Opinion
A144953
02-06-2017
ARKETHA MUNIR, Plaintiff and Appellant, v. NATIONSTAR MORTGAGE 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CGC14541511)
After plaintiff Arketha Munir defaulted on her mortgage, nonjudicial foreclosure proceedings were initiated by the recordation of a notice of default. Before the property was sold, Munir brought suit against defendants, alleging wrongful foreclosure, certain statutory violations, and breach of the implied covenant of good faith and fair dealing, based primarily on her theory that defendants lacked authority to foreclose because her loan had been securitized and sold into a trust after the closing date in the trust's pooling and servicing agreement. The trial court granted defendants' motion for judgment on the pleadings without leave to amend and entered a judgment of dismissal. We affirm.
We use the term defendants to refer collectively to Nationstar Mortgage, LLC (Nationstar), The Bank of New York Mellon (BNYM), and Mortgage Electronic Registration Systems, Inc. (MERS).
FACTUAL AND PROCEDURAL BACKGROUND
In 2003, Munir obtained a $799,200 loan from Countrywide Home Loans, Inc. (Countrywide), secured by a deed of trust (the DOT) on real property located at 817-819 Hayes Street in San Francisco. Under the DOT, MERS was named beneficiary and nonparty CTC Real Estate Services (CTC) was named trustee.
Munir's complaint alleges that her loan was originated in October of 2006, but the deed of trust attached to her complaint is dated and was recorded in September 2003. Because facts in exhibits to a complaint are accepted as true and "given precedence" if contrary to allegations in a pleading, we will assume that Munir's loan was originated in 2003. (See Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)
After Munir's loan was originated, it was securitized and sold into the CHL Mortgage Pass-Through Trust 2003-58 (the Trust). The pooling and servicing agreement (PSA) for the Trust had a closing date in 2003 by which all loans were supposed to be transferred to the trust custodian.
Eventually Munir defaulted on her loan payments, and in June of 2008, nonparty Recontrust Company, N.A. (Recontrust) recorded a notice of default. In October of 2008, MERS recorded a substitution of Recontrust as trustee. In July 2010, MERS again substituted Recontrust as Trustee and assigned the DOT to BNYM as trustee for the Trust. In September 2012, Recontrust recorded a new notice of default. Numerous notices of trustee's sale were recorded beginning in 2008, with the most recent recorded on January 8, 2013. The subject property has not yet been sold.
Recontrust also appears to have recorded and rescinded two notices of default in 2006 and 2007.
Defendants requested that the trial court take judicial notice of these notices and certain other recorded documents, and although no decision appears in the record, the parties agree that the trial court did so. Munir argues that the trial court erred in taking judicial notice of the "legal effect" of these documents as opposed to the fact of their recordation, but does not provide any transcript of the hearing on defendants' motion or otherwise explain how the trial court did so. We reject the argument and will take judicial notice of the documents. (See Evid. Code, § 459, subd. (a).)
Munir brought suit against defendants in September of 2014, alleging: (1) wrongful foreclosure; (2) violation of Civil Code section 2924, subdivision (a)(6); (3) violation of section 2934a; and (4) breach of the implied covenant of good faith and fair dealing. Defendants answered and moved for judgment on the pleadings. After a hearing, the trial court granted the motion and denied leave to amend.
Munir's complaint also named Bank of America, N.A., CTC, and Recontrust as defendants. These entities did not join in defendants' motion for judgment on the pleadings, and are not parties to this appeal.
Undesignated statutory references are to the Civil Code.
DISCUSSION
I.
Standard of Review
We review de novo a trial court's order granting a motion for judgment on the pleadings. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515.) We treat the pleadings as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law, and we consider evidence outside the pleadings which the trial court considered without objection. (Baughman v. State of California (1995) 38 Cal.App.4th 182, 187; O'Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 594, fn. 1.)
II.
Munir Failed to State a Claim for Wrongful Foreclosure
The elements of a claim for wrongful foreclosure are: "(1) the defendant[] caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) the plaintiff suffered prejudice or harm; and (3) the plaintiff tendered the amount of the secured indebtedness or was excused from tendering." (Chavez v. IndyMac Mortgage Services (2013) 219 Cal.App.4th 1052, 1062; Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.)
