The Didak Law Office files Amicus Curiae in Support of Yvanova's appeal to the California Supreme Court case S218973 - Amicus filed April 2015

8/9/2019 The Didak Law Office files Amicus Curiae in Support of Yvanova's appeal to the California Supreme Court case S21…

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S218973

IN THE SUPREME COURT OF CALIFORNIA ______________________

TSVETSANA YVANOVA,

Plainti ff and Petitioner

vs.

NEW CENTURY MORTGAGE CORPORATION, etc., et al.,

Defendants and Respondents.

____________________________________________

Los Angeles Superior Court Case No. LC 097218Honorable Russell Steven Kussman, Judge

Dept. NW “Q”

______________________

PETITION FOR LEAVE TO FILE BRIEF OF AMICUS CURIAE;

BRIEF OF AMICUS CURIAE

______________________

MARK F. DIDAK (SBN 104059)LAW OFFICE OF MARK F. DIDAK

520 Burnside Avenue, No. 9JLos Angeles, California 90036

Telephone: (310) 433-4489

[email protected] Attorneys for Amicus Curiae

mailto:[email protected]:[email protected]:[email protected]


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TABLE OF CONTENTS

Page

CERTIFICATE OF INTERESTED ENTITIES OR PERSONS ......................................... 1

APPLICATION OF MARK F. DIDAK AND THE LAW OFFICE OFMARK F. DIDAK FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE INSUPPORT OF PLAINTIFF AND PETITIONER TSVETSANA YVANOV .................... 2

TABLE OF CONTENTS ...................................................................................................... i

TABLE OF AUTHORITIES ............................................................................................. iii

I. Introduction and Statement of the Issue ................................................................... 4

II. Summary of Argument ............................................................................................. 4

III. Background: The Court of Appeal’s Holding Below .............................................. 4

IV. Legal Argument: A Borrower Has Standing to Challenge aVoid Assignment of Her Mortgage Note and Deed of Trust, in Orderto Ensure That Her Mortgage Contract Is Being Enforced by theOther Party to Her Mortgage Contract Rather Than an Imposter ............................ 5

A. Controlling California Authority Places the Burden of Proving a ValidAssignment of a Real Property Mortgage on the Putative Assignee ............. 5

B. California’s Nonjudicial Foreclosure Statutes and Cases Interpreting Them Permit Borrowers to Challenge the Authority ofThose Attempting to Enforce Their Mortgage Obligations Wherethe Borrower Alleges Facts Which, If Proved, Demonstrate theParty Attempting to Enforce the Obligation Is Not the Note Owneror Its Authorized Representative ................................................................... 9

1. Borrowers Have Standing Under Existing Case Law Where, As

Here, Their Lawsuits Are Consistent With the Policies Behind

California’s Nonjudicial Foreclosure Statutes ............................................... 9

2. The Legislature Recently Reaffirmed Borrowers’ Standing ............ 10


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C. Putative Assignees Must Prove They Received a Valid Assignmentto Foreclose Judicially; There Is No Principled Basis for TreatingPutative Assignees Differently In Nonjudicial Foreclosures ...................... 12

D. Borrowers Have Standing Under Article III of the

United States Constitution ........................................................................... 13

E. The Decision Below Conflicts With Other Cases HoldingBorrowers Have Standing ............................................................................ 13

F. Plaintiff’s Trust Deed Expressly Authorizes This Lawsuit ......................... 16

G. Courts Routinely Allow Litigants to Draw Factual Allegationsand Evidence from Contracts to Which Those Litigants Are NotParties, and Which They Have No Standing to Enforce or Attack ............. 17

H. The Notion That a Borrower Lacks Standing Under TheseCircumstances Defies Common Sense ........................................................ 18

I. Basic Legal Principles Concerning What Constitutes Proof of aValid Transfer of a Mortgage Note and Deed of Trust ............................... 18

1. Situations in Which a Transfer Is Invalid ......................................... 18

2. Requirements of a Valid Transfer .................................................... 19

a. Written Assignment Meeting the Requirements of

the Statute of Frauds ......................................................... 20

b. Negotiation and Delivery ................................................. 20

V. Respondents’ Answer Brief Fails to Address These Issues .................................... 24

VI. Conclusion .............................................................................................................. 24

Rule 8.204(c)(1) Certification ............................................................................................ 26


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iii

TABLE OF AUTHORITIES

Cases Page(s)

Adams v. Madison Realty & Dev., Inc. (3d Cir. 1988) 853 F.2d 163 ....... 20, 21, 22, 23, 24

Adler v. Newell (1895) 109 Cal. 42.................................................................................. 8, 9

Ahern v. McCarthy (1895) 107 Cal. 382 .............................................................................. 8

Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226 ............................................... 9

Ball v. DBNTC (W.D. Mo. 2012) 2012 U.S. Dist. LEXIS 17978 ............................... 13, 14

Bayview Loan Servicing, LLC v. Nelson (Ill. Ct. App. 2008) 382 Ill.App.3d 1184 .......... 15

Bunting v. Saltz (1890) 84 Cal. 168 ....................................................................... 19, 20, 21

California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053 ........................................ 9

Chilton v. Fed. Nat. Mortgage Assn. (E.D. Cal. 2009) 2009 WL 5197869 ...................... 10

Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284 ......... 5, 6, 7, 8, 12, 17, 22, 23, 25

Coon v. Shry (1930) 209 Cal. 612 ........................................................................................ 8

Creative Ventures, LLC v. Jim Ward & Assocs. (2011) 195 Cal.App.4th 1430 .......... 20, 21

Deutsche Bank National Trust Co. v. Ramotar (Sup.Ct. N.Y. 2011) 2011 WL 66041 ..... 15

First American Title Ins. Co. v. XWarehouse Lending Corp.

(2009) 177 Cal.App.4th 106 .............................................................................................. 8

Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 .................................... 18

Friends of the Earth, Inc. v. Laidlaw. Entl. Servs. (TOC), Inc.

(2000) 528 U.S. 167 ......................................................................................................... 13

Garfinkle v. Superior Court (1978) 21 Cal.3d 268 ............................................................. 8

Glaski v. Bank of America, etc. (2013) 218 Cal.App.4th 1079 .......................................... 2


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Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 ....................... 7, 9

Haug v. Riley (1897) 101 Ga. 372, 20 S.E. 44 ................................................................... 21

Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495 ..................... 5

Holmes v. Warren (1904) 145 Cal. 457 .............................................................................. 8

In re: Palmdale Hills Property, LLC (9th Cir. 2011) 654 F.3d 868 ................................. 13

In re Veal (9th Cir. B.A.P. 2011) 450 B.R. 897................................................................... 6

Javaheri v. JP Morgan Chase Bank, N.A. (C.D. Cal. 2011) CV10-08185 ODW (FFMx) ..................................................... 10, 14, 16

Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 .......................... 5, 19

Kemp v. Countrywide Home Loans, Inc. (Bk. D. N.J. 2010) 440 B.R. 624 ................ 14, 15

Keshtgar v. U.S. Bank, N.A. (2014) 226 Cal.App.4th 1201 ............................................. 2, 8

Mata v. Citimortgage, etc., et al. (C.D. Cal. 2011) 2011 WL 4542723 .................................................................................. 6

McLaughlin v. Wells Fargo Bank (C.D. Cal. 2013) 2013 WL 1164432 ..................... 13-14

Melendrez v. D&I Investment, Inc. (2005) 127 Cal.App.4th 1238 ...................................... 9

Naranjo v. SBMC Mortgage (S.D. Cal. 2012) 2012 WL 3030370 ........................ 14, 15, 16

