Kalnoki v. First American Trustee Servicing Solutions, LLC

Home loan borrower failed to allege viable claims for fraud, violation of the UCL or Rosenthal Act, or wrongful foreclosure based on alleged late transfer of loan to a securitized trust or flaws in the nonjudicial foreclosure process.  Following Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, the same court that decided Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366 holds that a court may take judicial notice of the date, parties and legal effect of a legally operative document that has been publicly recorded.  However, the court cannot take judicial notice of facts recited in recorded documents.  A substitution of trustee may properly be executed by an agent of the lender/beneficiary without accompanying proof of the agency.  Neither state law nor the standard Fannie-Freddie deed of trust forbids a lender from acting through agents in performing that act.  Following Rajamin v. Deutsche Bank Nat. Trust Co. (2d Cir. 2014) 757 F.3d 79 and rejecting Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079, this decision holds that a borrower failed to state a viable claim based on alleged violations of a securitized trust’s pooling and servicing agreement in the transfer of the borrower’s loan to the trust.  Furthermore, the borrower here failed to allege tender or prejudice from the various procedural or technical flaws in the foreclosure process that it attacked.  The decision distinguishes Sciarratta v. U.S. Bank, National Association (2016) 247 Cal.App.4th 552 on the issue of prejudice because in Sciarratta the recorded documents supported the plaintiff’s allegation that the wrong party foreclosed, whereas, here the recorded documents supported the contrary conclusion.  A notice of default and accompanying declaration are not invalid even if robo-signed.  Borrower who admitted default lacked UCL standing.  While foreclosure and loss of the home was an economic loss, it was not caused by the procedural or technical flaws in the foreclosure documents that borrower alleged (i.e., the purported unfair competition) but rather the foreclosure was caused by the borrower’s default.  Foreclosure is not debt collection under California’s Rosenthal Fair Debt Collection Practices Act.  This decision affirms an award of attorney fees against borrowers who unsuccessfully challenged a completed foreclosure of their property.  It holds that the attorney fee provisions in the deed of trust were broad enough to encompass the borrowers’ implied covenant, rescission of the deed of trust and other claims.  It does not address one-form-of-action or other anti-deficiency law limitations.

California Court of Appeal, Third District (Hull, J.); February 1, 2017; 2017 WL 432846


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