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Certification battle in Ohio MERS class action heats up

Certification battle in Ohio MERS class action heats up


Lexology-

On April 23, 2012, the plaintiff in State of Ohio ex rel. David P. Joyce, Prosecuting Attorney of Geauga County Ohio v. MERSCORP, Inc., et al., N.D. Ohio Case No. 1:11-cv-02474, filed its motion seeking an order certifying the action as a class action, appointing Geauga County as class representative, and appointing plaintiff’s counsel, the New York law firm of Bernstein Liebhard LLP, as class counsel. The plaintiff argues that the case, which the plaintiff is attempting to bring on behalf of all 88 Ohio counties for relief relating to the allegedly unlawful failure of MERS and its member institutions to record millions of mortgages and mortgage assignments throughout Ohio, meets all requirements of Rule 23(a) and that certification is proper under any one of the 3 subsections of Rule 23(b). The plaintiff hopes to persuade the court that the MERS/member institution policy concerning recordation of mortgages and assignments is a “common scheme or course of conduct” that has given rise to claims “ideally suited for class certification.”

[LEXOLOGY]

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COMPLAINT | State of Ohio, Geauga County v. MERSCORP, MERS et al., No. 11-M-001087

COMPLAINT | State of Ohio, Geauga County v. MERSCORP, MERS et al., No. 11-M-001087


IN THE COURT OF COMMON PLEAS
GEAUGA COUNTY, OHIO

STATE OF OHIO, ex.rel.
DAVID P. JOYCE
PROSECUTING ATTORNEY OF GEAUGA
COUNTY, OHIO
Courthouse Annex, 231 Main St. Suite 3A
Chardon, Ohio 44024

On behalf of Geauga County and all others similarly
situated,

Plaintiff,

v.

MERSCORP, INC.
1818 Library Street, Suite 300
Reston, Virginia 20190

and

MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.
1818 Library Street, Suite 300
Reston, Virginia 20190

[…]

[ipaper docId=69166120 access_key=key-9gi3i39l3vj116tff1y height=600 width=600 /]

 

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MERS v. JACOBY | CA 4DCA Div. 1 Affirms JGMT “QUIET TITLE, Foreclosure Sale, Companion case Nacif v. White-Sorenson”

MERS v. JACOBY | CA 4DCA Div. 1 Affirms JGMT “QUIET TITLE, Foreclosure Sale, Companion case Nacif v. White-Sorenson”


COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE

STATE OF CALIFORNIA

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS et al.,

Plaintiffs, Cross-defendants and             Appellants,

v.

SCOTT JACOBY,

Defendant, Cross-complainant and             Respondent.

D054010

(Super. Ct. No. GIC828794)

APPEAL from a judgment of the Superior Court of San Diego County, Judith F. Hayes, Judge.  Affirmed.

Scott Jacoby purchased property previously owned by J. Ross White-Sorensen at a court-ordered judicial foreclosure sale.  White-Sorensen and several entities with interests in two extinguished deeds of trusts brought an action against Jacoby, seeking to invalidate the sale and/or obtain declaratory relief providing that Jacoby holds the property subject to these deeds of trust.  Jacoby cross-complained seeking to quiet title to the property and for a judgment that he is the owner of unencumbered title to the property.

The court granted Jacoby’s summary judgment motion on the claims against him and on his affirmative quiet title claim.  White-Sorensen and two entities named on the extinguished deeds of trust appeal from the judgment.[1] We affirm.

FACTUAL AND PROCEDURAL SUMMARY

Overview

This appeal arises from an action filed by Linda Nacif against White-Sorensen resulting in a default judgment against White-Sorensen.  In the default judgment, the court found Nacif proved her claims and ordered a judicial foreclosure sale of White-Sorensen’s property.  The final judgment stated the proceeds of the sale shall be paid to Nacif for the judgment amount ($209,187 plus interest), and any surplus shall be paid to junior secured lenders who recorded interests after Nacif recorded her lis pendens.  Accredited was a lienholder who had recorded two deeds of trust securing loans to White-Sorensen after Nacif filed her lis pendens.

At the court-ordered judicial foreclosure sale conducted by the San Diego County Sheriff’s Office (Sheriff), Jacoby was the highest bidder at $222,524.  Pursuant to the court’s judgment, the Sheriff paid this amount to Nacif and there was no remaining surplus.  The Sheriff transferred title of the property to Jacoby, and Accredited’s later-recorded deeds of trust were extinguished, leaving Accredited with unsecured notes against White-Sorensen.  (Code Civ. Proc., § 701.630.)[2]

As explained in more detail below, White-Sorensen and the Accredited parties then filed claims against Jacoby seeking to set aside the sale or seeking an order that Jacoby purchased the property subject to Accredited’s deeds of trust.  Jacoby filed a cross-complaint seeking to quiet title to his property.

Jacoby moved for summary judgment, arguing his purchase at the court-ordered sale was conclusive and could not be challenged.  In opposing the motion, the Accredited parties argued the facts showed that before he bid on the property Jacoby had notice of their deeds of trust and that they were in the process of challenging the default judgment in the Nacif action.  The trial court found that even assuming Jacoby was aware of these facts, Jacoby was entitled to quiet title to the property because the statutes provide a judicial foreclosure sale to a party other than the judgment creditor is “absolute” and “may not be set aside for any reason.”  (§ 701.680, subd. (a).)  The court further found Jacoby did not purchase the property subject to Accredited’s deeds of trust because these instruments were not recorded when Nacif commenced her action and recorded the lis pendens.  The court thus granted Jacoby summary judgment.  As explained below, we agree with the court’s conclusions and affirm the judgment.

We note that we are concurrently filing an opinion in a companion case involving appellants’ disputes with Nacif.  (Nacif v. White-Sorensen (August 8, 2011, D056993 (Nacif II).) We also previously filed an opinion involving Accredited’s claims against Nacif.  (Accredited Home Lenders, Inc. v. Nacif (July 26, 2007, D048938) (Nacif I).) For clarity, we have made an effort to include facts in this opinion only to the extent they are relevant to the issues and/or appellate contentions asserted in this (the Jacoby) case.  A more detailed background of the underlying factual circumstances can be found in the Nacif I and Nacif II opinions.

Summary of Events Leading to Judicial Foreclosure Sale

In April 2004, Nacif filed an action against White-Sorensen, claiming White-Sorensen breached a contract to repay a loan and sought to impose an equitable mortgage on his property (the White-Sorensen property).  On the same day, Nacif recorded a lis pendens on the White-Sorensen property, giving notice of her equitable mortgage claim affecting the property.

Five months later, in September 2004, Accredited recorded two deeds of trust on the White-Sorensen property securing Accredited’s $675,000 loan to White-Sorensen.  The deeds of trust identified First American as the trustee and MERS as the nominee and nominal beneficiary.  White-Sorensen obtained this refinancing loan to fund a settlement with Nacif.  Although Nacif and White-Sorensen signed a settlement agreement in August 2004, Nacif later amended her complaint and continued her action against White-Sorensen based on allegations that he engaged in fraud in inducing her to agree to the settlement.  White-Sorensen then defaulted on the amended complaint.

In June 2005, the court entered a $209,187 default judgment against White-Sorensen on Nacif’s amended complaint.  The court also imposed an equitable mortgage on the White-Sorensen property and ordered the property sold at a foreclosure sale.  The amended final judgment, dated July 8, 2005, stated that all interests in the White-Sorensen property recorded “subsequent to the filing of notice of the pendency of this action” would be extinguished after the sale of the property.  (Italics added.)  Specifically, the judgment stated:  “[A]fter delivery of a deed by the levying officer to the purchaser at the sale, [White-Sorensen] and . . . all persons claiming to have acquired any estate or interest in the property subsequent to the filing of notice of the pendency of this action with the county recorder, are forever barred and foreclosed from all equity of redemption in, and claim to, the property and every part of it.”  (Italics added.)

Two weeks later, on July 22, 2005, the trustee on Accredited’s deeds of trust recorded a notice of trustee’s sale on the White-Sorensen property, based on claims that White-Sorensen had failed to make required payments on the $675,000 refinance loan.

On August 5, 2005, Nacif recorded an abstract of the July 8, 2005 final judgment, giving notice that the court had determined her judgment lien was superior to all interests in the property recorded after April 2004.

On August 12, 2005, the superior court issued a writ of execution on the July 8, 2005 final judgment.

On September 2, 2005, the Sheriff received instructions to levy upon the White-Sorensen property with a copy of the writ of sale.  One week later, on September 9, the Sheriff recorded a Notice of Levy and a copy of the writ of sale.

At some point between August 2005 and October 2005, Accredited learned of Nacif’s abstract of judgment which indicated that all liens (including Accredited’s deeds of trust) would be extinguished by the court-ordered judicial foreclosure sale.  Based on this information, Accredited retained White-Sorensen’s former counsel (S. Todd Neal) to “immediately file a Complaint for Declaratory Relief against Nacif on behalf of Accredited and MERS to protect the priority of the deeds of trust.”

In November 2005, Accredited filed a separate lawsuit against Nacif seeking a declaration that its deeds of trust had priority over Nacif’s July 8, 2005 final judgment.  In January 2006, Accredited filed a motion in Nacif’s case against White-Sorensen, seeking to vacate the entry of default and default judgment against White-Sorensen and for leave to intervene in this action.  Superior Court Judge Linda Quinn presided over the Nacif/White-Sorensen action.

While Accredited’s motions were pending in the Nacif/White-Sorensen action, on February 23, 2006, the Sheriff held a judicial foreclosure sale.  Jacoby, a third party, offered the highest bid at $222,524.  Based on Jacoby’s bid, the Sheriff determined Jacoby was the purchaser of the property.  One of Accredited’s attorneys (Neal) did not receive prior notice of the precise date of the sale.

Two weeks after the sale, on March 10, 2006, Judge Quinn issued a tentative ruling granting Accredited’s motion to set aside the White-Sorensen entry of default and default judgment, and granting Accredited’s motion for leave to file a complaint in intervention.

On March 15, 2006, the Sheriff recorded a “Sheriff’s Deed Under Execution” reflecting the conveyance of the White-Sorensen property to Jacoby.

On March 22, 2006, Judge Quinn confirmed the tentative ruling and entered an order vacating the default and the default judgment against White-Sorensen to permit Accredited to litigate its claims against Nacif.  Nacif appealed.  In her appeal, Nacif conceded Accredited’s rights to litigate its disputes with her in the Nacif/White-Sorensen action, but argued that Judge Quinn erred in vacating the entry of default and default judgment with respect to White-Sorensen.  (Nacif I, supra, D048938.)

Claims Between Appellants and Jacoby

While Nacif’s appeal was pending, in May 2006, Accredited, White-Sorensen and MERS filed a complaint in intervention against Jacoby, seeking declaratory relief that the “Sheriff [never had], and did not pass, good title” of the White-Sorensen property to Jacoby; Jacoby was “not a good faith purchaser for value”; and Jacoby did not acquire any valid interest in the property.  These parties alternatively sought a declaration that Jacoby’s ownership of the property was subject to Accredited’s deeds of trust.  The next month, Jacoby filed a cross-complaint seeking to quiet title against the Accredited parties and White-Sorensen, and seeking to confirm the validity of the Sheriff’s sale.

While these pleadings were pending, in July 2007, this court filed its decision reversing in part and affirming in part the court’s order vacating the entry of default and default judgment.  (Nacif I, supra, D048938.) We held the court properly vacated the judgment because the judgment affected Accredited’s rights, and the court would be required to determine the appropriate remedies (if any) as between Accredited and Nacif.  (Ibid.)  However, we reversed the portion of the judgment vacating the entry of default as to White-Sorensen, explaining that an entry of default has independent significance and is not void merely because the default judgment is later vacated.  (Ibid.)

Summary Judgment Proceedings

In March 2008, Jacoby moved for summary judgment on the intervention complaint and on his cross-complaint against White-Sorensen and the Accredited parties.  In support, he presented the evidence summarized above pertaining to the official actions leading to his purchase of the White-Sorensen property at the Sheriff’s sale.  Jacoby argued that because he was a third party purchaser at a court-ordered judicial foreclosure sale pursuant to a court judgment, the sale was final and was not subject to challenge “for any reason.”  (See § 701.680, subd. (a).)

In opposing the summary judgment, appellants did not dispute the chronology of events presented by Jacoby, but submitted additional facts in an attempt to create a basis for an exception to the general finality rules pertaining to judicial foreclosure sales.

