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Bank Must Produce The Note?

Dear Bill Parsons,

You asked me to look into the rumors that people who are under water in their homes can get out of their debts, stop foreclosures, and even cancel their home mortgage by going to court.  Those rumors are all over the Internet and even in seminars right now and all I can tell you to advise the people who come to you is:

Beware of False Hope and Help.  Banks Do Not Have to Prove Note in California Foreclosures.

People who have received Notices of Default, Notice of Sale or who are in trouble with their mortgages are being misled by Internet and other promises that they can get out of their mortgage by suing the banks and loan servicers.

Most of the false promises urge people to go to court and to make the bank or their agent produce the actual note upon which the debt is owed.

The common denominator is that the people making these false promises refer to court cases from Ohio or other states, including the federal courts in other states, to convince people to hire them or to attempt to get out of their mortgage by filing a case in California’s state and federal courts to get rid of the mortgage and stop a foreclosure — How?  By saying the bank must prove it has the original note or a copy.

The false promisors then claim that the court can void the note or loan if the bank or their agent does not have the note.  URGENT:  PLEASE READ THE FOLLOWING FROM A JANUARY 2010 CASE IN THE NORTHERN CALIFORNIA FEDERAL COURT:  IN CALIFORNIA AND OTHER WESTERN STATES THE BANK OR THEIR AGENT DOES NOT HAVE TO PRODUCE THE ORIGINAL NOTE OR A COPY IN COURT TO ENFORCE A FORECLOSURE.  DO NOT PAY ANYBODY MONEY TO TRY TO GET OUT OF YOUR MORTGAGE UNLESS YOU HAVE RESEARCHED ALL THIS AND HAVE CONSULTED WITH ANOTHER ATTORNEY.

William O. Davis, attorney at law, Redding, CA  530-242-1275

Cases to be aware of:

Newbeck v. Washington Mut. Bank
Slip Copy, 2010 WL 291821
N.D.Cal.,2010.
Jan 19, 2010 (Approx. 5 pages)

Even if they alleged tender, the basis on which they appear to seek relief does not support their claim. In California, there is no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure sale. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D.Cal.2009); Smith, 2009 WL 1948829, at *3; Neal v. Juarez, 2007 WL 2140640, *8 (S.D.Cal.) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97, 21 P.2d 413 (1933); Cal. Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 435, 44 P.2d 624 (1935)). California Civil Code Sections 2924 through 2924k “provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” Knapp v. Doherty, 123 Cal.App.4th 76, 86, 20 Cal.Rptr.3d 1 (2004) (quoting Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994)). Knapp explains the non-judicial foreclosure process as follows:
Upon default by the trustor [under a deed of trust containing a power of sale], the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale.

Knapp, 123 Cal.App.4th at 86, 20 Cal.Rptr.3d 1 (citation omitted). “A properly conducted nonjudicial foreclosure sale constitutes a final 13 adjudication of the rights of the borrower and lender.” Id. at 87, 20 Cal.Rptr.3d 1.

Plaintiffs have not pointed to controlling authority to show that this statutory scheme requires production of the original promissory note or deed of trust. Thus, even if they alleged tender, to the extent that they allege irregularities in the foreclosure sale based on Washington Mutual’s failure to produce the original promissory note or deed of trust, they do not state a claim.

Plaintiffs cite various out-of-state cases, which apply non-California law to judicial foreclosure actions. See In re Foreclosure Actions, 2007 WL 4034554 (N.D.Ohio); In re Foreclosure Cases, 2007 WL 3232430 (N.D.Ohio); Landmark Nat’l Bank v. Kessler, 289 Kan. 528, 216 P.3d 158 (2009); U.S. Bank Nat’l Ass’n v. Ibanez, 2009 WL 3297551 (Mass.Land Ct.). Because these cases do not apply California’s non-judicial foreclosure sale statutes, they do not support Plaintiffs’ position.

Accordingly, the Court dismisses Plaintiffs’ claim for “Equitable Set Aside Foreclosure Sale” with leave to amend to allege tender or the ability to offer tender and to plead facts that warrant setting aside the foreclosure sale V. Claim for Declaratory Relief.  The Declaratory Judgment Act (DJA) permits a federal court to “declare the rights and other legal relations” of parties to “a case of actual controversy.” 28 U.S.C. § 2201; ee Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th Cir.1986). The “actual controversy” requirement of the Declaratory Judgment Act is the same as the “case or controversy” requirement of Article III of the United States Constitution. Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir.1993).  Plaintiffs’ declaratory judgment claim fails because they have not alleged facts showing that there is an actual case or controversy. As noted above, the foreclosure sale has already been completed, which operates as a final adjudication of the rights among the parties. Unless Plaintiffs plead facts that show actionable irregularities in the foreclosure sale or any other reason to believe that the ownership of the property is in genuine dispute, declaratory relief is not necessary. Accordingly, the Court dismisses Plaintiffs’ declaratory judgment claim with leave to amend to plead a cognizable case or controversy.

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