Rivac et al v. NDEX West, LLC et al

Filing 69

ORDER VACATING JUDGMENT; ORDER DENYING RECONSIDERATION. Signed by Judge Hamilton on 3/22/2017. (pjhlc1, COURT STAFF) (Filed on 3/22/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SEVERINO RIVAC, et al.,

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v.

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NDEX WEST, LLC, et al.,

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United States District Court
Northern District of California

Case No. 13-cv-1417-PJH

Plaintiffs,

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Defendants.

ORDER VACATING JANUARY 2, 2014,
JUDGMENT; ORDER DENYING
RECONSIDERATION OF ORDER
GRANTING MOTION TO DISMISS
SECOND AMENDED COMPLAINT

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This matter is before the court for reconsideration of the order of dismissal and the

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judgment entered in the above-entitled action on January 2, 2014. Plaintiffs Severino

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Rivac and Warlita Rivac obtained a loan in 2007, evidenced by a promissory note and

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secured by a Deed of Trust on real property located in San Leandro, California (“the

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property”). After plaintiffs defaulted on the loan payments, the property was sold at a

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non-judicial foreclosure sale in February 2013.

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Plaintiffs filed the original complaint on February 20, 2013, against defendants

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NDeX West LLC ("NDeX West"); JPMorgan Chase Bank, N.A. ("JPMorgan" –

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erroneously sued as JP Morgan Chase Bank f.k.a. EMC Mortgage Corporation); Wells

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Fargo Bank, N.A. ("Wells Fargo"); and Mortgage Electronic Registration Systems, Inc.

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("MERS"). Plaintiffs asserted numerous causes of action, including a claim of wrongful

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foreclosure. Plaintiffs alleged that the assignment of the promissory note and deed of

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trust was void, and that the entity that had conducted the nonjudicial foreclosure sale thus

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had no interest in the underlying debt or in the property.

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After the court granted defendants' motion to dismiss the second amended

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complaint ("SAC") on December 17, 2013, without leave to amend, and entered judgment

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on January 2, 2014, plaintiffs filed a notice of appeal. On October 6, 2016, without

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having ruled on the appeal, the Ninth Circuit remanded the case to this court "to

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reconsider its holding in light of" the California Supreme Court's February 18, 2016,

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decision in Yvanova v. New Century Mortgage Corp., 62 Cal. 4th 919 (2016). Pursuant

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to this court's order, the parties submitted supplemental briefs.

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Having read the parties’ papers and carefully considered their arguments and the

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relevant legal authority, the court DENIES reconsideration and finds that the SAC was

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properly dismissed.
BACKGROUND

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United States District Court
Northern District of California

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In January 2007, plaintiffs Severino Rivac and Warlita Rivac borrowed $728,000

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secured by a promissory note and deed of trust on property located in San Leandro,

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California. The Deed of Trust listed the lender as BC Bancorp, and named Stewart Title

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of California as trustee and Mortgage Electronic Registration Systems, Inc. (“MERS”) as

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beneficiary. The Deed of Trust stated that MERS was "acting solely as a nominee for"

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the lender (BC Bancorp) and the lender's successors and assigns. On February 13,

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2007, Stewart Title recorded the Deed of Trust with the Alameda County Recorder, as

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Instrument No. 2007068834.

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The Deed of Trust provided that "[t]he Note or a partial interest in the Note

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(together with this Security Instrument) can be sold one or more times without prior notice

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to Borrower." The Deed of Trust further provided that "Lender, at its option, may from

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time to time appoint a successor trustee to any Trustee appointed hereunder by an

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instrument executed and acknowledged by Lender and recorded in the office of the

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Recorder of the county in which the Property is located. . . . Without conveyance of the

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Property, the successor trustee shall succeed to all the title, powers, and duties conferred

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upon the Trustee herein and by Applicable Law. . . ."

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Plaintiffs assert that BC Bancorp “securitized” and "sold" the interest in plaintiffs’
Deed of Trust to a mortgage-backed securities trust, through EMC Mortgage Corporation
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(“EMC”), to Wells Fargo Bank, N.A., as trustee for Structured Assets Mortgage

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Investments II, Inc., Bear Stearns Mortgage Funding Trust 2007-AR5 Mortgage Pass-

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Through Certificates, Series 2007-AR5 ("SAMI II 2007-AR5 Trust"). EMC (later merged

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into JPMorgan Chase Bank, N.A. (“JPMorgan”)) retained the servicing rights. Plaintiffs

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allege that "according to [p]laintiffs' audit" (an apparent reference to the 125-page "Audit

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and Analysis," discussed below, which was attached to the original complaint), the

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closing date of the SAMI II 2007-AR5 Trust was June 29, 2007.

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At some point, plaintiffs fell behind with the loan payments, and defaulted on the
loan. On March 15, 2011, MERS recorded two assignments of Deed of Trust. In the first

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assignment, MERS, acting as nominee for BC Bancorp, recorded, in the Alameda County

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United States District Court
Northern District of California

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Recorder’s Office, an assignment of "all beneficial interest" under the Deed of Trust

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(Instrument No. 2007068834), in favor of MERS as nominee for EMC. The document

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bears the signature of D’ne Fuller, as Assistant Secretary of MERS, and the assignment

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was dated March 8, 2011. Plaintiffs assert that Fuller was in fact a “robo-signer”

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employed by Wells Fargo. In the second assignment, MERS, as nominee for EMC,

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recorded an assignment of "all beneficial interest" under the Deed of Trust (Instrument

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No. 2007068834), also signed by D'ne Fuller, to Wells Fargo, as trustee for the

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certificateholders of SAMI II 2007-AR5 Trust ("second assignment"). That second

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assignment, which was recorded subsequent to the recording of the first assignment, was

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also dated March 8, 2011.

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On June 1, 2011, NDeX West LLC (“NDeX”), acting as agent for Wells Fargo

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(JPMorgan), recorded a Notice of Default and Election to Sell under Deed of Trust in the

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Alameda County Recorder’s Office. The Notice of Default indicated that plaintiffs were

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$73,501.02 in arrears on their loan payments. The Notice of Default was signed by

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Shannon E. Coleman, an employee of NDeX, as agent for the beneficiary, and was

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accompanied by a declaration of compliance with California Civil Code § 2923.5, signed

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by Keith Shehorn, an employee of EMC.

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On May 31, 2012, a Substitution of Trustee was recorded by Wells Fargo
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(JPMorgan) in favor of NDeX. It bears the signature of Birhan Ayele as Vice President of

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JPMorgan. Plaintiffs allege that Mr. Ayele was also a “robo-signer,” with no authority to

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act on behalf of the true beneficiary of the Deed of Trust. On June 8, 2012, a Notice of

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Trustee's Sale was recorded in the Alameda County Recorder's Office by NDeX.

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However, no sale was conducted at that time.

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On January 28, 2013, another notice of Trustee's Sale was recorded in the

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Alameda County Recorder's Office by NDeX. This notice indicated that the unpaid

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balance on the plaintiffs’ loan was $915,024.47, and that the sale would go forward on

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February 21, 2013.

