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US Bank National Association vs Ed Baumann

Case No: 1403403 Hearing Date: Wed Mar 05, 2014 9:30

October 5, 2014

Nature of Proceedings: (2) Motions for Summary Judgment; Motion: Stay; Case Management Conference Tentative Ruling: The court grants the motion of plaintiff U.S. Bank National Association, as trustee successor-in-interest to Wachovia Bank, National Association as Trustee for J.P. Morgan Mortgage Trust 2005-A4, for summary judgment. The court denies defendant Dondi Stevens’ motion for summary judgment. Defendant Stevens’ application for a stay of the proceeding is moot.

Background: Plaintiff U.S. Bank National Association, as trustee successor-in-interest to Wachovia Bank, National Association as Trustee for J.P. Morgan Mortgage Trust 2005-A4 (“US Bank”), brought this action in unlawful detainer against defendant Ed Baumann seeking possession of real property located at 1248 North San Marcos Rd. in Santa Barbara. US Bank had purchased the property at a nonjudicial foreclosure sale.

The original defendant -- Bauman -- did not occupy the premises. On October 31, 2012, plaintiff dismissed the complaint as to Baumann and added Dondi Stevens as defendant Doe 1. The court entered Stevens’ default and entered default judgment on January 18, 2013. The parties stipulated to set aside the default and default judgment on August 19, 2013.

Stevens filed an answer to the complaint on August 21, 2013. Stevens asserts two affirmative defenses. First, he alleges that US Bank failed to perfect title because there is a fatal break in the chain of title and therefore the foreclosure sale transfer is null and void. Second, Stevens alleges that 31% of the title is owned by unnamed descendants of the predecessor owner, who have given permission to Stevens to occupy the premises.

On October 16, 2013, Stevens initiated a separate action (Case #1433817) against US Bank and others for 1) injunctive relief, 2) declaratory relief for damages, 3) quiet title, 4) intentional infliction of emotional distress, 5) negligent infliction of emotional distress, 6) negligence, 7) fraud and deceit – intentional misrepresentation, 8) fraud and deceit – negligent misrepresentation, 9) fraud and deceit – suppression of material facts, 10) fraud and deceit – promises made without intention to perform, 11) promissory estoppel, and 12) violation of B&P Code § 17200.

Plaintiff’s Motion for Summary Judgment: US Bank moves for summary judgment, contending it purchased the property at a trustee’s sale in compliance with Civil Code § 2924 and is entitled to possession of the premises. The motion is based on the following facts:

On April 7, 2005, Stevens executed a Deed of Trust (DOT). The lender was Metrocities Mortgage, LLC, the trustee was Fidelity National Loan Portfolio Solutions and the beneficiary of the DOT was Mortgage Electronic Registration System (MERS). [US Bank’s Separate Statement of Undisputed Material Facts (SSUMF) #1, Exhibit 1] On June 30, 2009, the agent for the beneficiary under the DOT recorded a Notice of Default and Election to Sell under the DOT (NOD). [SSUMF #2, Exhibit 2] On July 23, 2009, the beneficiary under the DOT assigned its interest in the DOT to US Bank. [SSUMF #3, Exhibit 3] On August 13, 2009, US Bank substituted NDEx West, LLC as the trustee under the DOT. [SSUMF #4, Exhibit 4] On May 18, 2012, the trustee recorded a Notice of Trustee’s Sale (NOTS). [SSUMF #5, Exhibit 5] US Bank purchased the property at the trustee’s sale on August 22, 2011 and the Trustee’s Deed Upon Sale was recorded on September 29, 2011. [SSUMF ##6, 7, Exhibit 6]

On October 4, 2011, a registered California process server served Stevens and all unknown occupants of the property with a notice to vacate. [SSUMF ## 8, 9, Exhibit 7] More than 90 days elapsed since the service of the notice to vacate and defendant remains in possession of the premises. [SSUMF #10] US Bank filed this complaint on August 15, 2012. For purposes of this motion, US Bank waives any rental holdover damages demanded in the complaint. [SSUMF #11]

The day before the October 16, 2013 hearing on the motion, Stevens submitted his opposition to the motion. He argues that US Bank has failed to show that the property was sold in accordance with Civil Code § 2924. US Bank is the trustee of a securitized trust and the note and DOT were transferred to the trust after its closing date. Relying on Glaski v. Bank of America, 218 Cal.App.4th 1079, 1099 (2013), Stevens contends the assignment to US Bank is void and, therefore, the foreclosure is void. He also argues that MERS was not acting within the powers under its articles of organization and the contract and DOT were voidable because MERS did not pay for its “license to operate in California under the California Franchise Tax Board.”

