Filed 10/9/15 Henderson v. Bank of New York Mellon CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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
DIVISION FOUR
JANENE HENDERSON, B255851
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. TC027464)
v.
BANK OF NEW YORK MELLON et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County,
William Barry, Judge. Affirmed.
Stephen R. Golden & Associates, Stephen R. Golden and Elaine D. Etingoff for
Plaintiff and Appellant.
Houser & Allison, Robert W. Norman, Jr. and Eileen M. Horschel for Defendants
and Respondents.
______________________________
Janene Henderson appeals from a judgment of dismissal after the trial court
sustained a demurrer to her complaint. She argues that she has standing to preemptively
challenge the foreclosure of her home on the ground that the allegedly untimely
assignment of her loan to a securitized trust was void, and she need not show harm or
prejudice to herself in order to do so. We disagree and affirm.
FACTUAL AND PROCEDURAL SUMMARY
Appellant bought her home in 1999 and refinanced it in 2007 through an
adjustable rate loan. In 2012, an assignment of the loan to respondent Bank of New York
Mellon (BNYM), as trustee for the Certificate Holders of CWABS Inc., Asset Backed
Certificates, Series 2007-SEA1 (CWABS Trust) and substitution of ReconTrust
Company, N.A. (ReconTrust)1 as trustee under the deed of trust were recorded, followed
by a notice of default and notice of trustee’s sale. In 2013, appellant applied for a loan
modification to the new loan servicer, respondent Bayview Loan Servicing, LLC
(Bayview). She did not accept the terms Bayview offered her because the modified
monthly payments exceeded her means.
After Bayview notified appellant that she no longer qualified for a loan
modification, appellant sued BNYM, ReconTrust, and Bayview. Respondents demurred,
and appellant filed a first amended complaint, listing twelve causes of action: 1) lack of
standing; 2) negligent misrepresentation; 3) violation of Civil Code section 2923.5;
4) breach of contract; 5) unjust enrichment; 6) quiet title; 7) negligence; 8) declaratory
relief; 9) predatory lending and violation of the Unfair Competition Law (UCL) (Bus. &
Prof. Code, § 17200); 10) violation of the Homeowner Bill of Rights (HBOR) (Civ.
Code, §§ 2923.5, 2924, 2924.17); 11) violation of the Real Estate Settlement Procedures
Act (RESPA) (12 U.S.C.A. § 2601 et seq.); and 12) wrongful initiation of foreclosure.
The trial court overruled the demurrer as to the ninth cause of action and sustained it with
1
Although ReconTrust was a named defendant, it did not participate in the
proceedings below and has not appeared in this appeal.
2
leave to amend as to the eleventh. As to all other causes of action, the demurrer was
sustained without leave to amend.
Appellant’s second amended complaint alleged her loan had been securitized into
“CWL 2007-SEA1” in June 2007, as evidenced by a property securitization analysis
report appellant attached as an exhibit. She alleged that the recorded 2012 assignment
was invalid because it did not appear in an attached “Countrywide Letter to the Securities
and Exchange Commission,” which listed transactions between June and December 2007
for “CWL 07/SEA1.” Appellant claimed “it is well settled that the closing dates of trusts
are generally 3 months and no longer than one year.” Alternatively, she claimed the
CWABS Trust did not exist because the full name of the trust, as stated in the 2012
assignment, did not appear in a list of CWABS 2007 trusts attached to her complaint.
The second amended complaint asserted a cause of action for violation of RESPA,
based on Bayview’s alleged failure to respond to a request for mortgage assistance, which
appellant’s counsel submitted on her behalf in October 2013, after filing this lawsuit. It
also asserted a cause of action for predatory lending based on the terms of the loan, and a
violation of the UCL based on the allegedly improper securitization of the loan.
The court sustained respondents’ demurrer to the second amended complaint
without leave to amend, and dismissed the case. As to the cause of action under RESPA,
the court ruled appellant could not show that a RESPA request had been made on her
behalf. The court concluded that the predatory lending claim was time barred and did not
lie against respondents. The court also ruled appellant could not challenge the
securitization of her loan, and could not state a cause of action for violation of the UCL
based on the alleged discrepancies between the name of the trust listed in the recorded
assignment and the report attached to her complaint.
This appeal followed.
DISCUSSION
When a demurrer is sustained without leave to amend, we determine de novo
whether the complaint states facts sufficient to constitute a cause of action, and whether
3
the court abused its discretion in denying leave to amend. (Loeffler v. Target Corp.
(2014) 58 Cal.4th 1081, 1100.) We treat the demurrer as admitting all material facts
properly pleaded, but not conclusions of law. (Aubry v. Tri–City Hospital Dist. (1992)
2 Cal.4th 962, 967.)
Appellant raises two issues on appeal: whether she has standing to challenge the
assignment of her loan as allegedly void, and whether she must demonstrate harm or
prejudice in order to do so.
