[ipaper docId=70313218 access_key=key-4zh4guv7i4lndu77hex height=600 width=600 /]

IN THE SUPREME COURT OF THE STATE OF NEVADA

ANGELA HEREDIA-BONNET,
Appellant,

vs.

FIRST AMERICAN LOANSTAR
TRUSTEE SERVICES, LLC, A
FOREIGN ENTITY AND MERS, A
FOREIGN ENTITY,
Respondents.

ORDER OF REVERSAL AND REMAND
This is an appeal from a district court order denying a petition
for judicial review in a foreclosure mediation action and a post-judgment
order denying an NRCP 60(b) motion for relief from the initial order.
Second Judicial District Court, Washoe County; Patrick Flanagan, Judge.

Following an unsuccessful mediation conducted under
Nevada’s Foreclosure Mediation Program (the Program), appellant Angela
Heredia-Bonnet (Bonnet) filed a petition for judicial review in district
court. Among other things, Bonnet contended that respondent MERS’
conduct was sanctionable because it failed to produce certain required
documents at the mediation.’ See NRS 107.086(4), (5). The district court
denied Bonnet’s petition and ordered that a foreclosure certificate be
issued. As explained below, we reverse.

Standard of review

“[W]e. . review a district court’s decision regarding the
imposition of sanctions for a party’s participation in the Foreclosure
Mediation Program under an abuse of discretion standard.” Pasillas v.
HSBC Bank USA, 127 Nev. „ 255 P.3d 1281, 1286 (2011).

MERS failed to produce the required documents

To obtain a foreclosure certificate, a deed of trust beneficiary
must strictly comply with four requirements: (1) attend the mediation, (2)
participate in good faith, (3) bring the required documents, and (4) if
attending through a representative, have a person present with authority
to modify the loan or access to such a person. NRS 107.086(4), (5); Leyva
v. National Default Servicing Corp., 127 Nev. „ 255 P.3d 1275,
1279 (2011) (concluding that strict compliance with the Program’s
requirements is necessary).

NRS 107.086(4) states that the deed of trust beneficiary or its
representative “shall bring to the mediation the original or a certified copy
of the deed of trust, the mortgage note and each assignment of the deed of
trust or mortgage note.” Moreover, the Foreclosure Mediation Rules
(FMRs) require the beneficiary or its representative to conduct an
appraisal of the homeowner’s home. FMR 11(3)(b).

Here, the record demonstrates that MERS failed to produce
the deed of trust and any assignments. 2 Moreover, it failed to conduct an
appraisal of Bonnet’s home. Because MERS failed to strictly comply with
the Program’s requirements, the district court abused its discretion in
ordering a foreclosure certificate to be issued. Leyva, 127 Nev. at , 255
P.3d at 1279; Pasillas, 127 Nev. at , 255 P.3d at 1286.

On remand, the district court must determine how MERS
should be appropriately sanctioned. Pasillas, 127 Nev. at , 255 P.3d at
1286-87 (construing NRS 107.086(5) to mean that a violation of one of the
four statutory requirements must be sanctioned and that the district court
is to consider several factors in determining what sanctions are
appropriate). Accordingly, we

ORDER the judgment of the district court REVERSED AND
REMAND this matter to jtttAistrict court for proceedings consistent with
this order. 3

FOOTNOTES:

1The record indicates that a non-party, Chase Home Financing,
LLC, attended the mediation. Because MERS maintains that Chase
attended the mediation on its behalf, Chase’s conduct at the mediation is
properly imputed to MERS for purposes of this appeal.

2We recognize that Bonnet’s original lender may still own her loan,
in which case no assignments would exist. However, MERS’ inability to
verify who currently owns Bonnet’s loan necessarily means that MERS
was unable to confirm that no assignments needed to be produced.

3In light of the above disposition, Bonnet’s motion for summary
remand is denied as moot. Likewise, Bonnet’s appeal from the district
court order denying her motion for NRCP 60(b) relief is dismissed as moot.
See Estate of LoMastro v. American Family Ins., 124 Nev. 1060, 1079
11.55, 195 P.3d 339, 352 n.55 (2008).

[ipaper docId=70125501 access_key=key-64cbgpzkzydt7w2ha74 height=600 width=600 /]

IN THE SUPREME COURT OF THE STATE OF NEVADA

PATRICK MALLOY AND ORLENE
MALLOY,
Appellants,

vs.

WELLS FARGO BANK,
Respondent.

ORDER OF REVERSAL AND REMAND

This is an appeal from a district court order denying a petition
for judicial review in a foreclosure mediation action. Second Judicial
District Court, Washoe County; Patrick Flanagan, Judge.
Following an unsuccessful mediation conducted under
Nevada’s Foreclosure Mediation Program (the Program), appellants
Patrick and Orlene Malloy filed a petition for judicial review in district
court. The Malloys contended that respondent Wells Fargo Bank’s
conduct was sanctionable because it failed to produce certain required
documents at the mediation. See NRS 107.086(4), (5). The district court
denied the Malloys’ petition and ordered that a foreclosure certificate be
issued. As explained below, we reverse.
Standard of review

“[W]e. . review a district court’s decision regarding the
imposition of sanctions for a party’s participation in the Foreclosure
Mediation Program under an abuse of discretion standard.” Pasillas v.
HSBC Bank USA, 127 Nev. „ 255 P.3d 1281, 1286 (2011).
Wells Fargo failed to produce the required documents
To obtain a foreclosure certificate, a deed of trust beneficiary
must strictly comply with four requirements: (1) attend the mediation, (2)

participate in good faith, (3) bring the required documents, and (4) if
attending through a representative, have a person present with authority
to modify the loan or access to such a person. NRS 107.086(4), (5); Leyva
v. National Default Servicing Corp., 127 Nev. „ 255 P.3d 1275,
1279 (2011) (concluding that strict compliance with the Program’s
requirements is necessary).

NRS 107.086(4) states that the deed of trust beneficiary or its
representative “shall bring to the mediation the original or a certified copy
of the deed of trust, the mortgage note and each assignment of the deed of
trust or mortgage note.” Moreover, the Foreclosure Mediation Rules
(FMRs) require the beneficiary or its representative to provide the
homeowner with an appraisal of the homeowner’s home prior to the
mediation. FMR 11(1), (3)(b).

Here, the record on appeal demonstrates that Wells Fargo
failed to produce a certified copy of the mortgage note and that it failed to
provide the Malloys with an appraisal prior to the mediation. Because
Wells Fargo failed to strictly comply with the Program’s requirements, the
district court abused its discretion in ordering a foreclosure certificate to
be issued. Levva, 127 Nev. at , 255 P.3d at 1279; Pasillas, 127 Nev. at
, 255 P.3d at 1286.

On remand, the district court must determine how Wells
Fargo should be appropriately sanctioned. Pasillas, 127 Nev. at , 255
P.3d at 1286-87 (construing NRS 107.086(5) to mean that a violation of
one of the four statutory requirements must be sanctioned and that the
district court is to consider several factors in determining what sanctions
are appropriate). Accordingly, we

ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.

[ipaper docId=70123911 access_key=key-x73lindxwi0mg2wsu2m height=600 width=600 /]

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0804-10T3

AURORA LOAN SERVICES, LLC,
Plaintiff-Respondent,

v.

BERNICE TOLEDO,
Defendant-Appellant,

and

MR. TOLEDO, Husband of
BERNICE TOLEDO, MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., As Nominee
For LEHMAN BROTHERS BANK FSB;
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., As Nominee For
AURORA LOAN SERVICES LLC,
Defendants.
_________________________________________________________

Submitted September 26, 2011 – Decided October 18, 2011

Before Judges Alvarez and Skillman.

On appeal from Superior Court of New Jersey,
Chancery Division, Passaic County, Docket
No. F-10005-09.

Kenneth C. Marano, attorney for appellant.

Victoria E. Edwards (Akerman Senterfitt),
attorney for respondent.

PER CURIAM

Defendant appeals from an order entered on August 31, 2010,
which granted a summary judgment in this mortgage foreclosure
action declaring that defendant’s answer “sets forth no genuine
issue as to any material fact challenged and that [plaintiff] is
entitled to a judgment as a matter of law.” There is no
indication in the record before us that plaintiff ever secured a
final judgment of foreclosure. Therefore, the appeal appears
interlocutory. See Wells Fargo Bank, N.A. v. Garner, 416 N.J.
Super. 520, 523-24 (App. Div. 2010). However, because defendant
did not move to dismiss on that basis and the appeal has been
pending for a substantial period of time, we grant leave to
appeal as within time and address the merits. See R. 2:4-
4(b)(2).

The record before us is rather sparse and disjointed.
However, the following facts may be gleaned from that record.
Defendant owns a home in the Borough of Prospect Park. On
July 24, 2006, defendant executed two promissory notes payable
to Lehman Brothers Bank, the first for $320,000, which was
payable on August 1, 2036, and the second for $60,000, which was
payable on August 1, 2021. Both notes were secured by mortgages
on defendant’s home.

On September 1, 2006, plaintiff began servicing the notes
on behalf of Lehman.

Sometime in 2008, defendant went into default in the
payment of her obligations under the notes.

On January 30, 2009, plaintiff purportedly obtained an
assignment of the $320,000 note from Lehman and the mortgage
securing that note.1 This assignment was signed by a person
named Joann Rein, with the title of Vice-President of Mortgage
Electronic Systems, Inc. (MERS). MERS was described in the
assignment document as a “nominee for Lehman Brothers Bank.”

This document is discussed in greater detail later in the
opinion.

