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EMC Mtge. Corp. v Carlo | NYSC Vacates Foreclosure Sale, Plaintiff has not demonstrated ownership of the mortgage and note prior to commence foreclosure action

EMC Mtge. Corp. v Carlo | NYSC Vacates Foreclosure Sale, Plaintiff has not demonstrated ownership of the mortgage and note prior to commence foreclosure action


SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF RICHMOND

EMC MORTGAGE CORPORATION,
Plaintiff

against

FRED J. CARLO,
BOARD OF DIRECTORS OF
DEBMOR ESTATES HOMEOWNERS ASSOCIATION, INC.,
BOARD OF MANAGERS OF DEBMOR ESTATES CONDOMINIUM III,
NEW YORK CITY ENVIRONMENTAL CONTROL BOARD,
NEW YORK CITY TRANSIT ADJUDICATION BUREAU,
PEOPLE OF THE STATE OF NEW YORK, and
MRS. CARLO

Excerpt:
Conclusion

It is the finding of this court that the New York Supreme Court has jurisdiction to
adjudicate mortgage foreclosure matters. That is not the issue. Here, the plaintiff failed to have
ownership of the mortgage and note at the time it filed and served its summons and complaint
with the Richmond County Clerk. Therefore, the plaintiff lacked standing to commence this
action at the time.

Here, the default judgment of foreclosure and sale was taken while the defendant was
unrepresented by counsel. Consequently, he had no legal understanding of making an earlier
technical motion to challenge the standing of the plaintiff. Since the notice of the sale is
defective, the sale must set aside. Moreover due to the failure of the plaintiff to have ownership
of the note and mortgage at the time it commenced this action, it lacked the capacity and standing
to bring this action and to file a notice of pendency. Therefore, this action must be dismissed,
without prejudice.

[ipaper docId=76195227 access_key=key-1w65ml9txi5dz1f9a5ih height=600 width=600 /]

 

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



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Oregon Judge Panner issues TRO Against BONY, ReconTrust Because the Presence of MERS Demonstrates Non-Compliance w/ OTDA

Oregon Judge Panner issues TRO Against BONY, ReconTrust Because the Presence of MERS Demonstrates Non-Compliance w/ OTDA


IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

BILL R. LEEP and
JACQUELINE WATTS LEEP, Plaintiffs.

v.

THE BANK OF NEW YORK MELLON
and RECONTRUST COMPANY, N.A., Defendants.

EXCERPT:

Because of the alleged imminent foreclosure sale, and because the presence of MERS demonstrates a high probability that defendants did not comply with the recording requirements of the Oregon Trust Deed Act, I grant plaintiff’s request for a temporary restraing order (#3).

[ipaper docId=65592470 access_key=key-14q2h941a6sfvvfi6z1 height=600 width=600 /]

 

 

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



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Fannie and MERS

Fannie and MERS


If only someone with IT skills and I mean real IT skills was able to audit MERS, then you will be able to “follow the money”.

Abigail Field-

Fannie Mae has a lot of responsibility for our current foreclosure and mortgage crisis, although it has not been reported on much. That’s changing.

Last weekend, the Detroit Free Press reported that Fannie’s pushing foreclosures in violation of its own rules.  In the Free Press article Fannie Mae, unsurprisingly, denies the charges. When I contacted Fannie Mae spokeswoman Amy Bonitatibus, she wouldn’t discuss the Free Press article on the record. However she was willing to confirm Fannie Mae’s well known role in launching MERS. And perhaps Fannie Mae’s most far-reaching foreclosure and mortgage mess impacts stem from MERS.

Fannie Mae and MERS

Fannie Mae was instrumental in the creation and legitimation of MERS …

[REALITY CHECK]

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



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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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BANK OF NEW YORK vs. KC BAILEY SJC-10801 | MASS. SJC Vacates Summary JDGMT “Housing Court has jurisdiction to consider the validity of the plaintiff’s title as a defense to a summary process action after a foreclosure sale”

BANK OF NEW YORK vs. KC BAILEY SJC-10801 | MASS. SJC Vacates Summary JDGMT “Housing Court has jurisdiction to consider the validity of the plaintiff’s title as a defense to a summary process action after a foreclosure sale”


NOTICE: The slip opinions and orders posted on this Web site are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. This preliminary material will be removed from the Web site once the advance sheets of the Official Reports are published. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

BANK OF NEW YORK, trustee, [FN1]

vs.

KC BAILEY.

SJC-10801.

April 4, 2011. – August 4, 2011.

Summary Process. Housing Court, Jurisdiction. Jurisdiction, Housing Court, Summary process. Real Property, Record title. Mortgage, Foreclosure. Practice, Civil, Summary process, Summary judgment.

SUMMARY PROCESS. Complaint filed in the Boston Division of the Housing Court Department on January 13, 2009.

