Debrunner v. Deutsche Bank National Trust Company

138 Cal.Rptr.3d 830 (2012)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

P alleged that he was a private investor who, along with others, extended a $675,000 loan in March 2006 to Barbara Chiu and Shimin Xu, secured by a deed of trust on a home in Los Altos. Chiu executed a promissory note and second deed of trust in favor of P and his co-investors. Chiu was already a trustor on a first deed of trust on the property, having borrowed $975,000 from Quick Loan Funding, Inc. The trustee named on that deed of trust was Chicago Title Company. The following month Quick Loan assigned the deed of trust and Chiu's promissory note to Option One Mortgage Corporation (Option One), which shortly thereafter assigned both interests to FV-1, Inc. The final assignment of the deed of trust was from FV-1 to D. In January 2008, P filed a notice of default, and in April, they scheduled a trustee's sale for the following month. In June Chiu's business entity filed for chapter 11 bankruptcy protection. The bankruptcy court thereafter granted P's motion for relief from the bankruptcy stay, and in March 2009 they foreclosed and obtained a trustee's deed upon sale for the property. In August 2008, Saxon, the servicer of the first-position loan, filed a notice of default on the property. Because of the bankruptcy proceeding, however, the notice was rescinded. In July 2009 D moved for relief from the bankruptcy stay in order to file a new notice of default. That motion was taken off calendar when the bankruptcy matter was closed in August 2009. On September 15, 2009, a new notice of default was recorded on the property. It named D as the creditor and Saxon as its “attorney-in-fact.” The notice informed the debtor that payment to stop the foreclosure could be made to Saxon, and it provided Saxon's address and telephone number. The county recorded a “Substitution of Trustee” from Chicago Title Company to Old Republic. This document had been signed and notarized on September 2, 2008, by Saxon on behalf of D. P filed in November 2009 seeking a declaration that Ds had no right to foreclose because D did not have physical possession of or ownership rights to the original promissory note. P further sought to quiet title to the property and remove the first deed of trust in favor of Quick Loan. Ds argued that possession of the original note was not required under the applicable statutes. P maintained that any assignment of the deed of trust was immaterial because a deed of trust “cannot be transferred independently” of the promissory note, which must be “properly assigned” and attached; A deed of trust standing alone is a nullity. The court ruled that a chain of title had been established on the face of the first amended complaint. The court also rejected P's assertion that physical possession of the promissory note was a precondition to nonjudicial foreclosure, citing federal district court decisions. The case was dismissed, and P appealed.