Debrunner v. Deutsche Bank National Trust Co.
204 Cal. App. 4th 433
| Cal. Ct. App. | 2012Background
- Plaintiff Debrunner sought a declaratory judgment and quiet title to property targeted by nonjudicial foreclosure initiated by Deutsche Bank, Saxon, and Old Republic.
- The deed of trust on the Los Altos home had a complex chain: Quick Loan funded the 2004 first deed; Quick Loan assigned to Option One, then FV-1, then Deutsche Bank, with Saxon acting as agent.
- An assignment from FV-1 to Deutsche Bank allegedly conveyed “all beneficial interest” and “the note” was described as part of the secured loan.
- Old Republic, the foreclosure trustee, recorded a substitution of trustee in 2010, while a 2008 notice of default involving Saxon had been rescinded due to a bankruptcy stay.
- Plaintiff argued that proper foreclosures require possession of the note and valid chain of assignments; the trial court sustained the demurrer without leave to amend.
- The appellate court affirmed, rejecting the note possession requirement and finding the recorded assignments sufficient on their face to support foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an assignment of the deed of trust can foreclose without the promissory note | Debrunner: deed of trust cannot foreclose without the note; assignments without the note are nullities | Deutsche Bank: nonjudicial foreclosure does not require physical possession of the note; assignment of the deed of trust with note language suffices | No error; assignment of deed with note language supports foreclosure despite lack of note possession |
| Whether the notice of default identified the beneficiary and substitution of trustee properly | Notice failed to identify the beneficiary directly and listed Old Republic prematurely | Notice identified Deutsche Bank as creditor and Saxon as agent; no prejudice shown; strict compliance not required | Not prejudicial; notice sufficient under governing statutes |
| Whether UCC negotiable-instrument provisions override foreclosure procedures | UCC §§ 3104, 3109, 3301 require endorsement and delivery; note must be possessed | Comprehensive nonjudicial foreclosure framework (§§ 2924–2924k) governs; UCC does not apply here | UCC provisions do not control nonjudicial foreclosure; statutes govern |
| Whether the case supports quiet title and declaratory relief given foreclosure actions | Lack of lawful ownership of note/assignment undermines foreclosure and title | Assignments on face show chain of title; quiet-title claim fails | Claims fail; no viable cause of action for quiet title or declaratory relief given the foreclosure |
| Whether the court erred in denying leave to amend | Could cure defects with amendments adding tort claims | No reasonable possibility amendments would cure defects | No abuse of discretion; no viable amendments |
Key Cases Cited
- Moeller v. Lien, 25 Cal.App.4th 822 (Cal. App. 1994) (nonjudicial foreclosure scheme exhaustive; possession of note not required to initiate)
- Lane v. Vitek Real Estate Indus. Group, 713 F.Supp.2d 1092 (E.D. Cal. 2010) (no statutory right to require note and deed of trust together for nonjudicial foreclosure)
- Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (Cal. App. 2011) (no need for possession of the note to foreclose; focus on statutory framework)
- In re Veal, 450 B.R. 897 (9th Cir. B.A.P. 2011) (bankruptcy stay context; assignment of note vs. mortgage; California law relevance)
- Crowley v. Katleman, 8 Cal.4th 666 (Cal. 1994) (standard for reviewing demurrer and factual allegations on appeal)