Peng v. Chase Home Finance CA2/8, B245436(Cal. Ct. App. 2014)

California Courts of Appeal

Date Filed: April 8th, 2014

Status: Non-Precedential

Docket Number: B245436

Fingerprint: 437aeb15794e3eea001ae508104f2cb5f6fd3904

Filed 4/8/14 Peng v. Chase Home Finance CA2/8
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                 DIVISION EIGHT

JEFFRY PENG et al.,                                                  B245436

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. GC049568)
         v.

CHASE HOME FINANCE LLC et al.,

         Defendants and Respondents.

Authorities (4)

This opinion cites:

• Goodman v. Kennedy, 556 P.2d 737 (Cal. 1976)

• Hernandez v. City of Pomona, 49 Cal. App. 4th 1492 …

• Melendrez v. D & I INVESTMENT, INC., 26 Cal. Rptr. …

• Nestle v. City of Santa Monica, 496 P.2d 480 (Cal. 1972)

Full Table of Authorities

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<Excerpt and Dissent>

5 [citation], nor that the original lender would have refrained from foreclosure under the circumstances presented. If MERS indeed lacked authority to make the assignment, the true victim was not plaintiff but the original lender, which would have suffered the unauthorized loss of a $1 million promissory note.” (Id. at p. 272.) Likewise, here, there is no showing of prejudice to the Pengs from the sale of the mortgage to Freddie Mac. Whether Freddie Mac or Chase held the note, it is inescapable that the Pengs defaulted on it. They also did not tender payment or otherwise cure the default. There are no allegations, or proposed allegations,  that Chase or Freddie Mac interfered in any way with their payments or that Freddie Mac would have refrained from foreclosing on the property. As the Pengs acknowledge and as the record shows, Chase foreclosed on the property and issued a grant deed of the property to Freddie Mac. A nonjudicial foreclosure sale is presumed to have been conducted regularly, and the burden of proof rests with the party attempting to rebut this presumption. (Melendrez v. D&I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1258.) The Pengs have failed to allege any facts to rebut the  presumption the nonjudicial foreclosure was conducted properly. DISPOSITION The judgment is affirmed. Respondents are awarded costs on appeal. BIGELOW, P. J. I concur: GRIMES, J.

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RUBIN, J. – Dissenting

       I respectfully dissent.
       The promissory note signed by appellants Jeffry and Grace Peng obligated them to
repay their home loan. In August 2007, Freddie Mac acquired the promissory note from
Chase. Based on Freddie Mac owning the note, appellants seek to amend their complaint
to allege Chase did not have authority to enforce the promissory note or to foreclose on their home, 
but the majority rejects appellants’ proposed amendment. Relying on case
law rebuffing a homeowner’s challenge to a creditor-beneficiary’s authority to foreclose,
the majority notes that courts have traditionally reasoned that the homeowner’s challenge
is futile because, even if successful, the homeowner “merely substitute[s] one creditor for
another, without changing [the homeowner’s] obligations under the note.” (Fontenot v.
Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 271.) The only party prejudiced by
an illegitimate creditor-beneficiary’s enforcement of the homeowner’s debt, courts have
reasoned, is the bona fide creditor-beneficiary, not the homeowner.
       Such reasoning troubles me. I wonder whether the law would apply the same reasoning if we were dealing with debtors other than homeowners. I wonder how most of
us would react if, for example, a third-party purporting to act for one’s credit card
company knocked on one’s door, demanding we pay our credit card’s monthly statement
to the third party. Could we insist that the third party prove it owned our credit card
debt? By the reasoning of Fontenot and similar cases, we could not because, after all, we
owe the debt to someone, and the only truly aggrieved party if we paid the wrong party
would, according to those cases, be our credit card company. I doubt anyone would stand
for such a thing.
       I think cases such as Fontenot – and their solicitude for self-proclaimed creditor-
beneficiaries who ask us to take on their say-so authority to foreclose on someone’s home
– are, or should be, a legacy from a bygone era. There was a time when the orderliness and regulatory oversight of the mortgage industry perhaps justified a presumption that creditor-beneficiaries acted lawfully when they enforced a homeowner’s debt. In those
days, courts excused mortgage lenders from proving their authority because we trusted
they acted properly, and we presumed that a homeowner’s challenge was typically a
delaying tactic to avoid a valid foreclosure. (See e.g. Siliga v. Mortgage Electronic
Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 82 [“California courts have
refused to allow [homeowners] to delay the nonjudicial foreclosure process by pursuing
preemptive judicial actions challenging the authority of a foreclosing ‘beneficiary’ or
beneficiary’s ‘agent.’ ”]; Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th
497, 511-512 [same].)
       I think the old presumption no longer withstands the press of current events.
Today’s foreclosures playing out in the courts and elsewhere bear little resemblance to
what happened with the mortgages of our grandparents. Widespread securitization of
mortgages in the years before the financial meltdown of 2008, an economic catastrophe
triggered in part by the often unlawful repeated packaging, selling, repackaging, and
reselling of mortgages mostly unseen and poorly understood by homeowners, investors,
regulators, and the public, has changed the financial landscape, and should change the
legal landscape, too. The common law evolves to meet new challenges from new
circumstances. In a quip often attributed, perhaps incorrectly, to John Maynard Keynes, “When the facts change, I change my mind. What do you do sir?” The time has come to insist  upon regularity in foreclosure proceedings. I therefore believe we have reached the time to make clear a homeowner’s right to challenge a foreclosure based on the foreclosing party’s absence of authority to foreclose.

