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S218973

IN THE SUPREME COURT OF CALIFORNIA


______________________
TSVETSANA YVANOVA,
Plaintiff and Petitioner
vs.
NEW CENTURY MORTGAGE CORPORATION, etc., et al.,
Defendants and Respondents.
____________________________________________
Los Angeles Superior Court Case No. LC 097218
Honorable Russell Steven Kussman, Judge
Dept. NW Q

______________________
PETITION FOR LEAVE TO FILE BRIEF OF AMICUS CURIAE;
BRIEF OF AMICUS CURIAE
______________________
MARK F. DIDAK (SBN 104059)
LAW OFFICE OF MARK F. DIDAK
520 Burnside Avenue, No. 9J
Los Angeles, California 90036
Telephone: (310) 433-4489
mdidak@didaklaw.com
Attorneys for Amicus Curiae

TABLE OF CONTENTS
Page

CERTIFICATE OF INTERESTED ENTITIES OR PERSONS ......................................... 1


APPLICATION OF MARK F. DIDAK AND THE LAW OFFICE OF
MARK F. DIDAK FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE IN
SUPPORT OF PLAINTIFF AND PETITIONER TSVETSANA YVANOV .................... 2
TABLE OF CONTENTS ......................................................................................................i
TABLE OF AUTHORITIES ............................................................................................. iii
I.

Introduction and Statement of the Issue ................................................................... 4

II.

Summary of Argument ............................................................................................. 4

III.

Background: The Court of Appeals Holding Below .............................................. 4

IV.

Legal Argument: A Borrower Has Standing to Challenge a


Void Assignment of Her Mortgage Note and Deed of Trust, in Order
to Ensure That Her Mortgage Contract Is Being Enforced by the
Other Party to Her Mortgage Contract Rather Than an Imposter ............................ 5
A.

Controlling California Authority Places the Burden of Proving a Valid


Assignment of a Real Property Mortgage on the Putative Assignee ............. 5

B.

Californias Nonjudicial Foreclosure Statutes and Cases


Interpreting Them Permit Borrowers to Challenge the Authority of
Those Attempting to Enforce Their Mortgage Obligations Where
the Borrower Alleges Facts Which, If Proved, Demonstrate the
Party Attempting to Enforce the Obligation Is Not the Note Owner
or Its Authorized Representative ................................................................... 9
1.

Borrowers Have Standing Under Existing Case Law Where, As

Here, Their Lawsuits Are Consistent With the Policies Behind


Californias Nonjudicial Foreclosure Statutes ............................................... 9

2.

The Legislature Recently Reaffirmed Borrowers Standing ............ 10

C.

Putative Assignees Must Prove They Received a Valid Assignment


to Foreclose Judicially; There Is No Principled Basis for Treating
Putative Assignees Differently In Nonjudicial Foreclosures ...................... 12

D.

Borrowers Have Standing Under Article III of the


United States Constitution ........................................................................... 13

E.

The Decision Below Conflicts With Other Cases Holding


Borrowers Have Standing ............................................................................ 13

F.

Plaintiffs Trust Deed Expressly Authorizes This Lawsuit ......................... 16

G.

Courts Routinely Allow Litigants to Draw Factual Allegations


and Evidence from Contracts to Which Those Litigants Are Not
Parties, and Which They Have No Standing to Enforce or Attack ............. 17

H.

The Notion That a Borrower Lacks Standing Under These


Circumstances Defies Common Sense ........................................................ 18

I.

Basic Legal Principles Concerning What Constitutes Proof of a


Valid Transfer of a Mortgage Note and Deed of Trust ............................... 18
1.

Situations in Which a Transfer Is Invalid ......................................... 18

2.

Requirements of a Valid Transfer .................................................... 19


a. Written Assignment Meeting the Requirements of
the Statute of Frauds ......................................................... 20
b. Negotiation and Delivery ................................................. 20

V.

Respondents Answer Brief Fails to Address These Issues.................................... 24

VI.

Conclusion .............................................................................................................. 24

Rule 8.204(c)(1) Certification ............................................................................................ 26

ii

TABLE OF AUTHORITIES

Cases

Page(s)

Adams v. Madison Realty & Dev., Inc. (3d Cir. 1988) 853 F.2d 163 ....... 20, 21, 22, 23, 24
Adler v. Newell (1895) 109 Cal. 42.................................................................................. 8, 9
Ahern v. McCarthy (1895) 107 Cal. 382.............................................................................. 8
Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226 ............................................... 9
Ball v. DBNTC (W.D. Mo. 2012) 2012 U.S. Dist. LEXIS 17978 ............................... 13, 14
Bayview Loan Servicing, LLC v. Nelson (Ill. Ct. App. 2008) 382 Ill.App.3d 1184 .......... 15
Bunting v. Saltz (1890) 84 Cal. 168 ....................................................................... 19, 20, 21
California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053........................................ 9
Chilton v. Fed. Nat. Mortgage Assn. (E.D. Cal. 2009) 2009 WL 5197869 ...................... 10
Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284 .........5, 6, 7, 8, 12, 17, 22, 23, 25
Coon v. Shry (1930) 209 Cal. 612........................................................................................ 8
Creative Ventures, LLC v. Jim Ward & Assocs. (2011) 195 Cal.App.4th 1430 .......... 20, 21
Deutsche Bank National Trust Co. v. Ramotar (Sup.Ct. N.Y. 2011) 2011 WL 66041 ..... 15
First American Title Ins. Co. v. XWarehouse Lending Corp.
(2009) 177 Cal.App.4th 106 .............................................................................................. 8
Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 .................................... 18
Friends of the Earth, Inc. v. Laidlaw. Entl. Servs. (TOC), Inc.
(2000) 528 U.S. 167 ......................................................................................................... 13
Garfinkle v. Superior Court (1978) 21 Cal.3d 268 ............................................................. 8
Glaski v. Bank of America, etc. (2013) 218 Cal.App.4th 1079 .......................................... 2

iii

Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 ....................... 7, 9
Haug v. Riley (1897) 101 Ga. 372, 20 S.E. 44 ................................................................... 21
Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495 ..................... 5
Holmes v. Warren (1904) 145 Cal. 457 .............................................................................. 8
In re: Palmdale Hills Property, LLC (9th Cir. 2011) 654 F.3d 868 ................................. 13
In re Veal (9th Cir. B.A.P. 2011) 450 B.R. 897................................................................... 6
Javaheri v. JP Morgan Chase Bank, N.A.
(C.D. Cal. 2011) CV10-08185 ODW (FFMx) ..................................................... 10, 14, 16
Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497 .......................... 5, 19
Kemp v. Countrywide Home Loans, Inc. (Bk. D. N.J. 2010) 440 B.R. 624 ................ 14, 15
Keshtgar v. U.S. Bank, N.A. (2014) 226 Cal.App.4th 1201............................................. 2, 8
Mata v. Citimortgage, etc., et al.
(C.D. Cal. 2011) 2011 WL 4542723.................................................................................. 6
McLaughlin v. Wells Fargo Bank (C.D. Cal. 2013) 2013 WL 1164432 ..................... 13-14
Melendrez v. D&I Investment, Inc. (2005) 127 Cal.App.4th 1238 ...................................... 9
Naranjo v. SBMC Mortgage (S.D. Cal. 2012) 2012 WL 3030370........................ 14, 15, 16
Ohlendorf v. Amer. Home Mort. Servicing
(E.D. Cal. 2010) 2010 WL 31098 .............................................................................. 10, 14
Ord v. McKee (1855) 5 Cal. 515 .......................................................................................... 8
Peng v. Chase Home Finance LLC (2014) 2d Dist. Case No. B245436 ........................... 18
Pollard v. Saxe and Yolles Dev. Co. (1974) 12 Cal.3d 374 ............................................... 20
Pribus v. Bush (1981) 118 Cal.App.3d 1003 ............................................. 20, 21, 22, 23, 24
Secrest v. Security Nat. Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544 ........ 19

iv

Shaw v. Railroad Company Shaw v. Railroad Co.