I
Appellant acknowledges that the first issue is currently before the California
Supreme Court. That court has granted review in several cases that disagreed with Glaski
v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski), which, at present, is the only
published California case to hold that a borrower may challenge the allegedly late
transfer of a loan to a securitization trust as void. (See Yvanova v. New Century
Mortgage Corp. (2014) 226 Cal.App.4th 495, review granted Aug. 27, 2014, S218973;
Keshtgar v. U.S. Bank, N.A. (2014) 226 Cal.App.4th 1201, review granted Oct. 1, 2014,
S220012; Mendoza v. JPMorgan Chase Bank, N.A. (2014) 228 Cal.App.4th 1020, review
granted Nov. 12, 2014, S220675; Boyce v. T.D. Service Co. (2015) 235 Cal.App.4th 429,
review granted July 15, 2015, S226267.)
A. Standing under the HBOR
Appellant’s opening brief is not a model of clarity, but she mainly challenges the
consensus in California that “a preforeclosure, preemptive action is not authorized by the
nonjudicial foreclosure statutes because it creates an additional requirement that a
foreclosing entity first demonstrate in court that it is entitled to foreclose.” (Kan v. Guild
Mortgage Company (2014) 230 Cal.App.4th 736, 743, citing Jenkins v. JP Morgan
Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 512–513; see also Gomes v. Countrywide
Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155.) Appellant argues that the HBOR
(Civ. Code, §§ 2920.5; 2923.4–2923.7; 2924; 2924.9–2924.12; 2924.15; 2924.17–
2924.20), which amended the nonjudicial foreclosure law effective January 1, 2013, now
requires that a beneficiary of a deed of trust prove its interest when challenged.
4
Specifically, appellant relies on the HBOR provisions that “[n]o 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” (Civ. Code, § 2924, subd. (a)(6)), and that any
recorded notice of default, assignment of a deed of trust, or substitution of trustee “shall
be accurate and complete and supported by competent and reliable evidence.” (Id.,
§ 2924.17, subd. (a).) She points out that a borrower is allowed to seek injunctive relief
for any material violation of section 2924.17, and a trustee’s sale may be enjoined until
the court determines that the violation has been remedied. (Id., § 2924.19, subd. (a).)
We do not agree that the HBOR provisions on which appellant relies create broad
standing to challenge a beneficiary’s interest in an assigned loan on just any ground. By
itself, Civil Code section 2924, subdivision (a)(6) does not authorize a borrower to seek
injunctive relief, nor does section 2924.19 authorize seeking such relief for a violation of
section 2924. Section 2924.17 prohibits ‘“robo-signing,’ which ‘occurs when persons
sign a document without personal knowledge of the content attested to therein and/or sign
the documents without the requisite authority to do so.’ [Citation.]” (Trepany v.
Deutsche Bank National Trust Co. (C.D.Cal., July 23, 2015, No. CV 15–00965–AB),
2015 WL 4506901, at *5.)2 The legislative history of the HBOR, portions of which
appellant cites out of context, supports this interpretation. (See Sen. Rules Com., Off. of
Sen. Floor Analyses, Conf. Rep. No. 1 on Sen. Bill No. 900 (2011-2012 Reg. Sess.) as
amended June 27, 2012, pp. 25–29 [validity of foreclosure documents requirement arose
from concern over “robosigning”].)
Appellant cites Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 292 for
the general proposition that “[i]n 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
2
Unpublished federal cases may be cited as persuasive authority. (Aleman v.
AirTouch Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8.)
5
is in issue [citation] 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. [Citation.]” The issue in that case was similar to the problem identified
in cases of robo-signing—that there was lack of evidence the person executing the
assignment had authority to do so. (Id. at p. 293.)
Appellant has not alleged that any of the recorded documents on which
respondents rely has been robo-signed by a person unauthorized to sign it or lacking
personal knowledge of the information included in it. In her brief, appellant suggests that
Mortgage Electronic Registration Systems, Inc. (MERS) improperly initiated the
foreclosure against her along with respondents, even though it “possessed no rights to be
paid.” There is no allegation that MERS was involved in the foreclosure process at all,
and its authority to assign the loan as a nominee for the lender and beneficiary under the
deed of trust is well settled. (Siliga v. Mortgage Electronic Registration Systems, Inc.
(2013) 219 Cal.App.4th 75, 83–84.)
