Liao v. New Penn Fin., LLC
| Decision Date | 27 February 2018 |
| Docket Number | A145150 |
| Court | California Court of Appeals Court of Appeals |
| Parties | WILMA LIAO, Plaintiff and Appellant, v. NEW PENN FINANCIAL, LLC, et al., Defendants and Respondents. |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Contra Costa County Super. Ct. No. MSC14-02355)
Wilma Liao appeals from the dismissal of her wrongful foreclosure action. She contends the trial court erred in sustaining a demurrer to the complaint without leave to amend. We affirm.
Appellant and Manuel Gonzales obtained a loan of $462,850 from Shea Mortgage, Inc. (Shea), executing a promissory note and deed of trust dated August 1, 2005, in favor of the lender, secured by the real property at 5621 Leitrim Way in Antioch. The deed of trust, which was recorded on August 12, 2005, named First American Title as trustee and Mortgage Electronic Registration Systems, Inc. (MERS) as beneficiary, "solely as nominee" for the lender and lender's successors and assigns.1 The complaint alleged thatthe original servicer of the loan was Countrywide Home Loans Servicing, LP (Countrywide), and that Bank of America, N.A. (BA) became the servicer as successor by merger to BAC Home Loans Servicing, LP, formerly known as Countrywide Home Loans Servicing, LP.
On May 2, 2012, MERS executed an assignment of deed of trust to "The Bank of New York Mellon FKA the Bank of New York [(Mellon)], as Trustee for the Certificate Holders of CWALT, Inc., Alternative Loan Trust 2005-J14, Mortgage Pass-Through Certificates, Series 2005-J14 [(Loan Trust)]." The assignment was recorded on May 11, 2012.
On July 8, 2013, Resurgent Capital Services, LP (Resurgent), as servicer for Mellon, substituted Old Republic Default Management Services, a division of Old Republic National Title Insurance Company (Old Republic) as trustee under the deed of trust.2 The substitution of trustee was recorded on August 15, 2013.
Also on August 15, 2013, Old Republic recorded a notice of default, which stated that as of August 14, 2013, the loan was default in the amount of $49,321.67. Old Republic recorded a notice of trustee's sale on January 23, 2014, scheduling a foreclosure sale for February 18, 2014, followed by a second notice of trustee's sale dated December 10, 2014, scheduling a foreclosure sale for January 6, 2015.3 On December 12, 2014, Shellpoint (the current loan servicer, see fn. 2 ante) sent appellant and Gonzales adelinquency notice stating that the current amount necessary to cure their default was $93,977.34.
On December 18, 2014, appellant and Gonzales executed and recorded a grant deed by which Gonzales granted the Antioch property to appellant.
According to the allegations of the complaint, at some unidentified point appellant submitted an application for loan modification to Shellpoint, which denied the application as incomplete and insisted, even after Gonzales conveyed his interest in the property to appellant, that Gonzales also had to submit a loan application package.
On December 24, 2014, appellant filed a complaint for wrongful foreclosure, quiet title, violation of Civil Code section 2924.17, violation of Business and Professions Code section 17200 et seq. (Unfair Competition Law, UCL), unjust enrichment and accounting against New Penn, BA, Old Republic, Mellon and MERS. The essence of the complaint was that the securitization of appellant's loan by sale of the loan to the Loan Trust in 2005 extinguished MERS's interest, rendering void the May 2, 2012, assignment of the deed of trust from MERS to Mellon.
The complaint initially alleged that appellant's loan "was sold to" the Loan Trust "on or before November 2007,"4 and that this sale "extinguished all interest in the mortgage" formerly held by Shea and MERS. According to the complaint, the Loan Trust is a "Special Purpose Vehicle formed as a mortgage-backed securities trust in accordance with the Internal Revenue Tax Code of 1986, as amended." The complaint continues: Only the "Depositor" may make the final assignment and transfer of each mortgage loan to the trust, and the assignment must be made "as of the Closing Date of the trust (November 30, 2005) to maintain the favorable pass-through tax status of the trust entity." The complaint alleged that "[o]nce the trust owns a mortgage loan, only the trustee of the MBS6 trust has the authority to foreclose, to appoint an agent to foreclose, to assign the deed of trust or substitute a trustee under the deed of trust."