(1879) 101 U.S. 557, 563-564, 25 L.Ed. 892 .................................................................. 21
Todd v. Todd. (1912) 164 Cal. 255 ...................................................................................... 8
U.S. Bank National Assn. v. Ibanez (Sup.Ct. Mass. 2011) 458 Mass. 637 ........................ 14
Wells Fargo Bank, N.A. v. Erobobo (Sup.Ct. N.Y. 2013) 972 N.Y.S.2d 147 ....... 14, 15, 19
Yvanova v. New Century Mortgage Corp., 2d Dist. Case No. B247188 ......................... 2, 5
Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112 .................................................... 10
Constitutions, Statutes and Court Rules
U. S. Constitution, Article III ............................................................................................. 13
Civil Code 1624 .............................................................................................................. 19
Civil Code 2923.55 ................................................................................................... 10, 11
Civil Code 2924 .............................................................................................................. 10
Civil Code 2924.12 ......................................................................................................... 12
Civil Code 2924.17 ......................................................................................................... 11
Civil Code 2943 ........................................................................................................ 10, 11
Civil Code 2944 .............................................................................................................. 20
Civil Code 3201 .............................................................................................................. 20
Civil Code 3202 .............................................................................................................. 22
Civil Code 3440 ........................................................................................................ 19, 20
Commercial Code 9604 .................................................................................................. 20
Fed.R.Civ.Proc. 12(b)(6).................................................................................................... 15
California Rule of Court 8.204(c)(1) ................................................................................. 26

California Rule of Court 8.520(f) ........................................................................................ 2


Treatises
4 W. Hawkland & L. Lawrence,
Uniform Commercial Code Series 3-202:05 (1984) ............................................... 23, 24
Restatement Property 3d, 5.4(c),
Transfer of Mortgages and Obligations Secured By Mortgages ......................................... 8
Roger Bernhardt, California Mortgages and Deeds of Trust,
and Foreclosure Litigation, 1.26 (4th ed. 2009)a (1940) 15 Cal.2d 82 ................. 19, 21
5 Witkin, Cal. Proc. (5th ed. 2008) Pleading, 675 ......................................................... 12
5 Witkin, Cal. Proc. (5th ed. 2008) Pleading, 676 ......................................................... 12

vi

CERTIFICATE OF INTERESTED ENTITIES OR PERSONS


Mark F. Didak, dba the Law Office of Mark F. Didak (Petitioner) is a lawyer
licensed to practice law in the State of California. Pursuant to California Rule of
Court 8.208, Petitioner hereby states that Petitioners law practice is wholly owned by
Petitioner, and no other entity or person has an ownership of 10% or more therein.
Respectfully submitted,
DATED: April 15, 2015

LAW OFFICE OF MARK F. DIDAK

Mark F. Didak
_________________________________
MARK F. DIDAK
Attorneys for Amicus Curiae

APPLICATION OF MARK F. DIDAK AND THE LAW OFFICE OF MARK F.


DIDAK FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE IN SUPPORT
OF PLAINTIFF AND PETITIONER TSVETSANA YVANOVA

TO THE HONORABLE CHIEF JUSTICE AND ASSOCIATE JUSTICES OF


THE SUPREME COURT OF CALIFORNIA:
The undersigned respectfully requests permission to file a brief as amicus
curiae in the above-captioned matter under California Rules of Court, rule 8.520(f) in
support of Plaintiff and Petitioner Tsvetsana Yvanova.
Petitioner is a California lawyer who has handled several recent cases raising
many of the same issues involved in the instant case, including Dillenberg v. U.S.
Bank, N.A., et al., Second District Court of Appeal case no. B246432 (now final), and
Mata v. Citimortgage, Inc., United States District Court, Central District of California
case no. CV 10-9167 DSF (PLAx) (now settled), and expects to handle similar cases
in the future. In July, 2014 Petitioner wrote to urge review of the instant case, a letter
we believe was of significant value to the Court in considering and ultimately
granting Ms. Yvanovas Petition for Review.
In October, 2013, we wrote to oppose depublication of the Court of Appeals
opinion in Glaski v. Bank of America, etc., (2013) 218 Cal.App.4th 1079, Cal. Sup.
Ct. case no. S213814, which the Yvanova decision criticizes, but which we believe
was correctly decided.

More recently, we wrote separate letters requesting

depublication of the Court of Appeals decisions in Yvanova and Keshtgar v. U.S.


Bank, N.A., (2014) 226 Cal.App.4th 1201, Second District Court of Appeal case no.
B246193.
Petitioner has been a civil litigator since becoming a member of the California
bar in 1981, and at various points during his 34 years of practice has represented title
insurers and their insureds, and mortgagors on mortgage-related issues.

Since

approximately 2010, Petitioner has focused most of his time litigating issues relating

to foreclosures of securitized mortgages, including conducting extensive legal


research and analysis, and writing numerous briefs as well as several articles on these
subjects published in the Los Angeles Daily Journal. Petitioner has focused primarily
on attempting to get the California Supreme Court, and California Courts of Appeal,
to address the issues raised in this case, and the related issues in the accompanying
Brief of Amicus Curiae. Petitioner authored an amicus brief that was accepted by the
Supreme Court in Buss v. Superior Court, (1997) 16 Cal.4th 35. Petitioner is AVrated, and his qualifications and the numerous appeals he has handled can be reviewed
on his website, didaklaw.com.
Pursuant to California Rules of Court, rule 8.520(f)(4), Petitioner certifies that
no party or counsel for a party has authored the proposed brief in whole or in part.
Except for Petitioner himself, no party, counsel for a party, or other person made a
monetary contribution to fund the preparation or submission of the following amicus
brief.
The proposed brief follows.
Respectfully submitted,
DATED: April 15, 2015

LAW OFFICE OF MARK F. DIDAK

Mark F. Didak
_________________________________
MARK F. DIDAK
Attorneys for Amicus Curiae

I.

INTRODUCTION AND STATEMENT OF THE ISSUE


The Issue: In an action for wrongful foreclosure on a deed of trust securing a

home loan, does the borrower have standing to challenge an assignment of the note
and deed of trust on the basis of defects allegedly rendering the assignment void?
Answer: Yes.
II.

SUMMARY OF ARGUMENT
Long-established and controlling principles of mortgage law protect the rights

of real property owners by ensuring that only a lender/mortgagee or its valid


successor may enforce the security agreement contained in a mortgage or deed of
trust. These rules include strict requirements that must be met to perfect an attempted
assignment of a mortgage note and trust deed. When these requirements are fulfilled,
the assignment is valid, and is therefore binding on the borrower.

