RICK A. SLORP, Plaintiff-Appellant,
v.
LERNER, SAMPSON & ROTHFUSS; BANK OF AMERICA, N.A.; SHELLIE HILL; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants-Appellees.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

JULIA SMITH GIBBONS, Circuit Judge.

This case relates to alleged misconduct in a separate state-court foreclosure action. The law firm of Lerner, Sampson & Rothfuss (LSR) filed that foreclosure action against Rick Slorp on behalf of its client, Bank of America. Because Countrywide had originated Slorp’s mortgage, LSR attached to the complaint an assignment purporting to assign an interest in Slorp’s mortgage to Bank of America. The state court awarded judgment to Bank of America. Slorp subsequently retained counsel who questioned the assignment’s validity, and he sought to depose Shellie Hill, the LSR employee who had executed the assignment on behalf of Mortgage Electronic Registration Systems, Inc. (MERS). Bank of America promptly dismissed the foreclosure action, and the state court vacated its judgment.

Slorp then filed this action against LSR, Hill, MERS, and Bank of America to recover the attorney’s fees he expended in the foreclosure action. The gravamen of the complaint was that the defendants engaged in unfair, deceptive, and fraudulent debt-collection practices when they filed an illegitimate foreclosure action against Slorp. The defendants moved to dismiss the complaint, and as that motion was pending, Slorp sought leave to amend his complaint to add a civil claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68. The district court granted the motion to dismiss and denied the motion for leave to amend the complaint. We now affirm the dismissal of the original complaint but reverse the district court’s denial of the motion for leave to amend the complaint. We remand the case to the district court with instructions to permit Slorp to amend his complaint to add a RICO claim.

I.

LSR filed a separate foreclosure action on behalf of Bank of America in the Franklin County Court of Common Pleas in July 2010. Bank of America attached to its complaint a promissory note dated December 14, 2007. The note named Countrywide Bank, FSB as the lender and Slorp as the borrower. Bank of America also attached a mortgage that secured the promissory note with Slorp’s home. The poor printing quality renders the mortgage difficult to read, but it lists Countrywide Bank, FSB as the lender and MERS as the lender’s nominee.

Bank of America also attached a document, captioned “Assignment of Mortgage,” which states that MERS “does hereby assign to BAC Home Loans Servicing, L.P.^[1] fka Countrywide Home Loans Servicing, L.P. … all of its interest in that certain mortgage from Rick A. Slorp … to Mortgage Electronic Registration Systems, Inc., as nominee for Countrywide Bank, FSB.” The assignment was executed on behalf of MERS, “as nominee for Countrywide Bank, FSB, its successors and assigns,” by Shellie Hill, who purported to be an assistant secretary and vice president of MERS. The assignment was dated July 9, 2010, and was prepared by LSR.

After Slorp answered the foreclosure complaint, Bank of America moved for summary judgment. The court of common pleas granted that motion. Slorp moved for relief from the judgment in July 2011, and in February 2012 Slorp served Hill with a subpoena duces tecum, demanding that she “appear at an evidentiary hearing and bring documents demonstrating her relationship with [Bank of America] and its predecessors, documents demonstrating her appointment as Assistant Secretary and Vice president of Defendant MERS, and other documents related to the Assignment.” One month later—on the day before Hill was scheduled to testify at the evidentiary hearing—Bank of America voluntarily dismissed the foreclosure action, and the state court vacated the judgment.

On June 7, 2012, Slorp filed this action in the United States District Court for the Southern District of Ohio against LSR, Bank of America, Hill, and MERS. The four-count complaint alleged a violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692e; a violation of the Ohio Consumer Sales Practices Act (CSPA), Ohio Rev. Code §§ 1345.02 and 1345.03; falsification in violation of Ohio Rev. Code § 2921.13; and civil conspiracy to commit falsification.

According to the complaint, Hill “falsely executed” the assignment because Countrywide Bank did not exist on July 9, 2010, and Hill was not an employee of MERS on that date. Hill acted at the behest of LSR and with Bank of America’s knowledge, said Slorp, and her “false statement was made with the purpose to mislead the judge in the performance of her official function within the foreclosure action.” Slorp alleged that “filing and maintaining the foreclosure action with the use of false statements and evidence constitute[d] a false, deceptive, and/or misleading practice in an attempt to collect a debt.” Slorp sought actual damages of $8,934.44, treble damages of $26,803.32, statutory damages of $1,000, non-economic damages of $5,000, and fees and costs.

Bank of America and MERS moved to dismiss Slorp’s complaint, and LSR and Hill filed a separate motion to dismiss on the same day. After the parties finished briefing those motions, Slorp filed an amended complaint without first seeking the defendants’ consent or the court’s leave. The parties held a pretrial conference two days later, and Slorp pledged to file a motion for leave to amend within five days of that conference. Slorp then filed a motion for leave to file a second amended complaint, together with his proposed second amended complaint. The proposed complaint expanded the factual allegations and added a fifth count alleging a violation of RICO, 18 U.S.C. § 1961. The defendants opposed Slorp’s request for leave to amend.

The district court denied Slorp’s motion for leave and dismissed the complaint. The court held that Slorp lacked standing to challenge the validity of the assignment because he was not a party to the assignment. The district court also concluded that Slorp had not suffered damages attributable to the allegedly fraudulent assignment because his exposure to the foreclosure action resulted from his default on the promissory note rather than any of the defendants’ conduct. The court then rejected each of Slorp’s claims on the merits.

Turning to Slorp’s motion for leave to amend the complaint, the district court first noted that the proposed amended complaint “provides no new factual allegations that would alter the Court’s analysis” of the merits of Slorp’s claims. The court then denied the request for leave to amend because it held that the RICO claim in the proposed amended complaint was not viable. Slorp had not identified any injury caused by the assignment, the court stated, and he therefore would not be able to obtain relief under RICO. Slorp timely appealed.

II.

We begin with standing. Article III of the United States Constitution limits the power of the federal judiciary to the adjudication of certain “Cases” and “Controversies.” U.S. Const. art. III, § 2, cl. 1. From this textual limitation and “the separation-of-powers principles underlying that limitation,” the federal courts have “deduced a set of requirements that together make up the `irreducible constitutional minimum of standing.'” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1386-88 (2014) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Three components comprise this “irreducible constitutional minimum”: (1) the plaintiff must have suffered an “injury in fact,” (2) that injury must be “fairly traceable” to the defendant’s challenged conduct, and (3) it must be likely that the plaintiff’s injury would be redressed by the requested relief. Lujan, 504 U.S. at 560-61. At its essence, Article III standing requires the plaintiff to have some personal and particularized stake in the dispute. See Raines v. Byrd, 521 U.S. 811, 818-19 (1997).

To determine whether Slorp had Article III standing, we focus on whether Slorp sustained an injury that was traceable to the defendants’ conduct—the first two of the three “core components.” This “inquiry often turns on the nature and source of the claim asserted.” Raines, 521 U.S. at 818-19 (internal quotation marks omitted). And so it does here.

The district court held that Slorp lacked standing because he sustained no injury as a result of the assignment. In its view the foreclosure action “was filed because of his default under the terms of the Note and Mortgage; not because of the creation of the allegedly `false’ Assignment.” Although the foreclosure action caused Slorp to incur legal fees, the court stated, he incurred those fees because he defaulted, “not because of the Assignment.” Thus the district court held that Slorp sustained no injury attributable to the allegedly fraudulent assignment.

This analysis suffers from one key error: It mistakes the source of the injury alleged in Slorp’s complaint. Slorp does not attribute his injuries to the false assignment of his mortgage; rather, he attributes his injuries to the improper foreclosure litigation. According to the complaint, Bank of America (through LSR) filed a foreclosure action against Slorp despite its lack of interest in the mortgage; the defendants misled the trial court by fraudulently misrepresenting Bank of America’s interest in the suit; and Slorp incurred damages when he was compelled to defend his interests. If Bank of America had no right to file the foreclosure action, it makes no difference whether Slorp previously had defaulted on his mortgage.^[2] Slorp’s suit to recover damages caused by Bank of America’s lawsuit satisfies each of the three components of Article III standing. That is all that is required for count one, which alleged a violation of the FDCPA—a federal statute. See Hollingsworth v. Perry, 133 S. Ct. 2652, 2667 (2013) (stating that “standing in federal court is a question of federal law, not state law”); see also Coyne v. Am. Tobacco Co., 183 F.3d 488, 495 (6th Cir. 1999). Slorp has established standing to seek relief under the FDCPA, and the district court erred when it held otherwise.

III.

Whether Ohio law countenances Slorp’s state-law claims requires that we clarify the circumstances under which a mortgagor can challenge the validity of an assignment that purportsto assign the mortgagee’s interest in the mortgage to another entity.

Much of the district court’s analysis was taken from Livonia Properties Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, where we held that a homeowner did not have standing to challenge the validity of a home-loan assignment in an action contesting a foreclosure. 399 F. App’x 97, 102 (6th Cir. 2010). The type of standing we discussed in Livonia Properties is a common-law analogue of statutory standing, wholly unrelated to Article III standing. It is entirely a creature of state contract law and is assessed in conjunction with the merits of the claim, not as a threshold issue. Assignments are contracts and, as a general matter, are regulated by the common law of contracts. See 6A C.J.S. Assignments § 123 (2014). A person who is neither a party to the contract nor in privity with the parties, and who is not a third-party beneficiary of the contract, is said to lack “standing” to enforce the contract’s terms and to challenge its validity. See Kaplan v. Shure Bros., Inc., 266 F.3d 598, 602-03 (7th Cir. 2001) (analyzing contractual privity as an issue of state-law standing); City of Akron v. Castle Aviation, Inc., No. 16057, 1993 WL 191966, at *2 (Ohio Ct. App. June 9, 1993) (“As a general rule a non-party may not assert contract rights unless it is a third-party beneficiary under the contract or such standing is conferred by statute.”). Livonia Properties was one of innumerable cases recognizing that this general contract principle extends to assignments, subject to various caveats and exceptions. See also, e.g., Druso v. Bank One of Columbus, 705 N.E.2d 717, 721-22 (Ohio Ct. App. 1997).

We analyze the district court’s holding in more detail than might ordinarily be necessary because our Livonia Properties opinion has confounded some courts and litigants, see, e.g., Etts v. Deutsche Bank Nat’l Trust Co., No. 13-11588, 2014 WL 645358, at *4 (E.D. Mich. Feb. 19, 2014) (noting that the inexact use of the term “standing” to denote a homeowner’s eligibility to challenge certain aspects of a foreclosure made it “unclear whether Defendants are challenging Plaintiffs’ standing under Article III of the Constitution, under the Michigan statutory scheme, or both”), and has generally received more attention than an unpublished opinion might warrant.

A.

The district court held, and the defendants now maintain, that Slorp lacked standing to assert his claims because an individual who is not a party to an assignment may not attack the assignment’s validity. We differ with this interpretation of Livonia Properties. The sweeping rule that the district court extrapolated from Livonia Properties dwarfs our actual holding in that case. The district court in Livonia Properties stated that an individual “who is not a party to an assignment lacks standing to challenge that assignment,” and our Livonia Properties opinion quoted and endorsed that general statement, perhaps inartfully. 399 F. App’x at 102. But we quickly limited the scope of that rule, clarifying that a non-party homeowner may challenge the validity of an assignment to establish the assignee’s lack of title, among other defects. Id. (citing 6A C.J.S. Assignments § 132); see also Carmack v. Bank of N.Y. Mellon, 534 F. App’x 508, 511-12 (6th Cir. 2013) (“Livonia‘s statement on standing should not be read broadly to preclude all borrowers from challenging the validity of mortgage assignments under Michigan law.”). Thus a non-party homeowner may challenge a putative assignment’s validity on the basis that it was not effective to pass legal title to the putative assignee. See Conlin v. Mortg. Elec. Registration Sys., 714 F.3d 355, 361 (6th Cir. 2013); Livonia Props., 399 F. App’x at 102; see also Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 353-54 (1st Cir. 2013); 6A C.J.S. Assignments § 132 (“The debtor may also question a plaintiff’s lack of title or the right to sue.”).

There was no dispute in Livonia Properties that the assignor had assigned title to the assignee; rather, the homeowner lacked “standing” to assert that the assignment was not properly recorded and suffered from technical defects that prevented the assignee from establishing record chain of title under Michigan law. In this case, by contrast, Slorp alleges that Bank of America, the putative assignee, held neither his mortgage nor the attendant promissory note when it filed the foreclosure action because the parties lacked the authority to assign his mortgage to Bank of America when they purported to do so. That distinction makes all the difference. See Conlin, 714 F.3d at 361 (stating that a third party may challenge an assignment if that challenge would render the assignment void). Because Slorp alleges that the assignment was fraudulent and that Bank of America therefore did not hold title at the time of the foreclosure,^[3] Livonia Properties does not bar his suit—in fact, it supports it.

B.

Livonia Properties also does not govern Slorp’s standing to assert the statutory claims that he alleged in his complaint. Livonia Properties discusses the defenses that are available to homeowners who face foreclosure—i.e., the circumstances in which a homeowner may impede foreclosure by attacking the assignment of the mortgage. See 399 F. App’x at 102-03 (relying in large part on 6A C.J.S. Assignments § 132, which is captioned “Defenses”). That opinion says nothing about when a homeowner may bring suit to seek redress for fraudulent or deceptive acts in connection with a foreclosure.

Insofar as Ohio law affects Slorp’s standing to bring the CSPA, falsification, and conspiracy claims, the relevant law is the statutes that create those causes of action. Like the federal courts, Ohio courts distinguish between constitutional and statutory standing. Ohio’s constitutional standing doctrine resembles its federal counterpart. See Fed. Home Loan Mortg. Corp. v. Schwartzwald, 979 N.E.2d 1214, 1218-20 (Ohio 2012). By contrast, the Ohio state courts repeatedly have held that statutory standing is a question to be resolved with reference to the specific language of the applicable statute rather than to abstract standing principles. See, e.g., Ohio Valley Assocd. Builders & Contractors v. DeBra-Kuempel, 949 N.E.2d 582, 585-87 (Ohio Ct. App. 2011) (discussing statutory standing and stating that the “only issue” is whether the plaintiff was an “interested party” as defined in the relevant statute, “common-law standing notwithstanding”); Rose-Gulley v. Spitzer Akron, Inc., No.21778, 2004 WL 1736982, at *3 (Ohio Ct. App. Aug. 4, 2004) (holding that plaintiff lacked standing to assert CSPA claim because she was not a “consumer” within the meaning of that statute). “To incorporate common-law standing principles when the legislature has specifically authorized a party to bring suit is simply inappropriate.” Ohio Valley Associated Builders & Contractors v. Indus. Power Sys., Inc., 941 N.E.2d 849, 856 (Ohio Ct. App. 2010).

