- June 14, 2011
- Posted by: Christopher Hanson
- Category: Foreclosures
A week away for vacation, and look what happens!
As we’ve pointed out before, there is a conflict between California Appellate Courts and the Federal Bankruptcy Courts in California with respect to the authority MERS has to assign notes and deeds of trust. Looks like the California Appellate Courts are going to hold their position!
In a June 2011 case, Ferguson v. Avelo Mortgage, LLC (2011), Cal.App.4th , (2nd District, case B223447), the Court addressed the conflict directly, and said, in essence: We don’t care what the Federal Bankruptcy Courts have to say, we’re not stuck with their rulings, and we won’t follow them.
Specifically, the Court said:
“Appellants cite two federal cases for the proposition that MERS, as the nominee of the lender under a deed of trust, does not possess the underlying promissory note and cannot assign it, absent evidence of an explicit authorization from the original lender. (See Saxon Mortgage Services, Inc. v. Hillery (N.D. Cal. Dec. 9, 2008, No. C-08-4357) 2008 U.S. Dist. LEXIS 100056; see also In re Agard (Bankr. E.D. N.Y. Feb. 10, 2011, No. 10-77338-reg) 2011 Bankr. LEXIS 488.) Not all courts agree on this issue and appellants do not distinguish nor address other cases that have upheld MERS’s ability to assign a mortgage. (See US Bank, N.A. v. Flynn (N.Y.Sup. 2010) 897 N.Y.S.2d 855, 859 [assignee of MERS has standing to initiate foreclosure proceeding because where “an entity such as MERS is identified in the mortgage indenture as the nominee of the lender and as the mortgagee of record and the mortgage indenture confers upon such nominee all of the powers of such lender, its successors and assigns, a written assignment of the note and mortgage by MERS, in its capacity as nominee, confers good title to the assignee and is not defective for lack of an ownership interest in the note at the time of the assignment”]; see also Crum v. LaSalle Bank, N.A. (Ala. Civ. App. Sep. 18, 2009, No. 2080110) 2009 Ala. Civ. App. LEXIS 491 at pp. *6-7.) We are not bound by federal district and bankruptcy court decisions, and the cases cited by appellants are in direct conflict with persuasive California case law.”
So much for the brethren following one another. But what the hell, those pesky bankruptcy judges don’t know what they’re doing anyway. Sure.
Then the California Court addressed what other California Courts had to say on the issue by reviewing the earlier Gomes decision.
“The [Gomes] court rejected Gomes’s argument that MERS lacked authority to initiate the foreclosure procedure because the deed of trust explicitly provided MERS with the authority to do so. The court found that the “deed of trust contains no suggestion that the lender or its successors and assigns must provide Gomes with assurances that MERS is authorized to proceed with a foreclosure at the time it is initiated.” (Id. at p. 1157.) Thus, Gomes acknowledged MERS’s authority to foreclose by entering into the deed of trust.”
After agreeing with the Appellants’ claim that the Notice of Default was indeed defective, the Ferguson Court ignored the strict compliance with statutory requirements Courts are requiring of borrowers, and gave Banks this gift:
“Appellants offer no authority for the proposition that the defective nature of the initial notice of default corrupted all subsequent steps in the nonjudicial foreclosure proceeding such that the sale was void, not merely voidable.”
Why is that important?
Because “voidable” sales require a borrower to tender full payment as part of the complaint to set aside a foreclosure. “Void” sales do not.
Looks like the Banks won another round. The result may well have been different if the borrower/appellant had had a lawyer – rather than try to argue this appeal herself.