Tuesday, October 8, 2013

CHASE'S LETTER TO DEPUBLISH THE COURT'S DECISION -- GLASKI v BANK OF AMERICA

October 4, 2013

Chief Justice Tani G, Cantil-Sakauye
and the Associate Justices
Supreme Court of California
350 McAllister Street
San Francisco, California 94102-4797

Re: Request for Depublication

Glaski v. Bank of America, N.A., et at.,

California Court of Appeal, Fifth Appellate District
Case No. F064556

To: The Honorable Chief Justice and Associate Justices of the California Supreme Court

JPMorgan Chase Bank, N.A, as successor by merger to Chase Home Finance, LLC; JPMorgan
Chase Bank, N.A.; and California Reconveyance Company, Defendants-Respondents in the
above-mentioned appeal (together, "Respondents"), respectfully request that this Court depublish
the opinion of the Fifth District Court of Appeal in Glaski v, Bank ofAmerica, NA" et aI., No,
F064556, issued July 31,2013 and certified for publication on August 8, 2013 (the "Opinion"),
This request is made pursuant to Rule 8,1125 of the California Rules of Court,

INTRODUCTION

Respondents' interest in this appeal derives not only from the present case, but also from the
broad disruptive impact that the Court of Appeal's published ruling will have on nonjudicial
foreclosures in this State, California Civil Code §§ 2924 et seq, furnishes an "exhaustive" and
"comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a
power of sale contained in a deed of trust," such that courts should not "read any additional
requirements into the nonjudicial foreclosure statute." Gomes v, Countrywide Home Loans, Inc"
121 Cal. Rptr. 3d 819, 823-824 (Cl. App. 2011), Nevertheless, the Court of Appeal has done just
that, upending a previously consistent string of appellate decisions in the process, The Court of
Appeal held for the first time that a plaintiff has standing to challenge the nonjudicial foreclosure
on an undisputedly defaulted mortgage, based on an alleged breach of a loan securitization
agreement to which a plaintiff was neither a party nor an intended third-party beneficiary-and
which in no way relates to his payment obligations or to Respondents' authority to foreclose,

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The Court's decision threatens to unsettle thousands of completed and ongoing foreclosures
carried out lawfully under the State's statutory nonjudicial foreclosure regime. More to the
point, the Court's ruling thwarts the California legislature's clear purpose in enacting California
Civil Code §§ 2924 et seq. By conferring on defaulted borrowers a basis for challenging a
nonjudicial foreclosure, the Court's opinion has the effect of converting a streamlined, efficient
and comprehensive nonjudicial process into full-blown judicial foreclosure. Indeed, the effects
of the decision already are being seen, in the short time since the opinion was published, in both
newly filed complaints and existing cases in the California courts-where the Court of Appeal's
published opinion is now precedent. The Court's unwarranted broadening of standing law may
well have unfortunate repercussions in other contract cases as well.

THE COURT OF APPEAL'S DECISION

Ruling on grounds that were neither raised in the trial court (and which the trial court thus had no
occasion to address), nor briefed by the parties on appeal, the Court of Appeal held that
petitioner Thomas A. Glaski ("Glaski") had standing to maintain a wrongful-foreclosure action
based on allegations related to a loan securitization agreement to which he is a complete stranger.
Specifically, the Court of Appeal found standing based on Glaski's allegation that the assignment
of his mortgage to a securitization trust allegedly occurred after the trust closing date set forth in
the Pooling & Servicing Agreement ("PSA"). Relying on New York law, even though the PSA
that Glaski invoked states that Delaware law governs, the Court found that a belated assignment
to the trust would be void. The Court then held that California law recognizes a borrower's
standing to challenge an assignment that is void rather than voidable. The Court appeared to
believe that there was no California case law on point (Slip. Op. 17), and accordingly relied on
four non-California cases, all of which held that the borrower had, on similar allegations, failed
to state a claim for wrongful foreclosure (id.).

The Court of Appeal did not originally certify its opinion for publication. Glaski petitioned the
Court to publish the opinion, arguing that the standing rule announced by the Court "is a first
under California law." Antognini Aug. 2, 2013 Ltr. 2. The Court of Appeal then ordered the
opinion published on August 8, 2013. Respondents petitioned for rehearing; the Court of Appeal
denied that petition by order dated August 29, 2013.

