959 F.3d 334
9th Cir.2020Background
- Plaintiffs Bella and Enrique Perez owned two California homes secured by deeds of trust that named MERS as beneficiary and whose loans were later owned by U.S. Bank (Perez I) and Bank of New York Mellon (Perez II).
- The Perezes filed pre-foreclosure suits seeking declaratory relief, cancellation of instruments, and quiet title, alleging defective assignments meant the banks lacked authority to collect payments or foreclose.
- Neither property had been foreclosed: Perez I had a prior notice of default and a trustee’s sale scheduled that did not occur; Perez II showed no default and no foreclosure proceedings.
- Defendants moved to dismiss for failure to state a claim; district courts dismissed both complaints (Perez I without leave to amend), and the Perezes appealed.
- The Ninth Circuit applied California law and affirmed, holding California does not permit preemptive judicial actions to challenge a party’s authority to foreclose before a nonjudicial foreclosure has occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether California law allows preemptive (pre-foreclosure) judicial challenges to a foreclosing party’s authority | Perez: borrowers can sue preemptively to invalidate assignments and stop foreclosure | Defendants: California’s nonjudicial foreclosure scheme bars preemptive judicial interference | Held: Preemptive suits are not viable under California law; appellate precedent forbids them |
| Whether Yvanova’s post-foreclosure rule (void vs. voidable assignments) extends to pre-foreclosure suits | Perez: Yvanova shows assignments alleged to be void (not voidable) can be challenged before sale | Defendants: Yvanova was expressly limited to post-foreclosure wrongful-foreclosure actions | Held: Yvanova does not apply to pre-foreclosure actions; court need not decide void vs. voidable here |
| Whether dismissal without leave to amend (Perez I) was an abuse of discretion | Perez: would have amended to add facts (e.g., 2017 notice of default) and further explanations | Defendants: amendments would be futile because the suit remains preemptive and thus barred | Held: Denial of leave to amend was not an abuse of discretion; amendment would be futile |
| Whether the absence of an actual foreclosure affects standing/claims | Perez: alleged authority defects created actionable injury even before sale | Defendants: no foreclosure = no cognizable post-foreclosure injury; pre-foreclosure claims barred | Held: No foreclosure occurred; pre-foreclosure claims therefore fail under California law |
Key Cases Cited
- Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016) (holds borrowers can challenge void assignments in post-foreclosure wrongful-foreclosure suits; expressly limits application to post-foreclosure context)
- Gomes v. Countrywide Home Loans, Inc., 121 Cal. Rptr. 3d 819 (Cal. Ct. App. 2011) (refuses preemptive judicial actions to determine authority to initiate nonjudicial foreclosure)
- Jenkins v. JP Morgan Chase Bank, N.A., 156 Cal. Rptr. 3d 912 (Cal. Ct. App. 2013) (rejects preforeclosure suits challenging right to initiate nonjudicial foreclosure)
- Saterbak v. JPMorgan Chase Bank, N.A., 199 Cal. Rptr. 3d 790 (Cal. Ct. App. 2016) (after Yvanova, holds preemptive pre-foreclosure actions remain barred)
- Brown v. Deutsche Bank Nat. Trust Co., 201 Cal. Rptr. 3d 892 (Cal. Ct. App. 2016) (acknowledges possibility California Supreme Court could extend Yvanova but does not change existing precedent)
- Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th Cir. 2001) (federal courts sitting in diversity must follow state supreme court or, absent it, intermediate appellate precedent)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: complaint must state a plausible claim for relief)