The Northern District of California recently granted defendant bank’s motion to dismiss pro se plaintiffs’ complaint alleging wrongful foreclosure on jurisdictional grounds. See Wyman v. First Am. Title Ins. Co., 2017 WL 512869 (N.D. Ca. Feb. 8, 2017). In the case, plaintiffs obtained a loan from defendant bank secured by a deed of trust on plaintiffs’ residence. In April 2011, defendant bank recorded an assignment of the deed of trust to transfer and convey the beneficial interest in the residence to a third-party bank in its capacity as trustee of a securitized trust, but defendant bank remained the servicing agent. Plaintiffs commenced this action in November 2016, after a notice of default had been recorded against the property and then later rescinded. In their complaint, plaintiffs alleged that defendant bank lacks beneficial interest in the deed, and therefore does not have standing to foreclose. Plaintiffs’ causes of action all relate to the bank’s alleged securitization of the loan. Specifically, Plaintiffs allege that the April 2011 assignment of the deed of trust was unlawfully recorded and that it therefore was “void and of no force and effect.”
In its motion to dismiss, defendant bank argued, among other things, that plaintiff lacks standing to challenge the bank’s right to foreclose because the foreclosure has not yet happened and, in any case, the defects alleged render the assignment “voidable” rather than “void”. While the Court acknowledged that the “prevailing trend of decisional law” suggests that plaintiffs cannot pursue a pre-foreclosure suit in which they allege a void assignment, the court declined to render an opinion on this issue because it could dismiss the complaint on other grounds. The Court held that plaintiffs failed to allege a defect which would render the assignment void, rather than voidable, as required for standing under state case law. The Court found that “[a] mere mistake in recording is flexible and hardly voids an assignment. Plaintiffs’ entire theory fails because the mistake rated no where close to void.” The Court further held that “[t]he kind of technicality alleged here [which was “a mere typo”] is not sufficient to justify an exemption from the otherwise applicable bar on judicial intervention to the nonjudicial foreclosure process.” Therefore, plaintiffs lacked standing to challenge the bank’s right to foreclose.