                                             2
         Perhaps in recognition that the mortgage business is not what it once was, courts
have started to permit homeowners to challenge the loss of their homes on the ground
that the foreclosing party did not own the homeowner’s promissory note or security
interest and did not represent the party who did. “[O]nly the ‘true owner’ or ‘beneficial holder’ of a Deed of Trust can bring to completion a nonjudicial foreclosure under California law.” 
(Barrionuevo v. 
Chase Bank, N.A. (N.D.Cal. 2012) 885 F.Supp.2d 964,
972.) “Several courts have recognized the existence of a valid cause of action for
wrongful foreclosure where a party alleged not to be the true beneficiary instructs a
trustee to file a Notice of Default and initiate nonjudicial foreclosure.” (Id. at pp. 972-
973.) Among the cases in this post-2008 financial meltdown era are:
         Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1088, 1097: A
homeowner successfully “raised questions regarding the chain of ownership, by
contending that the defendants were not the lenders or beneficiaries under his deed of
trust and, therefore, did not have the authority to foreclose.”
         Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1378-
1379: Deutsche Bank was not entitled to summary judgment on a wrongful foreclosure
claim because it failed to show a chain of ownership that would establish it was the true
beneficiary under the deed of trust.
         Barrionuevo v. Chase Bank, N.A., supra, 885 F.Supp.2d at pages 973–974: The
court permitted a cause of action for wrongful foreclosure where a homeowner alleged
that Chase lacked authority to foreclose because Washington Mutual securitized the
subject loan, divesting itself of any interest, prior to transferring its beneficial interest to
Chase.
         Sacchi v. Mortgage Elec. Registration Sys. (C.D.Cal. June 24, 2011, No. CV 11-
1658 AHM (CWx)) 2011 U.S.Dist. Lexis 68007, *16-21: A homeowner stated a cause of
action for wrongful foreclosure where MERS transferred a lender’s beneficial interest in
a deed to the lender’s successor after the successor executed without authority a
substitution of trustee, making the new trustee’s notice of sale invalid.