Accordingly, to determine whether Slorp had standing to bring CSPA, falsification, and conspiracy claims against the defendants, we look only to the language of those statutes. See Kuempel, 949 N.E.2d at 586-87 (“[C]ommon-law standing requirements, such as establishing a `personal stake’ in a case, do not apply when the issue is statutory standing under [a statute].”). The principles outlined in Livonia Properties are irrelevant here.

IV.

Because Slorp has Article III standing and Livonia Properties does not bar his claim, we turn to the merits. Slorp alleged four causes of action in his initial complaint: a violation of the FDCPA, 15 U.S.C. § 1692e; a violation of the CSPA, Ohio Rev. Code §§ 1345.02 and 1345.03; falsification in violation of Ohio Rev. Code § 2921.13; and civil conspiracy to commit falsification. We take each claim in turn.

A.

The district court held that Slorp’s FDCPA claim was time-barred because he failed to file suit within the one-year statute of limitations. Slorp acknowledges that an FDCPA action generally must be brought “within one year from the date on which the violation occurs,” 15 U.S.C. § 1692k(d), but asks us to apply the continuing-violation doctrine to rescue his claim. Slorp also maintains that Bank of America, LSR, and Hill committed a second, unprecluded violation of the FDCPA when Hill submitted an affidavit to the district court affirming that she was authorized to execute the assignment. We agree with the district court.

1.

The continuing-violation doctrine provides that violations “which occur beyond the limitations period are actionable where a plaintiff challenges not just one incident of unlawful conduct but an unlawful practice that continues into the limitations period.” Haithcock v. Frank, 958 F.2d 671, 677 (6th Cir. 1992) (internal quotation marks and alterations omitted). This court historically recognized two distinct categories of continuing violations, serial and systemic, each of which constituted a narrowly limited exception to the general rule that the limitations clock begins to run at the time of the act that gives rise to the claim. See LRL Props. v. Portage Metro Hous. Auth., 55 F.3d 1097, 1105 (6th Cir. 1995). In National Railroad Passenger Corp. v. Morgan, however, the Supreme Court effectively eliminated the serial continuing-violation doctrine when it held that “discrete discriminatory acts are not actionable if time barred, even when they are related to acts alleged in timely filed charges.” 536 U.S. 101, 113 (2002). We have since held that “plaintiffs are now precluded from establishing a continuing violation exception by proof that the alleged acts of discrimination occurring prior to the limitations period are sufficiently related to those occurring within the limitations period.” Sharpe v. Cureton, 319 F.3d 259, 268 (6th Cir. 2003).

Although we continue to recognize systemic continuing violations, Slorp’s invocation of the continuing-violation doctrine in the FDCPA context is problematic. Courts have been “extremely reluctant” to extend the continuing-violation doctrine beyond the context of Title VII, Nat’l Parks Conservation Ass’n v. Tenn. Valley Auth., 480 F.3d 410, 416 (6th Cir. 2007) (internal quotation marks omitted), and we have never applied the continuing-violation doctrine to an FDCPA claim.

At least one court of appeals has stated in dicta that a defendant’s collection activities might amount to a continuing violation of the FDCPA. See Solomon v. HSBC Mortg. Corp., 395 F. App’x 494, 497 n.3 (10th Cir. 2010). But that case included FDCPA claims related to an allegedly baseless foreclosure action, and the court concluded that the deceptive acts alleged in the complaint, including the foreclosure action, were discrete acts rather than continuing violations. Id. at 497. No court of appeals has held that debt-collection litigation (or a misleading statement made in connection with that litigation) is a continuing violation of the FDCPA. See Schaffhauser v. Citibank (S.D.) N.A., 340 F. App’x 128, 131 (3d Cir. 2009) (per curiam) (holding that ongoing debt-collection litigation does not constitute a continuing violation of the FDCPA); Naas v. Stolman, 130 F.3d 892, 893 (9th Cir. 1997) (stating that the FDCPA’s statute of limitations begins to run when the debt-collection suit is filed rather than when the trial court issues its judgment).^[4]

Application of the continuing-violation doctrine to FDCPA claims would be inconsistent with the principles underlying the Supreme Court’s limited endorsement of that doctrine in Morgan. In Morgan the Court differentiated between discrete acts and continuing violations. “Discrete acts such as termination, failure to promote, denial of transfer, or refusal to hire are easy to identify,” and each of those discrete acts “constitutes a separate actionable unlawful employment practice.” 536 U.S. at 114 (internal quotation marks omitted). Only those discrete acts that occurred within the limitations period are actionable; “[a]ll prior discrete discriminatory acts are untimely filed and no longer actionable.” Id. at 114-15. Claims of hostile work environment, by contrast, “are different in kind from discrete acts. Their very nature involves repeated conduct.” Id at 115. “It occurs over a series of days or perhaps years and, in direct contrast to discrete acts, a single act of harassment may not be actionable on its own.” Id. Liability attaches to a discrete act as soon as that act occurs, whereas liability for a hostile work environment depends upon “proof of repeated conduct extending over a period of time.” Id. at 120 n.12. A plaintiff therefore may assert a claim for hostile work environment based on a series of component acts provided that just one of those acts occurred within the filing period. Id. at 117. All of the acts that comprise a claim for hostile work environment, “including those that would otherwise fall outside of the filing period,” are deemed timely if one of those acts occurred within the limitations window. Sasse v. U.S. Dep’t of Labor, 409 F.3d 773, 782 (6th Cir. 2005) (citing Morgan, 536 U.S. at 117).

The institution and maintenance of the debt-collection suit in this case is much more akin to a discrete act of discrimination than a hostile work environment. As a general matter, when a debt collector initiates a deceptive, abusive, or otherwise unfair lawsuit, there is no doubt that the FDCPA claim—insofar as it is viable—accrues on that date. Although the subsequent prosecution of that suit may exacerbate the damages, the continued accrual of damages does not diminish the fact that the initiation of the suit was a discrete, immediately actionable event.^[5]

To be sure, an individual will not always recognize that the debt-collection suit is deceptive or unfair on the date it is filed. Here, for example, Slorp may have learned that the assignment was fraudulent—and that the foreclosure action was illegitimate—after the limitations period expired. But tolling doctrines such as fraudulent concealment and the discovery rule exist to address such situations. The continuing-violation doctrine is concerned with whether the initial act gives rise to an actionable claim rather than whether the tortfeasor concealed that claim. See Morgan, 536 U.S. at 120 n. 12.

Accordingly, the district court correctly held that the continuing-violation doctrine cannot rescue Slorp’s FDCPA claim from the limitations clock.

2.

In Slorp’s proposed amended complaint he alleged that the defendants again violated the FDCPA when they opposed Slorp’s motion for relief from the judgment. We disagree.

A plaintiff who alleges several FDCPA violations, some of which occurred within the limitations period and some of which occurred outside that window, will be barred from seeking relief for the untimely violations, but that plaintiff may continue to seek relief for those violations that occurred within the limitations period. See Purnell v. Arrow Fin. Servs., LLC, 303 F. App’x 297, 301 (6th Cir. 2008). But the violations that occur within the limitations window must be discrete violations; they cannot be the later effects of an earlier time-barred violation. Id. at 302 (citing Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, 628 (2007), superseded by statute, Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111-2, 123 Stat. 5).

Even if the defendants misrepresented their interests in Slorp’s mortgage when they opposed his motion for relief, their opposition to Slorp’s motion is not independently actionable because it merely gave “present effect” to deceptive conduct that had occurred outside the limitations window. See Ledbetter, 550 U.S. at 628. The defendants’ deceptive conduct, as alleged in the complaint, consisted of their initiation of unfair, misleading, and abusive legal process against Slorp and their concurrent docketing of a fraudulent assignment. The defendants did not commit a fresh violation of the FDCPA each time they filed pleadings or memoranda reaffirming the legitimacy of their state-court suit; rather, those were the continuing effects of their initial violation. “[S]uch effects in themselves have no present legal consequences.” See id. (internal quotation marks omitted). Ledbetter held that the plaintiff was not denied equal pay each time she received a paycheck reflecting a discriminatory pay disparity.^[6] Id. It follows that Slorp was not deceived or abused anew each time the defendants reaffirmed their deceptive statements throughout the litigation. Amendment of the complaint to allege a second violation of the FDCPA therefore would have been futile.

B.

The district court dismissed the CSPA claim against LSR—the only defendant named in count two—because there was no “consumer transaction.” The CSPA prohibits an unfair, deceptive, or unconscionable act or practice by a supplier “in connection with a consumer transaction.” Ohio Rev. Code §§ 1345.02(A), 1345.03(A). The statute defines a consumer transaction as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” § 1345.01(A). The statute expressly excludes from this definition transactions between financial institutions, as defined in section 5725.01, and their customers. § 1345.01(A). The district court applied this exception to preclude Slorp’s CSPA claim against LSR.

In his reply brief Slorp concedes that Anderson v. Barclay’s Capital Real Estate, 989 N.E.2d 997 (Ohio 2013), bars CSPA claims related to the servicing of residential mortgage loans. He also concedes that Bank of America is a mortgage servicer. His sole argument on appeal is that neither Anderson nor any other case or statute bars CSPA claims against the law firms that represent mortgage servicers in foreclosure litigation.

We need not determine whether the CSPA countenances claims against law firms engaged in mortgage litigation because the state-court foreclosure action was not a “consumer transaction.” The CSPA defines a consumer transaction as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” § 1345.01(A). This definition does not encompass a lawsuit: Lawsuits do not involve the transfer of goods or services for personal purposes. Slorp therefore cannot bring a CSPA claim arising from the state-court foreclosure litigation.

When a debt collection agency files a lawsuit to enforce a debt stemming from a consumer transaction, the consumer may bring suit against the debt collection agency under the CSPA. Celebrezze v. United Research, Inc., 482 N.E.2d 1260, 1262 (Ohio Ct. App. 1984). This is because “[s]ince the Act provides consumer protection through all phases of the transaction, the seller cannot relieve itself of its duty to act fairly by assigning its claim to an agent or assignee and having that assignee conduct practices prohibited by the Act. Such a narrow construction of [Ohio Rev. Code §] 1345.01(C) would defeat the purpose of the Act.” Id. Here, LSR brought an allegedly deceptive lawsuit on behalf of Bank of America, a mortgage servicer. The Ohio Supreme Court recently held that the servicing of residential mortgages is not a consumer transaction under the CSPA “because there is no `transfer of an item of goods, a service, a franchise, or an intangible, to an individual.'” Anderson, 989 N.E.2d at 1001 (quoting Ohio Rev. Code § 1345.01(A)). Because the lawsuit was in furtherance of the servicing of a residential mortgage, which is not a consumer transaction, the lawsuit is not an act in furtherance of a consumer transaction as in Celebrezze and the lawsuit may not be regulated under the CSPA.

Slorp also contends that LSR is liable under the CSPA because “violating the FDCPA has been determined by an Ohio district court to violate the CSPA, and that decision was made available for public inspection under Ohio Revised Code § 1345.05(A)(3).” For that proposition he cites Becker v. Montgomery, Lynch, No. 02-874, 2003 WL 23335929 (N.D. Ohio Feb. 26, 2003). Becker stated that “any violation of any one of the enumerated sections of the FDCPA is necessarily an unfair and deceptive act or practice” in violation of the CSPA. Id. at *2. That interpretation of the CSPA overlooks substantial disparities in the language of the two statutes, and Becker thus paints with too broad a brush. Although conduct that violates the FDCPA often will violate the CSPA as well, neither the courts nor the parties should simply assume that the two statutes are coterminous without examining whether the alleged conduct is expressly prohibited under each statute.

Thus the district court properly dismissed Slorp’s CSPA claim.

C.

Slorp alleged that Hill and LSR violated the Ohio falsification statute, Ohio Rev. Code § 2921.13, when Hill falsely represented that she was authorized to execute the assignment on behalf of MERS. The district court dismissed Slorp’s falsification claim because neither Hill nor LSR had been charged with criminal falsification. Section 2921.13 is a criminal statute. It provides that a person is guilty of a misdemeanor if the person knowingly makes a false statement, or knowingly affirms the truth of a prior false statement, in various circumstances, including when the statement is made in an official proceeding, the statement is made to mislead a public official in performing his or her official function, or the statement is sworn before a notary public. Ohio Rev. Code § 2921.13(A). But the statute also establishes a civil remedy: “A person who violates this section is liable in a civil action to any person harmed by the violation for injury, death, or loss to person or property incurred as a result of the commission of the offense.” Id. § 2921.13(G).

Ohio courts have held that criminal charges are a condition precedent to the institution of a civil cause of action under section 2921.13(G). In Hershey v. Edelman, for example, the court refused to recognize civil liability under section 2921.13(G) absent criminal charges or criminal proceedings under section 2921.13. 932 N.E.2d 386, 392 (Ohio Ct. App. 2010). That holding is consistent with the statutory language, which provides a civil remedy for losses that result from “the commission of the offense.” Ohio Rev. Code § 2921.13(G) (emphasis added). Use of the word “offense” makes clear that civil liability is predicated on criminal guilt. The effect of the statute is to provide restitution to victims of the criminal offense; it does not create civil liability absent criminal conviction. Dismissal of Slorp’s falsification claim therefore was appropriate.

D.

Slorp also alleged that the defendants engaged in a civil conspiracy when they agreed to execute the fraudulent assignment and to falsify court documents. Yet Slorp’s appellate brief does not directly address his conspiracy claim and implicitly acknowledges that the claim is derivative of his falsification claim—that is, Slorp concedes that the conspiracy count must be dismissed if the falsification count is dismissed. Because we affirm the dismissal of the falsification count, we also affirm the dismissal of this count as a matter of course.

V.

We turn to count five, which Slorp unsuccessfully sought to add to his complaint. Slorp requested leave to amend his complaint to allege a civil violation of RICO, 18 U.S.C. §§ 1962, 1964. The district court denied the motion for leave to amend upon concluding that amendment of the complaint would be futile. In the district court’s view, Slorp “failed to adequately allege an injury resulting from the Assignment at issue here,” and “[c]onsequently, Plaintiff has failed to state a RICO claim upon which relief can be granted.”

The denial of a motion for leave to amend the complaint ordinarily is reviewed for abuse of discretion. Dubuc v. Green Oak Twp., 312 F.3d 736, 743 (6th Cir. 2002). When denial is on the basis of futility, however, the decision is reviewed de novo. Id.

The germane provision of RICO makes it unlawful for a person employed by or associated with an enterprise that affects interstate commerce to conduct or participate in the conduct of the enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). The statute provides a civil remedy that allows an individual to recover treble damages for injuries to that person’s business or property sustained by reason of the RICO violation. 18 U.S.C. § 1964(c).

The defendants argue that amendment of the complaint would be futile for three independent reasons: (1) Slorp cannot recover RICO damages because his injuries are attributable to his own default rather than to the defendants’ initiation of foreclosure proceedings; (2) Slorp’s proposed amended complaint does not identify a pattern of racketeering activity because he does not allege a plausible scheme or artifice to defraud; and (3) Slorp does not allege sufficient facts to support the existence of an enterprise. We take one at a time.

