May 15, 2014

FDN Los Angeles, California-based attorney Douglas E. Klein, Esq. has obtained what can only be described as a miracle ruling from the California 4th Appellate District in the matter of Bert G. Cotton v. MERS, Number E054291 (Opinion filed April 10, 2014). Mr. Klein represents the homeowner, whose complaint seeking to invalidate a nonjudicial foreclosure (which had been filed by a prior attorney) was dismissed without leave to amend. Mr. Klein took the case over for the appeal, as the homeowner’s prior counsel had withdrawn from the case.

The case involves numerous entities, including MERS, WaMu, and JPMorgan Chase (JPM), which claimed that it had acquired “certain assets” of WaMu and now held the “servicing rights” to the loan. MERS substituted the original trustee in 2008 and assigned the Deed of Trust (DOT) to JPM in 2009. Significantly, the homeowner was only asked at the closing to sign the DOT; he was never asked to sign, and thus did not sign, a Note.

The Defendants filed demurrers (the California form of a Motion to Dismiss) the claims for wrongful foreclosure, declaratory relief, violations of California Civil Code sec. 2923.5 and 2924, conversion, and unfair competition under California Business and Professions Code sec. 17200. The trial court sustained the demurrer without leave (permission) for the homeowner to amend his complaint, and entered a judgment of dismissal.

The appeals court reversed the trial court decision, holding that it is error for a trial court to sustain a demurrer without leave to amend if the party seeking to amend demonstrates a reasonable probability that the defect alleged in the demurrer can be cured by amending the complaint; that such a showing can be made for the first time on appeal; and that it is not relevant whether the party seeking to amend will be able to prove the allegations, citing prior published decisions of the appeals court.

The homeowner, through Mr. Klein, requested that the appeals court take judicial notice of the Glaski decision, which it did, holding that judicial notice of California decisional law is mandatory.

The holding states that the issue that the homeowner seeks to raise is not whether the holder of the DOT authorized MERS and the trustee sale company (California Reconveyance Corporation) to foreclose, but rather whether any of the Defendants had any interest in the DOT to begin with. The Court noted that the Gomes decision does not preclude claims that challenge a foreclosure based on specific allegations that an attempt to transfer the DOT was void.

The Court ultimately concluded that the homeowner established a reasonable probability that he can amend his complaint to allege claims for wrongful foreclosure, unfair competition, and violations of statutes based on fraudulent practices in the foreclosure.

Bravo to Mr. Klein for obtaining this more than significant ruling in what appears to be a case of first impression (that is, there are no other appellate opinions on the specific issues in this appeal and this decision is thus the first on those issues).

At this time, the ruling has been stamped that it is not to be published in the official reports. However, the reported cases which support the decision have no such caveat, and Mr. Klein is making a request to the appeals court that the decision be published. As those who follow this website will recall, a similar situation occurred with the Glaski opinion when it was first released. After it was certified for publication on request of Glaski’s counsel, the banks fought hard to seek to “de-publish” it, which requests were, as we all know, denied by the appeals court. This decision is equally important and should be published especially as it relies in part on Glaski and other published decisions.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com