633 F. App'x 580
4th Cir.2015Background
- Plaintiffs–Appellants Sostones and Yolanda Pena defaulted on their Loudoun County mortgage and the property was foreclosed.
- HSBC Bank USA, N.A. purchased the property at foreclosure as Trustee for Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-OA2.
- Penas challenged the assignment of the deed of trust from MERS to HSBC, claiming it was invalid and thus HSBC lacked authority to foreclose.
- The district court dismissed the complaint for lack of standing to challenge the assignment.
- Penas argued they sought to enforce conditions precedent to foreclosure under Virginia law, not to attack the contract itself.
- Record showed plaintiffs received notices of default and impending foreclosure; the dispute centers on who could provide proper notice and whether the assignment was valid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Penas have standing to challenge MERS–HSBC assignment? | Penas argue they may attack the contract’s prerequisites because it affects foreclosure. | Virginia law bars non-parties/beneficiaries from challenging contracts. | No standing; Penas cannot challenge the assignment. |
| May borrowers enforce conditions precedent to foreclosure where they are not parties to the assignment? | Borrowers can sue to enforce foreclosure conditions, as they are party to the deed of trust. | Enforcement hinges on challenging the assignment, which is improper for non-parties. | Virginia law provides no avenue to challenge the assignment; relief denied. |
Key Cases Cited
- Aziz v. Alcolac, Inc., 658 F.3d 388 (4th Cir. 2011) (assumed true for motion-to-dismiss and limited to integral documents)
- Phillips v. Pitt County Mem’l Hosp., 572 F.3d 176 (4th Cir. 2009) (may consider attached documents in dismissal context)
- Wells v. Shoosmith, 428 S.E.2d 909 (Va. 1993) (general rule: non-privity cannot attack contract validity)
- Mich. Mut. Ins. Co. v. Smoot, 129 F. Supp. 2d 912 (E.D. Va. 2000) (non-parties cannot sue on a contract; beneficiary requirement)
- CGM, LLC v. BellSouth Telecomm., Inc., 664 F.3d 46 (4th Cir. 2011) (prudential standing and right to assert others’ legal rights)