A.

In Slorp’s proposed amended complaint he alleges numerous injuries sustained as a result of the defendants’ RICO violations: Slorp had to defend himself against the improper foreclosure action, faces “potential multiple liability from others who may claim an interest in the mortgage or note,” possesses a “cloud[ed]” title to his home because the fraudulent assignment continues to be recorded with the Franklin County Recorder, and had to deal with a wrongful foreclosure action. Most of these damages are speculative, uncertain, and undefined. Cf. Berg v. First State Ins. Co., 915 F.2d 460, 464 (9th Cir. 1990) (stating that loss of security and peace of mind are not recoverable injuries under RICO). Slorp faces no imminent threat of potential double liability because Bank of America voluntarily dismissed its state-court foreclosure action and has shown no intent to revisit that decision. Slorp also identifies no monetary costs associated with the clouded title. But the attorney’s fees he paid in connection with the foreclosure action are real and quantifiable damages, and our analysis therefore focuses on whether those fees were injuries to Slorp’s business or property incurred by reason of the defendants’ alleged RICO violation. See 18 U.S.C. § 1964(c).

The first component of this inquiry concentrates on the term “business or property.” In Jackson v. Sedgwick Claims Management Services, Inc., the en banc court held that a RICO victim cannot recover damages for personal injuries flowing from a RICO violation. 731 F.3d 556, 564-70 (6th Cir. 2013) (en banc). Whether damages caused by the victim’s specific injury are recoverable under § 1964(c) depends on “the origin of the underlying injury.” Id. at 565. While “personal injuries and pecuniary losses flowing from those personal injuries fail to confer relief under § 1964(c),” id. at 565-66, injuries to property and at least some pecuniary losses flowing from those property injuries do confer relief under § 1964(c).

The question, then, is whether Slorp’s complaint alleges personal injuries or injuries to property. According to the proposed RICO count, the defendants used various schemes to mislead both Slorp and the state court and thus attempted fraudulently to deprive Slorp of his home through an illegitimate foreclosure sale. Those schemes revolved around a fraudulent mortgage assignment and a related foreclosure action. Thus, if we look to “the origin of the underlying injury” to determine whether it relates to property, Slorp has alleged quintessential property injuries: The object of the alleged scheme to defraud was to obtain title to Slorp’s home (i.e., real property) through foreclosure.

Of course, the specific injury for which Slorp seeks to recover is not an injury to his home—he did not lose title as a result of the foreclosure action and therefore cannot obtain damages on that claim. Rather, his alleged injury was the attorney’s fees he incurred in connection with that foreclosure action. Under Jackson, however, that is beside the point. Jackson held that the pecuniary losses flowing from those personal injuries were not recoverable because “an award of benefits under a workers’ compensation system and any dispute over those benefits are inextricably intertwined with a personal injury giving rise to the benefits.” 731 F.3d at 566. Thus it is the source of the injury that matters, and accordingly pecuniary losses flowing from a property injury are recoverable under § 1964(c) if they are similarly intertwined with that property injury. Cf. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (stating that a RICO plaintiff can recover only if “he has been injured in his business or property by the conduct constituting the violation”); Isaak v. Trumbull Sav. & Loan Co., 169 F.3d 390, 397 (6th Cir. 1999) (permitting RICO plaintiff to recover damages resulting from plaintiff’s purchase of an interest in a campground). Slorp suffered an injury to his home as a result of the defendants’ alleged scheme: The defendants initiated foreclosure proceedings and obtained a judgment awarding them the right to take possession of Slorp’s house. That direct property injury is not quantifiable because the state court ultimately vacated the judgment and permitted Slorp to retain his house, and unquantifiable injuries are not recoverable. See Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 614 (6th Cir. 2004). But the attorney’s fees he incurred were pecuniary losses intertwined with the property injury and therefore are recoverable under § 1964(c).

This inquiry flows into the second component of § 1964(c) damages analysis, which asks whether the injuries were sustained “by reason of” the alleged RICO violation. The phrase “by reason of” incorporates a statutory-standing requirement into § 1964(c), prohibiting a private RICO plaintiff from recovering for derivative or passed-on injuries. See Id. at 613-14. This statutory-standing requirement is not at issue here because there is no dispute about whether Slorp is the proper party to assert these claims. But in Holmes v. Securities Investor Protection Corp., the Supreme Court held that the phrase “by reason of” also incorporates a proximate-cause requirement into § 1964(c). 503 U.S. 258, 268 (1992). “[W]hile a RICO plaintiff and defendant may have a direct and not a derivative relationship, the causal link between the injury and the conduct may still be too weak to constitute proximate cause—because it is insubstantial, unforeseeable, speculative, or illogical, or because of intervening causes.” Trollinger, 370 F.3d at 614.

The defendants argue that “it was his mortgage default … which caused Slorp to have to defend the foreclosure action, not anything contained within the Assignment.” But the factual premise of this argument contradicts the factual allegations in Slorp’s complaint and overlooks our obligation to assume the veracity of those allegations. Slorp alleges that the assignment was fraudulent and that the defendants had no right to foreclose on his house. If the defendants were not authorized to initiate the foreclosure proceedings, Slorp’s injuries were caused by their fraud rather than his own alleged default.

According to the complaint, Hill was an authorized agent of neither MERS nor Countrywide, and she therefore lacked the authority to assign the mortgage to Bank of America. Assuming that to be true, as we must, Bank of America wrongfully initiated foreclosure proceedings against Slorp, and his damages were proximately caused by the defendants’ institution of fraudulent foreclosure proceedings that led Slorp to incur attorney’s fees. The allegedly fraudulent assignment allowed the defendants to perpetrate and conceal the fraud by precluding the state court from ascertaining whether the defendants were the proper parties to initiate the foreclosure proceedings. On those facts it was the defendants’ alleged misrepresentations rather than Slorp’s default that led to his injuries. Had the proper mortgagee, whoever that is, elected to initiate its own foreclosure proceedings against Slorp, he would have faced double liability, and the defendants’ fraudulent assignment would have led to the anomalous and unlawful result of two separate mortgagees—one real and one fraudulent— foreclosing on Slorp’s house. The fact that the legitimate mortgagee has not initiated foreclosure proceedings only reinforces the conclusion that the defendants’ allegedly fraudulent foreclosure led to Slorp’s injuries.

To be sure, Slorp’s injuries will vanish if the defendants prove that Bank of America was the legitimate mortgagee. But this case came to the district court on a motion to dismiss, and in that posture the court was required to accept the veracity of Slorp’s factual allegations. Slorp alleges injuries to his property that were proximately caused by the defendants’ allegedly baseless initiation of foreclosure proceedings and the fraudulent assignment of his mortgage. He is thus entitled to recover damages for those injuries unless he fails to satisfy his evidentiary burden, either on summary judgment or at trial.

B.

A successful RICO plaintiff must establish that the defendants engaged in a “pattern of racketeering activity.” 18 U.S.C. § 1962(c); see also In re ClassicStar Mare Lease Litig., 727 F.3d 473, 484 (6th Cir. 2013). LSR and Hill contend that Slorp has not identified a pattern of racketeering activity because he has not alleged a plausible scheme or artifice to defraud.

To establish a pattern of racketeering activity, the plaintiff must allege at least two related acts of racketeering activity that amount to or pose a threat of continued criminal activity. Brown v. Cassens Transp. Co., 546 F.3d 347, 354 (6th Cir. 2008). The RICO statute enumerates dozens of crimes that constitute racketeering activity. See 18 U.S.C. § 1961(1). Among these crimes are mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343—the two predicate crimes that Slorp alleged in his proposed amended complaint. Mail and wire fraud consist of (1) a scheme or artifice to defraud; (2) use of the mails or interstate wire communications in furtherance of the scheme; and (3) intent to deprive a victim of money or property. United States v. Turner, 465 F.3d 667, 680 (6th Cir. 2006); United States v. Daniel, 329 F.3d 480, 485 (6th Cir. 2003). “A scheme to defraud is any plan or course of action by which someone intends to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises.” United States v. Faulkenberry, 614 F.3d 573, 581 (6th Cir. 2010) (internal quotation marks and alterations omitted).

LSR first argues that Slorp’s allegations are insufficient because he cannot show that he relied on the defendants’ alleged misrepresentations. But “a plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant’s alleged misrepresentations.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 661 (2008). LSR’s first argument stumbles right out of the gate.

LSR also contends that “Slorp must allege sufficient plausible facts to indicate that LSR and Ms. Hill made a material misrepresentation of fact to Slorp that was calculated or intended to deceive Slorp.” Slorp has done just that. Slorp’s complaint alleges that LSR and Hill filed a state-court complaint against him misrepresenting that his mortgage had been assigned to Bank of America. He further alleges that LSR executed a fraudulent assignment and served it on Slorp in connection with the foreclosure action. According to Slorp, these material misrepresentations were intended to deceive both Slorp and the state court. Slorp therefore has alleged precisely what LSR demands of him.

C.

LSR also argues that Slorp has not alleged sufficient facts to support the existence of an enterprise. “The RICO statute makes it unlawful for `any person … associated with any enterprise … to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.'” In re ClassicStar, 727 F.3d at 490 (quoting 18 U.S.C. § 1962(c)) (alterations in original). An enterprise “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4).

An “association-in-fact enterprise” is “a group of persons associated together for a common purpose of engaging in a course of conduct.” United States v. Turkette, 452 U.S. 576, 583 (1981). The association-in-fact enterprise must be separate and distinct from the pattern of racketeering activity in which it engages, but the enterprise could have been formed solely for the purpose of engaging in the racketeering activity. Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 793-94 (6th Cir. 2012). The enterprise “must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle v. United States, 556 U.S. 938, 946 (2009). The enterprise need not have a hierarchical structure or chain of command, members of the group need not have fixed roles, the group need not have a name, and the enterprise may engage in “spurts of activity punctuated by periods of quiescence.” Id. at 948.

Slorp has adequately alleged the existence of an enterprise that satisfies these basic criteria. He alleged that the defendants conspired to draft and execute a false assignment and to use the assignment in foreclosure proceedings to seize Slorp’s property. He further alleged that the defendants used the mails and wires several times in furtherance of this scheme, and he alleged that the same defendants have engaged in similar malfeasance in other foreclosure proceedings, all with the aim of obtaining title to several properties that are not rightfully theirs. The alleged association-in-fact enterprise thus had a purpose and sufficient longevity, and its members had lasting relationships with one another. The defendants may introduce evidence to rebut any of these allegations, including the existence of an enterprise that was separate and distinct from the racketeering activity, but the allegations in Slorp’s complaint are sufficient to survive a motion to dismiss.^[7]

Accordingly, the district court erred when it determined that amendment of Slorp’s complaint to include a RICO count would be futile.

VI.

We affirm the dismissal of Slorp’s FDCPA, CSPA, falsification, and civil conspiracy claims. But we reverse the district court’s denial of the motion for leave to amend the complaint and remand this action to the district court to permit Slorp to pursue the RICO claim.

SUTTON, J., concurring.

I join all of the majority opinion but part V. As to that, I agree with the majority that the district court’s decision denying Slorp leave to add a civil RICO claim should be reversed. As the majority explains, the district court erred by concluding that Slorp suffered no cognizable injury, and that mistaken conclusion was the reason it denied leave to amend as futile. Rather than proceed to address the potential viability of other RICO claims in this setting, I would leave it at that, and let the district court address those claims in the first instance.

[1] Slorp alleges that BAC Home Loans Servicing was formerly known as Countrywide Home Loans Servicing and is currently an arm of Bank of America, N.A.

[2] Although whether Slorp had defaulted is not pertinent to the actual legal issue, whether Slorp had defaulted remains an issue in the case. Slorp did not concede default in his complaint, and the defendants’ assertions that he did default may not be considered by the district court in connection with a motion to dismiss testing Slorp’s allegations.

[3] In Slorp’s memorandum in opposition to the defendants’ motion to dismiss, he stated that he “has not attacked the validity of the assignment.” The district court’s opinion quoted this statement, which could be interpreted as an admission that the assignment was valid and effective. But this interpretation would belie the allegations of fraud in Slorp’s complaint, and when that language is read in context, it is clear that he does dispute the validity of the assignment. The statement relates to his requested relief rather than his allegations: He states that he does not presently seek a declaration of the invalidity of the assignment; he only seeks damages for the defendants’ prior fraudulent conduct. This interpretation comports with the allegations in the complaint and the arguments in his briefs, all of which maintain that the assignment was invalid.

[4] Most district court decisions have held that the continued prosecution of a collection suit is not a continuing violation under the FDCPA. See, e.g., McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 911 F. Supp. 2d 1, 46-47 (D. Mass. 2012); Ball v. Ocwen Loan Servicing, LLC, No. 1: 12-CV-0604, 2012 WL 1745479, at *5 (N.D. Ohio May 16, 2012); Wilhelm v. Credico, Inc., 455 F. Supp. 2d 1006, 1009 (D.N.D. 2006); Egbarin v. Lewis, Lewis & Ferraro LLC, No. 3:00-CV-1043, 2006 WL 236846, at *9 (D. Conn. Jan. 31, 2006) (collecting cases); Calka v. Kucker, Kraus & Bruh, LLP, No. 98-CV-0990, 1998 WL 437151, at *3 (S.D.N.Y. Aug. 3, 1998).

[5] Courts are divided on whether the relevant date for purposes of the accrual of an FDCPA claim is the date on which the suit is filed or the date on which the defendant is served. See Ruth v. Unifund CCR Partners, 604 F.3d 908, 914 (6th Cir. 2010). Because Bank of America’s foreclosure action was filed and served more than one year before Slorp filed suit, we need not resolve that dilemma.

[6] Although Congress subsequently enacted a statute superseding Ledbetter and resetting the statute of limitations each time an employee receives a paycheck reflecting a discriminatory pay disparity, that statute does not disturb Ledbetter‘s interpretation of the continuing-violation doctrine more generally. See Lewis v. City of Chicago, 560 U.S. 205, 214-15 (2010).

[7] LSR’s brief relies in large part on VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696 (6th Cir. 2000), but that case has been abrogated by both Bridge and Boyle.

RELATED:

FULL DEPOSITION TRANSCRIPT OF “SHELLIE HILL” OF LERNER, SAMPSON & ROTHFUSS LS&R

Contact Information

By Richard Cordray

Today the Consumer Financial Protection Bureau is taking its first enforcement action under the Bureau’s new mortgage servicing rules. We are entering an order against Michigan-based Flagstar Bank for violating those rules by failing borrowers and illegally blocking them from trying to save their homes. Flagstar took excessive time to process borrowers’ applications, did not tell them when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications. These unlawful practices caused many consumers to lose the homes they had been trying to save. That is wrong and it is unacceptable.

