YVONNE GONZALEZ ROGERS, District Judge.
Plaintiff Kelly Grace Ancheta ("Ancheta") brings this wrongful foreclosure action against defendants Mortgage Electronic Registration Systems, Inc. ("MERS"); Bank of America, N.A. ("BANA"), and The Bank of New York Mellon fka The Bank of New York, as Trustee for the CWALT, INC., Alternative Loan Trust 2006-0A9, Mortgage Pass-Through Certificates, Series 2006-0A9 ("BNYM"). Ancheta alleges two claims: wrongful foreclosure and violation of the California Unfair Competition Law, Business & Professions Code section 17200. The action was initially filed on September 20, 2016, in the Superior Court of the State of California, County of San Mateo, and was removed to this Court on November 9, 2016, based upon diversity. Defendants have filed a Motion to Dismiss the complaint under Rule 12(b)(6) for failure to state a claim based upon the statute of limitations and failure to allege a claim sufficiently. (Dkt. No. 11.)
Having carefully considered the papers submitted
Ancheta alleges that on April 14, 2006, she executed an adjustable rate mortgage including a Deed of Trust ("DOT"), relating to a residential property in San Mateo, California. The DOT identified American Mortgage Express Corporation ("AME") as the lender, defendant MERS as the nominal beneficiary and Chicago Title as the trustee. The original loan servicer was Countrywide Home Loans Servicing, LP. Subsequent servicers include Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP. (Dkt. No. 1, Exh. 1 [Complaint] ¶¶ 7, 8.) Shortly after origination, AME sold the loan was sold to Countrywide Home Loans, Inc. ("Countrywide") but without an accompanying assignment of the DOT. (Id. ¶9.) Countrywide later sold the loan to CWALT, Inc., and the loan was subsumed within a mortgage-backed securities trust (Alternative Loan Trust 2006-OA9) established by CWALT, Inc. (Id. ¶¶ 10, 11.) The trust was established under New York law. (Id. ¶ 11.)
On September 20, 2011, MERS as "nominee for AME" executed an Assignment of Deed of Trust to assign the beneficial interest in Ancheta's mortgage to the The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the CWALT, INC., Alternative Loan Trust 2006-0A9, Mortgage Pass-Through Certificates, Series 2006-0A9 ("BNYM") (Complaint at Exh. C.)
On January 17, 2012, Recontrust recorded a Notice of Trustee's Sale ("NOTS") which stated the total amount of the unpaid balance plus interest of the Subject Loan, plus expenses related to the publication of the Notice was $630,777.94. (Id. ¶ 29, Exh. I.) On February 17, 2012, Recontrust recorded a Trustee's Deed Upon Sale ("TDUS") that stated defendant BNYM has purchased the Subject Property on February 7, 2012, for $423,000. (Id. ¶ 29, Exh. J.)
Ancheta filed her complaint for wrongful foreclosure and violation of Business & Professions Code section 17200 in the state court on September 20, 2016. Thereafter, on November 9, 2016, defendants removed the action to this Court based upon diversity of citizenship.
Defendants move to dismiss Ancheta's claims on three grounds: (1) the wrongful foreclosure claim is time-barred; (2) the wrongful foreclosure claim fails as a matter of law for lack of standing to challenge the securitization issues, lack of prejudice from any defects in the foreclosure procedure, and failure to tender the amount of her indebtedness; and (3) the UCL claim fails as a matter of law
Defendants move to dismiss on the grounds that Ancheta's claims, brought four years and eight months after the foreclosure sale of the property, are barred by the applicable statute of limitations. Ancheta contends that "there is no statute of limitations applicable to a wrongful foreclosure action" (Oppo. at 6:4-5), that the statute of limitations is not the three-year statute of limitations under California Code of Civil Procedure section 338 (as defendants contend), and that, even if it were, it should be equitably tolled for her delayed discovery of the facts in support of her claim. These arguments all fail.
First, Ancheta's argument that no statute of limitations applies to a wrongful foreclosure action is completely without merit and lacks legal authority.
Second, based on the allegations of the complaint, the wrongful foreclosure claim falls within the three-year limitations period set forth in California Code of Civil Procedure section 338. Under California law, "the nature of the right sued upon, not the form of action or the relief demanded, determines the applicability of the statute of limitations." Jefferson v. J. E. French Co., 54 Cal.2d 717, 718 (1960). Section 338 provides a three-year statute of limitations for a variety of claims, including: "[a]n action upon a liability created by statute, other than a penalty or forfeiture;" "[a]n action for trespass upon or injury to real property;" "[a]n action for relief on the ground of fraud or mistake;" and "slander of title to real property." Cal. Code. Civ. Proc. § 338 (a), (b), (d), (g).