On February 23, 2009, plaintiff filed this mortgage
foreclosure action. The parties subsequently engaged in
negotiations to resolve the matter. Those negotiations were
unsuccessful and are not relevant to our disposition of this
appeal.

Plaintiff filed a motion for summary judgment to strike
defendant’s answer on the ground there was no contested issue of
fact material to plaintiff’s right to foreclose upon defendant’s
property. In support of this motion, plaintiff relied primarily
on an affidavit by Laura McCann, one of its vice-presidents,
and exhibits attached to that affidavit, which are discussed
later in this opinion. Defendant submitted an answering
certification.

After hearing oral argument, the trial court issued a brief
written opinion and order granting plaintiff’s motion. This
appeal followed.

To have standing to foreclose a mortgage, a party generally
must “own or control the underlying debt.” Wells Fargo Bank,
N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011) (quoting
Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch.
Div. 2010)). If the debt is evidenced by a negotiable
instrument, such as the promissory notes executed by defendant,
the determination whether a party owns or controls the
underlying debt “is governed by Article III of the Uniform
Commercial Code (UCC), N.J.S.A. 12:3-101 to -605, in particular
N.J.S.A. 12A:3-301.” Ibid. Under this section of the UCC, the
only parties entitled to enforce a negotiable instrument are
“[1] the holder of the instrument, [2] a nonholder in possession
of the instrument who has the rights of the holder, or [3] a
person not in possession of the instrument who is entitled to
enforce the instrument pursuant to [N.J.S.A.] 12A-3-309 or
subsection d. of [N.J.S.A.] 12A:3-418.” N.J.S.A. 12A:3-301
(brackets added).

In this case, it is clear for the same reasons as in Ford,
418 N.J. Super. at 598, that plaintiff is neither a “holder” of
the promissory notes executed by defendant nor a “person not in
possession” of those notes who is entitled to enforce them
pursuant to N.J.S.A. 12A:3-309 or N.J.S.A. 12A:3-418(d).

Therefore, as in Ford, plaintiff’s right to foreclose upon the
mortgages defendant executed to secure those notes depends upon
whether plaintiff established that it is “a nonholder in
possession of the instrument[s] who has the rights of a holder.”
N.J.S.A. 12A:3-301; see Ford, supra, 418 N.J. Super. at 498-99.

To establish its right to foreclose upon the mortgage
defendant executed to secure her $320,000 note to Lehman,
plaintiff relied upon an affidavit by Laura McCann, a vicepresident
of plaintiff. McCann’s affidavit states that she has
“custody and control of the business records of [plaintiff] as
they relate to [defendant’s] loans.” Regarding each of the
copies of defendant’s notes and mortgages attached to her
certifications, McCann asserts that it is a “true and correct
copy.” However, McCann does not state that she personally
confirmed that those attachments were copies of originals in
plaintiff’s files.

McCann’s affidavit also has attached a copy of a document
that purports to be a “Corporate Assignment of Mortgage” from
MERS, as Lehman’s nominee, to plaintiff. Again, McCann’s
affidavit asserts that this document “is a true and correct copy
of the instrument assigning the Mortgage and Note to
[plaintiff],” but does not state that she personally confirmed
that it was a copy of the original.

A certification in support of a motion for summary judgment
must be based on “personal knowledge.” Ford, supra, 418 N.J.
Super. at 599 (quoting R. 1:6-6); see also Deutsche Bank Nat’l
Trust Co. v. Mitchell, ___ N.J. Super. ___, ___ (App. Div. 2011)
(slip op. at 17-19). Our Supreme Court has recently reaffirmed
the need for strict compliance with this requirement in mortgage
foreclosure actions by adopting, effective December 20, 2010, a
new court rule which specifically states that an affidavit in
support of a judgment in a mortgage foreclosure action must be
“based on a personal review of business records of the plaintiff
or the plaintiff’s mortgage loan servicer.” R. 4:64-2(c)(2).
McCann’s affidavit does not state that she conducted such a
“personal review of [plaintiff’s] business records” relating to
defendant’s notes and mortgages.

Furthermore, even if plaintiff had presented adequate
evidence that the purported assignment of the mortgages and
notes attached to McCann’s affidavit was a copy of the original
in plaintiff’s files, this would not have been sufficient to
establish the effectiveness of the alleged assignment. This
document was signed by a JoAnn Rein, who identifies herself as a
vice-president of MERS, as nominee for Lehman Brothers, and was
notarized in Nebraska. Plaintiff’s submission in support of its
motion for summary judgment did not include a certification by
Rein or any other representative of MERS regarding her authority
to execute the assignment or the circumstances of the
assignment. In the absence of such further evidence, we do not
view the purported assignment of the mortgages and notes to be a
self-authenticating document that can support the summary
judgment in plaintiff’s favor. N.J.R.E. 901; see 2 McCormick on
Evidence § 221 (6th ed. 2006).

There is an additional potential problem with this
purported assignment. The assignment was not made by Lehman, as
payee of the promissory notes secured by the mortgage, but
rather by MERS, “as nominee for Lehman.” Although the notes and
mortgages appointed MERS as Lehman’s nominee, Lehman filed a
petition for bankruptcy protection in September 2008, see Andrew
Ross Sorkin, Lehman Files for Bankruptcy; Merrill is Sold, N.Y.
Times (Sept. 14, 2008), which was before the purported
assignment of defendant’s mortgage and note on January 30, 2009.

Therefore, we question whether Lehman’s designation of MERS as
its nominee remained in effect after Lehman filed its bankruptcy
petition, absent ratification of that designation by the
bankruptcy trustee. On remand, the trial court should address
the question whether MERS was still Lehman’s nominee as of the
date of its purported assignment of defendant’s note and
mortgage to plaintiff.

Accordingly, we reverse the August 31, 2010 order granting
plaintiff’s motion for summary judgment and remand to the trial
court for further proceedings in conformity with this opinion.

[ipaper docId=69388551 access_key=key-22fs56rdfpzf4tuolduu height=600 width=600 /]

Since they can’t find someone with real knowledge, they probably are stuck because the majority of the originating companies are long gone and so are the employees…just as planned.

Palm Beach Post-

WEST PALM BEACH — An appeals court ruling in favor of Wellington homeowners in foreclosure is causing “calamitous confusion,” according to bank attorneys who say it could snarl hundreds of thousands of pending foreclosure cases.

The bank is asking for a rehearing and clarification of the Sept. 7 decision by the 4th District Court of Appeal, which said a foreclosure affidavit submitted by a bank employee was hearsay because the person relied on computerized information and did not have personal knowledge of the case.

The lack of personal knowledge of foreclosure documents is the foundation of the robo-signing controversy that continues to delay foreclosure proceedings.

The bank is not challenging the court’s decision in Gary and Anita Glarum vs. LaSalle Bank, but it said the ruling has been misinterpreted to mean that the person relying on computerized records must be the one who actually entered them into the computer or the direct custodian of the record.

[PALM BEACH POST]

 In re: Edward D. Banks and Diane Marie Banks, Debtors.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

July Term 2011

CHRISTOPHER REGNER and KARIN REGNER,
Appellants,

v.

AMTRUST BANK,
Appellee.

No. 4D11-1281

September 28, 2011]

GERBER, J.

The defendants, whose home was sold at a foreclosure sale, appeal
the circuit court’s order denying their verified motion to vacate the
certificate of title issued after the sale. The court denied the motion even
though it recognized that the bank had not offered any evidence in
opposition to the motion. The defendants argue that the court erred in
denying their motion because the clerk of court issued the certificate of
title while their objections to the sale were pending and because the
court did not conduct an evidentiary hearing on their objections.
We agree with the defendants’ arguments a n d reverse.
Compare § 45.031(5), Fla. Stat. (2010) (“If no objections to the sale are
filed within 10 days after filing the certificate of sale, the clerk shall file a
certificate of title . . . .”), with § 45.031(8), Fla. Stat. (2010) (“If timely
objections to the bid are served, the objections shall be heard by the
court.”); see also Opportunity Funding I, LLC v. Otetchestvennyi, 909 So.
2d 361, 362 (Fla. 4th DCA 2005) (“The Clerk of the Court lacks authority
to issue a certificate of title . . . when an objection to a foreclosure sale is
timely filed.”). “For the court to ‘hear’ objections, it must provide both
notice and an opportunity for any interested party to address those
objections.” U.S. Bank Nat’l Ass’n v. Bjeljac, 43 So. 3d 851, 853 (Fla. 5th
DCA 2010) (citations omitted). Further, “‘it is reversible error for a trial
court to deny a party an evidentiary hearing to which [the party] is
entitled.’” Avi-Isaac v. Wells Fargo Bank, N.A., 59 So. 3d 174, 177 (Fla.
2d DCA 2011) (quoting Sperdute v. Household Realty Corp., 585 So. 2d
1168, 1169 (Fla. 4th DCA 1991)).

We remand for an evidentiary hearing on the defendants’ claims that:
(1) they did not receive notice of the sale; (2) the bank breached the
parties’ settlement agreement by wrongfully rejecting the defendants’
final redemption payment; a n d (3) the bank’s purchase price was
inadequate. See Bennett v. Ward, 667 So. 2d 378, 382 (Fla. 1st DCA
1995) (“Th e failure to give adequate notice of a judicial sale may
effectively deprive the mortgagor of the right to redeem the property.”);
Indian River Farms v. YBF Partners, 777 So. 2d 1096, 1098-99 (Fla. 4th
DCA 2001) (remanding for evidentiary hearing on whether mortgagor’s
assignee timely exercised its right of redemption before the issuance of
the certificate of title); Blue Star Invs., Inc. v. Johnson, 801 So. 2d 218,
219 (Fla. 4th DCA 2001) (“[T]o vacate a foreclosure sale, the trial court
must find (1) that the foreclosure sale bid was grossly or startlingly
inadequate; and (2) that the inadequacy of the bid resulted from some
mistake, fraud or other irregularity in the sale.”) (citations and internal
quotations omitted).

