By Daniel Edstrom
DTC Systems, Inc.
March 10, 2020

Johns Hopkins University has created a global dashboard monitoring the status of the Coronavirus 2019 (COVID-19) from over 100 countries around the world. You can see a link to this dashboard from here: http://lab27b.net/covid-19

By Daniel Edstrom
DTC Systems, Inc.

November 8, 2018

Today the United States filed a civil complaint against UBS AG and several of its United States affiliates (together, “UBS”) in federal court for the Eastern District of New York.

The complaint alleges UBS defrauded investors contributing to the 2008 financial crisis, “which resulted in lasting economic harm to the nation and unnecessary suffering for Americans”.

The complaint alleges investors “suffered catastrophic losses”. Further, the complaint alleges “These practices resulted in massive losses to investors, harmed homeowners, and ultimately jeopardized the banking system.”

The complaint alleges that UBS’ fraudulent actions were based on “mail fraud, wire fraud, bank fraud, and other misconduct.”

As detailed in the complaint, UBS knowingly misrepresented key characteristics  of the loans, thereby concealing the fact that the loans were much riskier and much more likely to default than UBS represented.

While the complaint seems to allege that the UBS conduct “harmed homeowners”, it is apparent from the massive number of foreclosures that conduct alleged against UBS also resulted in catastrophic losses for homeowners.

Included in the tables filed with the complaint are many of the alleged false representations, including the following (not all inclusive):

False Representation That All Loans Complied With Underwriting Guidelines

False Representation That All Loans Applied With Applicable Law:

“The transferor will represent that as of the closing date, each loan is in compliance with applicable federal and state laws and regulations.” (S-25)
“All loans submitted for consideration are subject to review for compliance with UBS Home Finance guidelines, the applicable product matrix, as well as with local, state, and federal mortgage lending requirements.” (S-32)

So the allegation is that the underlying loans had no underwriting and did not comply with applicable laws even though UBS was putting forth representations to the public and/or investors that the loans were appropriately subject to underwriting standards and that the loans did comply with applicable laws.

Here is the link to the U.S. Attorney’s Office for the Eastern District of New York press release from November 8, 2018: U.S. Attorney’s Office for the Eastern District of New York Press Release

Here is the link to the U.S. Department of Justice press release from November 8, 2018: Department of Justice Press Release

Here is the complaint filed in the Eastern District of New York on November 8, 2018: U.S. v. UBS Securities LLC, et al

By Daniel Edstrom
DTC Systems, Inc.

October 19, 2016

The purpose of Sarbanes-Oxley legislation is to put in place financial controls in order to not only reduce fraud, but to identify risks so that the controls can be expanded or new controls put in place. Large companies such as Wells Fargo Bank have compliance departments and ethics lines where questionable conduct (unlawful or not) can be reported “safely” in order for the company to take action to stop and/or remediate the questionable conduct. This is done so that a business operates safely and soundly, and is the perfect source for implementing new controls, enhancing existing controls, testing the effectiveness of the controls, or at least disclosing material deficiencies that can be identified and corrected at a later date.

Risk Management would entail identifying the risk, and then prioritizing, such that the highest priority risks can be mitigated first.  Assuming that early on this conduct was identified, the risk could have been low, leaving it to be addressed at a future date. Its fair to say now that it appears this conduct was effectively suppressed from any risk management.

Based on current reporting, it would appear that the compliance and ethics lines were used against those who reported questionable conduct. This is the exact opposite of the purpose for which Sarbanes-Oxley legislation was imposed, and if true, represents the creation of non-reported internal controls that do the exact opposite of what the legislation imposes. The exact opposite because the controls are put in place to reduce fraud, and require that senior officers such as the CEO and CFO, provide an oath that they have established appropriate internal controls, and then certify that they “have evaluated the effectiveness of the company’s internal controls”. Presumably they would need to disclose information related to material deficiencies.

It is fairly obvious (now) that they had no controls to inhibit, detect or report these issues even though they presumably had actual knowledge of the conduct (or reports of the actual knowledge, which if investigated appropriately would have led to actual knowledge of the conduct).  This, if true, would seemingly mean that when these officers gave their oath, they were knowingly concealing material information that should have been disclosed (no internal controls to detect this activity, fraud, false accounting, and no controls put in place to make sure if this conduct was reported, that it would be appropriately investigated, etc.). They seemingly also knew that their controls were defective, insufficient, and that there were material exceptions that they were knowingly withholding from disclosure. And even worse, it appears they may have implemented “secret” controls, policies and procedures to specifically target and retaliate against those who actually did make an effort to report this “questionable” conduct (i.e. opening accounts for their customers without the customers request in order to receive bonuses, and then, presumably, closing these accounts). But these “secret” controls were not disclosed at all, nor mentioned as a material exception.

But who was the target of the fraud? The customer? No, although they were a victim. This was all targeted at the stockholders in order to falsely inflate their stock value through false and fabricated financial transactions that simulated the “flow” of money in order to give the appearance that money was moving and that fees were being generated.

According to Wikipedia from this URL: https://en.wikipedia.org/wiki/Money_laundering

According to the United States Treasury Department:

Money laundering is the process of making illegally-gained proceeds (i.e. “dirty money”) appear legal (i.e. “clean”). Typically, it involves three steps: placement, layering and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the “dirty money” appears “clean.”^[10]

This could have started out as bad acts by one or more employees opening these accounts to get paid extra money. Or it could have started out designed from the top as a complete scheme and artifice to defraud. But either way is now irrelevant. Once it was happening and once known at the highest levels, it became a standard and practice. If it wasn’t a control fraud early on, it became one when ethics and compliance officers, managers or employees failed to act (or worse, retaliated or allowed others to retaliate). The final nail in the coffin came when senior officers decided retaliation was appropriate instead of enhancing their internal controls, disclosure controls and reporting. Once they knew or should have known of the conduct, it became their business processes, whether they controlled it directly or not. Closing your eyes so as not to learn the truth is an affirmative act.

How does Sarbanes-Oxley work?  Here is a small sampling on Section 302: Disclosure Controls from Wikipedia, available at this URL: https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act

Sarbanes–Oxley Section 302: Disclosure controls[edit]

Under Sarbanes–Oxley, two separate sections came into effect—one civil and the other criminal. 15 U.S.C. § 7241 (Section 302) (civil provision); 18 U.S.C. § 1350 (Section 906) (criminal provision).

Section 302 of the Act mandates a set of internal procedures designed to ensure accurate financial disclosure. The signing officers must certify that they are “responsible for establishing and maintaining internal controls” and “have designed such internal controls to ensure that material information relating to the company and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared.” 15 U.S.C. § 7241(a)(4). The officers must “have evaluated the effectiveness of the company‘s internal controls as of a date within 90 days prior to the report” and “have presented in the report their conclusions about the effectiveness of their internal controls based on their evaluation as of that date.” Id..

The SEC interpreted the intention of Sec. 302 in Final Rule 33–8124. In it, the SEC defines the new term “disclosure controls and procedures,” which are distinct from “internal controls over financial reporting.”^[30] Under both Section 302 and Section 404, Congress directed the SEC to promulgate regulations enforcing these provisions.^[31]

External auditors are required to issue an opinion on whether effective internal control over financial reporting was maintained in all material respects by management. This is in addition to the financial statement opinion regarding the accuracy of the financial statements. The requirement to issue a third opinion regarding management’s assessment was removed in 2007.

A Lord & Benoit Report: Bridging the Sarbanes-Oxley Disclosure Control Gap was filed with the SEC Subcommittee n internal controls which reported that those companies with ineffective internal controls, the expected rate of full and accurate disclosure under Section 302 will range between 8 and 15 percent. A full 9 out of every 10 companies with ineffective Section 404 controls self reported effective 302 controls in the same period end that an adverse Section 404 was reported, 90% in accurate without a Section 404 audit. http://www.section404.org/UserFiles/File/Lord_Benoit_Report_1_Bridging_the_Disclosure_Control_Gap.pdf

By Daniel Edstrom
DTC Systems, Inc.

On August 8, 2013 the Fifth Appellate District in the Court of Appeal of the State of California ordered the Thomas A. Glaski vs Bank of America, NA et al decision published, stating:

As the nonpublished opinion filed on July 31, 2013, in the above entitled matter hereby meets the standards for publication specified in the California Rules of Court, rule 8.1105(c), it is ordered that the opinion be certified for publication in the Official Reports.

Based on the importance of this case, the text of the July 31, 2013 ruling is listed verbatim:

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Fresno County.  Alan M. Simpson, Judge.

