Thursday, September 04, 2014

Mortgagor lacks standing to dispute or enforce PSA or Assignment of Note.

These two opinions show why securitization and assignment arguments MUST fail in a foreclosure dispute.  Borrower suffered no injury, has no interest in, and never became a party to the Pooling and Servicing Agreement (PSA) or any assignment of the note.  So, the borrower has no standing to dispute or enforce the assignment or PSA.


Maynard v. Wells Fargo Bank, N.A. (S.D. Cal., 2013) (“Plaintiffs also allege that they conducted a Securitization Audit of Plaintiffs’ chain of title and Wachovia’s PSA, and as a result, determined that Plaintiffs’ Note and DOT were not properly conveyed into the Wells Fargo Trust on or before July 29, 2004, the closing date listed in the Trust Agreement. (Id. at ¶ 34.)… To the extent Plaintiffs challenge the validity of the securitization of the Loan because Wells Fargo and U.S. Bank failed to comply with the terms of the PSA or the Trust Agreement, Plaintiffs are not investors of the Loan, nor are Plaintiffs parties to the PSA or Trust Agreement. Therefore, as many courts have already held, Plaintiffs lack standing to challenge the validity of the securitization of the Loan…Furthermore, although Plaintiffs contend they have standing to challenge the validity of the Assignment because they were parties to the DOT with the original lender (Wells Fargo), this argument also fails. (Doc. No. 49 at 11-12.).

Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 511-13, 156 Cal. Rptr. 3d 912 (Cal. Ct. App. 2013) (“[E]ven if any subsequent transfers of the promissory note were invalid, [the borrower] is not the victim of such invalid transfers because her obligations under the note remained unchanged.”). As stated above, these exact arguments have been dismissed by countless other courts in this circuit. Accordingly, Plaintiffs’ contentions that the Assignment is void due to a failure in the securitization process fails.”).



--

Bob Hurt            Blog 1 2 3   f  t  
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Thursday, August 28, 2014

To Florida Justices regarding Mortgage Notes and Foreclosure Complaints

Executive Summary

The author presents for the Florida Supreme Court Justices' consideration a request for adjustments to the Florida Rules of Civil Procedure with respect to Mortgage Foreclosure complaints, and clarification to the trial courts of the importance of heeding the evidence code requirement of admitting originals, but not copies, of negotiable instruments, and therefore of requiring reestablishment of lost notes in lieu of allowing enforcement of lost notes.

Please forward this to the justices.

Adjusting the Rules for Foreclosure Complaints

The Florida Rules of Civil Procedure, crafted by Florida's Supreme Court, contains a model foreclosure complaint form with the following words:
FORM 1.944. MORTGAGE FORECLOSURE
COMPLAINT
Plaintiff, A. B., sues defendant, C. D., and alleges:
1. This is an action to foreclose a mortgage on real property in .................. County, Florida.
2. On .....(date)....., defendant executed and delivered a promissory note and a mortgage securing payment of the note to plaintiff. The mortgage was recorded on .....(date)....., in Official Records Book .......... at page .......... of the public records of .................... County, Florida, and mortgaged the property described in the mortgage then owned by and in possession of the mortgagor, a copy of the mortgage containing a copy of the note being attached.
3. Plaintiff owns and holds the note and mortgage.
...

The language of point 3, requiring the words "Plaintiff owns and holds the note and mortgage," violates both the Uniform Commercial Code adopted by Florida's Legislature, AND controlling case law. 

Florida UCC Enforcing
673.3011 Person entitled to enforce instrument.The term “person entitled to enforce” an instrument means:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of a holder; or
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s.673.3091 or s. 673.4181(4).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

And yet, any Circuit court hearing a foreclosure case might dismiss the complaint for failing to plead as required in the above form.  In One West Bank v Bauer, One West held a note indorsed in blank, but failed to prove it owned the note.  About this the Florida 2nd DCA wrote as follows:

http://www.2dca.org/opinions/Opinion_Pages/Opinion_Pages_2014/May/May%2030,%202014/2D12-5393.pdf

Case law is clear that the proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder's representative. See Stone v. BankUnited, 115 So. 3d 411, 413 (Fla. 2d DCA 2013) (" 'Because a promissory note is a negotiable instrument and because a mortgage provides the security for the repayment of the note, the person having standing to foreclose a note secured by a mortgage may be either the holder of the note or a nonholder in possession of the note who has the rights of a holder.' " (quoting Mazine v. M & I Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011))); Mortg. Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007); Troupe v. Redner, 652 So. 2d 394, 395-96 (Fla. 2d DCA 1995). Because One West Bank possessed the original note, endorsed in blank, it was the lawful holder of the note entitled to enforce its terms. See Taylor v. Bayview Loan Servicing, LLC, 74 So. 3d 1115, 1117 (Fla. 2d DCA 2011); BAC Funding Consortium, Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010); Azize, 965 So. 2d at 153.