When these

requirements are not fulfilled, however, the putative assignment is void, and the
putative assignee remains a stranger to the loan contract between the lender and the
borrower. A borrower has standing to bring a legal action to prevent such a stranger
from taking her property.
The unarguable legal premise of Ms. Yvanovas lawsuit is that a borrowers
obligations are determined by the borrowers loan contract. Ms. Yvanova contracted
to make her mortgage payments to the owner of legal title to her debt, or the legal
owners authorized agent. Her loan contract does not allow strangers to demand or
collect payments orworseforeclose under color of a trust deed they have no right
to enforce and which clouds plaintiffs title. Like other borrowers, plaintiff did not
agree to pay somebodyrather, she agreed to pay a particular bank on particular
terms, that banks valid successor, or their authorized agents.
III.

BACKGROUND: THE COURT OF APPEALS HOLDING BELOW


The decision below holds that [a]n impropriety in the transfer of a promissory

note would . . . affect only the parties to the transaction, not the borrower. The
borrower thus lacks standing to enforce any agreements relating to such transactions.

Yvanova v. New Century Mortgage Corporation, et al., Second District Court of


Appeal case no. B247188 at p. 7, citing Jenkins v. JPMorgan Chase Bank, N.A.
(2013) 216 Cal.App.4th 497, 515 and Herrera v. Federal National Mortgage Assn.
(2012) 205 Cal.App.4th 1495, 1507 (internal quotation marks omitted). This holding
implicitly assumes that instead of being required to pay their lender or its successor,
mortgage borrowers have some generalized obligation to pay someone, even someone
who never acquired good title to the note. The Court of Appeal articulates no basis
for this special preference for the mortgage industry. No other type of contract is
presumed to be enforceable by someone who may be a pretender. Indeed, to the
extent mortgages historically were treated differently from other contracts, the
differences always favored the special interests of the property-owner over the
commercial interests of the lender, exactly the opposite of the implicit principle
underlying the Court of Appeals holding.
As we explain, the appellate courts broad holding that a homeowner may not
challenge the authority of a foreclosing entity is directly contrary to controlling
California Supreme Court authority and centuries of common law concerning
mortgages.
IV.

LEGAL ARGUMENT:

A BORROWER HAS STANDING TO

CHALLENGE A VOID ASSIGNMENT OF HER MORTGAGE NOTE


AND DEED OF TRUST, IN ORDER TO ENSURE THAT HER
MORTGAGE CONTRACT IS BEING ENFORCED BY THE OTHER
PARTY TO HER MORTGAGE CONTRACT RATHER THAN AN
IMPOSTER
A.

Controlling California Authority Places the Burden of


Proving a Valid Assignment of a Real Property Mortgage on
the Putative Assignee.

In Cockerell v. Title & Ins. Co., (1954) 42 Cal. 284, 293a case involving the
right to proceeds from the nonjudicial foreclosure sale of real propertythe Supreme

Court held that a party claiming rights as an assignee of a mortgage note bears the
burden of proving it received a valid assignment by clear and positive evidence, and
that courts are prohibited from presuming such assignments are valid: . . . [T]he
measure of sufficiency requires that the evidence of assignment be clear and positive
to protect an obligor from any further claim by the primary obligee . . . . Id., 42
Cal.2d at p. 292, citations omitted.

One who fails to prove it received a valid

assignment of the mortgage note has no standing to complain about not receiving
proceeds of the note or a sale of property securing it. Cockerell, supra, 42 Cal.2d at p.
293. Hence, it is those who cannot prove they received a valid mortgage assignment
who lack standing, not borrowers alleging absent or defective assignments. See also
Mata v. Citimortgage, etc., et al. (C.D. Cal. 2011) 2011 WL 4542723, *2 (because
Cockerell requires a party claiming rights under an assignment to prove a valid
assignment, borrowers stated a claim for declaratory relief as to whether their servicer
was entitled to collect their monthly mortgage payments where defendants refused
borrowers demands to provide such proof); see also In re Veal (9th Cir. B.A.P. 2011)
450 B.R. 897, 908, 913 (financial institutions that were not initial note payees were
required to demonstrate facts to establish prudential standing to sue to enforce it, in
turn requiring them to demonstrate a factual basis for claiming the substantive legal
right to enforce the note).
Since an assignee acquires no better rights than those belonging to the assignor
(Cockerell, supra, 42 Cal.2d at p. 293), the validity of claimed assignments of a
borrowers mortgage note depends on the validity of each purported sale of the note.
Defendants must prove a valid assignment to each assignee in the chain of title to the
note, including the authority of any indorser to bind that company. Id. A court may
not simply assume these facts:

Such assumptions, would indeed, constitute a

dangerous innovation. Id.


An entity who did not receive a valid assignment of the debt cannot recover on
the debt. Cockerell. It therefore follows that a borrower who has not paid such an

entity is not in default. Requiring the borrower to pay such an entity exposes the
borrower to the risk of double-payment if payment is demanded by another party
actually entitled to it. (See discussion at pp. 23-24, infra.) Indeed, that is precisely
why Cockerell requires a party claiming under an assignment to prove a valid
assignment by clear and positive evidence. Id., 42 Cal.2d at p. 292, citations omitted
(assignee must provide clear and positive proof of a valid assignment to protect an
obligor from any further claim by the primary obligee . . . .).
Worse, allowing an entity without actual authority to enforce the obligation to
take a borrowers home through foreclosure sanctions theft of the home.
For these reasons, a borrower has standing to bring an action to challenge the
foreclosing entitys authority where, as here, the borrower alleges facts which, if
proved, show the foreclosing party has no right to enforce the debt. (See discussion at
pp. 9-10, infra concerning the statement in Gomes v. Countrywide Home Loans, Inc.
(2011) 192 Cal.App.4th 1149, 1154, fn. 5, that California courts have repeatedly
allowed parties to pursue additional remedies for misconduct arising out of a
nonjudicial foreclosure sale when not inconsistent with the policies behind the
statutes.)
As we explain below (see Argument H, Section 2a, infra, p. 20), a mortgage
assignment must be made pursuant to a writing meeting the requirements of the
Statute of Frauds.1

Evidence an assignee must provide to meet Cockerells demand

for clear and positive proof of such a writing necessarily includes contracts for sale
of the note to which the borrower is not a party, such as mortgage sales agreements
and/or securitization agreements. The rule adopted by the court below, however, bars
lawsuits by borrowers who might rely on securitization agreements or other contracts
as evidence, thereby treating mortgage transfers via such agreements as presumptively

In addition, the mortgage note must be endorsed by the assignor and


delivered to the assignee. Elements of a valid mortgage assignment are discussed in
Argument I, section 2, infra, pp. 20-24.

valid in direct contravention of the holding in Cockerell. The Court of Appeals


decision below is the first published California appellate decision adopting this
dangerous innovation. It was not the last, as Keshtgar v. U.S. Bank, N.A. (case no.
S220012, rev. granted September 18, 2014) demonstrates. Worse, it is evident that
many federal court decisions and unpublished state court decisions have followed the
same flawed reasoning.
Decided in 1954, long after the nonjudicial foreclosure statutes were enacted, 2
Cockerell remains good law, as none of the subsequent amendments to the nonjudicial
foreclosure statutes expressly or impliedly undermines or limits its holding.
The Court of Appeals decision below also undermines controlling Supreme
Court authorities holding that a mortgage can only be enforced by the owner of the
note it secures. Adler v. Newell (1895) 109 Cal. 42, 48-50 (mortgage is a mere
incident to the debt that belongs to the holder of the note, and could be foreclosed
only by the latter); Ord v. McKee (1855) 5 Cal. 515, 516, cited with approval in
Adler; see also Restatement Property 3d Restatement Property 3d, 5.4(c), Transfer
of Mortgages and Obligations Secured By Mortgages (A mortgage may be enforced
only by, or in behalf of, a person who is entitled to enforce the obligation the
mortgage secures). Unless there is an existing indebtedness between the named
borrower and lender the mortgage has no existence. First Amer. Title Ins. Co. v.
XWarehouse Lending Corp. (2009) 177 Cal.App.4th 106, 116, citing Coon v. Shry
(1930) 209 Cal. 612, 615; accord, Holmes v. Warren (1904) 145 Cal. 457, 463; Todd
v. Todd (1912) 164 Cal. 255, 258; Ahern v. McCarthy (1895) 107 Cal. 382, 386.
Hence, one in possession of a mortgage or trust deed trust cannot enforce it unless he
also owns, or represents the owner of, an existing debt that the mortgage or deed of

