Now a borrower can survive demurrer or summary judgment if he shows the assignment is void. has standing to challenged allegedly improper securitization of mortgage loan
The Court now found that a break in the chain of title due to a void assignment is prejudicial to a borrower and they now have standing to sue for wrongful foreclosure. This is a huge change for plaintiffs, but essentially only means that most cases live to die another day.
A trustor filed suit against her lender and its successors to quiet title, claiming that her loan had been improperly transferred into a securitized trust and then wrongfully foreclosed. The trial court sustained a demurrer to the complaint and the Court of Appeal affirmed, holding that she had failed to allege tender of payment of her debt. The California Supreme Court reversed, concluding “that because in a nonjudicial foreclosure only the original beneficiary of a deed of trust or its assignee or agent may direct the trustee to sell the property, an allegation that the assignment was void, and not merely voidable at the behest of the parties to the assignment, will support an action for wrongful foreclosure. So now the Court held “that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on a void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment”, thus following Glaski v. Bank of America, 218 Cal.App.4th 1079, rather than the numerous cases that had disagreed with that decision.
So now, if an assignment is void, then the foreclosing party acts without legal authority in foreclosing and commits a wrongful foreclosure. On the other hand when an assignment is merely voidable, the power to ratify or avoid it lies solely with the parties to the assignment, and is not void unless and until one of them does so, meaning the objecting borrower is assert an interest that does not belong to her.
The court rejected the argument that the borrower suffered no prejudice from the assignment because she still owed the mortgage debt, its answer was that it was sufficient that she lost her ownership because of an allegedly illegal trustee’s sale. “The borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security.”
The court stated that it was not ruling on a borrower’s ability to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed, nor whether Yvanova had alleged sufficient facts to show the assignment was void, nor the substantive elements of the tort of wrongful foreclosure. The issue here was solely whether a borrower had standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void.”