Law Offices of Richard L. Antognini and Richard L. Antognini; Law Offices of Catarina M. Benitez and Catarina M. Benitez, for Plaintiff and Appellant.

AlvaradoSmith, Theodore E. Bacon, and Mikel A. Glavinovich, for Defendants and Respondents.

-ooOoo-

INTRODUCTION

            Before Washington Mutual Bank, FA (WaMu) was seized by federal banking regulators in 2008, it made many residential real estate loans and used those loans as collateral for mortgage-backed securities.[1]  Many of the loans went into default, which led to nonjudicial foreclosure proceedings.  Some of the foreclosures generated lawsuits, which raised a wide variety of claims.  The allegations that the instant case shares with some of the other lawsuits are that (1) documents related to the foreclosure contained forged signatures of Deborah Brignac and (2) the foreclosing entity was not the true owner of the loan because its chain of ownership had been broken by a defective transfer of the loan to the securitized trust established for the mortgage-backed securities.  Here, the specific defect alleged is that the attempted transfers were made after the closing date of the securitized trust holding the pooled mortgages and therefore the transfers were ineffective.

In this appeal, the borrower contends the trial court erred by sustaining defendants’ demurrer as to all of his causes of action attacking the nonjudicial foreclosure.  We conclude that, although the borrower’s allegations are somewhat confusing and may contain contradictions, he nonetheless has stated a wrongful foreclosure claim under the lenient standards applied to demurrers.  We conclude that a borrower may challenge the securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date.  Transfers that violate the terms of the trust instrument are void under New York trust law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement.

We therefore reverse the judgment of dismissal and remand for further proceedings.

FACTS

The Loan

Thomas A. Glaski, a resident of Fresno County, is the plaintiff and appellant in this lawsuit.  The operative second amended complaint (SAC) alleges the following:

In July 2005, Glaski purchased a home in Fresno for $812,000 (the Property).  To finance the purchase, Glaski obtained a $650,000 loan from WaMu.  Initial monthly payments were approximately $1,700.  Glaski executed a promissory note and a deed of trust that granted WaMu a security interest in the Property (the Glaski deed of trust).  Both documents were dated July 6, 2005.  The Glaski deed of trust identified WaMu as the lender and the beneficiary, defendant California Reconveyance Company (California Reconveyance) as the trustee, and Glaski as the borrower.

Paragraph 20 of the Glaski deed of trust contained the traditional terms of a deed of trust and states that the note, together with the deed of trust, can be sold one or more times without prior notice to the borrower.  In this case, a number of transfers purportedly occurred.  The validity of attempts to transfer Glaski’s note and deed of trust to a securitized trust is a fundamental issue in this appeal.

Paragraph 22—another provision typical of deeds of trust—sets forth the remedies available to the lender in the event of a default.  Those remedies include (1) the lender’s right to accelerate the debt after notice to the borrower and (2) the lender’s right to “invoke the power of sale” after the borrower has been given written notice of default and of the lender’s election to cause the property to be sold.  Thus, under the Glaski deed of trust, it is the lender-beneficiary who decides whether to pursue nonjudicial foreclosure in the event of an uncured default by the borrower.  The trustee implements the lender-beneficiary’s decision by conducting the nonjudicial foreclosure.[2]

Glaski’s loan had an adjustable interest rate, which caused his monthly loan payment to increase to $1,900 in August 2006 and to $2,100 in August 2007.  In August 2008, Glaski attempted to work with WaMu’s loan modification department to obtain a modification of the loan.  There is no dispute that Glaski defaulted on the loan by failing to make the monthly installment payments.

Creation of the WaMu Securitized Trust

In late 2005, the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust was formed as a common law trust (WaMu Securitized Trust) under New York law.  The corpus of the trust consists of a pool of residential mortgage notes purportedly secured by liens on residential real estate.  La Salle Bank, N.A., was the original trustee for the WaMu Securitized Trust.[3]  Glaski alleges that the WaMu Securitized Trust has no continuing duties other than to hold assets and to issue various series of certificates of investment.  A description of the certificates of investment as well as the categories of mortgage loans is included in the prospectus filed with the Securities and Exchange Commission (SEC) on October 21, 2005.  Glaski alleges that the investment certificates issued by the WaMu Securitized Trust were duly registered with the SEC.

The closing date for the WaMu Securitized Trust was December 21, 2005, or 90 days thereafter.  Glaski alleges that the attempt to assign his note and deed of trust to the WaMu Securitized Trust was made after the closing date and, therefore, the assignment was ineffective.  (See fn. 12, post.)

WaMu’s Failure and Transfers of the Loan 

In September 2008, WaMu was seized by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (FDIC) was appointed as a receiver for WaMu.  That same day, the FDIC, in its capacity as receiver, sold the assets and liabilities of WaMu to defendant JPMorgan Chase Bank, N.A., (JP Morgan).  This transaction was documented by a “PURCHASE AND ASSUMPTION AGREEMENT WHOLE BANK” (boldface and underlining omitted) between the FDIC and JP Morgan dated as of September 25, 2008.  If Glaski’s loan was not validly transferred to the WaMu Securitized Trust, it is possible, though not certain, that JP Morgan acquired the Glaski deed of trust when it purchased WaMu assets from the FDIC.[4]  JP Morgan also might have acquired the right to service the loans held by the WaMu Securitized Trust.

In September 2008, Glaski spoke to a representative of defendant Chase Home Finance LLC (Chase),[5] which he believed was an agent of JP Morgan, and made an oral agreement to start the loan modification process.  Glaski believed that Chase had taken over loan modification negotiations from WaMu.

On December 9, 2008, two documents related to the Glaski deed of trust were recorded with the Fresno County Recorder: (1) an “ASSIGNMENT OF DEED OF TRUST” and (2) a “NOTICE OF DEFAULT AND ELECTION TO SELL UNDER DEED OF TRUST” (boldface omitted; hereinafter the NOD).  The assignment stated that JP Morgan transferred and assigned all beneficial interest under the Glaski deed of trust to “LaSalle Bank NA as trustee for WaMu [Securitized Trust]” together with the note described in and secured by the Glaski deed of trust.[6]

Notice of Default and Sale of the Property

The NOD informed Glaski that (1) the Property was in foreclosure because he was behind in his payments[7] and (2) the Property could be sold without any court action.    The NOD also stated that “the present beneficiary under” the Glaski deed of trust had delivered to the trustee a written declaration and demand for sale.  According to the NOD, all sums secured by the deed of trust had been declared immediately due and payable and that the beneficiary elected to cause the Property to be sold to satisfy that obligation.

The NOD stated the amount of past due payments was $11,200.78 as of December 8, 2008.[8]  It also stated:  “To find out the amount you must pay, or to arrange for payment to stop the foreclosure, … contact:  JPMorgan Chase Bank, National Association, at 7301 BAYMEADOWS WAY, JACKSONVILLE, FL 32256, (877) 926-8937.”

Approximately three months after the NOD was recorded and served, the next official step in the nonjudicial foreclosure process occurred.  On March 12, 2009, a “NOTICE OF TRUSTEE’S SALE” was recorded by the Fresno County Recorder (notice of sale).  The sale was scheduled for April 1, 2009. The notice stated that Glaski was in default under his deed of trust and estimated the amount owed at $734,115.10.

The notice of sale indicated it was signed on March 10, 2009, by Deborah Brignac, as Vice President for California Reconveyance.  Glaski alleges that Brignac’s signature was forged to effectuate a fraudulent foreclosure and trustee’s sale of his primary residence.

Glaski alleges that from March until May 2009, he was led to believe by his negotiations with Chase that a loan modification was in process with JP Morgan.

Despite these negotiations, a nonjudicial foreclosure sale of the Property was conducted on May 27, 2009.  Bank of America, as successor trustee for the WaMu Securitized Trust and beneficiary under the Glaski deed of trust, was the highest bidder at the sale.

On June 15, 2009, another “ASSIGNMENT OF DEED OF TRUST” was recorded with the Fresno County Recorder.  This assignment, like the assignment recorded in December 2008, identified JP Morgan as the assigning party.  The entity receiving all beneficial interest under the Glaski deed of trust was identified as Bank of America, “as successor by merger to ‘LaSalle Bank NA as trustee for WaMu [Securitized Trust] .…”[9]  The assignment of deed of trust indicates it was signed by Brignac, as Vice President for JP Morgan.  Glaski alleges that Brignac’s signature was forged.