Munir argues that the assignment of her loan to the Trust after the closing date specified in the PSA was void, and that she has standing to challenge that assignment even though she is not a party to the PSA under Glaski v. Bank of America (2013) 218 Cal.App.4th 1079 (Glaski). Defendants argue that Glaski is distinguishable because it dealt with a post-foreclosure suit instead of the presale claim at issue here, and was wrongly decided in any event.
After defendants' brief was filed, our Supreme Court decided Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919 (Yvanova), holding that a borrower had standing to bring a wrongful foreclosure claim challenging an assignment to the foreclosing entity as void, despite not being a party to that assignment. (Id. at pp. 935-936.) We granted the parties leave to file supplemental briefs addressing Yvanova.
Defendants argue that even after Yvanova, Munir's wrongful foreclosure claim fails because: (1) Yvanova addressed only post-sale wrongful foreclosure, whereas no sale has yet taken place here; (2) Yvanova addressed void transfers, whereas the transfer as alleged here is merely voidable; (3) Munir cannot allege the element of prejudice; and (4) Munir did not tender the amount owed under the DOT.
A. Munir Cannot Allege a Sale as Required for Wrongful Foreclosure
The elements of a claim for wrongful foreclosure are: "(1) the defendant[] caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) the plaintiff suffered prejudice or harm; and (3) the plaintiff tendered the amount of the secured indebtedness or was excused from tendering." (Chavez v. IndyMac Mortgage Services, supra, 219 Cal.App.4th at p. 1062; Lona v. Citibank, N.A., supra, 202 Cal.App.4th at p. 104.) Defendants argue that because no foreclosure has occurred, Munir cannot establish the first element of her wrongful foreclosure claim. Munir argues that Yvanova's logic should be applied in the preforeclosure context. We are not persuaded.
Yvanova expressly limited its holding to the postforeclosure context, and did not address the issue of whether a wrongful foreclosure plaintiff may challenge an assignment to the foreclosing entity before any foreclosure sale takes place. (See Yvanova, supra, 62 Cal.4th at p. 924 ["We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party's right to proceed"].) Several courts have held that such preforeclosure suits are not permitted, in part because they are inconsistent with the nonjudicial foreclosure scheme enacted by the California Legislature. (See Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814-815 (Saterbak); Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513, disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13; Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1156.) Glaski, relied on heavily by Munir, likewise involved a postsale wrongful foreclosure claim. (Glaski, supra, 218 Cal.App.4th at p. 1086.)
Although not mentioned by Munir, before our high court decided Yvanova certain courts allowed presale wrongful foreclosure claims to proceed to the extent that they sought injunctive relief to prevent a sale and resulting harm. (See, e.g., Nguyen v. JPMorgan Chase Bank N.A. (N.D.Cal., May 15, 2013, No. 12-CV-04183) 2013 WL 2146606 at p. *4; Vong v. Bank of America, N.A. (E.D.Cal., May 22, 2013, No. CIV.S-12-2860 LKK/DAD) 2013 WL 2254243 at p. *8 & fn. 20.) To the extent that Munir's complaint may be construed to seek injunctive relief, we will consider defendants' second argument that the challenged transfer is at most voidable, and not void.
B. Munir Lacks Standing to Challenge the Transfer Since It Is at Most Voidable
and Not Void
Munir argues that because the assignment of her loan to the Trust was made after the closing date specified by the PSA, the assignment is void (as opposed to merely voidable) under New York law, and that she has standing to challenge a void transfer despite not being a party to the PSA under Glaski. (See Glaski, supra, 218 Cal.App.4th at pp. 1094-1098.) Defendants argue that Glaski was wrongly decided, is not consistent with the weight of New York authority, and that Yvanova expressly declined to endorse Glaski's reasoning on this point.
In Glaski, the plaintiff brought a post-sale wrongful foreclosure claim based on the transfer of his loan to a securitized trust after the closing date specified in the trust's pooling and servicing agreement. (Glaski, supra, 218 Cal.App.4th at pp. 1086, 1093-1095.) Glaski first acknowledged that under California law, "[w]here an assignment is merely voidable at the election of the assignor, third parties, and particularly the obligor, cannot . . . successfully challenge the validity or effectiveness of the transfer." (Id. at pp. 1094-1095, quoting 7 Cal.Jur.3d (2012) Assignments, § 43, p. 70.) The court went on to consider whether, under New York law, the alleged assignment to the securitized trust after the trust's closing date was void or merely voidable. (Glaski, at pp. 1095-1098.) Glaski concluded, in reliance on an unpublished New York trial court decision, that such a transfer was void, and that therefore the plaintiff had standing to challenge the assignment and had stated a claim for wrongful foreclosure. (Id. at pp. 1097, 1102, citing Wells Fargo Bank, N.A. v. Erobobo (N.Y.Sup.Ct., Apr. 29, 2013, 39 Misc.3d 1220(A)) 2013 WL 1831799 at pp. *8-*9.)