On remand, the defendants bear the burden to establish their claims.
See Richardson v. Chase Manhattan Bank, 941 So. 2d 435, 437 (Fla. 3d
DCA 2006) (“On remand [the mortgagor] bears the burden to establish at
the evidentiary hearing that she did not receive notice of the rescheduled
sale and must also show what harm, if any, she suffered by reason of not
being notified of the sale.”). The defendants shall be entitled to testify at
the evidentiary hearing if they so request. See Sperdute, 585 So. 2d at
1169 (“Neither the submission of affidavits nor argument of counsel is
sufficient to constitute an evidentiary hearing. Since the purpose of an
evidentiary hearing is to allow a party to ‘have a fair opportunity to
contest’ the factual issues, this purpose is not effectuated if a party is not
allowed to testify.”) (citation omitted).

Reversed and remanded.

WARNER and POLEN, JJ., concur.
* * *
Appeal of non-final order from the Circuit Court for the Seventeenth
Judicial Circuit, Broward County; Michael L. Gates, Judge; L.T. Case No.
09-58312CACE.

Charles D. Franken of Charles D. Franken, P.A., Plantation, for
appellants.

Vivian Lasaga of Spear and Hoffman, P.A., Miami, for appellee.

Not final until disposition of timely filed motion for rehearing.

[ipaper docId=66893544 access_key=key-kt8p1x6z49wlga8ku29 height=600 width=600 /]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

WEKESA O. MADZIMOYO,
Plaintiff-Appellant,

versus

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., f.k.a. The Bank of New York Trust Company, N.A.,
JP MORGAN CHASE BANK, N.A.,
GMAC MORTGAGE, LLC,
MCCURDY & CANDLER, LLC,
ANTHONY DEMARLO, Attorney,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(September 7, 2011)

Before TJOFLAT, CARNES and KRAVITCH, Circuit Judges.

PER CURIAM:

Wekesa Madzimoyo, proceeding pro se, appeals the district court’s
judgment on the pleadings in favor of the defendants. Because we conclude that
the district court lacked removal jurisdiction, we vacate and remand.

In July 2009, Madzimoyo filed an emergency petition in state court seeking
a temporary restraining order (TRO) to stop foreclosure proceedings on his home
by defendants Bank of New York Mellon Trust Company, JP Morgan Chase Bank,
McCurdy & Candler, and attorney Anthony DeMarlo. According to the petition,
none of the defendants was the original lender and there was no evidence that the
original lender had transferred its rights to any defendant. In support of his
petition, Madzimoyo submitted correspondence sent to the defendants in which he
sought to verify their rights over the mortgage. Some of the correspondence
referenced the Fair Debt Collection Practice Act (FDCPA) and Regulation Z, the
Truth-in-Lending regulations. The state court issued the TRO and scheduled a
hearing on the petition to stop the foreclosure.

The day before the scheduled hearing in state court, the defendants removed
the petition to federal district court in the Northern District of Georgia, asserting
federal-question jurisdiction because Madzimoyo had alleged violations of the
FDCPA and Regulation Z. Madzimoyo moved to remand to state court, disputing
that he raised any basis for federal jurisdiction.

The magistrate judge denied the motion to remand, finding that
Madzimoyo’s petition raised federal questions under the FDCPA and Regulation
Z. The defendants then moved for judgment on the pleadings. In a brief in
support of the motion, the defendants argued that the FDCPA and Regulation Z
claims failed because Madzimoyo had not alleged any violation of these statutes.
The magistrate judge recommended that the motion for judgment on the
pleadings be granted. The district court adopted the recommendation, over
Madzimoyo’s objections, and granted judgment on the pleadings. This appeal
followed.

On appeal, both parties address the merits of the order granting judgment on
the pleadings, and there is no discussion of the district court’s jurisdiction over
Madzimoyo’s action. Nevertheless, we are “obliged to notice any lack of
jurisdiction regardless of whether the question is raised by the parties themselves.”
Edge v. Sumter Cnty. Sch. Dist., 775 F.2d 1509, 1513 (11th Cir. 1985).

We review questions of subject-matter jurisdiction de novo. Romero v.
Drummond Co., 552 F.3d 1303, 1313 (11th Cir. 2008). We consider sua sponte
whether the district court had removal jurisdiction. Cotton v. Mass. Mut. Life Ins.
Co., 402 F.3d 1267, 1280 (11th Cir. 2005).

Under the removal statute:
Any civil action of which the district courts have original jurisdiction
founded on a claim or right arising under the Constitution, treaties or
laws of the United States shall be removable without regard to the
citizenship or residence of the parties. Any other such action shall be
removable only if none of the parties in interest properly joined and
served as defendants is a citizen of the State in which such action is
brought.

28 U.S.C. § 1441(b). In other words, to be removable on federal-question
jurisdiction grounds, the case must arise under federal law. See Merrell Dow
Pharm. Inc. v. Thompson, 478 U.S. 804, 807-08 (1986). The “well-pleaded
complaint” rule instructs that a case does not arise under federal law unless a
federal question is presented on the face of the plaintiff’s complaint. Id. at 808;
Kemp v. Int’l Bus. Mach. Corp., 109 F.3d 708, 712 (11th Cir. 1997) (citing
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 11 (1983)).

A federal question is presented by the complaint when the suit relies on a
federal cause of action or where “the vindication of a right under state law
necessarily turned on some construction of federal law.” See Merrell Dow, 478
U.S. at 808. Under this latter analysis, federal question jurisdiction should be
narrowly construed. See id. at 810-14. “[T]he mere presence of a federal issue in
a state cause of action does not automatically confer federal-question jurisdiction,”
even where the interpretation of federal law may constitute an element of the state
cause of action. Id. at 813. More recently, the Supreme Court fashioned another
test for deciding whether federal courts should exercise federal question
jurisdiction over removed state court proceedings: “does a state-law claim
necessarily raise a stated federal issue, actually disputed and substantial, which a
federal forum may entertain without disturbing any congressionally approved
balance of federal and state judicial responsibilities.” Grable & Sons Metal
Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). “If the plaintiff
elects to bring only state law causes of action in state court, no federal question
will appear in the complaint that could satisfy the well-pleaded complaint rule, and
the case may not be removed to federal court.” Kemp, 109 F.3d at 712.

Upon review of the record, we conclude that the district court should not
have exercised federal-question jurisdiction upon the removal of this case.
Although Madzimoyo’s petition referenced federal laws in passing, none of his
causes of action relied on even the interpretation of federal law. Rather,
Madzimoyo merely asserted that he requested his loan information from the
mortgage companies in accordance with federal law to show that he had acted
diligently and merited state relief. Accordingly, we vacate the judgment of the
district court and remand with instructions that the district court remand the
proceeding to the state court.

VACATED AND REMANDED.

[ipaper docId=66347058 access_key=key-v4vyt62h3kei1952mcn height=600 width=600 /]

[Cite as CitiMortgage, Inc. v. Robson, 2011-Ohio-4617.]

COURT OF APPEALS
RICHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT

CITIMORTGAGE, INC.
Plaintiff-Appellee

-vs-

DONALD SCOTT ROBSON, ET AL
Defendant-Appellant

Excerpts:

{¶4} The case began as a mortgage foreclosure case, and appellant
counterclaimed for trespass and damage to his personal property. The court found the
mortgaged house was unoccupied so appellee hired a contractor to enter and secure
the house and change the locks. Appellant alleged the contractor damaged an alarm
system in the house. The property has since been sold in a foreclosure sale.

[…]

{¶11} Nonetheless, the trial court addressed the issue of trespass. We find the
trial court should not have proceeded to determine the mortgage permitted appellee to
enter appellant’s property. This was beyond the scope of the motion for summary
judgment.

{¶12} The court also erred in finding appellant could not prevail because he had
not established damages. A property owner must prove two essential elements to state
a cause of action sounding in trespass: (1) an unauthorized intentional act, (2) resulting
in an intrusion that interferes with the owner’s right of exclusive possession of the
property. Merino v. The Salem Hunting Club, Columbiana App. No. 07CO16, 2008-
Ohio-6366, paragraph 41, citations deleted. If a property owner proves the elements of
trespass, he has a right to nominal damages without proof of actual damages. Id. at
paragraph 42, citations deleted.

[ipaper docId=65464191 access_key=key-1v92qoey28pjjdovpj82 height=600 width=600 /]

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

July Term 2011

GARY GLARUM and ANITA GLARUM,
Appellants,

v.

LASALLE BANK NATIONAL ASSOCIATION, as Trustee for
Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2006-FFI, FIRST WELLINGTON, INC., a dissolved
corporation, WELLINGTON SHORES HOMEOWNERS ASSOCIATION,
GREENVIEW SHORES NO.2 AT WELLINGTON HOMEOWNERS
ASSOCIATION, GREENVIEW SHORES HOMEOWNERS ASSOCIATION,
FIRST FRANKLIN FINANCIAL CORPORATION, and any unknown
heirs, devisees, grantees, creditors, and other unknown persons or
unknown spouses claiming by, through and under any of the abovenamed
parties,
Appellees.

No. 4D10-1372

[September 7, 2011]

PER CURIAM.