Nothing in the HBOR or Cockerell v. Title Ins. & Trust Co., supra, 42 Cal.2d 284
gives a borrower standing to challenge the allegedly late assignment of a loan to a
securitized trust, which is the only challenge raised on appeal. Nevertheless, appellant
contends she is “not barred from challenging the effectiveness of the assignments as
evidence that [respondents] did not have authority to foreclose,” citing a case from the
Western District of Missouri. (Ball v. Bank of N.Y. (W.D. Mo. Dec. 20, 2012, No. 4:12-
CV-144-NKL, 2012 WL 6645695, at *4.) The court in that case reasoned that in pointing
to defects in the securitization process, the borrowers do not “seek to enforce the
[securitization] contracts or affect the relationship between the parties to the contracts.
Rather, [they] point to defects in the securitization process as evidence that neither title
nor possession of the note passed to the trustee who sought to foreclose their mortgages.
Thus, [they] seek only to use the breaches as evidence that the party seeking to foreclose
is not the owner of their note.” (Ibid.) Appellant fails to acknowledge that the case
represents the minority view on the subject. The consensus among federal courts is that
borrowers lack standing to challenge the validity of the securitization of their loans,
6
particularly based on noncompliance with the terms of the PSA’s that set up the
securitization trusts to which the loans are assigned. (See Schwend v. U.S. Bank, N.A.
(E.D. Mo. Feb. 26, 2013, No. 4:10-CV-1590, 2013 WL 686592, at *3, fn. 3.)
B. Standing to Challenge Securitization Defects
Appellant contends that respondents have no right to foreclose because her loan
was transferred after the closing date of “CWL 2007-SEA 1.”3 In essence, she alleges an
irregularity in the securitization of her loan. Securitization occurs when “a mortgage
lender sells pools of mortgages into trusts created to receive the stream of interest and
principal payments from the mortgage borrowers. The right to receive trust income is
parceled into certificates and sold to investors, called certificateholders. The trustee hires
a mortgage servicer to administer the mortgages by enforcing the mortgage terms and
administering the payments. The terms of the securitization trusts as well as the rights,
duties, and obligations of the trustee, seller, and servicer are set forth in a Pooling and
Servicing Agreement (‘PSA’).” (BlackRock Financial Management Inc. v. Segregated
Account of Ambac Assur. Corp. (2d Cir. 2012) 673 F.3d 169, 173.) If it complies with
certain requirements of the Internal Revenue Code, the securitization trust qualifies as a
tax-exempt real estate mortgage investment conduit (REMIC). (26 U.S.C. §§ 860A-G.)
1. Standing under Glaski
The operative complaint alleges that the assignment of appellant’s loan to the
securitized trust is void because “it did not conform with the requirements under New
York law for [it] to be a tax exempt trust and it did not comply with Internal Revenue’s
law for creation and maintenance of a trust under New York law.” To the extent these
allegations are based on the holding of Glaski, supra, 218 Cal.App.4th 1079, which
appellant urges us to follow, we need not accept them. (Aubry v. Tri-City Hospital Dist.,
supra, 2 Cal.4th at p. 967 [on demurrer, we do not accept conclusions of law as true].)
3
Appellant appears to have abandoned her assumptions that “CWL 2007-SEA1”
is not the CWABS Trust and that the CWABS Trust does not exist.
7
Glaski, supra, 218 Cal.App.4th 1079 held that a borrower has standing to
challenge the assignment of a loan to a securitized trust after the trust’s closing date. (Id.
at pp. 1094–1096.) Because the borrower in that case alleged that the trust was formed
under New York law, Glaski followed a New York decision, Wells Fargo Bank, N.A. v.
Erobobo (2013) 39 Misc.3d 1220(A) (Erobobo I), which stated: ‘“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. [Citations.]’” (Glaski, at p. 1097.)
Erobobo I has since been reversed. (Wells Fargo Bank, N.A. v. Erobobo (2015) 127
A.D.3d 1176 (Erobobo II).) In reversing Erobobo I, the Appellate Division of the
Supreme Court of New York held that a borrower whose loan was assigned to a
securitized trust has no standing to challenge the assignee’s status “based on purported
noncompliance with certain provisions of the PSA.” (Erobobo II, at p. 1178, citing
Rajamin v. Deutsche Bank Nat’l. Trust Co. (2d Cir. 2014) 757 F.3d 79, 90 (Rajamin)
[holding that, under weight of New York authority, assignments in contravention of PSA
are voidable at trust beneficiary’s election, not void ab initio].)4
Glaski, supra, 218 Cal.App.4th 1079 also reasoned that treating the attempted
assignment as void rather than voidable “is justified because it protects the [trust]
beneficiaries . . . from the potential adverse tax consequence of the trust losing its status
as a REMIC trust under the Internal Revenue Code.” (Id. at p. 1097.) But the interests of
the trust beneficiaries are adverse to those of the borrower. (Rajamin, supra, 757 F.3d at
p. 90; see also Bank of America Nat. Assn. v. Bassman FBT, L.L.C. (Ill. App. 2012) 981
N.E.2d 1, 13 [“New York legislature could [not] have intended to allow a debtor in a
commercial transaction to invoke the provisions of a trust to which it is a stranger in
order to frustrate the collection of the debt”].)