The case was heard by Mary Lou Muirhead, J., on a motion for summary judgment.

The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

Jennifer Tarr (H. Esme Caramello with her) for the defendant.

Peter Guaetta (Victor Manougian with him) for the plaintiff.

Pamela S. Kogut, for Chelsea Collaborative & others, amici curiae, submitted a brief.

Ilana Gelfman, Richard M.W. Bauer, Nadine Cohen, & Ann Jochnick, for City Life/Vida Urbana, amicus curiae, submitted a brief.

Present: Ireland, C.J., Spina, Cordy, Botsford, Gants, & Duffly, JJ.

DUFFLY, J.

The question we address in this case is whether the Housing Court has jurisdiction to decide the validity of a challenge to a title, raised by a former homeowner as a defense to a summary process eviction action by a party acquiring the property pursuant to a foreclosure sale. The plaintiff, Bank of New York (BNY), asserts that it acquired title to the home of the defendant, KC Bailey, pursuant to foreclosure proceedings. [FN2] Seeking to evict Bailey, BNY filed an action for summary process pursuant to G.L. c. 239, § 1. Bailey’s answer to the complaint alleged, among other claims and defenses, that BNY was not the owner because the sale was not in compliance with the foreclosure statute, due to defective notice, and the deed was thus void. See U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011). In its motion for summary judgment, BNY argued that the Housing Court lacked jurisdiction to address the claim raised by Bailey’s defense, and that it had made out a prima facie claim for superior possession by virtue of the deed, a copy of which was attached to the complaint. The motion judge agreed; she allowed BNY’s motion, and entered summary judgment in favor of BNY. Bailey appealed from that judgment and we transferred the case to this court on our own motion. Because we conclude that the Housing Court has jurisdiction to consider the validity of the plaintiff’s title as a defense to a summary process action after a foreclosure sale pursuant to G.L. c. 239, § 1, we vacate the allowance of summary judgment and remand for further proceedings.

1. Background and prior proceedings. In 2005, Bailey obtained a mortgage on a home on West Selden Street in the Mattapan section of Boston, a home he had owned and in which he had lived since 1979. The mortgage was obtained from an entity identified as “Mortgage Electronic Registration Systems, Inc. (‘MERS’), solely as nominee for the Lender (America’s Wholesale Lender)” (MERS as “nominee” [FN3]). The record reflects that on March 6, 2007, proceedings for foreclosure by sale were instituted by MERS as “nominee,” and that MERS as “nominee” was the highest bidder at the foreclosure sale. [FN4] Bailey asserts that on March 26, 2007, he discovered that a notice to evict had been affixed by duct tape to the fence surrounding his West Selden Street property.

[FN5] He thereafter filed an action against MERS as “nominee” in the Superior Court seeking to set aside the foreclosure sale. That complaint eventually was dismissed without prejudice for failure to effect timely service. No further description of the Superior Court proceedings is necessary to an understanding of the issues before us, or the context in which they arose.


Returning to the circumstances that led to this Housing Court action, Bailey asserts that he received no notice of, and was unaware of, the sale by foreclosure that took place on March 6, 2007. [FN6] On December 30, 2008, BNY served Bailey with a notice of its intention to terminate his occupancy. When Bailey failed to vacate the property, BNY instituted the underlying action in the Housing Court and, on January 9, 2009, served Bailey with a summary process (eviction) summons. Bailey answered the summary process complaint, alleging in part that his home was “foreclosed without legally sufficient notice under [G.L. c. 244, § 17B.]” [FN7] Bailey asserted in his answer that he had received all personal, business, and legal correspondence for over thirty years at his United States post office box, the same post office box to which all previous correspondence regarding his mortgage had been sent; but he had received at that post office box no notice of an impending foreclosure.


[FN8] Thereafter, BNY filed its motion for summary judgment, claiming that MERS as “nominee” had assigned to BNY the note and the mortgage; that on Bailey’s default BNY had, on March 6, 2007, foreclosed; that BNY was the highest bidder at the foreclosure sale; and that BNY had served Bailey with a notice to quit and a summary process complaint and summons. [FN9] In a memorandum opposing the motion, Bailey contended that BNY’s “ownership” of Bailey’s home “remains in dispute, because notice of the foreclosure sale … was legally insufficient.” Concluding that Bailey’s challenge to the validity of the foreclosure was not within the Housing Court’s jurisdiction, the judge allowed BNY’s motion. The judge reasoned that “[t]he only issue before the [c]ourt is whether the [p]laintiff is entitled to possession,” and because BNY showed that “its deed was recorded prior to the service of the [n]otice to [q]uit,” BNY had established a prima face case for possession.

