In Glaski v. Bank of America, the appellate court held a borrower may base a wrongful foreclosure claim on allegations that the foreclosing party acted without authority because the assignment by which it purportedly became beneficiary under the deed of trust was not merely voidable but void. Subsequent appellate court opinions, for a variety of reasons, refused to follow Glaski.
In Yvanova v. New Century Mortgage the California Supreme Court considered the narrow question, considered in Glaski, of whether the borrower on a home loan secured by a deed of trust may base an action for wrongful foreclosure on allegations a purported assignment of the note and deed of trust to the foreclosing party bore defects rendering the assignment void.
The issue is now settled. The holding in Yvanova: “…because in a nonjudicial foreclosure only the original beneficiary of a deed of trust or its assignee or agent may direct the trustee to sell the property, an allegation that the assignment was void, and not merely voidable at the behest of the parties to the assignment, will support an action for wrongful foreclosure.”
The holding is a very narrow one. “We hold only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment. We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed.”
With respect to the issue of prejudice, which some courts had considered and used to deny a foreclosed plaintiff a right to challenge a void assignment, the court held that prejudice was not an element of wrongful foreclosure. “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity’s hands. No more is required for standing to sue.”
The court did not rule on the issue of tender, which some courts have also held must be alleged to support a wrongful foreclosure cause of action: “we express no opinion as to whether a plaintiff must allege tender,” except the court noted that “[t]ender has been excused when, among other circumstances, the plaintiff alleges the foreclosure deed is facially void, as arguably is the case when the entity that initiated the sale lacked authority to do so.”
In summary: a borrower who has suffered a nonjudicial foreclosure sale has standing to sue for wrongful foreclosure based on an allegedly void assignment. Standing is not lacking because of default or because borrower was not a party to the assignment.
Mr. Daymude consults with clients and accepts cases involving foreclosure, including wrongful foreclosure due to void assignments of deeds of trust. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.