Filed 9/27/19 Rivera v. Nationstar Mortgage CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION THREE

MANUEL A. RIVERA,

Plaintiff and Appellant,

v.

NATIONSTAR MORTGAGE LLC et al.,

Defendants and Respondents.

A153348

(Marin County

Super. Ct. No. CIV1700663)

Plaintiff Manuel Rivera appeals from a judgment entered in favor of defendants Nationstar Mortgage LLC (Nationstar), Mortgage Electronic Registration Systems, Inc. (MERS), and The Bank of New York Mellon (BNYM) (defendants) after the trial court granted their motion for judgment on the pleadings on Rivera’s first amended complaint without leave to amend. Rivera seeks to prevent BNYM from foreclosing on his home by alleging that MERS lacked the authority to assign the deed of trust to BNYM, and that various unrecorded transfers of the deed of trust into a securitized trust were in violation of the trust’s pooling and servicing agreement. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

We take the following factual allegations from the first amended complaint (FAC).

In March 2006, Rivera executed a mortgage on his home. The deed of trust identified Countrywide Home Loans, Inc. (Countrywide) as the lender and MERS as the nominal beneficiary. Countrywide sold the mortgage to EMC Mortgage Corp. (EMC), sponsor of a mortgage-backed securities transaction that created the Structured Asset Mortgage Investments II Trust 2006-AR3 (the SAMI II trust or trust), a special purpose vehicle formed to obtain certain tax benefits. Under the trust’s pooling and servicing agreement (PSA), only the depositor could transfer the rights and interests in a mortgage note and deed of trust to the trust, and all steps in the transfer must be supported by effective delivery and acceptance of the endorsed mortgage note and assigned deed of trust. The PSA further required that the transfer of each mortgage loan be made as of the trust’s closing date (April 28, 2006) or within 90 days thereafter in order to maintain the favorable tax status of the trust.

EMC sold Rivera’s mortgage to the depositor, Structured Asset Mortgage Investments II, Inc. (SAMI II), and SAMI II bundled his mortgage with others and sold them to JPMorgan Chase Bank, N.A. (Chase), the original trustee for the SAMI II trust. Those sales, however, were not properly securitized because they were made without appropriate assignment of the deed of trust and endorsement of the note “in violation of the governing trust documents,” i.e., the PSA.

Following the “failed” securitization of Rivera’s mortgage, four assignments of the deed of trust were recorded. In July 2011, MERS, falsely holding itself out as the current holder of Rivera’s deed of trust, attempted to assign the beneficial interest in the deed of trust to BNYM, successor trustee for the SAMI II trust (Assignment 1). Assignment 1 was void for several reasons. First, MERS had already “exited the chain of title” back in 2006 when Countrywide sold the mortgage loan to EMC, a non-MERS member, without executing and recording an assignment of the mortgage loan in the county where the real property was located, as required by MERS’s membership rules for transferring a secured promissory note to a non-MERS member. Second, because MERS never held any beneficial interest in Rivera’s mortgage loan and merely tracked changes in ownership for loans registered on its system, it lacked the ability to assign any interest in Rivera’s mortgage loan. Finally, MERS’s assignment to BNYM violated the PSA, as only the depositor (SAMI II) could make the final assignment to the trustee of the trust, and there were no recorded assignments of Rivera’s mortgage loan establishing that BNYM or its predecessor, Chase, received timely assignments of the mortgage.

In September 2011, MERS again attempted to assign all beneficial interest in Rivera’s mortgage loan to BNYM, this time falsely holding itself out as nominee for Countrywide (Assignment 2). But MERS could not possibly be acting nominal beneficiary for Countrywide, as Countrywide had already sold Rivera’s mortgage loan to EMC.

In June 2013, Bank of America, N.A. (BANA) purported to assign all beneficial interest under Rivera’s deed of trust to Nationstar (Assignment 3). This assignment was void because BANA had no beneficial interest in Rivera’s mortgage loan.

Thereafter, Nationstar, as attorney-in-fact for BNYM, substituted Barrett Daffin Frappier Treder & Weiss, LLP (Barret Daffin) as trustee under Rivera’s deed of trust. Barret Daffin issued and recorded a notice of default and executed a notice of trustee’s sale scheduling a foreclosure sale for October 2014. The substitution of trustee, notice of default, and notice of trustee’s sale were void because they flowed from the void assignments discussed above.

In December 2015, BANA, as attorney-in-fact for Nationstar, purported to assign all beneficial interest under the deed of trust to BNYM as successor trustee of the SAMI II trust (Assignment 4). Assignment 4 was void because Nationstar never received effective assignment of any interest in Rivera’s deed of trust and therefore, it had no authority to assign the beneficial interest to BNYM.

In 2016, Barrett Daffin issued and recorded additional notices of trustee’s sale, but the scheduled sales never took place.