This appeal presents two issues. First, we consider whether the trial
court improperly granted a summary judgment of foreclosure in favor of
LaSalle Bank. We also consider whether the trial court erred in
sanctioning appellants’ counsel for filing frivolous pleadings pursuant to
section 57.105, Florida Statutes. We reverse the trial court’s entry of
summary judgment in favor of LaSalle in part, as LaSalle’s summary
judgment evidence was insufficient to establish the amount due to
LaSalle under the note and mortgage. We likewise reverse the entry of
sanctions against appellants’ counsel as improper. However, we find no
merit in appellants’ contention that LaSalle lacked standing to seek
foreclosure.

Appellants admitted in their answer that they had not made payments
according to the terms of the note, and as such, they were in default.
Appellants, however, denied LaSalle’s allegations regarding the amount
of the default. To establish the amount of appellants’ indebtedness for
summary judgment, LaSalle filed the affidavit of Ralph Orsini, a “specialist”
at the loan servicer, Home Loan Services, Inc. Orsini claimed
in the affidavit that appellants were in default of their payment
obligations and owed in excess of $340,000 on the note. In opposition to
the motion for summary judgment, appellants filed Orsini’s deposition,
wherein Orsini explained that he derived the $340,000 figure from his
company’s computer system. However, Orsini did not know who entered
the data into the computer, and he could not verify that the entries were
correct at the time they were made. To calculate appellants’ payment
history, Orsini relied in part on data retrieved from Litton Loan Servicing,
a prior servicer of appellants’ loan.

Florida Rule of Civil Procedure 1.510(c) requires a party moving for
summary judgment to “identify any affidavits, answers to interrogatories,
admissions, depositions, and other materials as would be admissible in
evidence.” If this evidence, taken in the light most favorable to the nonmoving
party, shows no genuine issue of material fact, the moving party
is entitled to judgment as a matter of law. Volusia Cnty. v. Aberdeen at
Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000).

We find that Orsini’s affidavit constituted inadmissible hearsay and,
as such, could not support LaSalle’s motion for summary judgment.
Pursuant to section 90.803(6)(a), Florida Statutes, documentary evidence
may be admitted into evidence as business records if the proponent of
the evidence demonstrates the following through a record’s custodian:
(1) the record was made at or near the time of the event; (2)
was made by or from information transmitted by a person
with knowledge; (3) was kept in the ordinary course of a
regularly conducted business activity; and (4) that it was a
regular practice of that business to make such a record.
Yisrael v. State, 993 So. 2d 952, 956 (Fla. 2008).

Orsini did not know who, how, or when the data entries were made
into Home Loan Services’s computer system. He could not state if the
records were made in the regular course of business. He relied on data
supplied by Litton Loan Servicing, with whose procedures he was even
less familiar. Orsini could state that the data in the affidavit was
accurate only insofar as it replicated the numbers derived from the
company’s computer system. Despite Orsini’s intimate knowledge of how
his company’s computer system works, he had no knowledge of how that
data was produced, and he was not competent to authenticate that data.
Accordingly, Orsini’s statements could not be admitted under section
90.803(6)(a), and the affidavit of indebtedness constituted inadmissible
hearsay. Because LaSalle presented no competent evidence to show
$422,677.85 in damages, the amount of the judgment to which LaSalle is
entitled remains at issue. Therefore, we reverse the entry of judgment in
favor of LaSalle and remand for further proceedings.

The trial court also entered sanctions against appellants’ counsel for
filing a “form affidavit” from an expert, Rita Lord, who opined on the
ability of lay persons to distinguish between original and high-quality
copies of promissory notes. Lord did not represent in the affidavit that
she reviewed the papers at issue in this case. Nevertheless, the trial
court was distressed by appellants’ counsel’s habit of filing “the same
affidavit in ten different cases, when [Lord] hasn’t seen the documents in
this case.” The court awarded LaSalle its reasonable attorney’s fees for
having to file a motion to strike Lord’s affidavit.

We note that LaSalle moved for sanctions under section 57.105,
Florida Statutes. That statute permits a trial court to award a
“reasonable attorney’s fee” to the “prevailing party” where the plaintiff’s
claim was frivolous or to a party to compensate for the opposing party’s
dilatory conduct. § 57.105(1)-(2), Fla. Stat. The trial court did not find
that appellants’ claims were frivolous, a n d th e trial court did not
conclude that Lord’s affidavit was filed to cause unreasonable delay.
Thus, section 57.105 could not serve as a basis for the award of
attorney’s fees to LaSalle.

To the extent that the trial court may have been exercising its
inherent authority to sanction parties or their attorneys, we also find
error. “[A] trial court possesses the inherent authority to impose
attorneys’ fees against an attorney for bad faith conduct.” Moakley v.
Smallwood, 826 So. 2d 221, 226 (Fla. 2002). To impose attorney’s fees
as a sanction under its inherent authority, the trial court must make an
“express finding of bad faith conduct” that is “supported by detailed
factual findings describing the specific acts of bad faith conduct that
resulted in the unnecessary incurrence of attorneys’ fees.” Id. at 227.
The trial court did not make any specific findings of bad faith on the
record, and the sanctions order must be reversed without prejudice. See
Finol v. Finol, 912 So. 2d 627, 629 (Fla. 4th DCA 2005). “Upon remand,
should the court be asked to reconsider the issue, any future hearing
and order must comply with the requirements of Moakley.” Id.

In summary, we reverse the judgment of foreclosure and the entry of
sanctions against appellants’ counsel a n d remand for further
proceedings consistent with this opinion.

Reversed and remanded.

CIKLIN, LEVINE, JJ., and THORNTON, JOHN W., JR., Associate Judge, concur.

* * *

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Meenu Sasser, Judge; L.T. Case No. CA08-028930 AW.

Thomas Ice of Ice legal, P.A., Royal Palm Beach, for appellant.

Thomasina F. Moore and Dennis W. Moore of Butler & Hosch, P.A.,
Orlando, for appellee LaSalle Bank National Association.

Not final until disposition of timely filed motion for rehearing

[ipaper docId=64200208 access_key=key-2gbo7ur1dwfuhkdraayd height=600 width=600 /]

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

PETRA MARTINEZ,
Plaintiff – Appellant,

v.

AMERICA’S WHOLESALE LENDER;
COUNTRYWIDE HOME LOANS
SERVICING LP; BANK OF AMERICA,
RECONTRUST COMPANY N.A.; and
BANK OF NEW YORK MELLON,
Defendants – Appellees.

Appeal from the United States District Court
for the Northern District of California
William H. Alsup, District Judge, Presiding

Argued and Submitted May 12, 2011
San Francisco, California

Before: GOULD and M. SMITH, Circuit Judges, and ST. EVE, District Judge.**

In this appeal, Petra Martinez contends that the district court erroneously
granted summary judgment in favor of Defendants. As the facts and procedural
history are familiar to the parties, we do not recite them here except as necessary to
explain our disposition. For the reasons explained below, we affirm the district
court’s grant of summary judgment in part and reverse it in part.

We review a district court’s grant of summary judgment de novo. See
Florer v. Congregation Pidyon Shevuyim, N.A., 639 F.3d 916, 921 (9th Cir. 2011).
In doing so, we view the evidence in the light most favorable to the nonmoving
party, and determine both whether any genuine dispute as to any material fact
exists and whether the district court correctly applied the substantive law. See id.

In her Complaint, Martinez brought a number of causes of action against
Defendants based on their alleged role in foreclosing on a property over which she
held a mortgage interest. The relevant causes of action were to quiet title, for an
accounting, for tortious violation of statute (the Real Estate Settlement Procedures
Act), for unfair competition, for unfair debt-collection practices, for declaratory
relief, for slander of title, for intentional infliction of emotional distress, and for
negligent infliction of emotional distress.

Although the district court separately analyzed each of these causes of
action, as well as two implicit “overarching claims” of a “right to initiate
foreclosure proceeding[s]” and “deficient notice,” Martinez abandons all but two

of them on appeal. Specifically, in her opening brief, Martinez only addresses her
claim under California Civil Code Section 2923.5 (though her Complaint does not
identify it as a discrete cause of action) and her action to quiet title on the basis that
Defendants lacked authorization to carry out the foreclosure. She either ignores or
gives mere passing reference to her other causes of action, and so she has waived
them. See United States v. Graf, 610 F.3d 1148, 1166 (9th Cir. 2010) (citing
United States v. Williamson, 439 F.3d 1125, 1138 (9th Cir. 2006)); Rattlesnake
Coal. v. U.S. Envtl. Prot. Agency, 509 F.3d 1095, 1100 (9th Cir. 2007).

We affirm the district court’s grant of summary judgment in favor of
Defendants on Martinez’s Section 2923.5 claim. Although a private right of action
exists under this section, the remedy “is a simple postponement of the foreclosure
sale, nothing more.” Mabry v. Superior Court, 110 Cal. Rptr. 3d 201, 204 (Cal. Ct.
App. 2010). It follows that a claim under Section 2923.5 necessarily fails if a
foreclosure sale has occurred. See Hamilton v. Greenwich Investors XXVI, LLC,
126 Cal. Rptr. 3d 174, 185-86 (Cal. Ct. App. 2011). Defendants observe that the
relevant property was sold in foreclosure on April 28, 2010, and Martinez concedes
this fact in her reply. Martinez’s Section 2923.5 claim therefore fails.