Third, Ancheta has not alleged a basis for equitable tolling that would make her claim timely. Ancheta contends her claim is subject to equitable tolling pursuant to the discovery rule. Where a complaint demonstrates on its face that it would be barred without the benefit of the discovery rule, plaintiff must allege facts to show when the facts were discovered and how, as well as the inability to have discovered them earlier in spite of reasonable diligence." Fox, 35 Cal. 4th at 808. "[A] potential plaintiff who suspects that an injury has been wrongfully caused must conduct a reasonable investigation of all potential causes of that injury." Id. "If such an investigation would have disclosed a factual basis for a cause of action, the statute of limitations begins to run on that cause of action when the investigation would have brought such information to light." Id. at 808-09.
Ancheta alleges she "was unaware that the foreclosure sale of her property was illegal until she retained the services of a forensic mortgage loan auditor and attorney to investigate the chain of title to her loan and advise her of her legal rights." (Complaint ¶ 40). Ancheta apparently was aware of the foreclosure, and of the underlying indebtedness and default, and all the documents referenced in the allegations were recorded well before the NOD, NOTS, and foreclosure sale occurred. These events alone would appear to trigger Ancheta's duty to conduct a diligent investigation. The complaint does not allege any facts about why those events would not have triggered the time period, nor does it allege when she hired the auditor or attorney, or any other due diligence that might support equitable tolling of the statute of limitations. In her opposition, Ancheta states that she hired a forensic mortgage loan auditor and read his report on July 5, 2016, thereafter hiring an attorney on October 6, 2016. This argument raises the question as to what she was doing from February 7, 2012, until this audit report in July 5, 2016, and why she could not have discovered the facts she alleges now, over four years after the foreclosure sale. The argument that Ancheta was aware only of the foreclosure proceedings, not any illegal activities by defendants, simply does not support equitable tolling of the statute of limitations. The additional facts Ancheta suggests she can allege, in her opposition, do not support equitable tolling either.
Ancheta alleges that the foreclosure was improper for two reasons: (1) her loan was assigned to the trust after its closing date, in violation of the applicable Pooling and Service Agreement, making that assignment void; and (2) the interest MERS and its principal AME formerly held in her loan was extinguished as of May 30, 2006, when AME sold the loan to Countrywide such that any later actions by MERS, such as assignment of the deed of trust to BNYM, or substituting Recontrust as the trustee, were invalid.
On the securitization theory, Ancheta has not alleged facts sufficient to allow her to challenge the foreclosure based upon defects in the securitization of the mortgage loan. The California Supreme Court has held that a borrower who has suffered a nonjudicial foreclosure may challenge that foreclosure based upon the validity of an assignment only if the assignment is void under applicable law. Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919, 924 (2016). In Yvanova, the court was presented with the single question "under what circumstances, if any, may the borrower challenge a nonjudicial foreclosure on the ground that the foreclosing party is not a valid assignee of the original lender? Put another way, does the borrower have standing to challenge the validity of an assignment to which he was or she was not a party?" Id. at 928.
The Yvanova court held that a borrower may challenge the validity of the assignment if such assignment is void, but not if it is merely voidable under applicable law. Id. at 923. "[O]nly the entity holding the beneficial interest under the deed of trust—the original lender, its assignee, or an agent of one of these—may instruct the trustee to commence and complete a nonjudicial foreclosure." Id. at 935. "If a purported assignment necessary to the chain by which the foreclosing entity claims that power is absolutely void, meaning of no legal force or effect whatsoever, the foreclosing entity has acted without legal authority by pursuing a trustee's sale, and such an unauthorized sale constitutes a wrongful foreclosure." Id. (internal citations omitted). A voidable assignment, on the other hand, is one that the parties thereto may ratify or extinguish at their election, rights that the borrower has no power to assert or to challenge. Id. at 929-30.