Ohlendorf v. Amer. Home Mort. Servicing

(E.D. Cal. 2010) 2010 WL 31098 .............................................................................. 10, 14

Ord v. McKee (1855) 5 Cal. 515 .......................................................................................... 8

Peng v. Chase Home Finance LLC (2014) 2d Dist. Case No. B245436 ........................... 18

Pollard v. Saxe and Yolles Dev. Co. (1974) 12 Cal.3d 374 ............................................... 20

Pribus v. Bush (1981) 118 Cal.App.3d 1003 ............................................. 20, 21, 22, 23, 24

Secrest v. Security Nat. Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544 ........ 19


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Shaw v. Railroad Company Shaw v. Railroad Co.(1879) 101 U.S. 557, 563-564, 25 L.Ed. 892 .................................................................. 21

Todd v. Todd. (1912) 164 Cal. 255 ...................................................................................... 8

U.S. Bank National Assn. v. Ibanez (Sup.Ct. Mass. 2011) 458 Mass. 637 ........................ 14

Wells Fargo Bank, N.A. v. Erobobo (Sup.Ct. N.Y. 2013) 972 N.Y.S.2d 147 ....... 14, 15, 19

Yvanova v. New Century Mortgage Corp., 2d Dist. Case No. B247188 ......................... 2, 5

Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112 .................................................... 10

Constitutions, Statutes and Court Rules

U. S. Constitution, Article III ............................................................................................. 13

Civil Code § 1624 .............................................................................................................. 19

Civil Code § 2923.55 ................................................................................................... 10, 11

Civil Code § 2924 .............................................................................................................. 10

Civil Code § 2924.12 ......................................................................................................... 12

Civil Code § 2924.17 ......................................................................................................... 11

Civil Code § 2943 ........................................................................................................ 10, 11

Civil Code § 2944 .............................................................................................................. 20

Civil Code § 3201 .............................................................................................................. 20

Civil Code § 3202 .............................................................................................................. 22

Civil Code § 3440 ........................................................................................................ 19, 20

Commercial Code § 9604 .................................................................................................. 20

Fed.R.Civ.Proc. 12(b)(6).................................................................................................... 15

California Rule of Court 8.204(c)(1) ................................................................................. 26


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California Rule of Court 8.520(f) ........................................................................................ 2

Treatises

4 W. Hawkland & L. Lawrence,

Uniform Commercial Code Series § 3-202:05 (1984) ............................................... 23, 24

Restatement Property 3d, § 5.4(c),Transfer of Mortgages and Obligations Secured By Mortgages ......................................... 8

Roger Bernhardt, California Mortgages and Deeds of Trust,and Foreclosure Litigation, § 1.26 (4th ed. 2009)a (1940) 15 Cal.2d 82 ................. 19, 21

5 Witkin, Cal. Proc. (5th ed. 2008) Pleading, § 675 ......................................................... 12

5 Witkin, Cal. Proc. (5th ed. 2008) Pleading, § 676 ......................................................... 12


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CERTIFICATE OF INTERESTED ENTITIES OR PERSONS

Mark F. Didak, dba the Law Office of Mark F. Didak (“Petitioner”) is a lawyer

licensed to practice law in the State of California. Pursuant to California Rule of

Court 8.208, Petitioner hereby states that Petitioner’s law practice is wholly owned byPetitioner, and no other entity or person has an ownership of 10% or more therein.

Respectfully submitted,

DATED: April 15, 2015 LAW OFFICE OF MARK F. DIDAK

Mark F. Didak _________________________________MARK F. DIDAK

Attorneys for Amicus Curiae


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APPLICATION OF MARK F. DIDAK AND THE LAW OFFICE OF MARK F.

DIDAK FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE IN SUPPORT

OF PLAINTIFF AND PETITIONER TSVETSANA YVANOVA

TO THE HONORABLE CHIEF JUSTICE AND ASSOCIATE JUSTICES OF

THE SUPREME COURT OF CALIFORNIA:

The undersigned respectfully requests permission to file a brief as amicus

curiae in the above-captioned matter under California Rules of Court, rule 8.520(f) in

support of Plaintiff and Petitioner Tsvetsana Yvanova.

Petitioner is a California lawyer who has handled several recent cases raising

many of the same issues involved in the instant case, including Dillenberg v. U.S.

Bank, N.A., et al., Second District Court of Appeal case no. B246432 (now final), and

Mata v. Citimortgage, Inc., United States District Court, Central District of California

case no. CV 10-9167 DSF (PLAx) (now settled), and expects to handle similar cases

in the future. In July, 2014 Petitioner wrote to urge review of the instant case, a letter

we believe was of significant value to the Court in considering and ultimately

granting Ms. Yvanova’s Petition for Review.

In October, 2013, we wrote to oppose depublication of the Court of Appeal’s

opinion in Glaski v. Bank of America, etc., (2013) 218 Cal.App.4th 1079, Cal. Sup.

Ct. case no. S213814, which the Yvanova decision criticizes, but which we believe

was correctly decided. More recently, we wrote separate letters requesting

depublication of the Court of Appeal’s decisions in Yvanova and Keshtgar v. U.S.

Bank, N.A., (2014) 226 Cal.App.4th 1201, Second District Court of Appeal case no.

B246193.

Petitioner has been a civil litigator since becoming a member of the California

bar in 1981, and at various points during his 34 years of practice has represented title

insurers and their insureds, and mortgagors on mortgage-related issues. Since

approximately 2010, Petitioner has focused most of his time litigating issues relating


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to foreclosures of securitized mortgages, including conducting extensive legal

research and analysis, and writing numerous briefs as well as several articles on these

subjects published in the Los Angeles Daily Journal. Petitioner has focused primarily

on attempting to get the California Supreme Court, and California Courts of Appeal,to address the issues raised in this case, and the related issues in the accompanying

Brief of Amicus Curiae. Petitioner authored an amicus brief that was accepted by the

Supreme Court in Buss v. Superior Court , (1997) 16 Cal.4th 35. Petitioner is AV-

rated, and his qualifications and the numerous appeals he has handled can be reviewed

on his website, didaklaw.com.

Pursuant to California Rules of Court, rule 8.520(f)(4), Petitioner certifies that

no party or counsel for a party has authored the proposed brief in whole or in part.

Except for Petitioner himself, no party, counsel for a party, or other person made a

monetary contribution to fund the preparation or submission of the following amicus

brief.

The proposed brief follows.

Respectfully submitted,


Mark F. Didak _________________________________MARK F. DIDAKAttorneys for Amicus Curiae


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I. INTRODUCTION AND STATEMENT OF THE ISSUE

The Issue: In an action for wrongful foreclosure on a deed of trust securing a

home loan, does the borrower have standing to challenge an assignment of the note

and deed of trust on the basis of defects allegedly rendering the assignment void?Answer: Yes.

II. SUMMARY OF ARGUMENT

Long-established and controlling principles of mortgage law protect the rights

of real property owners by ensuring that only a lender/mortgagee or its valid

successor may enforce the security agreement contained in a mortgage or deed of

trust. These rules include strict requirements that must be met to perfect an attempted

assignment of a mortgage note and trust deed. When these requirements are fulfilled,

the assignment is valid, and is therefore binding on the borrower. When these

requirements are not fulfilled, however, the putative assignment is void, and the

putative assignee remains a stranger to the loan contract between the lender and the

borrower. A borrower has standing to bring a legal action to prevent such a stranger

from taking her property.