First, appellants argued that the sale could be set aside because Jacoby was not a good faith purchaser based on facts showing:  (1) an appraisal in 2004 (about 18 months before the sale) valued the White-Sorensen property at $690,000 and Jacoby purchased the property for $222,524; (2) before the sale Jacoby knew of Nacif’s lis pendens and that Accredited had two deeds of trust on the property; and (3) before the sale Jacoby asked Nacif’s attorney about the priority of Accredited’s liens, and Nacif’s attorney responded that the Accredited parties had filed a motion challenging the White-Sorensen default judgment.

Second, appellants presented the declaration of one of their attorneys (Neal), who stated that “Nacif proceeded with [the foreclosure] sale [without] provid[ing] any notice to me that a sale of the property was pending.”  (Italics added.)

Third, appellants presented the declarations of White-Sorensen and Neal Melton (Accredited’s mortgage broker/agent), who each discussed the events leading to the court’s July 8, 2005 amended default judgment against White-Sorensen, including Nacif’s execution of the 2004 settlement agreement with White-Sorensen and her failure to repay the settlement funds before filing her amended complaint against White-Sorensen.  Melton also asserted that “Accredited would not have refinanced the property without Ms. Nacif’s written assurances that the lis pendens would be released upon payment of the $115,000.”

Court’s Ruling on Jacoby’s Summary Judgment Motion

After considering the parties’ memoranda and supporting submissions, the court granted summary judgment in favor of Jacoby.  The court found the applicable statutes are “crystal clear” that when a third party purchases property at a judicial foreclosure sale, the sale “may not be set aside ‘for any reason.’ ”  The court also rejected appellants’ arguments that Jacoby held the property subject to Accredited’s deeds of trust, finding these arguments were not legally supported.  The court thereafter entered a judgment that Jacoby is the “owner of unencumbered title” of the White-Sorensen property, and that the opposing parties had “no right, title, estate, lien or interest in the Property adverse to” Jacoby.

White-Sorensen and the Accredited parties filed an appeal.  This court later stayed the appeal after Accredited advised the court it had filed for bankruptcy.  About one year later, Accredited and appellants requested that Accredited be dismissed from the appeal and “MERS and First American be substituted as appellants in Accredited’s place.”  We granted the request that Accredited be dismissed from the appeal, but denied the request that MERS and First American be substituted in Accredited’s place.  We found that the documents presented did not support a basis for a substitution in the case, but noted that MERS and First American were existing appellants in the appeal.

DISCUSSION

I.  Standard of Review

Jacoby moved for summary judgment on his affirmative pleadings and on the claims asserted against him.

When a defendant moves for summary judgment, the defendant “bears the burden of persuasion that there is no triable issue of material fact and that [the party] is entitled to judgment as a matter of law.”  (Aguilar v. Atlantic Richfield Co.Aguilar).)  A defendant satisfies this burden by showing one or more elements of the cause of action cannot be established or that there is a complete defense to that cause of action.  (Ibid.) (2001) 25 Cal.4th 826, 850 (

When a plaintiff or cross-complainant moves for summary judgment on its claims, the party bears the burden of proving each element of the cause of action entitling the party to judgment on that cause of action.  “[I]f a plaintiff who would bear the burden of proof by a preponderance of evidence at trial moves for summary judgment, [the plaintiff] must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.”  (Aguilar, supra, 25 Cal.4th at p. 851.)

If the moving party fails to present sufficient, admissible evidence to meet its initial burden, the court must deny the summary judgment motion.  This rule applies even if the opposing party does not object to the moving party’s evidence, presents defective declarations, or fails to present a sufficient counter showing.  (Rincon v. Burbank Unified School Dist. (1986) 178 Cal.App.3d 949, 954-956.)  However, once a party meets its initial summary judgment burden, ” ‘the burden shifts to the [opposing party] . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’ ”  (Aguilar, supra, 25 Cal.4th at p. 849.)  The opposing party may not rely upon the mere allegations or denials of its pleading to show the existence of a triable issue of material fact.  (Ibid.; see Chaknova v. Wilbur-Ellis Co. (1999) 69 Cal.App.4th 962, 974-975.)

We review a summary judgment de novo.  (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) We assume the role of the trial court and redetermine the merits of the motion.  In doing so, we view the factual record in the light most favorable to appellants, the parties opposing the summary judgment.  (See Garcia v. W&W Community Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)  We strictly scrutinize the moving party’s papers so that all doubts as to the existence of any material triable issues of fact are resolved in favor of the party opposing summary judgment.  (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)  “Because a summary judgment denies the adversary party a trial, [the motion] should be granted with caution.”  (Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305.)

II.  No Legal Basis to Set Aside Jacoby’s Purchase of White-Sorensen Property

Under section 701.680, a judicial foreclosure sale to a party other than the beneficiary is “absolute” subject only to the debtor’s right of redemption, and the sale “may not be set aside for any reason.”  (§ 701.680, subd. (a), italics added; see Arrow Sand & Gravel, Inc. v. Superior Court (1985) 38 Cal.3d 884, 890 (Arrow Sand) [a judicial foreclosure “sale ‘is absolute and may not be set aside for any reason’ “]; Amalgamated Bank v. Superior Court (2007) 149 Cal.App.4th 1003, 1018-1019 [“By purchasing the property at the sheriff’s auction, [the third party] became fee owner, subject only to the [debtor’s] right of redemption”]; First Federal Bank of California v. Fegen (2005) 131 Cal.App.4th 798, 800-801 [“the sale is ‘absolute and may not be set aside for any reason’ “]; Gonzalez v. Toews (2003) 111 Cal.App.4th 977, 981 [“section 701.680 is crystal clear—it states that [judicial foreclosure] sales are absolute and may not be set aside ‘for any reason’ unless the judgment creditor was the purchaser”]; see also 1 Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2011) § 3.84, pp. 237-238 [a judicial foreclosure sale “has finality and may not be set aside for any reason”]; 1 Greenwald & Asimow, Cal. Practice Guide:  Real Property Transactions (The Rutter Group 2010) ¶ 6:544.10, p. 6-112.11 [“judicial foreclosure sale to a party other than the beneficiary is ‘absolute,’ subject only to the trustor’s right of redemption”].)

The only exception to this rule is that a judgment debtor may challenge the sale if: (1) “the purchaser at the sale [was] the judgment creditor” and (2) “the sale was improper because of irregularities in the proceedings, because the property sold was not subject to execution, or for any other reason . . . .”  (§ 701.680, subds. (a), (c)(1); see First Federal Bank of California v. Fegen, supra, 131 Cal.App.4th at pp. 800-801.)  This exception is inapplicable here because the purchaser at the sale was a third party (Jacoby) and not the judgment creditor (Nacif).

In seeking to avoid this rule, respondents rely on two cases that were decided long before section 701.680 was enacted.  (See Riley v. Martinelli (1893) 97 Cal. 575; Hansen v. G & G Trucking Co. (1965) 236 Cal.App.2d 481.)  In 1982, the Legislature enacted section 701.680 as part of a comprehensive revision to the enforcement of judgments law, seeking to protect the purchaser’s title and ensure the finality of judicial foreclosure sales, and thus encourage fair bidding at judicial foreclosure sales.  (See Arrow Sand, supra, 38 Cal.3d at pp. 890-891; Amalgamated Bank v. Superior Court, supra, 149 CalApp.4th at p. 1018; Gonzalez v. Toews, supra, 111 Cal.App.4th at p. 980.)  Because the pre-1982 law did not contain provisions similar to section 701.680 barring all challenges to judicial foreclosure sales, Riley and Hansen, decided in 1893 and 1965, are unhelpful here.

Appellants alternatively contend the sale may be set aside because Jacoby was not a good faith purchaser based on facts showing that an appraisal in 2004 valued the property at $690,000 and Jacoby purchased the property for $222,524.  However, under section 701.680, subdivision (a), a court cannot set aside a judicial foreclosure sale to a third party based on the equities of the situation, including a substantial disparity between the fair market value and the sums successfully bid.  (See Amalgamated Bank v. Superior Court, supra, 149 Cal.App.4th at pp. 1008, 1009, 1018 [citing section 701.680, court declined to set aside a third party’s $2,000 successful bid for 57 acres of property with an approximate value of $6 million].)

Appellants additionally contend that if Jacoby had conducted a reasonable investigation, he would have discovered that appellants had intervened in the action and had moved to set aside the equitable judgment.  However, as recognized by the California Supreme Court, there is no exception to section 701.680, subdivision (a) based on facts showing the purchaser was aware of an existing challenge to the underlying judicial foreclosure judgment.  (See Arrow Sand, supra, 38 Cal.3d at pp. 887-891.)  In Arrow Sand, the issue was whether the fact that an appealing defendant has no statutory right to record a lis pendens pertaining to an appeal of a judicial foreclosure judgment violates the defendant’s equal protection rights because the applicable statutes permit plaintiffs and cross-complainants to record a lis pendens.  (Id. at p. 887.)  Relying on section 701.680, subdivision (a), the high court found no denial of equal protection because a lis pendens giving notice of an appeal of a judicial foreclosure judgment has no practical effect.  (Arrow Sand, supra, at pp. 890-891.)  The court explained that section 701.680, subdivision (a) “completely eliminate[s] the possibility that judicial sales [can] be set aside on reversal of the underlying judgment . . . .”  (Id. at p. 890.)  Thus, “unless a defendant titleholder seeks and receives a statutory stay of enforcement or supersedeas from a higher court, the judicial sale may proceed” (id. at p. 891), and thus “[a] recorded notice of lis pendens would not serve to vitiate the title of a purchaser at a judicial foreclosure sale” (id. at p. 887).  Under this holding, the fact that a third party purchaser knew of an existing challenge to a judicial foreclosure judgment is not a valid basis to later set aside the court-ordered judicial foreclosure sale.

We also reject appellants’ argument that they had a right to set aside the sale because the legislative history of section 701.680, subdivision (a) suggests the purpose of this code section was to limit a debtor’s right of redemption and there is no showing the statute was intended to limit challenges to a third party purchase.  In interpreting statutory language, the goal is to determine the legislative intent.  (See Esberg v. Union Oil Co. (2002) 28 Cal.4th 262, 268.)  To determine legislative intent, we must turn first to the words of the statute, giving them their usual and ordinary meaning.  (Ibid.)  When the language of a statute is clear, a court should enforce the statute according to these terms.  (Ibid.)  A court looks to legislative history only when the statute is ambiguous.  (Ibid.; see Niles Freeman Equipment v. Joseph (2008) 161 Cal.App.4th 765, 780.)

Here, the statutory language is clear:  section 701.680, subdivision (a) bars all challenges to a third party purchase at a judicial foreclosure sale.  (See Amalgamated Bank v. Superior Court, supra, 149 Cal.App.4th at p. 1018.)  Thus, even if the legislative history shows the Legislature was concerned primarily with the prior rule that provided debtors with expansive redemption rights and enacted the new legislation to limit these rights, this does not mean the Legislature did not also intend to bar other types of challenges to a purchase at a judicial foreclosure sale.  In this regard, appellants’ reliance on Yancey v. Fink (1991) 226 Cal.App.3d 1334 is misplaced.  Although the Yancey court discussed section 701.680, subdivision (a) in the context of a debtor’s statutory redemption rights, this does not mean the statute is limited to this subject matter.

III.  Jacoby’s Interests Are Not Subject to Accredited’s Deeds of Trust

Appellants also contend the court erred in quieting title in favor of Jacoby because Jacoby’s interest in the property is subject to Accredited’s two deeds of trust under section 726, subdivision (c).  This code section states in relevant part:  “Notwithstanding Section 701.630, the sale of the encumbered real property . . . does not affect the interest of a person who . . . has a lien thereon, if the conveyance or lien appears of record in the proper office at the time of the commencement of the action and the person holding the recorded conveyance or lien is not made a party to the action.”  (Italics added.)  Section 701.630 provides that:  “If property is sold pursuant to [a judicial foreclosure sale], the lien under which it is sold [and] any liens subordinate thereto . . . on the property sold are extinguished.”

Under these statutes, the general rule is that a judicial foreclosure sale extinguishes the lien under which the property is sold and all subordinate liens.  (See Little v. Community Bank (1991) 234 Cal.App.3d 355, 360; Mitchell v. Alpha Hardware & Supply Co. (1935) 7 Cal.App.2d 52, 57.)  However, an exception to this rule applies if the subordinate lienholder was not made a party to the judicial foreclosure action and this lien “appear[ed] of record . . . at the time of the commencement of the action.”  (§ 726, subd. (c), italics added.)  If these requirements are satisfied, the purchaser holds the property subject to the subordinate liens.

