Wednesday, November 26, 2014

Appellate Victory in California

Good news out of California and the Ninth Circuit today! 

I’m proud to say that I had a hand in this one. I also wrote about this in the following article back in April of this year, and now the Ninth Circuit agrees that my findings may have “teeth.”

From the Opinion:

The Riveras allege that the endorsement on the note is suspect for two reasons. First, they allege that, in an SEC filing disclosing information about the mortgage securitization trust for which DBNTC is trustee, the filing states that the mortgage notes pooled into the trust would not be endorsed and negotiated to the trust. And second, the Riveras allege that, after the FDIC’s 2008 asset sale to Chase, Leta Hutchinson became an officer of Chase. The Riveras in essence infer from the above-referenced allegations that the Hutchinson endorsement is a sham: (1) that Hutchinson did not actually endorse the Riveras’ note until 2012 – around the time Chase executed the assignment of the deed of trust; and (2) that, in 2012, Hutchinson no longer was an officer of the shut down Washington Mutual Bank and hence no longer had any authority to endorse the note on behalf of Washington Mutual.

1. First Claim for Relief – to Determine the Extent and Validity of Lien
 [t]heir first claim for relief also explicitly incorporates their allegations challenging DBNTC’s proof of claim and disputing the validity of the Hutchinson endorsement. Those allegations, when combined with what is set forth in the first claim for relief, are sufficient on their face to state a claim that DBNTC does not hold a valid lien against the Riveras’ property because the underlying debt never was validly transferred to DBNTC. See In re Leisure Time Sports, Inc., 194 B.R. at 861 (citing Kelly v. Upshaw, 39 Cal.2d 179 (1952) and stating that “a purported assignment of a mortgage without an assignment of the debt which it secured was a legal nullity.”).

While the Riveras cannot pursue their first claim for relief for purposes of directly challenging DBNTC’s pending nonjudicial foreclosure proceedings, Debrunner, 204 Cal.App.4th at 440-42, the first claim for relief states a cognizable legal theory to the extent it is aimed at determining DBNTC’s rights, if any, as a creditor who has filed a proof of secured claim in the Riveras’ bankruptcy case. Consequently, the bankruptcy court erred when it dismissed the Riveras’ first claim for relief.

Read the full opinion here:

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