The unarguable legal premise of Ms. Yvanova’s lawsuit is that a borrower’s

obligations are determined by the borrower’s loan contract. Ms. Yvanova contracted

to make her mortgage payments to the owner of legal title to her debt, or the legal

owner’s authorized agent. Her loan contract does not allow strangers to demand or

collect payments or — worse — foreclose under color of a trust deed they have no right

to enforce and which clouds plaintiff ’s title. Like other borrowers, plaintiff did not

“agree to pay somebody”— rather, she agreed to pay a particular bank on particular

terms, that bank’s valid successor, or their authorized agents.

III. BACKGROUND: THE COURT OF APPEAL’S HOLDING BELOW

The decision below holds that “[a]n impropriety in the transfer of a promissory

note would . . . affect only the parties to the transaction, not the borrower. The

borrower thus lacks standing to enforce any agreements relating to such transactions.”


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Yvanova v. New Century Mortgage Corporation, et al., Second District Court of

Appeal case no. B247188 at p. 7, citing Jenkins v. JPMorgan Chase Bank, N.A.

(2013) 216 Cal.App.4th 497, 515 and Herrera v. Federal National Mortgage Assn.

(2012) 205 Cal.App.4th 1495, 1507 (internal quotation marks omitted). This holdingimplicitly assumes that instead of being required to pay their lender or its successor,

mortgage borrowers have some generalized obligation to pay someone, even someone

who never acquired good title to the note. The Court of Appeal articulates no basis

for this special preference for the mortgage industry. No other type of contract is

presumed to be enforceable by someone who may be a pretender. Indeed, to the

extent mortgages historically were treated differently from other contracts, the

differences always favored the special interests of the property-owner over the

commercial interests of the lender, exactly the opposite of the implicit principle

underlying the Court of Appeal’s holding.

As we explain, the appellate court’s broad holding that a homeowner may not

challenge the authority of a foreclosing entity is directly contrary to controlling

California Supreme Court authority and centuries of common law concerning

mortgages.

IV. LEGAL ARGUMENT: A BORROWER HAS STANDING TO

CHALLENGE A VOID ASSIGNMENT OF HER MORTGAGE NOTE

AND DEED OF TRUST, IN ORDER TO ENSURE THAT HER

MORTGAGE CONTRACT IS BEING ENFORCED BY THE OTHER

PARTY TO HER MORTGAGE CONTRACT RATHER THAN AN

IMPOSTER

A. Controlling California Authority Places the Burden of

Proving a Valid Assignment of a Real Property Mortgage on

the Putative Assignee.

In Cockerell v. Title & Ins. Co., (1954) 42 Cal. 284, 293 — a case involving the

right to proceeds from the nonjudicial foreclosure sale of real property — the Supreme


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Court held that a party claiming rights as an assignee of a mortgage note bears the

burden of proving it received a valid assignment by “clear and positive evidence,” and

that courts are prohibited from presuming such assignments are valid : “. . . [T]he

measure of sufficiency requires that the evidence of assignment be clear and positiveto protect an obligor from any further claim by the primary obligee . . . .” Id., 42

Cal.2d at p. 292, citations omitted. One who fails to prove it received a valid

assignment of the mortgage note has “no standing to complain” about not receiving

proceeds of the note or a sale of property securing it. Cockerell, supra, 42 Cal.2d at p.

293. Hence, it is those who cannot prove they received a valid mortgage assignment

who lack standing, not borrowers alleging absent or defective assignments. See also

Mata v. Citimortgage, etc., et al. (C.D. Cal. 2011) 2011 WL 4542723, *2 (because

Cockerell requires a party claiming rights under an assignment to prove a valid

assignment, borrowers stated a claim for declaratory relief as to whether their servicer

was entitled to collect their monthly mortgage payments where defendants refused

borrowers’ demands to provide such proof); see also In re Veal (9th Cir. B.A.P. 2011)

450 B.R. 897, 908, 913 (financial institutions that were not initial note payees were

required to demonstrate facts to establish prudential standing to sue to enforce it, in

turn requiring them to demonstrate a factual basis for claiming the substantive legal

right to enforce the note).

Since an assignee acquires no better rights than those belonging to the assignor

(Cockerell, supra, 42 Cal.2d at p. 293), the validity of claimed assignments of a

borrower’s mortgage note depends on the validity of each purported sale of the note.

Defendants must prove a valid assignment to each assignee in the chain of title to the

note, including the authority of any indorser “to bind that company.” Id. A court may

not simply assume these facts: “Such assumptions, would indeed, constitute a

‘dangerous innovation.’” Id .

An entity who did not receive a valid assignment of the debt cannot recover on

the debt. Cockerell. It therefore follows that a borrower who has not paid such an


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entity is not in default . Requiring the borrower to pay such an entity exposes the

borrower to the risk of double-payment if payment is demanded by another party

actually entitled to it. (See discussion at pp. 23-24, infra.) Indeed, that is precisely

why Cockerell requires a party claiming under an assignment to prove a validassignment by clear and positive evidence. Id ., 42 Cal.2d at p. 292, citations omitted

(assignee must provide “clear and positive” proof of a valid assignment “to protect an

obligor from any further claim by the primary obligee . . . .”).

Worse, allowing an entity without actual authority to enforce the obligation to

take a borrower’s home through foreclosure sanctions theft of the home.

For these reasons, a borrower has standing to bring an action to challenge the

foreclosing entity’s authority where, as here, the borrower alleges facts which, if

proved, show the foreclosing party has no right to enforce the debt. (See discussion at

pp. 9-10, infra concerning the statement in Gomes v. Countrywide Home Loans, Inc.

(2011) 192 Cal.App.4th 1149, 1154, fn. 5, that “‘California courts have repeatedly

allowed parties to pursue additional remedies for misconduct arising out of a

nonjudicial foreclosure sale when not inconsistent with the policies behind the

statutes.’”)

As we explain below (see Argument H, Section 2a, infra, p. 20), a mortgage

assignment must be made pursuant to a writing meeting the requirements of the

Statute of Frauds.1 Evidence an assignee must provide to meet Cockerell ’s demand

for “clear and positive” proof of such a writing necessarily includes contracts for sale

of the note to which the borrower is not a party, such as mortgage sales agreements

and/or securitization agreements. The rule adopted by the court below, however, bars

lawsuits by borrowers who might rely on securitization agreements or other contracts

as evidence, thereby treating mortgage transfers via such agreements as presumptively

1 In addition, the mortgage note must be endorsed by the assignor anddelivered to the assignee. Elements of a valid mortgage assignment are discussed inArgument I, section 2, infra, pp. 20-24.


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valid in direct contravention of the holding in Cockerell . The Court of Appeal’s

decision below is the first published California appellate decision adopting this

“dangerous innovation.” It was not the last, as Keshtgar v. U.S. Bank, N.A. (case no.

S220012, rev. granted September 18, 2014) demonstrates. Worse, it is evident thatmany federal court decisions and unpublished state court decisions have followed the

same flawed reasoning.

Decided in 1954, long after the nonjudicial foreclosure statutes were enacted,2

Cockerell remains good law, as none of the subsequent amendments to the nonjudicial

foreclosure statutes expressly or impliedly undermines or limits its holding.

The Court of Appeal’s decision below also undermines controlling Supreme

Court authorities holding that a mortgage can only be enforced by the owner of the

note it secures. Adler v. Newell (1895) 109 Cal. 42, 48-50 (mortgage is “a mere

incident to the debt” that “belongs to the holder of the note, and could be foreclosed

only by the latter”); Ord v. McKee (1855) 5 Cal. 515, 516, cited with approval in

Adler ; see also Restatement Property 3d Restatement Property 3d, § 5.4(c), Transfer

of Mortgages and Obligations Secured By Mortgages (“A mortgage may be enforced

only by, or in behalf of, a person who is entitled to enforce the obligation the

mortgage secures”). “Unless there is an existing indebtedness between the named

borrower and lender the mortgage has no existence.” First Amer. Title Ins. Co. v.