REASONS FOR DEPUBLICATION

I.
The Court of Appeal's Decision Threatens to Severely Disrupt California's
Nonjudicial Foreclosure Regime, and to Generate a Flood of Meritless Litigation
Before the Court of Appeal, Glaski emphasized that "public policy" counseled in favor of
publishing the opinion because of the high number of mortgages assigned to securitization trusts,

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and the need for courts to ensure that lenders "do proper loan assignments." Antognini Aug. 2,
2013 Ltr. 4. In fact, the public policy concerns weigh in exactly the opposite direction, and
warrant depublication of the Court's opinion.

California Civil Code section 2924 establishes a "comprehensive statutory framework .., to
govern nonjudicial foreclosure sales [that] is intended to be exhaustive." Moeller v. Lien, 30 CaL
Rptr. 2d 777, 785 (Ct. App. 1994). 'The purposes of this comprehensive scheme are threefold:

(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a
defaulting debtor/trustor; (2) to protect the debtor/trustor from Wrongful loss of the property; and
(3) to ensure that a properly conducted sale is final between the parties and conclusive as to a
bona fide purchaser." Id at 782. Section 2924 permits "[t]he trustee, mortgagee, or beneficiary,
or any of their authorized agents"-for example, the loan servicer-to foreclose. Cal. Civil
Code § 2924(a)(I); see also id. § 2924b(b )(4) ("person authorized to record the notice of default
or the notice of sale" includes "an agent for the mortgagee or beneficiary, an agent of the named
trustee, any person designated in an executed substitution of trustee, or an agent of that
substituted trustee"). The statute does not require a foreclosing party to "produce the promissory
note or otherwise prove it holds the note" to non-judicially foreclose. Jenkins v. JP Morgan
Chase Bank, N.A., 156 Cal. Rptr. 3d 912, 925 eCI. App. 2013). Nor does it require a foreclosing
party to establish a chain of ownership in order to nonjudicially foreclose. DenniS v. Wachovia
Bank, FSB, 2011 WL 181373, *7-8 (N.D. Cal.Jan. 19,2011). That is because requiring a
foreclosing party to establish its interest in the note "would fundamentally undermine the
nonjudicial nature of the process[.]" Gomes, 121 Cal. Rptr. 3d at 824. "Because of the
exhaustive nature oft his scheme, California appellate courts have refused to read any additional
requirements into the nonjudicial foreclosure statute." Id. at 823-824.
The Court of Appeal's published ruling threatens to upend the settled law and expectations in
this area of California law. If followed by the lower courts, the now-published Glas/d decision
will allow borrowers-in circUMstances where there is no dispute among any assignor or
assignee o fthe note-to preclude mortgagees, trustees, or mortgage servicers who are statutorily
authorized to nonjudicially foreclose from doing so, on mortgages that are indisputably in default
(and which the mortgagor does not allege he can satisfy). That is plainly inconsistent with the
California statutory provisions governing the nonjudicial foreclosure process, none of which
"suggests that such a judicial proceeding is permitted or contemplated." Gomes, 121 Cal. Rptr.
3d at 824.

What is more, if followed by the lower courts, Glaski will permit borrowers to bring wrongful foreclosure claims that do nothing to further the foreclosure statute's purpose of"protect[ing] the
debtor/trustor from wrongful loss of the property," Moeller, 30 Cal. Rptr. 2d at 782 (emphasis
added), because the allegedly late assignment of a borrower's mortgage to a trust has nothing to
do with whether a borrower is in default or whether the foreclosing entity authorized by statute to

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foreclose in fact has that authority. See, e.g., Siliga v. Mortgage Elec. Registration Sys., Inc.,
161 Cal. Rptr. 3d 500, 508 (Ct. App. 2013) ("The assignment of the deed of trust and the note
did not change [plaintiffs'] obligations under the note, and there is no reason to believe that ...
the original lender would have refrained from foreclosure in these circumstances."). Such a fact finding detour is particularly unwarranted where the borrower knows from which entity he has
been receiving monthly statements and notices. See Jenkins, 156 Cal. Rptr. 3d at 926-927
(servicer has standing to foreclose).

There are tens of thousands of California mortgages that have been lawfully assigned to
securitization trusts, absent any objections by the actual parties to those agreements, and the
California nonjudicial foreclosure statute expressly permits several entities involved with the
mortgage to foreclose when a borrower defaults-as undisputedly occurred here. If the lower
courts follow Glaski, borrowers will flood the State's trial courts (and, eventually, its courts of
appeal) with wrongful-foreclosure lawsuits challenging their foreclosures based on allegations
about the assignments of their mortgages to securitization trusts or any number of other alleged
defects relating to an entity's authority to foreclose. They will do so regardless ofwhether they
are in default (as Glaski undisputedly was), and regardless of whether they intend to, or are able
to, make the required payments on their mortgage (as Glaski undisputedly was not). Indeed, the
flood already has commenced, with increasing numbers of Glaski-like complaints being filed
since the date the Court of Appeal's decision was published. The legislature enacted the
nonjudicial foreclosure statute precisely to avoid this sort of burden on the state's court system
and to avoid races to the courthouse in circumstances of foreclosure, especially where there was
no legitimate cause to stop or unwind a proper foreclosure. Because the Court of Appeal's
decision threatens to undermine the legislature's careful balancing of borrower and lender
interests, and to deluge the courts with meritless wrongful-foreclosure actions, this Court should
depublish the opinion.