The very next document filed by the Fresno County Recorder on June 15, 2009, was a “TRUSTEE’S DEED UPON SALE.”  (Boldface omitted.)  The trustee’s deed upon sale stated that California Reconveyance, as the duly appointed trustee under the Glaski deed of trust, granted and conveyed to Bank of America, as successor by merger to La Salle NA as trustee for the WaMu Securitized Trust, all of its right, title and interest to the Property.  The trustee’s deed upon sale stated that the amount of the unpaid debt and costs was $738,238.04 and that the grantee, paid $339,150 at the trustee’s sale, either in lawful money or by credit bid.

PROCEEDINGS

            In October 2009, Glaski filed his original complaint.  In August 2011, Glaski filed the SAC, which alleged the following numbered causes of action:

(1) Fraud against JPMorgan and California Reconveyance for the alleged forged signatures of Deborah Brignac as vice president for California Reconveyance and then as vice president of JPMorgan;

(2)  Fraud against all defendants for their failure to timely and properly transfer the Glaski loan to the WaMu Securitized Trust and their representations to the contrary;

(3) Quiet title against Bank of America, Chase, and California Reconveyance based on the broken chain of title caused by the defective transfer of the loan to the WaMu Securitized Trust;

(4) Wrongful foreclosure against all defendants, based on the forged signatures of Deborah Brignac and the failure to timely and properly transfer the Glaski loan to the WaMu Securitized Trust;

(5) Declaratory relief against all defendants, based on the above acts by defendants;

(8) Cancellation of various foreclosure documents against all defendants, based on the above acts by the defendants; and

(9) Unfair practices under California Business and Professions Code section 17200, et seq., against all defendants.

Among other things, Glaski raised questions regarding the chain of ownership, by contending that the defendants were not the lender or beneficiary under his deed of trust and, therefore, did not have the authority to foreclose.

In September 2011, defendants filed a demurrer that challenged each cause of action in the SAC on the grounds that it failed to state facts sufficient to constitute a claim for relief.  With respect to the wrongful foreclosure cause of action, defendants argued that Glaski failed to allege (1) any procedural irregularity that would justify setting aside the presumptively valid trustee’s sale and (2) that he could tender the amount owed if the trustee’s sale were set aside.

To support their demurrer to the SAC, defendants filed a request for judicial notice concerning (1) Order No. 2008-36 of the Office of Thrift Supervision, dated September 25, 2008, appointing the FDIC as receiver of Washington Mutual Bank and (2) the Purchase and Assumption Agreement Whole Bank between the FDIC and JP Morgan dated as of September 25, 2008, concerning the assets, deposits and liabilities of Washington Mutual Bank.[10]

Glaski opposed the demurrer, arguing that breaks in the chain of ownership of his deed of trust were sufficiently alleged.  He asserted that Brignac’s signature was forged and the assignment bearing that forgery was void.  His opposition also provided a more detailed explanation of his argument that his deed of trust had not been effectively transferred to the WaMu Securitized Trust that held the pool of mortgage loans.  Thus, in Glaski’s view, Bank of America’s claim as the successor trustee is flawed because the trust never held his loan.

On November 15, 2011, the trial court heard argument from counsel regarding the demurrer.  Counsel for Glaski argued, among other things, that the possible ratification of the allegedly forged signatures of Brignac presented an issue of fact that could not be resolved at the pleading stage.

Later that day, the court filed a minute order adopting its tentative ruling.  As background for the issues presented in this appeal, we will describe the trial court’s ruling on Glaski’s two fraud causes of action and his wrongful foreclosure cause of action.

The ruling stated that the first cause of action for fraud was based on an allegation that defendants misrepresented material information by causing a forged signature to be placed on the June 2009 assignment of deed of trust.  The ruling stated that if the signature of Brignac was forged, California Reconveyance “ratified the signature by treating it as valid.”  As an additional rationale, the ruling cited Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 (Gomes) for the proposition that the exhaustive nature of California’s nonjudicial foreclosure scheme prohibited the introduction of additional requirements challenging the authority of the lender’s nominee to initiate nonjudicial foreclosure.

As to the second cause of action for fraud, the ruling noted the allegation that the Glaski deed of trust was transferred to the WaMu Securitized Trust after the trust’s closing date and summarized the claim as asserting that the Glaski deed of trust had been improperly transferred and, therefore, the assignment was void ab initio.  The ruling rejected this claim, stating:  “[T]o reiterate, Gomes v. Countrywide, supra holds that there is no legal basis to challenge the authority of the trustee, mortgagee, beneficiary, or any of their authorized agents to initiate the foreclosure process citing Civil Code § 2924, subd. (a)(1).”

The ruling stated that the fourth cause of action for wrongful foreclosure was “based upon the invalidity of the foreclosure sale conducted on May 27, 2009 due to the ‘forged’ signature of Deborah Brignac and the failure of Defendants to ‘provide a chain of title of the note and the mortgage.’”  The ruling stated that, as explained earlier, “these contentions are meritless” and sustained the general demurrer to the wrongful foreclosure claim without leave to amend.

Subsequently, a judgment of dismissal was entered and Glaski filed a notice of appeal.

DISCUSSION

I.          STANDARD OF REVIEW

The trial court sustained the demurrer to the SAC on the ground that it did “not state facts sufficient to constitute a cause of action.”  (Code Civ. Proc., § 430.10, subd. (e).)  The standard of review applicable to such an order is well settled.  “[W]e examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory .…”  (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.)

When conducting this de novo review, “[w]e give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.  [Citation.]  Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.  [Citations.]”  (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.)  Our consideration of the facts alleged includes “those evidentiary facts found in recitals of exhibits attached to a complaint.”  (Satten v. Webb (2002) 99 Cal.App.4th 365, 375.)  “We also consider matters which may be judicially noticed.”  (Serrano v. Priest (1971) 5 Cal.3d 584, 591; see Code Civ. Proc., § 430.30, subd. (a) [use of judicial notice with demurrer].)  Courts can take judicial notice of the existence, content and authenticity of public records and other specified documents, but do not take judicial notice of the truth of the factual matters asserted in those documents.  (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1262.)              We note “in passing upon the question of the sufficiency or insufficiency of a complaint to state a cause of action, it is wholly beyond the scope of the inquiry to ascertain whether the facts stated are true or untrue” as “[t]hat is always the ultimate question to be determined by the evidence upon a trial of the questions of fact.”  (Colm v. Francis (1916) 30 Cal.App. 742, 752.) )

II.         FRAUD

A.        Rules for Pleading Fraud

The elements of a fraud cause of action are (1) misrepresentation, (2) knowledge of the falsity or scienter, (3) intent to defraud—that is, induce reliance, (4) justifiable reliance, and (5) resulting damages.  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)  These elements may not be pleaded in a general or conclusory fashion.  (Id. at p. 645.)  Fraud must be pled specifically—that is, a plaintiff must plead facts that show with particularity the elements of the cause of action.  (Ibid.)

In their demurrer, defendants contended facts establishing detrimental reliance were not alleged.

B.        First Cause of Action for Fraud, Lack of Specific Allegations of Reliance

Glaski’s first cause of action, which alleges a fraud implemented through forged documents, alleges that defendants’ act “caused Plaintiff to rely on the recorded documents and ultimately lose the property which served as his primary residence, and caused Plaintiff further damage, proof of which will be made at trial.”

This allegation is a general allegation of reliance and damage.  It does not identify the particular acts Glaski took because of the alleged forgeries.  Similarly, it does not identify any acts that Glaski did not take because of his reliance on the alleged forgeries.  Therefore, we conclude that Glaski’s conclusory allegation of reliance is insufficient under the rules of law that require fraud to be pled specifically.  (Lazar v. Superior Court, supra, 12 Cal.4th at p. 645.)

The next question is whether the trial court abused its discretion in sustaining the demurrer to the first fraud cause of action without leave to amend.

In March 2011, the trial court granted Glaski leave to amend when ruling on defendants’ motion for judgment on the pleadings.  The court indicated that Glaski’s complaint had jumbled together many different statutes and theories of liability and directed Glaski to avoid “chain letter” allegations in his amended pleading.

Glaski’s first amended complaint set forth two fraud causes of action that are similar to those included in the SAC.

Defendants demurred to the first amended complaint.  The trial court’s minute order states:  “Plaintiff is advised for the last time to plead each cause of action such that only the essential elements for the claim are set forth without reincorporation of lengthy ‘general allegations’.  In other words, the ‘facts’ to be pleaded are those upon which liability depends (i.e., ‘the facts constituting the cause of action’).”

After Glaski filed his SAC, defendants filed a demurrer.  Glaski then filed an opposition that asserted he had properly alleged detrimental reliance.  He did not argue he could amend to allege specifically the action he took or did not take because of his reliance on the alleged forgeries.