In this case, the undisputed facts show Accredited’s deeds of trust were not recorded in April 2004 when Nacif first commenced her action against White-Sorensen.  Thus, the section 726, subdivision (c) exception does not apply.  Appellants nonetheless urge us to hold that this statutory exception governs because Nacif filed the amended complaint after Accredited’s deeds of trust were recorded.  They posit that because the amended complaint did not “relate back” to the original complaint, the amended complaint—and not the original complaint—should be the operative pleading for purposes of determining when the action commenced under the section 726 subdivision (c) exception.

This argument is unsupported.  First, there is no basis for superimposing a statute-of-limitations relation-back theory onto section 726, subdivision (c).  Section 726, subdivision (c) reflects a legislative judgment that a party who records a lien on property after the filing of a lis pendens has the means to protect itself.  A lis pendens imparts constructive notice of an underlying judicial foreclosure action (and of the named parties in the action) to all subsequent encumbrancers.  (See § 405.24.)  Thus, a subsequently-recording lienholder has the information necessary to protect his or her rights by intervening in the action and seeking a stay of the foreclosure sale and/or participating at the foreclosure sale.  (See Arrow Sand, supra, 38 Cal.3d at p. 891.)

Under the statutory language and this underlying legislative policy, the commencement of the judicial foreclosure action, and not the filing of an amended complaint, is the critical trigger date for determining a lienholder’s interests.  If a junior lienholder records an interest after a lis pendens is recorded, these parties “need not be joined as defendants as long as the plaintiff records and serves a lis pendens immediately on filing the complaint.  The lis pendens binds such persons as effectively as if they had been joined in the action.”  (1 Bernhardt, Cal. Mortgages, Deeds of Trust and Foreclosure Litigation, supra, § 3.34, p. 205.)

Moreover, even assuming the relation-back theory was relevant to the application of section 726, subdivision (c) in this case, the amended complaint did relate back to the original complaint, at least with respect to the judicial foreclosure claim.  Under the relation-back doctrine, an amendment relates back to an original claim for purposes of the statute of limitations if the amendment:  (1) rests on the same general set of facts; (2) involves the same injury; and (3) refers to the same instrumentality.  (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-409; Barrington v. A. H. Robins Co. (1985) 39 Cal.3d 146, 150-151.) In determining whether the relation-back doctrine applies, the critical inquiry is whether the defendant had adequate notice of the claim based on the original pleading.  (See Garrison v. Board of Directors (1995) 36 Cal.App.4th 1670, 1678.)

In the original complaint, filed in April 2004, Nacif sued White-Sorensen for breach of contract and sought an order permitting her to foreclose on an equitable mortgage on the White-Sorensen property.  The caption on this original complaint stated:  “COMPLAINT TO FORECLOSE UNDER EQUITABLE MORTGAGE.”  The same day that she filed this complaint, Nacif recorded a lis pendens on the White-Sorensen property, giving notice of this foreclosure action.

In the amended complaint filed in November 2004, Nacif realleged her claims against White-Sorensen for breach of the loan agreement and again sought an equitable mortgage/judicial foreclosure of White-Sorensen’s property.  She also added new fraud allegations pertaining to the settlement.  The only substantive difference between the original complaint and the first amended complaint with respect to the equitable mortgage/judicial foreclosure cause of action, is that Nacif alleged she had been given a partial payment ($115,000), and thus that she was seeking only the remaining portion of the secured debt.

On this record, Nacif’s first amended complaint related back to the original complaint, at least with respect to the claim at issue here (the breach of contract claim seeking to impose an equitable mortgage and a judicial foreclosure sale).  The only factual difference between the complaints on this claim was the $115,000 payment made by White-Sorensen towards his debt.  Although this payment may have raised legal issues regarding Nacif’s ability to enforce the contract (see Myerchin v. Family Benefits, Inc. (2008) 162 Cal.App.4th 1526), this new legal issue did not preclude a finding that the Accredited parties had notice of the equitable mortgage claim when they recorded their deeds of trust.

Appellants argue that under the unique facts of this case, we should interpret section 726, subdivision (c) to mean that Nacif’s amended complaint was the “commencement” of the action because Nacif benefited from Accredited’s funding of her initial settlement with White-Sorensen and there were facts showing she wrongly refused to dismiss the complaint and withdraw the lis pendens.  However, under the statutory scheme, the issues regarding the propriety of Nacif’s conduct vis-à-vis Accredited does not affect the rights of Jacoby, who was a third party purchaser.  Moreover, the undisputed facts show that although Accredited may have disagreed with Nacif’s actions, the Accredited parties had actual knowledge of Nacif’s continuing lawsuit and judgment against White-Sorensen and of the fact that Nacif never withdrew the lis pendens.  Accredited’s counsel acknowledged in the proceedings below that based on this knowledge, the Accredited parties filed a declaratory relief action against Nacif and petitioned to intervene in Nacif’s continuing action against White-Sorensen before the judicial foreclosure sale took place.  Under these circumstances, the Accredited parties had the ability to protect themselves by filing for a stay of the judicial foreclosure sale and/or seeking some form of preliminary injunctive relief.

Finally, we find unavailing appellants’ challenge to the trial court’s statement at the conclusion of its summary judgment order that “the Accredited parties had ample notice of the pending judicial foreclosure sale, but took no action to protect its interests and did not seek a stay of the proceedings.”  Appellants assert that because in moving for summary judgment Jacoby did not specifically rely on the evidence that the Accredited parties had notice of the pending foreclosure sale, the court erred in relying upon this fact.  However, because the undisputed evidence established that Accredited had notice of the “pending judicial foreclosure sale” and had challenged the pending sale through a declaratory relief action, the court’s observation was appropriate.

Appellants argue that this notice finding contradicts statements in the Nacif I decision in which we observed that the trial court had a “sufficient factual basis” to conclude that Accredited did not unreasonably delay in filing its motion to vacate the default judgment and noted that the trial court could have credited evidence that Accredited denied receiving timely notice of the judgment or of the sale of the property.  (Nacif I, supra, D048938.)  These statements, however, were directed to Accredited’s notice of the precise date of the sale.  The fact that Accredited may not have had actual knowledge of the sale date is different from a conclusion that Accredited (and the parties asserting rights based on Accredited’s deeds of trust) knew or should have known that a sale was pending and they needed to act if they wanted to prevent a sale.  (Ibid.)  Moreover, our statement in the Nacif I decision was based on the limited record before us.  In the Nacif I opinion, we admonished that we were not intending to rule on any of the substantive issues pertaining to other matters in the case, including Nacif’s lis pendens and the effect of the lis pendens on the rights of the other parties.  (Ibid.)  Under these circumstances, we find unpersuasive appellants’ attempt to use a statement from the Nacif I opinion to suggest they had no notice of the pending foreclosure sale, when the undisputed facts show they did know of a pending sale and/or they had constructive knowledge of the pending sale based on recorded documents and their involvement in the lawsuit.

DISPOSITION

Judgment affirmed.  Appellants to bear respondent’s costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

McINTYRE, J.

AARON, J.



[1] These two entities are nominee/beneficiary Mortgage Electronic Registration Systems (MERS) and trustee First American Title Company (First American).  The original creditor/beneficiary on the deeds of trust, Accredited Home Lenders, Inc., also appealed from the judgment, but later filed for Chapter 11 bankruptcy.  We have since granted Accredited’s motion to be dismissed from the appeal.  For ease of reference, we collectively refer to Accredited, First American, and MERS as the Accredited parties.  We collectively refer to White-Sorensen, First American, and MERS as appellants.

[2] All further statutory references are to the Code of Civil Procedure.

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NACIF v. WHITE-SORENSON | CA 4DCA Div.1 REVERSED/REMAND “MERS and FIRST AMERICAN did not meet their s-jgmt burden to show they were real parties in interest as a matter of law with respect to Accredited’s claimed losses”

NACIF v. WHITE-SORENSON | CA 4DCA Div.1 REVERSED/REMAND “MERS and FIRST AMERICAN did not meet their s-jgmt burden to show they were real parties in interest as a matter of law with respect to Accredited’s claimed losses”


COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA

LINDA NACIF,

Plaintiff, Cross-Defendant, and             Appellant,

v.

J. ROSS WHITE-SORENSEN et al.,

Defendants, Interveners, and             Respondents.

D056993

(Super. Ct. No. GIC828794)

APPEAL from a judgment of the Superior Court of San Diego County, Linda B. Quinn and Judith F. Hayes, Judges.  Reversed and remanded with directions.

This now complicated case arose out of a simple matter:  Linda Nacif loaned $258,000 to her then-boyfriend, J. Ross White-Sorensen, who failed to repay the loan.  Nacif sued White-Sorensen and his companies (collectively White-Sorensen).  After White-Sorensen defaulted, the court entered judgment in Nacif’s favor and ordered White-Sorensen’s property sold at a foreclosure sale (White-Sorensen had agreed to secure the loan with property he owned).  A third party then purchased the property at the court-ordered sheriff’s sale.

The trial court thereafter vacated the default and default judgment, based solely on claims by White-Sorensen’s lender (Accredited Home Lenders, Inc. (Accredited)) that its rights were improperly extinguished upon the sale.  Nacif appealed.  In our prior unpublished opinion, we upheld the portion of the court’s order vacating the default judgment and remanded for the court to consider the unresolved claims between Accredited and Nacif.  (Accredited Home Lenders, Inc. v. Nacif (July 26, 2007, D048938) (Nacif I).)  But we expressly held the court erred in vacating the entry of default as to White-Sorensen, concluding there “was no legal or factual basis to vacate the entry of default as to [this party].”  (Ibid.) This court then remanded for the trial court “to resolve claims between Nacif and Accredited, and to enter a new default judgment as to White-Sorenson . . . after the resolution of those claims.”  (Ibid., italics added.)

On remand, the trial court disregarded this order and once again vacated the entry of default against White-Sorensen.  After permitting White-Sorensen to file a cross-complaint against Nacif, the court ultimately found in favor of White-Sorensen on each of Nacif’s claims against him and in favor of White-Sorensen on each of his affirmative claims against Nacif.  The trial court also granted summary judgment in favor of two parties who had intervened or had been brought into the action:  the trustee (First American Title Company (First American)) and a nominee/beneficiary (Mortgage Electronic Registration Systems, Inc. (MERS)) on the deeds of trust that secured Accredited’s loan to White-Sorensen.  The court also permitted these parties to amend the pleadings to be substituted in Accredited’s place after Accredited was dismissed from the action upon filing for bankruptcy.  The court awarded First American and MERS $675,000 against Nacif.

The court also granted the anti-SLAPP motion filed by White-Sorensen, MERS, and First American.  The court awarded these parties $300,000 in attorney fees as prevailing parties on their contract claims and on their anti-SLAPP motion.

Nacif appeals.  Respondents are White-Sorensen, MERS, and First American.  We determine the court erred in several ways.  We reverse and remand with directions.[1]

FACTUAL AND PROCEDURAL BACKGROUND

We summarize the facts in the light most favorable to Nacif, the party opposing the summary judgment and anti-SLAPP motions.  (See Garcia v. W&W Community Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)

I.  Background

Linda Nacif loaned $258,000 to White-Sorensen, who promised to repay the money and agreed to secure the loan with property he owned (the White-Sorensen property).  White-Sorensen then failed to pay the amounts owed.

In April 2004, Nacif sued White-Sorensen for breach of contract and sought an order permitting her to foreclose on an equitable mortgage on the White-Sorensen property.  The same day that she filed her complaint, Nacif recorded a lis pendens on the White-Sorensen property, giving notice of her equitable mortgage claim.

Four months later, in August 2004, the parties reached a settlement in which Nacif agreed to accept $115,000 and to remove the lis pendens once the funds were paid.  Nacif’s attorney prepared a stipulated judgment to reflect this agreement (the 2004 Settlement Agreement), which both parties signed.  The Settlement Agreement set forth the settlement amount, described Nacif’s agreement to release the lis pendens upon payment of the settlement funds, and contained a broad release in which both parties agreed to release each other for all known and unknown claims.  The Settlement Agreement also contained a provision that “If” a release of the lis pendens was required as a condition to funding White-Sorensen’s refinance, Nacif’s attorney would deliver the release to the refinance escrow officer with instructions that it may be recorded upon funding of the settlement amount.  (Italics added.)