Mortgage servicers play a central role in homeowners’ lives because they bear responsibility for managing the loans. They are the link between a mortgage borrower and a mortgage owner. They collect and apply payments, work out modifications to the loan terms, and handle the difficult process of foreclosure. Importantly, consumers cannot take their business elsewhere. Instead, they are stuck with their mortgage servicer, whether they are treated well or poorly.

In January 2014, the Consumer Bureau’s new mortgage servicing rules took effect. These new regulations establish specific rules of the road for handling loss mitigation applications. Since we first announced these rules almost two years ago, we have made clear that we expect full compliance to clean up the problems that had been pervasive in this industry and caused so many people to lose their homes. Consumers must not be hurt by illegal servicing any more. When mortgage servicers fail to treat people fairly, we will vigorously enforce the law.

Like many other servicers, Flagstar found that its volume of applications for loss mitigation rose sharply as a result of the foreclosure crisis. Our investigation found that Flagstar was simply not equipped to handle the influx. For a time, it took the staff up to nine months to review a single application. In 2011, Flagstar had 13,000 active loss mitigation applications but had only 25 full-time employees and a third-party vendor in India reviewing them. The Bureau found that in Flagstar’s loss mitigation call center, the average wait time was 25 minutes and the average call abandonment rate was almost 50 percent. Flagstar also had a heavy backlog of loss mitigation applications.

To make things worse, we found that Flagstar would clear its backlog of applications by closing those with expired documents – even though the documents had expired because Flagstar sat on them for so long. We also found that consumers would turn in loan modification applications but would not hear whether they were approved for many months. Flagstar was supposed to send “missing document” letters to consumers so they could provide any missing information, but it often delayed or did not send them at all.

We also concluded that when Flagstar did evaluate a completed application, it did a poor job. For example, we believe it routinely miscalculated the incomes of borrowers. Because loss mitigation programs are heavily dependent on the borrower’s income, this kind of miscalculation can have grave consequences for consumers. We determined that Flagstar’s failures led to wrongful denials of loan modifications.

Furthermore, when Flagstar denied an application, it did not give homeowners a specific reason why. Under the Consumer Bureau’s new rules, mortgage servicers must provide the specific reason why a complete application for a loan modification is rejected. This gives consumers a chance to fix the problem and either reapply or appeal the rejection. It also gives consumers more control over what is happening and provides them with critical information so they can make informed choices.

Another new mortgage servicing right for certain homeowners is the right to appeal the denial of a loan modification. But Flagstar has been wrongly telling borrowers that they only have the right to appeal if they live in certain states. That is not true. It does not matter what state the consumer lives in.

Finally, for those consumers lucky enough to get a trial loan modification, Flagstar kept them in a sort of “trial mod purgatory” for far too long. Indeed, Flagstar needlessly prolonged trial periods, causing some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardizing the potential for a permanent loan modification.

Struggling homeowners paid a heavy price, including losing the opportunity to save their homes, as a result of Flagstar’s illegal actions. These problems were compounded because consumers have almost nowhere to turn. In the mortgage servicing market, they could not take their business elsewhere but were stuck with whatever treatment they received from Flagstar.

As we have seen for many years now – and I have seen it in local government, state government, and now the federal government – mortgage servicing failures hurt homeowners. In many cases, we believe Flagstar deprived people of the ability to make an informed choice about how to save or sell their home, causing borrowers to drop out of the process entirely and driving them into foreclosure. A former manager testified that when borrowers got to an advanced stage of delinquency, “You can feel that they’ve given up. There’s no hope left.” Another former manager recalled a borrower who told him, “You know what? My home can just go to foreclosure. I’m not faxing any documentation anymore.”

To remedy these wrongs, the Consumer Bureau is ordering Flagstar to halt any further violations of federal law. Flagstar must pay $27.5 million to consumers whose loans were being serviced by Flagstar and who were subject to its unlawful practices. At least $20 million of this amount will go to victims of foreclosure. Flagstar must also engage in outreach to affected borrowers who were not foreclosed on and offer them loss mitigation options. Flagstar must halt the foreclosure process, if one is happening, during this outreach and qualification process. Flagstar also is barred from acquiring servicing rights for default loan portfolios until it demonstrates that it is able to comply with the laws that protect consumers during the loss mitigation process. In addition, Flagstar will make a $10 million payment to the Bureau’s Civil Penalty Fund.

The Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today’s action signals a new era of enforcement to protect consumers against the cost of servicer runarounds. The financial crisis is still fresh in our minds and too many homeowners continue to feel its effects. We need all mortgage servicers to understand that they must step up and follow the law. We are working very hard to fulfill this objective. Thank you.

FOR IMMEDIATE RELEASE:
September 29, 2014

CONTACT:
Office of Communications
Tel: (202) 435-7170

CFPB TAKES ACTION AGAINST FLAGSTAR BANK FOR VIOLATING NEW MORTGAGE SERVICING RULES

Flagstar to Pay $37.5 Million for Blocking Mortgage Borrowers’ Attempts to Save Their Homes

Washington, D.C. – Today the Consumer Financial Protection Bureau (CFPB) took action against Michigan-based Flagstar Bank for violating the CFPB’s new mortgage servicing rules by illegally blocking borrowers’ attempts to save their homes. At every step in the foreclosure relief process, Flagstar failed borrowers. The bank took excessive time to process borrowers’ applications for foreclosure relief, failed to tell borrowers when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications. The CFPB is ordering Flagstar to halt its illegal activities, pay $27.5 million to victims, and pay a $10 million fine.

“Because of Flagstar’s illegal actions and unacceptable delays, struggling homeowners lost the opportunity to save their homes,” said CFPB Director Richard Cordray. “The Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today’s action signals a new era of enforcement to protect consumers against the cost of servicer runarounds.”

Flagstar is a federal savings bank and mortgage servicer based out of Troy, Michigan. Flagstar administers foreclosure relief programs provided by the owner of the loan. Foreclosure relief programs mitigate losses for both the borrower and the owners of the loans by providing alternatives to foreclosure. These alternatives are known as “loss mitigation” programs. Flagstar is responsible for soliciting borrowers for these programs, collecting their applications, determining eligibility, and implementing the loss mitigation program for qualified borrowers.

The Bureau’s examinations and investigation found that from 2011 to the present, Flagstar failed to devote sufficient resources to administering loss mitigation programs for distressed homeowners. For example, in 2011, Flagstar had 13,000 active loss mitigation applications but only assigned 25 full-time employees and a third-party vendor in India to review them. For a time, it took the staff up to nine months to review a single application. In Flagstar’s loss mitigation call center, the average call wait time was 25 minutes and the average call abandonment rate was almost 50 percent. And Flagstar’s loss mitigation application backlog numbered well over a thousand. When the CFPB’s new mortgage servicing rules went into effect in January 2014, Flagstar committed violations of the new rules with respect to loss mitigation.

At every step in the foreclosure relief process, Flagstar failed consumers. Specifically, the Bureau found that Flagstar:

• Closed borrower applications due to its own excessive delays: Flagstar took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents, even though the documents had expired because of Flagstar’s delay.
• Delayed approving or denying borrower applications: Under the new CFPB mortgage servicing rules, Flagstar must evaluate a complete loss mitigation application within 30 days, if it receives the complete application more than 37 days before a foreclosure sale. Flagstar also failed to adhere to these timelines.
• Failed to alert borrowers about incomplete applications: Flagstar is responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a “missing document” letter. Flagstar failed to send, or delayed sending, missing document letters to borrowers.
• Miscalculated incomes: Eligibility for some loss mitigation programs, such as a loan modification, is highly dependent on borrower income. If borrowers have too much or too little income, they do not qualify. Flagstar routinely miscalculated borrower income and wrongfully denied loan modifications.
• Denied applications for unspecified reasons: Under the CFPB’s new rules, mortgage servicers must provide the specific reason a complete loan modification application is rejected. Flagstar’s policy was to say only “not approved for loss mitigation options by the investor/owner of the loan,” even though Flagstar’s internal systems contained the true reason for the denial.
• Misinformed borrowers about their appeal rights: Under the CFPB’s new rules, Flagstar must provide certain borrowers the right to appeal the denial of a loan modification. But Flagstar failed to provide this notice, and it wrongly stated that borrowers have an appeal right only if they reside in certain states. 
• Put borrowers in trial period purgatory: Flagstar needlessly prolonged trial periods for loan modifications. This caused some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardized borrowers’ permanent loan modification.

Flagstar’s failures as a mortgage servicer hurt homeowners. In many cases, Flagstar deprived borrowers of the ability to make an informed choice about how to save or sell their home, caused borrowers to drop out from the loss mitigation process entirely, and drove borrowers into foreclosure.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions violating the January 2014 mortgage servicing rules, and it has authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The CFPB’s order requires Flagstar to:

• Pay $27.5 million in redress to victims: Flagstar must pay $27.5 million to the approximately 6,500 consumers whose loans were being serviced by Flagstar and who were subject to its unlawful practices. At least $20 million of this will go to the approximately 2,000 victims of foreclosure. Borrowers who receive payments will not be prevented from taking individual action on their claims as a result of this settlement.
• End all loss mitigation mortgage servicing violations: Flagstar is prohibited from engaging in violations of the loss mitigation provisions of the CFPB’s mortgage servicing rules and unfair, deceptive and abusive acts or practices in connection with loss mitigation. Among other things, this means Flagstar must properly review, acknowledge, and evaluate loss mitigation applications and cannot improperly deny loss mitigation applications or improperly prolong the trial period for a loan modification.
• Stop acquiring default servicing rights from third parties: Flagstar is prohibited from acquiring servicing rights for default loan portfolios until it demonstrates it has the ability to comply with laws that protect consumers during the loss mitigation process.
• Engage in efforts to help affected borrowers preserve their home: For borrowers affected by Flagstar’s unlawful practices who were not foreclosed on, Flagstar must engage in outreach, including a door knocking campaign and translations services, to contact borrowers and offer them loss mitigation options. And Flagstar must halt the foreclosure process, if one is happening, during this outreach and qualification process for these borrowers. For affected borrowers who were previously denied a loss mitigation option, Flagstar must do an independent review to determine whether they were offered all loss mitigation options for which they qualified. If they were not, Flagstar must offer the borrower those loss mitigation options.
• Pay $10 million civil penalty: Flagstar will make a $10 million penalty payment to the CFPB’s Civil Penalty Fund.

The consent order is available at: http://files.consumerfinance.gov/f/201409_cfpb_consent-order_flagstar.pdf

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MONTGOMERY COUNTY, PENNSYLVANIA,
RECORDER OF DEEDS, by and through
NANCY J. BECKER, in her official capacity as
the Recorder of Deeds of Montgomery County,
Pennsylvania, on its own behalf and on behalf
of all others similarly situated,
Plaintiff,

vs.

THE BANK OF NEW YORK MELLON, THE
BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., CITIBANK, N.A., DEUTSCHE
BANK NATIONAL TRUST COMPANY,
DEUTSCHE BANK TRUST COMPANY
AMERICAS, HSBC BANK USA, N.A.,
JPMORGAN CHASE BANK, N.A., and WELLS
FARGO BANK, N.A.,
Defendants.

I. NATURE OF THE ACTION

1. The Montgomery County, Pennsylvania, Recorder of Deeds, by and through
Nancy J. Becker, the Montgomery County Recorder of Deeds, brings this action on its own
behalf and on behalf of a class of all other similarly situated Pennsylvania County Recorders of
Deeds (collectively, the “Recorders” or the “Class”) against The Bank of New York Mellon, The
Bank of New York Mellon Trust Company, N.A., Citibank N.A., Deutsche Bank National Trust
Company, Deutsche Bank Trust Company Americas, HSBC Bank, N.A., JPMorgan Chase N.A.,
and Wells Fargo Bank, N.A. (“Defendants”) to remedy Defendants’ failures to properly and
timely record mortgage assignments as required by Pennsylvania law.

2. Defendants have been among the most active participants in the mortgage-backed
securities (“MBS”) industry, including as trustees for numerous MBS trusts into which the
securitized mortgage loans are ultimately conveyed. In a securitization, a mortgage loan typically
is transferred multiple times before it is conveyed to the trustee on behalf of the MBS trust. Each
of the Defendants has engaged in transfers of mortgage loans secured by real property located in
Montgomery County and throughout Pennsylvania,

3. Each of the Defendants is also a member of, and participates in, the “MERS
System,” a private, members-only electronic registry for recording and tracking transfers of
mortgage loans without recording mortgage assignments in public land records offices.

4. In Montgomery County, Pa. v. MERSCORP, Inc., l1-CV-6968, 2014 WL
2957494 (E.D. Pa. Jun. 30,2014), this Court, per the Honorable 1. Curtis Joyner, entered a
declaratory judgment in Plaintiffs favor, finding that the failure to create and record mortgage
assignments evincing the transfers of promissory notes secured by mortgages on Pennsylvania
real estate, under the MERS System and otherwise, violates Pennsylvania recording statutes,
including 21 P.S. §§ 351,444 and 623-1.

5. Each of the Defendants has systematically failed to create and timely record mortgage
assignments in connection with transfers of promissory notes secured by mortgages on Pennsylvania
real estate, both when operating within the MERS System and otherwise. These failures to record
mortgage assignments have damaged the integrity of Pennsylvania’s public land records by
creating gaps in the chain of title and creating confusion amongst property owners and others
about the identity of the owners of their mortgages, and have wrongfully deprived the
Montgomery County Recorder of Deeds and all of the other Pennsylvania Recorders of millions
of dollars in recording fees, in violation of21 P.S. §§ 351,444 and 623-1 (together, the
“Pennsylvania Recording Statutes”). Plaintiff seeks an award of damages for these violations, to quiet
title on all of the adversely affected Pennsylvania properties by requiring Defendants to record the
missing mortgage assignments and pay the related recording fees, restitution for Defendants’ unjust
enrichment, and for declaratory and permanent injunctive relief

[…]

Go Warren Go! Shit is about to get real now.

Think Progress-

Sens. Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) want to investigate the Federal Reserve’s relationships with the banks it oversees after the release of taped conversations between managers and a former bank examiner at the Fed.

The recordings were made surreptitiously by a former Fed employee named Carmen Segarra, who is trying to prove in court that she was fired in retaliation for her attempts to bring a cultural shift to the supervisory work of the powerful central bank. They include a reprimand from her boss that she is “arrogant,” that she should “have a sense of humility” about her work, and should be guided more by the consensus within her working group than by her own instincts as a 10-year veteran of regulatory compliance work in the banking industry.

Segarra says she began making the tapes after her own colleagues tried on multiple occasions to cajole her into changing her notes from meetings with Goldman Sachs executives because they didn’t want an official record of some of the executives’ comments about the bank’s willingness to bend the rules.

[THINK PROGRESS]

Image: AP

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CASHMERE VALLEY BANK,
Petitioner,

v.