II. The Court of Appeal's Unprecedented Application Of California Standing Law
As Glaski recognizes, the Court of Appeal's decision is the "first under California law" to hold
that a borrower has standing to challenge an entity's authority to foreclose based on assignment
of his mortgage into a securitization trust in alleged violation of the trust's PSA. Antognini Aug.
2,2013 Ltr. 2. The Court's novel ruling as to California law departs from a "judicial consensus
[that] has developed holding that a borrower lacks standing to (I) challenge the validity of a
mortgage securitization or (2) request a judicial determination that a loan assignment is invalid
due to noncompliance with a pooling and servicing agreement, when the borrower is neither a
party to nor a third party beneficiary of the securitization agreement." In re Walker, 466 B.R.
271,285 (E.D. Pa. 2012) (emphasis added). Thus, in an area where the decisional law has
induced long settled expectations, Glask; (if it remains published) threatens to inject substantial
uncertainty into the foreclosure arena.

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There is no justification for allowing that uncertainty to be sowed, or to permit a proliferation of
new, meritless challenges to foreclosure, as the Glaski Court's decision is contrary to
foundational principles of California common law. California courts adhere to the well established
rule that "someone who is not a party to a contract has no standing to enforce the
contract" except "where the contract is made expressly for that person's benefit." 14A Cal. Jur.
3d Contracts § 310; see, e.g, Rodriguez v. 010, 151 Cal. Rptr. 3d 667,673 (Ct. App. 2013). The
Court of Appeal did not discuss this well-established rule of California common law, instead
basing its holding on a negative inference in a California Jurisprudence citation stating only that,
as to assignments, a borrower cannot challenge a voidable assignment. From this statement the
Court of Appeal arrived at the conclusion that a borrower could challenge an allegedly void
assignment. See Slip Op. 18 (citing 7 Cal. Jur. 3d Assignments § 43). Whatever California
Jurisprudence says about standing to challenge a voidable assignment, it does not suggest that a
borrower could challenge a void assignment, nor do any of the cases it cites.

Instead, California courts (both state and federal) have repeatedly invoked the principle that only
intended third-party beneficiaries can sue to challenge a breach by a party to the contract, and
therefore have repeatedly held that borrowers like Olaski may not pursue wrongful foreclosure
claims premised on a breach of a PSA because borrowers are not parties to these agreements and
the agreements are not made expressly for the borrowers' benefit. See, e.g, Jenkins, 156 Cal.
Rptr. 3d at 927 ("As an unrelated third party to the alleged securitization ... Jenkins lacks
standing to enforce any agreements, including the investment trust's pooling and servicing
agreement, relating to such transactions."); Sami v. Wells Fargo Bank, 2012 U.S. Dist. LEXIS
38466, at *15 (N.D. Cal. Mar, 21, 2012) (,,[T]he court finds that she lacks standing to do so
because she is neither a party to, nor a third party beneficiary of, [the PSA]."). These courts have
done so notwithstanding the fact that a borrower alleged that the defect in the assignment
rendered it "void," see, e.g., Almutarreb v. Bank olN. Y Trust Co., 2012 WL 4371410, at *2 n.l

(N.D. Cal. Sept. 24, 2012), and they have done so where the alleged voidness sprung from the
fact that the mortgage was transferred to the trust after the closing date of the trust, see, e.g,
Jenkins, 156 Cal. Rptr. 3d at 923-924; Sabherwal v. Bank olN. y. Mellon, 2013 WL 101407, at
*7 (S.D. Cal. Jan. 8, 2013).

The super-majority rule-that a borrower cannot base a challenge on an assignment contract if
the borrower is not a third-party beneficiary of the assignment contract-is correct and conforms
to the purposes of the nonjudicial foreclosure process. Because Glaski undermines that
consensus, and threatens settled expectations, the decision ought to be depublished.