In 2017, Rivera filed this action against defendants, BANA, and Barrett Daffin. After BANA’s demurrer to the original complaint was sustained with leave to amend, Rivera filed his FAC, which asserts seven causes of action for declaratory relief (against MERS, Nationstar, BANA, and Barrett Daffin), wrongful foreclosure (against defendants and Barrett Daffin), quiet title (against BNYM), violation of Business and Professions Code section 17200 (section 17200) (against defendants, BANA, and Barrett Daffin), unjust enrichment (against BANA and Nationstar), violation of Civil Code section 2923.55 (against BNYM, Nationstar, and Barrett Daffin), and cancellation of instruments (against all defendants). Common to all causes of action is the allegation that BNYM lacked the authority to initiate foreclosure proceedings because it never received effective assignment of Rivera’s deed of trust, as MERS, having no ownership interest in the note, lacked the ability and authority to assign any such interest to BNYM, and the assignments of the deed of trust during the securitization transaction were not recorded in compliance with the SAMI II trust documents.

In moving for judgment on the pleadings, defendants argued that because no foreclosure sale had taken place, Rivera lacked standing to preemptively challenge the assignment of the deed of trust. Defendants further argued that even if Rivera had standing, MERS’s assignment of the deed of trust to BNYM was not void, as California courts have upheld MERS’s authority to assign a deed of trust on behalf of the lender and its successors and assigns, and the weight of authority holds that a failed securitization of a mortgage loan does not render a deed of trust void.

The trial court granted defendants’ motion without leave to amend, and judgment was entered in their favor. Rivera timely appealed.

DISCUSSION

A. Standard of Review
B.
A motion for judgment on the pleadings, like a general demurrer, tests the allegations of the complaint, supplemented by any matter of which the trial court takes judicial notice, to determine whether plaintiff has stated a cause of action. (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1098.) We review the ruling de novo, assuming the truth of all material facts properly pled. (Ibid.) A judgment on the pleadings should not be granted without leave to amend if there is a reasonable possibility that the defect can be cured by amendment. (Minsky v. City of Los Angeles (1974) 11 Cal.3d 113, 118.) The plaintiff bears the burden of proving there is a reasonable possibility the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

C. Wrongful Foreclosure
D.
To state a claim for wrongful foreclosure, the plaintiff must allege that the defendants caused an illegal, fraudulent, or willfully oppressive sale of the property, the plaintiff suffered prejudice or harm, and the plaintiff tendered (or was excused from tendering) the amount of the secured indebtedness. (Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062.)

Because there is no allegation that a foreclosure sale has taken place, defendants argue that Rivera’s claim is barred by Gomes v. Countrywide Home Loans Inc. (2011) 192 Cal.App.4th 1149 (Gomes). Highlighting the comprehensive statutory framework for the regulation of nonjudicial foreclosure sales found in Civil Code sections 2924 through 2924k, Gomes reasoned that allowing a borrower to bring a pre-foreclosure lawsuit of the type here would fundamentally undermine the nonjudicial nature of the process, impose additional non-statutory requirements, and introduce the possibility of lawsuits filed solely for the purpose of delay. (Gomes, at pp. 1154–1157.) In barring such suits, Gomes distinguished certain federal decisions allowing pre-foreclosure actions that involved a “specific factual basis for alleging that the foreclosure was not initiated by the correct party.” (Id. at pp. 1155–1156 [noting none of the federal cases recognize a cause of action requiring the noteholder’s nominee to prove its authority to initiate a foreclosure proceeding].)

Relying on Yvanova v. New Century Mortgage Co. (2016) 62 Cal.4th 919 (Yvanova), Rivera seeks to avoid Gomes’s application to this case. In Yvanova, the Supreme Court held that a borrower has standing to sue for wrongful foreclosure based on allegations that an assignment of the note and deed of trust to the foreclosing entity was void, rather than merely voidable. (Yvanova, at p. 939.) Yvanova’s holding was a narrow one, and the court expressly declined to consider whether a borrower may bring such a claim preemptively. (Id. at pp. 933–934.) Rivera, however, argues that Yvanova’s reasoning applies with equal force to pre-sale actions. He further argues that the Gomes rule does not apply here because, like the federal cases distinguished in Gomes, he alleges a specific factual basis as to why the assignment of the deed of trust to BNYM is void.

We will assume, for the sake of argument, that a pre-foreclosure action alleging a void assignment of the deed of trust to the foreclosing party is permissible. (See Brown v. Deutsche Bank National Trust Co. (2016) 247 Cal.App.4th 275, 281 [recognizing “distinct possibility” Supreme Court will conclude borrowers have standing to bring pre-sale actions alleging void assignment of deed of trust].) Nonetheless, we conclude that judgment on the pleadings was appropriate because Rivera did not allege facts that, if true, would void MERS’s assignment of the deed of trust to BNYM.

The courts in this state have already rejected the argument that MERS’s lack of a possessory interest in the note demonstrates its lack of authority to make a valid assignment of a deed of trust on behalf of the original lender. (Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1498, 1504–1505 (Herrera), disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13.) As these cases have recognized, MERS may assign a deed of trust where it has the authority to do so on behalf of the lender. (Herrera, at p. 1505.) And similar to the situation in Herrera, Rivera’s deed of trust identified MERS as “a nominee for Lender and Lender’s successors and assigns” and stated that “[t]he beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender’s successors and assigns).” The deed of trust further stated that Rivera “understands and agrees that MERS holds only legal title to the interests granted by [him] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender.” Because EMC, SAMI II, and Chase, were “successors and assigns” of the original lender, MERS was authorized as their nominee to exercise the lender’s powers under the deed of trust. (Id. at pp. 1504–1505.)