The complaint alleged that appellant's loan was first sold by Countrywide to CWALT, Inc., the "securitization Depositor," which then sold the loan to Mellon, the trustee for the Loan Trust, but that these sales "were made without the required intervening assignment of [appellant's] Deed of Trust and endorsement of the Note in contravention of the governing trust documents." When MERS purported to assign the deed of trust to Mellon on May 2, 2012, appellant alleged, MERS "no longer had any valid agency with original lender Shea." Additionally, because CWALT Inc. was not a member of the MERS registry, "MERS exited the chain of title of [appellant's] mortgage in 2005." The assignment was also void because MERS "never held any interest in the debt, that is, the Note, secured by the deed of trust" and assignment of a deed of trust without the note "is a legal nullity." Because the assignment was void, the complaint continued, the substitution of trustee from Resurgent to Old Republic was also void, as were the notice of default executed by Old Republic in August 2013, and the notice of trustee's sale issued in January 2014.
Appellant's cause of action for wrongful foreclosure alleged that the May 2012 assignment from MERS to Mellon was void because the interest in appellant's loan originally held by MERS "and its principal, Shea Mortgage, was extinguished as ofNovember 30, 2005, when Shea sold the loan, for full loan value," to the Loan Trust. Additionally, Old Republic could not legally exercise the power of sale under the deed of trust because Old Republic was substituted on behalf of Mellon, which was an invalid trustee and invalid beneficiary. This cause of action further alleged various violations of the non-judicial foreclosure statutes and Uniform Commercial Code and claims of fraud based on the allegedly invalid assignment and related documents.
The cause of action for quiet title sought a declaration that appellant held title to the property free and clear of encumbrances in favor of Mellon because Mellon never received an effective assignment of the note or deed of trust and therefore did not hold the beneficial interest in the deed of trust that it claimed.
The cause of action for violation of Civil Code section 2924.17 alleged that New Penn, through Shellpoint, breached its statutory duty to review the various documents to substantiate the borrower's default and the right to foreclose.
The cause of action for violation of Business and Professions Code section 17200 et seq. (Unfair Competition Law or UCL) alleged that the defendants' conduct, such as executing false and misleading documents and acting as beneficiaries and trustees without legal authority constituted deceptive and fraudulent business acts or practices.
The cause of action for unjust enrichment alleged that because Mellon was an invalid beneficiary, BA and its predecessors had no right to the loan payments they collected from appellant on behalf of Mellon, and New Penn had no right to collect the payments it had attempted to collect, through Shellpoint, on Mellon's behalf.
Finally, the cause of action for accounting alleged that BA and Mellon owed appellant money they obtained from appellant under false pretenses.
Respondents demurred to the complaint on the grounds that each of the causes of action failed to state facts sufficient to constitute a cause of action. Respondents asserted, among other things, that there were no defects in the chain of title, the securitization of the loan did not affect the rights or obligations of the parties to the loan and respondents' right to foreclose, and appellant lacked standing to preemptively challenge a non-judicial foreclosure. Opposing the demurrer, appellant reiterated her theory that the sale of theloan to the Loan Trust extinguished MERS's interest and therefore rendered void the subsequent assignment from MERS to Mellon, and disputed the characterization of the case as a preemptive challenge to foreclosure.
The trial court sustained respondents' demurrer without leave to amend. The court followed the "majority rule" that "absent a dispute amongst lenders as to ownership, a party showing an assignment or other ownership interest may foreclose." The court explained that the complaint was based on the premise that a defaulting borrower could challenge the ownership interest of the foreclosing party, a position supported by Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski), but chose to follow the "nu...
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