However, as defendants note, the New York trial court decision on which Glaski relied has since been reversed. (See Wells Fargo Bank, N.A. v. Erobobo (N.Y.App.Div. 2015) 127 A.D.3d 1176, 1178.) The weight of New York authority likewise appears to reject Glaski's interpretation. (See, e.g., Rajamin v. Deutsche Bank Nat. Trust Co. (2d Cir. 2014) 757 F.3d 79, 88 ["[T]he weight of New York authority is contrary to plaintiffs' contention that any failure to comply with the terms of the PSAs rendered defendants' acquisition of plaintiffs' loans and mortgages void as a matter of trust law"]; Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 744 ["Although not necessary to our decision, we note that many courts have criticized Glaski's finding that the plaintiff had standing to challenge alleged violations of the securitization process"].) Yvanova recognized the disagreement over whether Glaski was correct on this question of New York law but expressly declined to opine on it. (Yvanova, supra, 62 Cal.4th at pp. 940-941.)
Because the New York authority relied on by Glaski has been overruled, and the balance of New York authority holds that transfers such as the one alleged here are voidable instead of void, we will join other post-Yvanova courts and conclude that the transfer at issue is merely voidable. (See Yhudai v. Impac Funding Corp. (2016) 1 Cal.App.5th 1252, 1256-1260 ["Because the decision upon which Glaski relied for its understanding of New York law has not only been reversed, but soundly and overwhelmingly rejected, we decline to follow Glaski on this point"]; Saterbak, supra, 245 Cal.App.4th at p. 815; Mendoza v. JPMorgan Chase Bank, N.A. (2016) 6 Cal.App.5th 802, 811-817.) We conclude Munir has no standing to challenge the assignment of her loan as violating the terms of the PSA, and her claim for wrongful foreclosure fails. (See Yvanova, supra, 62 Cal.4th at p. 936.)
In light of our conclusion that Munir lacks standing to challenge the assignment of her loan to the Trust, we need not reach the parties' arguments regarding the prejudice and tender elements of wrongful foreclosure.
III.
Munir Fails to Allege a Violation of Section 2924 Subdivision (a)(6)
Munir's second cause of action alleges violation of section 2924, subdivision (a)(6) (section 2924(a)(6)), which provides 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." Munir alleges that because BNYM did not lawfully receive a transfer of any interest in her loan, it violated section 2924(a)(6) by causing notices of default on her property to be recorded. Defendants argue that there is no private right of action to enforce section 2924(a)(6).
We agree that Munir has failed to state a claim for violation of section 2924(a)(6), but for a different reason than those offered by defendants. The Homeowner's Bill of Rights, of which section 2924(a)(6) is a part, has an effective date of January 1, 2013, and does not apply retroactively. (See Saterbak, supra, 245 Cal.App.4th at p. 818; Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, 158-159.) The notices of default on which Munir bases her section 2924(a)(6) claim were recorded on June 18, 2008, and September 24, 2012. Accordingly, section 2924(a)(6) does not apply, and Munir's claim for violation of that statute fails.
Munir's allegations also include five notices of trustee's sale, only one of which was recorded after January 1, 2013. Munir's allegations challenge the assignment of her loan to the Trust and subsequent notices of default, not the notices of trustee's sale. (See Saterbak, supra, 245 Cal.App.4th at p. 818, fn. 8). --------
IV.