To fund the settlement, White-Sorensen applied for a secured loan from Accredited to refinance his existing secured loans on the property.  As part of this loan application, White-Sorensen stated he had a monthly income of more than $34,000.  During the escrow on the refinance, White-Sorensen (and/or his agents) refused to disclose to Nacif the name of the lender, escrow company, or title company involved in the refinance transaction.  But in a letter to Nacif’s counsel, White-Sorensen’s counsel said the lender did not require the release of the lis pendens before the loan would be approved and merely required a payoff demand letter.  Nacif’s counsel told White-Sorensen’s counsel and a mortgage broker he would record a lis pendens release at the close of the settlement, but because he was concerned with the lack of disclosure of the identity of the lender and escrow company, he would exchange the release document only when the $115,000 funds were available.  When the escrow closed, neither the escrow company nor the lender requested the withdrawal of the lis pendens as a condition to the payoff demand.  Accredited recorded its two deeds of trust on the White-Sorensen property in September 2004.

After Nacif was paid the $115,000 and before releasing the lis pendens and dismissing her lawsuit against White-Sorensen, Nacif’s counsel discovered information leading him to believe that White-Sorensen had not been honest regarding his assets.  Nacif then filed a first amended complaint, realleging her claims against White-Sorensen for breach of the loan agreement and adding allegations of fraud, claiming she would not have agreed to the settlement if she had known these facts.  Nacif did not return the $115,000, but sought to recover only the balance of the loan principal plus interest.  Although White-Sorensen was served with, and had notice of, the amended complaint, he elected not to defend the action, and the court entered his default.

On June 30, 2005, after Nacif submitted a declaration supporting her claims, the court entered a default judgment against White-Sorensen in the amount of $209,187 (consisting of the remaining loan balance of $153,750 plus interest, costs, and attorney fees).  The court also imposed an equitable mortgage on the White-Sorensen property and ordered the property sold at a foreclosure sale.  The amended final judgment stated that all interests in the property recorded “subsequent to the filing of notice of the pendency of this action” would be extinguished after the sale of the property.  (Italics added.)

Several weeks later, on July 22, 2005, First American, Accredited’s trustee on its deeds of trust, recorded a Notice of Trustee’s Sale, based on Accredited’s claims that White-Sorensen had failed to make required payments on his $675,000 refinance loan.

Three weeks later, Nacif recorded an Abstract of Judgment, which reflected that her judgment lien was superior to Accredited’s deeds of trust.  Nacif advised Accredited and/or its agents of her priority lien and asserted a right to proceed with the sale.  Accredited objected to Nacif’s claim of priority.  After attempting to negotiate a resolution of its dispute with Nacif, Accredited filed a separate lawsuit in November 2005 against Nacif seeking to protect its priority interest in the White-Sorensen property.  The action was assigned to a different department of the superior court.

Two months later, in January 2006, Accredited filed a motion in the Nacif/White-Sorensen case to vacate the entry of default and default judgment and for leave to intervene in this action.  Accredited was represented by the same counsel who had previously represented White-Sorensen (S. Todd Neal).  White-Sorensen did not join in the motion to vacate the default or default judgment.

In its proposed intervention complaint, Accredited sought to protect its security interest in the White-Sorensen property.  Accredited claimed it had a lienhold interest totaling $675,000 and the default judgment extinguishing this interest would materially affect its rights.  (Nacif I, supra, D048938.)  Accredited asserted a right to intervene because it was not named in the underlying matter and therefore it had no opportunity to protect its interests.  (Ibid.)  Accredited requested various remedies, including a judicial determination that its secured equitable interest should be given first priority over Nacif’s equitable mortgage.  (Ibid.)  Accredited also asserted a breach of contract claim against Nacif.  (Ibid.)  Nacif did not oppose the motion for intervention, but objected to the motion to vacate the entry of default and default judgment against White-Sorensen.  (Ibid.)

While Accredited’s motions were pending, the White-Sorensen property was sold at a February 23, 2006 sheriff’s sale.  Accredited (and/or its agents) had actual notice of a pending foreclosure sale more than 90 days before the sale, but took no steps to delay or prevent the sale, other than to file its declaratory relief and intervention actions.  A third party (Scott Jacoby) purchased the property for $222,524 (the approximate amount of Nacif’s judgment against White-Sorensen) and these funds (minus administrative costs) were paid to Nacif.

In thereafter opposing Accredited’s motions to set aside White-Sorensen’s default, Nacif’s counsel argued that Accredited’s remedies were now limited to a damage action against Nacif because the property had been sold to a third party (after notice to Accredited), and these claims should have no effect on White-Sorensen’s default in the action.

In March 2006, the trial court granted Accredited’s motion for intervention and vacated the entry of default and judgment against White-Sorensen.  The parties then entered into a stipulation that Accredited would dismiss its second lawsuit against Nacif (which was pending in another superior court department) because all of the claims asserted in this second lawsuit were now contained in Accredited’s complaint-in-intervention.  (Nacif I, supra, D048938.)

Nacif then filed her notice of appeal.  Nacif appealed only from the portion of the court order vacating the default and default judgment, and did not challenge the court’s order granting Accredited’s motion to intervene in the action.  (Nacif I, supra, D048938.)

In July 2007, this court affirmed the portion of the order vacating the default judgment.  (Nacif I, supra, D048938.) We held the court properly vacated the judgment because the judgment affected Accredited’s rights, and the court would be required to determine the appropriate remedies (if any) as between Accredited and Nacif.  (Ibid.)  However, we reversed the portion of the order vacating the entry of default as to White-Sorensen, explaining that an entry of default has independent significance and is not void merely because the default judgment is later vacated.  (Ibid.)  We reasoned that although vacating the judgment was necessary to allow Nacif and Accredited to litigate their claims, it was not a proper basis to allow White-Sorensen to avoid the effect of his default, particularly because he had never moved to reopen the default.  (Ibid.)  In concluding there was no legal or factual basis to vacate the entry of default as to White-Sorensen, we rejected Accredited’s arguments that:  (1) White-Sorensen was not properly served in the underlying action; (2) Nacif’s first amended complaint was a “nullity” because Nacif did not receive specific permission to file it; and (3) the default was void because Nacif allegedly committed fraud in refusing to adhere to the terms of her settlement with White-Sorensen.  (Ibid.)

In so concluding, we emphasized that we were not ruling on any of the issues arising from the dispute between Nacif and Accredited, including whether Nacif’s lis pendens was a proper basis to subordinate Accredited’s trust deeds.  (Nacif I, supra, D048938.) We stated that “[b]ecause the parties have yet to litigate these issues before the trial court and it may depend on the resolution of disputed facts, it would be premature for us to address these issues here,” and we refused to consider the merits of amended intervention pleadings filed by Accredited and White-Sorensen while the appeal was pending.  (Ibid.)  We thus “remand[ed] for the court to resolve claims between Nacif and Accredited, and to enter a new default judgment as to White-Sorenson and [his company] after the resolution of those claims.”  (Ibid., italics added.)

II.  Proceedings on Remand

Unfortunately, as respondents acknowledge in their appellate brief, on remand the trial court “did not consider” our appellate opinion.  Instead, the court allowed White-Sorensen to relitigate the entry of default, which was not only contrary to our specific instructions but inconsistent with the law of the case doctrine.  The court also erroneously required Nacif to name MERS and First American in amended pleadings.  These errors led to a flurry of additional pleadings and motions, and ultimately to the court erroneously granting respondents’ summary judgment and anti-SLAPP motions without a proper showing they were entitled to this relief.  To explain these conclusions, we first summarize the three pleadings that were before the court on remand and then briefly describe the motion proceedings and the court’s rulings on respondents’ motions.  In the Discussion section, we shall more fully discuss the facts and arguments before the court when it made the rulings.

A.  The Three Pleadings Before the Court on Remand

1.  First Amended Intervention Complaint Against Nacif and Jacoby

While the Nacif I appeal was pending, Accredited, White-Sorensen, and MERS filed a first amended complaint in intervention.  The named defendants were Nacif and Scott Jacoby, the individual who purchased the White-Sorensen property at the court-ordered foreclosure sale.

This first amended intervention complaint asserted six causes of action against Nacif, each based primarily on allegations that Nacif breached the 2004 Settlement Agreement with White-Sorensen by failing to adhere to her promise to remove the lis pendens once she was paid the $115,000 in settlement funds.  The first cause of action sought a judicial declaration that Nacif “was not entitled to a default, a default judgment, or any equitable mortgage on the Property” and Accredited’s deeds of trust have priority over Nacif’s “right to an equitable mortgage.”  The second through fourth causes of action alleged breach of contract and fraud against Nacif.  The fifth cause of action alleged equitable subrogation and subordination.  The sixth cause of action sought to quiet title.

2.  Nacif’s Second Amended Complaint

Nacif’s first amended complaint against White-Sorensen (alone) was also before the trial court after the remand.  This was the same complaint upon which this court held the trial court had erred in vacating the entry of default against White-Sorensen.  (Nacif I, supra, D048938.)  Shortly after the remand, four parties (White-Sorensen, Accredited, MERS, and First American) moved for judgment on this complaint, arguing that Nacif’s failure to name these additional parties rendered the complaint defective as a matter of law because these other parties were “indispensible parties” on a foreclosure action.  Nacif vigorously opposed the motion, raising several arguments, including that:  (1) there was no need for her to name these other parties because they had already raised all of the issues in their amended intervention complaint; and (2) it would be improper to grant a judgment on the pleadings in favor of White-Sorensen because it was on this pleading that the Nacif I court explicitly held White-Sorensen had defaulted and that the default could not be vacated.

After a hearing, the trial court rejected these arguments, and granted the motion.  The court’s written order stated:  “The motion of Plaintiffs-in-Intervention Accredited Home Lenders, Inc., [MERS] and . . . White-Sorensen for Judgment on the Pleadings is GRANTED.  The court finds [these] moving parties are indispensible to the determination of plaintiff [Nacif]’s first amended complaint.”  (Italics added.)  The court provided Nacif 10 days’ leave to amend to add the necessary parties.  Nacif later unsuccessfully challenged this ruling in a writ petition in this court.

In Nacif’s second amended complaint (filed in response to the court’s order granting judgment on the pleadings), Nacif named White-Sorensen, Accredited, MERS, and First American.  As discussed more fully below, Nacif’s allegations against White-Sorensen were virtually identical to the allegations alleged in her first amended complaint.  To avoid any argument that she reopened White-Sorensen’s default, Nacif included a paragraph in the new pleading stating she “specifically denies any intention to allege any new or different causes of action against [White-Sorensen]” and “intends to preserve [his] status as [a] defaulted [party] . . . .”  With respect to the other named defendants, Nacif added a fraud cause of action against Accredited and sought declaratory relief against Accredited, MERS, and First American.[2]

3.  Cross-Complaint Against Nacif

The third pleading before the court was respondents’ cross-complaint against Nacif, filed after Nacif filed her second amended complaint.  The plaintiffs on this pleading—Accredited, MERS, White-Sorensen, and First American—alleged essentially the same six causes of action as were alleged in the first amended intervention complaint.

B.  Summary Judgment and Anti-SLAPP Motions

White-Sorensen, Accredited, MERS, and First American then sought summary judgment on each of the three pleadings before the court (Nacif’s second amended complaint, the first amended intervention complaint, and respondents’ cross-complaint).  These parties also filed an anti-SLAPP motion to strike Nacif’s second amended complaint.  We summarize the evidence and argument presented by respondents with respect to these pleadings.[3]

1. Summary Judgment Motion on Respondents’ Pleadings Against Nacif

On their own affirmative pleadings (cross-complaint and first amended intervention complaint), White-Sorensen, Accredited, MERS and First American argued they were entitled to recover as a matter of law on their contract, fraud, and equitable relief claims because the undisputed evidence showed:  Nacif is bound by her settlement with White-Sorensen because he paid her the $115,000; Nacif breached the 2004 Settlement Agreement by failing to release her lis pendens; and Nacif’s failure to release the lis pendens shows she made a material misrepresentation of fact without an intention to perform and misrepresented to White-Sorensen and Accredited that she would withdraw the lis pendens.

These parties argued they were entitled to damages of $675,000 as a matter of law based on: (1) a declaration filed by the mortgage broker involved in the Accredited refinance loan, who stated that a July 2004 appraisal valued the White-Sorensen property at $690,000; (2) Accredited’s deeds of trust showing it loaned $675,000 to White-Sorensen; and (3) evidence that the property had been sold to a third party.

2.  Summary Judgment Motion on Nacif’s Second Amended Complaint

In moving for summary judgment on Nacif’s second amended complaint, the defendants named in this pleading (White-Sorensen, Accredited, MERS and First American) argued that Nacif could not recover as a matter of law because the basis of her claims against White-Sorensen was legally flawed as she did not return the $115,000 she received as part of the settlement.  (See Myerchin v. Family Benefits, Inc. (2008) 162 Cal.App.4th 1526, 1529 [“a party offered a monetary settlement of a lawsuit may accept the money or reject it, but may not take the money and continue the lawsuit”].)  These defendants also argued Nacif would be unable to prove her claims against White-Sorensen or the other defendants based on Nacif’s deposition testimony in which she was unable to identify a factual basis for many of her claims.