2. Discussion. We review a decision to grant summary judgment de novo. See Ritter v. Massachusetts Cas. Ins. Co., 439 Mass. 214, 215 (2003). “The standard of review of a grant of summary judgment is whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.” Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991).

a. Subject matter jurisdiction. [FN10] That the Housing Court has jurisdiction over summary process actions pursuant to G.L. c. 239 is not in dispute. The Housing Court may hear summary process actions brought by those who acquire ownership of property via foreclosure by sale. See G.L. c. 185C, § 3. See also Bech v. Cuevas, 404 Mass. 249 (1989); Duggan v. Gonsalves, 65 Mass.App.Ct. 250, 254 n. 6 (2005) (Housing Court has appropriate jurisdiction over summary process action pursuant to G.L. c. 185C, § 3); Metropolitan Credit Union v. Matthes, 46 Mass.App.Ct. 326, 330 (1999); Commentary to Rule 1 of the Uniform Summary Process Rules, Mass. Ann. Laws Court Rules 705 (LexisNexis 2010-2011) (“Four Departments of the Massachusetts Trial Court have jurisdiction over summary process actions [Superior Court, District Court, Boston Municipal Court and Housing Court]”).

The question, as stated above, is whether, in the course of a summary process action brought in the Housing Court by a party acquiring the property pursuant to a foreclosure by sale, the judge may consider the former homeowner’s defense that the plaintiff’s title is invalid because the foreclosure was not conducted strictly according to the statute. See U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011). The answer to this question is informed by the historical context of the action for summary process.

Although the Housing Court has only been in existence since 1972, see G.L. c. 185A, inserted by St.1971, c. 843, §§ 1, 27, summary process is a long-standing cause of action. The current summary process statute, G.L. c. 239, § 1, derives from the “summary remedy” statute that has its roots in the beginning of the Eighteenth Century in the Province Laws 1700-1701. See Page v. Dwight, 170 Mass. 29, 31-37 (1897) (discussing evolution of “summary remedy,” St. 1825, c. 89, that provided remedies to “persons having the right of possession of houses and tenements”).

The summary remedy statute was in force when the General Statutes were revised in 1835 and was retained through later revisions, to provide a cause of action to those not in a traditional landlord-tenant relationship. See Page v. Dwight, supra at 34 (statute revised in part so that “in all such cases the like proceedings might be had as if the relation of landlord and tenant had theretofore existed between them. St. 1835, c. 114″). The summary remedy statute, codified in Rev. St. (1836) c. 104, “gave the process only to a ‘person entitled to the premises,’ which required him to prove that he was entitled to this possession, and which said that the defendant should have judgment if the plaintiff failed to prove his right to possession.” Id. at 37. In 1879, legislation was enacted specifically directed at those attempting to gain possession who had acquired property pursuant to foreclosure of the mortgage by sale. See id., citing St. 1879, c. 237.

Challenging a plaintiff’s entitlement to possession has long been considered a valid defense to a summary process action for eviction where the property was purchased at a foreclosure sale. See New England Mut. Life Ins. Co. v. Wing, 191 Mass. 192, 195 (1906) (in summary process action “by the purchaser at a mortgagee’s sale, the legal title may be put in issue, and it therefore became incumbent upon the plaintiff to establish its right of possession to the land demanded”). See also Sheehan Constr. Co. v. Dudley, 299 Mass. 51, 53 (1937) (in summary process action available to purchaser at foreclosure sale “it is incumbent upon such purchaser to establish his right of possession. The legal title in those circumstances plainly may be put in issue”). We have upheld that principle as recently as 1966, when we said, “The purpose of summary process is to enable the holder of the legal title to gain possession of premises wrongfully withheld. Right to possession must be shown and legal title may be put in issue…. Legal title is established in summary process by proof that the title was acquired strictly according to the power of sale provided in the mortgage; and that alone is subject to challenge.” Wayne Inv. Corp. v. Abbott, 350 Mass. 775, 775 (1966), citing Sheehan Constr. Co. v. Dudley, supra, and New England Mut. Life Ins. Co. v. Wing, supra.

The Housing Court was established in order to provide “a specialized forum to handle criminal and civil matters regarding housing that arise in the city of Boston.” LeBlanc v. Sherwin Williams Co., 406 Mass. 888, 891-892 (1990). In 1979, the Legislature enacted St.1979, c. 72, § 3, which further defined and expanded the Housing Court’s jurisdiction. See Tedford v. Massachusetts Hous. Fin. Agency, 390 Mass. 688, 693 n. 7 (1984); Boston v. Kouns, 22 Mass.App.Ct. 506, 510-511 (1986). The Housing Court’s jurisdiction over summary process actions is concurrent with that of the District Court and Superior Court. There is nothing in this jurisdictional scheme that supports a conclusion that the Legislature intended to give the Housing Court concurrent jurisdiction over summary process actions, yet preclude its consideration of the long-recognized validity of title defense to summary process.