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Plaintiffs filed the original complaint on February 20, 2013, against NDeX;

United States District Court
Northern District of California

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JPMorgan (erroneously sued as JP Morgan Chase Bank f.k.a. EMC Mortgage

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Corporation); Wells Fargo; and MERS. Plaintiffs alleged seven causes of action – breach

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of contract; breach of implied agreement; slander of title; violation of California Civil Code

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§ 2923.5; wrongful foreclosure; violation of 18 U.S.C. § 1962 (“RICO”); violation of

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California Business & Professions Code § 17200; and injunctive relief. Attached as an

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exhibit to the complaint was a 125-page document entitled "Mortgage Securitization Audit

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& Analysis Report," dated October 29, 2012, prepared by a third party identified as

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"Certified Securitization Analysis LLC." Plaintiffs asserted that this document should be

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incorporated by reference into the complaint. On March 1, 2013, NDeX recorded a

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Trustee's Deed Upon Sale, indicating that the property had been sold to Wells Fargo on

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February 21, 2013.

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On May 15, 2013, defendants filed a motion to dismiss, which was granted on July

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10, 2013. The court found that the complaint did not allege facts sufficient to state a

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claim under any of the causes of action. The court found further that the facts alleged in

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the complaint were not related in any comprehensible way to any facts in the attached

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125-page "Audit and Analysis," which also contained large portions that were illegible.

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The court noted that the facts asserted in the complaint all appeared to relate in one way

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or another to the “securitization” of the loan, and the foreclosure process, but indicated
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that it was not possible to tell which defendant was alleged to have done what.
The court granted leave to amend as to all causes of action except the RICO

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claim, and stated that "[p]laintiffs must clarify the bases of the claims, and must allege

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supporting facts as to each defendant." The court added, "As indicated at the hearing,

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the court will not consider the 125-page alleged ‘expert report’ as part of an amended

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complaint."

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Plaintiffs filed the first amended complaint ("FAC") on August 7, 2013. Defendants
filed a motion to dismiss on September 13, 2013, and on September 27, 2013, plaintiffs

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filed a second amended complaint ("SAC"). The court terminated the motion to dismiss

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the FAC and allowed the filing of the SAC, on the basis that plaintiffs had not previously

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United States District Court
Northern District of California

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used their one opportunity to amend “as a matter of course.”

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In the SAC, plaintiffs alleged causes of action for (1) breach of contract; (2) breach

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of implied agreement; (3) slander of title; (4) wrongful foreclosure; (5) violation of

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§ 17200, (6) violation of the Truth in Lending Act, 15 U.S.C. § 1601, et seq. (“TILA”);

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(7) violation of the Real Estate Settlement Practices Act, 12 U.S.C. § 2601, et seq.

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(“RESPA”), and (8) violation of the Federal Debt Collection Practices Act, 15 U.S.C.

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§ 1692, et seq. (“FDCPA”). Plaintiffs did not attach the 125-page "Audit and Analysis

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Report," but did refer throughout the SAC to "plaintiffs' audit," without any clear

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explanation.

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On October 18, 2013, defendants filed a motion to dismiss the SAC. The court

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granted the motion in an order issued on December 17, 2013. Because the court found

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that amendment would be futile, the dismissal was with prejudice.

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On January 2, 2014, the court issued an order dismissing nominal defendant

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NDeX (based on plaintiffs' statement of non-opposition to that dismissal). Also on

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January 2, 2014, the court entered judgment in favor of defendants.

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On January 31, 2014, plaintiffs filed a notice of appeal. Plaintiffs listed the issues

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for review as whether the court had erred in ruling that each of their eight causes of

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action failed to allege facts sufficient to state a claim, and whether the court had erred in
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denying further leave to amend. Nevertheless, their arguments in the appeal all relied on

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their legal conclusion that the foreclosure sale was “void.” In support of this proposition,

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plaintiffs argued that the assignments of the loan during securitization were untimely or

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were not recorded, which allegedly destroyed the chain of title to the loan and with it, the

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authority of any of the defendants to foreclose; and that the recorded assignments were

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void because the person who signed them was a “robo-signer” and lacked authority.
After the briefing was completed and the appeal was scheduled for oral argument,

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the Ninth Circuit panel vacated the hearing date and indicated that submission of the

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case was being "deferred pending the California Supreme Court's decision" in Yvanova

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(which had been issued on February 18, 2016). The Ninth Circuit requested the parties

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United States District Court
Northern District of California

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to submit supplemental briefs addressing the application of the Yvanova decision to the

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case. Both briefs were filed by the May 18, 2016 due date.
On October 6, 2016, the Ninth Circuit panel issued an order stating that the case

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was submitted for decision. That same day, the panel remanded the case to this court to

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reconsider its holding in light of the Yvanova decision, adding, "We express no opinion as

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to the outcome of that inquiry."
DISCUSSION

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A.

Allegations in the SAC
Throughout the SAC, plaintiffs alleged variants on the theme that the

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“securitization” of their loan was "improper." Plaintiffs asserted that in June 2007, their

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loan was "securitized," which they defined as "the act of producing an investment vehicle

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of Mortgage-Backed Securities ("MBS") using the Borrower's Mortgage Note as the

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under-lying corpus, as collateral." SAC ¶¶ 12, 33. They claimed that their loan was “split

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from the Deed of Trust for securitization,” and that they “obtained an Audit evidencing

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[the] loan transaction both as it actually occurred and as it was fraudulently portrayed in

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the securitization documents filed with the SEC[,]” including the Pooling and Servicing

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Agreement (“PSA”), the Prospectus, and the Forms 10-K, 10-Q, 8-K, and 15-D. SAC

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¶¶ 12-14.
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Plaintiffs asserted that "the actual lenders in the case, the individuals who invested

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in the securitized note, have not been consulted as to a loan modification, foreclosure or

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settlement" and further, that "JP Morgan and Wells Fargo failed to communicate with

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anyone representing the actual investor, and committed fraud on both the [p]laintiffs and

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the actual investors when they claimed to have done so." SAC ¶ 13.
Plaintiffs alleged that defendants “failed to follow the [PSA] for the securitized trust,

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failed to endorse the note and assign the deed of trust in a timely manner as set forth in

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the PSA, and failed to properly identify the true party of interest in their foreclosure

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action.” SAC ¶ 14. They claimed that under the terms of the PSA, all promissory notes

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transferred to the Trust were required to have a “complete chain of endorsements” by no

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United States District Court
Northern District of California

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later than 90 days after the Trust’s closing date, and that because these conditions were

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not complied with, the servicer in the present case was “trying to force through a

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foreclosure in the name of a beneficiary that clearly [had] no interest in the underlying

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loan as it had previously been sold.” SAC ¶ 15.
Plaintiffs also asserted that the closing date for the SAMI II 2007-AR5 Trust was

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on or about June 29, 2007, and that the Trust was no longer reporting income as of 2008.

