Case Number: BC520158 Hearing Date: June 03, 2014 Dept: 34

Moving Party: Defendants Homesales, Inc. and JPMorgan Chase Bank, N.A. (“defendants”)

Resp. Party: Plaintiff Rejo Yastroreja (“plaintiff’)

Defendants’ demurrer to plaintiff’s complaint is SUSTAINED.

The Court GRANTS Defendants’ Request for Judicial Notice of Exhs. 1-10. Courts properly take judicial notice of legal operative documents (e.g., recorded deed of trust, recorded assignment, and notice of trustee sale), where the complainant alleges no facts inferring a contrary conclusion. (Intengan v. Bac Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1054.) The Court takes judicial notice of defendants’ exhibits 7 through 10 because they are records of this court. (See Evid. Code, § 452(d), (h).)

The Court DENIES Defendants’ Request for Judicial Notice of Exhibits 11 and 12. As to Exh. 11, defendants fail to provide a certified copy. (See Super. Ct. L.A. County, Local Rules, rule 3.8(b).) The Court declines to take judicial notice of the truth of the matters stated in the internet print-out in defendants’ exhibit 12.

PRELIMINARY COMMENTS:

This is a wrongful foreclosure action in which the plaintiff basically alleges that defendants not legally foreclose on his home because 1) the Note and/or Deed of Trust had been bundled and sold as part of a collateralized security and 2) the defendants did not comply with Civil Code §2923.5. Unfortunately for plaintiff, whatever the political merits are of this argument, it has been repeatedly rejected by the courts. Simply put, plaintiffs have no standing to assert the first issue; as to the second issue, were the Court to find in plaintiff’s favor, the only recourse would be to postpone the foreclosure sale. In this case the foreclosure sale has ready take place.

BACKGROUND:

Plaintiff commenced this action on 9/3/13, alleging causes of action for: (1) cancellation of deed upon sale; (2) wrongful foreclosure; (3) injunctive relief; and (4) quiet title. Plaintiff purchased the subject property on 3/2/2007, pursuant to a deed of trust in favor of Chase Home Finance LLC on 2/23/2007. (Compl., ¶¶ 8-9.) After the housing market collapsed, plaintiff sought and entered into a loan modification agreement with Chase. (Id., ¶ 10.) Despite representations that plaintiff would be considered for a modification, defendants sold the property at a public auction and Homesales was granted and conveyed the property. (Id., ¶ 11.) Plaintiff alleges the sale was invalid because it took place without anyone presenting the note or a valid assignment of the note to Ndex West. (Id., ¶ 12.) Plaintiff alleges that the recording of the notice of default was in violation of Civil Code section 2924(a)(1)(C) because the beneficiary of the deed of trust never provided a declaration to Ndex West stating that plaintiff was in default. (Id., ¶ 13.) Homesales commenced an unlawful detainer action against plaintiff on 11/1/10. (Id., ¶ 14, Exh. B.)

ANALYSIS:

Defendants demur to the entire complaint on the grounds that the causes of action fail to state a claim for relief and are uncertain.

First cause of action for cancellation of trustee’s deed upon sale and second cause of action for wrongful foreclosure

Plaintiff alleges that the trustee’s deed upon sale should be canceled because the assignment of the deed of trust was invalid since Ndex West did not have the authority to assign the deed of trust which secured the note. (See Compl., ¶¶ 17-18.)

Defendants first argue that this cause of action fails because plaintiff failed to allege tender of the amount due under the loan. “In obtaining rescission or cancellation, the rule is that the complainant is required to do equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the plaintiff has received in the transaction.” (Fleming v. Kagan (1961) 189 Cal.App.2d 791, 796.) “A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.” (Karlsen v. American Sav.& Loan Assn. (1971) 15 Cal.App.3d 112, 117. Accord Sierra-Bay Fed. Land Bank Ass’n v. Sup. Ct. (1991) 227 Cal.App.3d 318, 337 [debtors may obtain equitable relief to set aside a foreclosure, upon showing an offer to pay the debt]; Abdallah v. United Sav. Bank (1996) 43 Cal.App.4th 1101, 1109 [required to allege tender of amount of secured indebtedness, in order to maintain any cause of action re sale irregularity].)

According to a recent opinion, to allege a viable claim for attacking a foreclosure sale based upon equitable principles, a complaint must allege more than just an offer to tender, but that there already has been a full tender of the debt, or any facts showing that it would be inequitable to require a tender, as opposed to giving the borrower a windfall by obtaining real property and evading a lawful debt. (See Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526.) In contrast, an older opinion held that, “an action to set aside a trustee’s sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security.” (Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 578.)

