Court Opinion

ID: 2716609
Source: CourtListenerOpinion
Date Created: 2014-08-08 18:09:27.211226+00
Date Added: 2024-06-11T15:24:51.911961
License: Public Domain

130 Nev., Advance Opinion 5b
                       IN THE SUPREME COURT OF THE STATE OF NEVADA

                DONNA WOOD, AS PERSONAL                              No. 62768
                REPRESENTATIVE OF THE ESTATE
                OF DANNY WOOD,
                Appellant,                                                  FILED
                vs.
                KEN GERMANN; MICHAEL LINTON;                                AUG 0 7 2014
                MERIDIAN FORECLOSURE SERVICE,                              Yy_pip,EMAN
                                                                       CLEW&
                INC., A FOREIGN CORPORATION;                          BY
                                                                           CHIEF DEPUVIICLERK
                AND INDYMAC MORTGAGE
                SERVICES,
                Respondents.

                           Appeal from a district court order denying a petition for
                judicial review in a Foreclosure Mediation Program matter. Eighth
                Judicial District Court, Clark County; Kathleen E. Delaney, Judge.
                           Affirmed.

                Brandon L. Phillips, Attorney at Law, PLLC, Las Vegas,
                for Appellant

                Brooks Hubley LLP and Michael R. Brooks and Jeffrey J. Todd, Las
                Vegas,
                for Respondents.

                BEFORE HARDESTY, DOUGLAS and CHERRY, JJ.

                                                OPINION
                PER CURIAM:
                           In this appeal, we examine the legal effect of a loan
                assignment from a homeowner's original lender to a subsequent purchaser
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                when that assignment violates the terms of the original lender and
                subsequent purchaser's Pooling and Servicing Agreement (PSA). In
                particular, we consider whether a loan assignment that is executed after
                the PSA's "closing date" renders the assignment void and ineffective to
                transfer ownership of the homeowner's loan. We conclude that a post-
                closing-date loan assignment does not render the assignment void, but
                merely voidable, and that a homeowner therefore lacks standing to rely on
                the timing of the assignment as a basis for challenging the subsequent
                purchaser's authority to enforce the loan. We therefore affirm the district
                court's denial of appellant's petition for judicial review.
                                                    FACTS
                             In conjunction with obtaining a 2004 home loan from IndyMac
                Bank, F.S.B., appellant Danny Wood' executed a promissory note and
                deed of trust in favor of IndyMac F.S.B. The deed of trust indicated that
                IndyMac F.S.B. was appointing Mortgage Electronic Registration
                Systems, Inc. (MERS), as the legal beneficiary of the deed of trust.    See
                Edelstein v. Bank of N.Y. Mellon,    128 Nev. „ 286 P.3d 249, 256-57
                (2012) (explaining this practice and considering its legal implications).
                Shortly thereafter, IndyMac F.S.B. contracted to sell appellant's loan and
                others to Deutsche Bank National Trust Company, who, in turn, was to
                maintain ownership of these loans as the trustee for investors of a
                securitization trust. See BlackRock Fin. Mgmt. Inc. v. Segregated Account
                of Ainbac Assurance Corp., 673 F.3d 169, 173 (2d Cir. 2012) (summarizing
                the process of loan securitization); Cervantes v. Countrywide Home Loans,

                      'While this appeal was pending, Donna Wood, as personal
                representative of Danny Wood's estate, was substituted as the appellant.
                NRAP 43(a)(1).

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                 Inc., 656 F.3d 1034, 1039 (9th Cir. 2011) (same). IndyMac F.S.B.'s and
                 Deutsche Bank's respective obligations were spelled out in a PSA. As
                 relevant to this appeal, the PSA required IndyMac F.S.B. to transfer all
                 subject loans into the trust by a September 2004 "closing date" and
                 provided that IndyMac F.S.B. would retain the servicing rights to the
                 transferred loans.
                             Appellant defaulted on his loan and elected to participate in
                 Nevada's Foreclosure Mediation Program (FMP) in 2012. Appellant, who
                 was not represented by counsel, attended mediation with respondent
                 IndyMac Mortgage Services, who appeared as Deutsche Bank's loan
                 servicer and representative. 2 Among other documents, IndyMac Mortgage
                 Services produced certified copies of appellant's original promissory note
                 that IndyMac F.S.B. had endorsed in blank, appellant's deed of trust, and
                 an assignment from MERS purporting to assign appellant's deed of trust
                 and promissory note to Deutsche Bank in January 2012. The mediation
                 concluded unsuccessfully, with the mediator noting summarily that
                 appellant disputed whether IndyMac Mortgage Services had complied
                 with the FMP's document-production requirements.
                             Appellant, then represented by counsel, filed a petition for
                 judicial review in district court. Appellant argued that his loan had been
                 improperly securitized and that, consequently, IndyMac Mortgage

                       2 IndyMac  F.S.B., which was Deutsche Bank's original servicer and
                 appellant's original lender, subsequently entered FDIC receivership, and
                 OneWest Bank acquired IndyMac F.S.B.'s assets. Respondent IndyMac
                 Mortgage Services is a division of OneWest Bank. Although the other
                 named respondents in this appeal were involved to some extent in the
                 underlying mediation, the issues presented in this appeal do not directly
                 concern those respondents.

