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Siliga v. Mortgage Elec. Registration Sys. Inc.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE
Feb 9, 2012
B233000 (Cal. Ct. App. Feb. 9, 2012)

Opinion

B233000

02-09-2012

JOHNNY SILIGA et al., Plaintiffs and Appellants, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. et al., Defendants and Respondents.

Law Offices of Nick A. Alden and Nick A. Alden for Plaintiffs and Appellants. Locke Lord, Conrad V. Sison and Daniel A. Solitro for Defendants and Respondents.


NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

(Los Angeles County Super. Ct. No. BC454905)

APPEAL from an order of the Superior Court of Los Angeles County, James C. Chalfant, Judge. Affirmed.

Law Offices of Nick A. Alden and Nick A. Alden for Plaintiffs and Appellants.

Locke Lord, Conrad V. Sison and Daniel A. Solitro for Defendants and Respondents.

Plaintiffs and appellants Johnny and Fa'alagilagi Siliga brought suit to challenge the pending foreclosure of their home. Simultaneous to the filing of their first amended complaint, the Siligas filed an ex parte application for a temporary restraining order. The trial court denied the application, and plaintiffs appeal. We conclude the trial court did not abuse its discretion, and therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Underlying Facts

The factual allegations in the Siligas' complaint are, in some cases, contradicted by the documents attached to the complaint. We will note those contradictions, with the understanding that the trial court could not have abused its discretion by relying on the documents themselves, rather than the Siligas' contrary characterizations thereof.

On January 21, 1998, the Siligas purchased their home. On June 25, 2004, the Siligas executed a deed of trust on the property to secure a $280,000 note in favor of Accredited Home Lenders, Inc. (Accredited Lenders). The deed of trust identified Ticor Title Company as the trustee; Accredited Lenders as the Lender; and Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for lender and lender's successors and assigns, and also as the beneficiary.

"As case law explains, 'MERS is a private corporation that administers the MERS System, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the mortgagee of record for participating members through assignment of the members' interests to MERS. MERS is listed as the grantee in the official records maintained at county register of deeds offices. The lenders retain the promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to investors without having to record the transaction in the public record. MERS is compensated for its services through fees charged to participating MERS members.' [Citation.] 'A side effect of the MERS system is that a transfer of an interest in a mortgage loan between two MERS members is unknown to those outside the MERS system.' [Citation.]" (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1151.)

The Siligas fell behind in their payments. On March 24, 2010, a notice of default and election to sell was recorded. The notice of default was signed by Marco Marquez for Quality Loan Service Corp. (Quality Loan Service), as agent for the beneficiary. The notice of default states that the beneficiary or its agent "has contacted the borrower, tried with due diligence to contact the borrower as required by California Civil Code § 2923.5[], . . . or is otherwise exempt from the requirements of § 2923.5. Pursuant to the attached declaration incorporated herein and made a part hereof by this reference." The attached declaration indicates that such contact was made on February 2, 2010. The declaration was signed, on March 22, 2010, by a document control officer for "Select Portfolio Servicing [Select Servicing] as authorized agent of Beneficiary." The declaration indicates that the beneficiary is "Deutsche Bank National Trust Company, as Indenture Trustee, on behalf of the holders of the Accredited Mortgage Loan Trust 2004-3 Asset-back Notes [Deutsche Bank Investors]."

The Siligas allege that Marquez is a "known 'Robo Sign[e]r.' " In their application for a restraining order, they argue that Marquez is a "Robo Sign[e]r" based on the declaration of their attorney, Nick Alden. Attorney Alden submitted two other notices of default signed by Marquez, and, comparing them to the notice of default in this case, stated, "The signatures in the three notices are totally dissimilar and could not have been signed by the same person." Attorney Alden is not a handwriting expert, and his opinion on this issue is therefore inadmissible. (Evid. Code § 800.) Attorney Alden also stated that he is experienced in real estate matters and that, "[i]f such [a] person [as Marco Marquez] exists, he is known in the foreclosure business as a 'Robo Sign[e]r,' signing on behalf of different entities." This statement appears to be hearsay. In any event, while the Siligas argue in their reply brief that there is "an issue" in this case regarding the use of a "Robo Sign[e]r," they make no argument as to the legal basis on which the foreclosure is somehow invalid due to Marquez's signature.