White-Sorensen, Accredited, MERS, and First American alternatively moved to strike Nacif’s second amended complaint under the anti-SLAPP statute.  They argued that Nacif’s “entire suit” is based on White-Sorensen’s false statements made to induce Nacif to settle the action, and is thus subject to the anti-SLAPP statute.  They further argued Nacif would not prevail on any of her affirmative claims against them.

3.  Accredited’s Bankruptcy and Dismissal and Substitution of Parties

While these summary judgment and anti-SLAPP motions were pending, Accredited moved to stay the proceedings because it had filed for bankruptcy.  However, at a hearing conducted shortly thereafter, the counsel who was jointly representing Accredited, MERS, First American, and White-Sorensen stated that a stay was unnecessary because he would be submitting a motion to dismiss Accredited from the action.  He explained that Accredited had previously sold its interests in the White-Sorensen loan to other entities (not parties to this litigation), and these other entities are “comfortable that their interests are adequately protected by First American and MERS.”

In response, Nacif’s counsel strenuously objected, arguing in part that counsel has “just confirmed what I’ve been saying for three years, that he doesn’t have a client.  He has . . . three parties, none of whom own the right . . . which is the basis for being in this action.”  The trial judge dismissed these concerns, saying she was “not worried about” these issues.

The court thereafter provided Nacif’s counsel additional time to file responses to the summary judgment motion to cure procedural deficiencies in the initial opposition.  On the same day that Nacif filed the supplemental opposition, respondents moved to dismiss Accredited from the action and asked that they be permitted to amend their affirmative pleadings to substitute First American and MERS in place of Accredited as real parties in interest.  They argued that MERS could be substituted for Accredited because MERS was a named beneficiary on the White-Sorensen deeds of trust.  They sought First American’s substitution based on their counsel’s declaration and letters from a senior counsel of Wells Fargo and a vice president of Solace Financial, LLC, who claimed that these entities had current rights in the White-Sorensen notes and deeds of trust and that First American (as title insurer) was an subrogee/assignee for “collection” purposes to Accredited’s rights on White-Sorensen’s notes.

Based on these papers, the court granted the substitution request.  The court thus dismissed Accredited from the action and permitted First American and MERS to be “substituted in ACCREDITED’s stead” as plaintiffs on the first amended intervention complaint and on the cross-complaint.

4. Court’s Rulings on Summary Judgment and Anti-SLAPP Motions

The court then ruled against Nacif on respondents’ summary judgment and anti-SLAPP motions.

With respect to the summary judgment motion on Nacif’s second amended complaint, the court found in favor of White-Sorensen, MERS, and First American.  The court reasoned that the 2004 Settlement Agreement was valid and binding and thus constituted a “complete defense to [Nacif’s] second amended complaint.”  The court further found that Nacif’s retention of the $115,000 in settlement funds barred her from recovering the balance of the debt owed to her, relying on Myerchin, supra, 162 Cal.App.4th 1526.  The court alternatively granted these parties’ anti-SLAPP motion.  The court found the anti-SLAPP statute applied because the second amended complaint arose from the settlement agreement with White-Sorensen, and as “demonstrated in the summary judgment motion, plaintiff has not and cannot establish a probability of success on the merits.”

On the affirmative pleadings filed by White-Sorensen, MERS, and First American, the court found the undisputed facts showed these parties proved each of their claims against Nacif, including breach of contract, fraud, and equitable subrogation.  The primary basis for this ruling was the evidence showing Nacif failed to comply with the 2004 Settlement Agreement provision requiring her to release the lis pendens and that her attorney provided assurances to Accredited’s agent that she would withdraw the lis pendens once she received the settlement money.  The court further found that First American and MERS met their summary judgment burden to prove they were damaged in the amount of $675,000 and were entitled to recover this amount from Nacif plus prejudgment interest.

The court additionally granted White-Sorensen, MERS, and First American their requested equitable relief, including that:  (1) Nacif “was never entitled to a default or a default judgment against any Defendant,” including White-Sorensen; (2) Nacif was not “entitled to an equitable mortgage or other interest” on White-Sorensen’s property; and (3) the White-Sorensen property was and remains “clear of any equitable mortgage or other interest claimed by . . . [Nacif].”

The court later awarded attorney fees of $300,000 to White-Sorensen, MERS, and First American on their anti-SLAPP motion and as prevailing parties on the breach of contract action.

DISCUSSION

I.  Summary Judgment Motion

A.  Standard of Review

The court granted summary judgment against Nacif on respondents’ claims asserted against her and on Nacif’s affirmative pleadings.

When a defendant moves for summary judgment, the defendant “bears the burden of persuasion that there is no triable issue of material fact and that [the party] is entitled to judgment as a matter of law.”  (Aguilar v. Atlantic Richfield Co.Aguilar).)  A defendant satisfies this burden by showing one or more elements of the cause of action cannot be established, or that there is a complete defense to that cause of action.  (Ibid.)  This burden can be met by relying on the opposing party’s factually inadequate discovery responses if these responses show the plaintiff “will be unable to prove its case by any means.”  (Weber v. John Crane, Inc. (2006) 143 Cal.App.4th 1433, 1439; see Scheiding v. Dinwiddie Construction Co. (1999) 69 Cal.App.4th 64, 78-81; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 589-590.) (2001) 25 Cal.4th 826, 850 (

When a plaintiff or cross-complainant moves for summary judgment on its claims, the party bears the burden of proving each element of the cause of action entitling the party to judgment on that cause of action.  “[I]f a plaintiff who would bear the burden of proof by a preponderance of evidence at trial moves for summary judgment, [the plaintiff] must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.”  (Aguilar, supra, 25 Cal.4th at p. 851.)

If the moving party fails to present sufficient, admissible evidence to meet its initial burden, the court must deny the summary judgment motion.  This rule applies even if the opposing party does not object to the moving party’s evidence, presents defective declarations, or fails to present sufficient counter showing.  (Rincon v. Burbank Unified School Dist. (1986) 178 Cal.App.3d 949, 954-956.)  However, once a party meets its initial summary judgment burden, ” ‘the burden shifts to the [opposing party] . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’ ”  (Aguilar, supra, 25 Cal.4th at p. 849.)  The opposing party may not rely upon the mere allegations or denials of its pleading to show a triable issue of material fact exists.  (Ibid.)

We review a summary judgment de novo.  (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) We assume the role of the trial court and redetermine the merits of the motion.  In doing so, we strictly scrutinize the moving party’s papers so that all doubts as to the existence of any material, triable issues of fact are resolved in favor of the party opposing summary judgment.  (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)  “Because a summary judgment denies the adversary party a trial, [the motion] should be granted with caution.”  (Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305.)

In applying these principles to this case, we first consider the propriety of the summary judgment granted in favor of White-Sorensen on Nacif’s second amended complaint and on White-Sorensen’s affirmative pleadings against Nacif.  We then examine the summary judgment granted in favor of MERS and First American on these parties’ affirmative pleadings (cross-complaint and complaint in intervention) and on Nacif’s second amended complaint against these respondents.

B.  Summary Judgment in Favor of White-Sorensen

1.  Nacif’s Claims Against White-Sorensen

Nacif contends the court erred in granting summary judgment to White-Sorensen on Nacif’s second amended complaint.  We agree.

In August 2004, Nacif filed a first amended complaint against White-Sorensen.  White-Sorensen defaulted on those claims, and the court entered White-Sorensen’s default.  Although the trial court later vacated the entry of default, this court found the court erred and ordered the court to reinstate the entry of default.  (Nacif I, supra, D048938.) This ruling constitutes law of the case.

The law of the case doctrine provides that ” ‘the decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case.’ ”  (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 301.)  Under this doctrine, the holding in Nacif I that there was no legal or factual basis to set aside White-Sorensen’s entry of default was binding on the trial court on remand with respect to White-Sorensen.  Thus, the trial court erred in vacating White-Sorensen’s default after the remand and requiring Nacif to file a second amended complaint against this defendant.

White-Sorensen contends the court properly vacated the entry of default because Nacif voluntarily reopened the default by filing her second amended complaint.  The argument is unavailing because Nacif’s filing of the second amended complaint was not a voluntary act on the part of Nacif.

Nacif strongly opposed respondents’ motion for judgment on the pleadings on her first amended complaint, and specifically asserted that a court order requiring her to file a second amended complaint would be inconsistent with the Nacif I court’s decision affirming the entry of default against White-Sorensen.  For reasons that are not entirely clear, the trial court rejected these arguments and granted the motion, providing Nacif with 10 days to file a second amended complaint against White-Sorensen and the other moving parties.  Had Nacif failed to file a new pleading against White-Sorensen in response to the court’s directive, the court would have dismissed her action and she would have lost her rights in the default.  Under these circumstances, Nacif’s filing of the second amended complaint was in response to an erroneous ruling by the trial court and does not constitute an intention to reopen the default.

White-Sorensen argues the court’s ruling was proper because the other moving parties (Accredited and MERS) were indispensable parties.  However, even if the court was required to grant the motion of these parties, it was not required to grant the motion on the pleadings as to White-Sorensen.  Because White-Sorensen’s default had already been affirmed on appeal, the court was required to adhere to that ruling.

White-Sorensen alternatively contends Nacif reopened the default by adding new allegations in the second amended complaint.  (See Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1744.)  The argument is not factually supported.

In the second amended complaint, only the first, second, and third causes of action name White-Sorensen as a defendant.  They are titled exactly the same as the causes of action in the first amended complaint, and contain identical factual allegations.  Moreover, at the outset of the second amended complaint, Nacif included a paragraph expressly stating that she was not intending “to allege any new or different cause of action against [White-Sorensen]” and intends to preserve the entry of default against White-Sorensen, and that she was filing the second amended complaint pursuant to the court’s ruling that she must do so.

White-Sorensen argues Nacif nonetheless reopened the default because she added two paragraphs in the “General Allegations” section of the complaint.  However, these paragraphs merely add brief background information regarding Nacif’s original loan to White-Sorensen and are not material to Nacif’s substantive claims against White-Sorensen.  White-Sorensen also contends Nacif reopened the default because she named other parties in the second amended complaint.  However, there is no authority that allegations against other parties reopens an entry of default, particularly where, as here, the court ordered the plaintiff to amend the complaint to add these parties.  Further, contrary to White-Sorensen’s assertions, the fact that Nacif mentioned White-Sorensen in the causes of action against other parties does not support a different result.  Because the joinder of these parties derive from White-Sorensen’s actions, it was reasonable for Nacif to identify White-Sorensen when alleging the claims against the other parties and does not suggest she was intending to reopen the lawsuit against him.

2.  White-Sorensen’s Affirmative Claims Against Nacif

Nacif also contends the court erred in granting summary judgment on White-Sorensen’s affirmative claims against her, including breach of contract, two types of fraud, declaratory relief, and equitable subrogation/subordination.  Each of these claims was based on White-Sorensen’s allegations that Nacif committed fraud and breached the 2004 Settlement Agreement by failing to withdraw the lis pendens and by filing the amended complaint seeking to rescind the settlement agreement.

We agree that the court erred in granting summary judgment to White-Sorensen on these claims.  White-Sorensen was barred from recovering on these affirmative claims by the prior entry of default.  Under the compulsory counterclaim rule, a defendant must assert all claims that arise “out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.”  (Code Civ. Proc., §§ 426.10, subd. (c), 426.30, subd. (a); see Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959-960; Carroll v. Import Motors, Inc. (1995) 33 Cal.App.4th 1429, 1435-1436.)  “[I]f a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.”  (Code Civ. Proc., § 426.30, subd. (a).)

In this case, White-Sorensen’s affirmative pleadings against Nacif arose from the same circumstances as those alleged by Nacif in her first amended compliant.  White-Sorensen failed to answer those allegations, and the court entered his default.  Although the trial court previously vacated the default, we reversed, holding there was no legal or factual basis for the court’s order setting aside the default.  (Nacif I, supra, D048938.)  We explained that once a court has entered a default, the defaulting party is precluded from reasserting claims or defenses that could have been raised in that action:  “Severe consequences attach to the entry of a default.  ‘A default cuts off the defendant from making any further opposition or objection to the relief which plaintiff’s complaint shows he is entitled to demand.’ . . .  Unless the default is set aside in a proper proceeding, the party may not thereafter file pleadings, move for a new trial, or demand notice of subsequent proceedings.”  (Ibid.)