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                    Services had failed to establish that Deutsche Bank owned his note and
                    held the beneficial interest in his deed of trust. Specifically, according to
                    appellant, because the terms of the PSA required appellant's original
                    lender to transfer his loan to Deutsche Bank no later than the PSA's
                    September 2004 closing date, the January 2012 MERS assignment
                    necessarily violated the PSA's terms and was therefore "void." The district
                    court denied appellant's petition for judicial review, and this appeal
                    followed.
                                                   DISCUSSION
                                On appeal, appellant maintains his argument that the
                    January 2012 MERS assignment was "void" because it was executed after
                    the PSA's closing date. According to appellant, because the assignment
                    was void, respondents therefore failed to produce the documents necessary
                    to demonstrate that Deutsche Bank was the entity entitled to enforce his
                    note and to foreclose. 3 While appellant points to an unpublished New

                          3 Respondents    suggest that the FMP judicial review process should
                    be limited to determining whether the required documents have been
                    produced and that a homeowner's concerns regarding the veracity of those
                    documents are beyond the FMP's limited scope. We disagree with this
                    suggestion. As this court has repeatedly recognized, the purpose of the
                    FMP's document-production requirements is to ensure that the party
                    seeking to enforce the homeowner's promissory note and to proceed with
                    foreclosure is actually authorized to do so. Einhorn v. BAG Home Loans
                    Servicing, LP, 128 Nev.         „ 290 P.3d 249, 251 (2012); Edelstein v.
                    Bank of N.Y. Mellon, 128 Nev.         „ 286 P.3d 249, 255 (2012); Leyva v.
                    Nat'l Default Servicing Corp., 127 Nev.          „ 255 P.3d 1275, 1279
                    (2011). It is not difficult to envision how this purpose might be defeated if
                    a homeowner were prohibited from challenging the veracity of a lender's
                    documents. Thus, we reject respondents' broader proposition. To the
                    extent that respondents are simply suggesting that not all document-
                    related improprieties call into question a party's authority to enforce the
                                                                         continued on next page...
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                  York trial court decision in arguing that an assignment executed after a
                  PSA's closing date is void, see Wells Fargo Bank, N.A. v. Erobobo, No.
                  31648/2009, 2013 WL 1831799, at *8 (N.Y. Sup. Ct. Apr. 29, 2013), and
                  while some authority exists to support that argument, see, e.g., Glaski v.
                  Bank of Am., N.A., 160 Cal. Rptr. 3d 449, 463 (Ct. App. 2013), most courts
                  to consider this issue instead hold that the assignment is voidable at the
                  option of the parties to the PSA.
                              These courts have recognized that a PSA is a contract between
                  the originating lender and the subsequent purchaser/trustee and that,
                  under traditional principles of contract law, a contracting party is capable
                  of ratifying conduct that is done in violation of the contract.    See, e.g.,
                  Rajam,in v. Deutsche Bank Nat'l Trust Co.,         F.3d „ 2014 WL
                  2922317, at *7-9 (2d Cr. 2014); Calderon v. Bank of Am., N.A.,       941 F.
                  Supp. 2d 753, 766-67 (W.D. Tex. 2013); Dernier v. Mortg. Network, Inc., 87
                  A.3d 465, 473-74 (Vt. 2013). Thus, although a post-closing-date loan
                  assignment violates the terms of the PSA, these courts conclude that such
                  an assignment is not void, 4 but is merely voidable, because the trustee has

                  ...continued
                  note and to foreclose (and may therefore not require further district court
                  scrutiny), we agree with this proposition.

                        4A  scenario in which a loan assignment might be void is where the
                  assignor did not possess the rights it was purporting to assign.       See
                  Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291 (1st Cir. 2013).
                  Here, while appellant raises various arguments regarding the authority of
                  MERS to assign his loan, this court has confirmed MERS' authority to
                  assign a loan on behalf of an original lender or the original lender's
                  successor. See Edelstein v. Bank of N.Y. Mellon, 128 Nev. „ 286
                  P.3d 249, 258 (2012). Because appellant's deed of trust contains language
                  identical to the language considered in Edelstein, appellant's arguments
                  regarding MERS' authority do not warrant further consideration.

