Tuesday, September 13, 2011
C.A. Rejects Borrowers’ Challenge to Standing to Foreclose
By KENNETH OFGANG, Staff Writer
The Fourth District Court of Appeal yesterday rejected a contention that borrowers may bring suit for wrongful foreclosure on the ground that the current owner of the trust deed has not been a identified.
Div. Two held that Civil Code Sec. 2924(a) does not permit a borrower to seek damages or declaratory relief when a trustee for an unidentified beneficiary seeks to exercise the power of sale. Even if such a cause of action were recognized, the panel added, neither the mortgage service company nor the operator of the national Mortgage Electronic Registration System would be a proper defendant, the court added.
Yesterday’s ruling affirmed the dismissal of a Riverside County couple’s suit against Countrywide Home Loans, Inc. and Mortgage Electronic Registration Systems, Inc. after Riverside Superior Court Judge Bernard Schwartz sustained demurrers.
Kenneth and Maria Robinson argued that their mortgage servicer, Countrywide, should be held liable for failure to provide them with requested information about who owned the trust deed on their property, after notifying them that they were in default.
The Robinsons borrowed $380,000 from SBMC Mortgage in October 2007, and executed a note and deed of trust identifying that company as lender, T.D. Service Company as trustee, and MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns,” and as “the beneficiary under this Security Instrument.”
The deed of trust further stated that “Borrower...understands and agrees that MERS holds only legal title to the interests granted by Borrower 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.. .”
In late 2008, the Robinsons were notified that they were delinquent. In 2009, ReconTrust, purporting to act as agent for the beneficiary of the deed of trust, recorded a notice of default.
The Robinsons sued ReconTrust, along with MERS and Countrywide. The suit against ReconTrust is still pending.
The plaintiffs alleged that their promissory note was “sold and resold” on the secondary mortgage market, and that as a result, it had become difficult or impossible to ascertain the actual owner of the beneficial interest in the note. They alleged that the identity of the person or entity that currently holds an ownership interest is unknown, and that as a result, they did not believe that the owner had authorized the foreclosure.
But Justice Art McKinster, writing for the Court of Appeal, cited Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, holding that a borrower may not preemptively challenge MERS’ right to initiate foreclosure. By the same reasoning, he said, the Robinsons are incorrect in asserting that Sec. 2924(a), which sets out the requisites for nonjudicial foreclosure, implies a requirement that the owner of the trust deed be identified.
Even if there were a statutory cause of action for wrongful foreclosure, the justice added, the plaintiffs alleged no facts that would cause MERS or Countrywide to be liable, since neither was alleged to be the principal of ReconTrust or otherwise responsible for its initiation of the foreclosure sale.
In a footnote, McKinster noted that borrowers facing an allegedly wrongful foreclosure have a remedy, in the form of an action to enjoin or set aside the sale.
The case is Robinson v. Countrywide Home Loans, Inc., 11 S.O.S. 5075.
Copyright 2011, Metropolitan News Company