XWarehouse Lending Corp. (2009) 177 Cal.App.4th 106, 116, citing Coon v. Shry

(1930) 209 Cal. 612, 615; accord, Holmes v. Warren (1904) 145 Cal. 457, 463; Todd

v. Todd (1912) 164 Cal. 255, 258; Ahern v. McCarthy (1895) 107 Cal. 382, 386.

Hence, one in possession of a mortgage or trust deed trust cannot enforce it unless he

also owns, or represents the owner of, an existing debt that the mortgage or deed of

2 In Garfinkle v. Superior Court , (1978) 21 Cal.3d 268, 281, the Supreme

Court noted that as of 1978, nonjudicial foreclosure had already been an availableremedy “for over a century” and that the Legislature validated its use by enactingsignificant restrictions on nonjudicial foreclosures in 1917. Id. at p. 278.


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trust secures. Adler, supra. This is a bedrock legal principle that is meaningless

unless a borrower can challenge a pretender seeking to enforce her mortgage note or

trust deed.

B. California’s Nonjudicial Foreclosure Statutes and Cases

Interpreting Them Permit Borrowers to Challenge the

Authority of Those Attempting to Enforce Their Mortgage

Obligations Where the Borrower Alleges Facts Which, If

Proved, Demonstrate the Party Attempting to Enforce the

Obligation Is Not the Note Owner or Its Authorized

Representative.

1. Borrowers Have Standing Under Existing Case Law Where, As

Here, Their Lawsuits Are Consistent With the Policies Behind California’s

Nonjudicial Foreclosure Statutes. “‘California courts have repeatedly allowed

parties to pursue additional remedies [i.e., legal action] for misconduct arising out of a

nonjudicial foreclosure sale when not inconsistent with the policies behind the

statutes.’” Gomes, supra, 192 Cal.App.4th at p. 1154, fn. 5, citing California Golf,

L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070-1071. There are three primary

policy objectives underlying the nonjudicial foreclosure provisions of the Civil Code:

“(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy

against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss

of the property; and (3) to ensure that a properly conducted sale is final between the

parties and conclusive as to a bona fide purchaser.” Melendrez v. D & I Investment,

Inc. (2005) 127 Cal.App.4th 1238, 1249-1250; accord, California Golf, supra. The

California Supreme Court adopted this approach in Alliance Mortgage Co. v.

Rothwell , (1995) 10 Cal.4th 1226, 1237.

Allowing borrowers to sue to forestall foreclosure where they allege facts

which, if true, support a claim that the wrong party is trying to foreclose supports the

policy of protecting debtors from wrongful loss of their properties. It promotes the


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policy of ensuring that a properly conducted sale is final between the parties and

conclusive as to a bona fide purchaser by reducing the risk of post-sale challenges. It

promotes the policy of providing a genuine creditor/beneficiary with a quick,

inexpensive and efficient remedy against a defaulting debtor.The basic bargain of the nonjudicial foreclosure statutes is that lenders can use

a streamlined nonjudicial process if they do not pursue a deficiency judgment. That

bargain in no way affects the ancient rule that the foreclosing entity must either own

the debt or be the debt owner’s authorized agent. See Ohlendorf v. Amer. Home Mort.

Servicing (E.D. Cal. 2010) 2010 WL 31098 (nonjudicially foreclosing defendants

“must prove that they have the right to foreclose”); Javaheri v. JP Morgan Chase

Bank, N.A. (C.D. Cal. 2011) CV10-08185 ODW (FFMx); Chilton v. Fed. Nat.

Mortgage Assn. (E.D. Cal. 2009) 2009 WL 5197869 (foreclosure trustee must have

permission to act on behalf of the proper beneficiary, i.e., the note’s current owner).

2. The Legislature Recently Reaffirmed Borrowers’ Standing. The

California Legislature recently reaffirmed that borrowers have standing to challenge a

foreclosing entity’s authority by enacting amendments to the nonjudicial foreclosure

provisions of the Civil Code, in particular § 2943 and § 2923.55(b)(1)(b)), requiring

beneficiaries and servicers, respectively, to provide borrowers with evidence of

indebtedness and the servicer’s right to enforce it. These amendments are part of the

legislation known collectively as the Homeowner Bill of Rights (“HBR”). Amended

Civil Code § 2924(a)(6) provides:

No entity shall record or cause a notice of default to be recorded orotherwise initiate the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original

trustee or the substituted trustee under the deed of trust, or thedesignated agent of the holder of the beneficial interest. No agent of theholder of the beneficial interest under the mortgage or deed of trust,original trustee or substituted trustee under the deed of trust may recorda notice of default or otherwise commence the foreclosure processexcept when acting within the scope of authority designated by the

holder of the beneficial interest . (Italics added.)


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The plain language of this section prohibits commencement of foreclosure by

anyone other than the holder of the beneficial interest, except “when acting within the

scope of authority designated by the holder of the beneficial interest” in a real

property mortgage or trust deed. In sum, only the owner of the debt or its authorizedrepresentative may exercise the power of sale or take the steps needed to do so.

The HBR also repealed old Civil Code § 2923.553 and replaced it with a new

statute that prohibits mortgage servicers, mortgagees, trustees, beneficiaries or

authorized agents from recording a notice of default pursuant to § 2924 until they

have, inter alia, notified the borrower that she may request a copy of her promissory

note or other evidence of indebtedness (§ 2923.55(b)(1)(B)(i)), a copy of her deed of

trust or mortgage (§ 2923.55(b)(1)(B)(ii)), and a copy of any assignment of the

mortgage or trust deed “required to demonstrate the right of the mortgage servicer to

foreclose” (§ 2923.55(b)(1)(B)(iii)). Similarly, § 2943(b)(1) entitles borrowers to

demand that a beneficiary or its authorized agent provide “true, correct and complete”

copies of the borrowers’ “note or other evidence of indebtedness with any

modification thereto.”4 Section 2923.55 requires a servicer to provide borrowers with

those documents upon request, while § 2924.17 requires any notice of default, notice

of sale, assignment of deed of trust, or substitution of trustee recorded on behalf of a

servicer in connection with a foreclosure, or any declaration or affidavit filed in any

court regarding a foreclosure, to be “accurate and complete and supported by

competent and reliable evidence.” It further requires the servicer to ensure it has

reviewed competent and reliable evidence to substantiate the borrower’s default and

the right to foreclose.

3 All further statutory references are to the Civil Code unless otherwise

indicated.

4 In short, the HBR gives a borrower the right to demand that lenders andservicers “show me the note”— and other critical documents — to prove their right toenforce the note and deed of trust.


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A borrower ’s right to such proof can be enforced by an action for injunction

under § 2924.12 — a form of relief that is “in addition to and independent of any other

rights, remedies, or procedures under any other law. Nothing in this section shall be

construed to alter, limit, or negate any other rights, remedies, or procedures provided by law.” Civ. Code § 2924.12(h).

Plainly, the Legislature intended to ensure that only owners of the debt or their

authorized agents can enforce the obligation and exercise the powers granted in the

accompanying mortgage or trust deed when it granted borrowers the right to obtain

documents evidencing ownership of the debt and authority to enforce it from servicers

and lenders, and authorized private actions to enforce that requirement.

C. Putative Assignees Must Prove They Received a Valid

Assignment to Foreclose Judicially; There Is No Principled

Basis for Treating Putative Assignees Differently in

Nonjudicial Foreclosures.

California law is clear that when a party who is not the original lender or its

authorized agent seeks to judicially foreclose on a mortgage, it must prove it owns the

note or is the owner’s authorized representative. See 5 Witkin, Cal.Proc. (5th

ed.