The court continued the hearing to October 30, 2013 to allow further briefing. For the October 30, 2013 hearing, the court posted a tentative ruling indicating that it was inclined to deny the motion for summary judgment and the motion for stay. At the hearing, the court continued the matter to January 8, 2014, to see if the Supreme Court ruled on the pending request for depublication of the Glaski case (Supreme Court Case No. S213814). The court again continued the hearing to March 5, 2014. There has been no filing in that case since October 17, 2013. The Supreme Court has yet to take action. On February 26, 2014, the Supreme Court denied the request to depublish the Court of Appeal’s decision in the Glaski case.

Defendant’s Motion for Summary Judgment: On December 30, 2013, Stevens filed his own motion for summary judgment. He bases this motion on the same arguments and evidence presented in opposition to US Bank’s motion. That is, Stevens argues that the transfer of the DOT to the securitized trust is void because the transfer came after the closing date under the Pooling and Servicing Agreement (“PSA”), MERS was not acting within the powers under its articles of organization and the contract and DOT were voidable because MERS did not pay for its “license to operate in California under the California Franchise Tax Board.”

Because the motions for summary judgment raise identical issues, the court will address them together.

Objections to Evidence: US Bank objects to all 17 paragraphs of the declaration of Robert Ramers on the grounds of no foundation, no personal knowledge, hearsay and irrelevance. The objections do not quote or set forth the objectionable statements. Therefore, the objections do not comply with CRC 3.1354(b). The court overrules the objections.

Analysis: In an unlawful detainer action, a party may move for summary judgment on five days notice and the motion shall be granted or denied on the same basis as a motion under CCP § 437c. CCP § 1170.7. Summary judgment is appropriate where there is no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. CCP § 437c(c). “The party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 850 (2001). “[A] plaintiff bears the burden of persuasion that ‘each element of’ the ‘cause of action’ in question has been ‘proved,’ and hence that ‘there is no defense’ thereto. [CCP § 437c(p)(1)].” Id. US Bank's initial burden of proof in moving for summary judgment, however, does not include disproving any affirmative defenses asserted by defendants. When a plaintiff meets its burden of proving each element of its cause of action, “the burden shifts to the defendant ‘to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’” Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co., 170 Cal.App.4th 554, 564-565 (2009).

Evidence: US Bank has submitted certified copies of all the recorded documents. A certified copy of a recorded instrument is self-authenticating. Evid. Code § 1530. Evid. Code § 1600 provides:

(a) The record of an instrument or other document purporting to establish or affect an interest in property is prima facie evidence of the existence and content of the original recorded document and its execution and delivery by each person by whom it purports to have been executed if:

(1) The record is in fact a record of an office of a public entity; and (2) A statute authorized such a document to be recorded in that office. (b) The presumption established by this section is a presumption affecting the burden of proof.

“The official act of recordation and the common use of a notary public in the execution of [recorded real property documents, including deeds of trust] assure 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.”

Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 264-265 (2011). “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.” Id. at 265. For example, the status of a beneficiary, such as MERS, is “not the type of fact that is generally an improper subject of judicial notice … since its status was not a matter of fact existing apart from the document itself.” The designation of a beneficiary under the deed of trust, as a legally operative document, is not reasonably subject to dispute. Other matters can be “inferred from the text or legal effect of the documents themselves, needing no outside confirmation.” Id. at 266.

The court will admit and consider US Bank’s evidence.

Unlawful Detainer after Foreclosure: The purchaser at a trustee’s sale has an immediate right to possession of the property. Farris v. Pacific States Auxiliary Corp., 4 Cal.2d 103, 105 (1935). CCP § 1161a(b) provides:

In any of the following cases, a person who holds over and continues in possession of … real property after a three-day written notice to quit the property has been served upon the person, … may be removed therefrom as prescribed in this chapter:

* * *

(3) Where the property has been sold in accordance with Section 2924 of the Civil Code, under a power of sale contained in a deed of trust executed by such person, or a person under whom such person claims, and the title under the sale has been duly perfected.

There is a common law presumption that a foreclosure sale has been conducted fairly and regularly and a statutory presumption of validity based on recitals in the trustee’s deed, which are both rebuttable. Civil Code § 2924(c), Royal Thrift & Loan Co. v. County Escrow Inc., 123 Cal.App.4th 24, 32 (2004). The trustee’s deed in this case establishes a presumption that the foreclosure sale was conducted fairly and regularly and that the deed is valid.

