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Tuesday, July 28, 2015
More on Glaski from HBOR Coalition California-- An Excellent Overview
Placing Glaski in the California Foreclosure Landscape
A. Distinguishing Gomes: Specificity
Gomes was probably Glaski’s biggest hurdle. The court dedicated an entire section of its opinion to differentiate its findings from those in Gomes. The borrower in Gomes also brought a wrongful foreclosure claim, alleging that the foreclosing entity, MERS, was not the beneficiary’s nominee because the unknown beneficiary did not appoint MERS as nominee, or give MERS authorization to foreclose. Unlike Glaski, however, Gomes left his argument there. He did not take the crucial step of explaining why MERS, who was listed as beneficiary and nominee in the deed of trust, was not the true beneficiary. Rather, Gomes alleged that CC § 2924 afforded him the right to “test” whether MERS had the beneficial interest before the sale took place. “Whether” is the key word and the difference between a Gomes claim and a Glaski claim. Gomes wanted to investigate whether or not MERS was the beneficiary. By contrast, Glaski alleged that Bank of America was definitely not the beneficiary because the assignment giving them beneficiary status was late to the trust, and therefore void. Gomesasked, “who has the authority to foreclose?” whereas Glaski stated: “X definitely does not have authority for these reasons . . . .” The Gomes court found that CC § 2924 provides no right for borrowers to ask “whether” the foreclosing party had the authority to do so.
B. Distinguishing Nguyen: Void vs. Voidable
The Glaski court also had to reckon with Nguyen v. Calhoun, 105 Cal. App. 4th 428 (2003), which held that anything outside of the foreclosure sale process cannot be used to challenge a presumably valid and complete sale. Specifically, the court had to consider whether an “ineffective transfer to the WaMu Securitized Trust” was an aspect of the foreclosure sale, or if it fell outside of that sale and was therefore irrelevant. Because the transfer to the trust was fundamental to Bank of America’s authority to foreclose, and would void the sale itself, the court decided that the trust transfer was part of the foreclosure sale and a valid basis for challenging the foreclosure.
C. Distinguishing Fontenot: Burden Shifting
The Glaski opinion nowhere cites Fontenotv. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011), but it is important to recognize why Glaski came out differently from that case.
As in Glaski, the borrower in Fontenot alleged that an invalid assignment voided the entire foreclosure transaction. Unlike Glaski, however, Fontenot based her invalid assignment theory, not on specific facts like a late transfer to a trust, but on the theory that the assignor (MERS) had the burden to prove the assignment was valid, and could not do so. The court determined that MERS did not bear that burden because nothing in the statutory scheme regulating nonjudicial foreclosures created that duty: “[A] nonjudicial foreclosure sale is presumed to have been conducted regularly, and the burden of proof rests with the party attempting to rebut this presumption.” If “‘the party challenging the trustee’s sale [can] prove such irregularity and . . . overcome the presumption of the sale’s regularity,’” that could shift the burden to defendant to show a valid assignment.
This is precisely what Glaski accomplished: by pleading specifically that the assignment is void because of the late transfer to the trust, Glaski rebutted the presumption of regularity, which is all he needed to do at the pleading stage.
III. The Promise & Limits of Glaski
Glaski cannot be used to bolster every securitization theory. To employ Glaski principles effectively, advocates should undertake the same analysis the court did.
First, does the borrower simply allege the foreclosing party does not hold the beneficial interest in the deed of trust (Gomes), or does the borrower allege that the foreclosing party could not possibly be the rightful beneficiary because the assignment giving them that interest was invalid? (Glaski).
Second, do the borrower’s allegations render the assignment void or voidable?
If void, thenGlaski could lend support to both the borrower’s standing and their wrongful foreclosure claim.
The HBOR Collaborative will monitor Glaski’s implications and influence as other courts interpret this important decision.
NOTE: THE NEW PUBLISHED CASE MENDOZA V JPMORGAN CHASE BANK