In Garfinkle v. Superior Court, (1978) 21 Cal.3d 268, 281, the Supreme


Court noted that as of 1978, nonjudicial foreclosure had already been an available
remedy for over a century and that the Legislature validated its use by enacting
significant restrictions on nonjudicial foreclosures in 1917. Id. at p. 278.

trust secures. Adler, supra. This is a bedrock legal principle that is meaningless
unless a borrower can challenge a pretender seeking to enforce her mortgage note or
trust deed.
B.

Californias Nonjudicial Foreclosure Statutes and Cases


Interpreting Them Permit Borrowers to Challenge the
Authority of Those Attempting to Enforce Their Mortgage
Obligations Where the Borrower Alleges Facts Which, If
Proved, Demonstrate the Party Attempting to Enforce the
Obligation Is Not the Note Owner or Its Authorized
Representative.

1.

Borrowers Have Standing Under Existing Case Law Where, As

Here, Their Lawsuits Are Consistent With the Policies Behind Californias
Nonjudicial Foreclosure Statutes.

California courts have repeatedly allowed

parties to pursue additional remedies [i.e., legal action] for misconduct arising out of a
nonjudicial foreclosure sale when not inconsistent with the policies behind the
statutes. Gomes, supra, 192 Cal.App.4th at p. 1154, fn. 5, citing California Golf,
L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070-1071. There are three primary
policy objectives underlying the nonjudicial foreclosure provisions of the Civil Code:
(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy
against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss
of the property; and (3) to ensure that a properly conducted sale is final between the
parties and conclusive as to a bona fide purchaser. Melendrez v. D & I Investment,
Inc. (2005) 127 Cal.App.4th 1238, 1249-1250; accord, California Golf, supra. The
California Supreme Court adopted this approach in Alliance Mortgage Co. v.
Rothwell, (1995) 10 Cal.4th 1226, 1237.
Allowing borrowers to sue to forestall foreclosure where they allege facts
which, if true, support a claim that the wrong party is trying to foreclose supports the
policy of protecting debtors from wrongful loss of their properties. It promotes the

policy of ensuring that a properly conducted sale is final between the parties and
conclusive as to a bona fide purchaser by reducing the risk of post-sale challenges. It
promotes the policy of providing a genuine creditor/beneficiary with a quick,
inexpensive and efficient remedy against a defaulting debtor.
The basic bargain of the nonjudicial foreclosure statutes is that lenders can use
a streamlined nonjudicial process if they do not pursue a deficiency judgment. That
bargain in no way affects the ancient rule that the foreclosing entity must either own
the debt or be the debt owners authorized agent. See Ohlendorf v. Amer. Home Mort.
Servicing (E.D. Cal. 2010) 2010 WL 31098 (nonjudicially foreclosing defendants
must prove that they have the right to foreclose); Javaheri v. JP Morgan Chase
Bank, N.A. (C.D. Cal. 2011) CV10-08185 ODW (FFMx); Chilton v. Fed. Nat.
Mortgage Assn. (E.D. Cal. 2009) 2009 WL 5197869 (foreclosure trustee must have
permission to act on behalf of the proper beneficiary, i.e., the notes current owner).
2.

The Legislature Recently Reaffirmed Borrowers Standing. The

California Legislature recently reaffirmed that borrowers have standing to challenge a


foreclosing entitys authority by enacting amendments to the nonjudicial foreclosure
provisions of the Civil Code, in particular 2943 and 2923.55(b)(1)(b)), requiring
beneficiaries and servicers, respectively, to provide borrowers with evidence of
indebtedness and the servicers right to enforce it. These amendments are part of the
legislation known collectively as the Homeowner Bill of Rights (HBR). Amended
Civil Code 2924(a)(6) provides:
No entity shall record or cause a notice of default to be recorded or
otherwise initiate the foreclosure process unless it is the holder of the
beneficial interest under the mortgage or deed of trust, the original
trustee or the substituted trustee under the deed of trust, or the
designated agent of the holder of the beneficial interest. No agent of the
holder of the beneficial interest under the mortgage or deed of trust,
original trustee or substituted trustee under the deed of trust may record
a notice of default or otherwise commence the foreclosure process
except when acting within the scope of authority designated by the
holder of the beneficial interest. (Italics added.)

10

The plain language of this section prohibits commencement of foreclosure by


anyone other than the holder of the beneficial interest, except when acting within the
scope of authority designated by the holder of the beneficial interest in a real
property mortgage or trust deed. In sum, only the owner of the debt or its authorized
representative may exercise the power of sale or take the steps needed to do so.
The HBR also repealed old Civil Code 2923.553 and replaced it with a new
statute that prohibits mortgage servicers, mortgagees, trustees, beneficiaries or
authorized agents from recording a notice of default pursuant to 2924 until they
have, inter alia, notified the borrower that she may request a copy of her promissory
note or other evidence of indebtedness ( 2923.55(b)(1)(B)(i)), a copy of her deed of
trust or mortgage ( 2923.55(b)(1)(B)(ii)), and a copy of any assignment of the
mortgage or trust deed required to demonstrate the right of the mortgage servicer to
foreclose ( 2923.55(b)(1)(B)(iii)). Similarly, 2943(b)(1) entitles borrowers to
demand that a beneficiary or its authorized agent provide true, correct and complete
copies of the borrowers note or other evidence of indebtedness with any
modification thereto.4 Section 2923.55 requires a servicer to provide borrowers with
those documents upon request, while 2924.17 requires any notice of default, notice
of sale, assignment of deed of trust, or substitution of trustee recorded on behalf of a
servicer in connection with a foreclosure, or any declaration or affidavit filed in any
court regarding a foreclosure, to be accurate and complete and supported by
competent and reliable evidence. It further requires the servicer to ensure it has
reviewed competent and reliable evidence to substantiate the borrowers default and
the right to foreclose.

All further statutory references are to the Civil Code unless otherwise

indicated.
4

In short, the HBR gives a borrower the right to demand that lenders and
servicers show me the noteand other critical documentsto prove their right to
enforce the note and deed of trust.

11

A borrowers right to such proof can be enforced by an action for injunction


under 2924.12a form of relief that is in addition to and independent of any other
rights, remedies, or procedures under any other law. Nothing in this section shall be
construed to alter, limit, or negate any other rights, remedies, or procedures provided
by law. Civ. Code 2924.12(h).
Plainly, the Legislature intended to ensure that only owners of the debt or their
authorized agents can enforce the obligation and exercise the powers granted in the
accompanying mortgage or trust deed when it granted borrowers the right to obtain
documents evidencing ownership of the debt and authority to enforce it from servicers
and lenders, and authorized private actions to enforce that requirement.
C.