“[W]here the purchaser at a trustee's sale proceeds under section 1161a of the Code of Civil Procedure he must prove his acquisition of title by purchase at the sale; but it is only to this limited extent, as provided by the statute, that the title may be litigated in such a proceeding. … [T]he plaintiff need only prove a sale in compliance with the statute and deed of trust, followed by purchase at such sale, and the defendant may raise objections only on that phase of the issue of title.” Evans v. Superior Court, 67 Cal.App.3d 162, 170-171 (1977). “Matters affecting the validity of the trust deed or primary obligation itself, or other basic defects in the plaintiff's title, are neither properly raised in this summary proceeding for possession, nor are they concluded by the [UDA] judgment.” Cheney v. Trauzettel, 9 Cal.2d 158, 160 (1937).

On October 4, 2011, a licensed process server served a three-day/90-day notice to vacate on Stevens by posting the notice in a conspicuous place on the property and mailing a copy, as authorized in CCP § 1162(a)(3). The return of a registered process server “establishes a presumption, affecting the burden of producing evidence, of the facts stated in the return.” Evid. Code § 647.

US Bank has carried its burden of production of evidence establishing the absence of a triable issue of material fact with regard to its title to the property and service of notice to vacate the property. Therefore, the burden of production shifts to Stevens.

Stevens’ evidence of a triable issue of material fact consists primarily of the late transfer to the securitized trust. He does not contend that the sale was not in compliance with the DOT but rather that it did not comply with the PSA. US Bank contends that Stevens has not submitted competent evidence that the loan was not transferred into the securitized trust within 90 days of the closing date as specified in the PsA. does not contest the fact that the note and DOT were not transferred to the securitized trust of which US Bank is trustee before the deadline for such transfers under the governing trust documents, including the PSA. A written assignment was not recorded until June 30, 2009 but recording is not required to transfer the loan and security. Wilson v. Pacific Coast Title Ins. Co., 106 Cal.App.2d 599, 602 (1951). To challenge a foreclosure sale on grounds of lack of a valid assignment, one must demonstrate that the purported beneficiary “did not receive a valid assignment of the debt in any manner.” Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 271-272 (2011).

US Bank says that, if the court believes plaintiff should submit evidence regarding this issue, it is prepared to submit a declaration and documentary evidence demonstrating that the thransfer occurred within 90 days of the closing date specified in the PSA. US Bank does not explain why, when its motion has been pending for five months, it has not submitted this evidence.

In Glaski v. Bank of America, supra, 218 Cal.App.4th at 1099, the Fifth District Court of appeal disagreed with contrary federal court holdings and held that the failure to transfer a note and DOT to a securitized trust prior to the deadline in the PSA renders that transfer void. If the transfer is void, the foreclosure pursued by the trust that is not the note holder is also void. A debtor need not tender the amount owing to the creditor to challenge a void foreclosure sale. Id. at 1100.

The challenge based on the lack of authority to pursue a nonjudicial foreclosure goes to compliance with Civil Code § 2924. Therefore, this is an issue of title that is properly before the court in this unlawful detainer action (UDA), assuming Stevens has standing to raise the issue.

But the Glaski court is not the only California Court of Appeal to address the issue of standing to assert a violation of the PSA. In Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013), the Fourth District Court of Appeal held that “an unrelated third party to the alleged securitization … lacks standing to enforce any agreements, including the investment trust's pooling and servicing agreement, relating to such transactions.” Id. at 515.

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 individual or entity that believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.

Id.

“Glaski represents a distinct minority view on the standing of third parties to enforce or assert claims based on alleged violations of a PSA.” Apostol v. Citimortgage, Inc., 2013 U.S. Dist. LEXIS 167308, *22 (N.D. Cal. Nov. 21, 2013). “The majority of federal district courts that have addressed the issue whether a borrower has standing to challenge securitization of a note by its transfer to a trust in an allegedly defective manner, are in accord with Jenkins.” Boza v. US Bank Nat'l Ass'n, 2013 U.S. Dist. LEXIS 161196, *18-*19 (C.D. Cal. Oct. 28, 2013).

The Jenkins analysis is consistent with jurisprudence requiring that a person challenging a foreclosure must show prejudice resulting from any irregularity in assignments of a deed of trust. This comes up in the context of challenges to foreclosures because of alleged “robo- signatures.” The prevailing view is that plaintiff homeowners lack standing to challenge the validity of “robo-signatures.” Bennett v. Wells Fargo Bank, N.A., 2013 U.S.Dist.LEXIS 112756 *17 (N.D. Cal. 2013), “The reasoning is that the plaintiff lacks standing to contest the validity of a robo-signature, because his foreclosure was the result of not making payments and entering default, such that he did ‘not suffer an injury as a result of the assignment of deed of trust, even if the assignment was fraudulent.’ [Citation.]” Id.