3692020.1--ALl09WB37


/8JALVARADOSMITH

Chief Justice Tani G. Cantil-Sakauye

and the Associate Justices
Supreme Court of California
October 4, 2013
Page 6

III. The Court Of Appeal's Unnecessary and Questionable Application of New York
Trust Law

A final reason for depublication is that the Court of Appeal reached its holding only because of
an unnecessary detour into and conclusion about New York trust law. The detour was
unnecessary because the trust agreement in this case states that it is governed by Delaware law.
Glaski's allegation that the Trust is governed by New York law contradicts the publicly filed
document that he invoked in his complaint and that the Court of Appeal relied upon in its
opinion. The PSA states explicitly that the Trust is a Delaware Statutory Trust, organized under
the Delaware Statutory Trusts Statute, 12 Del. Code Ann. §§ 3801 et seq., and governed by
Delaware law. See, e.g., PSA § 10.05 (governing law). There is no provision of the Delaware
statute, however, that would render an allegedly belated assignment to a trust void. Indeed, more
generally, Delaware courts reject the proposition that borrowers may challenge the allegedly
improper assignment oftheir mortgage. See, e.g., Branch Banking & Trust Co. v. Eid, 2013 WL
3353846, at *4 (Del. Super. Ct. June 13,2013) ("[AJ debtor is not a party to a mortgage
assignment, is not a third party beneficiary to the assignment and cannot show legal harm as a
result of the assignment. As such, the debtor has no legally cognizable interest in an assignment
and therefore is not in a position to complain about it. Thus, it is not plaintiff who lacks standing
to sue, but defendants who lack standing to contest the assignment.").

Accordingly, had the Court of Appeal limited its decision to only the law that actually governs
the trust agreement in this case, there would have been no need for the Court ever to opine on the
question whether California law ought to provide for a previously-unheard-of exception for void
(as opposed to voidable) assignments. Moreover, trial courts following Glaski will be put in the
awkward position of reaching disparate results in nonjudicial foreclosure cases based on their
interpretation of the foreign law under which a given securitized loan trust was formed. That is
hardly consistent with the purpose behind California Civil Code § 2924: to enact an exhaustive,
streamlined, and efficient nonjudicial foreclosure regime.

Having determined to venture into inapplicable New York law, the Court of Appeal compounded
the precedential problems with its now-published decision by declining to follow the majority of
courts that have construed New York trust law. See Bank of Am., Nat'! Assocs. v. Bassman FBT,
LLC, 981 N.E.2d 1, 8-9 (Ill. App. Ct. 2012) (collecting and discussing New York appellate
cases applying New York trust law and following cases that treat ultra vires acts as voidable
rather than void); see also Deutsche Bank Nat 'I Trust Co. v. Stefiej, 2013 WL 1103903, at *3-4

(N.D. Ill. Mar. 15,2013) ("After reviewing the pertinent New York authority on section 7-2.4,
this Court agrees with the analysis in Bassman and holds that section 7-2.4 only makes an act by
the trustee in contravention to the irust instrument voidable, not void."). Depublication is thus
also appropriate to avoid an unnecessary conflict with the New York appellate courts on an issue
ofNew York law. See Simmons v. Superior Ct. in &for L.A. County, 214 P.2d 844,852 (Cal.
3692020.1--ALI09.W837

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Dist. Ct. App. 1950) ("unseemly controversy between courts of different states should be
frowned upon and avoided ifpossible").

For the foregoing reasons, Respondents respectfully request that this Court depublish the
decision of the California Court of Appeal.

Respectfully,

ALVARADOSMITH
A Professional Corporation

Mikel Glavinovich

WILMER CUTLER PICKERING
HALE AND DORR LLP
Noah Levine [Pro Hac Vice pending]
7 World Trade Center
250 Greenwich Street
New York, New York 10007

Attorneys for Defendants and Respondents
JPMorgan Chase Bank, N.A. as successor by
merger to Chase Home Finance, LLC;
JPMorgan Chase Bank, N.A.; and California
Reconveyance Company

MG:je

3692020.1··ALl09W837

2 comments:

  1. Banks are $#!%%!& on there pants. Their fraudulent game may be over. What other reason would they have to request to depublish this decision? and if in fact other foreclosures are legit, why not let them got through the system? could those who recorded falls affidavits and fraudulent documents in the county land of records office go to jail and be accused of domestic terrorism?

    ReplyDelete
  2. On February 268, 2014 in S323814 in the Supreme Court of California En Banc the Supreme Court filed the order stating: "The requests for an order directing depublication of the opinion in the above-entitled appeal are denied.:

    Kennard and Chin, JJ, were recused and did not participate.

    ReplyDelete