The final issue concerns Martinez’s quiet-title claim. The district court
granted summary judgment to Defendants on this claim because “[u]ndisputed
facts show that plaintiff has an outstanding loan on the property, and that
defendant BNYM [Bank of New York Mellon] holds the promissory note. Plaintiff cannot
quiet the title until she repays the mortgage.” It is generally true that, in California,
“‘an action to set aside a trustee’s sale for irregularities in sale notice or procedure
should be accompanied by an offer to pay the full amount of the debt for which the
property was security.’” Ferguson v. Avelo Mortg., L.L.C., 126 Cal. Rptr. 3d 586,
591 (Cal. Ct. App. 2011) (quoting Arnolds Mgmt. Corp. v. Eischen, 205 Cal. Rptr.
15, 17 (Cal. Ct. App. 1984)). In the present case, however, Martinez has alleged
that the purported trustee, ReconTrust Company, N.A. (“ReconTrust”), had no
interest in the subject property and thus lacked authorization to attempt, or effect, a
nonjudicial foreclosure. If Martinez were to prove this allegation, the foreclosure
sale would be void under California law. See Dimock v. Emerald Props., L.L.C.,
97 Cal. Rptr. 2d 255, 261-63 (Cal. Ct. App. 2000). The tender rule does not apply
to a void, as opposed to a voidable, foreclosure sale. See Ferguson, 126 Cal. Rptr.
3d at 592; Dimock, 97 Cal. Rptr. 2d at 262-63; 4 Miller & Starr, Cal. Real Estate §
10:212 (3d ed.).

There would have been no error if Defendants had introduced admissible
evidence establishing that there is no genuine dispute that ReconTrust was
authorized to carry out the foreclosure sale, such that the sale was not void. Cf.,e.g.,
Ferguson, 126 Cal. Rptr. 3d at 595 (distinguishing Dimock and holding that
trustee’s sale conducted by authorized party is “merely voidable,” not void). In
moving for summary judgment, however, Defendants relied on documents attached
to declarations including those of Kalama M. Lui-Kwan, George Merziotis, and
Eva Tapia. Martinez, in opposing Defendants’ motion for summary judgment,
filed evidentiary objections to these declarations, which the district court overruled
without explanation. We conclude that the district court abused its discretion in
doing so.

A declarant must lay a proper foundation for evidence considered on
summary judgment. Bias v. Moynihan, 508 F.3d 1212, 1224 (9th Cir. 2007). For
documentary evidence submitted on summary judgment, however, “a proper
foundation need not be established through personal knowledge but can rest on any
manner permitted by Federal Rule of Evidence 901(b) or 902.” Secs. & Exch.
Comm’n v. Phan, 500 F.3d 895, 913 (9th Cir. 2007) (quoting Orr v. Bk. of Am., NT
& SA, 285 F.3d 764, 774 (9th Cir. 2002)). Put differently, “[t]he documents must
be authenticated and attached to a declaration wherein the declarant is the ‘person
through whom the exhibits could be admitted into evidence.’” Bias, 508 F.3d at
1224 (quoting Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542,
1551 (9th Cir. 1990)).

Lui-Kwan sought to introduce title documents, a variety of deeds, notices,
and other evidence relevant to the present case. His declaration presents numerous
authentication problems. First, he declared that he had reviewed title documents
that “appear” to have been recorded with the Monterey County Recorder’s office.
Second, he obtained copies of the relevant documents from private websites, which
are not self-authenticating. Cf. United States v. Salcido, 506 F.3d 729, 733 (9th
Cir. 2007) (per curiam); United States v. Tank, 200 F.3d 627, 630 (9th Cir. 2000).

Defendants nevertheless argue that “[a] majority of the exhibits are
documents recorded with the Monterey County Recorder bearing an official stamp
for the date and time of the recording as well as a document number . . . and, as
such, are self-authenticating[.]” The attached documents, however, are not
originals, but are copies, and therefore are not self-authenticating. Compare
United States v. Weiland, 420 F.3d 1062, 1074 (9th Cir. 2005) with United States
v. Hampton, 464 F.3d 687, 689 (7th Cir. 2006). Federal Rule of Evidence 902(4),
which governs “certified copies of public records,” requires the custodian or other
authorized person to certify that the copies are correct. Fed. R. Evid. 902(4).
Defendants failed to satisfy this requirement.

Defendants similarly failed to authenticate the documents attached to
Tapia’s declaration, which claim to be true and correct copies of documents
concerning Martinez’s loan and the Defendants’ corporate relationships. Tapia
asserted her “understanding” and “familiar[ity]” with the stated facts in a
conclusory manner that fails to establish her personal knowledge about the relevant
events and documents. Shakur v. Schriro, 514 F.3d 878, 890 (9th Cir. 2008); Bank
Melli Iran v. Pahlavi, 58 F.3d 1406, 1412 (9th Cir. 1995). Moreover, the
documents attached to her declaration are not admissible as “[c]ertified domestic
records of regularly conducted activity,” Fed. R. Evid. 902(11), because the
declaration contains no certification that ReconTrust made the records at or near
the time of the occurrence of the relevant matters, that it kept the records in the
course of a regularly conducted activity, or that it made the records by the regularly
conducted activity as a regular practice. Because Tapia failed to lay a foundation
for her personal knowledge about the documents, her testimony is not adequate
extrinsic evidence from “a witness who wrote it, signed it, used it, or saw others do
so” to establish admissibility under Federal Rule of Evidence 901(b)(1). Orr, 285
F.3d at 774 n.8 (internal quotation marks omitted). Defendants therefore failed to
authenticate the documents attached to Tapia’s declaration, and Tapia’s nondocumentary
factual assertions fail to meet the personal knowledge requirement of
Federal Rule of Civil Procedure 56(e)(1) (2009).

For the same reasons, we find that the documentary exhibits and factual assertions of
George Merziotis—to the extent that they are even relevant to the remaining
cause of action—fail to satisfy Federal Rule of Civil Procedure 56(e)
and the associated rules of evidence.

In light of these evidentiary problems, Defendants failed to introduce
sufficient admissible evidence to establish that the foreclosure sale was valid. We
therefore reverse as to Martinez’s quiet-title claim and remand to the district court
for further proceedings consistent with this disposition. Because the sole
remaining claim is founded on state law, we invite the district court to consider
whether it has subject-matter jurisdiction over the case.

Each party shall bear its own costs.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

[ipaper docId=62465221 access_key=key-kh9cm2cs52hqf1t4sif height=600 width=600 /]

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

AARON RICHARD, Plaintiff-Appellant,

v.

SCHNEIDERMAN & SHERMAN, P.C., GMAC MORTGAGE and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants-Appellees.

No. 297353.

Court of Appeals of Michigan.

August 11, 2011, 9:00 a.m.

Before: BORRELLO, P.J., and METER and SHAPIRO, JJ.

PER CURIAM.

Plaintiff, Aaron Richard, appeals as of right an order granting summary disposition in favor of defendants, Schneiderman & Sherman, P.C. (Schneiderman), GMAC Mortgage (GMAC), and Mortgage Electronic Registration Systems, Inc. (MERS). We reverse the trial court’s grant of summary disposition, vacate the foreclosure proceeding, and remand further proceedings consistent with this opinion.

This case arises from plaintiff’s attempts to challenge the foreclosure and sale of property he owned located at 19952 Hubbell in Detroit. Plaintiff purchased the property in part through a $50,000 loan, executed on May 4, 2006, from Homecomings Financial Network, Inc. The loan was secured by a May 4, 2006, mortgage with MERS, as the nominee of Homecomings.

It is not clear from the record when plaintiff fell behind on his mortgage payments. However, on October 9, 2009, Schneiderman, acting as GMAC’s agent, mailed plaintiff a notice stating that his mortgage was in default and informing him of his rights, including to request mediation. The outstanding debt owed to GMAC was listed as $50,267.78. Ultimately, MERS began non-judicial foreclosure by advertisement under MCL 600.3201, et seq., and purchased the property at the subsequent sheriff’s sale.

Plaintiff filed suit, in pro per, during the redemption period, alleging that the sheriff’s sale was “flawed” on numerous grounds and asserted that MERS did not hold any rights to the debt. Defendants filed for summary disposition, asserting, among other things, that the sheriff’s sale was “not only legal, but also valid, as all required procedures were followed.” The trial court granted summary disposition in favor of defendants and dismissed plaintiff’s claim.

Although many of plaintiff’s claims are without merit, it is clear that the sheriff’s sale was invalid because, although MERS was only a mortgagee, MERS foreclosed on plaintiff’s property utilizing non-judicial foreclosure by advertisement. This Court has held that MERS is not entitled to utilize foreclosure by advertisement where it does not own the underlying note. Residential Funding Co, Inc v Saurman, ___ Mich App ___; ___ NW2d ___ (Docket Nos. 290248, 291443; April 21, 2011), slip op at 11. Under such circumstances, “MERS’ inability to comply with the statutory requirements rendered the foreclosure proceedings . . . void ab initio.” Id. Because the application of Saurman is dispositive, we must determine whether Saurman is retroactive and, if so, whether to assign it full or limited retroactivity.

“[T]he general rule is that judicial decisions are to be given complete retroactive effect.” Hyde v Univ of Mich Bd of Regents, 426 Mich 223, 240; 393 NW2d 847 (1986). “Complete prospective application has generally been limited to decisions which overrule clear and uncontradicted case law.” Id.

Rules determined in opinions that apply retroactively apply to all cases “still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule[s].” Harper v Virginia Dep’t of Taxation, 509 US 86, 97, 113 S Ct 2510, 125 L Ed 2d 74 (1993). Rules determined in opinions that apply prospectively only, on the other hand, not only do not apply to cases still open on direct review, but do not even apply to the parties in the cases in which the rules are declared. See Pohutski v City of Allen Park, 465 Mich 675, 699, 641 NW2d 219 (2002). [McNeel v Farm Bureau Ins, 289 Mich App 76, 94; 795 NW2d 205 (2010).]

