In a groundbreaking new case that is a full reversal from the prevailing majority view, the California Court of Appeals for the Fifth Appellate District published today its opinion in Glaski v. Bank of America. Glaski is one of myriad wrongful foreclosure cases where wall street fat cats claimed to have sold a loan to a loan pool within 3 months of its origination, but in reality the assignment was not done until years later. In this exceptional case, the California Court of Appeals found that Wall Street's late assignment to the loan pool is fatal to the present bank's foreclosure claim, rendering the sale VOID.
The court flawlessly reasoned:
"[A] borrower may challenge the securitized trust's claim to ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust's closing date. Transfers that violate the terms of the trust instrument are void under New York law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement."
Following other cases, the court cited: "[i]n Barrionuevo v. Chase Bank, N.A. (N.D. Cal. 2012) 885 F.Supp. 964, the district court stated: 'Several courts have recognized the existence of a valid cause of action for wrongful foreclosure where a party alleged not to be the true beneficiary instructs the trustee to file a Notice of Default and initiate nonjudicial foreclosure.' (Id., at p. 973). We agree with this statement of law . . . a plaintiff asserting this theory must allege facts that show the defendant who invoked the power of sale was not the true beneficiary."
In an extremely wise and helpful move, the court also clarified the case in light of the anti-borrower Gomes v. Countrywide Home Loans, 192 Cal.App.4th 1149 (2011) decision which is endlessly cited by banks as a magical talisman against any wrongful foreclosure claim: "[i]n light of the limiting statements included in the Gomes opinion, we do not interpret it as barring claims that challenge a foreclosure based on specific allegations that an attempt to transfer the deed of trust was void. Our interpretation, which allows borrowers to pursue questions regarding the chain of ownership, is compatible with Herrera v. Deutsche Bank National Trust Co. . . ."
The court concluded that "[t]ender is not required where the foreclosure sale is void, rather than voidable, such as when a plaintiff proves that the entity lacked the authority to foreclose on the property."
WHAT DOES THIS MEAN FOR CALIFORNIA BORROWERS?
Everything. With the publication of this case, it becomes the law of the land under the doctrine of stare decisis, which provides that superior courts must follow published precedent of the Courts of Appeal. Considering that in all likelihood, a probable 90% of the foreclosures attempted or completed in California since 2007 have been based on interests arising out of late assignments to loan pools, this case has the potential to be just the arrow borrowers have needed to pursue justice and prevent unentitled banks from wrongfully using the nonjudicial foreclosure process to steal their homes from under them.
However, chances are that banks will now re-double their efforts to create a constitutional case out of the opinion, in that it undermines their entire modus operandi of routine foreclosures without no legal right.
Michael Rooney is an attorney in San Francisco, California. He is a California foreclosure defense attorney practicing litigation in wrongful foreclosure, dual tracking, short sales, and foreclosure UD defense in San Francisco County, Alameda County short sales, Contra Costa County, Napa County, Santa Clara County, and San Mateo County California. For more information, please visit http://mikerooneylaw.com.