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Daniel R. Shuster et al v. Bac Home Loans Servicing

November 29, 2012

DANIEL R. SHUSTER ET AL., PLAINTIFFS AND APPELLANTS,
v.
BAC HOME LOANS SERVICING, LP, ET AL., DEFENDANTS AND RESPONDENTS.



David Worley, Judge Superior Court County of Ventura (Super. Ct. No. 56-2010-00384794-CU-OR-SIM)

The opinion of the court was delivered by: Perren, J.

CERTIFIED FOR PUBLICATION

(Ventura County)

Appellants Daniel and Yvette Shuster borrowed $670,000 to purchase a home. The deed of trust securing the loan did not name a trustee. Here we hold that the omission of a trustee does not preclude non-judicial foreclosure of the deed of trust.

After the Shusters fell more than $90,000 behind in payments, the beneficiary of the deed of trust substituted respondent ReconTrust Company, N.A. (ReconTrust) as trustee to initiate non-judicial foreclosure proceedings. The beneficiary also assigned its interest in the deed of trust to respondent BAC Home Loans Servicing, LP (BAC),*fn1 which later assigned its interest to respondent Arch Bay Holdings, LLC - Series 2010B (Arch Bay). Arch Bay purchased the property at the foreclosure sale.

The Shusters sued to set aside the sale, primarily because the deed of trust failed to designate a trustee. Although an issue of first impression in California, the weight of authority from other jurisdictions supports the trial court's conclusion that the omission of a trustee does not prevent enforcement of the deed of trust. Accordingly, ReconTrust, as substituted trustee, had authority to commence foreclosure under Civil Code section 2924, subdivision (a)(1).*fn2 The Shusters' claims also fail because they do not allege tender of the amounts due under the loan. We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

In 2006, the Shusters borrowed $670,000 from WMC Mortgage Corp. (WMC) to purchase a residence located at 2610 Bloom Street, Simi Valley, California (Property). WMC recorded a deed of trust against the Property to secure the debt. The deed of trust did not name a trustee, but designated Mortgage Electronic Registration Systems, Inc. (MERS) as beneficiary, giving MERS "the right to foreclose and sell the Property, and to take any action required of Lender including, but not limited to, releasing and canceling [the trust deed]."

In 2010, the Shusters defaulted. MERS substituted ReconTrust as trustee, and assigned its beneficial interest in the deed of trust to BAC. ReconTrust recorded a notice of default, claiming arrearages in excess of $90,000. The Shusters failed to cure the default, and ReconTrust recorded a notice of trustee's sale. BAC assigned its beneficial interest in the deed of trust to Arch Bay, which acquired the Property at the sale.

The Shusters filed a complaint for quiet title, wrongful foreclosure and breach of contract, alleging respondents had no right to foreclose under the deed of trust. They sought cancellation of all recorded documents related to the foreclosure, plus actual and punitive damages. Respondents demurred and requested that the trial court take judicial notice of certain recorded documents related to the foreclosure. The Shusters did not object to the request for judicial notice. The trial court granted the request and sustained the demurrers with leave to amend.

The Shusters filed a first amended complaint alleging causes of action for cancellation of instruments, wrongful foreclosure and breach of contract. Respondents again demurred and requested that the trial court take judicial notice of the foreclosure documents. The Shusters did not object to the request.

Following supplemental briefing regarding the enforceability of a deed of trust that omits a trustee, the trial court concluded the omission "is no impediment to enforcement of the Trust Deed . . . ." The court sustained BAC and ReconTrust's demurrer without leave to amend, and entered an order of dismissal on June 7, 2011.

The trial court granted Arch Bay's request for judicial notice and sustained its demurrer with leave to amend. The court determined that Arch Bay had purchased the Property pursuant to a properly noticed trustee's sale and that the Shusters had failed to plead a viable ownership interest. The court observed that MERS, as the beneficiary, "had the authority to substitute in the trustee and assign its interest to BAC . . . . It does not matter that MERS never had any ownership interest or obligation under the security instrument; it was the listed beneficiary." The court further noted "there has been no tender or offer of a tender by Plaintiffs."

The Shusters filed a second amended complaint, again alleging claims for cancellation of instruments, wrongful foreclosure and breach of contract. Arch Bay demurred and requested that the trial court take judicial notice of the same foreclosure documents.*fn3 For the first time, the Shusters objected to the request for judicial notice. The trial court overruled the objections and sustained the demurrer without leave to amend, remarking the Shusters "do not plead additional material facts in their [second amended complaint]; [i]nstead, they ...


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