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                the option of accepting the loan assignment despite its untimeliness. See,
                e.g., Rajamin,      F.3d at , 2014 WL 2922317, at *9; Calderon, 941 F.
                Supp. 2d at 766-67; Dernier, 87 A.3d at 474. Applying these traditional
                principles of contract law, these courts further hold that the homeowner,
                who is neither a party to the PSA nor an intended third-party beneficiary,
                lacks standing to challenge the validity of the loan assignment. See, e.g.,
                Rajamin,         F.3d at , 2014 WL 2922317, at *7-8; Calderon, 941 F.
                Supp. 2d at 767; Dernier, 87 A.3d at 474-75.
                            We are persuaded by the reasoning of these courts because
                their reasoning comports with Nevada law regarding who is entitled to
                enforce a contract. 5 See Morelli v. Morelli, 102 Nev. 326, 328, 720 P.2d
                704, 705-06 (1986) (recognizing that a nonparty to a contract has standing
                to enforce the contract only when the nonparty is an intended third-party
                beneficiary). Thus, we conclude that the January 2012 MERS assignment
                was not void, but was merely voidable, as Deutsche Bank was entitled to
                ratify the post-closing-date loan assignment; and appellant, who is neither
                a party nor an intended third-party beneficiary of the PSA, lacked
                standing to challenge the assignment's validity. Consequently, by

                      5 Appellant   contends that consideration of this issue should be
                governed by New York trust law, which, under N.Y. Estates, Powers &
                Trusts Law § 7-2.4 (McKinney 2002), purportedly renders a trustee's ultra
                vires act void. We note that the "vast majority" of courts to consider this
                argument, Butler v. Deutsche Bank Trust Co. Ams., 748 F.3d 28, 37 n.8
                (1st Cir. 2014), including those that this opinion follows, see Rajamin,
                F.3d at , 2014 WL 2922317, at *9-11; Calderon, 941 F. Supp. 2d at 766;
                Dernier, 87 A.3d at 473-75, have rejected the contention that a loan
                assignment in violation of a PSA is void. See also Bank of Am. Nat'l Ass'n
                v. Bassman FBT, L.L.C., 981 N.E.2d 1, 8-9 (Ill. App. Ct. 2012) (reaching
                the same conclusion).

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                 appearing at the mediation and producing certified copies of appellant's
                 original promissory note, deed of trust, and the January 2012 MERS
                 assignment, IndyMac Mortgage Services produced the documents
                 necessary to establish that Deutsche Bank was the entity entitled to
                 enforce appellant's note and to proceed with foreclosure. NRS 107.086(4)
                 and (5) (2011) 6 (providing that a deed of trust beneficiary must bring to
                 the mediation the original or a certified copy of the deed of trust, mortgage
                 note, and each assignment of the deed of trust or note, and that the
                 beneficiary or its authorized representative must participate in good faith
                 in order to obtain an FMP certificate); see Leyva v. Nat'l Default Servicing
                 Corp., 127 Nev. , , 255 P.3d 1275, 1278-79 (2011) (discussing
                 document-production requirements under the FMP's statutory and rule
                 provisions). The district court therefore properly denied appellant's
                 petition for judicial review and ordered the issuance of an FMP certificate.
                 Edelstein, 128 Nev. at , 286 P.3d at 260 (noting that this court defers to
                 the district court's factual determinations and reviews de novo its legal
                 determinations in appeals from orders resolving FMP petitions for judicial
                 review).
                                               CONCLUSION
                 A loan assignment made in violation of a PSA is not void, but merely
                 voidable and may be ratified or rejected at the option of the parties

                       6 EffectiveOctober 1, 2013, the Legislature added a new subsection 4
                 to NRS 107.086. See 2013 Nev. Stat., ch. 536, §§ 3, 6(2), at 3480, 3484.
                 While the previous subsections 4 and 5 were not substantively changed,
                 they are now codified at NRS 107.086(5) and (6) (2013). Because the
                 mediation in this case took place before the 2013 amendment's effective
                 date, this opinion refers to the version of NRS 107.086 in effect at that
                 time.

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                   to the PSA. Because the homeowner is neither a party to nor an intended
                   beneficiary of thefl PSA, the homeowner lacks standing to contest the
                   assignment's validity. Here, although respondents produced an
                   assignment at the mediation that was executed after the PSA's closing
                   date, the assignment was nevertheless effective to transfer ownership of
                   appellant's loan to Deutsche Bank. Consequently, respondents produced
                   the documents necessary to establish that Deutsche Bank was entitled to
                   enforce appellant's note and to proceed with foreclosure. We therefore
                   affirm the judgment of the district court.

                                                                  KlecA.,62.-ct-\
                                                                Hardesty

                                                                          WA1 AS         J.
                                                                Douglas

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