Our conclusion that the Housing Court may consider the defense promotes the legislative goal of “just, speedy, and inexpensive” resolution of summary process cases. See Rule 1 of the Rules of Summary Process, supra. The pursuit of “speedy and inexpensive” summary process actions is compromised if the Housing Court must stay summary process proceedings while litigation on the validity of the foreclosure proceedings continues in another court. This creates precisely the type of unnecessary delay and inefficiency that the Legislature intended to eliminate when it reorganized the trial courts in the Commonwealth. See G.L. c. 211B; Konstantopoulos v. Whately, 384 Mass. 123, 129-130 (1981).

b. Proof of possession. Having determined that the Housing Court has jurisdiction to decide Bailey’s defense to the summary process action, we now address BNY’s contention that it nevertheless established possession and that the grant of summary judgment in its favor was appropriate.

To prevail on its motion for summary judgment, BNY “had the burden of showing that there are no material facts in dispute regarding its legal title to the property.” Metropolitan Credit Union v. Matthes, 46 Mass.App.Ct. 326, 330 (1999), citing Mass. R. Civ. P. 56(c), 365 Mass. 824 (1974), and Sheehan Constr. Co. v. Dudley, supra at 53-54. BNY contends, without citation to relevant authority, that to meet its burden it had only to prove that the foreclosure deed was recorded prior to service on Bailey of the notice to quit.
[FN11]

[FN11]

In a summary process action for possession after foreclosure by sale, the plaintiff is required to make a prima facie showing that it obtained a deed to the property at issue and that the deed and affidavit of sale, showing compliance with statutory foreclosure requirements, were recorded. See Lewis v. Jackson, 165 Mass. 481, 486-487 (1896); G.L. c. 244, § 15.
[FN12] BNY failed to submit an affidavit of sale “show[ing] that the requirements of the power of sale and of the statute have in all respects been complied with.” Id. [FN13]

Because BNY failed to make out a prima facie showing of possession, and the issues are disputed, the motion for summary judgment should not have been granted.

Conclusion. The decision granting summary judgment for the plaintiff is vacated. The case is remanded to the Housing Court for further proceedings consistent with this opinion.

So ordered.

FN1. For the certificateholders CWABS, Inc., Asset-Based Certificates Series 2005-13.

FN2. We acknowledge the amicus brief of City Life/Vida Urbana, and the amicus brief of the Chelsea Collaborative, Lynn United for Change, and the Merrimack Valley Project, both in support of the defendant.

FN3. Mortgage Electronic Registration Systems acts as nominee and as mortgagee of record for its members and appoints itself nominee, as mortgagee, for its members’ successors and assigns. See Mortgage Elec. Registration Sys. v. Saunders, 2 A.3d 289, 294 (Me.2010), quoting MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 100 (2006) (Kaye, C.J., dissenting in part). In this case, we are not faced with the issue whether MERS may properly be both the mortgagee and an agent of the mortgagee, and we do not decide in which capacity MERS acted here.

FN4. A copy of the notice placed in the newspaper is in the record, but the date is illegible. MERS as “nominee” noticed the foreclosure in the newspaper. In its appellate brief, the Bank of New York (BNY) included a copy of an affidavit from MERS as “nominee,” which states that MERS as “nominee” provided notice of the foreclosure to Bailey via certified mail. The affidavit was not included in the summary judgment record that was before the motion judge, and we do not consider it in our analysis on appeal. See Tetrault v. Mahoney, Hawkes & Goldings, 425 Mass. 456, 458-459 (1997); note 13, infra.

FN5. The notice was not included in the record.

FN6. BNY had previously filed a summary process action against Bailey in the Housing Court. On May 10, 2007, however, that action was dismissed without prejudice by agreement of the parties. That action, and the notice preceding it, is dated several months before the June 29, 2007, date of an “assignment of bid for value” purporting to transfer to BNY, as trustee for the certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2005-13, all of the interests of MERS as “nominee” in the West Selden Street property.

FN7. BNY makes much of the fact that Bailey, in his original answer and on appeal, cited G.L. c. 244, § 17B, in support of his claim that notice of the foreclosure was deficient. This statute governs the manner in which notice must be provided in an action for deficiency. It is apparent from his pleadings and arguments that Bailey’s intended reference was to G.L. c. 244, § 14, which sets forth the requirements of notice in connection with a foreclosure by sale. That statute provides, in relevant part:

“The mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person, may, upon breach of condition and without action, do all the acts authorized or required by the power; but no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale, notice thereof has been published once in each of three successive weeks, the first publication to be not less than twenty-one days before the day of sale, in a newspaper, if any, published in the town where the land lies or in a newspaper with general circulation in the town where the land lies and notice thereof has been sent by registered mail to the owner or owners of record of the equity of redemption as of thirty days prior to the date of sale, said notice to be mailed at least fourteen days prior to the date of sale to said owner or owners to the address set forth in [G.L. c. 185, § 61], if the land is then registered or, in the case of unregistered land, to the last address of the owner or owners of the equity of redemption appearing on the records of the holder of the mortgage …” (emphasis added).

