California Court of Appeals, First District, Fifth Division
U.S. BANK NATIONAL ASSOCIATION, as Trustee, etc., Plaintiff and Respondent,
STEPHANIE NAIFEH et al., Defendants and Appellants
FOR PARTIAL PUBLICATION[*]]
modified Aug. 17, 2016.
Superior Court of San Francisco City and County, No.
CGC-11-509805, Marla J. Miller, Judge.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
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Law, Mani Sheik; Murchison & Cumming, John Podesta and
Jennifer K. Letulle for Defendant and Appellant.
Ibrahim & Berg, John M. Sorich, Jenny L. Merris, Heather E.
Stern; Alvarado & Smith and Theodore E. Bacon for Plaintiff
by Needham, J., with Jones, P. J., and Bruiniers, J.,
Cal.Rptr.3d 123] NEEDHAM, J.
Stephanie Naifeh, Stephen Easterly, and Sam Segall appeal
from a judgment entered against them for cancellation of
written instruments. (Civ. Code, § 3412.) U.S. Bank
National Association (U.S. Bank or respondent) alleged that
Naifeh and Segall had fraudulently signed and recorded
numerous documents, which purported to divest respondent of
title to the real property it had obtained through the
foreclosure process after Naifeh defaulted on her loan.
Appellants, on the other hand, argued that Naifeh had
rescinded the loan transaction pursuant to the Truth in
Lending Act (TILA; 15 U.S.C. § 1601 et seq.), the
relevant security interest was therefore void, and for this
and other reasons respondent had no interest in the property.
contend (1) the trial court erred in ruling that Naifeh's
notice of rescission was insufficient to rescind the loan
transaction; (2) respondent should not have been allowed to
pursue its cancellation of instruments claims, because even
if the court properly allowed an amendment at trial to
substitute respondent for its predecessor in interest,
respondent omitted a quiet title
claim from its amended pleading; (3) respondent did not have
standing to seek cancellation of the instruments because it
had no interest in the real property, due to the absence of
any timely lawful assignment; and (4) the court made a number
of erroneous procedural rulings.
of a decision issued by the United States Supreme Court after
the trial court's ruling in this case, we will vacate the
judgment and remand for further proceedings, including the
adjudication of appellants' affirmative defense of
portion of the opinion certified for publication, we conclude
that a borrower may rescind the loan transaction under the
TILA without filing a lawsuit, but when the rescission is
challenged in litigation, the court has authority to decide
whether the rescission notice is timely and whether the
procedure set forth in the TILA should be modified in light
of the facts and circumstances of the case. In the portion of
the opinion not certified for publication, we conclude that
appellants' remaining arguments lack merit.
FACTS AND PROCEDURAL HISTORY
The Loan and Foreclosure
March 2007, Naifeh and Dusan Ristic obtained a $500,000
residential loan (Loan) from Washington Mutual Bank, FA
(WaMu), in connection with certain real property in San
Francisco (Property). The note was secured by a deed of trust
recorded against the Property on April 6, 2007. The deed of
trust identified WaMu as the lender and beneficiary,
California Reconveyance Company (CRC) as the trustee, and
Naifeh and Ristic as the borrowers.
the loan closed, WaMu gave Naifeh and Ristic what purported
to be a disclosure of the loan terms as required by the TILA.
(See 15 U.S.C. § 1635.) As discussed post,
Naifeh contends the TILA disclosures were deficient.
Chase Becomes the Loan Servicer
about May 1, 2007, WaMu entered into a " Pooling and
Servicing Agreement" pursuant to which the Loan (along
with other loans) was securitized and, at some point, placed
into the " WaMu Mortgage Pass-Through Certificate Series
2007-HY-6 Trust." The pooling and servicing agreement
defined WaMu as the servicer of the trust, with authority to
September 25, 2008, the Federal Deposit Insurance Corporation
(FDIC) [205 Cal.Rptr.3d 124] placed WaMu into receivership.