Thus, once the trial court entered default on Nacif’s complaint against White-Sorensen, and this court reversed the vacation of that default, White-Sorensen was precluded from asserting affirmative claims that related to Nacif’s causes of action.  By failing to prosecute the causes of action on a cross-complaint in response to Nacif’s first amended complaint, White-Sorensen forfeited his right to assert related claims and cannot revive them merely because Accredited was given the opportunity to litigate its claims against Nacif.

To avoid this result, White-Sorensen argues that Nacif voluntarily reopened the default when she filed her second amended complaint.  However, as explained above, this argument is not supported by the record.

C.  Summary Judgment on Affirmative Claims Asserted by First American and MERS

MERS and First American asserted affirmative claims against Nacif in the cross-complaint and the first amended intervention complaint.  These claims included breach of contract, fraud, and equitable relief.  The court awarded these parties summary judgment based on their own claims and on their assertions they were entitled to recover for Accredited’s losses.  We preliminarily discuss the issue of these parties’ right to recover for Accredited’s losses because this issue is foundational with respect to their right to recover on their affirmative pleadings.  We then discuss the summary judgment with respect to each cause of action asserted by these parties.  In engaging in this analysis, we agree with respondents that they are not necessarily bound by White-Sorensen’s default with respect to their rights to recover for their own alleged losses.

1.  MERS’s and First American’s Rights to Recover for Accredited’s Losses

Generally, a civil action must be prosecuted by the real party in interest, “except as otherwise provided by statute.”  (Code Civ. Proc., § 367.)  A party claiming to have standing must assert his or her own legal rights and interests, and cannot rest any claim to recover upon the legal rights or interests of a third party.  (Property Owners of Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672.)  Generally, the person possessing the right sued upon by reason of substantive law is the real party in interest.  (See Del Mar Beach Club Owners Assn. v. Imperial Contracting Co. (1981) 123 Cal.App.3d 898, 906.)

Based on their motion to amend the pleadings after Accredited filed for bankruptcy, the court permitted MERS and First American to substitute as real parties in interest for Accredited in their affirmative pleadings.  The court alsoAccredited’s claimed losses. found these parties were entitled to recover for Accredited’s losses as a matter of law.  We conclude the court erred in this latter ruling.  As explained below, these parties did not meet their summary judgment burden to show they were real parties in interest as a matter of law with respect to

MERS

In moving to substitute for Accredited and recover for Accredited’s losses, MERS relied solely on evidence that it was identified on the White-Sorensen deeds of trust as Accredited’s “nominee” and a “beneficiary.”  The deeds of trust state that MERS is a beneficiary “solely as nominee for Lender and Lender’s successors and assigns . . . .”

MERS is a private corporation providing a national electronic registration service that ” ‘tracks the transfer of ownership interests and servicing rights in mortgage loans.’ ”  (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151 (Gomes); see Ferguson v. Avelo Mortgage, LLC (2011) 195 Cal.App.4th 1618, 1625; Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System (2010) 78 U. Cin. L.Rev. 1359 (hereafter Peterson).)  MERS’s purpose is to streamline the mortgage process by serving as the nominee and as mortgagee of record for its members, thereby eliminating the need to record mortgage transfers.  (Gomes, supra, 192 Cal.App.4th at p. 1151.)  MERS thus remains nominal mortgagee of record even if the loan is transferred numerous times to different creditors.  (Ibid.)  In providing this service, MERS generally has no financial interest in the mortgage loan; its revenue comes not from repayment of the loan, but from fees the lenders pay to MERS.  (Ibid.; Peterson, supra, 78 U. Cin. L.Rev. at p. 1371.)

Under California law, MERS’s status as a “nominee” on a deed of trust means that it has the right to initiate foreclosure proceedings as the lender’s agent.  (See Gomes, supra, 192 Cal.App.4th at pp. 1157-1158; see also Ferguson, supra, 195 Cal.App.4th at pp. 1625-1627.)  Although California courts have not yet determined the precise scope of MERS’s rights to act beyond this limited role (see Gomes, supra, at p. 1157, fn. 9), most federal courts have held that MERS’s identification as a beneficiary on a deed of trust does not confer full “beneficiary” (lender) status with respect to all matters relating to the note and the mortgage lending process.  (Ibid.; see Weingartner v. Chase Home Finance, LLC (D.Nev. 2010) 702 F.Supp.2d 1276, 1280.)

But regardless of the extent of MERS’s rights as a named nominal beneficiary under California law, MERS’s status as a beneficiary on the deeds of trust in this case did not support a finding it was entitled to recover for Accredited’s claimed losses.  As we conclude in the companion Jacoby appeal, at the time of the summary judgment motion, the deed of trust had been extinguished by the third party sale.  (Jacoby, supra, D054010; see Code Civ. Proc., § 701.630.)  Thus, the only remaining legal instrument was White-Sorensen’s promissory note owed to Accredited (or its successors in interest).  There was no showing MERS had any financial interest in Accredited’s loan or that it received an assignment of the loan or claim.  Without more, MERS’s mere identification as a nominee or beneficiary on a deed of trust that had been extinguished did not confer real party in interest status on MERS with respect to the lender’s affirmative breach of contract and tort claims against a third party.  There is no factual or legal basis in the summary judgment record for the court to have permitted MERS to recover for injuries suffered by Accredited based on Accredited’s contract and fraud claims against Nacif.

First American

First American brought the claims against Nacif solely in its role as the trustee on the two deeds of trust executed by White-Sorensen.  This status did not give First American standing to recover on a breach of contract claim on behalf of Accredited (the creditor/trustor).  Although a trustee of a trust is the real party in interest in litigation involving trust property (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1102), a trustee on a deed of trust “is not a “trustee in the strict sense of the word” (Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 747).  It owes no fiduciary obligations, and is not a general agent of the trustor (debtor) or the beneficiary (creditor).  (Id. at pp. 747-748.)  Instead, the trustee has the authority to act “only so far as may be necessary to the execution of the trust.”  (Id. at p. 748.)  The trustee’s ” ‘only duties are:  (1) upon default to undertake the steps necessary to foreclose the deed of trust; or (2) upon satisfaction of the secured debt to reconvey the deed of trust.’ ”  (Heritage Oaks Partners v. First American Title Ins. Co. (2007) 155 Cal.App.4th 339, 345.)

In taking judicial notice of the relevant superior court files, we are aware that in moving to amend the pleadings, First American submitted its counsel’s declaration (with attached letters) asserting that, in addition to its role as trustee, First American served as the title insurer on White-Sorensen’s refinancing loan and that, as the title insurer, First American was subrogated to certain successor lenders’ rights.  However, the trial court’s decision to permit an amendment of the pleadings based on these claims did not relieve the parties of presenting admissible evidence in the context of moving for summary judgment that it was a proper party to recover on Accredited’s behalf.  Because a summary judgment deprives a party of a fundamental trial right, a summary judgment may be granted only if the moving party presents supporting facts showing it is entitled to a judgment in its favor as a matter of law.  (Code Civ. Proc., § 437c, subd. (c).)  Absent admissible, competent evidence in the summary judgment proceedings showing First American had a valid assignment or was subrogated to Accredited’s rights and that the scope of any such subrogation/assignment entitled First American to recover for Accredited’s losses, the court had no basis to grant summary judgment to First American based on claims that Nacif damaged Accredited’s rights.

Respondents’ Additional Real Party in Interest Arguments Are Without Merit

First American and MERS contend a trustee, nominee, and beneficiary on a deed of trust are indispensible parties in an action involving a foreclosure of the particular deed of trust.  (See Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 668.)  We agree with this principle, but it is inapplicable to establish real party in interest status in this case.  The judicial foreclosure had already taken place, and the Accredited deeds of trust extinguished.  (See Jacoby, supra, D054010.)  The fact that a trustee on Accredited’s deeds of trust may be an indispensible party in an action involving the foreclosure of that deed of trust does not establish First American or MERS were real parties in interest on contract and fraud claims asserted by the lender/creditor against a third party.

We also reject respondents’ arguments that Nacif waived her right to assert the standing issue because she did not “object to MERS and First American being substituted into Accredited’s place.”  The record makes clear that Nacif’s counsel objected to the substitution, and repeatedly argued that neither First American nor MERS were proper parties in the action.  Moreover, a party moving for summary judgment must establish all of the facts necessary to support a judgment in its favor even if the opposing party makes no objections to the moving party’s evidence and produces no evidence of its own.  (Rincon v. Burbank Unified School Dist., supra, 178 Cal.App.3d at pp. 954, 956.)  Because MERS and First American had no direct relationship with Nacif, it was incumbent on them to submit facts showing they had a right to recover for the lender’s claimed losses.

We now turn to examine the summary judgment with respect to each cause of action asserted by MERS and First American against Nacif.

2.  Breach of Contract Claim Asserted by First American and MERS

In their contract claims, First American and MERS alleged Nacif breached the 2004 Settlement Agreement by:  (1) refusing to withdraw the lis pendens after receiving the settlement funds; (2) refusing to acknowledge that the payment of $115,000 constituted payment of the settlement; and (3) filing the amended complaint after she had agreed to dismiss the claims with prejudice.[4] They alleged that as “a proximate cause of Nacif’s breach of the [Settlement] Agreement,” they were “damaged in an amount of at least the value of their [$675,000] loans which had previously been secured by [the] real property . . . .”  (Italics added.)

In moving for summary judgment on this claim, MERS and First American presented evidence showing the 2004 Settlement Agreement required Nacif to withdraw her lis pendens, she did not do this or return the settlement funds, and this conduct caused Accredited to lose its security interest in the property after Jacoby purchased the property at the foreclosure sale.  They further presented the declaration of a mortgage broker involved in the refinance who stated that the White-Sorensen property was appraised at approximately $690,000 when White-Sorensen’s loan was refinanced in July 2004.

This evidence did not meet respondents’ summary judgment burden to prove their contract claims as a matter of law.

First, neither party (nor Accredited) was a party to the contract (the 2004 Settlement Agreement) they claimed was breached.  Thus, to recover on a breach of contract claim, MERS and First American were required to establish they were third party beneficiaries of the contract.  (See Civ. Code, § 1559.)

To prove third party beneficiary status, the party must show the contracting parties intended to benefit the third party; it is not enough the third party would incidentally benefit from the party’s performance.  (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1022; Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891; Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348.)  ” ‘The fact that . . . the contract, if carried out to its terms, would inure to the third party’s benefit[,] is insufficient to entitle him or her to demand enforcement.’ ”  (Neverkovec, supra, 74 Cal.App.4th at p. 349.)  “On the other hand, ‘the third person need not be named or identified individually to be an express beneficiary.’  [Citations.]  ‘A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.’  [Citations.]”  (Spinks, supra, 171 Cal.App.4th at p. 1023.)  “Whether a third party is an intended beneficiary . . . to the contract involves construction of the parties’ intent, gleaned from reading the contract as a whole in light of the circumstances under which it was entered.”  (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1725.)

“Generally, it is a question of fact whether a particular third person is an intended beneficiary of a contract.”  (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225, 1233.)  The burden of proof is on the nonsignatory party to establish third party beneficiary status.  (See Neverkovec v. Fredericks, supra, 74 Cal.App.4th at p. 349.)

In moving for summary judgment, MERS and First American relied on the terms of the 2004 Settlement Agreement as well as communications between Nacif’s counsel and a mortgage broker (Neal Melton) to establish they were third party beneficiaries of the contract.  This evidence was insufficient to meet their summary judgment burden.

First, the 2004 Settlement Agreement does not identify the refinancing lender (Accredited), and instead pertains exclusively to the settlement between Nacif and White-Sorensen.  The only portion of the agreement that relates to the refinancing loan is a sentence that states that Nacif’s counsel shall deliver a release of the lis pendens to the escrow officer “[i]f the release is required as a condition to funding a refinance . . . .”  (Italics added.)  However, the evidence showed that Accredited did not require the release as a precondition to funding the refinance and the escrow company did not require the release before paying the funds to Nacif.

With respect to the communications between Nacif’s counsel and mortgage broker Melton, respondents submitted Melton’s declaration who said he was Accredited’s agent during the refinancing process.  Melton said that because Accredited was “concerned about the lis pendens,” Melton requested written confirmation from Nacif’s counsel that the lis pendens would be removed.  According to Melton, Nacif’s attorney provided a copy of the 2004 Settlement Agreement to Melton, and “confirmed both orally, and in writing, that the lis pendens would be removed upon payment of the $115,000″ to Nacif.  Melton said Accredited relied on these assurances in agreeing to refinance the loan and Accredited would not have refinanced the property without these assurances.