Rivera provides no authority supporting his contrary position that MERS’s failure to abide by its membership rules voided the assignments of the trust deed to non-MERS members. Nor does he provide any persuasive support for his claim that Assignment 2 was void because it was executed by MERS as nominee for Countrywide after Countrywide sold the loan. Even if MERS should have identified itself in Assignment 2 as nominee of Countrywide’s “successors and assigns,” there is no dispute that MERS was authorized by the deed of trust to act in that capacity.

We also conclude that Rivera fails to allege facts sufficiently showing the assignments were void due to their non-compliance with the requirements of the SAMI II trust’s PSA. Although Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski) previously provided support for this theory under New York law, subsequent decisions have made clear that the failure to timely record the assignments does not render them void. The New York case relied upon by Glaski—Wells Fargo Bank v. Erobobo (N.Y.App. Div. 2015) 127 A.D.3d 1176, 1178—was eventually overturned, and the Second Circuit Court of Appeals has since held that a post-closing transfer is not void under New York law, but only voidable. (Rajamin v. Deutsche Bank Nat’l Trust Co. (2d Cir. 2014) 757 F.3d 79, 90; accord, Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 812–817 (Mendoza).) Although an untimely assignment to a securitized trust may result in negative tax consequences for the trust’s investors, it does not render the assignment void under New York law. (Mendoza, at p. 818.)

The PSA at issue was not included in the record on appeal. Rather, the FAC provided the address to an online database of information purportedly obtained from Securities and Exchange Commission filings, and the PSA for the trust is found at this address. Because Rivera alleges that the referenced document is the governing PSA, we will take judicial notice sua sponte of its existence as if it were attached to the FAC. (Evid. Code, § 452, subd. (h).) By its terms, the PSA states that it is to be construed in accordance with New York law. Thus, based on the authorities above, we conclude Rivera fails to allege that the assignments to the securitized trust are void.

Finally, although defendants concede that Assignment 1 was erroneously executed by MERS in its individual capacity, and that Assignment 3 was without legal effect because BANA was never a beneficiary under the deed of trust, Rivera fails to explain how these errors voided Assignment 2 (MERS’s assignment of the deed of trust to BNYM, which is the only entity seeking foreclosure on Rivera’s mortgage loan).

In sum, even assuming it is theoretically possible to bring a pre-sale wrongful foreclosure action to challenge a void assignment of a deed of trust, Rivera has not sufficiently alleged facts that, if true, would render the instant assignment from MERS to BNYM void in order to state a valid cause of action.

E. Remaining Causes of Action and Leave to Amend
F.
Most of Rivera’s remaining causes of action fail because they are predicated on the allegedly void assignment of the deed of trust from MERS to BNYM. We also note that Rivera conceded below that his fourth cause of action for violation of section 17200 and fifth cause of action for unjust enrichment were not sufficiently pleaded.

No remaining allegations suffice to state a viable cause of action. The sixth cause of action alleges that BYNM and Nationstar violated Civil Code section 2923.55, subdivisions (a) and (b)(1)(B), which require mortgage servicers to send borrowers a statement informing them that they may request copies of various records including the promissory note, deed of trust, and any assignments of the deed of trust. (Civ. Code, § 2923.55, subd. (b)(1)(B).) Prior to the recording of a trustee’s deed upon sale, a borrower may bring an action for injunctive relief to enjoin a “material” violation of Civil Code section 2923.55. (Civ. Code, § 2924.12, subd. (a)(1).) Rivera alleges he never received the required statement from Nationstar, and as a result, he was forced to retain a forensic mortgage loan auditor and attorney “to uncover Defendants’ illegal forfeiture activity against him.” As alleged, however, the materiality of the statutory violation is predicated on the forfeiture activity being illegal, a premise Rivera has failed to sufficiently allege for the reasons discussed. Thus, he fails to allege a material violation of the statute.

As to the seventh cause of action for cancellation of instruments, although defendants concede errors in Assignments 1 and 3, Rivera fails to allege sufficient facts establishing that these instruments could cause him serious injury, including pecuniary loss or the prejudicial alteration of his position, if they are left outstanding. (Civ. Code § 3412; Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193–1194.)

We last consider whether Rivera has met his burden of proving a reasonable possibility that the defects identified above could be cured by amendment. (Blank, supra, 39 Cal.3d at p. 318.) We conclude he has not, because he failed to explain how he could amend the FAC so as to change the legal effect of his pleading. (Palm Springs Tennis Club v. Rangel (1999) 73 Cal.App.4th 1, 7–8.) Thus, the trial court did not abuse its discretion in denying leave to amend.

DISPOSITION

The judgment is affirmed. Defendants shall recover their costs on appeal.

 

_________________________

Fujisaki, J.

WE CONCUR:

_________________________

Siggins, P. J.

_________________________

Petrou, J.

A153348