Although One West Bank incorrectly pleaded that it held and owned the Bauers' note and mortgage, there is no dispute that One West Bank was in possession of the note at the time the foreclosure complaint was filed. In requiring One West Bank to prove ownership of the loan documents to establish its standing to foreclose, we conclude the trial court departed from the essential requirements of law by imposing a condition that is not required resulting in irreparable harm. See Deutsche Bank Nat'l Trust Co. v. Prevratil, 120 So. 3d 573, 575-76 (Fla. 2d DCA 2013) (granting petition for writ of certiorari from a trial court's order imposing a verification requirement for foreclosure complaint that was not required by law).

My case citations above deal with the note, but similar opinions deal with rights to enforce the mortgage. The SCOTUS opined as follows in Carpenter v Longan (1872), cited countless times across the land and never overturned,
"The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity."
Obviously whoever possesses a mortgage note indorsed in blank, or that holder's agent, may enforce it.  Just as obviously, the mortgage gets its power from the note and the mortgage holder may enforce it if authorized by the note holder, under the above UCC statute.

Thus, the statute and case law makes it obvious that the Florida Supreme Court justices grievously erred in their requirement that foreclosure plaintiffs claim they own and hold the note.  That forces many of them to commit perjury or file a sham pleading in order to exercise their enforcement rights.

The Justices should change that requirement to make it comport with the law and common sense.

Re-Establish Lost Note for Admission into Evidence

It seems axiomatic that one cannot enforce what does not exist.  The evidence code prohibits admission of a copy of a negotiable instrument into evidence.  Therefore, plaintiffs should re-establish a lost note first and foremost.

The Justices should provide clarification of the dichotomy presented by the Florida Statute 673.3091, 71.011, and 90.953.  These have caused intense confusion in foreclosures, mainly because so many plaintiffs blatantly lie to the court about having lost or destroyed the mortgage note, then, miraculously, manage to find it well into the proceeding. 

Incidentally, the Supreme Court seem incapable of imposing discipline on foreclosure mill law firm attorneys who in turn impose no discipline on their clients.  Following that example the trial courts let foreclosure plaintiffs and their attorneys get away with rampant perjury.  I personally think the Supreme Court should counsel the trial courts to file criminal complaints against such plaintiffs and their attorneys for conspiracy to defraud the court and for perjury.

673.3091 Enforcement of lost, destroyed, or stolen instrument.
(1) A person not in possession of an instrument is entitled to enforce the instrument if:
(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and
(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

71.011 Reestablishment of papers, records, and files.All papers, written or printed, of any kind whatsoever, and the records and files of any official, court or public office, may be reestablished in the manner hereinafter provided.
(1) WHO MAY REESTABLISH.Any person interested in the paper, file or record to be reestablished may reestablish it.
(2) VENUE.If reestablishment is sought of a record or file, venue is in the county where the record or file existed before its loss or destruction. If it is a private paper, venue is in the county where any person affected thereby lives or if such persons are nonresidents of the state, then in any county in which the person seeking the reestablishment desires.
(3) REMEDY CONCURRENT.Nothing herein shall prevent the reestablishment of lost papers, records and files at common law or in equity in the usual manner.
(4) EFFECT.
(a) Any paper, record or file reestablished has the effect of the original. A private paper has such effect immediately on recording the judgment reestablishing it, but a reestablished record does not have that effect until recorded and a reestablished paper or file of any official, court or public officer does not have that effect until a certified copy is filed with the official or in the court or public office where the original belonged. A certified copy of any reestablished paper, the original of which is required or authorized by law to be recorded, may be recorded.
(b) When any deed forming a link in a chain of title to land in this state has been placed on the proper record without having been acknowledged or proven for record and has thereafter been lost or destroyed, certified copies of the record of the deed as so recorded may be received as evidence to reestablish the deed if the deed has been so recorded for 20 years.
(5) COMPLAINT.A person desiring to establish any paper, record or file, except when otherwise provided, shall file a complaint in chancery setting forth that the paper, record or file has been lost or destroyed and is not in the custody or control of the petitioner, the time and manner of loss or destruction, that a copy attached is a substantial copy of that lost or destroyed, that the persons named in the complaint are the only persons known to plaintiff who are interested for or against such reestablishment.
Furthermore, only Florida, from what I can tell so far, has an element of its evidence code (90.953) forbidding admission of a copy of a mortgage note (a form of negotiable instrument) into evidence.  This flies in the face of the Florida Statute 673.3091, enforcement of a lost, destroyed, or stolen note.  The Supreme Court should recommend to the Legislature an adjustment to 90.953  to accommodate 673.3091 OR encourage the trial courts to direct plaintiffs to reestablish their "lost" notes under Florida Statute 71.011 before proceeding to foreclose on the re-established note. In my opinion, owners of beneficial interest in the note should not need a separate proceeding to accomplish this.  It should become a standard part of any foreclosure proceeding. 

Furthermore, the trial courts should not punish mortgagors for failing to make payments on a note that does not exist (in other words, until after reestablishment).  Loan servicers routinely refuse to show the original note when mortgagors demand to see strict proof that they owe the debt, and that seems like a blatant violation of the Fair Debt Collection Practices Act.  The note IS the debt, after all.  Without it, no debt exists, AND the mortgage security instrument has zero validity.  If trial courts did their duty, they would not allow foreclosure without a valid note and would not punish nonpayment by borrowers for whom the servicer refused to show the original note as proof of claim.