Given that this Court applied its holding to the cases in Saurman, it is clear that the holding in Saurman has been afforded at least limited retroactivity.^[1] However, cases given limited retroactivity apply “in pending cases where the issue had been raised and preserved,” Stein v Southeastern Mich Family Planning Project, Inc, 432 Mich 198, 201; 438 NW2d 876 (1989), while cases with full retroactivity apply to all cases then pending. This distinction makes a difference because, although plaintiff contested the foreclosure, he did not specifically raise and preserve the issue of whether MERS has the authority to foreclose by advertisement. Thus, Saurman is only applicable to this case if it is granted full retroactivity.

“The threshold question is whether `the decision clearly established a new principle of law.'” Rowland v Washtenaw Co Rd Comm, 477 Mich 197, 220; 731 NW2d 41 (2007) (citation omitted). Our Supreme Court has held that cases that properly interpret statutes, even if prior caselaw has held differently, “restore[] legitimacy to the law” and, thus, are “not a declaration of a new rule, but . . . a vindication of controlling legal authority.” Id. at 222 (quotation marks and citation omitted). In Saurman, this Court interpreted MCL 600.3204(1)(d). There was no existing caselaw and, therefore, it did not overrule any law or reconstrue a statute. See Hyde, 426 Mich at 240. Consequently, this Court’s decision in Saurman was not “tantamount to a new rule of law,” see Rowland, 477 Mich at 222 n 17, and, therefore should be given full retroactive effect.^[2] Hence, Saurman is applicable to the instant case, rendering the foreclosure proceedings void ab initio. Saurman, ___ Mich App at ___, slip op at 11.

Accordingly, we reverse the trial court’s grant of summary disposition, vacate the foreclosure proceeding, and remand for further proceedings consistent with this opinion. We do not retain jurisdiction.

[1] In addition, “there is a serious question as to whether it is constitutionally legitimate for this Court to render purely prospective opinions, as such ruling are, in essence, advisory opinions.” Rowland v Washtenaw Co Rd Comm, 477 Mich 197, 221; 731 NW2d 41 (2007), quoting Wayne Co v Hathcock, 471 Mich 445, 485 n 98; 684 NW2d 765 (2004).

[2] We reiterate the general rule that a retroactive decision cannot serve to reopen those cases that are already closed. Thus, where the time to oppose the foreclosure by advertisement, the time to oppose the resulting eviction, and the time to appeal from those actions have run, a party may not rely on Saurman in an attempt to reopen those cases to recover possession or ownership.

[ipaper docId=62409203 access_key=key-1dg3grocmbnrusk3fz4 height=600 width=600 /]

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

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.

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

[ipaper docId=62142237 access_key=key-1unza0b8v2yrl8bn819r height=600 width=600 /]

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

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.

[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 /]

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
July Term 2011

CATHERINE PAIGE PARKER, et. al.,
Appellants,

v.

LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE REGISTERED HOLDERS OF THE STRUCTURED ASSET SECURITIES CORPORATION, STRUCTURED ASSET INVESTMENT LOAN TRUST, MORTGAGE PASS-THROUGH CERTIFICATES M SERIES 2003-BC8,
Appellee.

EXCERPT:

This case is more akin to Demars v. Village of Sandalwood Lakes
Homeowners Association, 625 So. 2d 1219 (Fla. 4th DCA 1993). In that
case, a homeowners association filed suit to foreclose o n a lien for
unpaid assessments and obtained judgment. The association attempted
personal service twice at the homeowner’s residence. A tenant at the
residence did not know how to contact the homeowner. To establish a
diligent search for constructive service, the association’s attorney called a
mortgage holder a n d th e power company. Neither would divulge
information over the phone, and the association’s attorney did not follow
up with a letter. The court held the association’s search did not meet the
standards of reasonable diligence because the attorney for the
association did not follow up on any of his inquiries. Therefore, the
constructive service was defective, rendering the judgment of foreclosure
voidable.

In this case, the record reflects only one return of service. According
to the affidavit of diligent search and inquiry, Harris next searched credit
information, directory assistance, motor vehicle records, the post office,
property tax records, national death records, and prison records to try
and locate Parker. However, the affidavit shows the search for Parker
was less than diligent. Regarding efforts to locate Parker at her last
known address (the subject property) is a statement that “Process Server
stated: Tenant occupied.” No indication exists as to when the process
server went to the premises or how h e determined it was “tenant occupied.”

Further, no indication exists that the process server inquired
of the tenant the whereabouts of Parker. Under the section of the
affidavit titled “Inquiry of Neighbors at Last Known Address,” it merely
states: “Unable to contact neighbors,” with no statement as to who made
attempt, or on what dates or any description of any attempt made.
Under the section “Freedom of Information Act Inquiry Made to US Postal
Service,” it says “Requested change of address or boxholder information
[at property address] on 2/19/09. Upon receipt of their response, will
promptly revert,” with no follow-up of any information received from the
post office.

“[P]roof of a few attempts at service of process are insufficient to prove
diligent search.” Demars, 625 So. 2d at 1221. In this case, personal
service was attempted only once. As in Demars, the affidavit of diligent
search filed in this case displays a pattern of failure to follow up on
inquiries and leads that could have revealed Parker’s location. Therefore,
we find LaSalle’s search did not meet the standards of reasonable
diligence. Further, this case is distinguishable from Reina in that Parker
was diligent in pursuing the motion to quash. Parker’s trial counsel filed
a special limited appearance to attack the service of process fourteen
days after entry of final judgment and filed an emergency motion to
quash six days later. Therefore, we reverse, finding the final judgment
entered in this case voidable, and remand for further proceedings.

Reversed and remanded.

WARNER and POLEN, JJ., concur.

[ipaper docId=62109063 access_key=key-n7iqfzh60o7h00a6tw7 height=600 width=600 /]

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION

DOCKET NO. A-4925-09T3

DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE FOR LONG
BEACH MORTGAGE LOAN TRUST
2006-3,
Plaintiff-Respondent,

v.

CONSTANCE LAWRENCE MITCHELL
and GENERAL MOTORS ACCEPTANCE
CORPORATION,
Defendants,

and

JACQUELINE BETHEA,
Defendant-Appellant

EXCERPTS:

Deutsche Bank
could have established standing as an assignee, N.J.S.A. 46:9-9,
if it had presented an authenticated assignment indicating that
it was assigned the note before it filed the original complaint.
The only evidence presented by Deutsche Bank was to the
contrary. We reverse the grant of summary judgment and remand
for a hearing to determine whether or not, before filing the
original complaint, plaintiff was in possession of the note or
had another basis to achieve standing to foreclose, pursuant to
N.J.S.A. 12A:3-301.

Although our reversal of summary judgment resolves this
appeal, we think it important to note that the proofs presented
by plaintiff in support of summary judgment were inadequate. In
Ford, supra, we explained that “[a] certification will support
the grant of summary judgment only if the material facts alleged
therein are based, as required by Rule 1:6-6, on personal
knowledge.” 418 N.J. Super. at 599. We held that the trial
court should not have considered an assignment that was not
“authenticated by an affidavit or certification based on
personal knowledge.” Id. at 600.

In support of its motion for summary judgment, Deutsche Bank
provided a certification of an attorney dated January 22, 2009,
which stated that “[p]laintiff is the present holder of the Note
and Mortgage. A copy of the Assignment of Mortgage is attached
as Exhibit B.” The attorney certified that his knowledge was
based upon his “custody and review of the computerized records
of plaintiff which were made in the ordinary course of business
as part of plaintiff’s regular practice to create and maintain
said records and which were recorded contemporaneously with the
transactions reflected therein.” This attorney certification
does not meet the requirement of personal knowledge we
articulated in Ford. Attorneys in particular should not certify
to “facts within the primary knowledge of their clients.”7 See
Pressler & Verniero, Current N.J. Court Rules, comment on R.
1:6-6 (2011); Higgins v. Thurber, 413 N.J. Super. 1, 21 n.19
(App. Div. 2010), aff’d, 205 N.J. 227 (2011).

In support of its motion for final judgment, Deutsche Bank
provided a certification of proof of amount due by a specialist
of JP Morgan Chase Bank, N.A., servicer for Deutsche Bank, dated
June 9, 2009, stating, in part, that “[p]laintiff is still the
holder and owner of the aforesaid obligation and Mortgage.”
However, this certification does not make any mention of the
assignment of the mortgage or how the signor knows that Deutsche
Bank became the holder of the note.

At oral argument in the trial court, plaintiff’s counsel
indicated that plaintiff had possession of the note prior to
obtaining the assignment. Deutsche Bank did not present any
certification based on personal knowledge stating that it ever
possessed the original note.

We vacate the sheriff’s sale, the final judgment and the
order granting summary judgment and remand to the trial court
for further proceedings in conformance with this opinion.
Reversed and remanded.

[ipaper docId=62021680 access_key=key-4mudnf5uqqv6rtls971 height=600 width=600 /]

CHRISTOPHER MORGAN AND SHARON TAKVAM, Appellants,

v.

HSBC BANK USA, NA, Appellee.

No. 2009-CA-000597-MR.

Court of Appeals of Kentucky.

July 29, 2011.

J. Hays Lawson, Louisville, Kentucky, Brief for Appellants.

Kimberlee S. Rohr, Cincinnati, Ohio, Brief for Appellee.

BEFORE: LAMBERT AND MOORE, JUDGES; ISAAC,^[1] SENIOR JUDGE.

NOT TO BE PUBLISHED

OPINION

LAMBERT, JUDGE.