Putative Assignees Must Prove They Received a Valid


Assignment to Foreclose Judicially; There Is No Principled
Basis for Treating Putative Assignees Differently

in

Nonjudicial Foreclosures.
California law is clear that when a party who is not the original lender or its
authorized agent seeks to judicially foreclose on a mortgage, it must prove it owns the
note or is the owners authorized representative. See 5 Witkin, Cal.Proc. (5th ed.
2008), Pleadings, 675, 676 (foreclosure complaint should allege, inter alia, (3)
Plaintiffs ownership of the note and mortgage if he or she is a transferee and not the
original payee or mortgagee; allegation of assignment to plaintiff). There is no valid
reason why this rule should not apply where the borrower pleads facts which, if true,
demonstrate that an entity lacking a valid assignment is attempting to foreclose
nonjudicially. Indeed, Cockerell shows that this principle applies equally to cases
involving nonjudicial foreclosures.

Moreover, as noted above, the nonjudicial

foreclosure statutes allow the beneficiary to use a streamlined process in exchange for
giving up the right to pursue a deficiency, but nothing in the statutes suggests that
they were designed to provide less protection to property owners by allowing
foreclosures by persons or entities lacking authority.

12

D.

Borrowers Have Standing Under Article III of the United


States Constitution.

Under Article III of the United States Constitution, standing requires only that
a plaintiff suffered an injury in fact that is (1) concrete and particularized; (2) actual
or imminent, not conjectural or hypothetical; (3) the injury is fairly traceable to the
challenged action of the defendant; and (4) it is likely, as opposed to merely
speculative, that the injury will be redressed by a favorable decision. See In re:
Palmdale Hills Property, LLC (9th Cir. 2011) 654 F.3d 868, 873, citing Friends of the
Earth, Inc. v. Laidlaw Environmental Servs. (TOC), Inc. (2000) 528 U.S. 167, 180181.
Ms. Yvanova alleges a concrete and particularized injury in the form of being
foreclosed upon by defendants who were not entitled to enforce her mortgage note or
trust deed. This damage has already occurred and is continuing. These injuries are
directly traceable to defendants challenged actions, including initiating foreclosure
proceedings and threatening to complete them. A decision in favor of plaintiff will
redress this injury. Article III standing is therefore established.
E.

The Decision Below Conflicts With Other Cases Holding


Borrowers Have Standing.

Better reasoned recent cases decided by federal courts hold that a borrower
does not lose standing simply because her complaint mentions a securitization
agreement.

See McLaughlin v. Wells Fargo Bank (C.D. Cal. 2013) 2013 WL

1164432; Ball v. DBNTC (W.D. Mo. 2012) 2012 U.S. Dist. LEXIS 17978, *11. The
McLaughlin the court wrote:
Defendants argue that Plaintiff has no standing to challenge an improper
transfer of his Deed of Trust because he is not a party to the Pooling
Service Agreement (PSA) and thus cannot bring a claim for a breach
of that contract. . . . While Defendants are correct that Plaintiff has no
standing to challenge a violation of the PSA or improper securitization,
this is a mischaracterization of his claims. . . . Plaintiff alleges that
Defendants fraudulently assigned his Deed of Trust to themselves in

13

order to collect on a mortgage that they had no interest in. Id.


Mortgagees have standing to challenge fraudulent conduct perpetrated
upon them. [Citations.] Therefore, Defendants motion to dismiss will
not be granted for lack of standing.
Similarly, in Ball, supra, the court observed:
A number of cases have held that defects in the securitization process
cannot be raised by a mortgagee to support a wrongful foreclosure
claim. These courts seem to reason that, because the mortgagees are not
parties to any of the securitization contracts, they have no standing to
claim noncompliance with these agreements. . . .
But the Plaintiffs do not seek to enforce the contracts or affect the
relationship between the parties to the contracts. Rather, the Plaintiffs
point to defects in the securitization process as evidence that neither
title nor possession of the note passed to the trustee who sought to
foreclose their mortgages. Thus, the Plaintiffs seek only to use the
breaches as evidence that the party seeking to foreclose is not the
owner of their note. . . . (Id., 2012 U.S. Dist. LEXIS 17978 at pp.
**11-13, bold added, citations omitted.)
Additionally, a fast-growing body of state and federal cases arising out of the
mortgage crisis holds that mortgagors have standing to assert claims in court to ensure
that they only pay the right parties. See, e.g., U.S. Bank National Assn. v. Ibanez
(Sup. Ct. Mass. 2011) 458 Mass. 637, 649-650 (banks which submitted selfcontradictory securitization documents undermining their claims to have received
assignments of mortgages could not foreclose); Wells Fargo Bank, N.A. v. Erobobo
(Sup. Ct. N.Y. 2013) 972 N.Y.S.2d 147, 2013 N.Y. Slip Op. 50675(U) (Erobobo)
(foreclosing REMIC denied summary judgment on grounds triable issue existed
regarding REMICs ownership of mortgage where it received assignment of note
eighteen months after REMIC closing date and in violation of other requirements of
PSA); Naranjo v. SBMC Mortgage (S.D. Cal. July 24, 2012) 2012 WL 3030370
(borrower alleging her loan was not validly assigned to trust may seek restitution of
sums paid to defendants and declaration that defendants may not enforce note and
trust deed); Javaheri, supra; Ohlendorf, supra; Kemp v. Countrywide Home Loans,

14

Inc. (Bk. D. N.J. 2010) 440 B.R. 624, 629-630, 634 ) (bank bought note and mortgage
as trustee under pooling and servicing agreement but never possessed the note; neither
bank nor its servicer allowed to enforce the note); Deutsche Bank National Trust Co.
v. Ramotar (Sup. Ct. N.Y. 2011) 2011 WL 66041 (allegations of robosigning and
other concerns about banks standing were sufficient to raise triable issues of fact
precluding summary judgment in favor of bank suing to foreclose on Ramotar home);
Bayview Loan Servicing, LLC v. Nelson (Ill. Ct. App. 2008) 382 Ill.App.3d 1184,
1188 (summary judgment in favor of foreclosing entity where there was no evidence
it ever obtained any legal interest in the subject property).
New York law governs the mortgage securitization trust which purports to own
Ms. Yvanovas mortgage (PSA, 201(c) and 10.03), as it governs most such trusts.
A New York state court decision that clearly explains the applicable legal principles is
Erobobo, supra, which we commend to the Court.

There, a REMIC claiming

ownership of a mortgage note sued to foreclose and the homeowner answered with a
general denial. When the trust sought summary judgment, the homeowner alleged
that the trust had failed to acquire the note by the closing date as required by the PSA,
instead receiving a putative assignment of the note some eighteen months later.
Alternatively, the homeowner asserted the putative note transfer was invalid because
it was assigned directly to the REMIC rather than through an intermediary as required
by the PSA. The New York trial court held that if either defense were established, the
putative transfer of the note to the trust would be void under New York Trust Law
which provides that every sale, conveyance or other act of the trustee in
contravention of the trust is void. Id., 2013 N.Y. Slip. Op. 50675(U) at p. 12, citing
EPTL 7-2.4. Note that New York state court has ever overruled or criticized the
holding of Erobobo.
As in this case, the complaint in Naranjo, supra, relied in part on the
defendants failures to perfect assignments of the mortgage in the time and manner
required by a PSA. Defendants moved to dismiss under Fed.R.Civ.Proc. 12(b)(6).