--

Bob Hurt            Blog 1 2 3   f  t  
2460 Persian Drive #70
Clearwater, FL 33763
Email Call: (727) 669-5511
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Florida Supremes Confuse Foreclosure Litigants and Judges


The Florida Rules of Civil Procedure, crafted by Florida's Supreme Court, contains a model foreclosure complaint form with the following words:


FORM 1.944. MORTGAGE FORECLOSURE
COMPLAINT
Plaintiff, A. B., sues defendant, C. D., and alleges:
1. This is an action to foreclose a mortgage on real property in .................. County, Florida.
2. On .....(date)....., defendant executed and delivered a promissory note and a mortgage securing payment of the note to plaintiff. The mortgage was recorded on .....(date)....., in Official Records Book .......... at page .......... of the public records of .................... County, Florida, and mortgaged the property described in the mortgage then owned by and in possession of the mortgagor, a copy of the mortgage containing a copy of the note being attached.
3. Plaintiff owns and holds the note and mortgage.
...

The language of point 3, requiring the words "Plaintiff owns and holds the note and mortgage," violates both the Uniform Commercial Code adopted by Florida's Legislature, AND controlling case law. 


673.3011 Person entitled to enforce instrument.The term “person entitled to enforce” an instrument means:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of a holder; or
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s.673.3091 or s. 673.4181(4).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
673.3091 Enforcement of lost, destroyed, or stolen instrument.
(1) A person not in possession of an instrument is entitled to enforce the instrument if:
(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and
(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.






And yet, any Circuit court hearing a foreclosure case might dismiss the complaint for failing to plead as required in the above form.  In One West Bank v Bauer, One West held a note indorsed in blank, but failed to prove it owned the note.  About this the Florida 2nd DCA wrote as follows:

http://www.2dca.org/opinions/Opinion_Pages/Opinion_Pages_2014/May/May%2030,%202014/2D12-5393.pdf


Case law is clear that the proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder's representative. See Stone v. BankUnited, 115 So. 3d 411, 413 (Fla. 2d DCA 2013) (" 'Because a promissory note is a negotiable instrument and because a mortgage provides the security for the repayment of the note, the person having standing to foreclose a note secured by a mortgage may be either the holder of the note or a nonholder in possession of the note who has the rights of a holder.' " (quoting Mazine v. M & I Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011))); Mortg. Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007); Troupe v. Redner, 652 So. 2d 394, 395-96 (Fla. 2d DCA 1995). Because One West Bank possessed the original note, endorsed in blank, it was the lawful holder of the note entitled to enforce its terms. See Taylor v. Bayview Loan Servicing, LLC, 74 So. 3d 1115, 1117 (Fla. 2d DCA 2011); BAC Funding Consortium, Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010); Azize, 965 So. 2d at 153.


Thus, the statute and case law makes it obvious that the Florida Supreme Court justices grievously erred in their requirement that plaintiffs claim they own and hold the note.

They should change that requirement accordingly.


--

Bob Hurt            Blog 1 2 3   f  t  
2460 Persian Drive #70
Clearwater, FL 33763
Email Call: (727) 669-5511
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Thursday, August 21, 2014

Bitching At Google About Blogger's Composer

Dear Google:

Apparently you think your Blogger works JUST FINE.  That seems apparent because you don't give any mechanism to bloggers to complain about it.

So, let me clue you in.  BLOGGER's COMPOSER SUCKS!

Yes, I composed this.  But I want to compose in Word and then publish from there to Blogger.  That became impossible when you broke the mechanism a few years ago.

All right. I want to compose in Google Docs and publish from there to Blogger.  Impossible.  For some IDIOTIC REASON, you never enabled that feature.

In order for me to show a Google Doc article in Blogger, I have to Embed it, and of course THAT SUCKS TOO, because many blog layouts don't accommodate the necessary screen size to show the document properly.

I want to cut and paste from my Email composer Thunderbird into Blogger.  That is utterly BRAINDEAD.  It loses all the images.  Don't worry, I have bitched at Mozilla about that too (and any Thunderbird developers can consider these comments as MORE well-deserved BITCHING.

WTF is wrong with you developers?  Can't you grok the simple reality that I want to use the tools I have become used to, and it is YOUR RESPONSIBILITY to accommodate them in the mechanisms that earn you billions of dollars in ad revenue, like blogs made on Blogger.

Even when I email to blogger it screws up the formatting of the document.  And God Help Me if I try to edit that screwed up formatting in composer.  Blogger provides no mechanism to undo spans that float right, etc, so I have to go into the HORRID HTML editor to do that.

Speaking of which, your HTML editor SUCKS TOO.  Look at the FREE editors that show matching tags, like notpad++ and JEdit.  Why don't you borrow some code from them and do it right.  HELLS BELLS, even Chrome's "Inspect Element" does a good job of that.  Why don't you put that into Blogger's HTML editor.