Because we look to the substance, rather than the form, of Bailey’s asserted defense, his incorrect citation is not fatal to his claim. See Quinn v. Walsh, 49 Mass.App.Ct. 696, 704 (2000) (label attached to pleadings should not govern their substance). Bailey argued repeatedly that the foreclosing agent failed to provide him proper notice before conducting the foreclosure sale and thus provided sufficient notice to the plaintiff of the defense being asserted. See Clark v. Greenhalge, 411 Mass. 410, 413 n. 6 (1991).

FN8. Bailey’s answer also set forth various counterclaims which were dismissed and are not a subject of this appeal.

FN9. As earlier stated, the record reflects that MERS as “nominee,” not BNY, was the holder of the mortgage on March 6, 2007, and that the foreclosure was conducted by MERS as “nominee,” which was the highest bidder at the foreclosure sale.

FN10. During oral argument, BNY contended that the case might be moot because BNY had foreclosed the mortgage by entry pursuant to G.L. c. 244, § 2, and Bailey therefore could no longer contest BNY’s title based on defective notice of the foreclosure sale. See Grabiel v. Michelson, 297 Mass. 227, 228-229 (1937) (any defect in foreclosure by sale irrelevant after proper foreclosure by entry completed).

In order to foreclose on a mortgage by entry, BNY must have been the mortgagee at the time of entry. See U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 n. 15 (2011); G.L. c. 244, §§ 1-2. Nothing in the record indicates when or by what means the entry was made, and whether at the time of entry BNY was the mortgagee of the West Selden Street property. It may well be that BNY can establish that it has acquired an assignment of the mortgage despite defects in the foreclosure by sale. On the record before us, we are unable to make this determination.

FN11. In support of its motion for summary judgment, BNY submitted only the foreclosure deed and the eviction notice.

FN12. General Laws c. 244, § 15, provides: “The person selling, or the attorney duly authorized by a writing or the legal guardian or conservator of such person, shall, after the sale, cause a copy of the notice and his affidavit, fully and particularly stating his acts, or the acts of his principal or ward, to be recorded in the registry of deeds for the county or district where the land lies, with a note or reference thereto on the margin of the record of the mortgage deed, if it is recorded in the same registry. If
the affidavit shows that the requirements of the power of sale and of the statute have in all respects been complied with, the affidavit or a certified copy of the record thereof, shall be admitted as evidence that the power of sale was duly executed.”

FN13. We do not consider the affidavit submitted by BNY on appeal, which it conceded was not part of the record before the judge. See Tetrault v. Mahoney, Hawkes & Goldings, 425 Mass. 456, 458-459 (1997).

END OF DOCUMENT

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NOVASTAR v. SAFFRAN | MA Appeals Court Reverses APP. Division Decision and District Court Judgment “Present Holder, MERS, Ibanez Principles”

NOVASTAR v. SAFFRAN | MA Appeals Court Reverses APP. Division Decision and District Court Judgment “Present Holder, MERS, Ibanez Principles”


H/T ForeclosureHamlet

COMMONWEALTH OF MASSACHUSETTS APPEALS COURT

NOVASTAR MORTGAGE, INC.

vs.

ELLIOT SAFFRAN

10-P-1107

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

After foreclosing on the mortgage of Elliot Saffran, and purchasing the Saffran property located at 26 Debbie Lane in Milford (property) at the foreclosure sale, the plaintiff, Novastar Mortgage, Inc. (Novastar) brought this summary process action for possession and monetary damages. [FN1] After a jury-waived trial in the District Court, judgment entered in favor of Novastar. Upon Saffran’s appeal to the Appellate Division, the judgment of summary process was affirmed. For the reasons discussed, we reverse the decision of the Appellate Division and order entry of a new decision reversing the judgment of the District Court and remanding the case to that court for further proceedings in light of U.S. Bank Natl. Assn. v. Ibanez, 458 Mass. 637 (2011), a case decided while Saffran’s appeal was pending in this court.

Saffran challenges Novastar’s title to the property, claiming that the foreclosure sale was invalid because, as alleged by Saffran, Novastar was not the holder of the mortgage at the critical stages of the foreclosure process. [FN2] The original mortgage identified Novastar as the ‘Lender’ but a separate corporation, Mortgage Electronic Registration Systems, Inc. (MERS), as mortgagee ‘solely as a nominee for Lender and Lender’s successors and assigns.’ Saffran claims that by failing to produce a valid assignment of the mortgage from MERS to Novastar at the summary process trial, Novastar failed to establish, as required by statute, that it was the ‘present holder’ of the mortgage at the time of the notice of sale and the subsequent foreclosure sale. See id. at 648, citing G. L. c. 183, § 21, and G. L. c. 244, § 14 (‘[O]nly a present holder of the mortgage is authorized to foreclose on the mortgaged property’).

