Sciarratta v. U.S. Bank National Association, (2016) 202 Cal.Rptr.3d 219, is another in a series of wrongful foreclosure cases working their way through the courts of appeal. In this case, the borrower, Sciarratta, was foreclosed on after becoming $15,000.00 in arrears on a $620,000.00 loan.
The borrower brought a wrongful foreclosure action against the foreclosing bank and trustee, alleging that the entity that conducted the nonjudicial foreclosure sale on her home had no interest in either the underlying debt or the subject property, and thus, the assignment to Bank of America was void. The applicable rule from the case law is that where a homeowner alleges that a nonjudicial foreclosure sale was wrongful because of a void assignment—the homeowner has standing to sue for wrongful foreclosure. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919.)
Under the facts of this case, Washington Mutual (WAMU) was the original lender/deed of trust and promissory note holder. WAMU assigned its interest to JPMorgan Chase Bank, and then on April 27, 2009, JPMorgan Chase Bank assigned its interest in the loan to Deutsche Bank. Then, on November 9, 2009, JPMorgan Chase Bank purportedly assigned its interest in the loan to Bank of America, which is the bank that ultimately foreclosed. The problem was that JPMorgan Chase Bank had already assigned all of its interest in the loan to Deutsche Bank, and so JPMorgan Chase had no interest to assign to Bank of America.
The defendant nonetheless filed a “demurrer” (essentially, an early motion to dismiss), arguing that even if the assignment to Bank of America was void the plaintiff’s complaint should be dismissed because it failed to specifically allege that plaintiff was harmed by the mistake, that is, the borrower would have defaulted and been foreclosed on anyway. The required elements for a wrongful disclosure case are: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.
The trial court agreed that specific prejudice or harm should have been alleged, and it dismissed the case. However, the court of appeal reversed, holding that no prejudice or harm needs to be alleged beyond the allegedly wrongful foreclosure itself in order to state a cause of action for wrongful foreclosure in the situation where the foreclosing beneficiary’s interest is void. The court explained that, “[a] homeowner experiences prejudice or harm when an entity with no interest in the debt forecloses. When a non-debtholder forecloses, a homeowner is harmed because he or she has lost her home to an entity with no legal right to take it. If not for the void assignment, the incorrect entity would not have pursued a wrongful foreclosure….The critical issue is not the plaintiff’s ability to pay, but rather whether the defendant’s conduct resulted in the plaintiff’s harm; i.e., a foreclosure that was wrongful because it was initiated by a person or entity having no legal right to do so; i.e. holding void title.”
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