Blogger SUCKS.  Fix it.

Bob Hurt.

Wednesday, August 20, 2014

Memorize This Number If You Hired a Foreclosure Defense Lawyer

Moving:  Such Fun!


800 444 6787


It will connect you to Allied Van Lines after you LOSE YOUR HOUSE.  They can help move all your stuff when you get evicted.  You will lose the house, you know...

... UNLESS you heed the comments below.

NO defense exists against a foreclosure of a valid mortgage note that you breached. 


None. Nada. Zero. Zilch. Niente. Niemals.  Bupkis. 

All foreclosure defenses eventually fail. Only a crooked foreclosure defender hides that ugly truth from you.  The foreclosure eventually goes through to completion.  The foreclosure victim loses the house. OR, if qualified, the victim accepts an onerous loan modification.  You probably don't qualify. Fewer than 20% do.

If you face foreclosure and don't hire a competent professional to examine your mortgage comprehensively, YOU WILL LOSE YOUR HOUSE, one way or another, sooner or later. If you cannot prove that the lender or lender's associates injured you at the inception of your loan, YOU WILL LOSE YOUR HOUSE. If you can prove it but fail aggressively to negotiate or litigate on the basis of those injuries, YOU WILL LOSE YOUR HOUSE.


And that means you will have to move out. So, I decided to do you a favor and give you the above number of Allied Van Lines. Call them and they will move everything you own to your new home.

Oh, right, I nearly forgot. If you complain that you cannot afford a mortgage examination, or the litigation or negotiation to use it effectively, then you will really whine about what Allied Van Lines charges to move you across town or to another state.

That's IFF (if and only if) you have a home to which you can move.

And if you cannot afford the move, here's what your house can looklike after you get evicted:



 
You KNOW Whom to Call

The worst part of disasters like those shown above: generally the mortgagor (that means YOU, the borrower in default on your loan) will end up owing money for all the necessary repairs, the eviction cost, the litigation cost, lawyer fees, accrued interest, etc.

Only the Mortgage Attack methodology will give you the opportunity to save your home from such a disaster AND win concessions or money from those who injured you.

That means you must get your mortgage examined comprehensively by a competent professional. Then you can use the causes of action from the examination report as leverage in a settlement negotiation or a lawsuit against the lender and lenders associates or agents.

See?  You use the causes of action to attack the crooked mortgage instead of defending against an indefensible foreclosure.

"Causes of action" means "reasons to sue." They can consist of a wide array tortious conduct, contract breaches, legal errors, and violations of state and federal regulations. Examples include appraisal fraud, loan application fraud, wrongful credit reputation damage, and many other terrible injuries that cost you a lot of money or put you in unnecessary jeopardy.

Some mortgage borrowers get injured badly, some get injured little, and some not at all. But any injuries can justify a set-off from the amount of your debt OR another settlement that benefits you, such as a favorable loan modification like a balloon-free reduction in your debt and interest rate, or a keys for cash deal. 

You might even win a huge amount of compensatory and punitive damages (money) if you sue successfully for the injuries. In my experience, over 90% of those who get their mortgage examined have suffered injury by the lender or associates.

Yes, you can get a favorable loan modification if you negotiate from a position of power. That means you tell the lender to give you favorable terms (for example assumable 3% fixed rate for 30 years, loan balance reduced to the present value of your home, all accrued interest and costs forgiven, no 1099 to the IRS). 

But you have no negotiating power without a mortgage examination report that shows how the lender or others injured you.

If YOU don't want to lose your home to foreclosure, you know what to do. Call me today to get started on a mortgage examination by a competent professional. 

Here's another number to memorize while you make up your mind whether to lose your house or to take practical action that will give you some hope of redemption in your mortgage: 


727 669 5511

Call Now
It's your choice: 

  1. Allied Van Lines (800 444 6787), or 
  2. Mortgage Attack (727 669 5511). Now. 

Which makes most sense to you?



What? You still don't feel "convinced" that you need to call me right now?

Okay, I have taken the time to write up a couple of examples of the benefits you can enjoy IF you act NOW to get your mortgage examined:




And here's a little help for developing a MORTGAGE ATTACK MENTALITY:






Feel better?

Okay. Now call me. I wait expectantly to hear from you. 

727 669 5511

Bob Hurt Blog 1 2 3 f t
Maven, Ombudsman
Mortgage Attack
2460 Persian Drive #70
Clearwater, FL 33763
Email Call: (727) 669-5511
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Monday, August 18, 2014

May California Deed of Trust Assignee enforce it without recording the Assignment?

Conundrum:  You find out that the assignee of your California Deed of Trust never acknowledged and recorded the deed of trust with the clerk of courts, and now wants to enforce the mortgage in order to foreclose.  You dig around and find these California Civil Code sections below.  Should you attack the assignee's standing to foreclose?

Answer:  No. In California, the assignee of beneficial interest in a mortgage security instrument must duly acknowledge and record the assignment in order to have the right to force a foreclosure sale.  The assignee of a beneficial interest in a deed of trust need not record the assignment in order to force a foreclosure sale.