15

The district court denied the motion, allowing Naranjo to proceed on her claims for
declaratory relief, improper debt collection, RESPA, unfair business practices, and for
an accounting. See Naranjo, supra at *4-10. The court wrote: The vital allegation
in this case is the assignment of the loan into the WAMU Trust was not completed by
May 30, 2006 as required by the Trust Agreement. This allegation gives rise to a
plausible inference that the subsequent assignment, substitution, and notice of default
and election to sell may also be improper. . . . Id. at *3.
In Javaheri, JP Morgan Chase (Chase) claimed it was entitled to enforce
plaintiffs 2007 WAMU mortgage because it acquired WAMU in September, 2008.
Plaintiff alleged, however, that Chase could not enforce her mortgage because before
Chase acquired WAMU, WAMU had transferred her note to a securitization trust.
There, it became part of, or was subject to, a Loan Pool, a Pooling and Servicing
Agreement, a Collateralized Debt Obligation, an Investment Trust, and/or a Special
Purpose Vehicle. Id. at p. 2. The district court denied Chases motion to dismiss
Javaheris complaint, stating that [c]oupled with Plaintiffs allegation that JPMorgan
never properly recorded its claim of ownership in the Subject Property [], the
abovementioned facts regarding the transfer of Plaintiffs Note prior to JPMorgans
acquisition of WaMus assets raise Plaintiffs right to relief above a speculative
level. Id. at p. 7.
F.

Plaintiffs Deed of Trust Expressly Authorizes This Lawsuit.

Plaintiffs trust deedlike many, but not all, otherscontains Non-Uniform


Covenant 22, authorizing the borrower to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale.
Plaintiffs DOT states in relevant part:
NON-UNIFORM COVENANTS:
covenant and agree as follows:

Borrower and Lender further

22. Acceleration; Remedies. Lender shall give notice to Borrower


prior to acceleration following Borrowers breach of any covenant
or agreement in this Security Instrument . . . . The notice shall

16

specify: (a) the default; (b) the action required to cure the default;
(c) a date, not less than 30 days from the date the notice is given to
Borrower, by which the default must be cured; and (d) that failure
to cure the default on or before the date specified in the notice may
result in acceleration of the sums secured by this Security
Instrument and sale of the Property. The notice shall further inform
Borrower of the right to reinstate after acceleration and the right to
bring a court action to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale. (Bold print in
original; italics and underline added. This page of the DOT appears at
RA, p. 53.)
The crux of plaintiff Yvanovas complaint is that she does not have any
contract with defendants and so does not owe them any money. Defendants are, at
best, officious intermeddlers. Accordingly, this action alleges the non-existence of a
default and is authorized by the DOT.
G.

Courts

Routinely

Allow

Litigants

to

Draw

Factual

Allegations and Evidence from Contracts to Which Those


Litigants Are Not Parties, and Which They Have No
Standing to Enforce or Attack.
It is not unusual for a lawsuit to be based on allegations derived from a
contract to which one of the litigants is not a party. Consider a hypothetical in which
Homeowner A hires a contractor to remodel his bathroom, relying on the contractors
promise to complete the work within two weeks. The contractor never shows up.
Homeowner A then discovers that the contractor actually spent the promised time
remodeling the bathroom of Homeowner B, who signed up the contractor just an hour
before the contractor signed up with A. Can A use Bs agreement with the contractor
as a source of facts for his fraud complaint, and as evidence that the contractor never
intended to honor his contract with A? Absolutely. Does A have standing to enforce
Bs contract or sue for some breach of it by the contractor or B? No.
The validity of any purported transfer of a mortgage note is relevant to
determining under Cockerell whether the assignee can prove by clear and positive

17

evidence that it received a valid assignment. There is no black magic by which that
standing is lost simply because the purported transfers were supposed to be effected
by contracts to which the borrower is not a party, and which she has no right to
enforce or attack directly.
H.

The Notion That a Borrower Lacks Standing Under These


Circumstances Defies Common Sense.

As Justice Lawrence Rubin wrote in a recent dissent in an unpublished case,


Peng v. Chase Home Finance LLC (April 8, 2014) case no. B245436, the idea that a
borrower has no standing to challenge whether one seeking to take his home via
foreclosure is actually entitled to do so is difficult to square with common sense or the
law with respect to any other type of debt:
The only party prejudiced by an illegitimate creditor-beneficiarys
enforcement of the homeowners debt, courts have reasoned, is the bona
fide creditor-beneficiary, not the homeowner.
Such reasoning troubles me. I wonder whether the law would apply the
same reasoning if we were dealing with debtors other than homeowners.
I wonder how most of us would react if, for example, a third-party
purporting to act for ones credit card company knocked on ones door,
demanding we pay our credit cards monthly statement to the third
party. Could we insist that the third party prove it owned our credit card
debt? By the reasoning of Fontenot [v. Wells Fargo Bank, N.A. (2011)
198 Cal.App.4th 256] and similar cases, we could not because, after all,
we owe the debt to someone, and the only truly aggrieved party if we
paid the wrong party would, according to those cases, be our credit card
company. I doubt anyone would stand for such a thing. (Peng, supra,
dissent, p. 1.)
I.

Basic Legal Principles Concerning What Constitutes Proof of


a Valid Transfer of a Mortgage Note.

1.

Situations In Which a Transfer Is Invalid. A wide variety of defects

can render an attempted assignment of a mortgage note or trust deed void. Cases
arising from the current mortgage crisis most often involve problems with
indorsements to the note. Either one or more of the required indorsements is missing,

18

or it is defective. Missing indorsements are common. Defective indorsements most


often involve instances in which the party cannot prove an indorsement was
authorized, the indorsement is void because it violates the terms of a securitization
agreement, the indorsement is post-dated or undated, or the indorsement is forged.
Void assignments of trust deeds most commonly arise where the instrument is
purportedly transferred by an unauthorized agent of the putative assignee, and/or the
trust deed is transferred independently of the note it purports to accompany.
Although a valid transfer of the note results in a valid transfer of the trust deed
by operation of law, the opposite is not true. Rather, even an assignment of the
security instrument that would otherwise be valid is void unless it is accompanied by
a valid transfer of the note. Indeed, under California Civil Code 3440, such a
transfer is conclusively presumed to be a fraudulent conveyance. See also Bunting v.
Saltz (1890) 84 Cal. 168, 169-170; Roger Bernhardt, California Mortgages and Deeds
of Trust, and Foreclosure Litigation, 1.26 (4th ed. 2009).

A transfer that is

fraudulent per se cannot be ratified, and therefore is void rather than merely voidable.
Moreover, under New York law as interpreted by New York state courts,
failure to endorse a mortgage note in accordance with a securitization trusts PSA
renders void any putative transfer of the note to the trust. See Erobobo, supra.
2.

Requirements of a Valid Transfer.

a.

Written Assignment Meeting the Requirements of the Statute of Frauds.

An assignment of a mortgage note must be made pursuant to a writing


fulfilling the requirements of the Statute of Frauds, Civil Code 1624(a)(3), because
by operation of law, sales of mortgage notes also effect the transfer of the
accompanying trust deeds or mortgages. Secrest v. Security Nat. Mortgage Loan
Trust 2002-2 (2008) 167 Cal.App.4th 544, 547-548 (real property note secured by a
deed of trust comes within the statute of frauds); Jenkins, supra, at pp. 507-508 (deed
of trust within statute of frauds).
///

19

b.

Negotiation and Delivery.

