Sciarratta v. U.S. Bank National Assn, 2016 WL 2941194 (California Court of Appeal, Nares, J., May 18, 2016)
Issue: Must a foreclosure sale be set aside where the foreclosing lender is not the actual owner of the loan at the time of the sale, or must the borrower show prejudice first?
Holding: Yes, “a homeowner who has been foreclosed on by one with no right to do so—by those facts alone—sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure.”
APPEAL from a judgment of the Superior Court of Riverside County, John Vineyard, Judge. Reversed and remanded.
Nares Huffman O’Rourke
The lender here filed a Notice of Default. Subsequently it assigned the loan to a different bank. Shortly after the foreclosure sale, the original lender assigned the loan to yet a second different bank who purportedly “purchased” the property at the sale. The court agreed that the lender that foreclosed was not the owner of the note at the time of the foreclosure. The borrower brought an action for wrongful foreclosure and the lender argued that there was no prejudice to the borrower since the conflicting transfers were paperwork mistakes and either way, the borrower was in default and had not cured. The trial court agreed with the lender and dismissed the case.
The Court of Appeal reversed.
“[W]e conclude that a homeowner who has been foreclosed on by one with no right to do so—by those facts alone—sustains prejudice or harm sufficient to constitute a cause of action for wrongful foreclosure.”
“When a non-debtholder forecloses, a homeowner is harmed by losing her home to an entity with no legal right to take it. Therefore under those circumstances, the void assignment is the proximate cause of actual injury and all that is required to be alleged to satisfy the element of prejudice or harm in a wrongful foreclosure cause of action.”
The lender defended by arguing that it later recorded a “corrective assignment” which showed
“that ‘[a]t most’ Chase ‘made procedural errors on the documents regarding the identity of the beneficiary, and that Chase later corrected these errors.’ However, this is an appeal from a judgment of dismissal after a demurrer was sustained, where we are required to assume the truth of the facts plaintiff has alleged. Defendants cannot hijack Sciarratta’s first amended complaint, delete allegations not to their liking, insert other contrary allegations such as this one about a mere ‘procedural error[]’, and contend the resulting pleading they have cobbled together fails to state a cause of action. Sciarratta alleges that at the time of the nonjudicial foreclosure sale, Deutsche Bank was the assignee and Bank of America was not. The judicially noticeable documents do not contradict these allegations.”