Discussion:  A mortgage differs from a deed of trust.  Both secure the note, such that they entitle the owner of beneficial interest in the note (or agent) to enforce the note by foreclosure and forcible sale of the property.  However, a mortgage requires enforcement through judicial action - the foreclosing party must sue the borrower for breaching the note.  By contrast, a deed of trust involves a trustee who receives notice of the breach and of fulfillment of conditions precedent from the owner of beneficial interest in the note (or holder or agent), then orders the sale of the property held in trust.  A mortgage operates as a lien with title remaining in the borrower (technically, it goes to the mortgagee for purposes of a mortgage only), and a deed of trust conveys title to the trustee until the borrower has retired the debt.

It seems axiomatic that owner of beneficial interest in the note (oobi) may, in the event the borrower breaches the note, enforce the note through foreclosure and forcing the sale of the property securing the debt. Furthermore, it seems axiomatic that the oobi may assign the security instrument, to another party who may enforce the security instrument by forcing a foreclosure sale. 

But... always verify what the law means by looking at how the courts have opined.

For reference see Calvo v HSBC Bank, 199 CAL.APP.4TH 118 (CAL. APP. 2011)

California Civil Code Section

2932. A power of sale may be conferred by a mortgage upon the mortgagee or any other person, to be exercised after a breach of the obligation for which the mortgage is a security.

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

2924. (a) Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which case it is to be deemed a pledge. Where, by a mortgage created after July 27, 1917, of any estate in real property, other than an estate at will or for years, less than two, or in any transfer in trust made after July 27, 1917, of a like estate to secure the performance of an obligation, a power of sale is conferred upon the mortgagee, trustee, or any other person, to be exercised after a breach of the obligation for which that mortgage or transfer is a security, the power shall not be exercised except where the mortgage or transfer is made pursuant to an order, judgment, or decree of a court of record, or to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or is made by a public utility subject to the provisions of the Public Utilities Act, until all of the following apply: (1) The trustee, mortgagee, or beneficiary, or any of their authorized agents shall first file for record, in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated, a notice of default. That notice of default shall include all of the following: (A) A statement identifying the mortgage or deed of trust by stating the name or names of the trustor or trustors and giving the book and page, or instrument number, if applicable, where the mortgage or deed of trust is recorded or a description of the mortgaged or trust property. (B) A statement that a breach of the obligation for which the mortgage or transfer in trust is security has occurred. (C) A statement setting forth the nature of each breach actually known to the beneficiary and of his or her election to sell or cause to be sold the property to satisfy that obligation and any other obligation secured by the deed of trust or mortgage that is in default. (D) If the default is curable pursuant to Section 2924c, the statement specified in paragraph (1) of subdivision (b) of Section 2924c. (2) Not less than three months shall elapse from the filing of the notice of default. (3) Except as provided in paragraph (4), after the lapse of the three months described in paragraph (2), the mortgagee, trustee, or other person authorized to take the sale shall give notice of sale, stating the time and place thereof, in the manner and for a time not less than that set forth in Section 2924f. (4) Notwithstanding paragraph (3), the mortgagee, trustee, or other person authorized to take sale may record a notice of sale pursuant to Section 2924f up to five days before the lapse of the three-month period described in paragraph (2), provided that the date of sale is no earlier than three months and 20 days after the recording of the notice of default. (5) Until January 1, 2018, whenever a sale is postponed for a period of at least 10 business days pursuant to Section 2924g, a mortgagee, beneficiary, or authorized agent shall provide written notice to a borrower regarding the new sale date and time, within five business days following the postponement. Information provided pursuant to this paragraph shall not constitute the public declaration required by subdivision (d) of Section 2924g. Failure to comply with this paragraph shall not invalidate any sale that would otherwise be valid under Section 2924f. This paragraph shall be inoperative on January 1, 2018. (6) No entity shall record or cause a notice of default to be recorded or otherwise initiate the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original trustee or the substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest. No agent of the holder of the beneficial interest under the mortgage or deed of trust, original trustee or substituted trustee under the deed of trust may record a notice of default or otherwise commence the foreclosure process except when acting within the scope of authority designated by the holder of the beneficial interest. (b) In performing acts required by this article, the trustee shall incur no liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default under the secured obligation, deed of trust, or mortgage. In performing the acts required by this article, a trustee shall not be subject to Title 1.6c (commencing with Section 1788) of Part 4. (c) A recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice. (d) All of the following shall constitute privileged communications pursuant to Section 47: (1) The mailing, publication, and delivery of notices as required by this section. (2) Performance of the procedures set forth in this article. (3) Performance of the functions and procedures set forth in this article if those functions and procedures are necessary to carry out the duties described in Sections 729.040, 729.050, and 729.080 of the Code of Civil Procedure. (e) There is a rebuttable presumption that the beneficiary actually knew of all unpaid loan payments on the obligation owed to the beneficiary and secured by the deed of trust or mortgage subject to the notice of default. However, the failure to include an actually known default shall not invalidate the notice of sale and the beneficiary shall not be precluded from asserting a claim to this omitted default or defaults in a separate notice of default. (f) With respect to residential real property containing no more than four dwelling units, a separate document containing a summary of the notice of default information in English and the languages described in Section 1632 shall be attached to the notice of default provided to the mortgagor or trustor pursuant to Section 2923.3.



