California Appeals Court: Homeowner Can't File Lawsuit To Stop Foreclosure Process Based On Claim That Noteholder Did Not Authorize It

In Southern California, Metropolitan News Enterprise reports:

• A defaulting mortgagee may not bring a declaratory action challenging the noteholder’s right to initiate a non-judicial foreclosure through a nominee, the Fourth District Court of Appeal ruled Friday. Div. One affirmed a San Diego Superior Court judge’s ruling dismissing an action against Countrywide Home Loans, Inc., Mortgage Electronic Registration Systems, Inc., and ReconTrust Company, N.A.

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• Gomes sued in May 2009, accusing the defendants of “wrongful initiation of foreclosure” and violation of consumer protection laws. He asserted on information and belief that the current owner of the note did not authorize MERS to proceed with the foreclosure, and argued that the nonjudicial foreclosure statute does not preclude a prior judicial determination as to whether the party initiating foreclosure has legal authorization to do so. He asked for damages, a declaration of his right to challenge the nonjudicial foreclosure proceeding, and rescission of the notice of default.

• Judge Steven R. Denton sustained demurrers brought on behalf of all defendants. Gomes appealed, solely with regard to his causes of action seeking damages for wrongful foreclosure and declaratory relief.

• The Court of Appeal affirmed, saying there was no legal basis for a pre-foreclosure action, and that even if there was, the defendants would prevail because Gomes agreed, by executing the deed of trust, that MERS could initiate foreclosure if he defaulted.

• Justice Joan Irion, writing for the appellate court, said allowing suits such as Gomes’ would “interject the courts into [the Civil Code’s] comprehensive nonjudicial scheme” governing foreclosures, something not “permitted or contemplated” by the statutory language.

• Sec. 2924(a)(1), which expressly permits a “trustee, mortgagee, or beneficiary, or any of their authorized agents” to initiate foreclosure, she noted, makes no provision for a private action to determine whether the initiating party is so authorized.

• “The recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the noteholder would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures,” the justice wrote.

For the story, see C.A. Rejects Challenge to Nonjudicial Foreclosure Proceeding (Homeowner Cannot Use Court to Stop Process Based on Claim That Noteholder Did Not Authorize It—Panel).

For the ruling, see Gomes v. Countrywide Home Loans, Inc., (2011) ___ Cal.App.4th ___. (Certified for Publication, February 18, 2011) (when link expires, TRY HERE).