2008), Pleadings, §§ 675, 676 (foreclosure complaint should allege, inter alia, “(3)

Plaintiff’s ownership of the note and mortgage if he or she is a transferee and not the

original payee or mortgagee; allegation of assignment to plaintiff”). There is no valid

reason why this rule should not apply where the borrower pleads facts which, if true,

demonstrate that an entity lacking a valid assignment is attempting to foreclose

nonjudicially. Indeed, Cockerell shows that this principle applies equally to cases

involving nonjudicial foreclosures. Moreover, as noted above, the nonjudicial

foreclosure statutes allow the beneficiary to use a streamlined process in exchange for

giving up the right to pursue a deficiency, but nothing in the statutes suggests that

they were designed to provide less protection to property owners by allowing

foreclosures by persons or entities lacking authority.


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D. Borrowers Have Standing Under Article III of the United

States Constitution.

Under Article III of the United States Constitution, standing requires only that

a plaintiff suffered an “injury in fact” that is (1) concrete and particularized; (2) actualor imminent, not conjectural or hypothetical; (3) the injury is fairly traceable to the

challenged action of the defendant; and (4) it is likely, as opposed to merely

speculative, that the injury will be redressed by a favorable decision. See In re:

Palmdale Hills Property, LLC (9th Cir. 2011) 654 F.3d 868, 873, citing Friends of the

Earth, Inc. v. Laidlaw Environmental Servs. (TOC), Inc. (2000) 528 U.S. 167, 180-

181.

Ms. Yvanova alleges a concrete and particularized injury in the form of being

foreclosed upon by defendants who were not entitled to enforce her mortgage note or

trust deed. This damage has already occurred and is continuing. These injuries are

directly traceable to defendants’ challenged actions, including initiating foreclosure

proceedings and threatening to complete them. A decision in favor of plaintiff will

redress this injury. Article III standing is therefore established.

E. The Decision Below Conflicts With Other Cases Holding

Borrowers Have Standing.

Better reasoned recent cases decided by federal courts hold that a borrower

does not lose standing simply because her complaint mentions a securitization

agreement. See McLaughlin v. Wells Fargo Bank (C.D. Cal. 2013) 2013 WL

1164432; Ball v. DBNTC (W.D. Mo. 2012) 2012 U.S. Dist. LEXIS 17978, *11. The

McLaughlin the court wrote:

Defendants argue that Plaintiff has no standing to challenge an impropertransfer of his Deed of Trust because he is not a party to the PoolingService Agreement (“PSA”) and thus cannot bring a claim for a breachof that contract. . . . While Defendants are correct that Plaintiff has nostanding to challenge a violation of the PSA or improper securitization,this is a mischaracterization of his claims. . . . Plaintiff alleges thatDefendants fraudulently assigned his Deed of Trust to themselves in


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order to collect on a mortgage that they had no interest in. Id. Mortgagees have standing to challenge fraudulent conduct perpetratedupon them. [Citations.] Therefore, Defendants’ motion to dismiss willnot be granted for lack of standing.

Similarly, in Ball, supra, the court observed:

A number of cases have held that defects in the securitization processcannot be raised by a mortgagee to support a wrongful foreclosureclaim. These courts seem to reason that, because the mortgagees are not parties to any of the securitization contracts, they have no standing toclaim noncompliance with these agreements. . . .

But the Plaintiffs do not seek to enforce the contracts or affect the

relationship between the parties to the contracts. Rather, the Plaintiffs

point to defects in the securitization process as evidence that neither

title nor possession of the note passed to the trustee who sought to

foreclose their mortgages. Thus, the Plainti f fs seek only to use the

breaches as evidence that the party seeking to foreclose is not the

owner of their note . . . . ( Id ., 2012 U.S. Dist. LEXIS 17978 at pp.**11-13, bold added, citations omitted.)

Additionally, a fast-growing body of state and federal cases arising out of the

mortgage crisis holds that mortgagors have standing to assert claims in court to ensure

that they only pay the right parties. See, e.g., U.S. Bank National Assn. v. Ibanez

(Sup. Ct. Mass. 2011) 458 Mass. 637, 649-650 (banks which submitted self-

contradictory securitization documents undermining their claims to have received

assignments of mortgages could not foreclose); Wells Fargo Bank, N.A. v. Erobobo

(Sup. Ct. N.Y. 2013) 972 N.Y.S.2d 147, 2013 N.Y. Slip Op. 50675(U) (“ Erobobo”)

(foreclosing REMIC denied summary judgment on grounds triable issue existed

regarding REMIC’s ownership of mortgage where it received assignment of note

eighteen months after REMIC closing date and in violation of other requirements of

PSA); Naranjo v. SBMC Mortgage (S.D. Cal. July 24, 2012) 2012 WL 3030370

(borrower alleging her loan was not validly assigned to trust may seek restitution of

sums paid to defendants and declaration that defendants may not enforce note and

trust deed); Javaheri, supra; Ohlendorf, supra; Kemp v. Countrywide Home Loans,


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Inc. (Bk. D. N.J. 2010) 440 B.R. 624, 629-630, 634 ) (bank bought note and mortgage

as trustee under pooling and servicing agreement but never possessed the note; neither

bank nor its servicer allowed to enforce the note); Deutsche Bank National Trust Co.

v. Ramotar (Sup. Ct. N.Y. 2011) 2011 WL 66041 (allegations of robosigning andother concerns about bank’s standing were sufficient to raise triable issues of fact

precluding summary judgment in favor of bank suing to foreclose on Ramotar home);

Bayview Loan Servicing, LLC v. Nelson (Ill. Ct. App. 2008) 382 Ill.App.3d 1184,

1188 (summary judgment in favor of foreclosing entity where there was no evidence

it ever obtained any legal interest in the subject property).

New York law governs the mortgage securitization trust which purports to own

Ms. Yvanova’s mortgage (PSA, §§ 201(c) and 10.03), as it governs most such trusts.

A New York state court decision that clearly explains the applicable legal principles is

Erobobo, supra, which we commend to the Court. There, a REMIC claiming

ownership of a mortgage note sued to foreclose and the homeowner answered with a

general denial. When the trust sought summary judgment, the homeowner alleged

that the trust had failed to acquire the note by the closing date as required by the PSA,

instead receiving a putative assignment of the note some eighteen months later.

Alternatively, the homeowner asserted the putative note transfer was invalid because

it was assigned directly to the REMIC rather than through an intermediary as required

by the PSA. The New York trial court held that if either defense were established, the

putative transfer of the note to the trust would be void under New York Trust Law

which provides that “every sale, conveyance or other act of the trustee in

contravention of the trust is void.” Id., 2013 N.Y. Slip. Op. 50675(U) at p. 12, citing

EPTL §7-2.4. Note that New York state court has ever overruled or criticized the

holding of Erobobo.

As in this case, the complaint in Naranjo, supra, relied in part on the

defendants’ failures to perfect assignments of the mor tgage in the time and manner

required by a PSA. Defendants moved to dismiss under Fed.R.Civ.Proc. 12(b)(6).


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The district court denied the motion, allowing Naranjo to proceed on her claims for

declaratory relief, improper debt collection, RESPA, unfair business practices, and for

an accounting. See Naranjo, supra at *4-10. The court wrote: “The vital allegation

in this case is the assignment of the loan into the WAMU Trust was not completed byMay 30, 2006 as required by the Trust Agreement. This allegation gives rise to a

plausible inference that the subsequent assignment, substitution, and notice of default

and election to sell may also be improper. . . .” Id . at *3.