The Siligas allege that Quality Loan Service was not the duly appointed trustee at the time the notice of default was recorded. Quality Loan Service did not record the notice of default as the trustee; it recorded the notice as agent for the beneficiary. A notice of default may be filed by a "trustee, mortgagee, or beneficiary, or any of their authorized agents." (Civ. Code, § 2924, subd. (a)(1).)

Civil Code section 2923.5 provides that, prior to the notice of default, the mortgagee, beneficiary or authorized agent shall make contact with the borrower (or exercise due diligence to attempt to do so) "in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure."

The Siligas allege that the notice of default identified Select Servicing as the beneficiary. This is incorrect. Select Servicing is apparently the loan servicing company, and was identified on the notice of default as the party to contact in order to determine the amount owed or to arrange payment to stop the foreclosure. The notice of default was signed by Quality Loan Service as agent for the beneficiary, and the attached declaration clearly identified the beneficiary as the Deutsche Bank Investors.

On April 28, 2010, an assignment of the deed of trust was recorded. By this document, MERS assigned to the Deutsche Bank Investors all beneficial interest in the deed of trust, "[t]ogether with the note or notes therein described or referred to."

The document indicates that, upon recordation, it is to be returned to Select Servicing. Because of this, the Siligas allege that MERS made the assignment on behalf of Select. The conclusion does not follow. MERS was the nominee of the original lender, Accredited Lenders, and its successors and assigns. It could have made the assignment on behalf of Accredited Lenders or anyone else in the chain of title. As noted above, transfers of interests in loans between MERS members are unknown outside of the MERS system. (See fn. 1, ante.)

On May 19, 2010, a substitution of trustee was recorded, designating Quality Loan Service as the new trustee. The document was signed by the Deutsche Bank Investors, by Select Servicing, its attorney in fact. On August 19, 2010, Quality Loan Service recorded a Notice of Trustee's Sale.

In short, the documents reveal the following course of events: (1) The Siligas executed a deed of trust identifying Accredited Lenders, a MERS member, as the lender, and MERS as the beneficiary and lender's nominee; (2) at some point, the Deutsche Bank Investors, another MERS member, became the holder of the note and accompanying security interest; (3) the Siligas defaulted on their payments; (4) the Deutsche Bank Investors, through their loan servicing company, Select Servicing, contacted the Siligas as required by statute, in order to explore their options to avoid foreclosure; (5) the Deutsche Bank Investors, through their agent, Quality Loan Service, recorded a notice of default; (6) MERS recorded an assignment of the deed of trust (and note) to the Deutsche Bank Investors; (7) the Deutsche Bank Investors filed a substitution of trustee, identifying Quality Loan Service as the new trustee; and (8) the new trustee, Quality Loan Service, recorded a notice of trustee's sale.

2. The Allegations of the Siligas' Complaint

The Siligas brought suit against MERS, Quality Loan Service, and the Deutsche Bank Investors, challenging the propriety of the foreclosure. As discussed above, the Siligas took a different view of the facts, and alleged certain irregularities based on their view. First, believing that Quality Loan Service recorded the notice of default as trustee rather than as agent of the beneficiary, the Siligas alleged that Quality Loan Service invalidly noticed the default two months before it had been appointed trustee. Second, believing that the notice of default identified Select Servicing, rather than the Deutsche Bank Investors, as the beneficiary, the Siligas allege that the notice of default was invalid as it was recorded on behalf of an entity that did not have an assignment in its favor. Third, even though the assignment of the deed of trust to the Deutsche Bank Investors indicated that it assigned the interest in the underlying note as well as the deed of trust, the Siligas alleged that the Deutsche Bank Investors could not foreclose as the note was never assigned to them.

More importantly, however, the Siligas also questioned MERS's role in the transaction. They alleged that MERS, as the mere nominee of Accredited Lenders, did not have the authority to assign the deed of trust or the note, as it was not in the chain of title.

Finally, the Siligas alleged two statutory failures: (1) failure to comply with the requirement to contact the debtors prior to filing the notice of default as specified in Civil Code section 2923.5; and (2) failure to post the notice of trustee's sale at least 20 days prior to the sale, as required by Civil Code section 2924f.