COURT OF APPEAL OF CALIFORNIA, SECOND DISTRICT. EIGHT.

CALVO V. HSBC BANK USA, N.A. 

199 CAL.APP.4TH 118 (CAL. APP. 2011)

  • DECIDED SEPT. 13, 2011

EUGENIA CALVO, Plaintiff and Appellant, v. HSBC BANK USA, N.A., as Trustee, etc., Defendant and Respondent.

No. B226494.

Court of Appeal of California, Second District. Eight.

September 13, 2011.

Appeal from the Superior Court of Los Angeles County, No. BC415545, Mark V. Mooney, Judge. *119

Dennis Moore for Plaintiff and Appellant.

Houser Allison, Eric D. Houser, Robert W. Norman, Jr., and Carrie N. Heieck for Defendant and Respondent.


*120


OPINION


Plaintiff Eugenia Calvo obtained a loan secured by a deed of trust against her residence. The original lender assigned the loan and deed of trust to HSBC Bank USA, N.A. (HSBC Bank). A new trustee was also substituted after the loan was originated. Plaintiff defaulted in payment of the loan. The new trustee initiated foreclosure proceedings and executed a foreclosure sale of plaintiffs residence. Notice of the assignment of the deed of trust appeared only in the substitution of trustee, which was recorded on the same date as the notice of trustee's sale. The second amended complaint seeks to set aside the trustee's sale for an alleged violation of Civil Code section 2932.5, 1 which requires the assignee of a mortgagee to record an assignment before exercising a power to sell real property. HSBC Bank and its agent, the nominal beneficiary under the deed of trust, demurred to the second amended complaint, and the trial court sustained the demurrer without leave to amend.

1.

All statutory references are to the Civil Code unless otherwise specified.

We find defendant HSBC Bank did not violate section 2932.5 because that statute does not apply when the power of sale is conferred in a deed of trust rather than a mortgage. We affirm the judgment dismissing the complaint.

BACKGROUND

Plaintiff sued HSBC Bank and Mortgage Electronic Registration Systems, Inc. (MERS), its agent and nominal beneficiary under the deed of trust recorded against her residence. Plaintiff had borrowed money from CBSK Financial Group, Inc., which is not a defendant in this lawsuit. Her loan was secured by a deed of trust against her residence that was recorded on September 1, 2006. The deed of trust identified plaintiff as the trustor, CBSK Financial Group as the lender, MERS as the nominal beneficiary and lender's agent, and Lawyers Title Company as the trustee. In the deed of trust, plaintiff granted title to her residence to the trustee, in trust, with the power of sale. The deed of trust stated: "MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, *121 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 the Security Instrument."

Aztec Foreclosure Corporation was substituted as trustee under the deed of trust on or about June 2, 2008. The substitution of trustee stated that MERS, as nominee for HSBC Bank, "is the present Beneficiary" under the deed of trust, as MERS had been for the original lender. The substitution of trustee was not recorded until October 14, 2008, the same date on which Aztec Foreclosure Corporation recorded a notice of trustee's sale. More than three months before recordation of the substitution of trustee, Aztec Foreclosure Corporation had recorded a notice that plaintiff was in default in payment of her loan and that the beneficiary had elected to initiate foreclosure proceedings. The notice of default advised plaintiff to contact HSBC Bank to arrange for payment to stop the foreclosure.

HSBC Bank bought plaintiffs residence in the foreclosure sale, and a trustee's deed upon sale was recorded on January 9, 2009. The gist of the complaint is that HSBC Bank initiated foreclosure proceedings under the deed of trust without any recordation of the assignment of the deed of trust to HSBC Bank in violation of section 2932.5.

DISCUSSION

A demurrer tests the legal sufficiency of the complaint. We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action. For purposes of review, we accept as true all material facts alleged in the complaint, but not contentions, deductions or conclusions of fact or law. We also consider matters that may be judicially noticed. ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [ 216 Cal.Rptr. 718, 703 P.2d 58].) When a demurrer is sustained without leave to amend, "we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm." ( Ibid.) Plaintiff has the burden to show a reasonable possibility the complaint can be amended to state a cause of action. ( Ibid.)

