We’ve all waited with bated breath for the “Happening” of the California Supreme Court decision in Yvanova vs. New Century Mortgage Corporation a case, as the Supremes put it, “granted plaintiff‘s petition for review, limiting the issue to be briefed and argued to the following: “In an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void?“”
While Yvanova wins the appeal, the Supremes’ opinion is less exciting than hoped for – yet it had some redeeming qualities when you look deep into the opinion and the footnotes. It sorta keeps you Hangin’ On (pun intended).
The only real heavy clarification is between void and voidable. It doesn’t deal with New York trust laws and void assignments that try to enter the trusts after it closes (very wimpy). And the Supremes did a good job of tearing apart some other cases (dissecting) in order to establish its point. GLASKI, Reinagel and Culhane got a good going over and if the argument is that the assignment is void – the homeowner has standing to challenge it. Don’t make the mistake of confusing void with voidable – as one attorney pointed out – merely voidable does not give you standing.
The opinion really didn’t detail examples and certainly the Supremes didn’t want to address Plaintiffs trying to enter an assignment into a trust after the trust had closed being void (or voidable) – they apparently saved that for another day. But they did clarify that the mortgage contract states that the lender or its assigns must hold beneficial interest:
“On the narrow question before us—whether a wrongful foreclosure plaintiff may challenge an assignment to the foreclosing entity as void—we conclude Glaski provides a more logical answer than Jenkins. As explained in part I, ante, only the entity holding the beneficial interest under the deed of trust—the original lender, its assignee, or an agent of one of these—may instruct the trustee to commence and complete a nonjudicial foreclosure. (§ 2924, subd. (a)(1); Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at p. 972.) If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever (Colby v. Title Ins. and Trust Co., supra, 160 Cal. at p. 644; Rest.2d Contracts, § 7, com. a), the foreclosing entity has acted without legal authority by pursuing a trustee‘s sale, and such an unauthorized sale constitutes a wrongful foreclosure. (Barrionuevo v. Chase Bank, N.A., at pp. 973–974.)”
There were some good citations as our good friend Charles points out. Starting around page 22:
“The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”
And the Justices have apparently perused Prof. Adam Levitin’s The Paper Chase as they penned:
“It is no mere “procedural nicety,” from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so. (Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title, supra, 63 Duke L.J. at p. 650.) “Such a view fundamentally misunderstands the mortgage contract. The mortgage contract is not simply an agreement that the home may be sold upon a default on the loan. Instead, it is an agreement that if the homeowner defaults on the loan, the mortgagee may sell the property pursuant to the requisite legal procedure.” (Ibid., italics added and omitted.)”
And, on page 23 they thumbed their noses at UCC 3-301 wherein it appears to allow a thief to make claims:
“The logic of defendants‘ no-prejudice argument implies that anyone, even a stranger to the debt, could declare a default and order a trustee‘s sale—and the borrower would be left with no recourse because, after all, he or she owed the debt to someone, though not to the foreclosing entity. This would be an ―odd result indeed. (Reinagel, supra, 735 F.3d at p. 225.)”
It never felt right that UCC 3-301 could be used in place of actual chain of title argument and discovery. We’ve seen too many lower court judges just glaze over the necessary process – you just know they slept through their Uniform Commercial Code classes.
The Supremes continued along that line with one of our favorite remarks:
“As a district court observed in rejecting the no-prejudice argument, ―[b]anks are neither private attorneys general nor, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank‘s deed of trust. (Miller v. Homecomings Financial, LLC (S.D.Tex. 2012) 881 F.Supp.2d 825, 832.)”
The Supremes acknowledged the potential for damage in a wrongful foreclosure. Anyone dealing with this corrupt securitization system and hair-brain HAMP modification program knows the stress and cost associated with it. Just to think about dealing with it multiple times is overwhelmingly depressive. And don’t tell me ‘if it hasn’t happened yet – it’s not likely to’ because there is certainly a deficiency in intelligence in that statement – as the Court pointed out when they acknowledged California Attorney General, Kamala D. Harris’ amicus curiae brief:
“Defendants note correctly that a plaintiff in Yvanova‘s position, having suffered an allegedly unauthorized nonjudicial foreclosure of her home, need not now fear another creditor coming forward to collect the debt. The home can only be foreclosed once, and the trustee‘s sale extinguishes the debt. (Code Civ. Proc., § 580d; Dreyfuss v. Union Bank of California, supra, 24 Cal.4th at p. 411.) But as the Attorney General points out in her amicus curiae brief, a holding that anyone may foreclose on a defaulting home loan borrower would multiply the risk for homeowners that they might face a foreclosure at some point in the life of their loans. The possibility that multiple parties could each foreclose at some time, that is, increases the borrower‘s overall risk of foreclosure.“
It’s not necessarily whether or not the perpetrators could win – it is the cost to defend your position and protect your home – not to mention the torment and stress. If you are in foreclosure or fighting foreclosure you know how expensive the battle / war can be.
And let’s not overlook page 25, footnote 13:
“We disapprove Jenkins v. JPMorgan Chase Bank, N.A., supra, 216 Cal.App.4th 497, Siliga v. Mortgage Electronic Registration Systems, Inc., supra, 219 Cal.App.4th 75, Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th 256, and Herrera v. Federal National Mortgage Assn., supra, 205 Cal.App.4th 1495, to the extent they held borrowers lack standing to challenge an assignment of the deed of trust as void.”
A Hawaii attorney points out there are some disappointments because the Supremes:
- Do nothing to resolve any PSA restrictive standing issues.
- Do nothing to take cost burden off homeowners to fight foreclosures.
- Do not explain when an assignment is void and when it is voidable.
- Do not prevent another 10 million homeowners from being foreclosed on.
- Do not address the issue of a sale to a third-party purchaser.
These are just issues yet to be brought before the higher courts – and, thus they “just keep us [me] hanging on…”