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SAC ¶ 72. They alleged that their Note and Deed of Trust was securitized "on or before

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June 29, 2007, and was sold to a Real Estate Mortgage Investment Conduit (REMIC) 1

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"according to [p]laintiffs' audit" (apparently a reference to the 125-page document

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attached as an exhibit to the original complaint). SAC ¶ 73.
Plaintiffs alleged, however, that any assignment of a beneficial interest of a deed

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of trust occurring in 2011 (as here) or later, could not have REMIC status, and the

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advantageous tax treatment associated therewith, because under the terms of the PSA,

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the securitized trust must have received the assignments of the beneficial interest of the

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A real estate mortgage investment conduit or REMIC is a pass-through vehicle created
under the Tax Reform Act of 1986 to issue multiclass mortgage-backed securities.
REMICs may be organized as corporations, partnerships, or trusts, and those meeting
qualifications are not subject to double taxation (taxation of earnings at the corporate
level, then again at the level of individual shareholders). See J.Downes & J.E. Goodman,
Dictionary of Finance and Investment Terms (Barron’s 9th ed. 2014) at 206, 619-20.
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Deed of Trust within 90 days of the close of the trust (June 29, 2007). SAC ¶¶ 71-72.

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They asserted that in recording the assignments in 2011, defendants breached the PSA

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as well as the terms of plaintiffs' Deed of Trust. SAC ¶ 73. Based on this, plaintiffs

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claimed that defendants did not have the authority to foreclose on the property – and that

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the "attempts to foreclose are void and of no force and effect." SAC ¶ 16.
Plaintiffs raised this "improper securitization" issue in each of the eight causes of

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action asserted in the SAC. For example, in the first cause of action for breach of

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express agreements, they alleged that neither JPMorgan nor Wells Fargo was the lender,

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beneficiary, or trustee "after the sale to the securitized trust," and they therefore breached

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the acceleration remedies provision of the Deed of Trust by causing the Notice of Default

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United States District Court
Northern District of California

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to be recorded since the Notice of Default was noticed by a trustee not authorized to act

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on behalf of the "true beneficiaries," who plaintiffs claimed were the certificate holders of

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the securitized trust. SAC ¶ 33. They also claimed that defendants breached the PSA by

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recording the assignment on March 15, 2011, which was years after the June 2007

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securitization, as opposed to within 90 days as required by the PSA. SAC ¶¶ 38-40.
Plaintiffs repeated similar allegations in the second cause of action for breach of

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implied agreements, see SAC ¶¶ 45-47; in the third cause of action for slander of title,

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see SAC ¶¶ 59-61, 80; in the fourth cause of action for wrongful foreclosure, see SAC

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¶¶ 84, 88-90; in the fifth cause of action for violation of § 17200, see SAC ¶ 101-102,

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105-107; in the sixth cause of action for violation of TILA, see SAC ¶¶ 114-115; in the

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seventh cause of action for violation of RESPA, see SAC ¶¶ 128-133; and in the eighth

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cause of action for violation of the FDCPA, see SAC ¶ 150. Thus, every cause of action

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reflected plaintiffs' claim that the securitization was improper and that the assignments

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were "void."

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B.

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Defendants' Motion to Dismiss the SAC
In their motion to dismiss the SAC, defendants argued that securitization of the

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loan did not nullify their right to foreclose. They noted that the court previously rejected

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plaintiffs' assertions that defendants lacked authority to foreclose based on any alleged
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defects in securitization, and they argued that plaintiffs had alleged no facts in the SAC

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showing that the securitization was improper. They also noted that ¶ 20 of the Deed of

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Trust specifically provided that "[t]he Note or a partial interest in the Note (together with

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this Security Interest) can be sold one or more times without prior notice to the

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Borrower[,]" and that the power of sale, which plaintiffs had expressly granted in the Deed

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of Trust, is not nullified when a loan is securitized.

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Finally, defendants argued that even if plaintiffs could show that the loan was
improperly securitized – which they could not – they still had not alleged any facts

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showing they suffered any harm as a result. For example, defendants asserted, plaintiffs

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did not dispute that they were in default when the foreclosure sale occurred, and did not

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United States District Court
Northern District of California

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allege any facts showing that the securitization of the loan had any effect on their ability

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to make timely payments on the loan.

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Plaintiffs did not directly address these arguments in their opposition. Instead,

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they argued that they had "standing" to dispute the foreclosure and the "violation" of the

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PSA. They asserted that courts have recognized a borrower's right to bring claims

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challenging a party's interest under a deed of trust; and further, they were not challenging

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legal securitization under ¶ 20 of the Deed of Trust, but rather, "late transfer to the trust in

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violation of the [PSA] for the Series 2007-A Trust." They argued that the court "should

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follow the line of cases imposing a literal interpretation” of New York Law of Estates,

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Trusts, and Powers § 7-2.4, which the California Court of Appeal relied on in Glaski v.

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Bank of America, 218 Cal. App. 4th 1079 (2013), in holding that acts in contravention of

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the trust are void rather than voidable.

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Plaintiffs asserted that applying the literal interpretation of New York Trust Law

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would further the statutory purpose (to protect trust beneficiaries from wrongful acts of the

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trustee – in this case, adverse tax consequences of the trust losing its REMIC status).

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They argued that rather than ruling (as defendants urged) that plaintiffs did not have

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standing to challenge a breach of the PSA, the court should instead "follow the holding in

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Glaski that procedural irregularities in a foreclosure proceeding are not required to bring
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suit for lack of standing due to a post-closing assignment such as is the case here."
Plaintiffs also argued that their claims were not barred by the tender rule, because

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in light of the "void" assignments, requiring plaintiffs to tender the full amount as a

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prerequisite for seeking to set aside the foreclosure would be inequitable. Finally,

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plaintiffs asserted, as to each cause of action (breach of contract, breach of implied

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agreement, slander of title, wrongful foreclosure, violation of Civil Code § 2923.5,

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violation of TILA, violation of RESPA, violation of FDCPA) that they had pled facts

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sufficient to state a claim, including as part of each argument the assertion that the

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securitization was improper and rendered the assignments – and thus the Notice of

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United States District Court
Northern District of California

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Default and the foreclosure sale – void.
In the December 17, 2013, order granting the motion to dismiss the SAC, the court

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first reviewed a number of arguments that applied generally to one or more causes of

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action. The court found plaintiffs’ arguments unpersuasive, including the argument that

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the original note did not have endorsements in "wet ink" and thus was never properly

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endorsed to Wells Fargo; and the argument that the foreclosure sale was invalid because

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the assignments were "robo-signed." The court was persuaded by defendants’

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arguments, including the argument that plaintiffs lacked standing to sue because they

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had not tendered the full amount of their indebtedness nor alleged credible tender; the

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argument that plaintiffs' claim under Civil Code § 2923.5 was without merit because

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§ 2923.5 provides relief only in the form of a postponement of an impending foreclosure

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sale; and the argument that plaintiffs could show no prejudice arising from the alleged

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foreclosure because the cause of the foreclosure was plaintiffs' default.

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More importantly for purposes of this order, the court found that the securitization

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did not nullify any rights granted under the Deed of Trust, including the right to foreclose.

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The court cited numerous decisions by federal district courts located in California,

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rejecting claims that a foreclosing entity lacks standing solely as a result of the

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securitization of the loan. The court also noted that a majority of federal courts within this

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district have concluded that plaintiffs lacked standing to challenge noncompliance with a
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PSA in securitization unless they were parties to the PSA or third-party beneficiaries to

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the PSA. Following this, the court addressed each of the causes of action pled in the

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SAC, and analyzed each in light of whether plaintiffs had pled facts sufficient to support

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the elements of each claim. The court found that SAC failed to state a claim as to any of

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the eight causes of action, and found further that granting further leave to amend would

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be futile.

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C.