To perfect a transferees interest in a mortgage note, the note must be


negotiated to the transferee. See, e.g., Creative Ventures, LLC v. Jim Ward & Assocs.
(2011) 195 Cal.App.4th 1430, 1446, 1446-1447; Pribus v. Bush (1981) 118
Cal.App.3d 1003, 1010-1011; cf. Commercial Code 3201(b).5 The negotiation
requirement dates back to the time of the Law Merchant (see Pribus, supra, 118
Cal.App.3d at pp. 1007-1008; Adams v. Madison Realty & Dev., Inc. (3d Cir. 1988)
853 F.2d 163, 166-169), prior to which a transferee could never acquire an interest
enforceable against the borrower (Creative Ventures, LLC, supra).
Negotiation consists of two elements, indorsement and delivery. 6 If either
valid indorsement or delivery is absent, a purchaser of a real property mortgage note

The holdings of Creative Ventures, LLC and Pribus are based on the
Commercial Code. However, Civil Code 2944 makes the Commercial Code
inapplicable to obligations governed by Civil Code 2920-2967. These sections of
the Civil Code govern real property mortgages and include the HBR.
Civil Code 2944 provides:
None of the provisions of this chapter [Title 14, Liens, Chapt. 2,
Mortgages, Civil Code 2920-2967] applies to any transaction or
security interest governed by the Commercial Code, except to the extent
made applicable by reason of an election made by the secured party
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code.
(Commercial Code 9604(a)(1)(b) concerns obligations secured by a
combination of personal and real property.)
Nevertheless, courts may look to the Commercial Code for guidance in
analogous situations. See, e.g., Pollard v. Sax and Yolles Dev. Co. (1974) 12 Cal.3d
374, 380.
6

Delivery of the note is required because without physical transfer, a sale of


personal property (including a mortgage note) is conclusively presumed to be a
fraudulent conveyance under Civil Code 3440. See Bunting v. Saltz (1890) 84 Cal.

20

is not entitled to enforce it against the borrower.7 Thus in Adams, supra, the court
denied enforcement of a mortgage note to a transferee to whom it was not validly
indorsed. See discussion of Adams, infra. With respect to indorsement, a mortgage
note is similar to a third-party check, which the paying bank can only honor if it is
presented by a third party to whom the check has been validly indorsed.
In Creative Ventures, LLC, supra, 195 Cal.App.4th at p. 1446, the court
addressed the negotiation requirement:
The negotiation requirement may seem a bit formalistic, but it has a
sound historical and mercantile basis. At common law, contracts could
not be transferred so as to give the transferee a right to enforce the
contract directly. The law of negotiable instruments was adopted by the
law merchant as an exception to this rule, in order to allow the indorsee
the right to sue on the contract in his or her own name. (Shaw v.
Railroad Co. (1879) 101 U.S. 557, 563-564, 25 L.Ed. 892.)
It follows that in an action against a putative assignee of a mortgage
challenging its authority to enforce the obligation by demanding payment or through
foreclosure, the assignee must meet the Cockerell standard of clear and positive
evidence that the note was actually and validly negotiated and delivered.
One obvious reason for requiring endorsement of the note is so the note itself
reflects the transfer.

It has been said that it is indispensably necessary that

negotiable instruments carry within them the indicia by which their ownership is to
be determined lest their value as a circulating medium [] be largely curtailed, if
not entirely destroyed. Adams, supra, 853 F.2d at pp. 166-169, quoting Haug v.
Riley (1897) 101 Ga. 372, 20 S.E. 44, 46. It also helps ensure that mortgagors pay the
168, 169-170; see also Roger Bernhardt, California Mortgages and Deeds of Trust,
and Foreclosure Litigation, 1.26 (4th ed. 2009).
7

Although the obligation cannot be enforced against the borrower,


commercial law allows the transferee to seek to recover the benefit of its purchase
from the party responsible for the lack of valid indorsement. The ultimate risk is thus
allocated to the responsible seller, not the borrower who had nothing to do with the
subsequent transfer. See fn. 8, p. 24, infra.

21

party to whom the obligation is owed, while also ensuring they do not payor worse,
lose their property topersons not entitled to receive payment on the note or
otherwise enforce it and the accompanying security agreement. Cockerell; Adams;
Pribus, supra.
Failure to validly endorse the note is no mere technicality that courts can
dispense with in order to force the mortgagor to pay the putative purchaser. In
Adams, for example, plaintiffs executed various promissory notes governed by Article
3 of New Jerseys U.C.C. in favor of Madison Partnerships. After a series of transfers
in 1984 and 1985, Empire of America Federal Savings Bank (Empire) bought 418
of the notes for approximately $45.1 million.

The notes themselves bore no

endorsements to Empire. Instead, the transfers to Empire were memorialized by two


loose sheets of paper, purporting to be allonges, containing several endorsements, the
last of which was to Empire. However, the two sheets failed to comply with the
requirement of U.C.C. 3202(2) that an allonge be so firmly affixed [to the notes] as
to become a part thereof. Id., 853 F.2d at pp. 164-165. Based on this defect, the
makers of the notes asserted that Empire had not received good title to the notes and
could not enforce them.
The trial court determined that Empire could enforce the notes. It ruled the
failure to firmly affix the allonges was hypertechnical and did not justify allowing
the borrowers to stop paying Empire. Id.
The Court of Appeals disagreed and reversed:
. . . The Codes requirement that an indorsement be firmly affixed to
its instrument is a settled feature of commercial law, adopted verbatim
by every American state, the District of Columbia, and the Virgin
Islands. . . . With a unanimity unusual in decisional law, the directive
has been faithfully observed.[fn]
The historical origins of the provision have been chronicled to the days
of the Law Merchant. See Pribus v. Bush [supra, 118 Cal.App.3d at pp.
1007-1008]. . . .

22

. . . Courts have advanced two justifications for the firmly-affixed


requirement. The California Court of Appeal[] reasoned that the
provision serves to prevent fraud, remarking that a signature innocently
placed upon an innocuous sheet of paper could be fraudulently attached
to a negotiable instrument in order to simulate an indorsement. Pribus,
[118 Cal.App.3d at p. 1009, fn. 7] . . . .
The affixation requirement has also been cited for its utility in
preserving a traceable chain of title, thus furthering the Codes goal of
free and unimpeded negotiability of instruments. Nearly a century ago,
the Supreme Court of Georgia declared it indispensably necessary that
negotiable instruments should carry within them the indicia by which
their ownership is to be determined; otherwise, their value as a
circulating medium would be largely curtailed, if not entirely
destroyed. Haug[, supra]. Chancellor Hawkland writes that it would
be unreasonable to impose upon the indorsee the risk that the present
holder or a prior holder had negotiated the instrument to someone not in
the apparent chain of title by virtue of a separate document. 4 W.
Hawkland & L. Lawrence, Uniform Commercial Code Series 3202:05 (1984). . . . (Adams, supra, 853 F.2d at pp. 166-169, footnotes
and some citations omitted.)
The court in Adams goes on to observe that until the maker pays a holder, he
will not be discharged from his obligation, exposing the borrower to the risk of
double-payment:
From the makers standpoint, therefore, it becomes essential to
establish that the person who demands payment of a negotiable note, or
to whom payment is made, is the duly qualified holder. Otherwise, the
obligor is exposed to the risk of double payment, or at least to the
expense of litigation incurred to prevent duplicative satisfaction of the
instrument. These risks provide makers with a recognizable interest in
demanding proof of the chain of title. Consequently, plaintiffs here, as
makers of the notes, may properly press defendant to establish its holder
status. . . . (Id., 853 F.2d at p. 169, italics added.)
Similarly, the reason a putative assignee must provide clear and positive
proof it received a valid assignment is to protect an obligor from any further claim
by the primary obligee . . . . Cockerell, supra, 42 Cal.2d at p. 292, citations omitted.