Here, Ancheta's challenge to the timing of the assignment to the mortgage-based securities trust is subject to New York law. An assignment to a trust after its closing date has been determined to be voidable, not void, under New York trust law. See Mendoza v. JPMorgan Chase Bank, N.A., 6 Cal. App. 5th 802, 813 (2016), review filed (Jan. 24, 2017) ("New York state and federal courts . . . [hold that] a borrower does not have standing to challenge an assignment that allegedly breaches a term or terms of a PSA because the beneficiaries, not the borrower, have the right to ratify the trustee's unauthorized acts"); Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal.App.4th 808, 815 (2016), reh'g denied (Apr. 11, 2016), review denied (July 13, 2016) (an untimely assignment, to a securitized trust made, in violation of trust terms for a closing date, is voidable, not void, under governing New York state law); Yhudai v. IMPAC Funding Corp., 1 Cal.App.5th 1252, 1259 (2016) review denied (Oct. 26, 2016) ("[A] postclosing assignment of a loan to an investment trust that violates the terms of the trust renders the assignment voidable, not void, under New York law," after recent changes in applicable law).
As to the theory that MERS lacked authority to execute assignments and substitutions, Ancheta alleges that, shortly after origination, her original lender, AME sold her mortgage loan to Countrywide Home Loans, Inc. in a table-lending transaction. (Complaint ¶ 9.) She alleges that Countrywide sold the loan to CWALT, Inc., which ended MERS' agency relationship since CWALT is not a MERS member and the terms of the PSA only permitted the depositor (CWALT) to make the final assignment and transfer of the loans to the trust. Ancheta contends that any interest AME and MERS had in her loan was extinguished as of May 30, 2006, according to the terms of the Pooling and Servicing Agreement (PSA) governing the trust. (Complaint ¶¶ 11, 13, 14.)
While Ancheta alleges that MERS lost its authority to make assignments during the course of the securitization process because of the sale of the note from Countrywide to CWALT, she does not offer more than conclusory allegations that the assignments by MERS were void rather than merely voidable.
To the extent that Ancheta's objection centers on the terms of the PSA for the trust, failure to comply with the terms of a PSA renders defendants' acquisition of Ancheta's loan merely voidable (by the trust beneficiary) rather than void. Mendoza, 6 Cal. App. 5th at 813 (citing numerous cases for the proposition that an act in violation of a trust PSA is voidable—not void— under New York law and a borrower has no standing to challenge such violations); Saterbak, 45 Cal. App. 4th at 815 (same); see also Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1156 (2011) ("California's nonjudicial foreclosure law does not provide for the filing of a lawsuit to determine whether MERS has been authorized by the holder of the Note to initiate a foreclosure"). Ancheta has no standing to complain about violation of the terms of the trust's PSA unless such violations would render MERS's assignments void.
Defendants' arguments regarding failure to show prejudice and lack of tender both depend upon whether the challenged assignments are void or voidable. If the assignments are void, plaintiff need not allege tender of the indebtedness or prejudice arising from the allegedly invalid assignments. See Sciarratta v. U.S. Bank National Assn., 247 Cal.App.4th 552, 555, 568 (2016) (relying on Yvanova, void assignment would be proximate cause of injury and therefore result in prejudice to plaintiff, and if the foreclosure is void, tender of the debt is not required to state a claim.); but see Kalnoki v. First Am. Tr. Servicing Sols., LLC, 8 Cal. App. 5th 23 (2017) (where assignment substituted one creditor for another, without affecting obligations on the note, the fact of borrowers' default, the likelihood of foreclosure, or their ability to make payments, borrowers could not show prejudice arising from assignment); see also Glaski, 218 Cal.App.4th at 1100 ("Tender is not required where the foreclosure sale is void, rather than voidable, such as when a plaintiff proves that the entity lacked the authority to foreclose on the property.") Because the allegations do not sufficiently state the basis for the claim that the assignments were void, they are likewise insufficient to establish whether Ancheta was required to plead tender and prejudice.
For the same reasons that the wrongful foreclosure claim fails, the UCL claim likewise fails. The claim is time-barred and the facts alleged are not sufficient to state a basis for equitable tolling. Further, the claim is derivative of the wrongful foreclosure claim.
Accordingly, the Motion to Dismiss is
Ancheta shall file her complaint no later than
This terminates Docket No. 11.
1. Deed of trust dated April 19, 2006, recorded April 26, 2006;
2. Assignment of deed of trust dated October 7, 2011, recorded October 12, 2011;
3. Notice of Default dated October 7, 2011, recorded October 12, 2011;
4. Notice of Trustee's Sale dated January 12, 2012, recorded January 17, 2012;
5. Trustee's Deed Upon Sale dated February 9, 2012, recorded February 17, 2012
The Court