Accordingly, Glaski failed to carry his burden of demonstrating he could allege with the requisite specificity the elements of justifiable reliance and damages resulting from that reliance.  (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [the burden of articulating how a defective pleading could be cured is squarely on the plaintiff].)  Therefore, we conclude that the trial court did not abuse its discretion when it denied leave to amend as to the SAC’s first cause of action for fraud.

C.        Second Fraud Cause of Action, Lack of Specific Allegations of Reliance

Glaski’s second cause of action for fraud alleged that WaMu failed to transfer his note and deed of trust into the WaMu Securitized Trust back in 2005.  Glaski further alleged, in essence, that defendants attempted to rectify WaMu’s failure by engaging in a fraudulent scheme to assign his note and deed of trust into the WaMu Securitized Trust.  The scheme was implemented in 2008 and 2009 and its purpose was to enable defendants to fraudulently foreclosure against the Property.

The second cause of action for fraud attempts to allege detrimental reliance in the following sentence:  “Defendants, and each of them, also knew that the act of recording the Assignment of Deed of trust without the authorization to do so would cause Plaintiff to rely upon Defendants’ actions by attempting to negotiate a loan modification with representatives of Chase Home Finance, LLC, agents of JP MORGAN.”  The assignment mentioned in this allegation is the assignment of deed of trust recorded in June 2009—no other assignment of deed of trust is referred to in the second cause of action.

The allegation of reliance does not withstand scrutiny.  The act of recording the allegedly fraudulent assignment occurred in June 2009, after the trustee’s sale of the Property had been conducted.  If Glaski was induced to negotiate a loan modification at that time, it is unclear how negotiations occurring after the May 2009 trustee’s sale could have diverted him from stopping the trustee’s sale.  Thus, Glaski’s allegation of reliance is not connected to any detriment or damage.

Because Glaski has not demonstrated how this defect in his fraud allegations could be cured by amendment, we conclude that the trial court did not abuse its discretion in denying leave to amend the second cause of action in the SAC.

III.       WRONGFUL FORECLOSURE BY NONHOLDER OF THE DEED OF TRUST

A.        Glaski’s Theory of Wrongful Foreclosure

Glaski’s theory that the foreclosure was wrongful is based on (1) the position that paragraph 22 of the Glaski deed of trust authorizes only the lender-beneficiary (or its assignee) to (a) accelerate the loan after a default and (b) elect to cause the Property to be sold and (2) the allegation that a nonholder of the deed of trust, rather than the true beneficiary, instructed California Reconveyance to initiate the foreclosure.[11]

In particular, Glaski alleges that (1) the corpus of the WaMu Securitized Trust was a pool of residential mortgage notes purportedly secured by liens on residential real estate; (2) section 2.05 of “the Pooling and Servicing Agreement” required that all mortgage files transferred to the WaMu Securitized Trust be delivered to the trustee or initial custodian of the WaMu Securitized Trust before the closing date of the trust (which was allegedly set for December 21, 2005, or 90 days thereafter); (3) the trustee or initial custodian was required to identify all such records as being held by or on behalf of the WaMu Securitized Trust; (4) Glaski’s note and loan were not transferred to the WaMu Securitized Trust prior to its closing date; (5) the assignment of the Glaski deed of trust did not occur by the closing date in December 2005; (6) the transfer to the trust attempted by the assignment of deed of trust recorded on June 15, 2009, occurred long after the trust was closed; and (7) the attempted assignment was ineffective as the WaMu Securitized Trust could not have accepted the Glaski deed of trust after the closing date because of the pooling and servicing agreement and the statutory requirements applicable to a Real Estate Mortgage Investment Conduit (REMIC) trust.[12]

B.        Wrongful Foreclosure by a Nonholder of the Deed of Trust

The theory that a foreclosure was wrongful because it was initiated by a nonholder of the deed of trust has also been phrased as (1) the foreclosing party lacking standing to foreclose or (2) the chain of title relied upon by the foreclosing party containing breaks or defects.  (See Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 764; Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th 1366 [Deutsche Bank not entitled to summary judgment on wrongful foreclosure claim because it failed to show a chain of ownership that would establish it was the true beneficiary under the deed of trust ]; Guerroro v. Greenpoint Mortgage Funding, Inc. (9th Cir. 2010) 403 Fed.Appx. 154, 156 [rejecting a wrongful foreclosure claim because, among other things, plaintiffs “have not pleaded any facts to rebut the unbroken chain of title”].)

In Barrionuevo v. Chase Bank, N.A. (N.D.Cal. 2012) 885 F.Supp.2d 964, the district court stated:  “Several courts have recognized the existence of a valid cause of action for wrongful foreclosure where a party alleged not to be the true beneficiary instructs the trustee to file a Notice of Default and initiate nonjudicial foreclosure.”  (Id. at p. 973.)  We agree with this statement of law, but believe that properly alleging a cause of action under this theory requires more than simply stating that the defendant who invoked the power of sale was not the true beneficiary under the deed of trust.  Rather, a plaintiff asserting this theory must allege facts that show the defendant who invoked the power of sale was not the true beneficiary.  (See Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1506 [plaintiff failed to plead specific facts demonstrating the transfer of the note and deed of trust were invalid].)

C.        Borrower’s Standing to Raise a Defect in an Assignment

One basis for claiming that a foreclosing party did not hold the deed of trust is that the assignment relied upon by that party was ineffective.  When a borrower asserts an assignment was ineffective, a question often arises about the borrower’s standing to challenge the assignment of the loan (note and deed of trust)—an assignment to which the borrower is not a party.  (E.g., Conlin v. Mortgage Electronic Registration Systems, Inc. (6th Cir. 2013) 714 F.3d 355, 361 [third party may only challenge an assignment if that challenge would render the assignment absolutely invalid or ineffective, or void]; Culhane v. Aurora Loan Services of Nebraska (1st Cir. 2013) 708 F.3d 282, 291 [under Massachusetts law, mortgagor has standing to challenge a mortgage assignment as invalid, ineffective or void]; Gilbert v. Chase Home Finance, LLC (E.D.Cal., May 28, 2013, No. 1:13-CV-265 AWI SKO) 2013 WL 2318890.)[13]

California’s version of the principle concerning a third party’s ability to challenge an assignment has been stated in a secondary authority as follows:

“Where an assignment is merely voidable at the election of the assignor, third parties, and particularly the obligor, cannot … successfully challenge the validity or effectiveness of the transfer.”  (7 Cal.Jur.3d (2012) Assignments, § 43.)

This statement implies that a borrower can challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment.  (See Reinagel v. Deutsche Bank National Trust Co. (5th Cir. 2013) ___ F.3d ___ [2013 WL 3480207 at p. *3] [following majority rule that an obligor may raise any ground that renders the assignment void, rather than merely voidable].)  We adopt this view of the law and turn to the question whether Glaski’s allegations have presented a theory under which the challenged assignments are void, not merely voidable.

We reject the view that a borrower’s challenge to an assignment must fail once it is determined that the borrower was not a party to, or third party beneficiary of, the assignment agreement.  Cases adopting that position “paint with too broad a brush.”  (Culhane v. Aurora Loan Services of Nebraska, supra, 708 F.3d at p. 290.)  Instead, courts should proceed to the question whether the assignment was void.

D.        Voidness of a Post-Closing Date Transfers to a Securitized Trust

Here, the SAC includes a broad allegation that the WaMu Securitized Trust “did not have standing to foreclosure on the … Property, as Defendants cannot provide the entire chain of title of the note and the [deed of trust].”[14]

More specifically, the SAC identifies two possible chains of title under which Bank of America, as trustee for the WaMu Securitized Trust, could claim to be the holder of the Glaski deed of trust and alleges that each possible chain of title suffers from the same defect—a transfer that occurred after the closing date of the trust.

First, Glaski addresses the possibility that (1) Bank of America’s chain of title is based on its status as successor trustee for the WaMu Securitized Trust and (2) the Glaski deed of trust became part of the WaMu Securitized Trust’s property when the securitized trust was created in 2005.  The SAC alleges that WaMu did not transfer Glaski’s note and deed of trust into the WaMu Securitized Trust prior to the closing date established by the pooling and servicing agreement.  If WaMu’s attempted transfer was void, then Bank of America could not claim to be the holder of the Glaski deed of trust simply by virtue of being the successor trustee of the WaMu Securitized Trust.

Second, Glaski addresses the possibility that Bank of America acquired Glaski’s deed of trust from JP Morgan, which may have acquired it from the FDIC.  Glaski contends this alternate chain of title also is defective because JP Morgan’s attempt to transfer the Glaski deed of trust to Bank of America, as trustee for the WaMu Securitized Trust, occurred after the trust’s closing date.  Glaski specifically alleges JP Morgan’s attempted assignment of the deed of trust to the WaMu Securitized Trust in June 2009 occurred long after the WaMu Securitized Trust closed (i.e., 90 days after December 21, 2005).