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California Supreme Court's Decision in Yvanova
Prior to Yvanova, California appellate courts regularly held that a borrower had no

standing to file a wrongful foreclosure case based on a claim that assignments of the

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note and deed of trust were void. See, e.g., Siliga v. Mortg. Elec. Reg. Sys., Inc., 219

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United States District Court
Northern District of California

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Cal. App. 4th 75 (2013); Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497

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(2013); Herrera v. Fed. Nat’l Mortg. Ass’n., 205 Cal. App. 4th 1495 (2012); Fontenot v.

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Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011) (all disapproved of by Yvanova).

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In Yvanova, the California Supreme Court noted that one key legal issue arising

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out of the 2008 collapse of the housing bubble was whether and how defaulting

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homeowners could challenge the validity of the chain of assignments involved in the

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securitization of their loans. Id., 62 Cal. 4th at 923. In the decision below, the Court of

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Appeal had held that the plaintiff could not state a cause of action for wrongful

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foreclosure based on an allegedly void assignment because she lacked standing to

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assert defects in the assignment, to which she was not a party. Id. The California

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Supreme Court accepted review to resolve that "standing" issue. Id. at 926.

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The plaintiff in Yvanova had executed a note securing a deed of trust on

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residential property in 2006. Id. at 924. The lender and beneficiary of the trust deed was

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New Century Mortgage Corporation, which filed for bankruptcy in 2007. Id. In 2008, New

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Century was liquidated and its assets were transferred to a liquidation trust. Id. On

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December 19, 2011, New Century (despite its earlier dissolution) executed a purported

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assignment of the deed of trust to Deutsche Bank National Trust, as trustee of a Morgan

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Stanley investment loan trust. Id. at 924-25. The recorded document listed New Century
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as the assignor, and listed Deutsche Bank as trustee for the investment trust. Id. at 925.

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Ocwen Loan Servicing was listed as the "contact" for both New Century and Deutsche

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Bank, and as "attorney in fact" for New Century. Id.

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The plaintiff asserted that the investment trust to which the deed of trust on the

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property was assigned in December 2011 had a closing date (date by which all loans and

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mortgages or trust deeds must be transferred to the investment pool) of January 27,

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2007. Id. On August 20, 2012, Western Progressive LLC recorded two documents – one

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dated February 28, 2012, substituting itself in place of Deutsche Bank as trustee on the

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deed of trust, and a second dated August 16, 2012, giving notice of a trustee's sale. Id.
The property was sold at public auction on September 14, 2012. Id. The deed conveyed

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United States District Court
Northern District of California

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the property from Western Progressive LLC, as trustee, to the purchaser at auction, THR

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California LLC. Id.

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The plaintiff filed suit. In the second amended complaint, she asserted a single

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cause of action for quiet title, against numerous defendants including New Century,

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Ocwen Loan Servicing, Western Progressive, Deutsche Bank, Morgan Stanley Mortgage

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Capital, and the Morgan Stanley investment trust. Id. Plaintiff alleged that the December

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19, 2011 assignment of the deed of trust from New Century to the Morgan Stanley

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investment trust was void for two reasons – New Century's assets had previously been

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transferred to a bankruptcy trustee, and the Morgan Stanley investment trust had closed

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to new loans in 2007. Id. Defendants demurred, and the demurrer was sustained

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without leave to amend. Id. at 925-26.

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The Court of Appeal affirmed, finding that the quiet title action failed because

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plaintiff did not allege that she had tendered payment of her debt. Id. at 926. The Court

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of Appeal also considered the question (on which it had received briefing) whether the

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plaintiff could amend the complaint to plead a cause of action for wrongful foreclosure.

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Id. The Court of Appeal concluded that leave to amend was not warranted. Id.

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The Court of Appeal acknowledged that there was a split of authority in California,
contrasting the decision in Jenkins with the decision in Glaski v. Bank of America, N.A.,
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218 Cal. App. 4th 1079 (2013). Jenkins, issued by the Court of Appeal's Fourth District,

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slightly predated Glaski, issued by the Fifth District, but the Glaski court did not cite

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Jenkins. Although the facts in the two cases differed, the plaintiff in each case

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challenged the authority of the defendants to initiate nonjudicial foreclosure, claiming that

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defendants had failed to comply with the provisions of the PSA that governed the

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securitized trust into which each of the loans had been pooled.

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In Jenkins, the plaintiff sued to prevent a foreclosure sale that had not yet

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occurred, alleging that the purported beneficiary who sought the sale had no security

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interest because a purported transfer of the loan into a securitized trust was made in
violation of the PSA that governed the investment trust. Id., 216 Cal. App. 4th at 504-05.

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United States District Court
Northern District of California

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The court held that California law did not permit a preemptive judicial action to challenge

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the authority of the foreclosing beneficiary or beneficiary's agent to initiate and pursue

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foreclosure. Alternatively, the court held that as an unrelated third party, the plaintiff

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lacked standing to enforce any agreements, including the investment trust's PSA, relating

15

to the securitization. Id. at 515.

16

In Glaski, the plaintiff challenged a foreclosure sale that had gone forward. He

17

claimed that his note and deed of trust had never been validly assigned to the securitized

18

trust because the purported assignments under which the foreclosing defendant became

19

the beneficiary were made after the trust's closing date and were thus invalid. Id., 218

20

Cal. App. 4th at 1082-87. The court found that a borrower has standing to challenge

21

such an assignment on the basis that it is void, though not on the basis that it is voidable,

22

and found that cases holding that a borrower may never challenge an assignment

23

because the borrower is neither a party nor a third-party beneficiary of the assignment

24

agreement "paint with too broad a brush" by failing to distinguish between void and

25

voidable agreements. Id., 218 Cal. App. 4th at 1094-95.

26

As here, the securitized trust at issue in Glaski was governed by New York law.

27

The Glaski court pointed to New York Estates, Powers & Trusts Law § 7-2.4, which

28

provides, "If the trust is expressed in an instrument creating the estate of the trustee,
13

1

every sale, conveyance or other act of the trustee in contravention of the trust, except as

2

authorized by this article and by any other provision of law, is void." Glaski, 218 Cal.

3

App. 4th at 1096. Because the securitized trust was created by the PSA, which

4

established a closing date after which the trust could no longer accept loans, the court

5

found that § 7-2.4 provided a legal basis for concluding that the trustee's attempt to

6

accept a loan after the closing date would be void in contravention of the trust document.

7

Id. at 1096-97.

8

In interpreting EPTL § 7-2.4, the Glaski court relied on what was then a recent
lower-court decision from New York – Wells Fargo Bank, N.A. v. Erobobo, 39 Misc. 3d

10

1220(A), 972 N.Y.S. 2d 147, 2013 WL 1831799 at *8 (Apr. 29, 2013) – which held, in a

11
United States District Court
Northern District of California

9

judicial foreclosure action, that under § 7-2.4, any transfer to a trust in contravention of

12

the trust documents is void. However, while that decision was good law at the time the

13

Glaski court issued its decision, it was reversed two years later. See Wells Fargo Bank,

14

N.A. v. Erobobo, 127 A.D. 1176, 9 N.Y.S.3d (Apr. 29, 2015) (mortgagor whose loan is

15

owned by a trust does not have standing to challenge the foreclosing party's possession

16

or status as assignee of the note and mortgage based on purported noncompliance with

17

certain provisions of the PSA).