The trial court did not err in sustaining the demurrer without leave to amend. Plaintiffs lawsuit rests on her claim that the foreclosure sale was void and should be set aside because HSBC Bank invoked the power of sale without complying with the requirement of section 2932.5 to record the assignment of the deed of trust from the original lender to HSBC Bank. We find no merit in this contention. *122

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

It has been established since 1908 that this statutory requirement that an assignment of the beneficial interest in a debt secured by real property must be recorded in order for the assignee to exercise the power of sale applies only to a mortgage and not to a deed of trust. In Stockwell v. Barnum(1908) 7 Cal.App. 413 [ 94 P. 400] ( Stockwell), the court affirmed the judgment against a plaintiff who sought to set aside and vacate a sale of real property under a deed of trust. In Stockwell, a couple borrowed money from two individuals and gave them a promissory note that provided, in case of default in the payment of interest, the holder of the note had the option to demand payment of all the principal and interest. To secure payment of the note, the borrowers executed and delivered a deed of trust by which they conveyed to the trustee legal title to a parcel of real estate, with the power of sale on demand of the beneficiaries of the promissory note. The borrowers defaulted. The original lenders assigned the note to another individual, who elected to declare the whole amount of principal and interest due and made demand on the trustee to sell the property. Before the trustee's sale was made, but on the same day as the trustee's sale, the defaulting couple conveyed the real property to the plaintiff, who then sued to set aside the trustee's sale.

One of the bases on which the plaintiff in Stockwell sought to set aside the sale was that no assignment of the beneficial interests under the deed of trust was recorded and therefore the original lender's assignee had no right to demand a trustee's sale of the property. The plaintiff inStockwell relied on former section 858, the predecessor of section 2932.5, as support for this contention. (The parties correctly acknowledge that § 2932.5 continued former § 858 without substantive change.) (Law Revision Com. com., Deering's Ann. Civ. Code, § 2932.5 (2005 ed.) p. 454.) TheStockwell court found the statute did not apply to a trustee's sale.

The Stockwell court distinguished a trust deed from a mortgage, explaining that a mortgage creates only a lien, with title to the real property remaining in the borrower/mortgagee, whereas a deed of trust passes title to the trustee with the power to transfer marketable title to a purchaser. The court reasoned that since the lenders had no power of sale, and only the trustee could transfer title, it was immaterial who held the note. ( Stockwell, supra, 7 Cal.App. at p. 416.) "The transferee of a negotiable promissory note, *123 payment of which is secured by a deed of trust whereby the title to the property and power of sale in case of default is vested in a third party as trustee, is not an encumbrancer to whom power of sale is given, within the meaning of section 858 . . . ." ( Id. at p. 417.)

The holding of Stockwell has never been reversed or modified in any reported California decision in the more than 100 years since the case was decided. The rule that section 2932.5 does not apply to deeds of trust is part of the law of real property in California. After 1908, only the federal courts have addressed the question whether section 2932.5 applies to deeds of trust, and only very recently. Every federal district court to consider the question has followed Stockwell. (See, e.g., Roque v. SunTrust Mortgage, Inc.(N.D.Cal., Feb. 10, 2010, No. C-09-00040 RWM) 2010 U.S.Dist. Lexis 11546, p. *8 ["Section 2932.5 applies to mortgages, not deeds of trust. It applies only to mortgages that give a power of sale to the creditor, not to deeds of trust which grant a power of sale to the trustee."]; Parcray v. Shea Mortgage, Inc. (E.D.Cal., Apr. 23, 2010, No. CV-F-09-1942 OWW/GSA) 2010 U.S.Dist. Lexis 40377, p. *31 ["There is no requirement under California law for an assignment to be recorded in order for an assignee beneficiary to foreclose."]; Caballero v. Bank of America (N.D.Cal., Nov. 4, 2010, No. 10-CV-02973-LHK) 2010 U.S.Dist. Lexis 122847, p. *8 ["§ 2932.5 does not require the recordation of an assignment of a beneficial interest for a deed of trust, as opposed to a mortgage"].)2

2.

Plaintiff cited only one bankruptcy court decision in support of her argument that section 2932.5 applies to deeds of trust. ( U.S. Bank N.A. v. Skelton (In re Salazar) (Bankr. S.D.Cal. 2011) 448 B.R. 814.) We find the analysis in that case unpersuasive. Holdings of the federal courts are not binding or conclusive on California courts, though they may be entitled to respect and careful consideration. ( Bank of Italy etc. Assn. v. Bentley (1933) 217 Cal. 644,653 [20 P.2d 940] ( Bank of Italy).) A federal bankruptcy court decision interpreting California law, however, is not due the same deference. (SeeStern v. Marshall (2011) 564 U.S. ___ [ 180 L.Ed.2d 475, 131 S.Ct. 2594].)

Plaintiff argues that Stockwell is "[o]utdated" and, that in the "modern era," there is no difference between a mortgage and a deed of trust. Plaintiff misconstrues Bank of Italy, supra, 217 Cal. 644 as holding that deeds of trust are the same as mortgages with a power of sale, and therefore, as supporting her argument that section 2932.5 applies to both mortgages and deeds of trust. First, our Supreme Court inBank of Italy did not consider or construe section 2932.5 or its predecessor statute.