STATE OF WASHINGTON,
DEPARTMENT OF REVENUE,
Respondent.

EXCERPT:

“We hold that Cashmere cannot claim the deduction because its investments in
REMICs and CMOs were not “primarily secured” by first mortgages or trust deeds.
Cashmere’s investments in REMICs and CMOs gave it the right to receive defined
income streams from a pool of mortgages, trust deeds, and mortgage-backed
securities, held in trust for investors. The ultimate source of cash flow was mortgage
payments. However, Cashmere’s investments were not backed by any encumbrance
on property nor did Cashmere have any legal recourse to the underlying trust assets
in the event of default. Thus, Cashmere’s investments were not “primarily secured”
by mortgages or trust deeds.”

[…]

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, Plaintiff-Appellee,
v.
LOIS M. BLANK, et al., Defendant-Appellant.

Bruce M. Broyles, 5815 Market Street, Suite 2, Youngstown, OH 44512 (For Defendant-Appellant).

OPINION

TIMOTHY P. CANNON, P.J.

{¶1} Appellant, Lois M. Blank, appeals the September 9, 2013 judgment of the Ashtabula County Court of Common Pleas granting summary judgment and issuing a decree of foreclosure in favor of appellee, JPMorgan Chase Bank, National Association. For the reasons that follow, we reverse and remand to the trial court.

{¶2} On February 25, 2008, appellant signed a promissory note payable to Chase Bank USA, N.A in the amount of $382,500. The same day, appellant granted a mortgage in the same amount to Chase Bank USA, N.A. on the property at 3471 Lake Road in Conneaut, Ohio. The mortgage was recorded on February 29, 2008, and was later assigned by Chase Bank USA, N.A. to appellee, which duly recorded the assignment on June 25, 2012.

{¶3} According to appellee, on December 10, 2010, an acceleration warning was mailed, “return service requested,” to appellant. The warning informed appellant that she was in default for her failure to make the required monthly payments on her loan, beginning with the payment due August 1, 2009. The warning also indicated the total amount past due and payable.

{¶4} On June 28, 2012, appellee brought a complaint in foreclosure, alleging that appellant was in default under the terms of the note and that she owed the sum of $379,754.18. Attached to the complaint were copies of the note and mortgage. On August 3, 2012, appellant filed her answer, which included five affirmative defenses.

{¶5} On September 12, 2012, appellee filed a motion for summary judgment, arguing that appellant’s affirmative defenses were “insufficient to comply with the Civil Rules’ requirement of notice pleading.” Additionally, appellee’s motion asserted that appellant failed to set forth any specific facts that demonstrated a genuine issue of material fact for trial.

{¶6} On January 28, 2012, appellant filed a response to appellee’s motion for summary judgment. Attached to appellant’s response was an affidavit in which appellant averred that she never received any notice of her default pursuant to the terms of the promissory note and mortgage either by regular mail, certified mail, or personal delivery.

{¶7} On March 11, 2013, appellee filed a reply in support of its motion for summary judgment. In its reply, appellee asserted that appellant’s affidavit attached to her response was unexecuted and that appellee had not received an executed copy. As a result, appellee argued the trial court could not rely on “[a]ppellant’s unexecuted Affidavit” and that summary judgment was proper.

{¶8} On September 9, 2013, the trial court granted appellee’s motion for summary judgment. In a separate judgment entry, also dated September 9, 2013, the trial court filed an “entry granting summary judgment and decree in foreclosure and reformation of mortgage.”

{¶9} Appellant timely appeals the trial court’s granting of summary judgment and decree in foreclosure in favor of appellee. Appellee chose not to file a merit brief.

{¶10} Appellant sets forth one assignment of error, which states:

{¶11} “The trial court erred in granting summary judgment to Appellee when there were genuine issues of material fact still in dispute.”

{¶12} Under her sole assignment of error, appellant frames three sub-issues for our review. First, appellant contends that “[a]ppellee failed to fulfill a condition precedent to the acceleration of the debt and the filing of the foreclosure complaint.” Second, appellant asserts that “[t]he trial court erred in finding that Appellee had standing to file the foreclosure * * *.” Third, appellant argues that the trial court erred in not considering her affidavit, “as it was not a prohibited `self-serving’ affidavit.”

{¶13} We review a trial court’s decision on a motion for summary judgment de novo. Fed. Home Loan Mtge. Corp. v. Zuga, 11th Dist. Trumbull No. 2012-T-0038, 2013-Ohio-2838, ¶13. Under Civ.R. 56(C), summary judgment is proper if:

(1) No genuine issue as to any material fact remains to be litigated;

(2) the moving party is entitled to judgment as a matter of law; and

(3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party.

Id. at ¶10, citing Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327 (1977).

{¶14} The moving party bears the initial burden to demonstrate from the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, that there is no genuine issue of material fact to be resolved in the case. Id. at ¶12. To properly support a motion for summary judgment in a foreclosure action, a plaintiff must present evidentiary-quality materials showing: (1) the movant is the holder of the note and mortgage, or is a party entitled to enforce it; (2) if the movant is not the original mortgagee, the chain of assignments and transfers; (3) the mortgager is in default; (4) all conditions precedent have been met; and (5) the amount of principal and interest due. Wachovia Bank v. Jackson, 5th Dist. Stark No. 2010-CA-00291, 2011-Ohio-3203, ¶40-45. “If this initial burden is met, the nonmoving party then bears the reciprocal burden to set forth specific facts which prove there remains a genuine issue to be litigated, pursuant to Civ.R. 56(E).” Zuga, supra, at ¶12.

{¶15} Appellant’s three sub-issues will be considered out of order. In her second sub-issue presented for review, appellant asserts that summary judgment was improper, as “[t]he trial court erred in finding that appellee had standing to file the foreclosure complaint in light of the undated allonge that was not attached to the complaint and an assignment of mortgage without a transfer of the underlying debt.”

{¶16} A plaintiff in a foreclosure action must have standing at the time it files the complaint in order to properly invoke the jurisdiction of the trial court. Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶41-42. “It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.” Id. at ¶22, quoting State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d 176, 179 (1973). A party’s standing to sue is evaluated at the time of the filing of the complaint. Id. at ¶24. Additionally, the lack of standing cannot be cured by a subsequent assignment of the note and mortgage subsequent to filing the complaint. Id. at ¶38.

{¶17} A plaintiff in a foreclosure case demonstrates standing by having an interest in either the promissory note or mortgage. Fed. Home Loan Mtge. Corp. v. Koch, 11th Dist. Geauga No. 2012-G-3084, 2013-Ohio-4423, ¶24, citing Fed. Home Loan Mtge. Corp. v. Rufo, 11th Dist. Ashtabula No. 2012-A-0011, 2012-Ohio-5930, ¶18. The requisite “interest” can be met by demonstrating an assignment of either the note or mortgage. Rufo at ¶44. There is no standing to proceed with the foreclosure if the interest did not exist at the time the foreclosure complaint was filed. Schwartzwald at ¶25-27.

{¶18} The assignment of a mortgage, without an express transfer of the note, is sufficient to transfer both the mortgage and the note if the record indicates the parties’ intent to transfer both. Bank of N.Y. Mellon v. Veccia, 11th Dist. Trumbull No. 2013-T-0101, 2014-Ohio-2711, ¶20, citing Bank of New York v. Dobbs, 5th Dist. Knox No. 2009-CA-000002, 2009-Ohio-474, ¶31. In this case, appellee attached to its complaint the assignment of mortgage which “assign[ed], transfer[red] and set over unto [appellee], * * *, a certain mortgage from [appellant] to Chase Bank USA, N.A.” By attaching a copy of the assignment of mortgage to the complaint, appellee demonstrated the requisite standing existed at the time the foreclosure complaint was filed.

{¶19} Appellant argues that because appellee attached to its motion for summary judgment an undated allonge, not previously attached to appellee’s complaint, a question of fact was created as to whether appellee had standing when the complaint was filed. Appellant argues that had the allonge existed at the commencement of appellee’s action, it would have appeared after the note. We disagree. The fact that the allonge was not attached to the complaint does not require the conclusion that appellee lacked standing.

{¶20} In this case, the record reflects the parties’ intent for the note and mortgage to be transferred together. The mortgage states:

This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower’s conveyance under the Security Instrument and the Note. For this purpose, Borrower does hereby mortgage, grant and convey to Lender the following described property * * *.

The promissory note states:

In addition to the protections given to the Note Holder under this Note, a Mortgage, Deed of Trust, or Security Deed (the `Security Instrument’), dated the same day as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under the Note.

{¶21} The language contained in the note and mortgage demonstrates the clear intent that both be transferred together. See, e.g., LSF6 Mercury Reo Invs. v. Garrabrant, 5th Dist. Delaware No. 13-CAE-06-0050, 2014-Ohio-901, ¶18 (the clear intent by the parties to keep the note and mortgage together, rather than transferring the mortgage alone, is demonstrated by the fact that the note refers to the mortgage and the mortgage refers to the note). As a result, appellee sufficiently demonstrated standing to enforce the note and file the foreclosure complaint. Appellant’s second sub-issue is without merit.

{¶22} Appellant’s first and third sub-issues are considered together, as they both argue that appellee failed to properly notify appellant of conditions precedent to foreclosure. In appellant’s first sub-issue, she asserts that summary judgment was improper because “[a]ppellee failed to fulfill a condition precedent to the acceleration of the debt and the filing of the foreclosure complaint.” In appellant’s third sub-issue, she asserts that summary judgment was improper because “[t]he trial court could consider the affidavit of Lois M. Blank, as it was not a prohibited `self-serving’ affidavit.” In summary, appellant argues that (1) appellee mailed the demand letter by way other than first-class mail; (2) she did not receive any notice; and (3) delivery methods other than first-class are not deemed received until actual delivery.

{¶23} “Where prior notice of default and/or acceleration is required by a provision in a note or mortgage instrument, the provision of notice is a condition precedent subject to Civ.R. 9(C).” Citimortgage, Inc. v. Hijjawi, 11th Dist. Lake No. 2013-L-0105, 2014-Ohio-2886, ¶17, quoting First Fin. Bank v. Doellman, 12th Dist. Butler No. CA2006-02-029, 2007-Ohio-0222, ¶20. Additionally, a general denial of the performance of conditions precedent is insufficient to place performance of a condition precedent at issue. Doellman, supra, at ¶20.

{¶24} In this case, the mortgage contained language requiring that appellant be given notice before the acceleration of the debt and the filing of a foreclosure complaint. Specifically, the mortgage states:

Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument * * *. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the note secured by this Security Instrument, foreclosure by judicial proceedings and sale of the Property.

{¶25} The mortgage also specifies how notice is to be given. Specifically, “[a]ny notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means.”

{¶26} In support of its motion for summary judgment, appellee offered the affidavit of Richard H. Eubanks, a vice president for appellee. Eubanks’ affidavit stated:

1. I am authorized to execute this affidavit on behalf of [appellee]. The statements made in this Affidavit are based on my personal knowledge.

* * *

4. In my capacity as Vice President, I have access to [appellee]’s business records, maintained in the ordinary course of regularly conducted business activity, including the business records for and relating to the Borrower’s loan. Their records include the historic records of Chase Home Finance LLC, which merged with [appellee] effective May 1, 2011. I make this affidavit based upon my review of those records relating to the Borrower’s loan and from my own personal knowledge of how they are kept and maintained. The loan records for the Borrower are maintained by [appellee] in the course of its regularly conducted business activities and are made at or near the time of the event, by or from information transmitted by a person with knowledge.

5. [Appellee]’s business records that relate to [appellant]’s loan I reviewed and relied upon for the statements made in this affidavit include but are not limited to the Note, Mortgage and [appellee]’s electronic servicing system. True and exact copies of the Note (Exhibit A), Mortgage (Exhibit B), Assignment (Exhibit C) and Demand Letter (Exhibit D) are attached hereto.

{¶27} Appellant filed an affidavit in support of her memorandum in opposition to appellant’s motion for summary judgment. Appellant’s affidavit stated:

4. At no time prior to [ ] the filing of the complaint for foreclosure did JPMorgan Chase Bank, National Association send a notice of acceleration to pursuant to the terms of the mortgage.

5. I did not receive a notice of default or notice of acceleration, by regular mail or by certified mail at any time prior to the filing of the complaint for foreclosure.

6. No one personally delivered to me a notice of default or notice of acceleration at any time prior to the filing of the complaint for foreclosure.

{¶28} Upon review of the record, we hold that a genuine question of material fact remains as to whether the required notice provisions of the mortgage had been met by appellee. The acceleration warnings attached to Eubanks’ affidavit stated that the notices were sent “return service requested.” Whether this is first-class mail or some other form of delivery that would produce confirmation of receipt is not clear from the record. Appellee offered no affidavit evidence to support that the notices were sent first-class mail. The mortgage states notice is given upon mailing when using first-class mail, but only upon delivery when sent through other means. Based on this plain language, appellee does not need to prove delivery of the notice only when using first-class mail. Appellant’s affidavit declares that notice was not received. If notice was not sent via first-class mail, but rather sent by other means that provides a receipt of service, that receipt should have been provided.

{¶29} In sum, appellee did not present sufficient evidence to indicate how the notice was sent. A question of fact exists as to whether appellee sent the notice via first-class mail or through some other means. Once appellant contested the receipt of notice, appellee could have offered an affidavit stating that notice was sent first-class mail or offered proof of actual delivery if some other method was used. See, CitiMortgage, Inc. v. Loncar, 7th Dist. Mahoning No. 11 MA 174, 2013-Ohio-2959, ¶28. Furthermore, appellee’s affidavit does not declare that the conditions precedent were met prior to the filing of the foreclosure complaint. See id.

{¶30} For these reasons, appellant’s first and third sub-issues are well taken. The record in this case demonstrates that a question of fact remains as to whether appellee complied with the notice provisions contained in the mortgage. As such, appellant’s assignment of error has merit to the extent indicated.

{¶31} For the reasons stated in this opinion, the judgment of the trial court is reversed and remanded to the trial court.

THOMAS R. WRIGHT, J., COLLEEN MARY O’TOOLE, J., concur.

Would you expect anything different?

Buzz Flash/Truth-Out

The website Wall Street on Parade has been tenacious in uncovering misdeeds in the nation’s financial capital, as well as various levels of government that enable the malfeasance. On September 23, it reported on an intriguing speech by Attorney General Eric Holder in an article entitled, “Eric Holder Says Justice Department Has Moles on Wall Street”:

Avoiding detection as a mole becomes so much more challenging when the highest law enforcement officer in the land, U.S. Attorney General Eric Holder, comes to New York to address Wall Street’s lawyers and tells them, flat out, that he’s got moles stationed inside his Wall Street targets. (There were likely 100,000 text messages flying about Wall Street before Holder got to the next paragraph of his speech.)

The revelation by Holder came on September 17, not in off the cuff remarks, but in a carefully prepared speech delivered at NYU School of Law in Manhattan.