18

In the interim (between the two Erobobo decisions), the Second Circuit issued its

19

decision in Rajamin v. Deutche Bank Nat’l Trust Co., 757 F.3d 79 (2nd Cir. 2014), holding

20

that even if the plaintiffs (the mortgagors in that case) had standing, based on EPTL § 7-

21

2.4, to challenge a mortgage assignment as invalid, ineffective, or void, "the weight of

22

New York authority is contrary to plaintiffs' contention that any failure to comply with the

23

terms of the PSAs rendered defendants' acquisition of plaintiffs' loans and mortgages

24

void as a matter of trust law." Id. at 88.

25

The Second Circuit distinguished "void" agreements (void ab initio) from "voidable"

26

agreements (agreements that can be ratified by the parties and which thus can also be

27

voided, but only by the parties), citing authority for the proposition that under New York

28

law, a trust's beneficiaries may ratify the trustee's otherwise unauthorized act, while “a
14

1

void act is not subject to ratification.” Id. at 88-89.

2

While a few other courts have reached conclusions about
EPTL § 7-2.4 similar to that of the Erobobo court, see, e.g.,
Aurora Loan Services LLC v. Scheller, No. 2009-22839, 2014
WL 2134576, at *2-4 (N.Y. Sup. Ct. Suffolk Co. May 22,
2014); Glaski v. Bank of America, National Association, 218
Cal. App. 4th 1079, 1094-98, 160 Cal. Rptr. 3d 449, 461-64
(5th Dist. 2013), we are not aware of any New York appellate
decision that has endorsed this interpretation of § 7-2.4. And
most courts in other jurisdictions discussing that section have
interpreted New York law to mean that “a transfer into a trust
that violates the terms of a PSA is voidable rather than void,”
Dernier v. Mortgage Network, Inc., 2013 VT 96, ¶ 34, 87 A.3d
465, 474 (2013); see, e.g., Bank of America National Ass'n v.
Bassman FBT, L.L.C., 2012 IL App (2d) 110729, ¶¶ 18-21,
366 Ill. Dec. 936, 981 N.E.2d 1, 8-10 (2d Dist. 2012); see also
Butler v. Deutsche Bank Trust Co. Americas, 748 F.3d 28, 37
n.8 (1st Cir. 2014) (“not[ing] without decision . . . that the vast
majority of courts to consider the issue have rejected
Erobobo's reasoning, determining that despite the express
terms of [EPTL] § 7–2.4, the acts of a trustee in contravention
of a trust may be ratified, and are thus voidable”).

3
4
5
6
7
8
9
10

United States District Court
Northern District of California

11
12
13

In sum, we conclude that as unauthorized acts of a trustee
may be ratified by the trust's beneficiaries, such acts are not
void but voidable; and that under New York law such acts are
voidable only at the instance of a trust beneficiary or a person
acting in his behalf. Plaintiffs here are not beneficiaries of the
securitization trusts; the beneficiaries are the certificateholders. Plaintiffs are not even incidental beneficiaries of the
securitization trusts, for their interests are adverse to those of
the certificateholders. Plaintiffs do not contend that they did
not receive the proceeds of their loan transactions; and their
role thereafter was simply to make payments of the principal
and interest due. The law of trusts provides no basis for
plaintiffs' claims.

14
15
16
17
18
19
20

Id. at 90.

21

Relying on Jenkins, the Court of Appeal in Yvanova held that plaintiff's allegations

22

of improprieties in the assignment of her deed of trust to Deutsche Bank were of no avail

23

because, as a third party to that assignment, she was unaffected by such deficiencies

24

and had no standing to enforce the terms of the agreements allegedly violated. Yvanova,

25

62 Cal. 4th at 926. The Court of Appeal acknowledged that Glaski, the authority on

26

which plaintiff relied, conflicted with Jenkins on the standing issue, but the court agreed

27

with the reasoning of Jenkins and declined to follow Glaski. Id.

28

The California Supreme Court granted plaintiff's petition for review, limiting the
15

1

issue to be briefed and argued to the following: "In an action for wrongful foreclosure on

2

a deed of trust securing a home loan, does the borrower have standing to challenge an

3

assignment of the note and deed of trust on the basis of defects allegedly rendering the

4

assignment void?" Id. The court concluded that "because in a nonjudicial foreclosure

5

only the original beneficiary of a deed of trust or its assignee or agent may direct the

6

trustee to sell the property, an allegation that the assignment was void, and not merely

7

voidable at the behest of the parties to the assignment, will support an action for wrongful

8

foreclosure.” Id. at 923; see also id. at 942-43 (“[A] home loan borrower has standing to

9

claim that a nonjudicial foreclosure was wrongful because an assignment by which the
foreclosing party purportedly took a beneficial interest was not merely voidable but void,

11
United States District Court
Northern District of California

10

depriving the foreclosing party of any legitimate authority to order a trustee's sale.”).

12

As to the “narrow question” before it – whether a wrongful foreclosure plaintiff may

13

challenge an assignment to the foreclosing entity as void – the California Supreme Court

14

concluded that Glaski provided a “more logical answer” than Jenkins. Id. at 935. The

15

court agreed with Glaski, to the extent Glaski held that “a wrongful foreclosure plaintiff

16

has standing to claim the foreclosing entity's purported authority to order a trustee's sale

17

was based on a void assignment of the note and deed of trust.” Id. at 939. The court

18

rejected Jenkins insofar as that decision “spoke too broadly in holding a borrower lacks

19

standing to challenge an assignment of the note and deed of trust to which the borrower

20

was neither a party nor a third party beneficiary. Jenkins' rule may hold as to claimed

21

defects that would make the assignment merely voidable, but not as to alleged defects

22

rendering the assignment absolutely void.” Id.

23

The court explained a void contract has no legal force or effect and never can be

24

ratified or validated by the parties to it, but a voidable contract – despite its defects – is

25

one that the contracting parties either may ratify and thereby give legal force and effect,

26

or extinguish at their election. Id. at 929-30. The court added that a borrower

27

challenging a void assignment is not asserting the rights of the parties to the assignment,

28

but rather his or her own right to have a foreclosure conducted solely at the direction of
16

1

the current holder of the note and deed of trust. Id. at 935-37. Because the parties to a

2

void assignment can do nothing to validate it, the borrower is not asserting any rights

3

belonging to those parties when he or she seeks to invalidate the assignment. Id. at 936.

4

However, the court emphasized that, unlike in Glaski, the question whether

5

“allegations that the plaintiff’s note and deed of trust were purportedly transferred into the

6

trust after the trust’s closing date were sufficient to plead a void assignment and hence to

7

establish standing” was not before the court. Id. at 931. Thus, the court “express[ed] no

8

opinion” on the question whether “a postclosing date transfer into a New York securitized

9

trust is void or merely voidable.” Id. For this reason, the court did not consider the
Rajamin court’s “expressed disagreement” with Glaski, on the question “whether, under

11
United States District Court
Northern District of California

10

New York law, an assignment to a securitized trust made after the trust’s closing date is

12

void or merely voidable.” Id. at 940-41.

13

D.