Christopher Morgan and Sharon Takvam appeal from the Shelby Circuit Court’s entry of summary judgment in favor of HSBC Bank USA, NA in a foreclosure action. After a careful review of the record and the parties’ briefs, we reverse and remand for proceedings consistent with this opinion.

On August 22, 2005, Morgan and Takvam executed a note in the amount of $101,200.00 to Ownit Mortgage Solutions, Inc. (Ownit). That same day, Morgan and Takvam granted a mortgage to Mortgage Electronic Registration Systems, Inc., (MERS) as nominee for Ownit. The mortgage encumbered the property located at 12233 Mount Eden Road, Mount Eden, Kentucky 40046. After executing the note and mortgage, Morgan and Takvam defaulted on their payments and currently owe for their March 1, 2008, payment. At the time of this appeal, they owed $101,066.87, plus interest at 9.875% per year from February 1, 2008, in addition to court costs, advances, and other charges, including a reasonable attorney fee, as allowed by law.

On July 31, 2008, HSBC Bank USA, National Association, as Trustee for Ownit Mortgage Loan Trust, Mortgage Loan Asset Backed Certificates, Series 2005-5 (HSBC) instituted foreclosure proceedings by filing a complaint against Morgan and Takvam, based on their alleged default under the note and mortgage. In the complaint, HSBC claimed to be the holder of the note on Morgan and Takvam’s home, but stated that a copy of the note was unavailable at the time the complaint was filed. Rather than filing an answer, Morgan^[2] moved to dismiss the complaint, arguing that HSBC did not have standing to sue and that the complaint failed to state a claim for which relief may be granted. The basis for Morgan’s motion to dismiss was that HSBC did not attach a copy of the note to its complaint, and thus there was no proof that they had standing to enforce the note.

HSBC responded to the motion to dismiss on September 11, 2008, and in its response attached a copy of an adjustable rate note between Ownit, as lender, and Morgan and Takvam, as borrowers. HSBC was not a party to this note. On August 11, 2008, an assignment of mortgage from Ownit to HSBC dated August 4, 2008, was recorded in Shelby County, Kentucky. While Morgan’s motion to dismiss was still pending, HSBC filed for summary judgment on December 3, 2008. The copy of the note HSBC attached to the motion for summary judgment included an undated “Note Allonge” signed by Richard Williams as Vice President of Litton Loan Servicing, LP and as Attorney in Fact of Ownit. This document purported to negotiate the note to HSBC.

On January 7, 2009, the trial court held a hearing on Morgan’s motion to dismiss and HSBC’s motion for summary judgment. Subsequently, on February 25, 2009, the trial court denied Morgan’s motion to dismiss and entered summary judgment in HSBC’s favor. Morgan filed a timely motion to vacate under Kentucky Rules of Civil Procedure (CR) 59.05 on March 6, 2009, and on March 18, 2009, the trial court orally denied Morgan’s motion and noted the same on the docket sheet.

Morgan filed a notice of appeal on April 2, 2009. On April 8, 2009, this Court, sua sponte, raised the issue of jurisdiction and ordered Morgan to show why the appeal should not be dismissed as being interlocutory because no order appeared in the record denying Morgan’s CR 59.05 motion. After considering Morgan’s response, this Court entered another order on June 8, 2009, ordering that the appeal be held in abeyance for thirty days to allow the circuit court to enter an order in accordance with its March 18, 2009, docket sheet notation overruling Morgan’s motion to vacate.

Although the case was returned to this Court’s active docket automatically at the expiration of that thirty-day period per the Court’s order, the record did not reflect that the trial court ever entered an order denying the motion to vacate. On March 16, 2011, this court again held the matter in abeyance for thirty days to permit the parties to petition the trial court to enter a proper order denying the CR 59.05 motion. On March 31, 2011, the parties tendered an order from the trial court denying the CR 59.05 motion, and this case was returned to our active docket for consideration of the merits on appeal.

On appeal, Morgan raises two arguments; namely, 1) that HSBC was not entitled to a judgment as a matter of law because it did not have authority to enforce the note and 2) that summary judgment was premature because discovery was incomplete and because he did not have time to conduct discovery to determine whether HSBC breached an assumed duty.

In Lewis v. B & R Corp., 56 S.W.3d 432, 436 (Ky. App. 2001), this Court set forth the standard of review in an appeal from the entry of a summary judgment:

The standard of review on appeal when a trial court grants a motion for summary judgment is “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” The trial court must view the evidence in the light most favorable to the nonmoving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor. The moving party bears the initial burden of showing that no genuine issue of material fact exists, and then the burden shifts to the party opposing summary judgment to present “at least some affirmative evidence showing that there is a genuine issue of material fact for trial.” The trial court “must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists.” While the Court in Steelvest[, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991),] used the word “impossible” in describing the strict standard for summary judgment, the Supreme Court later stated that that word was “used in a practical sense, not in an absolute sense.” Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court’s decision and will review the issue de novo. [Citations in footnotes omitted.]

Morgan’s first argument addresses whether HSBC was entitled to judgment as a matter of law based upon the argument that HSBC lacked standing to enforce the note. Initially, we note that the particular facts of this case, in particular the sequence of events that unfolded, is troubling. In its complaint, HSBC alleged that it was the holder of the note on Morgan’s home but claimed that a copy of the note was unavailable. Morgan moved to dismiss on grounds that HSBC failed to produce the note and thus had no proof that, as the holder of the note, it was entitled to proceed in foreclosure against Morgan and Takvam.

KRS 355.1-201(2)(u) defines a “holder” as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” Morgan argues that at the time it filed suit, HSBC was not a holder of the note and accordingly could not enforce the note. In support of this argument, Morgan points out that the note was payable to a specific, identified entity: Ownit. Morgan argues that Ownit could have transferred or negotiated its rights to HSBC by endorsement, which requires a signature by an authorized representative of Ownit in the signator’s official capacity, see KRS 355.3-402, but that it failed to properly do so.

Initially, HSBC produced a note between Ownit, Morgan, and Takvam, and subsequently, at summary judgment stage, produced another note with the aforementioned note allonge purporting to assign the note to HSBC. In its order granting summary judgment, the trial court held that the endorsement in the note allonge by Richard Williams, as president of Litton Loan Servicing LP and attorney- in- fact for Ownit, was sufficient proof that HSBC was a holder of the note. In support of this holding, the trial court explained that as an attorney- in-fact for Ownit, Williams was authorized to transact business for Ownit. However, we find it troubling that when HSBC initially filed suit, a copy of this note was not attached and that later, this undated note allonge purporting to indorse the note to HSBC appeared in the record.

Further, HSBC argues that under KRS 355.3-203(2), it has the power to enforce the note. That statute states that “[t]he transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument.” The Official comment to Section 203(2) states: “If the transferee is not a holder because the transferor did not indorse; the transferee is nevertheless a person entitled to enforce the instrument under Section 3-301 if the transferor was a holder at the time of transfer.”

Thus, according to HSBC, even if Ownit did not properly indorse the note, as Morgan claims on appeal, it can enforce the note if Ownit was a holder at the time of the transfer, or at the time the note allonge was signed. The difficulty in determining the applicability of the note allonge is the fact that it is not dated, and thus there is nothing in the record to determine whether the transferor, Ownit, was a holder at the time it allegedly transferred its interest in the note to HSBC.

This case is further complicated by the fact that the mortgage was not assigned to HSBC until August 4, 2008, and was subsequently recorded on August 11, 2008. HSBC filed suit on July 31, 2008, and the parties were served on August 2, 2008. Morgan argues that because HSBC did not have possession of the note and the mortgage when it filed suit, and thus had no standing, it cannot cure its lack of standing by subsequently acquiring an interest in the mortgage.

Because this is an issue of first impression in the state of Kentucky, Morgan cites to Wells Fargo Bank, N.A. v. Marchione, 887 N.Y.S.2d 615 (N.Y.A.D. 2 Dept. 2009), in support of this argument. In that case, the parties executed a mortgage with Option One Mortgage Corporation on September 2, 2005. Id. at 616. The parties allegedly failed to make payments beginning on April 1, 2007, and Wells Fargo initiated suit by filing a summons and complaint on November 30, 2007. Id. Option One assigned its “right, title and interest” in the aforementioned mortgage to Wells Fargo in an assignment dated December 4, 2007. Id. The assignment contained a provision stating that it became effective on October 28, 2007. Id. The Appellate Court held that because Wells Fargo did not have an interest in the note and mortgage before they filed suit and only acquired such an interest after filing suit, the bank lacked standing to bring the suit. Id. at 617. Specifically, the trial court held, “[i]n order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the mortgage. . . . Here, Wells Fargo lacked standing to bring this foreclosure action because it was not the assignee of the mortgage on November 30, 2007, the day the action was commenced.” Id. Ohio also requires that banks have an interest in the mortgage when suit is filed. See Wells Fargo Bank, N.A. v. Byrd, 897 N.E.2d 722 (Ohio App. 1 Dist. 2008) (“bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.”).