Civil Code section 2924f, subdivision (b)(1) provides that before any sale of property can be made under the power of sale in a deed of trust, notice of the sale shall be posted in a conspicuous place on the property at least 20 days before the date of sale, "where possible and where not restricted for any reason."
The Siligas also alleged a failure to comply with certain time requirements, as set forth in Civil Code former section 2923.52. They do not pursue this argument on appeal.

3. The Application for a Temporary Restraining Order

On May 13, 2011, the Siligas sought a temporary restraining order, as the trustee's sale was then set for May 18, 2011. As to the issue of MERS's role in the foreclosure process, they relied on authority from federal district and bankruptcy courts to the effect that MERS, as a mere nominee, lacks authority to transfer a note or the beneficial interest in a deed of trust, without proof of direct authorization from the noteholder.

The declaration of Johnny Siliga, submitted in support of the application for temporary restraining order, stated that the trustee's sale was then scheduled for February 14, 2011. If this was true, the application for a temporary restraining order was moot when it was filed.

As to the purported statutory violations, the Siligas supported their application with their own declarations, each representing that, "No one ever contacted me before the recording of the Notice of Default to discuss the loan or help me avoid foreclosure on the Subject Property. I did not receive a copy of the Notice of Trustee's Sale. At no point in time did I ever see any posting on my property before the foreclosure took place."

The Siligas took the position, however, that the foreclosure sale had not yet taken place.

The trial court denied the application for a temporary restraining order. The court: (1) disagreed with the Siligas' interpretation of the documents; (2) declined to follow federal district court authority regarding MERS, in favor of California appellate court authority approving MERS's right to initiate a foreclosure (Gomes v. Countrywide Home Loans, Inc., supra, 192 Cal.App.4th at p. 1157); and (3) concluded that, as to the alleged failure to telephone the Siligas, the narrowly-drafted declarations of the Siligas were insufficient. The Siligas filed a timely notice of appeal.

The court stated, "[W]hether it happened before or after the notice of default was recorded, I sit as a court of equity in dealing with injunctive relief, and I'm not going to grant an injunction if they didn't contact a plaintiff before the notice of default [as stated in the declarations], but they did contact the plaintiff after the notice of default."

DISCUSSION

" ' "The law is well settled that the decision to grant [a restraining order] rests in the sound discretion of the trial court." [Citation.] "A trial court will be found to have abused its discretion only when it has ' "exceeded the bounds of reason or contravened the uncontradicted evidence." ' " [Citation.] "Further, the burden rests with the party challenging the [trial court's order] to make a clear showing of an abuse of discretion." [Citation.]' [Citation.]" (Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827, 834.)

" '[T]rial courts should evaluate two interrelated factors when deciding whether or not to issue [a restraining order]. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the [restraining order] were denied as compared to the harm that the defendant is likely to suffer if the [order] were issued.' [Citation.]" (Church of Christ in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 1251.)

"[W]hen a trial court denies an application for a restraining order, 'it implicitly determines that the plaintiffs have failed to satisfy either or both of the "interim harm" and "likelihood of prevailing on the merits" factors. On [appellate review], the question becomes whether the trial court abused its discretion in ruling on both factors. Even if the appellate court finds that the trial court abused its discretion as to one of the factors, it nevertheless may affirm the trial court's order if it finds no abuse of discretion as to the other.' [Citation.]" (Church of Christ in Hollywood v. Superior Court, supra, 99 Cal.App.4th at p. 1252.)

It is clear in this case that the trial court did not abuse its discretion in denying the application for a temporary restraining order. Plaintiffs have wholly failed to establish a likelihood of prevailing on the merits.

First, as we discussed above, the documents attached to the complaint undermine many of the Siligas' assertions of impropriety. Thus, the trial court did not abuse its discretion in concluding that the Siligas did not establish a probability of prevailing on their theories that: (1) Quality Loan Service did not record the notice of default as a trustee; (2) Select Servicing purported to be the beneficiary at the time of the notice of default; and (3) the Deutsche Bank Investors were not assigned the beneficial interest in the note along with the deed of trust. Second, as to the Siligas's allegations that MERS did not have the authority to assign the deed of trust and note, despite the Siligas' reliance on federal law to the contrary, there is California authority that: (1) when MERS is identified in the initial deed of trust as the beneficiary, MERS has the ability to assign the deed of trust (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 267, fn. 7); and (2) the assignee of a deed of trust need not record an assignment prior to exercising the power of sale (Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 120). The Siligas acknowledge this authority, but assert the right to argue, in good faith, that the authority is erroneous. We do not contest the Siligas' right to challenge controlling authority. We conclude, however, that when controlling authority is in opposition to one's position, the trial court does not abuse its discretion in concluding that one has failed to establish a likelihood of prevailing.