To meet its summary judgment burden, a moving party must present evidence that “would require a reasonable trier of fact” to find in its favor.  (Aguilar, supra, 25 Cal.4th at p. 851.)  Under the terms of the 2004 Settlement Agreement, a reasonable trier of fact could conclude the purpose of the agreement was to resolve the parties’ dispute and that the lis pendens withdrawal requirement was intended to benefit White-Sorensen (to remove the cloud on his title) and to assist him to obtain funds, and not to directly benefit his refinancing lender.  The facts that the refinance loan was mentioned in the settlement agreement and that Nacif knew the lender would receive a benefit from Nacif’s promise to remove the lis pendens do not require a finding that Accredited was a third party beneficiary.  Viewing the 2004 Settlement Agreement in light of the totality of the circumstances, a trier of fact could find Accredited was not an intended beneficiary.  (See Sheppard v. Banner Food Products (1947) 78 Cal.App.2d 808, 812 [lender not a third party beneficiary of contract between buyer and seller even though lender relied on parties’ express assurances that sale would be completed].)[5]

Moreover, even assuming the evidence established the lender (Accredited) was an intended third party beneficiary, this does not confer third party beneficiary status on MERS or First American.  These parties presented no evidence to show that Nacif had any intent to benefit these parties, who were suing in their role as trustee of Accredited’s deeds of trust and as nominee and beneficiary on the deeds of trust.  Although a party may establish third party beneficiary status if the party was a member of a class of entities ” ‘for whose benefit [the contract] was made’ ” (Spinks, supra, 171 Cal.App.4th at p. 1023), the parties presented no evidence that Nacif intended to benefit a class of trustees or a nominee/beneficiary on a deed of trust.  In fact, at the time Nacif and White-Sorensen entered into the 2004 Settlement Agreement, the deeds of trust were not yet in existence.

We additionally conclude MERS and First American failed to meet their summary judgment burden on their contract claim because their submitted evidence would not require a trier of fact to find Nacif’s alleged breach of the 2004 Settlement Agreement caused them to suffer damages and the amount of those damages.  To recover on a breach of contract claim, each plaintiff moving for summary judgment must show “damages to plaintiff as a result of the breach.”  (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239, italics added; Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1088.)  ” ‘Contractual damages are “the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.”  [Citations.]’ ”  (Emerald Bay Community Assn., supra, 130 Cal.App.4th at p. 1088.)

MERS and First American alleged they suffered damages in the form of the impairment/loss of the security for the two loans to White-Sorensen, totaling $675,000, plus interest and attorney fees.  In support, they proffered the two deeds of trust securing the two loans (totaling $675,000) from Accredited to White-Sorensen.  They also relied on their counsel’s declaration, who summarily stated:  “Accredited, MERS and First American have accrued damages of $675,000 . . . by [Nacif’s] refus[al] to release the lis pendens and reactivating this action . . . .”  Respondents additionally presented mortgage broker Melton’s declaration, in which he stated that Accredited refinanced the White-Sorensen property by paying off two deeds of trust totaling $481,765.20 and then loaning White-Sorensen $675,000 secured by the two deeds of trust.  Melton further stated that “[a]n appraisal obtained in conjunction with the refinance of the property [in 2004] valued the property at approximately $690,000.”

This evidence does not establish these parties suffered damages resulting from Nacif’s breach of contract.  First, although they seek to be compensated for the loss of the security for the two loans totaling $675,000, there is no evidence that either owned the rights to the proceeds of the loan.  Essentially, the court awarded each of these parties $675,000 without any evidence they lost this amount or, more importantly, that they would have received this amount if Nacif had fulfilled the claimed contractual obligations.

Additionally, even if these parties could assert Accredited’s alleged loss as a basis for their claim, the record does not show Accredited was entitled to recover $675,000 as a matter of law.  Melton’s assertion that the property was appraised at $690,000 at the time of the refinancing (August 2004) does not necessarily mean it had this same value at the time of the foreclosure sale 18 months later (February 2006).  There was no competent evidence before the court showing the value of the property was at least $675,000 at the time it was sold, and thus that Nacif’s actions were a substantial factor in causing this amount of lost security.

Additionally, there was evidence showing Accredited had notice of a pending foreclosure sale and failed to take appropriate actions to prevent the sale and/or to timely assert its rights in the security.  Thus, a factual question exists as to the amount of damages caused by Nacif’s alleged breach of contract (as opposed to losses caused by Accredited’s conduct).  Although a moving party plaintiff does not have the burden to disprove the defendants’ affirmative defenses to prevail on a summary judgment motion (see Santa Ana Unified School Dist. v. Orange County Development AgencyCDF Firefighters v. Maldonado, supra, 158 Cal.App.4th at p. 1239; Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097.) (2001) 90 Cal.App.4th 404, 411), Accredited’s conduct contributing to its losses is relevant to the causation element, and not merely to affirmative defenses such as mitigation of damages.  Because the amount of damages caused by Nacif’s conduct raises factual questions, it was not appropriate to grant summary judgment.  (See

3. Fraud Claims Asserted by First American and MERS

We similarly conclude the court erred in granting summary judgment on the fraud claims brought by First American and MERS.

MERS and First American asserted two fraud claims against Nacif.  First, they alleged Nacif falsely represented she would withdraw the lis pendens and dismiss her claims against White-Sorensen upon receipt of the settlement funds.  Second, they alleged promissory fraud, i.e., that Nacif made a promise to withdraw the lis pendens and dismiss the action without an intent to perform these promises.  With respect to both, they alleged the false promises induced White-Sorensen to pay her $115,000 and caused MERS to be nominated as the beneficiary under the deeds of trust.  They alleged that this fraud resulted in Nacif obtaining a fraudulent equitable mortgage and judgment of subordination and that she was unjustly enriched from the proceeds of the sheriff’s sale.

In moving for summary judgment on these claims, MERS and First American relied primarily on the evidence showing that during the escrow process, mortgage broker Melton spoke with Nacif’s attorney, and Nacif’s attorney confirmed that the lis pendens would be withdrawn upon payment of the $115,000 to Nacif.  Based on these assurances, Accredited funded the $115,000 settlement payment and paid it to Nacif’s attorney directly from escrow.  Melton said Accredited relied on Nacif’s attorney’s assurances and would not have refinanced the property without Nacif’s statements that the lis pendens would be released upon payment of the $115,000.

To prove a fraud cause of action, the plaintiff must show the defendant made a false representation or a nondisclosure of material fact to the plaintiff; the plaintiff had no knowledge of the falsity; the defendant had the intent to defraud; and the plaintiff justifiably relied on the representation (or nondisclosure).  (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)  Additionally, the plaintiff must show the “plaintiff has been damaged as a result of the defendant’s misrepresentation or concealment of fact.”  (Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1542.)  Without damages an alleged fraud is not actionable.  (Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1415.)

MERS and First American did not satisfy their summary judgment burden to establish that there were no triable issues of fact on these elements and that they were entitled to judgment as a matter of law.  First, there was no showing that Nacif made any misrepresentations to them.  At most, Nacif’s counsel made a false statement to Accredited’s agent (Melton).  The evidence did not show Melton was acting on behalf of the trustee or nominee/beneficiary on the deeds of trust.  Moreover, there was no evidence that Nacif owed any duty to these parties to disclose material information. Further, there was no showing the parties suffered a loss from the alleged fraud.  Neither First American nor MERS presented any evidence that they suffered damages. Additionally, even if these parties could recover for misrepresentations made to Accredited’s agent, the evidence did not compel a finding that Accredited justifiably relied on Nacif’s representations to its detriment.  The evidence showed that the lis pendens remained recorded at all times and the parties knew about (or were on inquiry notice of) the ongoing superior court action and the fact that the court-ordered sheriff’s sale had been scheduled.  The evidence also showed that Accredited did not require the lis pendens withdrawal as a condition of the refinancing, and that White-Sorensen represented on the loan application that he earned $34,000 per month.

On this record, a factfinder could reasonably infer that the promise to withdraw the lis pendens was not the primary (or even a relevant) factor in Accredited’s decision to lend money to White-Sorensen.  A jury could find that it was just as likely that Accredited agreed to loan White-Sorensen the funds because White-Sorensen’s income provided an adequate source of funds for loan repayment and/or Accredited understood it could immediately bundle the secured notes with other notes and sell the loan to other entities, regardless of the value of the security.  Further, a jury could reasonably find that Accredited knew about the pending judicial foreclosure and could have taken steps to prevent the sale, and thus Nacif’s representation about her intention to remove the lis pendens was not the sole or primary cause of Accredited’s loss.

Additionally, as with the breach of contract claim, the evidence on the summary judgment motion did not show as a matter of law that $675,000 was the amount of damages suffered by Accredited and/or MERS and First American.  Thus, they did not establish their right to recover on the fraud claim as a matter of law.  (See Department of Industrial Relations v. UI Video Stores, Inc., supra, 55 Cal.App.4th at p. 1097.)

4. Equitable Claims Brought by First American and MERS

Nacif also challenges the court’s summary judgment in favor of First American and MERS on their equitable subrogation and declaratory relief claims.  We agree the court erred in these rulings.

To the extent the equitable relief was based on the court’s findings on the breach of contract and fraud claims, we have concluded the court erred in granting summary judgment on these claims.  Further, to the extent the equitable relief pertains to priority of the deeds of trust and/or equitable mortgage, there was no basis to award this relief because these parties’ rights to assert priority issues based on the Accredited deeds of trust had been extinguished after the sale of the property to a third party.  (See Jacoby, supra, D054010.)  On the summary judgment record before us (and viewing the facts in the light most favorable to Nacif), Accredited had notice of the foreclosure sale, but took no timely action to prevent the sale or to offer a bid at the sale to preserve its rights.  Because Accredited no longer had an interest in the property at the time of the summary judgment motion, First American and MERS could not assert priority issues based on Accredited’s former deeds of trust.

D.  Nacif’s Second Amended Complaint Against First American and MERS

Nacif’s only cause of action against First American and MERS in her second amended complaint is a claim for declaratory relief, essentially seeking a declaration that the court should find in her favor on respondents’ claims against her.  For example, she sought a declaration that “none of the Defendants has standing to make the claims each has asserted because none of them any longer owns an interest in or otherwise has a legal claim related to the Deeds of Trust.”

On appeal, Nacif does not directly challenge the court’s grant of summary judgment in favor of these parties on these claims.  We thus affirm the court’s judgment with respect to these parties.  Because the same issues are raised in the intervention complaint and the cross-complaint, there is no need for these claims to be litigated in this pleading.

II.  Anti-SLAPP Motion

Nacif contends the court erred in granting respondents’ motion under Code of Civil Procedure section 425.16 (section 425.16) to strike Nacif’s second amended complaint against White-Sorensen, MERS, and First American.[6]

Section 425.16 authorizes a defendant to file a special motion to strike any cause of action arising from an act in furtherance of the defendant’s constitutional rights of free speech or petition for redress of grievances.  (Flatley v. Mauro (2006) 39 Cal.4th 299, 311-312.)  This anti-SLAPP statute seeks to encourage participation in matters of public significance and prevent chilling the exercise of constitutional rights through “abuse of the judicial process.”  (§ 425.16, subd. (a); Flatley v. Mauro, supra, at pp. 312-313.)  Courts must broadly construe the statute.  (§ 425.16, subd. (a).)

The analysis of an anti-SLAPP motion involves two steps.  “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one ‘arising from’ protected activity.  (§ 425.16, subd. (b)(1).)  If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.”  (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76.)  “Only a cause of action that satisfies both prongs of the anti-SLAPP statute — i.e., that arises from protected speech or petitioning and lacks even minimal merit — is a SLAPP, subject to being stricken under the statute.”  (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.)  We review de novo an order granting a motion to strike.  (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)

Under these principles, we conclude the court erred in granting respondents’ anti-SLAPP motion.

First, with respect to Nacif’s claims against White-Sorensen, the record showed Nacif had a probability of prevailing on those claims.  In fact, this court had already determined that Nacif had prevailed because of White-Sorensen’s default.  This ruling was law of the case.  (Nally, supra, 47 Cal.3d at p. 301.)  Thus, even if Nacif’s claims against White-Sorensen were subject to the anti-SLAPP statute, the court erred in granting the motion because Nacif met her burden to show a probability of prevailing on her claims.