23

Both Adams and Pribus involved endorsements that were defective because
they were not properly attached to mortgage notes, but there are other types of defects
that commonly arise. These include but are not necessarily limited to forged or
otherwise unauthorized indorsements; indorsements executed without a valid written
authorization of the indorsing entity; and indorsements executed after the indorsing
entity ceases to exist or do business.
Adams and Pribus clearly demonstrate that a transferee in possession of a note
lacking a valid indorsement cannot enforce the obligation against the original
borrower. Instead, its remedy is against the commercial parties responsible for the
missing or defective indorsement.8
V.

RESPONDENTS ANSWER BRIEF FAILS TO ADDRESS THESE


ISSUES
Petitioners opening brief adverts to Cockerell and the necessity of proper

negotiation of the note before one in respondents position can enforce the
accompanying security agreement. Yet, respondents Answer Brief is utterly silent on
these issues. Respondents therefore should be deemed to concede the point.
VI.

CONCLUSION
The question of standing here is simple. A mortgage is a contract. It requires

the mortgagor to pay her lender or its successor. When an effort to transfer the note
and trust deed to a successor is void, the putative transferee does not become the
lenders successor and has no right to enforce the obligation by demanding payment,

As between the endorser and the assignee, the endorser bears the risk of
claims by someone not in the apparent chain of title . . . . 4 W. Hawkland & L.
Lawrence, cited in Adams, supra. Notes typically contain provisions allowing the
assignee to sue the endorser if there is a failure to validly transfer the instrument.
Where a mortgage is securitized, the pooling and servicing agreement also typically
contains an indemnification and repurchase provisions pursuant to which the assignee
may obtain relief from its assignor.

24

let alone by foreclosing on the real property securing the note. The putative transferee
is a stranger to the mortgage contract.
The mortgagor suffers an injury in fact where such a stranger takes or attempts
to take the mortgagors property. The injury is concrete and particularized; actual or
imminent (rather than conjectural or hypothetical); fairly traceable to the challenged
action of the defendant; and (4) it is likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision. The fact the note can be validly
transferred does not mean every attempted transfer is perfected, or that the mortgagor
is not damaged where her property is foreclosed upon by an entity that never received
a valid transfer. To allow foreclosures by entities to whom the mortgagor has no
contractual obligation sanctions theftand not just ordinary theft, but theft of
peoples homes.
The Court of Appeals decision in this case directly contravenes established
principles of California mortgage law, both ancient and recent.

Its holding that

borrowers somehow have a generalized obligation to make mortgage payments to


someone who may or may not be the other party to their loan contract directly
contradicts Cockerell and other controlling cases dating back to the 1800s and recent
revisions to Californias nonjudicial foreclosure statutes such as the HBR.

By

rendering it impossible for borrowers to challenge foreclosures by entities that never


received a valid assignment of their mortgages, the decision enacts the dangerous
innovation the Supreme Court warned about in Cockerell, by making putative
mortgage assignments presumptively valid, and indeed, entirely immune from judicial
scrutiny. The decision is emblematic of too many mortgage cases since the current
mortgage crisis began in 2008, cases decided without any consideration of the vast
body of mortgage law that predated the mortgage crisis.

It is untethered from

precedent or governing statutes, and contradicts fundamental principles of mortgage


law.

25

Allowing borrowers to sue when they allege facts which, if true, prove an
imposter is trying to enforce their mortgage through collection or foreclosure upholds
the public policy of this State requiring that borrowers pay the right party. This policy
is especially important in an era when tens of millions of mortgages are transferred
multiple times in the secondary market.

It is a policy clearly endorsed by the

Legislatures recent enactment of the HBR.


The nonjudicial foreclosure process loses all legitimacy if there is no process to
prevent strangers to the debt from taking peoples homes. The Court of Appeals
holding that no effective process exists raises issues of court acquiescence in possible
theft of real property and a complete absence of due process for homeowners.
The Court must reverse the holding below to restore well-established principles
of California law that are thoroughly undermined by the dangerous innovation
promulgated by the decision below and the growing number of cases like it.
DATED: April 15, 2015

LAW OFFICE OF MARK F. DIDAK

Mark F. Didak
_________________________________
MARK F. DIDAK
Attorneys for Amicus Curiae

26

RULE 8.204(c)(1) CERTIFICATION


I, Mark F. Didak, hereby declare as follows:
1.

I am an attorney duly licensed to practice law in this state, and counsel

of record for amicus curiae. The facts stated herein are known to me personally, and
if called as a witness I would competently testify thereto. I make this declaration
under Rule 8.204(c)(1), California Rules of Court.
2.

I certify that this brief was produced on computer and does not exceed

14,000 words, including footnotes. According to the Word program used to produce
this brief, the word count is 8,154, not including this certificate, the certificate
regarding interested entities and persons, tables of contents and authorities, proof of
service, cover, the date and signature blocks, and forward-slashes.
I declare under penalty of perjury under the laws of the State of California that
the foregoing is true and correct. Executed this 15th day of April, 2015 at Los
Angeles, California.

Mark F. Didak
________________________________
MARK F. DIDAK

27

PROOF OF SERVICE
STATE OF CALIFORNIA, COUNTY OF LOS ANGELES
I am an attorney licensed to practice law in all courts in the State of California.
I am over the age of 18 years; my business address is 520 Burnside Ave., No. 9J, Los
Angeles, CA 90036. On April 16, 2015, I served the document(s) described as
Petition for Leave to File Brief of Amicus Curiae; Brief of Amicus Curiae on the
interested party(ies) in this action as follows:

Richard L. Antognini, Esq.


Law Offices of Richard L. Antognini
819 I Street
Lincoln, California 95648-1742

K. Lee Marshall, Esq.


Nafiz Cekirge, Esq.
Andrea N. Winterniz, Esq.
Sarah Samuelson, Esq.
Bryan Cave LLP
560 Mission Street, Suite 2500
San Francisco, California 94105

California Court of Appeal


Second Appellate District
Division One
300 South Spring Street
Eric D. Houser, Esq.
Second Floor, North Tower, Rm. 2217 Robert W. Norman, Esq.
Los Angeles, California 90013
Houser & Allison APC
3780 Kilroy Airport Way, Suite 130
Los Angeles Superior Court
Long Beach, California 90806
Attn: Hon. Russell S. Kussman
6230 Sylmar Avenue
Van Nuys, California 91401
BY FIRST CLASS U.S. MAIL: By placing a true copy thereof in a sealed
envelope addressed as above, and placing it for collection and mailing following
ordinary business practices. I am readily familiar with the firms practice of
collection and processing correspondence, pleadings, and other matters for mailing
via the United States Postal Service on that same day with postage thereon fully
prepaid at Los Angeles, California in the ordinary course of business. I am aware that
on motion of the party served, service is presumed invalid if the postal cancellation
date or postage meter date is more than one day after date of deposit for mailing in
affidavit.
AN ELECTRONIC COPY was filed for service on the California Supreme
Court this date pursuant to Rule 8.212(c)(2), Cal.R.Ct.

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I declare under penalty of perjury under the laws of the State of California that
the foregoing is true and correct. Executed on April 16, 2012, at Los Angeles,
California.

Mark F. Didak
MARK F. DIDAK

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