The Siligas also argue that, even if the language of the assignment of the deed of trust included assignment of the note, that language was insufficient as, in order to effect an assignment, the note itself must be physically delivered to the assignee. For this proposition, the Siligas rely on In re Golden Plan of California (9th Cir. 1987) 829 F.2d 705, 709. The case does not support the Siligas. While the Ninth Circuit noted, in a footnote, that transfer of an instrument is necessary in order to perfect a security interest in the instrument (id. at p. 708, fn. 2), the holding of the case was that certain investors were, in fact, sold interests in a note and deed of trust even though the documents were not physically delivered to them (id. at pp. 707, 709-710.)

On appeal, the Siligas argue that Accredited Lenders went into bankruptcy, and that, when it did so, its appointment of MERS as its nominee lapsed. Even if the bankruptcy of Accredited Lenders was somehow relevant - and it may not be, as an assignment of the note to the Deutsche Bank Investors (or any other MERS member) may well have predated the bankruptcy - there was no evidence submitted in support of the temporary restraining order to the effect that Accredited Lenders did, in fact, declare bankruptcy. Indeed, the issue was not addressed in the Siligas' complaint or written application for a restraining order at all. Instead, at the hearing on the temporary restraining order, which was combined with a hearing on a similar application in another case, the Siligas' counsel simply stated, "In fact, some of the lenders are not even in existence when [MERS] made the assignment. Okay, we'll take your word that [MERS] was acting as an agent. The agency terminated with the death of the principal, and we cited case law on that." Any authority on this issue was cited in the other case; the argument was not made with respect to the Siligas. Similarly, the Siligas argue for the first time on appeal that the provisions in the deed of trust relating to MERS were unconscionable. The Siligas cannot argue on appeal that the trial court abused its discretion in concluding that they did not establish a probability of prevailing by relying on a theory that they never raised before the trial court.

We express no opinion on the merits of the Siligas' arguments.
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Similarly, the Siligas argue that it may well be that MERS was not authorized to assign the deed of trust to the Deutsche Bank Investors. The Siligas have no evidence of a lack of authorization, and California law holds that a plaintiff may not bring a court action to determine whether the party initiating the nonjudicial foreclosure process is authorized to do so. (Gomes v. Countrywide Home Loans, Inc., supra, 192 Cal.App.4th at p. 1154.) Again, while the Siligas may disagree with this authority, they have not established a probability of prevailing, given the current state of California law, and the lack of specific factual evidence to support their assertion.

Thirdly and finally, the trial court did not abuse its discretion in concluding that the Siligas did not establish the right to restrain the foreclosure sale based on their declarations that they did not receive the statutorily-required pre-foreclosure telephone call, and that notice of sale was not properly posted. As to the first, the Siligas' declarations were narrowly drafted, and the beneficiary's declaration, attached to the notice of default, was to the contrary. As to the second, there is no doubt that the Siligas ultimately received notice of the trustee's sale.

DISPOSITION

The order denying the Siligas' application for a temporary restraining order is affirmed. Defendants MERS, Quality Loan Service, and the Deutsche Bank Investors shall recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CROSKEY, J.

WE CONCUR:

KLEIN, P. J.

KITCHING, J.


Summaries of

Siliga v. Mortgage Elec. Registration Sys. Inc.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE
Feb 9, 2012
B233000 (Cal. Ct. App. Feb. 9, 2012)
Case details for

Siliga v. Mortgage Elec. Registration Sys. Inc.

Case Details

Full title:JOHNNY SILIGA et al., Plaintiffs and Appellants, v. MORTGAGE ELECTRONIC…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE

Date published: Feb 9, 2012

Citations

B233000 (Cal. Ct. App. Feb. 9, 2012)

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