4
Rajamin, supra, 757 F.3d 79, also questioned the assumption that the date on the
recorded assignment determines when the assignment was made, reasoning that a PSA by
its terms was sufficient to effectuate an assignment. (Id. at p. 91.)
8
2. Appellant’s Alternative Argument
Appellant cannot avoid application of the majority rule—that borrowers lack
standing to enforce the terms of PSA’s—by relying not on the applicable PSA, but on a
schedule attached to a “Countrywide Letter to the Securities and Exchange Commission.”
The schedule lists transactions between June and December 2007 for “CWL 07/SEA1,”
but the list allegedly does not include the assignment of appellant’s loan. Appellant
essentially asserts that the assignment is void because it was not disclosed to the
Securities and Exchange Commission and took place outside the dates listed in the
disclosure. That is yet another conclusion of law that on demurrer we need not accept as
true. (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at p. 967.) Even assuming her
loan is not listed among the “sales transactions” for “CWL 07/SEA1,” appellant cites no
authority that the validity of an assignment to a securitized trust is governed by schedules
submitted to the Securities and Exchange Commission, or that a nondisclosure of a sales
transaction to that administrative agency renders the transaction void ab initio and subject
to challenge by a borrower who is neither a party to the transaction, nor a beneficiary.
(Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 [unsupported contentions are
forfeited on appeal].)
Appellant lacks standing to challenge the securitization of her loan as defective,
and the alleged defects do not render the assignment of the loan to the CWABS Trust
void.
II
Appellant’s argument that she is not required to show harm or prejudice to herself
from the allegedly irregular securitization of her loan is contrary to the weight of
California authority. (See Jenkins v. JP Morgan Chase Bank, N.A., supra, 216
Cal.App.4th at pp. 514–515 [preemptive action for declaratory relief requires actual
controversy and may not be based on “theoretical claims of hypothetical transferors and
transferees”]; Siliga v. Mortgage Electronic Registration Systems, Inc., supra, 219
Cal.App.4th at p. 85 [absent prejudice, borrower has no standing to challenge defective
assignment]; see also Herrera v. Federal National Mortgage Assn. (2012) 205
9
Cal.App.4th 1495, 1507; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th
256, 272.)
Appellant cites no authority for the proposition that the HBOR has dispensed with
that requirement. The legislative history of the HBOR, on which appellant relies, shows
the Legislature was intent on protecting “against any potential frivolous claims or efforts
to merely delay legitimate foreclosure proceedings”; to that end, “no legal action
whatsoever could be brought unless the violation is material.” (Sen. Rules Com., Off. of
Sen. Floor Analyses, Conf. Rep. No. 1 on Sen. Bill No. 900 (2011-2012 Reg. Sess.) as
amended June 27, 2012, pp. 32–33.) To the extent Civil Code sections 2924.12 and
2924.19 authorize a borrower to seek a temporary injunction for a “material” violation of
certain HBOR provisions, such an injunction may be issued only after weighing “two
interrelated factors: the likelihood the moving party ultimately will prevail on the merits,
and the relative interim harm to the parties from the issuance or nonissuance of the
injunction.” (Monterossa v. Superior Court (2015) 237 Cal.App.4th 747, 754, citing
Hunt v. Superior Court (1999) 21 Cal.4th 984, 999.)
Alternatively, appellant argues that a borrower whose loan was invalidly
securitized may be subject to inconsistent judgments and double payments and may lack
a meaningful opportunity “to achieve some type of workout and avoid foreclosure.”
Without evidence of conflicting claims, the risk of double exposure is purely
hypothetical. (Rajamin, supra, 757 F.3d at pp. 85–86.) Although she offers to amend the
complaint, appellant does not claim she can truthfully allege that the assignment of her
loan has exposed her personally to double payments and inconsistent judgments. She has
not cited, and we are not aware of, any case where the original lender or assignor sought
to invalidate an assignment to a securitization trust in order to pursue a claim against a
borrower. Nor has the assignment prevented appellant from applying for a loan
modification, as she alleges that she received and rejected Bayview’s modification offer.
Appellant cannot show that any alleged securitization defect caused her harm or
prejudice.
The court correctly sustained respondents’ demurrer without leave to amend.
10
DISPOSITION
The judgment of dismissal is affirmed. Respondents are entitled to their costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EPSTEIN, P. J.
We concur:
WILLHITE, J.
MANELLA, J.
11