8.208, 8.204, subds. (a)(c).)
Further, plaintiff lodged a four-volume appellants appendix, but the appendix contains
no proof of service, and defendants represent they were never served with one, in
violation of court rule 8.124, subdivision (e)(1)(A).
Plaintiff argues that a trial court may not dismiss a case brought by a litigant in
propria persona, and as such a litigant she need not comply with the courts rules. She is
incorrect. A party may choose to act as his or her own attorney, but such a party is to be
5

treated like any other party and is entitled to the same, but no greater consideration than
other litigants and attorneys. (Barton v. New United Motor Manufacturing (1996) 43
Cal.App.4th 1200, 1210.) As with attorneys, in propria persona litigants must follow
correct rules of procedure. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246-1247.)
Defendants request that we disregard plaintiffs opening brief and appendix.
Although it is within our discretion to do so, we think our request for further briefing
clarified the pertinent issues and gave both parties an opportunity to address them.
C.

Substantive Issue
Plaintiffs essential allegation is that Deutsche Banks receipt of title from New

Century Mortgages bankruptcy estate was defective for several specified reasons.
Deutsche Bank therefore had no proper title to her trust deed and no standing to
foreclose. Plaintiff contends this defect permits her to quiet title. Defendants demurred,
and the trial court sustained the demurrer, on the ground that plaintiffs default and
failure to tender the amount due on her loan deprived her of standing to seek quiet title.
As defendants argued and the trial court found, plaintiff is not entitled to quiet title
because she failed to allege she tendered funds to discharge her debt. (Aguilar v. Bocci
(1974) 39 Cal.App.3d 475, 477 [a plaintiff may not quiet title in himself without
discharging his debt].) But when evaluating a complaint the court must attend to the facts
properly alleged therein, not the labels appended to them or the theories for recovery.
(Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 592.) We construe the
complaint liberally, in attempt to attain substantial justice between the parties. (King v.
Central Bank, supra, 18 Cal.3d at p. 843.)
In our request for letter briefing we invited the parties to discuss, in essence,
whether plaintiff should be given leave to amend to allege a cause of action for wrongful
foreclosure. Plaintiff responded as follows: Despite the fact that Plaintiff/Appellant has
presented all facts and factual allegations correctly, to support her claim and additional 41

Plaintiffs request for leave to file a time chart is granted.

6

5 causes of actionthe core facts remain unchanged. However, a leave to amend will
greatly benefit the framing of the case for two reasons: First: New developments in the
economic and legal history since 2012 and new annotated case law supporting the issues
discussed and Second: following the Supplement brief questions, Appellant/Plaintiff will
be able to frame the same issues in a more succinct and focused manner with more
appropriate causes of action. Defendants, on the other hand, argued amendment would
be futile because plaintiff cannot state a cause of action for declaratory relief or wrongful
foreclosure for the same reasons she may not quiet title in herself: She has no standing to
challenge Deutsch Banks claim to title.
We agree with defendants. Because a promissory note is a negotiable instrument,
a borrower must anticipate it can and might be transferred to another creditor. As to
plaintiff, an assignment merely substituted one creditor for another, without changing her
obligations under the note. (Herrera v. Federal National Mortgage Assn. (2012) 205
Cal.App.4th 1495, 1507.) An impropriety in the transfer of a promissory note would
therefore affect only the parties to the transaction, not the borrower. The borrower thus
lacks standing to enforce any agreements relating to such transactions. (Jenkins v.
JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515 (Jenkins).)
Plaintiff argues the transfer of her promissory note and deed of trust from New
Century Mortgage to Deutsch Bank and the subsequent securitization of the note were
improper. But even if she is correct, the relevant parties to such a transaction were the
holders (transferors) of the promissory note and the third party acquirers (transferees) of
the note. As an unrelated third party to the alleged securitization, and any other
subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks
standing to enforce any agreements, including the investment trusts pooling and
servicing agreement, relating to such transactions. (Jenkins, supra, 216 Cal.App.4th at
p. 515.) Plaintiff would not be the victim of such invalid transfers 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
7

and may suffer the unauthorized loss of its interest in the note. It is also possible to
imagine one or many invalid transfers of the promissory note may cause a string of civil
lawsuits between transferors and transferees. (Ibid.) But plaintiff may not assume the
theoretical claims of hypothetical transferors and transferees to assert causes of action
for declaratory relief or wrongful foreclosure. (Ibid.)
Plaintiff argues Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 supports
her argument that a borrower may challenge a nonjudicial foreclosure based on
allegations that one or more transfers in the chain of title of a trust deed was void. She is
correct. There, after concluding that noncompliance with the terms of a pooling and
servicing agreement would render an assignment void, the court adopted without analysis
the majority rule in Texas that an obligor may resist foreclosure on any ground that
renders an assignment in the chain of title void. (Reinagel v. Deutsche Bank Natl Trust
Co. (5th Cir. Tex. 2013) 722 F.3d 700, 705.)
But no California court has followed Glaski on this point, and many have
pointedly rejected it. (See, e.g., Apostol v. Citimortgage, Inc. (N.D.Cal., Nov. 21, 2013)
2013 U.S.Dist. Lexis 167308, 23-24; Dahnken v. Wells Fargo Bank, N.A., C 13-2838
PJH (N.D.Cal., Nov. 8, 2013) 2013 U.S.Dist. Lexis 160686; In re Sandri (Bankr.
N.D.Cal., Nov. 4, 2013) 2013 Bankr. Lexis 4663.) And as discussed above, Jenkins is
directly to the contrary. We agree with the reasoning in Jenkins, and decline to follow
Glaski.
Plaintiff alleges nothing unlawful about the foreclosure process beyond the
argument that an allegedly deficient assignment and securitization deprived Deutsche
Bank of an interest in the property. She has no standing to make such a claim.
Therefore, any cause of action for wrongful foreclosure would fail as a matter of law.

DISPOSITION
The judgment is affirmed. Respondents are to receive their costs on appeal.
NOT TO BE PUBLISHED

CHANEY, J.
We concur:

ROTHSCHILD, Acting P. J.

JOHNSON, J.