Munir Fails to Allege a Violation of Section 2934a
Under section 2934a, subdivision (c), where a substitution of trustee "is effected after a notice of default has been recorded but prior to the recording of the notice of sale, the beneficiary or beneficiaries or their authorized agents shall cause a copy of the substitution to be mailed . . . to the trustee then of record and to all persons to whom a copy of the notice of default would be required to be mailed by the provisions of Section 2924b." (§ 2934a, subd. (c).) Section 2934a, subdivision (c) also requires that "[a]n affidavit shall be attached to the substitution that notice has been given to those persons and in the manner required by this subdivision." (Ibid.) Munir alleges that defendants violated section 2934a, subdivision (b) by failing to cause notice of the substitution of Recontrust as trustee dated September 15, 2008, to be mailed to her, and by failing to record an affidavit of that mailing with the substitution. Defendants argue that there is no private right of action under § 2934a, that Munir has failed to allege any prejudice, and that the parties agreed to an alternative method of substituting a trustee in the DOT.
We agree that Munir has not alleged a violation of section 2934a, subdivision (c). The DOT signed by the parties provides a method for substitution of the trustee that does not include mailing of notice or recordation of an affidavit: "Lender, at its option, may from time to time appoint a successor trustee to any Trustee appointed hereunder by an instrument executed and acknowledged by Lender and recorded in the office of the Recorder of the county in which the Property is located." In Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, Division Four of this court held that an identical provision in a deed of trust superseded the requirement of mailing an affidavit under section 2934a, subdivision (c), because "[i]t is well settled that parties to a deed of trust may agree to a form of substitution of trustee other than that provided in section 2934a." (Id. at pp. 15-16.) We agree with the reasoning of Ram v. OneWest Bank, FSB and find that Plaintiff has not alleged any violation of section 2934a, subdivision (c).
V.
Munir Fails to Allege a Breach of the Implied Covenant of Good Faith and Fair Dealing
Munir's final claim is that defendants breached the implied covenant of good faith and fair dealing in the DOT by misrepresenting their ownership interest in her loan and their authority to foreclose, by enforcing a contract they knew to be unconscionable, by failing to offer a reasonable loan modification, and by not informing her that the loan had been sold. Defendants argue that this claim is inconsistent with Munir's allegations that no interest in the DOT was ever properly transferred to them, and that Munir's claim is contrary to the express terms of the DOT.
"It is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract." (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373.) "Because contracts differ, the nature and extent of the duties owed under the implied covenant are also variable and 'will depend on the contractual purposes.' " (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1147.) Thus, it is well settled the implied covenant does not extend so far as to impose enforceable duties that are beyond the scope of the contract, nor does the covenant prohibit actions that are expressly authorized by the contract's terms. (Carma Developers, supra, 2 Cal.4th at p. 374.)
Munir has failed to allege any contractual relationship with Nationstar, which is not a party to the DOT. Similarly, Munir repeatedly alleges that she has no contractual relationship with BNYM because the beneficial interest in the DOT was never properly transferred to it. Munir effectively concedes this point, offering no rebuttal in her reply brief. Thus, Munir's claim for breach of the implied covenant fails against these defendants. (See Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49 ["The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract"].)
In addition, Munir's various allegations are contrary to the express terms of the DOT. For example, Munir alleges that defendants breached the covenant by failing to inform her that her loan had been sold, but the DOT expressly provides that the note or a partial interest therein "can be sold one or more times without prior notice to Borrower." (See Carma Developers, supra, 2 Cal.4th at p. 374.) Munir also argues that defendants breached the covenant by recording documents indicating that they were the beneficiaries of the DOT when they were not, or by failing to "assess the Plaintiffs financial situation" and "offer any real options to prevent foreclosure." These vague allegations do not establish breach of the covenant, especially where the DOT expressly authorizes the substitution of trustee, and the issuance of a notice of default and trustee's sale in the event of default. (See Jenkins v. JPMorgan Chase Bank, supra, 216 Cal.App.4th at pp. 525-528, disapproved on other grounds in Yvanova, supra, 62 Cal.4th at p. 939, fn. 13.)
VI.
The Trial Court Did Not Err in Denying Leave to Amend
Finally, Munir argues that she should have been granted leave to amend so that she could "clarify her arguments," but she does not explain how she could plead additional facts so as to overcome the deficiencies discussed above. The trial court did not abuse its discretion in denying leave to amend. (See Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 992 ["To show abuse of discretion, plaintiff must show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action"].)
DISPOSITION
The judgment is affirmed.
/s/_________
Jones, P.J. We concur: /s/_________
Needham, J. /s/_________
Bruiniers, J.