Mendoza v. JPMorgan Chase Bank, N.A., C071882

CourtCalifornia Court of Appeals
Writing for the CourtRAYE, P.J.
Citation212 Cal.Rptr.3d 1,6 Cal.App.5th 802
Parties Maria MENDOZA, Plaintiff and Appellant, v. JPMORGAN CHASE BANK, N.A. et al., Defendants and Respondents.
Docket NumberC071882
Decision Date13 December 2016

Yesk Law, Michael Yesk, Pleasant Hill, Megan Dailey ; United Law Center and Danny A. Barak, Roseville, for Plaintiff and Appellant.

Bryan Cave, Daniel T. Rockey, Robert J. Esposito and Joseph J. Poppen, San

Francisco, for Defendants and Respondents.

OPINION ON REMAND

RAYE, P.J.

The California Supreme Court's narrow ruling on a borrower's standing to challenge the validity of the chain of assignments involved in the securitization of her loans in Yvanova v. New Century Mortgage Corp . (2016) 62 Cal.4th 919, 199 Cal.Rptr.3d 66, 365 P.3d 845 (Yvanova ) clarifies what is the dispositive issue in this appeal, but expressly did not decide how to resolve it.1 (Id . at p. 931, 199 Cal.Rptr.3d 66, 365 P.3d 845.) The court held a borrower has standing to allege that an assignment of the promissory note and deed of trust to the foreclosing party is void, not voidable; yet it did not decide whether a post-closing date transfer into a New York securitized trust is void or voidable. (Id. at p. 935, 199 Cal.Rptr.3d 66, 365 P.3d 845.) New York law, as interpreted by an overwhelming majority of New York, California, and federal courts, however, provides that defects in the securitization of loans can be ratified by the beneficiaries of the trusts established to hold the mortgage-backed securities and, as a result, the assignments are voidable. Following this ever-expanding body of law, we conclude plaintiff Maria Mendoza, the borrower, does not have standing to challenge the alleged irregularities in the securitization of her loan. We therefore affirm the trial court's dismissal of the second amended complaint for wrongful foreclosure, declaratory relief, and quiet title.

FACTUAL ALLEGATIONS

The second amended complaint, from which we extract the facts for purposes of this appeal, alleges irregularities in the assignment of the Mendoza deed of trust and defects in the process by which the Mendoza loan was securitized. As alleged, these defects left the foreclosing entities without title to the property and without authority to foreclose. We first summarize plaintiff's description of the loan and foreclosure processes and then consider plaintiff's accounting of the flaws in those processes that entitle her to the relief sought.

The Loan, Assignment of Deed of Trust, and Substitution of Trustee

In November 2007 Maria and Juan Mendoza borrowed $540,600 from defendant JPMorgan Chase Bank, N.A. (Chase), secured by a deed of trust. The deed of trust identifies the Mendozas as the "Borrowers," Chase as the "Lender," Chase as "Beneficiary," and North American Title Company as the "Trustee."2 By March of 2011, the borrowers were $54,030 in arrears.

On March 4, 2011, Chase assigned "all beneficial interest" in the Mendoza deed of trust to Chase Home Finance LLC; Chase Home Finance LLC, as the "present Beneficiary under [the Mendozas'] Deed of Trust," substituted California Reconveyance Company for North American Title Company as the trustee; and California Reconveyance Company, as trustee, issued a "Notice of Default and Election to Sell Under Deed of Trust." It is this assignment of the deed of trust and the substitution of the trustee that plaintiff challenges.

Colleen Irby signed the assignment as an officer of Chase, but according to plaintiff, Irby's profile page on LinkedIn.com identifies her as an employee of California Reconveyance Company. Plaintiff alleges on information and belief, therefore, that Irby fraudulently executed the assignment and Irby was nothing more than what has come to be known as a "robo-signer""an individual who simply signs thousands of property record documents without any legal or corporate authority whatsoever." The notary, Carla Dodd, who notarized Irby's signature was also, according to plaintiff, a "part of this scheme by the bank defendants." Plaintiff alleges that the substitution of the trustee was similarly fraudulent. The three documents were recorded on March 7, 2011.

On June 8, 2011, California Reconveyance Company gave "Notice of Trustee's Sale" to occur on June 29, 2011. On July 5, 2011, California Reconveyance Company recorded a "Trustee's Deed Upon Sale." The Trustee's Deed Upon Sale recites that the grantee, Chase Home Finance LLC, was the highest bidder at a public auction held on June 29, 2011, and purchased the property for $262,144. California Reconveyance Company, as trustee, conveyed title to plaintiff's home to Chase, "successor by merger to Chase Home Finance LLC." Plaintiff alleges that because the assignment of the deed of trust and the substitution of California Reconveyance Company as the trustee were robo-signed and California Reconveyance Company commenced the nonjudicial foreclosure and held the trustee sale, the Trustee's Deed Upon Sale is void.