Based on these allegations, we will address whether a post-closing date transfer into a securitized trust is the type of defect that would render the transfer void.  Other allegations relevant to this inquiry are that the WaMu Securitized Trust (1) was formed in 2005 under New York law and (2) was subject to the requirements imposed on REMIC trusts (entities that do not pay federal income tax) by the Internal Revenue Code.

The allegation that the WaMu Securitized Trust was formed under New York law supports the conclusion that New York law governs the operation of the trust.  New York Estates, Powers & Trusts Law section 7-2.4, provides:  “If the trust is expressed in an instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.”[15]

Because the WaMu Securitized Trust was created by the pooling and servicing agreement and that agreement establishes a closing date after which the trust may no longer accept loans, this statutory provision provides a legal basis for concluding that the trustee’s attempt to accept a loan after the closing date would be void as an act in contravention of the trust document.

We are aware that some courts have considered the role of New York law and rejected the post-closing date theory on the grounds that the New York statute is not interpreted literally, but treats acts in contravention of the trust instrument as merely voidable.  (Calderon v. Bank of America, N.A. (W.D.Tex., Apr. 23, 2013, No. SA:12-CV-00121-DAE) ___ F.Supp.2d ___, [2013 WL 1741951 at p. *12] [transfer of plaintiffs’ note, if it violated PSA, would merely be voidable and therefore plaintiffs do not have standing to challenge it]; Bank of America National Association v. Bassman FBT, L.L.C. (Ill.Ct.App. 2012) 981 N.E.2d 1, 8 [following cases that treat ultra vires acts as merely voidable].)

Despite the foregoing cases, we will join those courts that have read the New York statute literally.  We recognize that a literal reading and application of the statute may not always be appropriate because, in some contexts, a literal reading might defeat the statutory purpose by harming, rather than protecting, the beneficiaries of the trust.  In this case, however, we believe applying the statute to void the attempted transfer is justified because it protects the beneficiaries of the WaMu Securitized Trust from the potential adverse tax consequence of the trust losing its status as a REMIC trust under the Internal Revenue Code.  Because the literal interpretation furthers the statutory purpose, we join the position stated by a New York court approximately two months ago:  “Under New York Trust Law, every sale, conveyance or other act of the trustee in contravention of the trust is void.  EPTL § 7-2.4.  Therefore, the acceptance of the note and mortgage by the trustee after the date the trust closed, would be void.”  (Wells Fargo Bank, N.A. v. Erobobo (Apr. 29, 2013) 39 Misc.3d 1220(A), 2013 WL 1831799, slip opn. p. 8; see Levitin & Twomey, Mortgage Servicing, supra, 28 Yale J. on Reg. at p. 14, fn. 35 [under New York law, any transfer to the trust in contravention of the trust documents is void].)  Relying on Erobobo, a bankruptcy court recently concluded “that under New York law, assignment of the Saldivars’ Note after the start up day is void ab initio.  As such, none of the Saldivars’ claims will be dismissed for lack of standing.”  (In re Saldivar (Bankr.S.D.Tex., Jun. 5, 2013, No. 11-10689) 2013 WL 2452699, at p. *4.)

We conclude that Glaski’s factual allegations regarding post-closing date attempts to transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis for concluding the attempted transfers were void.  As a result, Glaski has a stated cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e., Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the Glaski deed of trust.[16]

We are aware that that some federal district courts sitting in California have rejected the post-closing date theory of invalidity on the grounds that the borrower does not have standing to challenge an assignment between two other parties.  (Aniel v. GMAC Mortgage, LLC (N.D.Cal., Nov. 2, 2012, No. C 12-04201 SBA) 2012 WL 5389706 [joining courts that held borrowers lack standing to assert the loan transfer occurred outside the temporal bounds prescribed by the pooling and servicing agreement]; Almutarreb v. Bank of New York Trust Co., N.A. (N.D.Cal., Sept. 24, 2012, No. C 12-3061 EMC) 2012 WL 4371410.)  These cases are not persuasive because they do not address the principle that a borrower may challenge an assignment that is void and they do not apply New York trust law to the operation of the securitized trusts in question.

E.         Application of Gomes

The next question we address is whether Glaski’s wrongful foreclosure claim is precluded by the principles set forth in Gomes, supra, 192 Cal.App.4th 1149, a case relied upon by the trial court in sustaining the demurrer.  Gomes was a pre-foreclosure action brought by a borrower against the lender, trustee under a deed and trust, and MERS, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans in the secondary mortgage market.  (Id. at p. 1151.)  The subject trust deed identified MERS as a nominee for the lender and that MERS is the beneficiary under the trust deed.   After initiation of a nonjudicial forclosure, borrower sued for wrongful initiation of foreclosure, alleging that the current owner of the note did not authorize MERS, the nominee, to proceed with the foreclosure. The appellate court held that California’s nonjudicial foreclosure system, outlined in Civil Code sections 2924 through 2924k, is a “‘comprehensive framework for the regulation of a nonjudicial foreclosure sale’” that did not allow for a challenge to the authority of the person initiating the foreclosure.  (Gomes, supra, at p. 1154.)

In Naranjo v. SBMC Mortgage (S.D.Cal., Jul. 24, 2012, No. 11-CV-2229-L(WVG)) 2012 WL 3030370 (Naranjo), the district court addressed the scope of Gomes, stating:

“In Gomes, the California Court of Appeal held that a plaintiff does not have a right to bring an action to determine the nominee’s authorization to proceed with a nonjudicial foreclosure on behalf of a noteholder.  [Citation.]  The nominee in Gomes was MERS.  [Citation.]  Here, Plaintiff is not seeking such a determination.  The role of the nominee is not central to this action as it was in Gomes.  Rather, Plaintiff alleges that the transfer of rights to the WAMU Trust is improper, thus Defendants consequently lack the legal right to either collect on the debt or enforce the underlying security interest.”  (Naranjo, supra, 2012 WL 3030370, at p. *3.)

Thus, the court in Naranjo did not interpret Gomes as barring a claim that was essentially the same as the post-closing date claim Glaski is asserting in this case.

Furthermore, the limited nature of the holding in Gomes is demonstrated by the Gomes court’s discussion of three federal cases relied upon by Mr. Gomes.  The court stated that the federal cases were not on point because none recognized a cause of action requiring the noteholder’s nominee to prove its authority to initiate a foreclosure proceeding.  (Gomes, supra, 192 Cal.App.4th at p. 1155.)   The Gomes court described one of the federal cases by stating that “the plaintiff alleged wrongful foreclosure on the ground that assignments of the deed of trust had been improperly backdated, and thus the wrong party had initiated the foreclosure process.  [Citaiton.]  No such infirmity is alleged here.”  (Ibid.; see Lester v. J.P. Morgan Chase Bank (N.D.Cal., Feb. 20, 2013) ___ F.Supp.2d____, [2013 WL 633333, p. *7] [concluding Gomes did not preclude the plaintiff from challenging JP Morgan’s authority to foreclose].)  The Gomes court also stated it was significant that in each of the three federal cases, “the plaintiff’s complaint identified a specific factual basis for alleging that the foreclosure was not initiated by the correct party.”  (Gomes, supra, at p. 1156.)

The instant case is distinguishable from Gomes on at least two grounds.  First, like Naranjo, Glaski has alleged that the entity claiming to be the noteholder was not the true owner of the note.  In contrast, the principle set forth in Gomes concerns the authority of the noteholder’s nominee, MERS.  Second, Glaski has alleged specific grounds for his theory that the foreclosure was not conducted at the direction of the correct party.

In view of the limiting statements included in the Gomes opinion, we do not interpret it as barring claims that challenge a foreclosure based on specific allegations that an attempt to transfer the deed of trust was void.  Our interpretation, which allows borrowers to pursue questions regarding the chain of ownership, is compatible with Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th 1366.  In that case, the court concluded that triable issues of material fact existed regarding alleged breaks in the chain of ownership of the deed of trust in question.  (Id. at p. 1378.)  Those triable issues existed because Deutsche Bank’s motion for summary judgment failed to establish it was the beneficiary under that deed of trust.  (Ibid.)

F.         Tender

Defendants contend that Glaski’s claims for wrongful foreclosure, cancellation of instruments and quiet title are defective because Glaski failed to allege that he made a valid and viable tender of payment of the indebtedness.  (See Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117 [“valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust”].)