14

Application of Yvanova and Subsequent Decisions
In the present case, plaintiffs asserted that because the Deed of Trust was either

15

never transferred to the SAMI II 2007-AR5 Trust, or was transferred after the closing date

16

of the Trust, both the first assignment of the Deed of Trust by MERS, as nominee for BC

17

Bancorp, to MERS, as nominee for EMC, and the second assignment of the Deed of

18

Trust by MERS, as nominee for EMC, to Wells Fargo Bank, were void. Based on this,

19

plaintiffs alleged that NDeX West (the substituted Trustee) had no legal right to foreclose

20

on the property.

21

A beneficiary or trustee under a deed of trust who conducts an illegal, fraudulent,

22

or willfully oppressive sale of property may be liable to the borrower for wrongful

23

foreclosure. Yvanova, 62 Cal. 4th at 929; see also Chavez v. Indymac Mortg. Servs.,

24

219 Cal. App. 4th 1052, 1062 (2013). A foreclosure initiated by one with no authority to

25

do so is wrongful for purposes of such an action. Yvanova, 62 Cal. 4th at 929. Only the

26

original beneficiary, its assignee, or the agent of either of them has the authority to

27

instruct the trustee to initiate and complete a nonjudicial foreclosure sale. Id.

28

Where – as here – a borrower asserts that an assignment was ineffective, a
17

1

question often arises about the borrower's standing to challenge the assignment – a

2

transaction to which the borrower is not a party. In Yvanova, as explained above, the

3

California Supreme Court held that a borrower has standing to sue for wrongful

4

foreclosure in such a situation, but only where an alleged defect in the assignment

5

renders the assignment void rather than voidable. “Unlike a voidable transaction, a void

6

one cannot be ratified or validated by the parties to it even if they so desire.” Id. at 936.

7

The court disapproved Jenkins “to the extent [it] held borrowers lack standing to

8

challenge an assignment of the deed of trust as void.” Id. at 939 n.13. The court added,

9

however, that “Jenkins' rule may hold as to claimed defects that would make the

10

United States District Court
Northern District of California

11

assignment merely voidable . . ." Id. at 939.
Like the plaintiffs in the present case, the plaintiff in Yvanova alleged that the

12

assignment of her deed of trust into a securitized trust was void because the assignment

13

occurred after the trust's closing date, making the subsequent foreclosure wrongful.

14

Yvanova, 62 Cal. 4th at 925. However, the Yvanova court expressly declined to address

15

that argument: “We did not include in our order the question of whether a postclosing

16

date transfer into a New York securitized trust is void or merely voidable, and . . . we

17

express no opinion on the question here.” Id. at 931. Instead, the court remanded the

18

case for reconsideration of whether the plaintiff could amend her complaint to state a

19

cause of action for wrongful foreclosure.

20

Two recent California Court of Appeal decisions – Yhudai v. Impac Funding Corp.,

21

1 Cal. App. 5th 1252 (2016) and Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App.

22

4th 808 (2016) – considered the question the California Supreme Court left open in

23

Yvanova. The facts in Yhudai and Saterbak are similar to those in the present case. The

24

deeds of trust in both cases named MERS as the beneficiary, as nominee for the lenders.

25

Yhudai, 1 Cal. App. 5th at 1254; Saterbak, 245 Cal. App. 4th at 811. The deeds of trust

26

in both cases were sold to securitized investment trusts formed under New York law, and

27

in both cases, MERS, as nominee for the lenders, executed and recorded assignments of

28

the deeds of trust into the securitized trusts after the closing date of the trusts. Id.
18

The plaintiffs in both cases challenged foreclosures on the ground that MERS'

1
2

untimely assignments of the deeds of trust into the securitized trusts were void. Id. Both

3

courts considered the ruling in Yvanova, and then affirmed orders sustaining demurrers

4

without leave to amend, concluding that the borrowers lacked standing to challenge

5

assignments that were merely voidable. Yhudai, 1 Cal. App. 5th at 1259; Saterbak, 245

6

Cal. App. 4th at 815.

7

Subsequent cases have relied on Yhudai and/or Saterbak for the propositions that

8

the borrower under a deed of trust may challenge a nonjudicial foreclosure on the ground

9

that the foreclosing party is not a valid assignee of the original lender only if the alleged
assignment is void, but not if the assignment is merely voidable; and that under New York

11
United States District Court
Northern District of California

10

law (the law that applies to the PSA at issue here) an assignment of a deed of trust to a

12

real estate mortgage investment conduit (REMIC) trust after the closing date under the

13

securitization agreement is merely voidable rather than void, and thus the borrower under

14

the deed of trust cannot rely on the late assignment to challenge the nonjudicial

15

foreclosure, even assuming that the assignment was “robo-signed” in that it was signed

16

by a person without legal or corporate authority. See e.g., Mendoza v. JPMorgan Chase

17

Bank, N.A., 6 Cal. App. 5th 802, 811-17, 819-20 (2016).
In short, a post-closing assignment of a loan to an investment trust renders the

18
19

assignment voidable, not void. Mendoza, Yhudai, Saterbak, and unreported decisions

20

issued since Yvanova, have rejected the reasoning underlying Glaski’s holding that a

21

defective assignment of a deed of trust into a securitized trust renders the assignment

22

void. See Mendoza, 6 Cal. App. 6th at 811-17; Yhudai, at 1259; Saterbak, at 815 n.5.2

23

The weight of authority now holds that an untimely assignment to a securitized trust,

24

made after the securitized trust's closing date, is not void but merely voidable. See

25

Saterbak, 245 Cal. App. 4th at 815; Yhudai, 1 Cal. App. 5th at 1259; see also Rajamin,

26

757 F.3d at 88-89. Likewise, any failure to comply with the terms of the PSA renders

27
2

28

Saterbak is distinguishable on the basis that it involved a pre-foreclosure challenge. Id.
at 815.
19

1

Defendants' acquisition of plaintiffs' loan merely voidable by the trust beneficiary, rather

2

than void. Saterbak, 245 Cal. App.4th at 815; see also Rajamin, 757 F.3d at 88-89.

3

E.

4

Supplemental Briefing in the Present Case
Following the remand of the present case, this court ordered supplemental briefing

5

on the effect of the Yvanova decision on the order dismissing the SAC. Defendants filed

6

their supplemental brief on November 2, 2016. They make three main arguments. First,

7

they assert that the "narrow" holding in Yvanova – that a borrower "has standing to claim

8

a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing

9

party purportedly took a beneficial interest in the deed of trust was not merely voidable
but void", id., 62 Cal. 4th at 942 – is inapplicable here because plaintiffs failed to plead a

11
United States District Court
Northern District of California

10

"void" loan assignment. They note that the court in Yvanova specifically declined to rule

12

on the question whether a post-closing date transfer into a New York securitized trust is

13

void or merely voidable, which they argue means that Yvanova recognizes borrower

14

standing only where the defect in the assignment renders the assignment void (and not

15

merely voidable).

