243 Cal. App. 4th 1293
Cal. Ct. App.2016Background
- Majd obtained a $600,000 adjustable interest-only mortgage in 2006; payments later became unaffordable and he defaulted.
- In 2011 the deed of trust was assigned to Citibank as trustee for a securitized trust; Recontrust recorded a notice of default and later conducted a trustee’s sale in August 2012. Citibank allegedly purchased the property at the sale.
- Majd applied for a HAMP loan modification with Bank of America in early 2012; he alleges repeated document submissions and that Bank of America told him foreclosure would not proceed while modification review was pending.
- Despite ongoing review and alleged assurances, a notice of trustee’s sale issued and the property was sold; Bank of America later denied the modification five days after the sale.
- Majd sued (third amended complaint) asserting wrongful foreclosure, negligent misrepresentation, breach of good faith, promissory fraud/estoppel, UCL (Bus. & Prof. Code § 17200), and cancellation of instruments against Bank of America, Wells Fargo, and Nationstar; the trial court sustained demurrers and dismissed without leave to amend on several claims.
- The Court of Appeal affirmed in part and reversed in part: it reversed dismissal of the UCL claim against Bank of America and reversed denials of leave to amend as to wrongful foreclosure and cancellation claims (subject to adding indispensable parties and pleading agency); it affirmed dismissal as to securitization-based challenges, negligent misrepresentation, promissory fraud, and as to Wells Fargo and Nationstar.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge securitization / defective assignments | Majd: assignments to the securitized trust were defective (post-closing) and thus foreclosure was void | Bank of America/Wells Fargo: plaintiff lacks standing; assignments (even if flawed) didn't prejudice borrower | Court: No standing absent specific facts showing prejudice; sustained dismissal of securitization-based claims |
| Dual-tracking / HAMP violation and UCL liability | Majd: Bank of America proceeded with foreclosure while HAMP modification review pending; this is unfair and violates HAMP guidelines and UCL | Bank: HAMP does not guarantee a modification; foreclosure depends on borrower default, not servicer promises | Court: Allegations that servicer foreclosed during pending HAMP review and denied modification shortly after sale state a UCL claim; reversed dismissal as to UCL claim against Bank of America |
| Tender rule / ability to seek relief from foreclosure sale | Majd: tender should be excused because he sought modification and foreclosure while review pending made tender inequitable | Bank: Majd failed to tender and therefore cannot challenge foreclosure | Court: Tender rule inapplicable where foreclosure could have been avoided by modification; plaintiff excused from tender for UCL and wrongful foreclosure claims |
| Wrongful foreclosure and cancellation of trustee’s deed | Majd: foreclosure was wrongful and trustee’s deed should be cancelled (Citibank bought property) | Bank/Recontrust: Recontrust conducted sale; defendants say plaintiff didn’t plead agency or join buyer/purchaser | Court: Plaintiff stated wrongful foreclosure theory but failed to allege Recontrust acted as agent of servicer—leave to amend to plead agency; cancellation claim may proceed only if indispensable party (Citibank/purchaser) is joined — leave to amend to add purchaser if appropriate |
Key Cases Cited
- Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (recognizing limits on borrowers suing to challenge authority to foreclose under the nonjudicial foreclosure statute)
- Glaski v. Bank of America, 218 Cal.App.4th 1079 (allowing challenge to securitization transfers under certain trust-law voidability theory — court here declines to follow)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (explaining HAMP program, servicer obligations, trial period plan, and NPV requirement)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49 (holding foreclosure within 30 days after HAMP denial in violation of Making Home Affordable Guidelines can be an unfair UCL practice)
- Siliga v. Mortgage Electronic Registration Systems, Inc., 219 Cal.App.4th 75 (dismissing securitization-based claims for lack of alleged prejudice)
- Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (rejecting prejudice from assignment defects and discussing HUD/deed provisions relating to pre-foreclosure contacts)
- Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872 (treating dual-tracking as an unfair practice relevant to UCL analysis)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (standing under Bus. & Prof. Code § 17204 requires injury in fact and loss of money or property)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (tender rule: borrower must generally tender to challenge trustee’s sale, subject to exceptions)
- Mabry v. Superior Court, 185 Cal.App.4th 208 (tender excused where lender failed to comply with pre-foreclosure meeting requirement and modification process would have obviated tender)
- Miles v. Deutsche Bank Nat. Trust Co., 236 Cal.App.4th 394 (elements of wrongful foreclosure tort)