The trial judge did not address this issue directly. As the Appellate Division observed, the judge implicity rejected the argument because he awarded Novastar possession. Apparently, the trial judge took the position that because Novastar produced a foreclosure deed which stated that Novastar was the present holder of the mortgage from Saffran to MERS by virtue of a conveyance, the burden was on Saffran to show that Novastar was not the mortgage holder at the time of the notice of sale and the foreclosure sale of the property. [FN3]

In summary process proceedings, it is a foreclosing entity’s burden to establish that ‘title was acquired strictly according to the power of sale provided in the mortgage . . . .’ Wayne Inv. Corp. v. Abbott, 350 Mass. 775, 775 (1966). In Ibanez, 458 Mass. at 647, the Supreme Judicial Court stated that ‘[o]ne of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose.’ Thus, as the court explained, a plaintiff that is ‘not the original mortgagee[] to whom the power of sale was granted [but] rather, claim[s] the authority to foreclose as [an] assignee’ must demonstrate that it was the assignee of the mortgage both ‘at the time of the notice of sale and the subsequent foreclosure sale.’ Id. at 648. ‘A plaintiff that cannot make this modest showing cannot justly proclaim that it was unfairly denied [relief].’ Id. at 651.

We interpret the holding in Ibanez as placing the burden to present proof of an actual assignment on the entity, here Novastar, which is claiming the right to foreclose as an assignee. Therefore, the trial judge erred by requiring Saffran to demonstrate that Novastar was not the mortgage holder at the critical stages of the foreclosure process. Accordingly, we reverse the decision of the Appellate Division and a new decision is to enter reversing the judgment of the District Court and remanding the case to that court for a new determination in light of the principles discussed in Ibanez.

So ordered.

By the Court (Kantrowitz, Mills & Vuono, JJ.),

Entered: June 10, 2011.

FN1. In June, 2006, Saffran borrowed $420,000 from Novastar and secured the loan with a mortgage on the property.
FN2. Saffran also claims that the foreclosure deed is fraudulent. However, when pressed by the trial judge, Saffran acknowledged that he had no evidence to support his claim. Accordingly, we agree with the judge’s conclusion that Saffran failed to meet his burden of demonstrating fraud on the court by clear and convincing evidence. See Rockdale Mgmt. Co. v. Shawmut Bank, N.A., 418 Mass. 596, 598-600 (1994).
FN3. The foreclosure deed had been recorded at the Worcester County registry of deeds twenty-two days after the foreclosure sale. Novastar also produced (1) the statutory foreclosure affidavit pursuant to G. L. c. 244, § 14, in which Novastar’s attorney averred that the power of sale was duly executed, see G. L. c. 244, § 15, and (2) a copy of the notice of sale, which stated that Novastar was the present holder of the subject mortgage ‘by assignment’ from MERS. Novastar did not, however, produce a copy of an assignment of the mortgage from MERS. Interestingly, Saffran has included what purports to be such an assignment in his appendix. However, because the document was not presented to the trial judge, we do not consider it.
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CA Appeal Court Reverses Judgment “CRC VP Deborah Brignac Affidavit Fail” | Herrera v. Deutsche Bank Nat. Trust

CA Appeal Court Reverses Judgment “CRC VP Deborah Brignac Affidavit Fail” | Herrera v. Deutsche Bank Nat. Trust


UPDATE: Filed 5/31/11; partial pub. cert. & mod. 6/28/11 (see end of opn.)

The opinion in the above-entitled matter filed on May 31, 2011, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be partially published in the Official Reports and it is so ordered.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(El Dorado)
—-

ROBERT HERRERA et al.,
Plaintiffs and Appellants,
v.
DEUTSCHE1 BANK NATIONAL TRUST COMPANY
et al.,
Defendants and Respondents.

EXCERPT:

Defendants also relied on Brignac’s declaration, which declared that the 2003 deed of trust permitted the beneficiary to appoint successor trustees. Brignac, however, did not simply declare the identity of the beneficiary and the new trustee under the 2003 deed of trust. Instead, she declared that an Assignment of Deed of Trust and a Substitution of Trustee were recorded on February 27, 2009. These facts add nothing to the judicially noticed documents; they establish only that the documents were recorded.

Brignac further declared that “[t]he Assignment of Deed of Trust indicates that JPMorgan Bank [sic], successor in interest to Washington Mutual Bank, successor in interest to Long Beach Mortgage Company, transfers all beneficial interest in connection with the [deed of trust] to Deutsche Bank National Trust Company as Trustee for Long Beach Mortgage Loan Trust 2003-4.” (Italics added.) This declaration is insufficient to show the Bank is the beneficiary under the 2003 deed of trust. A supporting declaration must be made on personal knowledge and “show affirmatively that the affiant is competent to testify to the matters stated.” (Code Civ. Proc., § 437c, subd. (d).) Brignac’s declaration does not affirmatively show that she can competently testify the Bank is the beneficiary under the 2003 deed of trust. At most, her declaration shows she can testify as to what the Assignment of Deed of Trust “indicates.” But the factual contents of the assignment are hearsay and defendants offered no exception to the hearsay rule prior to oral argument to make these factual matters admissible.