Wall Street on Parade points out that the moles are called “undercover cooperators” by the Department of Justice (DOJ).

[BUZZ FLASH/TRUTH-OUT]

We will get to the truth

Truth-Out-

Barely a year removed from the devastation of the 2008 financial crisis, the president of the Federal Reserve Bank of New York faced a crossroads. Congress had set its sights on reform. The biggest banks in the nation had shown that their failure could threaten the entire financial system. Lawmakers wanted new safeguards.

The Federal Reserve, and, by dint of its location off Wall Street, the New York Fed, was the logical choice to head the effort. Except it had failed miserably in catching the meltdown.

New York Fed President William Dudley had to answer two questions quickly: Why had his institution blown it, and how could it do better? So he called in an outsider, a Columbia University finance professor named David Beim, and granted him unlimited access to investigate. In exchange, the results would remain secret.

[TRUTH-OUT]

(Photo: Earl Wilson / The New York Times)

US attorney general’s tenure has proven unhelpful to the five million victims of mortgage abuses in the US

The Guardian-

The telling sentence in NPR’s report that US attorney general Eric Holder plans to step down once a successor is confirmed came near the end of the story.

“Friends and former colleagues say Holder has made no decisions about his next professional perch,” NPR writes, “but they say it would be no surprise if he returned to the law firm Covington & Burling, where he spent years representing corporate clients.”

A large chunk of Covington & Burling’s corporate clients are mega-banks like JP Morgan Chase, Wells Fargo, Citigroup and Bank of America. Lanny Breuer, who ran the criminal division for Holder’s Justice Department, already returned to work there.

In March, Covington highlighted in marketing materials their award from the trade publication American Lawyer as “Litigation Department of the Year,” touting the law firm’s work in getting clients accused of financial fraud off with slap-on-the-wrist fines.

[THE GUARDIAN]

image: Jason Reed/Reuters

Reuters-

The U.S. Supreme Court handed down an unusual order Tuesday, directing the lawyers in a case called Public Employees’ Retirement System of Mississippi v. IndyMac to file letter briefs explaining whether a newly proposed settlement of the underlying mortgage-backed-securities class action affects the question presented to the Supreme Court. That sure caught my attention.

The IndyMac case, scheduled to be argued on Oct. 6, is the most consequential case of the term for securities lawyers. It’s not potentially catastrophic, like last term’s Halliburton v. Erica P. John Fund, but it does impact big institutional investors that sometimes prefer to opt out of securities class actions and bring their own suits. Will the IndyMac settlement strip those investors of their chance to challenge an opinion by the 2nd U.S. Circuit Court of Appeals that sets an inviolable three-year limit on their individual claims?

I don’t think so. It’s true that on Monday, Berman DeValerio, lead counsel in the underlying IndyMac class action in federal court in Manhattan, notified U.S. District Judge Lewis Kaplan that plaintiffs have reached a $340 million settlement agreement with the underwriter defendants in the case. But because of the complicated procedural history of the class action, the settlement doesn’t resolve all claims by the Mississippi pension fund that appealed the 2nd Circuit’s ruling to the Supreme Court. In fact, according to the settlement brief, “none of the securities at issue on the appeal to the U.S. Supreme Court were underwritten by the settling defendants.”

[REUTERS]

Keep it going…

Pennsylvania Record-

After winning a June 30, 2014 decision against the company that maintains a national Montgomery County Recorder of Deeds Nancy Becker registry of mortgage transactions, the Montgomery County Record of Deeds has filed a class action suit at the U.S. District Court for the Eastern District of Pennsylvania against the banks who allegedly bought and sold mortgages without paying the real estate recording fees.

In June, U.S. District Judge J. Curtis Joyner allowed Montgomery County Recorder of Deeds Nancy Becker to continue with her class action suit against Merscorps, the multi-billion dollar business that owns and maintains the MERS electronic database, which records mortgage transactions made between investors and trusts. Becker claimed that the database did not record thousands of transactions, denying Montgomery County more than $15 million in fees.

The civil trial has not yet begun, but in the meantime Becker has now gone after the banks that used the MERS system to avoid paying for each transaction of Montgomery County mortgages.

[PENNSYLVANIA RECORD]

KCSG-

Utah Fifth District Judge Jeffrey Wilcox listened to Sam Adamson tell his story on the witness stand about the illegal foreclosure conducted on his home by ReconTrust Company over four years ago. After taking the case under advisement Judge Wilcox issued a ruling stating that the foreclosure sale on Adamson’s home was void and never happened. “Judge Wilcox listened to all of the testimony and carefully reviewed case law and made the appropriate ruling,” Attorney John Christian Barlow, who represents the Adamsons, told KCSG news.

This ruling is significant because it renders ReconTrust foreclosure action invalid as if it never happened. For years Utah homeowners have battled Bank of America (NYSE: “BAC”) and its subsidiary ReconTrust Company over the validity of the bank’s foreclosure actions in Utah, Barlow said.

Adamson challenged ReconTrust’s foreclosure action, which under Utah law only a title insurance company or an attorney can legally foreclose on real property (UCA 57-1-21). The Bank of America used ReconTrust to foreclose on homes in Utah up until approximately 2012 when the Utah Supreme Court ruled (Fed. Nat. Mortgage Ass’n v. Sundquist 2013 UT 45, 311 P.3d 1004) that ReconTrust did not qualify under Utah Law to conduct foreclosure sales. However, the Utah Supreme Court left open the question of what happens to the homeowners and homes that were foreclosed by ReconTrust.

[KCSG]

More of the same…

Yahoo News-

Among the potential candidates the White House is considering to replace Eric Holder Jr. as attorney general are Donald Verrilli Jr., the current U.S. solicitor general; Kamala Harris, California’s attorney general; and Sheldon Whitehouse, a two-term Democratic senator from Rhode Island.

White House officials have known about Holder’s plans to step down for months, but the decision wasn’t finalized until Holder and President Obama discussed it in a one-on-one conversation over Labor Day weekend. As recently as this August, Obama was still trying to persuade Holder to stay, according to a source familiar with the conversation. While vacationing around the same time on Martha’s Vineyard, Obama gently pressured Holder to rethink his plans to retire, even waxing nostalgic about the heady days of the 2008 campaign when the two men cemented their personal friendship.

Obama knows that getting a new attorney general confirmed by the Senate — which could possibly be controlled by the Republicans come January — will be challenging, particularly deep in the second term of his presidency.

[YAHOO NEWS]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Anyone want to guess what law firm or bank he will end up at? Maybe Covington & Burling, because he never gave up representing the banks even as AG.

related:

EXCLUSIVE: Eric Holder, Covington & Burling and MERSCORP

Insight: Top Justice officials connected to mortgage banks

NBC NEWS-

Attorney General Eric Holder plans to announce Thursday that he will resign after nearly six years, a Justice Department official told NBC News.

Holder plans to stay on the job until a successor is confirmed, the official said.

Holder, the first African American to hold the job of attorney general, is among just a handful of cabinet officials who have stayed in their posts since the beginning of Barack Obama’s presidency. After his departure, just two – the Department of Agriculture’s Tom Vilsack and the Department of Education’s Arne Duncan – will remain from Obama’s original cabinet.

[NBC NEWS]

KHOU-

A terminally-ill woman who saw her bucket list dream come true with a wedding at Houston’s Co-Cathedral of the Sacred Heart has one final wish—to save her husband and her home from foreclosure.

Morrissia “Risa” Sauer, 50, profiled in stories here on KHOU last year, suffers from a variety of ailments, including congestive heart failure. Doctors have told her there is nothing they can do other than try to make her comfortable in her final months. Silverado Hospice has been providing in-home care for the last year at her Richmond home she shares with her husband Johnny.

But even after the bucket list highlight of their wedding last November, the couple’s struggles have continued. Johnny has a low-paying job where his health insurance helps with Risa’s extensive medical costs, including her hospice care, but the additional bills and burdens of Risa’s terminal fight now have the couple three months behind on the mortgage at their modest home, and, despite her terminal illness, their bank is threatening foreclosure.

[KHOU]

Image: KHOU

• Carlton Fields Jorden Burt
• September 22 2014
• 

source: Carlton Fields

Protecting Homeowners from Non-Judicial Foreclosure of Mortgages held by Fannie Mae and Freddie Mac

Florence W. Roisman, Indiana University Robert H. McKinney School of Law

Abstract

Fannie Mae and Freddie Mac hold or guarantee about three-quarters of the mortgages in the U.S. Traditionally, those mortgages have been foreclosed by non-judicial foreclosure in the states (more than half the states) that allow non-judicial foreclosure. In September 2008, a federal agency, the Federal Housing Finance Agency, put Fannie and Freddie into conservatorship and took total control of both. This article asks whether, post-conservatorship, foreclosure of mortgages held by Fannie and Freddie is subject to Fifth Amendment due process constraints, which most non-judicial foreclosure statutes do not satisfy. The article concludes that such foreclosures are subject to the Fifth Amendment.

The Price of Crisis: Eminent Domain, Local Governments, and the Value of Underwater Mortgages

Raymond H. Brescia

Albany Law School

Nicholas M. Martin

Albany Law School

September 19, 2014

Temple Political & Civil Rights Law Review, Vol. 24, 2014, Forthcoming
Albany Law School Research Paper No. 6 for 214-2015

Abstract:

Governments at all levels in the U.S. have deployed a range of tactics to address some of the most pernicious effects of the Financial Crisis of 2008: namely, a loss of trillions in homeowner equity as well as the growth of the prevalence of underwater mortgages, where the outstanding principals on the mortgages exceed the value of the underlying properties. Among other tactics for addressing such impacts, local governments have begun to explore whether it is wise and legal to use the power of eminent domain to seize distressed home mortgages. This Article attempts to situate this approach to such mortgages within the larger economic, legal and policy context to determine whether this approach has a sound basis in law and policy. To do this, we deploy the tools of Comparative Institutional Analysis to assess the potential viability of using eminent domain to seize underwater mortgages. In doing so, we review the wide-ranging efforts of governments at all levels in the United States to deal with the economic effects of the Financial Crisis of 2008. We look at the relative success of these different tactics used by these governmental entities — from ex ante regulatory approaches to ex post law enforcement and civil litigation strategies — to assess the most effective tools available to remedy the economic and social problems posed by distressed mortgages. We then determine whether the use of eminent domain by localities is consistent with those governmental responses to the fallout of the Financial Crisis that have proven effective in responding to some of its worst impacts: here, the loss of homeowners’ equity in their homes and the prevalence of underwater mortgages.

In carrying out this analysis we ask, and attempt to answer, five key questions. First, are local governments appropriate actors to address the lingering problem of underwater mortgages? Second, what has been the relative success of the range of tactics that governments at all levels have used to address underwater mortgages, including law enforcement strategies and legislative and regulatory measures? Third, assuming local governments are appropriate actors to address this problem, how should localities and, if necessary, courts, value underwater mortgages in the context of condemnation proceedings: i.e., what is the appropriate amount of compensation that localities should pay mortgagees and other lienholders when seizing underwater mortgages? Fourth, what are some strategies local governments can use to find the resources necessary to finance a program that would seize underwater mortgages and, in effect, purchase them from mortgage holders? Finally, what are some potential down-side risks to local governments taking these actions? This review concludes not only that local governments are appropriate actors to address underwater mortgages, but also that ex post legal tools — such as eminent domain — are appropriate and effective techniques to use to address the fallout from the Financial Crisis of 2008, particularly its impact on homeowners. It also finds that the just compensation due holders of distressed, underwater mortgages, should governments seek to seize them by eminent domain, should be roughly sixty percent of the unpaid principal balance on those mortgages.

BOGDAN SZUMILAS, Plaintiff and Appellant,
v.
WELLS FARGO BANK et al., Defendants and Respondents.

Anglin Flewelling Rasmussen Campbell & Trytten, Robin C. Campbell, Robert Collings Little and Steven R. Telles for Defendant and Respondent Wells Fargo Bank.

Barrett Daffin Frappier Treder & Weiss, Edward A. Treder and Darlene P. Hernandez for Defendant and Respondent NDeX West.

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.

JOHNSON, J.

Plaintiff appeals judgment entered after the trial court sustained defendants Wells Fargo Bank, N.A. and NDeX West, LLC’s demurrer to his First Amended Complaint based upon the 2011 foreclosure of plaintiff’s home. Plaintiff contends the trial court erred in (1) taking judicial notice of defendants’ documents, (2) finding that the statute of limitations barred his fraud claims, and (3) sustaining defendants’ demurrer to his claims for fraud, negligent misrepresentation, wrongful foreclosure, and slander of title. We affirm in part and reverse in part.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

1. Plaintiff’s 2007 Refinance

In 2002, plaintiff purchased his home at 5056 Varna Avenue, Sherman Oaks. The property was secured by a trust deed in favor of Bank of America. Plaintiff refinanced the property through Downey Savings & Loan in 2004.

In October or November 2007, plaintiff sought to refinance his property again. At the time, plaintiff was unaware that the housing market was deteriorating and home prices were falling. Plaintiff contacted Wells Fargo^[1] in response to its marketing materials touting the benefits and safety of its loan products. The Bank conducted an appraisal of plaintiff’s property, and plaintiff believes the appraisal valued his property at over $1.2 million.

In November 2007, plaintiff spoke with Shundale Hudson at the Bank. Hudson pitched an adjustable rate mortgage (ARM) loan product to plaintiff. During the discussion, plaintiff disclosed to Hudson that he was an immigrant from Poland and his work visa had expired. Hudson informed plaintiff that notwithstanding his expired work visa, plaintiff met the Bank’s underwriting criteria and qualified for the loan. Hudson assured plaintiff that in spite of his work status, the value of the property would continue to go up and plaintiff would have no problem refinancing in the future. On December 18, 2007, plaintiff executed a trust deed in favor of the Bank (in this case, World Savings Bank) in the amount of $940,000. The trust deed was recorded January 2, 2008.

The Bank’s loan commitment letter dated December 4, 2007, contained the terms of the loan and stated that the loan would be for $940,000 and the “index” would be the “`[the Bank’s] COSI.” Plaintiff “had no reason to believe that [the Bank], a large and well known financial institution in business for many years, would lie and make a large loan to him knowing that [plaintiff] was unqualified for said loan and that the odds that [plaintiff] would default on said loan and suffer foreclosure at some point were high.” Nonetheless, believing such representations to be true, plaintiff relied on them and entered into the loan.

Plaintiff alleged that the Bank disregarded prudent underwriting standards in making the loan to plaintiff and knew that home prices were not rising but in fact were falling and that ARM rates were increasing at an “alarming rate,” and thus that there was a reasonable likelihood plaintiff would default on the loan and would be foreclosed on. Plaintiff alleged that the Bank engaged in such practices with the business strategy of maximizing short-term profits from the high loan origination fees associated with riskier loans like the one sold to plaintiff and through the selling of securitized loans. Plaintiff alleged that his loan was securitized and that the Bank failed to disclose this fact.