In Javaheri v. JPMorgan Chase Bank, N.A., 2012 U.S.Dist.LEXIS 114510 (C.D. Cal. 2012), the district court accepted as true the proposition that a substitution of trustee was robo- signed but concluded such evidence failed to raise a triable issue of fact because the plaintiff lacked standing to challenge the foreclosure on that basis. The court explained:

Only someone who suffered a concrete and particularized injury that is fairly traceable to the substitution can bring an action to declare the assignment of CRC as void. … Javaheri was not party to this assignment, and did not suffer any injury as a result of the assignment. Instead, the only injury Javaheri alleges is the pending foreclosure on his home, which is the result of his default on his mortgage. The foreclosure would occur regardless of what entity was named as trustee, and so Javaheri suffered no injury as a result of this substitution.

Id. at *16. Accord, Carollo v. Vericrest Fin., Inc., 2012 U.S.Dist.LEXIS 137017 *9 (N.D. Cal. 2012): “[T]he homeowner-plaintiff's claimed injury is foreclosure. The foreclosure resulted from a default which would have occurred regardless of what entity was named as trustee. Thus, the homeowner-plaintiff does not suffer an injury as a result of the assignment of deed of trust, even if the assignment was fraudulent. Accordingly, the homeowner-plaintiff lacks standing to complain.”

For the foregoing reasons, the court will follow Jenkins and the majority of federal courts rather than Glaski and holds that Stevens lacks standing to assert non-compliance with the PSA in defense of this UDA.

Plaintiff argues that Sevens’ challenge to the foreclosure sale is barred by the doctrine of res judicata and collateral estoppel because an earlier federal lawsuit was dismissed with prejudice. The doctrine of res judicata has a double aspect. “‘In its primary aspect,’ commonly known as claim preclusion, it ‘operates as a bar to the maintenance of a second suit between the same parties on the same cause of action.’” Boeken v. Philip Morris USA, Inc., 48 Cal.4th 788, 797 (2010). The federal action included causes of action for rescission and restitution, illegality of contract, cancellation of note and deed of trust, and violation of the federal Fair Debt Collection Practices Act. None of those causes of action are present in this case or in Case #1438417.

Collateral estoppel “prevents a party or that party’s privy from relitigating in a second proceeding an issue that was already litigated and determined in a prior proceeding.” Taylor v. Lockheed Martin Corp., 113 Cal.App.4th 380, 385 (2003). For collateral estoppel to apply, the following requirements must be fulfilled: “First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.” Lucido v. Superior Court, 51 Cal.3d 335, 341 (1990).

This is no evidence that the issue of plaintiff not being the noteholder and that the foreclosure sale was therefore void was actually litigated in the federal case. The court is not granting summary judgment based on the res judicata and collateral estoppel arguments.

Stevens argues other factual disputes that do not create triable issues of material fact. Stevens says that MERS’s role as beneficiary of the DOT is ultra vires – beyond its corporate authority – because it cannot serve as a beneficiary. But the evidence Stevens cites indicates that MERS cannot be the beneficiary under the note but can be a mortgagee or beneficiary of a security instrument, such as a DOT. Stevens argues that assignment of the note carries the mortgage with it, while an assignment of the mortgage alone is a nullity, citing Carpenter v. Longan, 83 U.S. 271, 274 (1873). But the note and DOT are not split. The DOT provides that MERS is acting solely as the nominee for the Lender. If the lender’s nominee is the beneficiary under the DOT, the note and DOT are not split. Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1151 (2011). “California's statutory nonjudicial foreclosure scheme (§§ 2924–2924k) does not require that the foreclosing party have a beneficial interest in or physical possession of the note.” Shuster v. BAC Home Loans Servicing, LP, 211 Cal.App.4th 505, 511 (2012).

Stevens also says that the contract and DOT are voidable because MERS was not paying for its license to operate in California to the Franchise Tax Board. But Stevens provides no evidence in support of this supposed fact. (He cites 14 of the Ramers declaration, but that paragraph says nothing about nonpayment for a license or the Franchise Tax Board.)

For the foregoing reasons, the court grants plaintiff US Bank’s motion for summary judgment and denies defendant Stevens’ motion for summary judgment.

Motion for Stay: On October 17, 2013, Stevens filed an ex parte motion to consolidate this action with Case #1438417 and an application to stay this unlawful detainer action pending resolution of the other case. The minute order of that date reflects that the court denied the motion to consolidate and set the application for stay for hearing on October 30, 2013. That application was also continued to January 8, 2014. Because the court is granting plaintiff US Bank’s motion for summary judgment, the application for stay is moot.


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Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager

 

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