Glaski contends that he is not required to allege he tendered payment of the loan balance because (1) there are many exceptions to the tender rule, (2) defendants have offered no authority for the proposition that the absence of a tender bars a claim for damages,[17] and (3) the tender rule is a principle of equity and its application should not be decided against him at the pleading stage.

Tender is not required where the foreclosure sale is void, rather than voidable, such as when a plaintiff proves that the entity lacked the authority to foreclose on the property.  (Lester v. J.P. Morgan Chase Bank, supra, ___ F.Supp.2d____, [2013 WL 633333, p. *8]; 4 Miller & Starr, Cal. Real Estate (3d ed. 2003) Deeds of Trust, § 10:212, p. 686.)

Accordingly, we cannot uphold the demurrer to the wrongful foreclosure claim based on the absence of an allegation that Glaski tendered the amount due under his loan.  Thus, we need not address the other exceptions to the tender requirement.  (See e.g., Onofrio v. Rice (1997) 55 Cal.App.4th 413, 424 [tender may not be required where it would be inequitable to do so].)

G.        Remedy of Setting Aside Trustee’s Sale

Defendants argue that the allegedly ineffective transfer to the WaMu Securitized Trust was a mistake that occurred outside the confines of the statutory nonjudicial foreclosure proceeding and, pursuant to Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 445, that mistake does not provide a basis for invalidating the trustee’s sale.

First, this argument does not negate the possibility that other types of relief, such as damages, are available to Glaski.  (See generally, Annot., Recognition of Action for Damages for Wrongful Foreclosure—Types of Action, supra, 82 A.L.R.6th 43.)

Second, “where a plaintiff alleges that the entity lacked authority to foreclose on the property, the foreclosure sale would be void.  [Citation.]”  (Lester v. J.P. Morgan Chase Bank, supra, ___ F.Supp.2d____, [2013 WL 633333, p. *8].)

Consequently, we conclude that Nguyen v. Calhoun, supra, 105 Cal.App.4th 428 does not deprive Glaski of the opportunity to prove the foreclosure sale was void based on a lack of authority.

H.        Causes of Action Stated

Based on the foregoing, we conclude that Glaski’s fourth cause of action has stated a claim for wrongful foreclosure.  It follows that Glaski also has stated claims for quiet title (third cause of action), declaratory relief (fifth cause of action), cancellation of instruments (eighth cause of action), and unfair business practices under Business and Professions Code section 17200 (ninth cause of action).  (See Susilo v. Wells Fargo Bank, N.A. (C.D.Cal. 2011) 796 F.Supp.2d 1177, 1196 [plaintiff’s wrongful foreclosure claims served as predicate violations for her UCL claim].)

IV.       JUDICIAL NOTICE

A.        Glaski’s Request for Judicial Notice

When Glaski filed his opening brief, he also filed a request for judicial notice of (1) a Consent Judgment entered on April 4, 2012, by the United States District Court of the District of Columbia in United States v. Bank of America Corp. (D.D.C. No. 12-CV-00361); (2) the Settlement Term Sheet attached to the Consent Judgment; and (3) the federal and state release documents attached to the Consent Judgment as Exhibits F and G.

Defendants opposed the request for judicial notice on the ground that the request violated the requirements in California Rules of Court, rule 8.252 because it was not filed with a separate proposed order, did not state why the matter to be noticed was relevant to the appeal, and did not state whether the matters were submitted to the trial court and, if so, whether that court took judicial notice of the matters.

The documents included in Glaski’s request for judicial notice may provide background information and insight into robo-signing[18] and other problems that the lending industry has had with the procedures used to foreclose on defaulted mortgages.  However, these documents do not directly affect whether the allegations in the SAC are sufficient to state a cause of action.  Therefore, we deny Glaski’s request for judicial notice.

B.        Defendants’ Request for Judicial Notice of Assignment

The “ASSIGNMENT OF DEED OF TRUST” recorded on December 9, 2008, that stated JP Morgan transferred and assigned all beneficial interest under the Glaski deed of trust to “LaSalle Bank NA as trustee for WaMu [Securitized Trust]” together with the note described in and secured by the Glaski deed of trust was not attached to the SAC as an exhibit.  That document is part of the appellate record because the respondents’ appendix includes a copy of defendants’ request for judicial notice that was filed in June 2011 to support a motion for judgment on the pleadings.

In ruling on defendants’ request for judicial notice, the trial court stated that it could only take judicial notice that certain documents in the request, including the assignment of deed of trust, had been recorded, but it could not take judicial notice of factual matters stated in those documents.  This ruling is correct and unchallenged on appeal.  Therefore, like the trial court, we will take judicial notice of the existence and recordation of the December 2008 assignment, but we “do not take notice of the truth of matters stated therein.”  (Herrera v. Deutsche Bank National Trust Co., supra, 196 Cal.App.4th at p. 1375.)  As a result, the assignment of deed of trust does not establish that JP Morgan was, in fact, the holder of the beneficial interest in the Glaski deed of trust that the assignment states was transferred to LaSalle Bank.  Similarly, it does not establish that LaSalle Bank in fact became the owner or holder of that beneficial interest.

Because the document does not establish these facts for purposes of this demurrer, it does not cure either of the breaks in the two alternate chains of ownership challenged in the SAC.  Therefore, the December 2008 assignment does not provide a basis for sustaining the demurrer.

DISPOSITION

            The judgment of dismissal is reversed.  The trial court is directed to vacate its order sustaining the general demurrer and to enter a new order overruling that demurrer as to the third, fourth, fifth, eighth and ninth causes of action.

Glaski’s request for judicial notice filed on September 25, 2012, is denied.

Glaski shall recover his costs on appeal.

                                                                                                            _____________________
Franson, J.

WE CONCUR:

_____________________
Wiseman, Acting P.J.

_____________________
Kane, J.

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

Plaintiff and Appellant,

v.

BANK OF AMERICA, NATIONAL ASSOCIATION et al.

Defendants and Respondents.

F064556

(Super. Ct. No. 09CECG03601)

ORDER GRANTING REQUEST FOR PUBLICATION

             As the nonpublished opinion filed on July 31, 2013, in the above entitled matter hereby meets the standards for publication specified in the California Rules of Court, rule 8.1105(c), it is ordered that the opinion be certified for publication in the Official Reports.

_______________________                                                                                                                     FRANSON, J.

I CONCUR:

_____________________
KANE, J.

By Daniel Edstrom
DTC Systems, Inc.

The following article was posted by Neil F. Garfield of livinglies.wordpress.com and comes from the following URL: http://livinglies.wordpress.com/2013/08/02/glaski-decision-in-california-appellate-court-turns-the-corner-on-getting-it/

On the other hand we should not assume that they have arrived nor that this decision will have pervasive effects throughout California or elsewhere in the United States or other countries.

J.P. Morgan did suffer a crushing defeat in this decision. And the borrower definitely receive the benefits of a judicial decision that will allow the borrower to sue for wrongful foreclosure including equitable and legal relief which in plain language means reversing the foreclosure and getting damages. Probably one of the most damaging conclusions by the appellate court is that an examination of whether the loan ever made it into the asset pool is proper in determining the proper party to initiate a foreclosure or to offer a credit bid at a foreclosure auction.  The court said that alleged transfers into the trust after the cutoff date are void under New York State law which is the law that governs the common-law trusts created by the banks as part of the fraudulent securitization scheme.

Before you give them a standing ovation remember that it is possible for additional documentation to be created, fabricated and forged showing that despite the apparent violation of the cutoff date, the trustee has accepted the loan into the trust. This will most likely be a lie. I don’t think there is any entity acting as trustee of a trust that doesn’t know that it is under intense scrutiny and doesn’t want to be subject to liability that could amount to trillions of dollars advanced by investors with the purchase of bogus mortgage-backed bonds that were presumably managed by the trustee but in reality not managed at all  because the bonds were worthless. This gave the banks the opportunity to claim that they owned the bonds and therefore had an insurable interest which gave rise to the whole problem with AIG and AMBAC and other insurers or parties who had guaranteed the bond, the loan or any loss (credit default swaps).

The fact that the loan in this case was definitely securitized is also interesting. Of course Washington Mutual was stating to everyone that it was not involved in the securitization of mortgage loans when in fact nearly all of the loans originated became subject to claims of securitization. This case explains why I never say that the loan was securitized or that the loan was in any particular trust, to wit: I don’t believe that a funded trust exists with the ability to purchase loans and therefore I don’t believe the loans are in any of the asset pools. So when people ask me how they can prove which trust their loan is actually in, I reply that they are asking the wrong question.