At oral argument, defendants contended that the recorded documents were actually business records and admissible under the business record exception. We note that Brignac did not provide any information in her declaration establishing that the sources of the information and the manner and time of preparation were such as to indicate trustworthiness.

….

[ipaper docId=56885717 access_key=key-1rfy00ej1uibn7jeincn height=600 width=600 /]

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LADOUCER v. BAC HOME LOANS SERVICING, LP, Dist. Court, SD Texas, Corpus Christi Div. 2010 "DO NOT BELIEVE A WORD THEY SAY"

LADOUCER v. BAC HOME LOANS SERVICING, LP, Dist. Court, SD Texas, Corpus Christi Div. 2010 "DO NOT BELIEVE A WORD THEY SAY"


Always follow your “INSTINCTS”

WILLIAM C LADOUCER, et al, Plaintiffs,
v.
BAC HOME LOANS SERVICING, LP, et al, Defendants.

Civil Action No. C-10-78.

United States District Court, S.D. Texas, Corpus Christi Division.

 April 23, 2010.

 

ORDER

 

JANIS GRAHAM JACK, District Judge.

On this day came on to be considered the Court’s sua sponte review of its subject matter jurisdiction in the above-styled action. For the reasons discussed below, the Court REMANDS this action pursuant to 28 U.S.C. § 1447(c) to the 79th Judicial District of Jim Wells, Texas, where it was originally filed and assigned Cause No. 10-02-48732-CV.

 

I. Factual and Procedural Background

In their Original Petition, Plaintiffs William C. Ladoucer and Julie A. Ladoucer allege as follows:

Plaintiffs were the owners of a home located at 271 House Avenue in Sandia, Jim Wells County, Texas and that the Defendants BAC Home Loan Servicing, LP (“BAC”) and Countrywide Home Loans, Inc. (“Countrywide”) were the respective servicer and holder of the mortgage on that property. (D.E. 1, Exh. 1 p. 2.) On December 29, 2008, Plaintiffs signed a resale contract to sell their property with a closing date set for February 27, 2009. (Id. at pp. 2-3.) Plaintiffs faxed the contract of sale to Defendant Countrywide. (Id. at p. 2.) Plaintiff Julie A. LaDoucer spoke to a representative at Countrywide’s Homeowner Retention Department to confirm receipt of the contract and was led to believe “that a foreclosure sale that the defendants had scheduled for January of 2009 was cancelled.” (Id. at pp. 2-3.) However, instead of cancelling the foreclosure, “Defendants foreclosed on the property on January 6, 2009.” (Id.) After the foreclosure, Plaintiffs claim that the potential buyers backed out of the sale and Plaintiffs “thereby lost almost $27,680.00 in equity which they would have realized from the sale of the property.” (Id. at p. 3.)

In February 2009, Plaintiffs allege that Defendants took possession of the property and changed the locks. (Id. at p. 3.) In March 2009, Plaintiffs allege that personal property had been taken from the home including a $4,500 shed that had been purchased by the Plaintiffs. (Id. at pp. 3-4.) Plaintiffs’ credit rating was also adversely affected by the foreclosure notation on their credit. (Id. at p. 4.)

Plaintiffs filed this action in state court on February 1, 2010. (D.E. 1, Exh. 1.) Defendants were served with process of February 16, 2010 and timely removed this case to federal court on March 12, 2010 on the grounds that this Court has diversity jurisdiction over this action. (D.E. 1.) Plaintiffs filed an Amended Complaint on April 23, 2010.[1] (D.E. 11.)

II. Discussion

 A. General Removal Principles

 A defendant may remove an action from state court to federal court if the federal court possesses subject matter jurisdiction over the action. 28 U.S.C. § 1441(a); see Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). A court, however, “must presume that a suit lies outside its limited jurisdiction.” Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). The removing party, as the party seeking the federal forum, bears the burden of showing that federal jurisdiction is proper. See Manguno, 276 F.3d at 723. “Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.” Id. When subject matter jurisdiction is improper, a court may raise the issue sua sponte. See Lane v. Halliburton, 529 F.3d 548, 565 (5th Cir. 2008) (“We are duty-bound to examine the basis of subject matter jurisdiction sua sponte.” (citations omitted)); H&D Tire and Auto. Hardware v. Pitney Bowes Inc., 227 F.3d 326, 328 (5th Cir. 2000) (“We have a duty to raise the issue of subject matter jurisdiction sua sponte.”).

