Something interesting this way came on Dec. 17, 2018.
By Doug Boggs July 3, 2019
Some say that there have been minute movements toward a seemingly truer justice found in foreclosure courtrooms that are taking place as of late. Are we seeing glimmers of hope from an otherwise wasteland of inaction by the courts against the myriad of institutional fraud and corruption from not only our judicial system but also the financial and real estate sectors? Can we find optimism and perhaps see a shift moving from corporate authoritarianism to more socially democratic results? Is the corporate socialism paradigm ebbing?
In one of the newer cases that are making some waves in how future foreclosure arguments are going to be constructed is the CA Supreme Court decision in the case of Dr. Leevil, LLC vs. Westlake Health Care Center. This December 17, 2018, decision begins to shed light on the timing and legal clarity of who holds power and standing to foreclose? This basic foreclosure question in contract law is now being challenged in nearly every foreclosure case with valid evidence to show cause exposing just how corrupt, unlawful and unconscionable the results can be of courts continuing to ignore and gloss over this legal point of fact.
The property owners defaulted on a loan secured by a deed of trust on commercial property. The lender instituted foreclosure proceedings, and Dr. Leevil, LLC purchased the property at a trustee’s sale. The day after it purchased the facility, Dr. Leevil served the tenant Westlake Health Care Center with a three-day notice to quit. Dr. Leevil recorded title to the property five days later. When Westlake failed to vacate, Dr. Leevil sued for unlawful detainer.
If the property is foreclosed, and the tenant in possession does not vacate, which is often the case, the new owner of the property (purchaser at trustee’s sale) will likely want to evict the tenant. That requires service of a 3-day written “notice to quit” upon the tenant, followed by an unlawful detainer (eviction) lawsuit.
Westlake opposed the lawsuit, arguing the notice to quit was invalid because it was served before Dr. Leevil recorded title to the property. The trial court disagreed, finding the notice to quit was valid. Westlake agreed to surrender possession and pay damages. The court of appeal affirmed, holding that Code Civ. Proc. §1161a(b)(3) does not require a new owner to record title prior to serving a notice to quit.
In this case, the Supreme court overturned the Court of Appeal ruling stating:
“We conclude that an owner that acquires title to a property
under a power of sale contained in a deed of trust must perfect
title before serving the three-day written notice to quit required
by Code of Civil Procedure section 1161a(b). Accordingly, the
judgment of the Court of Appeal is reversed.”
The main issue was the timing of the notice and perfect of title. The court concluded that it must precede an unlawful detainer action where the action is not brought by a landlord but by a new owner who has acquired title to the property under a power of sale contained in a deed of trust. Dr. Leevil filed the 3 Day Notice, as a necessary code compliance action to follow in the beginning process of a power of sale clause. He filed this the first day after purchasing the property at a Trustee Sale, yet five days before he filed to perfect his title.
In a unanimous decision, the California Supreme Court overturned the Court of Appeal, ruling the purchaser at a foreclosure sale, in this case, Dr. Leevil, must perfect his title and be the legal owner following recordation of a trustee’s deed, then serve the 3-day notice of eviction. The Supreme Court held that perfection of title, which includes recording the trustee’s deed, is necessary before the new owner serves a three-day written notice to quit on the possessor of the property. This means that there must be the proper filings and legal postings of the court prior to an unlawful detainer action. The Court thus reversed the judgment of the Court of Appeal, which had concluded that perfection of title need only precede the filing of the unlawful detainer action and that the new owner may serve the notice to quit immediately after acquiring ownership.
I feel that an arguable defense that one can take from this ruling might be that the foreclosing party to a foreclosure sale must be able to prove that their ability to foreclose. This ruling should show a more stringent find for standing before a party can begin the foreclosure proceedings in a power of sale clause. The possible prima facia evidence of this is only merely assumed in a non-judicial foreclosure proceeding. This is due to the fact that there is no independent party between the lender and the borrower to keep this type of thing from getting out of hand. Despite that, the CA Supreme Court ruled in 1978 that this is to be the case. There is no independent trustee in a deed of trust, and there has not been since Jan.1, 1998. Thus, creating the fabrication of documents and filing forged or fraudulent paperwork. The same levity to the perfected title must be applied to a foreclosure case as to an unlawful detainer as the same depth of damages could occur. This could have some very large implications in the cases to come.
With the millions of cases of fraud, forgery, robosigning or other means of fabrication of documents that have been uncovered, and continue to be largely ignored by the courts, there might be some light at the end of the proverbial rabbit hole, or rather a tunnel. Perhaps we are finally whittling away at the necessity by the courts to actually follow the rules of contract law.
Through more definitive case law such as this, we will now begin to see arguments to further refine that definition and how it might change the foreclosure process. If it is now a precedent that the perfection of the title is required to file an unlawful detainer action, will it now be an argument that perfection of the title is to be required before the property can be auctioned at a Trustee sale through the power of sale clause? if so, this ruling could have major implications in the foreclosure litigation world.
As a nationally certified Bloomberg Forensic Loan Securitization Auditor, I have found fraud in every single client’s documents. Whether it is through an audit completed by a third party which I reviewed and analyzed or one that my office completed. The results of illegalities, improprieties, fraud and/or forgery are quite staggering. Despite this, courts across the country still to this day rarely rule for the foreclosing party the need to present the original title prior to the ability to foreclose. The courts are fully aware that the deeds of trust and mortgage notes have been shredded making the contract void.
I am hopeful that this case will bring a breath of fresh air to the arguments of standing and the need to further support this claim in the future.
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