What is being played out here in this case and hundreds of thousands of other cases is a representation by the foreclosing entity that the trust owns the loan when in fact it never owned the loan nor could it because the money that was advanced by investors was never deposited into the trust. We have the same banks representing to regulatory authorities and insurers that it is the bank and not the trust that owns the loan even though the bank merely made the loan using money advanced by investors who believed that they were buying mortgage-backed bonds. The truth is they were merely making a deposit into an account maintained by the investment bank. The resulting transactions do not qualify for exemption as securities or insurance under the 1998 law. Nor do they qualify for REMIC treatment under the Internal Revenue Code.

In other words if you take a close look and actually follow the path of the money and the path of the paper you will find that despite the pronouncements from the Department of Justice and other agencies, this is a simple fraud case using a Ponzi model. The hallmark of a Ponzi model is that it collapses as soon as the investors stop buying the bogus securities. If the government cares to do so it can freely prosecute the individuals and companies involved without any air of exemption under the 1998 law because none of the parties followed the securitization path presumed by the 1998 law. So we are back to this, to wit: a security is a security and subject to SEC regulations and insurance is an insurance contract subject to insurance regulators, and fraud is fraud subject to recovery of restitution, compensatory damages, punitive damages, treble damages etc.

You should remember when reading this decision that the appellate court was not ruling in favor of the borrower granting the substantive relief the borrower  was seeking. The appellate court merely reversed the trial court decision to dismiss the borrower’s claims. That only means that the borrower now as an opportunity to prove the elements of quiet title, wrongful foreclosure, slander of title, cancellation of instruments and relief under California’s version of unfair business practices. But the devil is in the details and proving the case requires aggressive discovery and aggressive preparation for trial. It is highly probable that the case will settle. The bank will probably be willing to pay almost any amount of money to avoid a judgment setting forth the elements of a wrongful foreclosure and how the bank violated the law.

The Bank will attempt to avoid any final order that undermines the value of loans that are subject to claims of securitization, because those loans supposedly support the value of the bogus mortgage-backed bonds sold to investors.  Any such final order would also undermine the balance sheet of J.P. Morgan and any other major bank carrying the mortgage bonds as assets on their balance sheet. If those assets are diminished, then the bank is not as well funded as it has been reporting. In fact, those assets might well vanish completely from the balance sheet of those banks, causing the banks to be seized by the FDIC and broken up into smaller pieces for regional and community banks to pick up. Hence this decision represents a risk factor that could eliminate the legal fiction created by smoke and mirrors from Wall Street banks, to wit: it is not the borrowers who are deadbeats, it is the banks who are broke and whose management has run off with billions and perhaps trillions of dollars that should be in the United States economy. The absence of that money lies at the root of our unemployment and low economic activity.

This Glaski case has many of the elements that we have been discussing for years. Fabricated documents, forgeries, perjury, false affidavits and no money trail to backup the story painted by the fabricated documents. And of course it has our old friend Washington Mutual Bank And the supposed take over by Chase Bank that never actually happened.

And it involves the issue of assignments and the fact that the assignment is not the transaction itself but only a report of a transaction. If the borrower proves that the transaction reported in the assignment or other instrument of conveyance never occurred, or if the borrower is successful in shifting the burden of proof to the bank to show that it did occur, the assignment will have no value whatsoever unless the transaction is present, to wit: that someone actually purchased the loan through the payment of money or other valuable consideration that was received by a party who actually owned the loan.

Thus even if Chase Bank were able to show that it entered into a transaction in which the loans were transferred (something we can find no evidence of which the FDIC receiver says never occurred) that would only be the equivalent of a quit claim deed, to wit: whoever received the consideration for the transfer of the loans was merely conveying any interest they had even if they had no interest at all. Hence the transactions by which Washington Mutual allegedly came to be the owner of the loan must be examined in the same way as the transaction between the Washington Mutual bankruptcy estate and chase bank.

You should also take note that the decision was published with the admonition that it is  “not to be published in the official reports.”  this is further indication that the court is concerned about the far-reaching effects of the decision and essentially tells trial judges that they do not have to follow it. So for those who wish to point to this decision and say “game over” we are not there yet. But I do think that we passed the halfway point and we are probably in the fifth or sixth inning of a nine inning game. Translating that to time, I would estimate that it’s going to take another three or four years to clean up this mess and that it might take several decades to clean up the title corruption that was created by the banks.

Download the Glaski decision: Glaski-vs-BofA-For-Publication-2013-08-08

Perils of Pooling: OneWest

By Daniel Edstrom
DTC Systems, Inc.

The following article was posted by Neil F. Garfield of livinglies.wordpress.com and comes from the following URL: http://livinglies.wordpress.com/2013/07/31/perils-of-pooling-onewest/

Apparently my article yesterday hit a nerve. NO I wasn’t saying that the only problems were with BofA and Chase. OneWest is another example. Keep in mind that the sole source of information to regulators and the courts are the ONLY people who understand mergers and acquisitions. So it is a little like one of those TV shows where the only way they can get an arrest and conviction is for the perpetrator or suspect to confess. In this case, they “confess” all kinds of things to gain credibility and then lead the agencies and judicial system down a rabbit hole which is now a well trodden path. So many people have gone down that hole that most people that is the way to get to the truth. It isn’t. It is part of a carefully constructed series of complex conflicting lies designed carefully by some very smart lawyers who understand not just the law but the way the law works. The latter is how they are getting away with it.

Back to OneWest, which we have detailed in the past.

The FDIC has posted the agreement at http://www.fdic.gov/about/freedom/IndyMacMasterPurchaseAgrmt.pdf

OneWest was created almost literally overnight (actually over a weekend) by some highly placed players from Wall Street. There is an 80% loss sharing arrangement with the FDIC and yes, there appears to be some grey area about ownership of the loans because of that loss sharing agreement. But the evidence of a transaction in which the loans were actually purchased by a brand new entity that was essentially unfunded is completely absent. And that is because OneWest and Deutsch take the position that the loans were securitized despite IndyMac’s assurances to the contrary. The only loans in which OneWest appears to be a player are those in which the loan was subject to (false) claims of securitization. No money went to the trustee, no money went to the trust, no assets went into the pool because the REMIC asset pool lacked the funding to purchase any assets.

Add to that a few facts. Deutsch is usually the “trustee”of the REMIC asset pool, but Reynaldo Reyes says he has nothing to do. He has no trust accounts and makes no decisions and performs no actions. Sound familiar. I have him on tape and his deposition has already been taken and publicized on the internet by others. Reyes says the whole arrangement is “counter-intuitive” (a very creative way of saying it is a lie). It is up to the servicer (OneWest) to decide what loans are subject to modification, mediation or even reinstatement. It is up to the servicer as to when to foreclose. And the servicer here is OneWest while the Master Servicer appears to be the investment banking arm of Deutsch, although I do not have that confirmed.

The way Reyes speaks about it the whole thing ALMOST makes sense. That is, until you start thinking about it. If Deutsch Bank has an extensive trust subsidiary, which it does, then why is a VP of asset management in control of the trust operations of the REMIC asset pools. Answer: because there are no funded trusts and there are no asset pools with assets. Hence any statement by OneWest that it is the owner of the loan is untrue as is the allegation that Deutsch is the trustee because all trustee duties have been delegated to the servicer. That leaves the investor with an empty box for an asset pool and no trustee or manager or even an agent to to actually know what is going on or who is monitoring their money and investments.

Note that like BOfA using Red Oak Merger Corp., there is the creation of a fictional entity that was not used by the name of, no kidding, “Holdco.” This is to shield OneWest from certain liabilities as a lender. Legally it doesn’t work that way but practically it generally does work that way because judges listen to bank lawyers to tell them what all this means. That is like asking a 1st degree murder defendant to explain to the jury the meaning of reasonable doubt.

Now be careful here because there is a “loan sale” agreement referenced in the package posted by the FDIC. But it refers to an exhibit F. There is no exhibit F and like the ambiguous agreements with the FDIC in Countrywide and Washington mutual, there are words there, but they don’t really say anything. Suffice it to say that despite some fabricated documents to the contrary, there is no evidence I have seen that any loan receivable was transferred to or from a REMIC asset pool, Indy-mac, or Hold-co.

These people were not stupid and they are not idiots. And their lawyers are pretty smart too. They know that with the presumption of a funded loan in existence, the banks could pretty much get away with saying anything they wanted about the ownership, the identity of the creditor and the ability to make a credit bid at the auction of a property that should never have been foreclosed in the first instance — and certainly not by these people.

But if you dig just a little deeper you will see that the banks are represented to the regulatory authorities that they own the bonds (not true because the bonds were created and issued to specific investors who bought them); thus they include the bonds as significant items on their balance sheet which allows them to be called mega banks or too big to fail when in fact they have a tiny fraction of the reserve requirements of the Federal Reserve which follows the Basel accords.