 B. Removal Based on Diversity Jurisdiction

When the alleged basis for federal jurisdiction is diversity under 28 U.S.C. § 1332, the removing defendant has the burden of demonstrating that there is: (1) complete diversity of citizenship; and (2) an amount-in-controversy greater than $75,000. See 28 U.S.C. § 1332(a).

 1. Diversity of Parties

 Section 1332(a) requires “complete diversity” of citizenship, and the district court cannot exercise diversity jurisdiction if one of the plaintiffs shares the same state citizenship as any one of the defendants. See Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003). In removal cases, diversity of citizenship must exist both at the time of filing in state court and at the time of removal to federal court. See Coury v. Prot, 85 F.3d 244, 249 (5th Cir. 1996).

 In this case, complete diversity exists because Plaintiffs are residents of Texas and Defendant BAC is a resident of North Carolina while Defendant Countrywide is a New York corporation with its principal place of business in California. (D.E. 1.)

 2. Amount in Controversy

Generally, the amount in controversy for the purposes of establishing federal jurisdiction should be determined by the plaintiff’s complaint. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938); De Aguilar v. Boeing Co., 47 F.3d 1404, 1411-12 (5th Cir. 1995). Where the plaintiff has not made a specific monetary demand, the defendant has the burden to prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional amount. See Manguno, 276 F.3d at 723 (“where . . . the petition does not include a specific monetary demand, [the defendant] must establish by a preponderance of the evidence that the amount in controversy exceeds $75,000″); St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998); Allen v. R&H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995).

1. This Court Lacks Diversity Jurisdiction Over This Case

 Plaintiffs do not demand over $75,000, the minimum amount of damages necessary for federal diversity jurisdiction. (D.E. 1, Exh. 1.) Rather, Plaintiffs’ Original Petition states that the foreclosure of the home itself caused only $27,680 of damages in lost equity. (Id. at 3.) Further, Plaintiffs claim that the total damages for the wrongful foreclosure, fraud, and breach of contract claims, including the above-stated $27,680 damages in lost equity, are “at least $35,000.” (D.E. 1, Exh. 1, pp. 4-5.) Plaintiffs also claim “at least $20,000″ for the exemplary damages claim, and “at least $5000″ for reasonable attorneys’ fees. (D.E. 1, Exh. 1, pp. 4-5.) In total, Plaintiffs claim only $70,000 in damages. This is less than the $75,000 required for diversity jurisdiction. 28 U.S.C. § 1332.

 Defendants, in a conclusory manner, nonetheless assert that “[t]he face of the petition . . . reveals that the amount in controversy exceeds $75,000.” (D.E. 1, p. 3.) Defendants state that under Texas law, exemplary damages “could alone result in the recovery of more than $75,000.” (Id. (emphasis added).) However, Defendants ignore that Plaintiffs’ Petition specifies only $20,000 in exemplary damages, drastically less than Defendants’ assertions. (D.E. 1, Exh. 1, p. 4.) Based on Defendants’ claims alone, this Court cannot assume that exemplary damages will be so high that they would give this Court jurisdiction. This is especially true given that “[a]ny ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand.” Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).

 Defendants have thus failed to establish that this action involves an amount in controversy of more than $75,000, exclusive of costs and interests, as required for this Court to have diversity jurisdiction over this suit pursuant to 28 U.S.C. § 1332. Therefore, Defendants have failed to meet their burden of showing that federal jurisdiction exists and that removal was proper. Frank v. Bear Stearns & Co., 128 F.3d 919, 921 (5th Cir. 1997) (“The party invoking the removal jurisdiction of federal courts bears the burden of establishing federal jurisdiction over the state court suit.”). Accordingly, this Court must remand this action pursuant to 28 U.S.C. § 1447(c). (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”). See Lott v. Dutchmen Mfg., Inc., 422 F.Supp.2d 750, 752 (E.D. Tex. 2006) (citing Manguno, 276 F.3d at 723).

 III. Conclusion

 For the reasons stated above, this Court determines sua sponte that it does not have subject matter jurisdiction over the above-styled action. This case is hereby REMANDED pursuant to 28 U.S.C. § 1447(c) to the 79th Judicial District of Jim Wells, Texas, where it was originally filed and assigned Cause No. 10-02-48732-CV.

 SIGNED and ORDERED.

[1] Plaintiffs filed an Amended Complaint on April 23, 2010, however, for purpose of removal, this Court looks only to the pleadings and allegations at the time of removal. See Adair v. Lease Partners, Inc., 587 F.3d 238, 243 (5th Cir. 2009) (“[T]he power to remove is evaluated at the time of removal.”); Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 265 (5th Cir. 1995) (finding removal jurisdiction is based on complaint at the time of removal and a plaintiff cannot defeat removal by amending the complaint).

Posted in bac home loans, case, conspiracy, countrywide, foreclosure fraud, short saleComments (0)


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