16

Here, defendants assert, plaintiffs argued in opposition to the motion to dismiss

17

the SAC that their "void" loan transfer theory was premised on Glaski, which (as

18

explained above) held that an untimely loan assignment to a loan trust governed by a

19

PSA to which New York law applies, is "void" under EPTL § 7-2.4. However, defendants

20

argue, the Second Circuit in Rajamin rejected Glaski's interpretation of § 7-2.4. They

21

note further that the Saterbak court concluded, relying on Rajamin, that non-compliance

22

with a PSA closing-date term would render an assignment "merely voidable," rather than

23

void, see Saterbak, 245 Cal. App. 4th at 815, and that the Yhudai court, also relying on

24

Rajamin, similarly held that "a postclosing assignment of a loan to an investment trust

25

that violates the terms of the trust renders the assignment voidable, not void, under New

26

York law[,]” Yhudai, 1 Cal. App. 5th at 1259.

27
28

Defendants contend that every federal appellate court to consider this issue has
followed Rajamin's interpretation of § 7-2.4, including the Ninth Circuit. They cite
20

1

Barcarse v. Cent. Mortg. Co., 661 Fed. Appx. 905, 906 (9th Cir. 2016) ("Under New York

2

law, to which the Barcarses claimed the PSA was subject, these alleged violations of the

3

trust agreement would make the transfers voidable, not void"); and Morgan v. Aurora

4

Loan Servs., LLC, 646 Fed. Appx. 546, 550 (9th Cir. 2016) ("an act in violation of a trust

5

agreement is voidable – not void – under New York law . . . ."); and also cite decisions

6

from the Fifth, Seventh, and Eighth Circuits. Finally, defendants note, on July 13, 2016,

7

the California Supreme Court denied the petition for review in Saterbak (and also denied

8

the petition for depublication) and on October 26, 2016, denied the petition for review in

9

Yhudai.

10

In their second main argument, defendants contend that while Yvanova noted that

United States District Court
Northern District of California

11

California law requires a plaintiff to allege facts establishing "a tender of the amount of

12

the secured indebtedness, or an excuse of tender" in order to state a claim for wrongful

13

foreclosure, the court expressed no opinion as to whether the plaintiff “must allege tender

14

to state a cause of action for wrongful foreclosure under the circumstances of this case."

15

See id., 62 Cal. 4th at 929 n.4. Defendants assert, therefore, that plaintiffs' claims are

16

still barred by their failure to tender.

17

Under California law, a valid and viable tender of the indebtedness owing is

18

essential to an action to cancel a voidable sale under a deed of trust, see Saldate v.

19

Wilshire Credit Corp., 686 F.Supp. 2d 1051, 1059-60 (E.D. Cal. 2010) (citing cases), and

20

that this tender requirement applies to any cause of action that is "implicitly integrated"

21

with the challenged foreclosure sale, see Arnolds Mgmt Corp. v. Eischen, 158 Cal. App.

22

3d 575, 580 (1984). Defendants argue that the court correctly ruled in the order

23

dismissing the SAC that "[p]laintiffs' inability to tender bars their attempt to set aside the

24

foreclosure sale . . . , and every claim asserted in the SAC is implicitly connected to

25

plaintiffs' attempt to set aside the foreclosure sale." See Dec. 17, 2013 Order at 9. Thus,

26

they contend, since Yvanova made no ruling regarding the tender requirement, no

27

change to this court's ruling is warranted.

28

In their third main argument, defendants contend that while Yvanova noted that
21

California courts require a plaintiff attacking a foreclosure sale to "show prejudice," the

2

court declined to decide whether the allegations in that case established prejudice

3

sufficient to state a claim. See id., 62 Cal. 4th at 929 n.4. Defendants assert that a party

4

attacking a foreclosure sale must allege facts demonstrating a defect or irregularity in the

5

nonjudicial foreclosure process caused actual prejudice to their interests under the deed

6

of trust. In addition, defendants contend, while it is true that Yvanova disapproved

7

Jenkins (and two similar cases), it did so only "to the extent they held borrowers lacked

8

standing to challenge the assignment of a deed of trust as void," see id. at 939 n.13, and

9

expressly did not disapprove the other aspects of those cases, such as their holdings that

10

facts establishing prejudice must be alleged to state a claim attacking a foreclosure sale,

11
United States District Court
Northern District of California

1

see id. at 929 n.4.

12

Defendants contend that this court correctly ruled that "[p]laintiffs have not alleged

13

facts showing that any alleged irregularities in the process caused them any harm – in

14

particular, plaintiffs do not dispute the underlying debt, and do not dispute that they

15

defaulted on the payments" and that plaintiffs also failed to "allege any facts in the SAC

16

showing that they suffered a distinct prejudice as a result of the complained of

17

irregularities in the securitization process." Dec. 17, 2013 Order at 12-13. Defendants

18

argue that because the Yvanova court limited its holding to the issue of standing, and

19

made no ruling regarding the requirement that a party attacking a foreclosure sale must

20

plead facts showing an irregularity that caused them prejudice, no change to the court’s

21

ruling is required.

22

Plaintiffs filed their supplemental brief on December 16, 2016. Plaintiffs contend

23

that the SAC successfully alleged a void transaction, and that because they alleged a

24

void transaction, the tender rule does not apply. Plaintiffs agree with defendants that

25

under Yvanova, a borrower has standing to challenge an assignment only on the basis

26

that it is void – not on the basis that it is voidable. They claim, however, that Yvanova

27

"affirmed" Glaski on the issue of standing to sue, and they agree that Yvanova did not

28

decide the question whether a deed of trust transferred to a securitized trust after its
22

1
2

closing date becomes "void" (as opposed to merely "voidable").
In addition, plaintiffs claim that "[d]efendants' main argument stems from the

3

aftermath" of the reversal of the lower court's decision in Erobobo, but argue that it is a

4

"misstatement of the Glaski holding to state that Erobo [sic] invalidates Glaski."

5

According to plaintiffs, "[f]rom the very outset, Glaski was skeptical as to the extent it

6

should be bound by New York case law" and instead "felt that the entire decision hinged

7

on” an interpretation of EPTL § 7-2.4, “the statute that governs all New York trusts."

8

Plaintiffs contend that "[i]nsofar as Glaski cites the holding in Erobobo, it is only as part of

9

a desire to join 'those courts that have read the statute liberally." Thus, plaintiffs assert,
"the reversal of Erobobo does not affect the validity of Glaski, or of Yvanova's own

11
United States District Court
Northern District of California

10

reliance on Glaski, because Glaski was never bound to Erobobo.” They argue further

12

that defendants’ reliance on Yhudai is faulty for the same reason.

13

Plaintiffs contend that because Glaski was a California court's fair interpretation of

14

EPTL § 7-2.4, the ruling in that case “does not lose its impact” in the wake of Erobobo.

15

Moreover, they argue, Erobobo was reversed "on procedural grounds" – as the court

16

found that the plaintiff had "waived the defense of lack of standing." In any event,

17

plaintiffs argue, regardless of the outcome of Erobobo, what is important here is whether

18

the improper assignment of the Deed of Trust renders the loan void, as a matter of New

19

York law. They claim that under a literal reading of § 7-2.4, it does.

20

As for defendants’ citation to Saterbak and that court’s reliance on the Second

21

Circuit's decision in Rajamin for the proposition that the improper assignment of a deed of

22

trust to a securitized trust renders it voidable rather than void, plaintiffs contend that the

23

problem is that Glaski "did not rely on any matter of New York case law to reach its

24

holding." They assert that "Glaski still stands," and that part of its holding "affirms the

25

right of the California courts to interpret New York statutory law in cases where California

26

properties have been assigned to New York trusts." They claim that Glaski "rightly holds

27

that EPTL § 7-2.4 should be interpreted literally in order to achieve its desired effect."