In Javaheri, JP Morgan Chase (“Chase”) claimed it was entitled to enforce

plaintiff ’s 2007 WAMU mortgage because it acquired WAMU in September, 2008.

Plaintiff alleged, however, that Chase could not enforce her mortgage because before

Chase acquired WAMU, WAMU had transferred her note to a securitization trust.

There, it “became part of, or was subject to, a Loan Pool, a Pooling and Servicing

Agreement, a Collateralized Debt Obligation, an Investment Trust, and/or a Special

Purpose Vehicle.” Id. at p. 2. The district court denied Chase’s motion to dismiss

Javaheri’s complaint, stating that “[c]oupled with Plaintiff’s allegation that JPMorgan

never properly recorded its claim of ownership in the Subject Property [], the

abovementioned facts regarding the transfer of Plaintiff’s Note prior to JPMorgan’s

acquisition of WaMu’s assets raise Plaintiff’s right to relief above a speculative

level.” Id. at p. 7.

F. Plaintiff’s Deed of Trust Expressly Authorizes This Lawsuit.

Plaintiff’s trust deed— like many, but not all, others — contains Non-Uniform

Covenant 22, authorizing the borrower to “ bring a court action to assert the non-

existence of a default or any other defense of Borrower to acceleration and sale.”

Plaintiff’s DOT states in relevant part:

NON-UNIFORM COVENANTS: Borrower and Lender furthercovenant and agree as follows:

22. Acceleration; Remedies. Lender shall give notice to Borrower

prior to acceleration following Borrower’s breach of any covenant

or agreement in this Security Instrument . . . . The notice shall


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specify: (a) the default; (b) the action required to cure the default;

(c) a date, not less than 30 days from the date the notice is given to

Borrower, by which the default must be cured; and (d) that failure

to cure the default on or before the date specified in the notice may

result in acceleration of the sums secured by this Security

Instrument and sale of the Property. The notice shall further inf ormBorr ower of the right to reinstate after acceleration and the right to

bri ng a court action to asser t the non-existence of a default or any

other defense of Borrower to acceleration and sale. (Bold print inoriginal; italics and underline added. This page of the DOT appears atRA, p. 53.)

The crux of plaintiff Yvanova’s complaint is that she does not have any

contract with defendants and so does not owe them any money. Defendants are, at

best, officious intermeddlers. Accordingly, this action alleges the non-existence of a

default and is authorized by the DOT.

G. Courts Routinely Allow Litigants to Draw Factual

Allegations and Evidence from Contracts to Which Those

Litigants Are Not Parties, and Which They Have No

Standing to Enforce or Attack.

It is not unusual for a lawsuit to be based on allegations derived from a

contract to which one of the litigants is not a party. Consider a hypothetical in which

Homeowner A hires a contractor to remodel his bathroom, relying on the contractor’s

promise to complete the work within two weeks. The contractor never shows up.

Homeowner A then discovers that the contractor actually spent the promised time

remodeling the bathroom of Homeowner B, who signed up the contractor just an hour

before the contractor signed up with A. Can A use B’s agreement with the contractor

as a source of facts for his fraud complaint, and as evidence that the contractor never

intended to honor his contract with A? Absolutely. Does A have standing to enforce

B’s contract or sue for some breach of it by the contractor or B? No.

The validity of any purported transfer of a mortgage note is relevant to

determining under Cockerell whether the assignee can prove by clear and positive


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evidence that it received a valid assignment. There is no black magic by which that

standing is lost simply because the purported transfers were supposed to be effected

by contracts to which the borrower is not a party, and which she has no right to

enforce or attack directly.H. The Notion That a Borrower Lacks Standing Under These

Circumstances Defies Common Sense.

As Justice Lawrence Rubin wrote in a recent dissent in an unpublished case,

Peng v. Chase Home Finance LLC (April 8, 2014) case no. B245436, the idea that a

borrower has no standing to challenge whether one seeking to take his home via

foreclosure is actually entitled to do so is difficult to square with common sense or the

law with respect to any other type of debt:

The only party prejudiced by an illegitimate creditor- beneficiary’senforcement of the homeowner’s debt, courts have reasoned, is the bona

fide creditor-beneficiary, not the homeowner.

Such reasoning troubles me. I wonder whether the law would apply thesame reasoning if we were dealing with debtors other than homeowners.I wonder how most of us would react if, for example, a third-party

purporting to act for one’s credit card company knocked on one’s door,

demanding we pay our credit card’s monthly statement to the third party. Could we insist that the third party prove it owned our credit carddebt? By the reasoning of Fontenot [v. Wells Fargo Bank, N.A. (2011)198 Cal.App.4th 256] and similar cases, we could not because, after all,we owe the debt to someone, and the only truly aggrieved party if we paid the wrong party would, according to those cases, be our credit cardcompany. I doubt anyone would stand for such a thing. ( Peng, supra,dissent, p. 1.)

I. Basic Legal Principles Concerning What Constitutes Proof of

a Valid Transfer of a Mortgage Note.

1. Situations In Which a Transfer Is Invalid. A wide variety of defects

can render an attempted assignment of a mortgage note or trust deed void. Cases

arising from the current mortgage crisis most often involve problems with

indorsements to the note. Either one or more of the required indorsements is missing,


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or it is defective. Missing indorsements are common. Defective indorsements most

often involve instances in which the party cannot prove an indorsement was

authorized, the indorsement is void because it violates the terms of a securitization

agreement, the indorsement is post-dated or undated, or the indorsement is forged.Void assignments of trust deeds most commonly arise where the instrument is

purportedly transferred by an unauthorized agent of the putative assignee, and/or the

trust deed is transferred independently of the note it purports to accompany.

Although a valid transfer of the note results in a valid transfer of the trust deed

by operation of law, the opposite is not true. Rather, even an assignment of the

security instrument that would otherwise be valid is void unless it is accompanied by

a valid transfer of the note. Indeed, under California Civil Code § 3440, such a

transfer is conclusively presumed to be a fraudulent conveyance. See also Bunting v.

Saltz (1890) 84 Cal. 168, 169-170; Roger Bernhardt, California Mortgages and Deeds

of Trust, and Foreclosure Litigation, § 1.26 (4th ed. 2009). A transfer that is

fraudulent per se cannot be ratified, and therefore is void rather than merely voidable.

Moreover, under New York law as interpreted by New York state courts,

failure to endorse a mortgage note in accordance with a securitization trust’s PSA

renders void any putative transfer of the note to the trust. See Erobobo, supra.

2. Requirements of a Valid Transfer.

a. Written Assignment Meeting the Requirements of the Statute of Frauds.

An assignment of a mortgage note must be made pursuant to a writing

fulfilling the requirements of the Statute of Frauds, Civil Code § 1624(a)(3), because

by operation of law, sales of mortgage notes also effect the transfer of the

accompanying trust deeds or mortgages. Secrest v. Security Nat. Mortgage Loan

Trust 2002-2 (2008) 167 Cal.App.4th 544, 547-548 (real property note secured by a

deed of trust comes within the statute of frauds); Jenkins, supra, at pp. 507-508 (deed

of trust within statute of frauds).

/ / /


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b. Negotiation and Delivery.

To perfect a transferee’s interest in a mortgage note, the note must be

negotiated to the transferee. See, e.g., Creative Ventures, LLC v. Jim Ward & Assocs.

(2011) 195 Cal.App.4th 1430, 1446, 1446-1447; Pribus v. Bush (1981) 118Cal.App.3d 1003, 1010-1011; cf. Commercial Code § 3201(b).5 The negotiation

requirement dates back to the time of the Law Merchant (see Pribus, supra, 118

Cal.App.3d at pp. 1007-1008; Adams v. Madison Realty & Dev., Inc. (3d Cir. 1988)

853 F.2d 163, 166-169), prior to which a transferee could never acquire an interest

enforceable against the borrower (Creative Ventures, LLC, supra).