In the fourth cause of action, plaintiff alleges that he was and is willing to tender any delinquent amount due “minus all damages already cased [sic] to the Plaintiff” (Complaint, ¶ 32.) Plaintiff does not allege that tender of the full amount due was made prior to bringing this action. Even if the Court were to follow Arnolds, this is not sufficient.

Recognized exceptions to the requirement to tender the debt are: (1) the borrower attacks the validity of the debt (e.g., based on fraud); (2) the borrower has a counter-claim or set-off against the beneficiary sufficient to cover the amount due; (3) it would be inequitable as to a party not liable for the debt; and (4) the trustee’s deed is void on its face, apart from equitable principals (e.g., trustee lacked power to convey property). (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-113.) “Tender is not required where the foreclosure sale is void, rather than voidable, such as when a plaintiff proves that the entity lacked the authority to foreclose on the property.” (Glaski v. Bank of Amer. (2013) 218 Cal.App.4th 1079, 1100.)

Plaintiff alleges that the foreclosure sale was void because defendants did not have the authority to foreclose because of the improper assignment of the deed of trust. (See Compl., ¶¶ 17-18.) Plaintiff alleges that the loan was sold to investors as a mortgage backed security and that none of the defendants owned the loan or the note or were appointed as trustee or beneficiary. (Id., ¶¶ 20-21.) Defendant provides evidence that the deed of trust was assigned to Chase Home Finance LLC and that Ndex West was substituted in as the trustee. (See RJN Exhs. 2, 4.)

Plaintiff does not have standing to challenge the assignment of the deed of trust. In Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079, a trust (the Trust) was formed which consisted of a pool of residential mortgage notes. (Id. at p. 1084.) The closing date for the Trust was in December 2005, and the plaintiff (Glaski) alleged that the attempt to assign his note and deed of trust to the Trust was made after the closing date and therefore was ineffective. (Ibid.) Glaski’s complaint contended that the defendants did not have the authority to foreclose. (Id. at p. 1088.) The court found that the plaintiff had standing to raise a defect in the assignment. (Id. at pp. 1094-1095.) It was relevant in Glaski that the plaintiff had alleged that the assignment was improper, that the Trust was formed under New York law, and that it was subject to requirements imposed on REMIC trusts. (Id. at p. 1096.) The court concluded that Glaski’s allegations were sufficient to support the claim that the transfers were void and, as a result, the entity commencing the sale was not the holder of the deed of trust. (Id. at p. 1097.) Like the instant case, Glaski involved a post-sale challenge to the foreclosure. (See Glaksi., 218 Cal.App.4th at p. 1087.)

Federal case law has noted that Glaski represents a “distinct minority view on the standing of third parties to enforce or assert claims based on alleged violations of a PSA” and that “other California Court of Appeal decisions have found to the contrary.” (Apostol v. CitiMortgage, Inc. (N.D. Cal. 2013) 2013 WL 6328256, *6 [citing Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App. 4th 497, 515].)

In Jenkins, which was decided just a few months before Glaski, the plaintiff brought a pre-sale action on the ground that her loan was pooled in a securitized investment trust without proper compliance with the trust’s PSA. (Jenkins, 216 Cal.App.4th at p. 505.) Specifically, the plaintiff alleged that “the terms of the pooling and serving agreement were violated because: (1) the promissory note was not transferred into the investment trust with a complete and unbroken chain of endorsements and transfers; and (2) the trustee of the investment trust did not have actual physical possession of the note and deed of trust prior to the closing date of the investment trust.” (Id. at p. 510.) The court noted that “California courts have refused to delay the nonjudicial foreclosure process by allowing trustor-debtors to pursue preemptive judicial actions to challenge the right, power, and authority of a foreclosing ‘beneficiary’ or beneficiary’s ‘agent’ to initiate and pursue foreclosure.” (Id. at p. 511.) The court rejected the plaintiff’s attempt to seek preemptive action because it would “result in the impermissible interjection of the courts in a nonjudicial scheme enacted by the California Legislature.” (Id. at p. 513.)

In the alternative, the court found that even if there were a proper legal basis for a preemptive suit, the plaintiff’s cause of action would still fail because the plaintiff did not have standing to challenge the transfer. (Jenkins, 216 Cal.App.4th at pp. 513-515.) The court noted that even if the improper securitization occurred, “the relevant parties to such a transaction were the holders (transferors) of the promissory note and the third party acquirers (transferees) of the note.” (Id. at pp. 514-515.) “As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [the plaintiff] lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions.” (Id. at p. 515.)