Because it is impossible to determine from the record when Ownit transferred its interest in the note to HSBC and because the mortgage was not assigned to HSBC until August 4, 2008, after HSBC filed suit against Morgan, we simply cannot say that HSBC had standing to bring the instant action. CR 17.01 provides that “every action shall be prosecuted in the name of the real party in interest, but…an assignee for the benefit of creditors…may bring an action…” It follows that, where a cause of action has been assigned, the assignee becomes the real party in interest. See CR 17.01. However, “[i]n no event may an assignee maintain an action for any part of a claim which has not been assigned to him.” Works v. Winkle, 234 S.W.2d 312, 315 (Ky. App. 1950). A mere expectancy is not enough to establish standing, a party must prove a “present or substantial interest.” Plaza B.V. v. Stephens, 913 S.W2d 319, 322 (Ky. 1996) (quoting Ashland v. Ashland F.O.P. No.3, Inc., 888 S.W.2d 667 (Ky. 1994)). In the instant case, HSBC cannot prove when it obtained a present or substantial interest in the note and it did not receive an interest in the mortgage until after it filed suit. Accordingly, the trial court’s judgment as a matter of law that HSBC had standing to pursue its claims was in error.

For the foregoing reasons, we reverse the Shelby Circuit Court’s summary judgment and remand this matter for further proceedings consistent with this opinion.

ISAAC, SENIOR JUDGE, CONCURS.

MOORE, JUDGE, CONCURS IN RESULT BY SEPARATE OPINION.

Respectfully, I concur with the result that HSBC Bank did not establish that it had standing to file a complaint at the time it commenced this action. Although a bankruptcy action, I agree with the analysis and detailed explanation set forth in In re Veal, ___ B.R. ___, 2011 WL 2304200 (9th Cir. BAP, June 20, 2011) and find it to be persuasive and an excellent explanation relevant to the issue presently before the Court.

[1] Senior Judge Sheila R. Isaac sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes (KRS) 21.580.

[2] We note that while Takvam was named on the Notice of Appeal, she does not appear to have actively participated at the trial court level below, and she has not filed a separate brief on appeal. Thus we refer only to Morgan throughout the opinion.

[ipaper docId=61901445 access_key=key-rvpjr78h5lui22v5isn height=600 width=600 /]

IN THE SUPREME COURT OF THE STATE OF NEVADA

GEORGE M. FOUST AND BECKY H.
FOUST, AS HUSBAND AND WIFE,
Appellants,

vs.

WELLS FARGO, N.A., STATE OF
INCORPORATION PRESENTLY
UNKNOWN; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; AND AMERICAN
HOME SERVICING MORTGAGES,
INC., A DELAWARE CORPORATION,
Respondents.

ORDER OF REVERSAL AND REMAND

This is an appeal from a district court order dismissing a complaint as to respondents, certified as final under NRCP 54(b), in a foreclosure action. Eighth Judicial District Court, Clark County; Timothy C. Williams, Judge.

EXCERPTS:

On January 30, 2009, Wells Fargo signed a document substituting AHMSI Default Services, Inc. (AHMSI Default), as a substitute trustee, but did not have this document acknowledged until February 2, 2009. Also on January 30, 2009, AHMSI Default, acting as a substitute trustee for Wells Fargo, signed and acknowledged a notice of default against the Fousts, and recorded the same on February 2, 2009. However, Wells Fargo’s status as of January 30, 2009, is unclear.

According to the record, American Home Mortgage Servicing, Inc., executed an assignment of the deed of trust to Wells Fargo on February 20, 2009, which was recorded on February 25, 2009. It included a provision stating “Misc. Comments: EFFECTIVE DATE OF ASSIGNMENTS: 01/02/2009.” This effective date is prior to the date on which Wells Fargo substituted AHMSI Default as trustee.

[…]

The issues the Fousts raise on appeal are: (1) whether AHMSI Default wrongfully commenced a foreclosure against them because AHMSI Default was not a proper substitute trustee, as Wells Fargo was not entitled to enforce the note; and (2) whether Wells Fargo was assigned the deed of trust prior to the date on which AHMSI Default entered the notice of default. We conclude that the district court erred in granting the motion to dismiss because the Fousts presented a claim upon which relief could be granted. Thus, we reverse and remand this matter to the district court for further proceedings consistent with this order.

Standard of review

We review the district court’s legal conclusions, including a determination that a plaintiff has failed to state any legitimate causes of action under NRCP 12(b)(5), de novo. See Buzz Stew, LLC v. City of N. Las Vegas, 124 Nev. 224,  228, 181 P.3d 670, 672 (2008). In reviewing motions to dismiss pursuant to NRCP 12(b)(5), we accept all facts in the complaint as true, construe the pleadings liberally, and draw all possible inferences in favor of the nonmoving party: Id.; Blackjack Bonding v. Las Vegas Mun. Ct., 116 Nev. 1213, 1217, 14 P.3d 1275, 1278 (2000). This standard of review is rigorous, and the plaintiffs “complaint should be dismissed only if it appears beyond a doubt that it could prove no set of facts, which, if true, would entitle it to relief.” Buzz Stew, 124 Nev. at 227-28, 181 P.3d at 672.

The Fousts stated a claim upon which relief can be granted

This appeal focuses on the Fousts’ fifth cause of action, in which the Fousts alleged that Wells Fargo may not own the note and mortgage and, therefore, lacked standing to foreclose. Construing this allegation liberally and drawing all possible inferences in favor of the Fousts, the first amended complaint presents a claim upon which relief could be granted.

While deeds of trust and mortgage notes work together in the context of mortgage lending, they are distinct documents with separate functions. Leyva v. National Default Servicing Corp., 127 Nev. „ P.3d , (Adv. Op. No. 40, July 7, 2011). We do not analyze those distinctions here, but possessing only the deed of trust does not create an entitlement to enforce the underlying note. See In re Veal, No. 09-14808, 2011 WL 2304200, at *12 (B.A.P. 9th Cir. June 10, 2011). To enforce a debt secured by a deed of trust and mortgage note, a person must be entitled to enforce the note pursuant to Article 3 of the Uniform Commercial Code. Id. at *7; see also Restatement (Third) of Property: Mortgages § 5.4(c) (1997) (“A mortgage may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures.”). “Article 3 is codified in NRS 104.3101-.3605.” Levva, 127 Nev. at n.6, P.3d at n.6. If Wells Fargo was not entitled to enforce the note, then the substitution of AHMSI Default as trustee and the subsequent foreclosure notice against the Fousts may have been in error.

Therefore, the central inquiry on remand is whether Wells Fargo was entitled to enforce the note. 5

[ipaper docId=61586486 access_key=key-i7h01aw8cljs5u6snq2 height=600 width=600 /]

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

IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT

JANICE M. RISCH,
Appellant,

v.

BANK OF AMERICA, NATIONAL
ASSOCIATION, AS SUCCESSOR BY
MERGER TO LASALLE BANK, N.A. AS
TRUSTEE FOR ZUNI 2006-OA1,
Appellee.

Opinion filed August 3, 2011.

Appeal pursuant to Fla. R. App. P. 9.130
from the Circuit Court for Lee County; Hugh
E. Starnes, Senior Judge.

EXCERPT:

Janice M. Risch appeals the trial court’s denial of her emergency motion for rehearing or, in the alternative, for relief from judgment pursuant to Florida Rule of Civil Procedure 1.540. The record shows that the trial court conducted a hearing on Ms. Risch’s motion; however, there was no evidence presented. Since Ms. Risch’s motion asserted allegations of misrepresentation, which might give rise to relief pursuant to rule 1.540(b)(3), and since she attached an affidavit and records which could support her claim, we reverse and remand for an evidentiary hearing. See S. Bell Tel. & Tel. Co. v. Welden, 483 So. 2d 487, 489 (Fla. 1st DCA 1986) (“[W]here the moving party’s allegations raise a colorable entitlement to rule 1.540(b)(3) relief, a formal evidentiary hearing on the motion, as well as permissible discovery prior to the hearing, is required.”); see also Rosenthal v. Ford, 443 So. 2d 1077, 1078 (Fla. 2d DCA 1984) (“The  credibility of appellant’s allegations should only be determined by the trial court after an evidentiary hearing thereon.”).

Reversed and remanded.

SILBERMAN, C.J., and DAVIS, J., Concur.

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[ipaper docId=61414766 access_key=key-1vxb8f0u4phx5c06wq5g height=600 width=600 /]

DEMUCHA v WELLS FARGO | California Appeals Court Reverses & Remands “QUIET TITLE, FRAUD & MISREPRESENTATION, SLANDER OF CREDIT”

A Bakersfield homeowner is taking on a bank, in a battle that could have sweeping implications for people facing foreclosure.

Mark Demucha wants Wells Fargo to prove it owns his home loan. And, if his lawsuit is successful, it could set a legal precedent that slows or even stops foreclosures across the state.

[KGET]

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT

MARK DEMUCHA et al.,
Plaintiffs and Appellants,

v.

WELLS FARGO HOME MORTGAGE INC.,
Defendant and Respondent.

-ooOoo-

This case presents a classic example of the longstanding rule that “in passing upon the question of the sufficiency or insufficiency of a complaint to state a cause of action, it is wholly beyond the scope of the inquiry to ascertain whether the facts stated are true or untrue” as “[t]hat is always the ultimate question to be determined by the evidence upon a trial of the questions of fact.” (Colm v. Francis (1916) 30 Cal.App. 742, 752.)

The trial court dismissed this civil action after sustaining the demurrer of respondent Wells Fargo Home Mortgage, a division of Wells Fargo Bank, N.A. (Wells Fargo), to the first amended complaint of appellants Mark and Cheryl DeMucha. Appellants contended in the trial court, as they do on this appeal, that the allegations of their pleading were sufficient to survive demurrer. As we explain, we agree with appellants on all of their causes of action except the second (their attempt to state a cause of action for removal of a cloud on title) and the fourth (their attempt to state a cause of action for intentional infliction of emotional distress). We reverse the judgment, remand the matter to the trial court, and direct that court to overrule respondent’s demurrer as to all causes of action except the second and fourth.

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