On or about that date, JPMorganChase, National Association
(Chase) acquired certain assets and liabilities of WaMu from
the FDIC, as receiver for WaMu, including WaMu's interest
in the Loan. Respondent contends that Chase became the
servicer of the Loan, and Chase possessed the records related
to the Loan and the original note.
Assignment to Bank of America, NA, as Trustee of the HY06
" Assignment of Deed of Trust" recorded on March
31, 2009, states that Chase, as successor in interest to
WaMu, assigned " all beneficial interest" under the
deed of trust to " Bank of America, National Association
as successor by merger to 'LaSalle Bank NA as trustee for
WaMu Mortgage Pass-Through Certificates Series 2007-HY06
Naifeh's and Ristic's Default
Naifeh defaulted on the Loan in 2008 by failing to make
payments. A " Notice of Default and Election to Sell
Under Deed of Trust" was recorded by trustee CRC on
March 31, 2009.
and 2009, Naifeh sought a modification of the Loan. WaMu
denied the modification request. Chase purportedly offered a
modification, but no modification was ultimately agreed upon.
10, 2009, a " Notice of Trustee's Sale" was
recorded, stating that the Property would be sold at a public
auction later that month. The trustee's sale was
postponed to May 2010.
Naifeh's Notice of Rescission
the notice of trustee's sale, Naifeh sent a letter to CRC
on July 18, 2009, with copies to the " CFO" of WaMu
and the " CFO" of Chase, notifying them that she
and Ristic were rescinding the loan pursuant to "
Regulation Z" (12 C.F.R. § 226.33(b) (2016)) based
on certain deficiencies in the TILA disclosures. A similar
letter, dated July 20, 2009, attached a rescission form
signed by Naifeh and Ristic. Naifeh contends that WaMu,
Chase, and CRC received the rescission notice but took no
December 18, 2009, Naifeh sent another rescission notice to
WaMu, Chase, and CRC, purportedly pursuant to the TILA. That
same month, she sent a written request to CRC, WaMu, Chase,
and others for verification of the debt.
January 2010, Naifeh learned that the note and deed of trust
had purportedly been transferred from Chase to BofA.
According to Naifeh, she sent " Bank of America"
copies of her rescission notices and debt verification
request. The bank acknowledged receipt of the notices and
asked Naifeh for the property address, account number, and
other identifying information, but then told her it could not
find any records related to the property other than old
mortgages that had already been paid off.
sent follow-up letters to the " CFO" of " Bank
of America, NA," as well as to WaMu, Chase and CRC on
January 20, 2010, January 27, 2010, and February 2, 2010. On
March 24, 2010, she sent further correspondence to Chase,
CRC, and Chase's attorneys, inquiring about a variety of
matters including the location and validity of the note and
deed of trust, and proposing to " settle and close this
Naifeh's Recording of False Documents
in April 2010--the month before the scheduled foreclosure
sale of the Property--Naifeh and a friend (appellant Segall)
caused several documents to be recorded with the county
recorder, by which Naifeh purported to show she owed [205
Cal.Rptr.3d 125] nothing on the Loan and was released from
the mortgage debt.
on April 5, 2010, Naifeh recorded a " Substitution of
Trustee," which she signed with the false representation
that she was an " authorized representative" of
CRC. The document purported to substitute Segall as trustee
under the deed of trust, in place of CRC.
April 20, 2010, Naifeh and Segall recorded a "
Modification of Deed of Trust," which Segall signed as
" Authorized Agent, Trustee" and Naifeh signed as
" Trustor, Authorized Representative." The
Modification of Deed of Trust, falsely purporting to be an
agreement between Naifeh and Chase, stated that the deed of
trust had " erroneously set forth the amount of
indebtedness secured thereby as being $500,000," and
modified the deed of trust " to correctly reflect the
amount of indebtedness secured thereby to be zero dollars
($0.00) and to reflect a status of 'paid as
April 26, 2010, Naifeh recorded a " Full
Reconveyance," which Segall falsely executed as "
Trustee/Authorized Agent," and which purported to
reconvey the deed of trust and ...