Second, with respect to Nacif’s claim against MERS and First American (a single declaratory relief claim), this claim is not subject to the anti-SLAPP statute.  Nacif brought the declaratory relief claim against MERS and First American solely in response to arguments brought by these parties that they were indispensible parties.  In adding these parties in the second amended complaint, Nacif did not allege any wrongful conduct on the part of MERS or First American.  Instead, she merely sought declaratory relief that her actions in foreclosing on the equitable mortgage (that had been previously approved by the trial court) were proper and that neither MERS nor First American had a legal basis to challenge these actions.  This cause of action essentially mirrored the claims brought against her by First American and MERS.  On this record, Nacif’s claim did not arise from protected petitioning or free speech activity by MERS or First American.

III.  Judicial Notice

Nacif requested that this court take judicial notice of:  (1) the record, court docket, and Court of Appeal opinion in the Nacif I case; (2) the record on appeal, court docket, and court file in the Jacoby case; and (3) the petition, record, court docket, court file and disposition in Nacif’s earlier writ petition to this court in this case.  We grant the request with respect to our prior Nacif I opinion.  We deny the remainder of the request because the documents are either already contained in the existing appellate record or are not relevant to the specific appellate issues raised in this case.[7]

On our own motion, we have also taken judicial notice of documents contained in the superior court files in this case.  (Evid. Code, §§ 459, subd. (a), 452, subd. (d); see Litmon v. Superior Court (2004) 123 Cal.App.4th 1156, 1162, fn. 3; Becker v. McMillin Construction Co. (1991) 226 Cal.App.3d 1493, 1496, fn. 3.)  We have relied on those records only to the extent they are relevant to the appellate issues and discussed in this opinion.

IV.  Summary of Conclusions

Based on the law of the case doctrine and the compulsory counterclaim rules, the court erred in granting White-Sorensen’s summary judgment motion on Nacif’s second amended complaint and on White-Sorensen’s affirmative pleadings against Nacif.  The court further erred in granting White-Sorensen’s anti-SLAPP motion.  We thus reverse these rulings and instruct the court to find in favor of Nacif and against White-Sorensen on these motions.  The court is further ordered to reenter White-Sorensen’s entry of default as it was directed to do in Nacif I (see Nacif I, supra, D048938), and to enter a default judgment against White-Sorensen.

With respect to the affirmative claims brought by MERS and First American against Nacif, the court erred in granting summary judgment.  In reaching this conclusion, we have not intended to opine on whether these parties will ultimately prevail on their claims at trial.  Our conclusions are based solely on the summary judgment record before us.  Because a summary judgment in favor of a plaintiff is a particularly drastic procedure that eliminates a defendant’s right to defend itself at a trial, a moving party plaintiff must establish each element of the cause of action and show there are no triable factual issues with respect to each element.  (See Aguilar, supra, 25 Cal.4th at p. 851.)  Although MERS and First American produced some evidence supporting their claims, they did not meet their burden to show that each element has been established and thus that there was no defense to the claims.

With respect to Nacif’s second amended complaint against MERS and First American, Nacif did not challenge the summary judgment on this pleading.  We thus conclude the court properly granted summary judgment on this pleading.

DISPOSITION

The court is ordered to vacate the judgment entered on September 17, 2009 and enter new orders as follows:

(1)  The court shall vacate the summary judgment in favor of White-Sorensen on Nacif’s second amended complaint, and enter a new order denying White-Sorensen’s summary judgment motion with respect to this pleading.  The court shall also vacate its order granting the motion for judgment on the pleadings with respect to White-Sorensen, and enter a new order denying the motion for judgment on the pleadings with respect to White-Sorensen.  Thus, on remand Nacif’s first amended complaint is the operative pleading against White-Sorensen.  The court shall withdraw its order vacating the entry of default with respect to this pleading, and shall enter a new order reinstating the entry of default as to White-Sorensen on Nacif’s first amended complaint and enter judgment in Nacif’s favor.

(2)  The court shall enter a new order denying the summary judgment motion by White-Sorensen, MERS, First American on their cross-complaint filed on March 27, 2009.

(3)  The court shall enter a new order denying the summary judgment motion by White-Sorensen and MERS on their first amended intervention complaint filed on May 24, 2006.

(4)  The court shall enter an order granting the summary judgment motion filed by First American and MERS on Nacif’s second amended complaint.  The court shall dismiss Nacif’s claims against these parties, and dismiss Nacif’s second amended complaint.

(5)  The court shall vacate its order granting respondents’ anti-SLAPP motion and enter a new order denying this motion.

(6)  The court shall reinstate its order dismissing Accredited from the case.

(7)  The court shall vacate its attorney fees award in favor of respondents.

(8)  On remand, any further rulings in this case shall be consistent with the holdings in this opinion and in Nacif I.

Respondents are ordered to pay appellant’s costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

McINTYRE, J.

AARON, J.



[1] The third party purchaser, Scott Jacoby, was brought into this action by Accredited and related parties.  The court had earlier granted Jacoby summary judgment.  In a companion appellate opinion filed today, we uphold this summary judgment.  (Mortgage Electronic Registration Systems, Inc. v. Jacoby (August 8, 2011, D054010) (Jacoby.) We discuss facts relevant to Jacoby in this opinion only to the extent they are relevant to the issues raised in this appeal.


[2] Nacif also named the mortgage broker and several other entities, but the court later granted a motion to strike these parties from the complaint and Nacif does not challenge this ruling on appeal.

[3] Because we have concluded respondents did not meet their summary judgment and anti-SLAPP burdens with respect to their affirmative pleadings, we focus primarily on their evidence and do not detail Nacif’s opposition.

[4] First American and MERS also alleged Nacif was liable because she “proceed[ed] with a sheriff’s sale of the property without proper notice to Accredited, MERS or First American.”  However, because these parties did not move for summary judgment based on this allegation, we omit it from our discussion of the propriety of the summary judgment on the contract claims.

[5] At oral argument, respondents’ counsel complained that Nacif had not specifically raised the third party beneficiary issue in the proceedings below.  However, it was respondents’ burden to show each element of their contract cause of action to prevail on summary judgment, and this burden obviously includes a third party beneficiary showing where, as here, there is no evidence MERS or First American had a contractual relationship with Nacif.  In any event, we have concluded the court erred in granting summary judgment in favor of these parties on numerous grounds, and our discussion of the third party beneficiary issue is also intended to assist the parties and court on remand.

[6] We reject respondents’ argument that Nacif’s appeal from the anti-SLAPP order was untimely.  Additionally, we are required to address the anti-SLAPP ruling regardless of our conclusions on the summary judgment motions because the court awarded respondents attorney fees for prevailing on the anti-SLAPP motion.  (See § 425.16, subd. (c)(1).)

[7] Although the court initially issued an order signed by the presiding justice denying the motion in its entirety, we later notified the parties that the merits panel would reconsider the order after a full review of the record and arguments.  (See Delmonico v. Laidlaw Waste Systems, Inc. (1992) 5 Cal.App.4th 81, 83, fn. 1 [a ruling on a motion by a single appellate justice may be reconsidered by merits panel].)   We deny respondents’ motion to strike Nacif’s reply brief based on our earlier ruling.

[ipaper docId=62142239 access_key=key-4s29d4rcb3txnssgr3b height=600 width=600 /]

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUDComments (3)

FBI informs family they bought stolen house after paying mortgage for a year

FBI informs family they bought stolen house after paying mortgage for a year


MURRIETA, Calif. (KABC) — A family is being told the house they thought they bought in Murrieta actually belongs to someone else. The family says they can’t stop making their mortgage payments.

“Even though you’ve made your payments in full every month, you could get a knock at the door saying get out,” said would-be homeowner Charlie Zahari. “If you look at it, we’re renters in a house we can’t move out of.”

That was hardly the feeling last summer where there was all the euphoria of buying their first home.

They custom painted the girls’ bedrooms and sodded the backyard.

[KABC-TV/DT]

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in STOP FORECLOSURE FRAUDComments (1)

CLASS ACTION AMENDED against MERSCORP to include Shareholders, DJSP

CLASS ACTION AMENDED against MERSCORP to include Shareholders, DJSP


Kenneth Eric Trent, P.A. of Broward County has amended the Class Action complaint Figueroa v. MERSCORP, Inc. et al filed on July 26, 2010 in the Southern District of Florida.

Included in the amended complaint is MERS shareholders HSBC, JPMorgan Chase & Co., Wells Fargo & Company, AIG, Fannie Mae, Freddie Mac, WAMU, Countrywide, GMAC, Guaranty Bank, Merrill Lynch, Mortgage Bankers Association (MBA), Norwest, Bank of America, Everhome, American Land Title, First American Title, Corinthian Mtg, MGIC Investor Svc, Nationwide Advantage, Stewart Title,  CRE Finance Council f/k/a Commercial Mortgage Securities Association, Suntrust Mortgage,  CCO Mortgage Corporation, PMI Mortgage Insurance Company, Wells Fargo and also DJS Processing which is owned by David J. Stern.

MERSCORP shareholders…HERE

[ipaper docId=36456183 access_key=key-26csq0mmgo6l8zsnw0is height=600 width=600 /]

Related article:

______________________

CLASS ACTION FILED| Figueroa v. Law Offices Of David J. Stern, P.A. and MERSCORP, Inc.

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in bank of america, chain in title, citimortgage, class action, concealment, CONTROL FRAUD, corruption, countrywide, djsp enterprises, fannie mae, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, forgery, Freddie Mac, HSBC, investigation, jpmorgan chase, Law Offices Of David J. Stern P.A., lawsuit, mail fraud, mbs, Merrill Lynch, MERS, MERSCORP, mortgage, Mortgage Bankers Association, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., Mortgage Foreclosure Fraud, non disclosure, notary fraud, note, racketeering, Real Estate, RICO, rmbs, securitization, stock, title company, trade secrets, trustee, Trusts, truth in lending act, wamu, washington mutual, wells fargoComments (13)

Bank of America Sues First American on ‘Lien Protection’ Claims

Bank of America Sues First American on ‘Lien Protection’ Claims


Is this the first of many to come?
Bank of America Sues First American on ‘Lien Protection’ Claims

March 18, 2010, 10:46 AM EDT

By David Mildenberg

March 18 (Bloomberg) — Bank of America Corp. stepped up efforts to curtail the cost of soured mortgages by suing First American Corp., claiming the title insurer refused to cover more than 5,500 loans that caused $535 million of losses.

First American, the second-biggest title insurer, was supposed to protect the bank against defective titles on home- equity loans and lines of credit, according to the suit, filed March 5 in a North Carolina court. The suit focuses on loans in which Bank of America relied on a borrower’s word regarding any outstanding liens or mortgages, the suit said.

Home lenders are sparring with mortgage insurers, bond investors and Fannie Mae and Freddie Mac over who should bear the cost of record defaults. Bank of America, the biggest U.S. lender by assets, said last week it’s writing off $1.5 billion to $2 billion of unpaid home-equity loans each quarter, and has sued MGIC Investment Corp., the biggest mortgage insurer, for allegedly denying millions of dollars of claims.

The policies described in the First American case sound like “liar’s title insurance,” similar to the “liar loans” common among subprime lenders in the middle of the last decade, said Jack M. Guttentag, chairman of GHR Systems, a consulting firm in Wayne, Pennsylvania. Liar loans are industry slang for mortgages made to borrowers who inflated their income on applications that weren’t verified by lenders.

Lenders such as Charlotte, North Carolina-based Bank of America bought “lien protection” plans as a faster, cheaper approach for home-equity loans than full title insurance policies as housing sales soared in the mid-2000s. Full title insurance typically involves an independent check by the insurer on whether the title might face competing claims for ownership or financial obligations.

2,000 Letters

The American Land Title Association, a trade group representing title insurers, opposed some of the lien-protection plans because they offered less legal protection than traditional title insurance.

First American denied or ignored most of Bank of America’s claims in 2008 and 2009, according to the lawsuit. Last August, Santa Ana, California-based First American started sending more than 2,000 letters to the bank seeking information and documents related to the claims, the suit said.

First American subsidiaries “regret that their valuable customer, Bank of America, has chosen to file a legal action against the companies,” spokeswoman Carrie Gaska said in an e-mailed statement. “We are hopeful that we will be able to resolve this matter outside of court with continued discussions.”

The suit was filed in Mecklenburg County Superior Court in Charlotte. Bank of America spokeswoman Shirley Norton had no comment.

MGIC has said it will defend itself against Bank of America’s lawsuit, which was filed by the lender’s Countrywide unit. Bank of America ranked second last year in home mortgage lending behind Wells Fargo & Co.

–With assistance from John Gittelsohn in New York. Editors: William Ahearn, Rick Green

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Alec McCabe in New York at amccabe@bloomberg.net

Posted in bank of america, forensic mortgage investigation audit, title companyComments (0)


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