                                                3
       Ohlendorf v. Am. Home Mortg. Servicing (E.D.Cal. 2010)

279 F.R.D. 575

, 583:
Permitted a homeowner to pursue a claim for wrongful foreclosure where the foreclosing
party may have relied on a series of backdated transfers of a deed of trust’s beneficial
interest to pursue foreclosure. Documents showed that MERS was the beneficiary under
the deed of trust at the time foreclosure proceedings began, but the notice of default listed
Deutsche Bank as beneficiary and a mortgage servicer as trustee. To rectify the “taint”
of the inconsistent recorded documents, MERS filed a backdated assignment of the
beneficial interest to the mortgage servicer, and 11 seconds later the mortgage servicer
recorded a backdated assignment of the deed of trust to Deutsche.
       Javaheri v. JPMorgan Chase Bank, N.A. (C.D.Cal. June 2, 2011, No. CV10-08185
ODW (FFMx)) 2011 U.S.Dist. Lexis 62152, *12-14: A homeowner stated a claim for
wrongful foreclosure against J.P. Morgan Chase by alleging that lender Washington
Mutual sold the homeowner’s promissory note to an investment pool, which thereafter
transferred the promissory note to another investment pool, preventing J.P. Morgan
Chase from obtaining the note when it acquired Washington Mutual’s assets because the
note was no longer owned by Washington Mutual at the time of the assignment.
       I suspect that creditor-beneficiaries and their trustees do not want to be forced to
prove they own a homeowner’s debt and have authority to foreclose because it is now
well understood that in too many cases they can’t prove their ownership and authority.
I am not prejudging the facts in this case, for that is why we have discovery and a trial.
But tellingly, even here respondents’ demurrer was beset by missing paperwork. In their
demurrer, respondents state:
       “On June 12, 2007, Plaintiffs obtained a loan (“Loan”) from Chase. In connection
with the Loan, Plaintiffs executed a promissory note (“Note”) and deed of trust (“DOT”),
securing the Loan . . . . Chase was the beneficiary and First American was the trustee
under the DOT. [¶] Subsequently, Chase assigned the DOT to Chase Home Finance,
LLC. After Plaintiffs defaulted on the Loan, First American recorded a Notice of Default
and Election to Sell Under Deed of Trust (“NOD”) against the Property. Chase Home

                                              4
Finance, LLC, also recorded a Substitution of Trustee, reflecting the substitution of
Northwest Trustee as the trustee under the DOT. Because Plaintiffs failed to cure the
default, Northwest Trustee recorded, on February 1, 2011, a Notice of Trustee’s Sale
(“NOTS”) against the Property. Northwest Trustee conducted the trustee’s sale on
December 28, 2011, where Chase, successor by merger to Chase Home Finance, LLC,
acquired title to the Property. On March 28, 2012, Chase recorded a Grant Deed,
reflecting that it had granted the property to FHLMC.”
       But notice what is missing from respondents’ history of the loan – Chase’s sale to
Freddie Mac of appellants’ promissory note in August 2007. Freddie Mac’s “Loan Look-
Up Tool” states its “records show that Freddie Mac is the owner of your [i.e. appellants’]
mortgage and it was acquired on August 23, 2007.” I do not suggest that respondents
intended to mislead the trial court by omitting the fact that Chase had sold appellants’
promissory note in 2007, four years before Chase bought the house in foreclosure.
The reason I point out the omission is to highlight the difficulty of learning from tangled
paper trails “who, what, where, when, and how” in mortgage cases involving lender
documents that are sometimes – take your pick – incomplete, lost, inaccurate, post-dated,
altered, robosigned, or created after the fact.1 I would therefore permit appellants to pursue their claim for wrongful foreclosure on the grounds that Chase did not have authority to enforce the debt or to foreclose. What do respondents have to fear? Chase either had the authority to act when it submitted a credit bid to foreclose on appellants’

1
        In this case, for example, appellants signed their promissory note and deed of trust
in June 2007 and Chase sold the note to Freddie Mac in August 2007. The Trustee’s
Deed Upon Sale states Chase bought appellants’ home in foreclosure on December 28,
2011 (by credit bid, a prerogative of the present beneficiary). Chase thereafter gave the
house to Freddie Mac by Grant Deed on March 9, 2012, but, incongruously, the Trustee’s
Deed Upon Sale – which precedes the Grant Deed in the chain of title – was not notarized
until March 22, 2012, almost two weeks after Chase had deeded the house to Freddie
Mac. A trifle, perhaps, but wouldn’t it have been more businesslike and orderly to
notarize the Trustee’s Deed Upon Sale closer to the actual sale in late December 2011,
rather than wait three months until after Chase transferred ownership of the house by a
Grant Deed to Freddie Mac (thus superseding the yet-to-be-recorded Trustee’s Deed
Upon Sale)?
                                               5
home despite having sold appellants’ promissory note to Freddie Mac – and has the evidence to prove it –  or it did not. (See Civ. Code, § 2924h, subd.(b) [the “present
beneficiary” may credit bid at trustee’s sale].) It really is a simple matter. Is that too
much to ask when people are losing their homes?

       RUBIN, J.

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