Arabia v. BAC Home Loans Servicing, L.P.
208 Cal. App. 4th 462
| Cal. Ct. App. | 2012Background
- Arabia refinanced his home with a $2,846,250 First Loan secured by a deed of trust and a junior HELOC; he defaulted in 2007 leading to nonjudicial foreclosure attempts.
- The PSA assigned BAC as master servicer with authority to foreclose on defaulted loans within the Trust; BONY acts as trustee for the certificates.
- BAC filed a cross-complaint for judicial foreclosure after Arabia’s nonjudicial foreclosure efforts; Countrywide and BONY were later named cross-complainants.
- The superior court granted BAC’s summary judgment on the judicial foreclosure cross-complaint and issued a decree authorizing foreclosure; Arabia appealed.
- Arabia challenges (1) whether section 725a allows a loan servicer to sue in its own name, (2) the validity of the foreclosure decree’s provisions, and (3) whether a junior lienholder must be joined as a cross-defendant.
- The court concludes section 725a does not prohibit a loan servicer from filing a judicial foreclosure action in its name and remands to strike an improper rent provision in the decree.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 725a prohibits a loan servicer from filing a judicial foreclosure action in its name | Arabia: servicers cannot sue in their own name under 725a | BAC: 725a does not restrict filing in servicer’s name | Section 725a does not prohibit filing by a loan servicer |
| Whether the right to foreclose can be assigned to the loan servicer | Arabia: assignment cannot create standing for servicer | BAC: PSA assigns foreclose-right arising from the promissory note/deed of trust | Right to foreclose is assignable; BAC validly forecloses |
| Whether junior lienholders must be joined as cross-defendants in a judicial foreclosure | Arabia: Countrywide must be joined to protect junior lien | BAC: no requirement to name junior lienholder for complete relief | Not required to join junior lienholder under §726(c); Countrywide not a necessary cross-defendant |
| Whether the foreclosure decree improperly orders rent prior to sale | Arabia: rent order premature; potential contempt | BAC: rent provision authorized in decree | Paragraph 10 striking; rent provision improper and remanded; other decree provisions affirmed |
Key Cases Cited
- Alliance Mortgage Co. v. Rothwell, 10 Cal.4th 1226 (Cal. 1995) (foreclosure framework; nonjudicial vs judicial distinctions)
- Moeller v. Lien, 25 Cal.App.4th 822 (Cal. App. 1994) (nonjudicial foreclosure scheme details)
- Bernhardt, Bernhardt (containing sections on judicial foreclosures) (California Supreme Court) (procedural aspects of judicial foreclosure; deficiencies)
- Countrywide Home Loans, Inc. v. Superior Court, 69 Cal.App.4th 785 (Cal. App. 1999) (joinder and complete relief in foreclosure actions; party status)