Cedano v. Aurora Loan Services, LLC (In Re Cedano)
470 B.R. 522
9th Cir. BAP2012Background
- Cedano executed a $444,000 promissory note on January 25, 2007, secured by a deed of trust on his Canoga Park residence, with MERS as beneficiary and nominee and with authority to foreclose.
- SCME Mortgage Bankers assigned the Note to the Rali Series 2007-QH8 Trust as part of securitization; Deutsche Bank Trust Company Americas was trustee and Aurora serviced the loan.
- Cal-Western Reconveyance Corporation became substitute trustee under a recorded substitution on September 28, 2009, after an August 2009 Notice of Default was issued.
- Foreclosure proceedings started with a Notice of Default in August 2009, a Notice of Trustee's Sale in November 2009, and culminated in a sale on July 13, 2010, at which Aurora was the successful bidder; Debtor filed Chapter 13 on July 15, 2010.
- Cal-Western executed a Trustee's Deed Upon Sale to Aurora on July 29, 2010; Debtor filed an adversary complaint on December 10, 2010 asserting six causes of action related to wrongful foreclosure and related torts.
- The bankruptcy court dismissed the complaint for failure to state a claim, allowed limited amendment, and ultimately dismissed with prejudice; Debtor appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the foreclosure was wrongful, including tender and authorization questions | Cedano argued lack of authority to foreclose and procedural defects in the foreclosure process | Defendants argued foreclosure complied with California nonjudicial procedure and that tender was not required or defects not fatal | Dismissal affirmed; MERS authorized; Cal-Western validly foreclosed; 2923.5 issues did not void sale; tender exceptions analyzed |
| Whether the NOD/Notice of Sale and Trustee's Deed could be cancelled | Alleged lack of authority to initiate foreclosure invalidated subsequent documents | Documents remained valid despite alleged defects; cancellation not warranted | Dismissal affirmed; defects did not void subsequent instruments |
| Whether the slander of title claim lies | Recording of instruments without merit constitutes slander of title | No false publication or lack of justification established | Dismissal affirmed; claim failed on falsity/justification and underlying facts |
| Whether the quiet title claim should prevail | Debtor sought determination of title free of adverse claims based on alleged improper foreclosure | Quiet title requires viable underlying wrongful foreclosure; not shown | Dismissal affirmed; failure to plead viable wrongful-foreclosure basis |
| Whether the professional negligence claim against Cal-Western survives | Cal-Western breached duty by failing to ascertain validity of foreclosure documents | Trustee duties limited to 2924 compliance; no broader fiduciary duty owed to trustor | Dismissal affirmed; no viable negligence claim given statutory duties |
Key Cases Cited
- Castaneda v. Saxon Mortgage Servs., Inc., 687 F.Supp.2d 1191 (E.D. Cal. 2010) (MERS authority and nonjudicial foreclosure framework)
- Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (Cal. Ct. App. 2011) (MERS as nominee and authority to foreclose; real party in interest)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (Cal. Ct. App. 2011) (tender exceptions and foreclosure challenges)
- Stebley v. Litton Loan Servicing, LLP, 202 Cal.App.4th 522 (Cal. Ct. App. 2011) (tender and remedies under Cal. Civ. Code § 2923.5)
- Arnolds Mgmt. Corp. v. Eischen, 158 Cal.App.3d 575 (Cal. Ct. App. 1984) (tender necessity in foreclosure challenges)