28

In plaintiffs’ view, the statute is clear. They note that the word "voidable" does not
23

1

appear anywhere in the text of the statute, which provides that “if the trust is expressed in

2

the instrument creating the estate of the trustee, every sale, conveyance or other act of

3

the trustee in contravention of the trust, except as authorized by this article and by any

4

other provision of law, is void.” EPTL § 7-2.4. Thus, plaintiffs argue, because the

5

assignments were made after the closing date of the Trust, they are void under § 7-2.4,

6

and, because the assignments were void under that section, plaintiffs have standing,

7

even as non-parties, to challenge the assignments.

8

Plaintiffs also attempt to discredit the Rajamin decision, and particularly, its

9

rejection of Glaski, asserting that while the Glaski court considered the analysis of courts
around the country that "felt the way the Rajamin court did,” it decided to join the courts

11
United States District Court
Northern District of California

10

that had read § 7-2.4 literally. In addition, they contend, while it is true that numerous

12

courts have relied on Rajamin, the decision has “little” persuasive value, because it is a

13

decision by a federal appeals court interpreting state law – and, also in plaintiffs' view, its

14

analysis is "very sparse and lopsided" and "relies upon circular reasoning and a subtle

15

reframing of the issue." They argue that the Rajamin court did not find the word "void"

16

ambiguous, but rather improperly "re-wrote" the statute to use a different word –

17

"voidable."

18

Plaintiffs contend that "the only major issue that gave the Yvanova court pause

19

was the issue of whether or not a foreclosure sale had taken place."3 They argue that

20

because § 7-2.4 could have used "voidable" but opted to use only the word "void," courts

21

should not be reading the statute as though it also includes the word "voidable."

22

F.

Analysis
On reconsideration, the court finds that the SAC was properly dismissed for failure

23
24

to state a claim. This is so even though Yvanova disapproved Jenkins and other

25

California Court of Appeal decisions that the court previously cited in ruling that plaintiffs

26

did not have standing to sue for wrongful foreclosure.

27
3

28

This is not supported by a reading of Yvanova, which in any event was not faced with
deciding that issue.
24

1

A wrongful foreclosure is a common law tort claim to set aside a foreclosure sale,

2

or an action for damages resulting from the sale, on the basis that the foreclosure was

3

improper. Sciarratta v. U.S. Bank Nat'l Ass'n, 247 Cal. App. 4th 552, 561 (2016). “Mere

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technical violations of the foreclosure process will not give rise to a tort claim; the

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foreclosure must have been entirely unauthorized on the facts of the case.” Id. at 562

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(quotation omitted).

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As explained above, Yvanova holds that where a note and deed of trust have been

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transferred to a securitized trust, and the loan goes into default, a borrower has standing

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to challenge a subsequent foreclosure if the prior transaction was void – but not if it is
voidable. Yvanova did not rule on whether the securitization process rendered the

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United States District Court
Northern District of California

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transaction void or voidable, but cases both prior to, and especially subsequent to,

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Yvanova, have held that failure by the parties to the securitization to comply with the

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provisions of the PSA renders the transaction voidable but not void. This includes any

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late assignments of beneficial interest in a particular loan which is being placed into the

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securitized trust. Thus, under Yvanova, and subsequent decisions, because plaintiffs in

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this case have alleged no void transaction, but only (at best) a voidable transaction, they

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do not have standing to assert a claim of wrongful foreclosure.

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While § 7-2.4 states that a trustee's act contravening the terms of a trust is void,

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the “weight of New York authority” is that “unauthorized acts by trustees are generally

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subject to ratification by the trust beneficiaries,” and are therefore merely voidable at the

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beneficiary's election. Rajamin, 757 F.3d at 88. Indeed, Rajamin expressly rejected

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Glaski 's contrary interpretation of the statute, explaining “we are not aware of any New

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York appellate decision that has endorsed this interpretation of § 7–2.4.” Id. at 90.

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Moreover, as discussed above, the unpublished trial court opinion Glaski cited to

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support its interpretation of § 7-2.4 has been reversed. See Erobobo, 127 A.D.3d at

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1178. Based on this authority, the Saterbak court declined to follow this aspect of Glaski

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and concluded that “the alleged defects [ – the assignment of a deed of trust to a

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securitized mortgage investment trust after it closed – ] merely render the assignment
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voidable.” Saterbak, 245 Cal. App. 4th at 815 & n.5. Similarly, the Yhudai court held

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that "[b]ecause the decision upon which Glaski relied for its understanding of New York

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law [Erobobo] has not only been reversed, but soundly and overwhelmingly rejected, we

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decline to follow Glaski on this point." Yhudai, 1 Cal. App. 5th at 1259 (citing Saterbak).

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The Mendoza court also rejected Glaski's literal interpretation of § 7-2.4, based on

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the reversal of Erobobo and also based on the language in Rajamin. Id., 6 Cal. App. 5th

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at 812-15. The court noted that New York courts “continue to uphold" the rationale set

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forth in Rajamin – that “a borrower does not have standing to challenge an assignment

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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[,]” and that as a

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Northern District of California

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consequence, “an assignment after the publicized closing date is voidable, not void,

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under New York law.” Id. at 813 (citations omitted).

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Post-Yvanova decisions by the Ninth Circuit support defendants’ argument that the

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alleged violations of the trust agreement render the assignments voidable, but not void.

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See Zeppeiro v. GMAC Mortg., LLC, 662 Fed. App'x 500, 501 (9th Cir. 2016); Barcarse,

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661 Fed. Appx. at 906; Morgan, 646 Fed. Appx. at 550. And finally, numerous district

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court decisions have adopted similar conclusions. See, e.g., Avila v. Wells Fargo Bank¸

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2016 WL 7425925 at *4 (N.D. Cal. Dec. 23, 2016) (“This order follows the prevailing trend

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and rejects Glaski as a misstatement of New York law.”); Jacinto v. Ditech Fin. LLC, 2016

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WL 6248901 at *3 (N.D. Cal. Oct. 26, 2016) (an act in violation of a trust agreement, such

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as a PSA, is voidable, not void, under New York law); Patel v. U.S. Bank, N.A., 2016 WL

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4013 861 at *1-3 (N.D. Cal. July 27, 2016) (finding that “the weight of the authority

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demonstrates that an assignment done in violation of the PSA is merely voidable, not

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void, under New York law”); Spangler v. Selene Fin. LP, 2016 WL 3951654 at *3-4 (N.D.

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Cal. July 22, 2016) ("Yvanova does not stand for the proposition that a wrongful

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foreclosure action can be based on an assignment that occurs after the closing date.");

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Meixner v. Wells Fargo Bank, N.A., 2016 WL 3277262 at *7 (E.D. Cal. June 14, 2016)

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("Glaski is an outlier and not widely accepted law.").
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CONCLUSION

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In accordance with the foregoing, the court DENIES reconsideration of the order of

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dismissal. The January 2, 2014 judgment is VACATED. The court will issue an

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amended judgment as of the date of this order.

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IT IS SO ORDERED.

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Dated: March 22, 2017

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__________________________________
PHYLLIS J. HAMILTON
United States District Judge

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United States District Court
Northern District of California

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