After two unsuccessful attempts to state viable causes of action against defendants, in April 2012 plaintiff filed a second amended complaint for wrongful foreclosure, quiet title, and declaratory relief against Chase; Chase Mortgage Finance Corporation; Chase Home Finance, LLC; California Reconveyance Company; The Bank of New York Trust Company, N.A. [ (BONY) ], Trustee for the Multi-Class Mortgage Pass-Through Certificates Series 2007-A3 and/or Series 2007-S6; North American Title Company; Colleen Irby; and Carla Dodd. In June the trial court sustained defendants' demurrer without leave to amend and entered judgment in favor of defendants on July 10, 2012.

The general allegations in the second amended complaint contain a long dissertation on the evils of Wall Street's greed and the securitization of predatory loans. Plaintiff's description of foreclosure abuse generally, as extracted from the popular media, is fully developed, but her allegations of the specific flaws in the securitization of her specific loan are quite sparse. An essential step in the process of securitizing a loan is the transfer of the promissory note and deed of trust into a trust. Plaintiff identifies two trusts, "Trust 2007-A3" and "Trust 2007-S6," which are real estate mortgage investment conduit (REMIC) trusts; their terms are set forth in pooling and service agreements (PSA's) for the trusts, which are governed under New York law. The PSA's are not part of the record on appeal. Plaintiff directs us to the Internet to examine the PSA's allegedly filed with the Securities and Exchange Commission establishing rules for such transfers. She alleges that the PSA's establish cutoff dates (November 29, 2006, and November 28, 2007) by which loan closings must take place to be included in either trust.

Plaintiff alleges that because her loan was executed well before the closing dates, it was eligible for inclusion in the trusts and defendant banks "intended to transform, sell, convey or otherwise transfer title, for consideration, the Note and [Deed of Trust] from debt instruments into Defendant Trusts 2007-A3, A6 or Doe 1 as securities or stocks through the ‘Securitization’ process." According to plaintiff, however, the " ‘true sales' " never took place because defendant banks failed to follow "the basic legal requirements for the transfer of non-negotiable instruments and thereby, the legal, equitable, and pecuniary interest in Plaintiffs' Note and [Deed of Trust]." As a consequence, plaintiff asserts that Chase and Chase Home Finance LLC, "which purport to be Plaintiffs' creditors and/or purported owners of the Plaintiffs' Home, actually have no right, title, or interest in Plaintiffs' Note and [Deed of Trust], and have no right to collect mortgage payments, demand mortgage payments, report derogatorily against Plaintiffs' credit, or foreclose on Plaintiffs' Home."

Plaintiff admits she is in default. Yet she alleges: "[T]he bank defendants are attempting to take advantage of the complex structured finance system to defraud yet another homeowner. Having already benefitted from an American taxpayer bailout of unprecedented proportions, Plaintiffs are informed and believe, and thereon allege, that the bank defendants will oppose this [Second Amended Complaint] and seek a Court—sanctioned bailout by attempting to validate the blatantly fabricated ‘Assignment’ of the [Deed of Trust] and Substitution ... and as a consequence thereby the Trustee's Deed upon Sale ..., thereby committing fraud on the Court, and misleading the Plaintiffs into believing that the bank defendants were their actual creditors and were entitled to foreclose on their home." Plaintiff asserts: "Simply put, the Court should not allow the bank defendants to trample over 200 years of well-settled property laws just because Plaintiffs at one time ‘owed somebody the money’."

Because plaintiff's note and deed of trust were not properly transferred into the trusts before the applicable closing dates, plaintiff alleges that neither the note nor the deed of trust was part of Trust 2007-A3, Trust 2007-S6, or Doe 1. The second amended complaint concludes: "The failure to deposit the Note into the Trust 2007-A3, Trust 2007-S6, or Doe 1 before the closing date is a violation of the PSAs and of New York trust law. Consequently, Trust 2007-A3, Trust 2007-S6 or Doe 1 cannot claim any legal or equitable right, title, or interest in Plaintiffs' Note and [Deed of Trust] since BONY or Doe 2 cannot take any action which is not authorized by the Securitization agreements that created and govern Trust 2007-A3, Trust 2007-S6 or Doe 1."

In short, plaintiff alleges that the securitization of her loan failed. Plaintiff asserts the bank acted with malice by recording an assignment of an interest it knew it did not possess, fully aware that the ensuing notice of default and all that followed were void.

In her complaint, plaintiff describes a litany of bad bank practices and summarizes a number of "Relatively Recent...

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