2. Plaintiff’s 2008 Default and 2009 Loan Modification

At some point after the loan was funded, plaintiff’s work visa was not renewed. In July or August 2008, plaintiff began to have difficulty making the monthly payments on time. By December 2008, his loan was in arrears. The Bank sent plaintiff a “Notice of Intent to Foreclose” dated December 17, 2008. Around this time plaintiff became aware that the Bank had made false statements to him, “but [plaintiff] was still unaware of the full extent of the fraud or even that he had any actionable claim against [the Bank].” In January 2009, the Bank (Wells Fargo) completed its merger with Wachovia.

In early 2009, plaintiff contacted the Bank to obtain a loan modification and informed the Bank’s representatives of the monthly payment he could afford. The Bank offered plaintiff a loan modification that “did little more than merge the defaulted payment amounts into a new loan amount to bring his account current” and did not lower the monthly payments in any way that would make the loan affordable to plaintiff in the long term. The loan was made on a “take it or leave it” basis. The payments were fixed, and plaintiff was told that if he made the new payments for at least 12 months he would be able to apply for a new loan modification with better terms.

Plaintiff continued to make the payments on the loan with his dwindling savings and credit cards until he was no longer able to make the payments. He contacted the Bank (now Wells Fargo) in June 2010 to request a new loan modification. He was told that the prior loan officer had given him the wrong information and that the Bank only allowed one loan modification to be made. Further, plaintiff discovered that his monthly payments were not fixed when he received a letter in July 2010 informing him that his monthly payments would be increasing. Plaintiff alleged that the Bank made representations to him about the loan modification that it knew to be false when made.

3. September 2010 Notice of Default

Plaintiff was unable to make the monthly payments and on or about September 30, 2010, NDeX, as agent for the Bank as beneficiary, recorded a notice of default stating that $16,870.19 was unpaid.

After recordation of the notice of default, on November 2, 2010, NDeX recorded a substitution of trustee dated October 14, 2010, whereby the Bank substituted NDeX in as the new trustee. Plaintiff alleged the substitution was signed by a “robo signer.” Plaintiff further alleged that the substitution of trustee was fraudulent because it was not executed by the lender, but instead by NDeX substituting itself as trustee in violation of the terms of the deed of trust. As a result, because the Bank lacked standing to record the notice of default and initiate foreclosure, NDeX lacked the authority to record the notice of default or execute a substitution of trustee.

A notice of trustee’s sale recorded December 30, 2010 set a foreclosure sale for January 24, 2011. The notice of sale was executed by NDeX, as trustee.

4. Plaintiff’s January 24, 2011 Bankruptcy Petition; June 2011 Foreclosure Sale of the Property

Believing that his best option was a short sale, plaintiff located a short sale buyer. Plaintiff believes the short sale buyer made an offer to the Bank, but the Bank declined the offer. On January 24, 2011, plaintiff filed a bankruptcy petition and served the necessary documents on defendants. Notwithstanding the automatic stay of bankruptcy, defendants proceeded with the trustee’s sale and the property was purchased by the Bank for less than the amount offered by plaintiff’s short sale buyer. The sale was rescinded when defendants realized the sale violated the automatic stay.

Plaintiff did not include any potential claims he had against the Bank or NDeX in his bankruptcy schedules. Plaintiff asserts his bankruptcy counsel did not inform him of any possible requirement that he list a claim against defendants for a yet unknown amount of damages for false statements.

On motion by the Bank, the automatic stay was lifted on May 12, 2011. Following the lifting of the stay, plaintiff read the documents associated with his loan and the communications he had with the Bank. Plaintiff spoke to an attorney specializing in foreclosures and read websites devoted to foreclosure issues. As a result of his research, plaintiff learned that defendants’ conduct was actionable.

A second notice of trustee’s sale was recorded May 30, 2011, setting a foreclosure date for June 20, 2011.^[2] Plaintiff alleged that when a note is assigned, such assignment must be recorded; if there is a break in the chain of title the security has been broken and the note becomes unsecured. Here, he alleged the Bank’s notice of default was null and void because the Bank did not have possession of the note and did not know who owned the note, and thus the current record beneficiary of the deed of trust was not the holder of the note. With the note and mortgage separated because the note was payable to one party and the beneficiary under the deed of trust was a different party, the obligation was unsecured.

On June 20, 2011, the Bank acquired the property with a credit bid of $634,661, less than 50 percent of the 2007 appraised value. A trustee’s deed upon sale was executed July 28, 2011 and recorded August 1, 2011.

5. Plaintiff’s June 2011 Complaint

On June 16, 2011, plaintiff filed this action.^[3]

Plaintiff’s first amended complaint filed December 6, 2011 asserted claims for fraud (against the Bank), negligent misrepresentation (against the Bank), wrongful foreclosure (against the Bank and NDeX), slander of title (against the Bank and NDeX).^[4] Plaintiff sought $1 million in damages and equitable relief, including cancellation of the deed of trust and trustee’s deed on sale. Plaintiff sought punitive damages, interest, and attorneys’ fees.

Plaintiff alleged as the basis for his fraud claim that in November 2007, the Bank made representations to plaintiff that it would make a loan that he could afford given his financial condition, plaintiff would not receive a loan unless he met the Bank’s underwriting guidelines; in reality, the Bank knew these representations were false because it knew that plaintiff could not afford the loan and its underwriting practices were unsound, which greatly increased the risk plaintiff would default on the loan. In 2009, the Bank made a loan modification to plaintiff, but told him it was on a “take it or leave it” basis and if he made his payments for 12 months, plaintiff would receive an additional loan modification. When plaintiff sought an additional loan modification in June 2010 as his resources were dwindling, plaintiff learned his payment would be increased and he would not receive an additional loan modification, contrary to what he had been told.

Plaintiff’s negligent misrepresentation claim alleged that the Bank had no reasonable basis for believing its representations to be true.

Plaintiff’s wrongful foreclosure claim alleged that his loan was “securitized, sold or transferred to investors and that Defendants [did] not own the loan or the corresponding Note at the time of the foreclosure sale.” He further alleged that none of the defendants legally assigned the note, and thus were not the real parties in interest. He alleged that the notice of default was signed by a “robo signer” “carrying a phony title” and who lacked personal knowledge of the facts. As a result, the notice of default was null and void and defendants violated Civil Code section 2923.5.

Plaintiff’s slander of title claim alleged that defendants were not the trustee, beneficiary, or assignee of any note, deed of trust; the notice of default or notice of sale recorded against the property was wrongful; their conduct was not privileged; and defendants violated Civil Code section 2924, subdivision (a)(1)(C).

6. The Bank and NDeX’s Demurrer

On January 9, 2012, the Bank demurred, joined by NDeX, arguing that plaintiff was estopped to assert any claims against it because plaintiff failed to disclose his claims against it in his bankruptcy proceedings; plaintiff’s fraud claim was time barred; on the merits, plaintiff’s fraud and negligent misrepresentation claims lacked allegations of specificity, misrepresentation of a past or existing fact, or a fiduciary duty; plaintiff’s wrongful foreclosure claim failed because the Bank was authorized to foreclose as the real party in interest; and plaintiff’s slander of title claim failed because the Bank did not make a false publication and its recordation of the notice of default was privileged. The Bank also filed a motion to strike plaintiff’s allegations relating to emotional distress, fraudulent conduct, damages suffered, and the punitive damage prayer. The Bank requested judicial notice of numerous documents, including the deed of trust, official certification from the Comptroller of the Currency documenting Wachovia’s merger with Wells Fargo, the notice of default, substitution of trustee and notice of sale, and plaintiff’s bankruptcy petition, schedules, and order of discharge.

In opposition, plaintiff asserted his failure to list his claim against the Bank in his bankruptcy schedules was the result of ignorance and mistake and was not a bad faith attempt to defraud the bankruptcy court. On January 26, 2012, Plaintiff had filed a motion to reopen the bankruptcy case to add the claims to allow the trustee to pursue or abandon the claims, but the bankruptcy court ruled that there was “no bankruptcy purpose for reopening the case to list a potential claim in state court that was discovered and filed after the bankruptcy case was closed.”^[5] Further, the fraud claim was not time barred because plaintiff did not discover his cause of action until at the earliest December 2008, which was less than three years before the filing of his action in June 2011. On the merits, plaintiff asserted he pleaded his fraud claim with specificity, pointing to the Bank’s representations in 2009 and 2010; in any event, he should be permitted to conduct discovery to find the names of individuals making such representations on behalf of the Bank. Plaintiff further asserts that such representations were not opinions because plaintiff was told he qualified for the loan, he could afford the payments because his property would continue to appreciate, and he would have no problem refinancing. Further, his wrongful foreclosure claim had merit because the Bank was not the real party in interest under the deed of trust, the substitution of trustee was defective, and the notice of default was null and void; his slander of title claim had merit because the FAC alleges that defendants lacked privilege to record the notice of default and notice of sale. Plaintiff opposed the Bank’s motion to strike, asserting that he sufficiently pleaded fraud and malice to support punitive damages, pointing to his allegations that the Bank “did not care if [plaintiff] actually qualified for the loan or would likely default.”

Plaintiff sought judicial notice of, among other things, his motion to reopen his bankruptcy case and the bankruptcy court’s denial of that motion.

In reply, the Bank argued that its purported representations regarding plaintiff’s future home values were opinions, its assessment of plaintiff’s ability to repay his home loan or its statements on his ability to obtain future refinancing are not actionable because they were not a representations of a past or existing material fact; plaintiff’s claims are time barred because the statute of limitations was not tolled, as plaintiff cannot plead he did not have notice of facts sufficient to put him on notice of any wrongdoing; plaintiff’s wrongful foreclosure action failed because the fact the Bank is not the original holder of the note does not bar foreclosure.

7. Trial Court Ruling

The trial court sustained the Bank’s demurrer without leave to amend. First, the court found that judicial estopped precluded plaintiff from asserting his claims against the Bank because plaintiff failed to list his claim against the bank in his bankruptcy schedules. The court found plaintiff’s fraud claim lacked specificity. “Aside from naming one of defendants’ employees, there is little more than this.” Further, the bank’s alleged misrepresentations that plaintiff’s property would appreciate amounted to little more than nonactionable opinions and/or statements about future events, and in any event, plaintiff was not entitled to rely on a lender’s assessment of whether he could afford a loan. For the same reasons, the court found plaintiff’s negligent misrepresentation claim failed. Further, the fraud claim was time barred because plaintiff’s loan closed December 18, 2007, meaning the allegedly false representations had occurred more than three years before the filing of plaintiff’s complaint.

With respect to plaintiff’s wrongful foreclosure claim, the court rejected plaintiff’s contentions based upon the Bank’s lack of possession of the note, citing Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 (Gomes). The court concluded that plaintiff was not damaged by the securitization process because the process merely substituted one creditor for another. Lastly, plaintiff failed to state a claim for slander of title because based on the foregoing, plaintiff could not establish a false publication or any financial loss based on defendants’ conduct because he did not dispute he defaulted on the loan. The trial court took judicial notice on behalf of defendants of (among other documents) the trust deed, notice of default, substitution of trustee, and plaintiffs’ bankruptcy petition, schedules, and discharge; the trial court also took judicial notice on behalf of plaintiff of (among other documents) plaintiff’s motion to reopen his bankruptcy case and the bankruptcy court’s denial of that motion.

DISCUSSION

Plaintiff contends the trial court erred in (1) taking judicial notice of defendants’ documents, (2) finding that the statute of limitations barred his fraud claims, and (3) sustaining defendants’ demurrer to his claims for fraud, negligent misrepresentation, wrongful foreclosure, and slander of title. Respondents (the Bank is joined by NDeX in the Bank’s arguments related to the claims for wrongful foreclosure and slander of title) contend the trial court properly took judicial notice of recorded documents; plaintiff fails to allege facts establishing the Bank was not entitled to initiate the foreclosure sale; plaintiff cannot allege any harm suffered from the trustee’s sale; because plaintiff failed to schedule his claims against defendants, he is estopped from asserting them now; plaintiffs’ fraud and negligent misrepresentation claims are barred by the statute of limitations; and NDeX was property appointed substitute trustee and its recordation of the foreclosure documents was privileged.

I. Standard of Review

On appeal from a judgment of dismissal following an order sustaining a demurrer, “we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose.” (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume the truth of the properly pleaded factual allegations, facts that can be reasonably inferred from those pleaded, and facts of which judicial notice can be taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) We review the trial court’s denial of leave to amend for an abuse of discretion. (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) “When a demurrer is sustained without leave to amend, we determine whether there is a reasonable probability that the defect can be cured by amendment. [Citation.]” (V.C. v. Los Angeles Unified School Dist. (2006) 139 Cal.App.4th 499, 506.)

II. Judicial Notice

Plaintiff contends the trial court erred in taking judicial notice of defendants’ recorded instruments and the facts therein, when the validity of those documents and the facts therein were subject to dispute. Plaintiff asserts that defendant’s documents do not establish that the Bank was the real party in interest and true beneficiary of the deed of trust, or that the note was not securitized and sold to third parties, or that the notice of default and substitution of trustee were not fraudulent.

As a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice. (County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1008-1009.) We must take judicial notice of matters properly noticed by the trial court, and may take notice of any matter specified in Evidence Code section 452. (Evid. Code, § 459, subd. (a).) While we may take judicial notice of court records and official acts of state agencies (Evid. Code, § 452, subds. (c), (d)), the truth of matters asserted in such documents is not subject to judicial notice. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-1565.) We evaluate the trial court’s grant of judicial notice for abuse of discretion. (See Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549.)

“`Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.'” (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.) A trial court may take judicial notice of recorded deeds. (Maryland Casualty Co. v. Reeder (1990) 221 Cal.App.3d 961, 977.) Courts may take judicial notice not only of the existence and recordation of recorded documents, but also matters that may be deduced from the documents. (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1118.) In addition, although it is improper for the court to take judicial notice of the facts in recorded documents, the court may take judicial notice of the legal effect of the documents’ language when the effect was clear. (Ibid.)

Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 explained the role of judicial notice in the context of a demurrer to a wrongful foreclosure action based upon arguments that the beneficiary lacked the authority to foreclose and the assignment of trustee was defective. The trial court can take judicial notice of the dates, parties, and legally operative language of recorded documents, but may not take judicial notice of the truth of factual representations made in such documents. (Id. at p. 265.) In sum, “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Ibid.)

Herrera v. Deutsche National Trust Co. (2011) 196 Cal.App.4th 1366, upon which plaintiff relies, does not challenge these basic principles. In Herrera, the court reversed summary judgment because the trial court had taken judicial notice of disputed facts recited in the recorded documents, including that the bank was the beneficiary under the deed of trust due to gaps in the assignment of the beneficial interest. (Id. at pp. 1374-1376.) Here, in contrast, there are no breaks in the chain of title; there can be no dispute the Bank is the successor in interest to World Savings Bank through name change and merger, or that NDeX is the proper successor trustee to the original trustee under the deed of trust. Thus, the trial court properly judicially noticed recorded deeds and the recorded effect of such documents, namely that the parties to the instruments were the parties with the authority to execute them. (See Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 267, fn. 7.)