Negotiation consists of two elements, indorsement and delivery.6 If either

valid indorsement or delivery is absent, a purchaser of a real property mortgage note

5 The holdings of Creative Ventures, LLC and Pribus are based on the

Commercial Code. However, Civil Code § 2944 makes the Commercial Codeinapplicable to obligations governed by Civil Code §§ 2920-2967. These sections ofthe Civil Code govern real property mortgages and include the HBR.

Civil Code § 2944 provides:

None of the provisions of this chapter [Title 14, Liens, Chapt. 2,Mortgages, Civil Code §§ 2920-2967] applies to any transaction orsecurity interest governed by the Commercial Code, except to the extentmade applicable by reason of an election made by the secured party pursuant to subparagraph (B) of paragraph (1) of subdivision (a) ofSection 9604 of the Commercial Code.

(Commercial Code § 9604(a)(1)(b) concerns obligations secured by acombination of personal and real property.)

Nevertheless, courts may look to the Commercial Code for guidance inanalogous situations. See, e.g., Pollard v. Sax and Yolles Dev. Co. (1974) 12 Cal.3d374, 380.

6 Delivery of the note is required because without physical transfer, a sale of personal property (including a mortgage note) is conclusively presumed to be afraudulent conveyance under Civil Code § 3440. See Bunting v. Saltz (1890) 84 Cal.


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is not entitled to enforce it against the borrower.7 Thus in Adams, supra, the court

denied enforcement of a mortgage note to a transferee to whom it was not validly

indorsed. See discussion of Adams, infra. With respect to indorsement, a mortgage

note is similar to a third-party check, which the paying bank can only honor if it is presented by a third party to whom the check has been validly indorsed.

In Creative Ventures, LLC, supra, 195 Cal.App.4th at p. 1446, the court

addressed the negotiation requirement:

The negotiation requirement may seem a bit formalistic, but it has asound historical and mercantile basis. At common law, contracts couldnot be transferred so as to give the transferee a right to enforce thecontract directly. The law of negotiable instruments was adopted by the

law merchant as an exception to this rule, in order to allow the indorseethe right to sue on the contract in his or her own name. (Shaw v. Railroad Co. (1879) 101 U.S. 557, 563-564, 25 L.Ed. 892.)

It follows that in an action against a putative assignee of a mortgage

challenging its authority to enforce the obligation by demanding payment or through

foreclosure, the assignee must meet the Cockerell standard of “clear and positive

evidence” that the note was actually and validly negotiated and delivered.

One obvious reason for requiring endorsement of the note is so the note itselfreflects the transfer. It has been said that it is “indispensably necessary” that

negotiable instruments “‘carry within them the indicia by which their ownership is to

be determined’” lest ‘“their value as a circulating medium [] be largely curtailed, if

not entirely destroyed.’” Adams, supra, 853 F.2d at pp. 166-169, quoting Haug v.

Riley (1897) 101 Ga. 372, 20 S.E. 44, 46. It also helps ensure that mortgagors pay the

168, 169-170; see also Roger Bernhardt, California Mortgages and Deeds of Trust,and Foreclosure Litigation, § 1.26 (4th ed. 2009).

7 Although the obligation cannot be enforced against the borrower,commercial law allows the transferee to seek to recover the benefit of its purchasefrom the party responsible for the lack of valid indorsement. The ultimate risk is thusallocated to the responsible seller, not the borrower who had nothing to do with thesubsequent transfer. See fn. 8, p. 24, infra.


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party to whom the obligation is owed, while also ensuring they do not pay — or worse,

lose their property to — persons not entitled to receive payment on the note or

otherwise enforce it and the accompanying security agreement. Cockerell ; Adams;

Pribus, supra.Failure to validly endorse the note is no mere “technicality” that courts can

dispense with in order to force the mortgagor to pay the putative purchaser. In

Adams, for example, plaintiffs executed various promissory notes governed by Article

3 of New Jersey’s U.C.C. in favor of Madison Partnerships. After a series of transfers

in 1984 and 1985, Empire of America Federal Savings Bank (“Empire”) bought 418

of the notes for approximately $45.1 million. The notes themselves bore no

endorsements to Empire. Instead, the transfers to Empire were memorialized by two

loose sheets of paper, purporting to be allonges, containing several endorsements, the

last of which was to Empire. However, the two sheets failed to comply with the

requirement of U.C.C. 3202(2) that an allonge be “so firmly affixed [to the notes] as

to become a part thereof.” Id ., 853 F.2d at pp. 164-165. Based on this defect, the

makers of the notes asserted that Empire had not received good title to the notes and

could not enforce them.

The trial court determined that Empire could enforce the notes. It ruled the

failure to firmly affix the allonges was “hypertechnical” and did not justify allowing

the borrowers to stop paying Empire. Id .

The Court of Appeals disagreed and reversed:

. . . The Code’s requirement that an indorsement be “firmly affixed” to

its instrument is a settled feature of commercial law, adopted verbatim by every American state, the District of Columbia, and the Virgin

Islands. . . . With a unanimity unusual in decisional law, the directivehas been faithfully observed.

[fn]

The historical origins of the provision have been chronicled to the daysof the Law Merchant. See Pribus v. Bush [ supra, 118 Cal.App.3d at pp.1007-1008]. . . .

http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=749&utid=2


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. . . Courts have advanced two justifications for the firmly-affixedrequirement. The California Court of Appeal[] reasoned that the provision serves to prevent fraud, remarking that a signature innocently placed upon an innocuous sheet of paper could be fraudulently attachedto a negotiable instrument in order to simulate an indorsement. Pribus,

[118 Cal.App.3d at p. 1009, fn. 7] . . . .

The affixation requirement has also been cited for its utility in preserving a traceable chain of title, thus furthering the Code’s goal offree and unimpeded negotiability of instruments. Nearly a century ago,the Supreme Court of Georgia declared it “indispensably necessary” that

negotiable instruments “should carry within them the indicia by which

their ownership is to be determined; otherwise, their value as acirculating medium would be largely curtailed, if not entirelydestroyed.” Haug [, supra]. Chancellor Hawkland writes that it would

be “unreasonable to impose upon the indorsee the risk that the presentholder or a prior holder had negotiated the instrument to someone not inthe apparent chain of title by virtue of a separate document.” 4 W.Hawkland & L. Lawrence, Uniform Commercial Code Series § 3-202:05 (1984). . . . ( Adams, supra, 853 F.2d at pp. 166-169, footnotesand some citations omitted.)

The court in Adams goes on to observe that “until the maker pays a holder, he

will not be discharged from his obligation,” exposing the borrower to the risk of

double-payment: From the maker’s standpoint, therefore, it becomes essential to

establish that the person who demands payment of a negotiable note, or

to whom payment is made, is the duly qualified holder. Otherwise, the

obligor is exposed to the risk of double payment, or at least to the

expense of litigation incurred to prevent duplicative satisfaction of the

instrument. These risks provide makers with a recognizable interest in

demanding proof of the chain of title. Consequently, plaintiffs here, as

makers of the notes, may properly press defendant to establish its holder

status. . . .

( Id ., 853 F.2d at p. 169, italics added.)