Second, the court in Bank of Italy did not hold that a mortgage is the same as a deed of trust. Far from it; theBank of Italy court recognized that the distinction between a mortgage, which creates only a lien, and a deed of trust, *124which passes title to the trustee, "has become well settled in our law and cannot now be disturbed." ( Bank of Italy, supra, 217 Cal. at p. 655.) Third, the court's holding was expressly limited to the question (not in issue here) whether in California it is permissible to sue on a promissory note secured by a deed of trust without first exhausting the security or showing that it is valueless. The trial court had found "that no action may be brought on a note secured by a deed of trust unless and until the security is exhausted. The correctness of this conclusion is the sole point involved on this appeal." ( Id. at pp. 647, 648, 650.)

The plaintiff in Bank of Italy had argued the only statute requiring that security be exhausted before suing on the note was limited to mortgages and did not include the distinctly different deeds of trust. ( Bank of Italy, supra, 217 Cal. at p. 653.) The Bank of Italy court therefore considered whether the differences between a mortgage and a deed of trust under California law should permit the holder of a note secured by a deed of trust to sue on the note without exhausting the security by a sale of the property. The court recognized there were an increasing number of cases that applied the same rules to deeds of trust that are applied to mortgages and concluded that "merely because `title' passes by a deed of trust while only a `lien' is created by a mortgage," in both situations the security must be exhausted before suit on the personal obligation. ( Bank of Italy, supra, 217 Cal. at pp. 657-658.) Nothing in the holding or analysis of the Bank of Italy opinion supports plaintiffs position here that we should find section 2932.5 applies to a deed of trust.

Plaintiff also is mistaken in contending that Strike v. Trans-West Discount Corp. (1979) 92 Cal.App.3d 735 [ 155 Cal.Rptr. 132] ( Strike) supports her position. In Strike, a homeowner had a judgment entered against him on a business debt he had guaranteed. The homeowner later defaulted in payments on a bank loan that was secured by a deed of trust against his home, and he asked the judgment creditor to help him out. The judgment creditor agreed to buy an assignment of the home loan and deed of trust from the bank, consolidate the indebtedness on the home loan with the amount owed to satisfy the judgment, and extend the maturity date of these obligations.

The homeowner defaulted again, and the judgment creditor initiated nonjudicial foreclosure proceedings. The homeowner sued in an attempt to avoid foreclosure and eviction but did not prevail at trial. The Court of Appeal affirmed. Among the homeowner's arguments that were rejected on appeal was the contention that the judgment creditor's interest in his home was an equitable lien that could only be foreclosed by judicial process. The Court of Appeal found the creditor had the right to pursue nonjudicial foreclosure, distinguishing an equitable subrogee from an assignee of a deed of trust with *125 the power of sale. The court stated: "A recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary [citation] including authority to exercise any power of sale given the beneficiary ([§ 858])." (Strike, supra, 92 Cal.App.3d at p. 744.)

Plaintiff contends the sentence quoted above establishes that section 2932.5 (formerly codified at § 858) applies to deeds of trust. But the Strike court was not asked to consider or construe the predecessor of section 2932.5. TheStrike court briefly referred to the predecessor of section 2932.5 by way of illustrating the difference between an equitable subrogee and an assignee under a deed of trust with a power of sale. ( Strike, supra, 92 Cal.App.3d at p. 744.) "`It is axiomatic, of course, that a decision does not stand for a proposition not considered by the court.`" ( Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 332 [ 87 Cal.Rptr.2d 423, 981 P.2d 52].)

In California, over the course of the past century, deeds of trust have largely replaced mortgages as the primary real property security device. (See 4 Miller Starr, Cal. Real Estate (3d ed. 2003) former § 10:2, p. 15.) Thus, section 2932.5 (and its predecessor, § 858) became practically obsolete and was generally ignored by borrowers, creditors, and the California courts. On the other hand, other statutes expressly give MERS the right to initiate foreclosure on behalf of HSBC Bank irrespective of the recording of a substitution of trustee. Section 2924, subdivision (a)(1), states that a "trustee, mortgagee, or beneficiary, or any of their authorized agents," may initiate the foreclosure process. MERS was both the nominal beneficiary and agent (nominee) of the original lender and also of HSBC Bank, which held the note at the time of the foreclosure sale of plaintiffs residence. Thus, MERS had the statutory right to initiate foreclosure on behalf of HSBC Bank pursuant to section 2924, subdivision (a)(1).

MERS also had the right to initiate foreclosure on behalf of HSBC Bank pursuant to the express language of the deed of trust. Plaintiff agreed in the deed of trust that MERS had the right to initiate foreclosure and to instruct the trustee to exercise the power of sale as nominee (i.e., agent) of the original lender and its successors and assigns. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149,1157, fn. 9 [ 121 Cal.Rptr.3d 819] [construing a deed of trust identical in pertinent part to the trust deed in this case as granting MERS power to initiate foreclosure as the agent of the note holder, even if not also as beneficiary].) HSBC Bank was the assignee of the original lender. Accordingly, HSBC Bank and MERS, its nominal beneficiary and agent, were entitled to invoke the power of sale in the deed of trust, and plaintiff has alleged no legal basis for setting aside the sale in this case. *126

We affirm the judgment of dismissal. Respondent is to recover its costs of appeal.

Bigelow, P. J., and Flier, J., concurred.

*127





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