III. Judicial Estoppel

Plaintiff argues the trial court erred in applying judicial estoppel based on his failure to schedule his claims against defendants in his bankruptcy proceedings because his failure to do so was based on ignorance and mistake and was not a bad faith attempt to defraud the bankruptcy court; further, at the time he filed his bankruptcy petition he did not contemplate a civil lawsuit against defendants and did not know the amount of his damages. He claims he did not know or was not advised by his bankruptcy counsel that he was required to list the claim against the Bank, and in any event, did not discover his claims against the Bank were actionable fraud until after the bankruptcy case was closed. Further, he filed a motion to reopen his bankruptcy case to list the claim, but the bankruptcy court denied the motion.

Judicial estoppel is an equitable doctrine aimed at preventing fraud on the courts. “`The primary purpose of the doctrine is not to protect the litigants, but to protect the integrity of the judiciary. [Citations.] The doctrine does not require reliance or prejudice before a party may invoke it.'” (Billmeyer v. Plaza Bank of Commerce (1995) 42 Cal.App.4th 1086, 1092.) The doctrine applies where a party has taken positions so irreconcilable that “`one necessarily excludes the other.'” (Prilliman v. United Air Lines, Inc. (1997) 53 Cal.App.4th 935, 960.) The remedy is extraordinary and will only be invoked where a party’s inconsistent positions will result in a miscarriage of justice. (Haley v. Dow Lewis Motors, Inc. (1999) 72 Cal.App.4th 497, 511.)

In practice, judicial estoppel will be applied where “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial . . . proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as the result of ignorance, fraud, or mistake.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.) Although the majority view requires the party to be estopped to have been successful in asserting the earlier position, under equitable principles, the doctrine may be applied even where the first position was not actually adopted by the tribunal. (Id. at p. 183, fn. 8.)

The application of judicial estoppel in the bankruptcy context provides that parties who fail to schedule potential claims in their bankruptcy actions are barred from asserting such claims in later proceedings. A debtor in bankruptcy proceedings has “an express, affirmative duty to disclose all assets, including contingent and unliquidated claims.” (In re Coastal Plains, Inc. (5th Cir. 1999) 179 F.3d 197, 207-208.) Section 554, subdivision (c) of the Bankruptcy code (11 U.S.C. § 554(c)) provides that any property not otherwise administered in the bankruptcy proceedings is abandoned to the debtor. A corollary rule is that a “pre-petition asset which [is] not properly disclosed in a debtor’s schedules is not deemed abandoned and remains property of the estate.” (In re Tennyson (W.D. Ky. 2004) 313 B.R. 402, 405-406.) Where claims are not included in a debtor’s assets, the bankruptcy trustee cannot evaluate the claims to determine whether they should be pursued by the bankruptcy estate. (Id. at p. 406.)

However, if the failure to schedule potential claims is the result of inadvertence, courts may decline to apply judicial estoppel. Judicial estoppel is not applied where the debtor lacks knowledge of the factual basis of the undisclosed claim, or where the debtor has no motive for concealment. (See In re Coastal Plains, Inc., supra, 179 F.3d at p. 210; De Leon v. Comcar Industries, Inc. (11th Cir. 2003) 321 F.3d 1289, 1291.) Claimed lack of knowledge of awareness of the statutory disclosure duty is not relevant. (In re Coastal Plains, supra, 179 F.3d at p. 212.)

Here, we conclude judicial estoppel does not bar plaintiff’s claims against defendants because plaintiffs’ allegations establish his failure to schedule his claims against the Bank were the result of inadvertence. Although the FAC alleges plaintiff was aware that defendants had made false statements about his ability to pay the loan in July or August 2008, when he began to have difficulty making the payments on time, and certainly by December 2008, when his loan was in arrears, plaintiff further asserts that at that time, he was “still unaware of the full extent of the fraud or even that he had any actionable claim against [the Bank].”

Furthermore, plaintiff’s belated attempt to reopen his bankruptcy case does not bar his claims. Plaintiff did not realize the import of his failure to schedule his claim against the Bank until the Bank filed its demurrer, and plaintiff immediately moved to reopen his bankruptcy case to correct the omission. This conduct is equally consistent with a proper motive as with an improper motive. Therefore, at the demurrer stage, the trial court erred in finding judicial estoppel barred plaintiff’s claim.

IV. Fraud and Negligent Misrepresentation

A. Statute of Limitations

A cause of action for fraud is governed by a three-year statute of limitations. (Code Civ. Proc., § 338, subd. (d).) The action accrues when the aggrieved party discovers the facts constituting the fraud. (Ibid.) “The courts interpret discovery in [the] context [of fraud] to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information [that] would put a reasonable person on inquiry. A plaintiff need not be aware of the specific facts necessary to establish a claim since they can be developed in pretrial discovery. Wrong and wrongdoing in this context are understood in their lay and not legal senses. [Citation.] [¶]. . . `”Under this rule constructive and presumed notice or knowledge are equivalent to knowledge. So, when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to [her] investigation (such as public records or corporation books), the statute commences to run.” [Citation.]'” (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1374.)

Here, as discussed above, plaintiff was aware of his claims against the Bank in December 2008, less than three years before his complaint was filed in June, 2011. Thus, the statute of limitations is not a bar to plaintiff’s claims against the Bank.

B. Merits

“`The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.'” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).) In contrast, a claim for negligent misrepresentation does not require knowledge of falsity; rather, the plaintiff must show “(1) the misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance . . ., and (5) resulting damage. (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) Essential to both types of common law claims is a showing of reliance. (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1092.)

“[E]very element of the cause of action for fraud must be alleged in full, factually and specifically.” The policy of liberal construction of pleading will not be invoked to sustain a defective pleading in any material respect. (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.) “`Th[e] particularity requirement necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.”‘” (Lazar, supra, 12 Cal.4th at p. 645.) Moreover, in fraud complaints against a corporation, the plaintiff must allege: (1) “`the names of the . . . persons who made the representations[; (2)] their authority to speak [for the corporation; (3)] to whom they spoke[; (4)] what they said or wrote[;] and [(5)] when it was said or written.'” (Ibid.)

Here, the FAC does not specifically allege (with one exception, the name of the bank’s agent, Shundale, at the inception of the 2007 refinance) the persons making the representations, their authority, and the time of such representations. However, plaintiff has alleged that over the course of several years, from 2007 to 2010, various representations were made by different bank employees at the ever-changing parade of banks that held his loan. Plaintiff should have been granted leave to amend to plead with more specificity the names, capacities, and statements of persons making representations to him to support his misrepresentation claims.

V. Wrongful Foreclosure

Plaintiff makes three arguments concerning his wrongful foreclosure claim. He contends the Bank was not the real holder of the note because it did not have physical possession and there were no assignments recorded in conformity with Civil Code section 2932.5 to perfect the chain of title; additionally, the substitution of trustee was void because the Bank was not the owner of the note and had no right to substitute NDeX as trustee; and finally, foreclosure cannot be initiated before the trustee is substituted.

“`”[Civil Code s]ections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.”‘” (California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070.) The power of sale in a deed of trust allows a beneficiary recourse to the security without the necessity of a judicial action. (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249.) Absent any evidence to the contrary, a nonjudicial foreclosure sale is presumed to have been conducted regularly and fairly. (Civ. Code, § 2924, subd. (c).) However, irregularities in a nonjudicial trustee’s sale may be grounds for setting it aside if they are prejudicial to the party challenging the sale. (Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1097-1098.)

The “elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.) “`In order to challenge the sale successfully there must be evidence of a failure to comply with the procedural requirements for the foreclosure sale that caused prejudice to the person attacking the sale. The mere inadequacy of price, standing alone, does not justify setting aside the trustee’s sale, but the sale can be set aside where there is a gross inadequacy of the price paid at the sale, together with a slight irregularity, unfairness, or fraud.’ [Citation.]” (Angell v. Superior Court (1999) 73 Cal.App.4th 691, 700.)

To address plaintiff’s first contention, a party foreclosing on a deed of trust need not own or possess the underlying note. A homeowner who gives a deed of trust to secure his repayment of a home loan does not have standing to challenge the foreclosing party’s authority to act on behalf of the deed of trust’s beneficiary. (Gomes, supra, 192 Cal.App.4th at pp. 1154-1155 [rejected attempt to require proof of note’s ownership]; Fontenot v. Wells Fargo Bank, N.A., supra, 198 Cal.App.4th at p. 268 [citing Gomes for proposition that foreclosure statutory scheme “does not include a requirement that an agent demonstrate authorization by its principal” to initiate foreclosure]; accord Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433, 440 [rejecting contention that “no foreclosure of a deed of trust is valid unless the beneficiary is in possession of the underlying promissory note.”].) The statutory scheme governing nonjudicial foreclosure “permits a notice of default to be filed by the `trustee, mortgagee, or beneficiary, or any of their authorized agents.’ The provision does not mandate physical possession of the underlying promissory note in order for this initiation of foreclosure to be valid.” (Debrunner, at p. 440.)

Second, there was no break in the chain of title. There can be no reasonable dispute that World Savings Bank became Wachovia, which was merged into Wells Fargo. An assignment need not be recorded to be effective between the parties; the purpose of recordation is to give notice to third parties. As explained in Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, “`[b]ecause a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor. As to plaintiff, an assignment merely substituted one creditor for another, without changing [plaintiff’s] obligations under the note.'” (Id. at p. 515.) Further, “even if any subsequent transfers of the promissory note were invalid, [plaintiff] is not the victim of such invalid transfers because [plaintiff’s] obligations under the note remained unchanged. Instead, the true victim may be an entity or individual who believes it has a present beneficial interest in the promissory note and may suffer the unauthorized loss of its interest in the note.” (Ibid.)

Third, the timing of the effect of the substitution of trustee is of no legal consequence to the ultimate validity of the foreclosure sale and plaintiff’s entitlement to relief. Civil Code section 2934a, subdivision (a)(4) provides in part: “From the time the substitution is filed for record, the new trustee shall succeed to all the powers, duties, authority, and title granted and delegated to the trustee named in the deed of trust.” Absent prejudice, any mistake in the execution and recording of the substitution does not warrant relief. (See Knapp v. Doherty (2004) 123 Cal.App.4th 76, 93-94 & fn. 9.) Here, plaintiff cannot allege he suffered any prejudice as a result of the sequence of the transfers. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 231-232.) Although the substitution was recorded after the notice of default was recorded, plaintiff does not dispute that he was in default under the note and deed of trust.

Finally, plaintiff lacks standing to contest the transfers of the Note and deed of trust. The relevant parties to these transfers were the holders (transferors) and the third party acquirers (transferees). Plaintiff is not the victim of these transfers because as noted above, his obligation under the note remained unchanged. Plaintiff “may not assume the theoretical claims of hypothetical transferors and transferees” to assert a cause of action for wrongful foreclosure. (Jenkins v. JPMorgan Chase Bank, N.A., supra, 216 Cal.App.4th at p. 515.)^[6]

VI. Slander of Title

Plaintiff asserts that the FAC adequately alleges that defendants wrongfully and without privilege recorded the notice of default, substitution of trustee, notice of trustee’s sale, and trustee’s deed upon sale because he alleged that defendants knew that the Bank was not the beneficiary under the deed of trust.

Disparagement of title occurs when a person, without a privilege to do so, publishes a false statement that “disparages title to property and causes pecuniary loss.” (Stalberg v. Western Title Ins. Co. (1994) 27 Cal.App.4th 925, 929.) “The elements of the tort are (1) publication, (2) absence of justification, (3) falsity and (4) direct pecuniary loss.” (Seeley v. Seymour (1987) 190 Cal.App.3d 844, 858.) What makes conduct actionable is not whether a defendant succeeds in casting a legal cloud on plaintiff’s title, but whether the defendant could reasonably foresee that the false publication might determine the conduct of a third person buyer or lessee. (Ibid.; Wilton v. Mountain Wood Homeowners Assn. (1993) 18 Cal.App.4th 565, 568.)

Here, there can be no slander of title resulting from a properly conducted nonjudicial foreclosure sale. Civil Code section 2924 provides that “[t]he mailing, publication, and delivery of notices as required herein . . . shall constitute privileged communications within Section 47.” The Civil Code section 47 privilege applies to “any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) Here, the Bank and NDeX were the proper parties to conduct the trustee’s sale and therefore were privileged to record the notice of default and notice of trustee’s sale.

DISPOSITION

The judgment is reversed with respect to plaintiff’s claims for fraud and negligent misrepresentation, and affirmed in all other respects. The parties are to bear their own costs on appeal.

CHANEY, Acting P. J. and MILLER, J.^[*], concurs.

[1] Wells Fargo was the successor by merger with Wells Fargo Bank Southwest, N.A., formerly known as Wachovia Mortgage, FSB, formerly known as World Savings Bank. Although plaintiff originated the note and trust deed at issue here with World Savings Bank, for clarity (unless specific identification of the financial institution is necessary), we refer to the entity holding plaintiff’s note and trust deed as “the Bank.”

[2] The First Amended Complaint alleges a date of January 20, 2011, but this date appears to be in error.

[3] NDeX was added by Doe amendment on July 8, 2011. The matter was removed to federal court on August 5, 2011, and remanded to state court on September 20, 2011.

[4] The first amended complaint also stated claims for cancellation of instruments, quiet title, and declaratory relief. On appeal, plaintiff only challenges the trial court’s rulings with respect to his first four causes of action (fraud, negligent misrepresentation, wrongful foreclosure, and slander of title).

[5] In support of his opposition to demurrer, plaintiff requested judicial notice of numerous documents, including his filings with the bankruptcy court relating to the reopening of the case.

[6] The Supreme Court granted review in Yvanova v. New Century Mortgage Corp. (2014) 226 Cal.App.4th 495, review granted August 27, 2014, S218973, to address the issue of whether, in an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void.

[*] Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

Pundits and think tanks are trying to bring back subprime lending, spinning it as a virtuous move for the economy. Nothing could be more obviously a terrible idea

The Guardian-

Mortgages are hard to get, with demands for high credit scores and a perfect lending history, so some say it’s time to bring back subprime mortgage lending.

This is, obviously, a bad idea. The financial industry has plenty of reasons to offer the same high-risk, high-return loans that made so many bankers rich during the housing bubble before everything crashed. But it’s less clear why any sensible commentator wants to cheer the industry on.

Story after story lately follows the same flawed logic: the shoddy lending that caused the financial crisis has now swung too far in the other direction, preventing deserving people from getting mortgages. The poor or middle class can’t access credit, which is the fault of “over-regulation” of banks.

[THE GUARDIAN]