Then when you turn your head and peak into courtrooms you find the same banks claiming ownership of the loan receivable, which was created when the funding occurred at the “closing” of the loan. They know they are taking inconsistent positions but most judges lack the sophistication to pinpoint the inconsistency. And that is how 5 million people lost their homes.

On the one hand the banks are claiming there was no fraud in the issuance of mortgage backed bonds by a REMIC asset pool formed as a trust. In fact, they say the loans were transferred into the REMIC asset pool. Which means that ownership of the mortgage bonds is ownership of the loans — at least that is what the paperwork shows that was used to sell pension funds on buying these worthless bogus bonds. Then they turn around and come to court as the “holder” and get a foreclosure sale in which the bank submits the credit bid and buys the property without spending one dime. What they have done is, in lay terms, offered the debt to pay for the property. But the debt, according to the same people is owned by the investors or the REMIC trust, not the banks.

Then they turn to the insurers and counterparties on credit default swaps, and the Federal reserve that is buying these bonds and they say that the banks own the bonds, have an insurable interest, and should receive the proceeds of payments instead of the investors who actually put up the money. And then they say in court that the account receivable is unpaid, there is a default, and therefore the home should be foreclosed. What they have done is create a chaotic complex of lies and turn it into an illusion that changes colors and density depending upon whom the banks are talking with.

There is no default on the account receivable if the account was paid, regardless of who paid it — as long as it was really paid to either the owner of the loan receivable or the authorized agent of the owner (i.e., the investor/lender). And so it is paid. And if paid, there can be no action on the note because the loan receivable has been satisfied. There can be no action on the mortgage because it was never a perfected lien and because the loan receivable was extinguished by PAYMENT. You can’t use the mortgage to enforce the note which is evidence for enforcement of a debt when the debt no longer exists.

Judges are confused. The borrower must owe money to someone so why not simply enter judgment and let the creditors sort it out amongst themselves. The answer is because that is not the rule of law and if a creditor has a claim against the borrower it should be brought by that creditor not some stranger to the transaction whose actions are stripping the real creditor of lien rights and collection rights over the debt. What the courts are doing, by analogy, is saying that you must have killed someone when you fired that gun so we will dispense with evidence and a jury and proceed to sentencing. We will let the people in the crowd decide who is the victim who can bring a wrongful death action against you even if we don’t even know when the gun was fired and who pulled the trigger. In the meanwhile you are sentenced to death or life in prison under our rocket docket for murders of unknown persons.

Perils of Pooling

By Daniel Edstrom
DTC Systems, Inc.

The following article was posted by Neil F. Garfield of livinglies.wordpress.com and comes from the following URL: http://livinglies.wordpress.com/2013/07/30/perils-of-pooling/

Perils of Pooling

We hold these truths to be self evident: that Chase never acquired any loans from Washington Mutual and that Bank of America never acquired any loans from Countrywide.  A review of the merger documents approved by the FDIC reveals that neither Chase nor Bank of America wanted to assume any liabilities in connection with the lending operations of Washington Mutual or Countrywide, respectively. The loans were expressly left out of the agreement which is available for everyone to see on the FDIC website in the reading room.

With the exception of a few instances in which the court pointed out that Chase only acquired servicing rights and that Bank of America may not have acquired any rights, judges have been rubber-stamping foreclosures initiated by Bank of America (or entities controlled by Bank of America like Recontrust) under the assumption that Bank of America must be the owner of the Countrywide mortgages. The same is true  for judges who have been rubber-stamping foreclosures initiated by Chase under the assumption that Chase must be the owner of the Washington Mutual mortgages. After all, if they don’t own the mortgages then who does? The answer is that in nearly all cases either BofA nor Countrywide and neither Chase nor WAMU owned the loans and their financial statements prove it.

Not only have the judges been rubber-stamping the foreclosures and participating in a scheme that is correcting our title records nationwide, the entry of judgment against the borrower and for Bank of America or for Chase completes the theft of the investors money that was used for exorbitant fees, profits and bonuses and then finally for the funding of the origination or acquisition of loans. The fact that the REMIC trust was ignored in both form and content has also been the subject of the defective rulings from the bench.  Not only have the courts ruled against the borrowers and for the banks, they have even ruled against the presentation of evidence that would have shown that the investors were being stripped of their expected lien rights and then stripped again on their expected return of principal and interest, and then barred by collateral estoppel from ever bringing it up.

Since most of the foreclosures have emanated from Bank of America and Chase it is a fair assumption that most of the foreclosure sales were void because no valid bid was received in exchange for the deed. The property is still owned by the original homeowner In any case where a credit bid was submitted by Bank of America or Chase on any loan in which either Countrywide Mortgage or Washington Mutual was involved. I might add that the Federal Reserve in New York is completely aware of these facts and is steadfastly refusing to reveal the truth to the public or even to the homeowners whose homes were illegally and wrongfully foreclosed by Bank of America and Chase for a loan where both Bank of America and Chase and their chain of affiliates had been paid multiple times on a loan receivable account owned by the source of the funds, to wit: the investors who thought they were buying mortgage bonds from a funded legally organized REMIC trust.

CAVEAT:  The courts are mainly concerned with finality. In many states there may be a statute of limitations to challenge a void deed from an auction sale. Check with an attorney who is licensed in the jurisdiction in which your property is located before you take any action or make any decision.

It seems crazy to think that someone could apply for a loan and get the benefits of funding without ever being required to pay it back to the lender.  But that is exactly what is happening as a result of defective court decisions.  The lender consists of a group of investors including pension funds that are now underfunded as a result of the civil and possibly criminal theft of funds by Bank of America and Chase or the investment firms acquired by them.

Homeowners are being forced to pay Bank of America and Chase rather than the investors who actually advanced the funds. Bank of America and Chase actively interfere and Stonewall whenever a borrower or an investor seeks to peek under the hood to see what is in the box. There is nothing in the box. The deal was always between the investors and homeowners. The bank’s lied. They pretended that they were the lenders when in fact there were only the intermediaries. The result was that all the payments received from borrowers, government, the federal reserve, insurers, guarantors, co-obligors, and counterparties on credit default swaps went to the accounts of Bank of America and Chase rather than to the investors.

 By holding back the money, Bank of America and Chase, just like other banks created the illusion of a default and since they had created the illusion of ownership of the default they took the money instead of handing it over to the investors. You read the lawsuits that have been filed by  investors against the investment banks that sold them worthless mortgage bonds issued by an empty asset pool you will see that they allege affirmatively that the notes and mortgages are unenforceable.

That makes it unanimous! Both the lender and the borrower agree that the documentation is defective and unenforceable. Both the lender and the borrower agree that the lender should get paid.  And both the lender and the borrower agree that the lender is entitled to be paid only once for the money advanced by the lender.  And both the lender and the borrower agree that the banks are holding trillions of dollars in money that should have been used to pay off the account receivable owned by the investors.

With the lender paid off or where the account receivable has been reduced by payments to the banks who were acting as agents of the investors but breaching their duties to the investors, the amount payable by the homeowner as a borrower would be correspondingly reduced or eliminated. In fact, under the requirements of the federal truth in lending act, the overpayment is due to the borrower for failure to disclose the true facts of the transaction. In fact, under federal law, treble damages, legal interest, attorneys fees and costs probably also apply.

By Daniel Edstrom
DTC Systems, Inc.

The following press release was issued on July 26, 2013:

Press Release

All Assignments of a Mortgage Must Be Recorded Before the Mortgagee Begins Foreclosure by Advertisement

By Daniel Edstrom
DTC Systems, Inc.

The Minnesota Supreme Court issued a ruling requiring strict compliance with recording assignments prior to starting a foreclosure by advertisement.

Quote from the ruling:

Under Minn. Stat. § 580.02 (2012), all assignments of a mortgage must be recorded before the mortgagee begins the process of foreclosure by advertisement. Absent strict compliance with this requirement, a foreclosure by advertisement is void.
Affirmed.

Download the ruling here: http://dtc-systems.net/wp-content/uploads/2013/06/Ruiz-vs-1st-Fidelity-Foreclosure-by-Advertisement-must-have-strict-compliance.pdf

Will the Niday & Brandrup Rulings Change How Foreclosures Are Conducted In Oregon? Not Likely!

By Daniel Edstrom
DTC Systems, Inc.

This blog post was posted to the Querin Law LLC website (www.q-law.com).  Click the link below to read the post.

Will The Niday & Brandrup Rulings Change How Foreclosures Are Conducted In Oregon? Not Likely!

Posted on June 23, 2013 by Phil Querin