Courtois v. Mortgage Electronic Registration Systems CA4/1
D078198
| Cal. Ct. App. | Jun 30, 2021Background
- In 2006 Courtois obtained a mortgage secured by a deed of trust that named MERS as beneficiary "solely as nominee" for the lender and its successors and assigns. The deed of trust expressly authorized MERS to exercise foreclosure rights.
- MERS recorded an assignment of the deed of trust to Bank of America in 2011 (First Assignment); Bank of America assigned to Deutsche Bank in 2012 (Second Assignment); notices of default and trustee's sale followed in 2012–2013.
- Courtois sued other lenders and trustees in 2017 alleging parties without authority threatened nonjudicial foreclosure; she amended in 2019 to add MERS, alleging the 2011 assignment was unauthorized because the loan had been sold in 2006 to a Goldman Sachs entity that was not a MERS member.
- Her first amended complaint asserted slander of title, cancellation of instruments, UCL, and declaratory relief, all premised on MERS 2011 assignment.
- MERS moved for judgment on the pleadings arguing the suit was an impermissible preemptive challenge to a nonjudicial foreclosure, that the deed of trust language precluded the claimed lack of assignment authority, and that the claims were time-barred; the trial court granted judgment for MERS and denied leave to amend.
- The Court of Appeal affirmed, holding the claims were preemptive and barred by the deed language, and further concluding the claims were time-barred on the face of the complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether borrower may bring a preemptive suit to challenge a partys authority to pursue nonjudicial foreclosure | Courtois: she can enjoin or adjudicate the right before foreclosure because defendants arent the true owners of the debt | MERS: California law bars preemptive preforeclosure challenges because they improperly inject courts into the statutory nonjudicial scheme | Held: Preemptive challenge barred; plaintiff cannot pursue preforeclosure adjudication of foreclosure authority (affirmed) |
| Whether MERS lacked authority to record the 2011 assignment because the loan was sold to a non-MERS member in 2006 | Courtois: MERS ceased to be beneficiary/nominee after the 2006 sale and thus had no power to assign in 2011 | MERS: Deed of trust grants MERS authority "as nominee for lender and lenders successors and assigns," so transfer to non-MERS members does not negate MERS authority | Held: Deed language forecloses this theory; plaintiff failed to plead facts showing MERS lacked assignment authority |
| Whether the claims are timely or subject to delayed discovery/continuing harm tolling | Courtois: statute of limitations tolled by delayed discovery of MERS records and by ongoing risk of foreclosure | MERS: Claims arise from a discrete 2011 act; plaintiff had inquiry notice by 2012 and did not plead diligence | Held: Claims are time-barred; delayed-discovery and continuing-harm theories fail |
| Whether denial of leave to amend was proper after judgment on the pleadings | Courtois: should be allowed to amend to cure defects | MERS: pleading defects were substantive and amendment would not cure deficiencies | Held: Denial of leave to amend was not an abuse of discretion |
Key Cases Cited
- Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal.App.4th 808 (Cal. Ct. App. 2016) (preemptive preforeclosure suits are generally prohibited)
- Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919 (Cal. 2016) (post-foreclosure challenges to void assignments may be cognizable; does not authorize preforeclosure suits)
- Herrera v. Federal Natl Mortgage Assn., 205 Cal.App.4th 1495 (Cal. Ct. App. 2012) (deed language granting MERS authority as nominee defeats challenge to MERS assignment power)
- Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797 (Cal. 2005) (delayed discovery rule: accrual postponed until plaintiff has reason to discover the cause of action)
- Perez v. Mortgage Elec. Registration Sys., Inc., 959 F.3d 334 (9th Cir. 2020) (follows California appellate rule that preemptive preforeclosure challenges are not permitted)