Similarly, the reason a putative assignee must provide “clear and positive”

proof it received a valid assignment is “to protect an obligor from any further claim

by the primary obligee . . . .” Cockerell , supra, 42 Cal.2d at p. 292, citations omitted.

http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=750&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=750&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=750&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=710&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1897009586&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=46&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=710&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1897009586&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=46&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=710&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1897009586&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=46&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=710&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1897009586&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=46&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=710&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1897009586&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=46&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=750&utid=2http://web2.westlaw.com/find/default.wl?mt=StateLitigation&db=227&rs=WLW12.04&tc=-1&rp=%2ffind%2fdefault.wl&findtype=Y&ordoc=1988094683&serialnum=1981121225&vr=2.0&fn=_top&sv=Split&tf=-1&referencepositiontype=S&pbc=4D9048DB&referenceposition=750&utid=2


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Both Adams and Pribus involved endorsements that were defective because

they were not properly attached to mortgage notes, but there are other types of defects

that commonly arise. These include but are not necessarily limited to forged or

otherwise unauthorized indorsements; indorsements executed without a valid writtenauthorization of the indorsing entity; and indorsements executed after the indorsing

entity ceases to exist or do business.

Adams and Pribus clearly demonstrate that a transferee in possession of a note

lacking a valid indorsement cannot enforce the obligation against the original

borrower. Instead, its remedy is against the commercial parties responsible for the

missing or defective indorsement.8

V. RESPONDENTS’ ANSWER BRIEF FAILS TO ADDRESS THESE

ISSUES

Petitioner’s opening brief adverts to Cockerell and the necessity of proper

negotiation of the note before one in respondents’ position can enforce the

accompanying security agreement. Yet, respondents’ Answer Brief is utterly silent on

these issues. Respondents therefore should be deemed to concede the point.

VI. CONCLUSION

The question of standing here is simple. A mortgage is a contract. It requires

the mortgagor to pay her lender or its successor. When an effort to transfer the note

and trust deed to a successor is void, the putative transferee does not become the

lender’s successor and has no right to enforce the obligation by demanding payment,

8 As between the endorser and the assignee, the endorser bears the risk of

claims by “someone not in the apparent chain of title . . . .” 4 W. Hawkland & L.Lawrence, cited in Adams, supra. Notes typically contain provisions allowing theassignee to sue the endorser if there is a failure to validly transfer the instrument.Where a mortgage is securitized, the pooling and servicing agreement also typicallycontains an indemnification and repurchase provisions pursuant to which the assigneemay obtain relief from its assignor.


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let alone by foreclosing on the real property securing the note. The putative transferee

is a stranger to the mortgage contract.

The mortgagor suffers an injury in fact where such a stranger takes or attempts

to take the mortgagor’s property. The injury is concrete and particularized; actual orimminent (rather than conjectural or hypothetical); fairly traceable to the challenged

action of the defendant; and (4) it is likely, as opposed to merely speculative, that the

injury will be redressed by a favorable decision. The fact the note can be validly

transferred does not mean every attempted transfer is perfected, or that the mortgagor

is not damaged where her property is foreclosed upon by an entity that never received

a valid transfer. To allow foreclosures by entities to whom the mortgagor has no

contractual obligation sanctions theft — and not just ordinary theft, but theft of

peoples’ homes.

The Court of Appeal’s decision in this case directly contravenes established

principles of California mortgage law, both ancient and recent. Its holding that

borrowers somehow have a generalized obligation to make mortgage payments to

someone who may or may not be the other party to their loan contract directly

contradicts Cockerell and other controlling cases dating back to the 1800’s and recent

revisions to California’s nonjudicial foreclosure statutes such as the HBR. By

rendering it impossible for borrowers to challenge foreclosures by entities that never

received a valid assignment of their mortgages, the decision enacts the “dangerous

innovation” the Supreme Court warned about in Cockerell , by making putative

mortgage assignments presumptively valid, and indeed, entirely immune from judicial

scrutiny. The decision is emblematic of too many mortgage cases since the current

mortgage crisis began in 2008, cases decided without any consideration of the vast

body of mortgage law that predated the mortgage crisis. It is untethered from

precedent or governing statutes, and contradicts fundamental principles of mortgage

law.


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Allowing borrowers to sue when they allege facts which, if true, prove an

imposter is trying to enforce their mortgage through collection or foreclosure upholds

the public policy of this State requiring that borrowers pay the right party. This policy

is especially important in an era when tens of millions of mortgages are transferredmultiple times in the secondary market. It is a policy clearly endorsed by the

Legislature’s recent enactment of the HBR.

The nonjudicial foreclosure process loses all legitimacy if there is no process to

prevent strangers to the debt from taking peoples’ homes. The Court of Appeal’s

holding that no effective process exists raises issues of court acquiescence in possible

theft of real property and a complete absence of due process for homeowners.

The Court must reverse the holding below to restore well-established principles

of California law that are thoroughly undermined by the “dangerous innovation”

promulgated by the decision below and the growing number of cases like it.


Mark F. Didak _________________________________

MARK F. DIDAKAttorneys for Amicus Curiae


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RULE 8.204(c)(1) CERTIFICATION

I, Mark F. Didak, hereby declare as follows:

1. I am an attorney duly licensed to practice law in this state, and counsel

of record for amicus curiae. The facts stated herein are known to me personally, andif called as a witness I would competently testify thereto. I make this declaration

under Rule 8.204(c)(1), California Rules of Court.

2. I certify that this brief was produced on computer and does not exceed

14,000 words, including footnotes. According to the Word program used to produce

this brief, the word count is 8,154, not including this certificate, the certificate

regarding interested entities and persons, tables of contents and authorities, proof of

service, cover, the date and signature blocks, and forward-slashes.

I declare under penalty of perjury under the laws of the State of California that

the foregoing is true and correct. Executed this 15th day of April, 2015 at Los

Angeles, California.

Mark F. Didak ________________________________MARK F. DIDAK


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PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

I am an attorney licensed to practice law in all courts in the State of California.I am over the age of 18 years; my business address is 520 Burnside Ave., No. 9J, Los

Angeles, CA 90036. On April 16, 2015, I served the document(s) described as Petition for Leave to File Brief of Amicus Curiae; Brief of Amicus Curiae on theinterested party(ies) in this action as follows:

BY FIRST CLASS U.S. MAIL: By placing a true copy thereof in a sealedenvelope addressed as above, and placing it for collection and mailing followingordinary business practices. I am readily familiar with the firm’s practice ofcollection and processing correspondence, pleadings, and other matters for mailingvia the United States Postal Service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I am aware thaton motion of the party served, service is presumed invalid if the postal cancellationdate or postage meter date is more than one day after date of deposit for mailing inaffidavit.

AN ELECTRONIC COPY was filed for service on the California SupremeCourt this date pursuant to Rule 8.212(c)(2), Cal.R.Ct.

Richard L. Antognini, Esq.Law Offices of Richard L. Antognini819 I StreetLincoln, California 95648-1742

California Court of AppealSecond Appellate DistrictDivision One300 South Spring StreetSecond Floor, North Tower, Rm. 2217Los Angeles, California 90013

Los Angeles Superior CourtAttn: Hon. Russell S. Kussman6230 Sylmar Avenue

Van Nuys, California 91401

K. Lee Marshall, Esq. Nafiz Cekirge, Esq.Andrea N. Winterniz, Esq.Sarah Samuelson, Esq.Bryan Cave LLP

560 Mission Street, Suite 2500San Francisco, California 94105

Eric D. Houser, Esq.Robert W. Norman, Esq.Houser & Allison APC3780 Kilroy Airport Way, Suite 130Long Beach, California 90806


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I declare under penalty of perjury under the laws of the State of California thatthe foregoing is true and correct. Executed on April 16, 2012, at Los Angeles,California.

Mark F. Didak

MARK F. DIDAK

Documents

The Didak Law Office files Amicus Curiae in Support of Yvanova's appeal to the California Supreme Court case S218973 - Amicus filed April 2015