Furthermore, even if any subsequent transfers of the promissory note were invalid, [plaintiff] is not the victim of such invalid transfers because her obligations under the note remained unchanged. Instead, the true victim may be an entity or individual who believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of their interest in the note. It is also possible to imagine one or many invalid transfers of the promissory note may cause a string of civil lawsuits between transferors and transferees. [Plaintiff], however, may not assume the theoretical claims of hypothetical transferors and transferees for the purposes of showing a “controversy of concrete actuality.”

(Id. at p. 515.)

Jenkins differs from the instant action because it was a pre-sale action. However, given that Jenkins’s standing analysis was provided as an alternative to the reasoning that the claim failed because it was preemptive, it is unlikely that this difference renders Jenkins inapplicable.

In the very recent case of Yvanova v. New Century Mortgage Corporation (Cal. Ct. App., Apr. 25, 2014, B247188) 2014 WL 2149797, the court found that a plaintiff could not state an action for wrongful foreclosure based on an allegedly improper transfer of the deed because the plaintiff had no standing to challenge the bank’s claim to title. (Id. at *4.)

“Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note.” [Citation.] An impropriety in the transfer of a promissory note would therefore affect only the parties to the transaction, not the borrower. The borrower thus lacks standing to enforce any agreements relating to such transactions. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 515 (Jenkins ).)

Plaintiff argues the transfer of her promissory note and deed of trust from New Century Mortgage to Deutsch Bank and the subsequent securitization of the note were improper. But even if she is correct, “the relevant parties to such a transaction were the holders (transferors) of the promissory note and the third party acquirers (transferees) of the note.” “As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks standing to enforce any agreements, including the investment trust’s pooling and servicing agreement, relating to such transactions.” (Jenkins, supra, 216 Cal.App.4th at p. 515.) Plaintiff would not be 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. It is also possible to imagine one or many invalid transfers of the promissory note may cause a string of civil lawsuits between transferors and transferees.” (Ibid.) But plaintiff “may not assume the theoretical claims of hypothetical transferors and transferees” to assert causes of action for declaratory relief or wrongful foreclosure. (Ibid.)

Plaintiff argues Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 supports her argument that a borrower may challenge a nonjudicial foreclosure based on allegations that one or more transfers in the chain of title of a trust deed was void. She is correct. There, after concluding that noncompliance with the terms of a pooling and servicing agreement would render an assignment void, the court adopted without analysis the majority rule in Texas that an obligor may resist foreclosure on any ground that renders an assignment in the chain of title void. [Citation.]

But no California court has followed Glaski on this point, and many have pointedly rejected it.[Citations.] And as discussed above, Jenkins is directly to the contrary. We agree with the reasoning in Jenkins, and decline to follow Glaski.

(Yvanova, at pp. *4-*5.) For these reasons, the Court agrees with Jenkins and finds that plaintiff lacks standing to challenge defendants’ authority to foreclose on the property.

Plaintiff also argues that defendants violated Civil Code section 2923.5. (See Compl., ¶¶ 23-25.) For violations of Civil Code Section 2923.5, “the sole available remedy is ‘more time’ before a foreclosure sale occurs…. After the sale, the statute provides no relief.” (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526.) Plaintiff acknowledges that the foreclosure sale has already occurred. (See Compl., ¶ 11.)

Therefore, plaintiff has not established an exception to the tender rule and does not allege sufficient facts to support the claims for cancellation of the trustee’s deed upon sale and wrongful foreclosure. Accordingly, defendants’ demurrer to the first and second causes of action is SUSTAINED.

Fourth Cause of Action for Quiet Title

The fourth cause of action also requires tender of the amount owed. There has been a long-standing equitable rule that “a mortgagor of real property cannot, without paying his debt, quiet his [or her] title against the mortgagee.” (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707.) As discussed above, plaintiff fails to allege tender of the full amount due and owing and does not allege facts supporting an exception to the tender requirement.

Accordingly, defendants’ demurrer to the fourth cause of action is SUSTAINED.

Third Cause of Action for Injunctive Relief

“Injunctive relief is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted.” (Shell Oil Co. v. Richter (1942) 52 Cal.App.2d 164, 168.) Therefore, plaintiff must allege an actual dispute in order to obtain injunctive relief. Because all of the underlying causes of action fail, plaintiff fails to allege a dispute in support of the claim for injunctive relief.

Accordingly, defendants’ demurrer to the third cause of action is SUSTAINED.