Brown v. Deutsche Bank National Trust Co.
247 Cal. App. 4th 275
| Cal. Ct. App. | 2016Background
- In 2004 Brown took a $450,000 loan secured by a deed of trust naming Washington Mutual as beneficiary and California Reconveyance Company (CRC) as trustee.
- Washington Mutual failed in 2008; the FDIC as receiver executed a Purchase and Assumption Agreement (P&A) by which Chase acquired many Washington Mutual assets and mortgage-servicing rights.
- CRC recorded a notice of default in March 2011 as trustee for Chase; Chase later assigned the deed of trust to Deutsche Bank and CRC recorded a notice of sale in 2011–2013.
- Brown filed three successive lawsuits challenging the foreclosure as initiated by an entity without authority because she alleged the deed of trust had been improperly assigned; this appeal arises from dismissal of her third suit after defendants demurred to her amended complaint.
- The trial court sustained the demurrer without leave to amend, relying on (1) doctrines limiting preemptive suits to challenge foreclosure authority, (2) standing and pleading defects, and (3) matters judicially noticed (including the P&A) that contradicted Brown's assignment theory.
- On appeal the Court of Appeal affirmed, concluding Brown failed to plead facts showing CRC lacked authority and forfeited arguments attacking the trial court's reliance on judicially noticed documents or showing amendable defects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a borrower may bring a pre-sale (preemptive) suit to challenge the authority of the entity initiating nonjudicial foreclosure | Brown contended she could challenge the foreclosure before sale because the assignment to Deutsche Bank was invalid | Defendants argued preemptive suits are disfavored/ barred because they undermine the nonjudicial foreclosure scheme and cause delay | Court did not decide the general question (not necessary) but noted some authority disfavors preemptive challenges and affirmed dismissal on other grounds |
| Whether Brown had standing to bring a pre-sale challenge to an allegedly void assignment | Brown argued she had standing to prevent an unauthorized foreclosure | Defendants argued Brown lacked standing or failed to allege a cognizable injury pre-sale | Court did not resolve standing definitively (Yvanova discussed) and affirmed dismissal on independent grounds |
| Whether the judicially noticed P&A and foreclosure documents preclude Brown's allegation that Chase never acquired rights to the loan | Brown alleged the loan had been sold to a third party not included in the P&A, so Chase lacked authority | Defendants produced the P&A showing Chase purchased mortgage-servicing rights and broadly acquired Washington Mutual assets, contradicting Brown's claim | Court held the P&A (judicially noticed) contradicted Brown's factual theory and undermined her claim that CRC lacked authority to foreclose |
| Whether the demurrer should have been sustained with leave to amend | Brown requested leave to add facts to cure defects | Defendants argued Brown offered no plausible amendment and forfeited challenges by failing to explain cures | Court held Brown failed to show a reasonable possibility amendment could cure defects and forfeited the leave-to-amend argument; demurrer properly sustained without leave |
Key Cases Cited
- Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919 (discusses standing to challenge void assignments post-sale)
- Moeller v. Lien, 25 Cal.App.4th 822 (overview of nonjudicial foreclosure purpose and statutory framework)
- Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (describing purposes of California's foreclosure statutes and limits on preemptive suits)
- Cansino v. Bank of America, 224 Cal.App.4th 1462 (standard of review on sustaining demurrer and leave-to-amend analysis)
- Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal.App.4th 497 (authority holding borrowers may be barred from preemptive suits challenging foreclosing entity's authority)