Yvanova v. New Century Mortgage Corporation
Facts: A homeowner obtains a loan secured by a trust deed on their property. The trust deed permits the mortgage holder to assign the mortgage to third parties and substitute the trustee without notice. The original mortgage holder files bankruptcy and their assets are transferred to a bankruptcy trustee. The homeowner defaults and is served a notice of default (NOD). Without authorization from the bankruptcy trustee, the original mortgage holder assigns the trust deed to a successor mortgage holder who nonjudicially forecloses on the property.
Claim: The foreclosed owner seeks to set aside the foreclosure and quiet title to the property, claiming the assignment of the trust deed from the original mortgage holder to the successor mortgage holder was void and therefore the foreclosure is invalid since the mortgage holder’s assets were in the possession of a bankruptcy trustee and the mortgage holder did not have authority to assign the trust deed.
Counterclaim: The mortgage holder claims the details of the assignment of the trust deed are immaterial to the foreclosed owner’s obligations as a borrower and thus the foreclosed owner cannot challenge the assignment since they are an unrelated third party and unaffected by any procedural deficiencies concerning the assignment.
Holding: The California Supreme Court holds the foreclosed owner may challenge the assignment of the trust deed in an action for wrongful foreclosure if the assignment is alleged to be void since a void assignment lacks any legal effect. [Yvanova v. New Century Mortgage Corporation et al. (February 18, 2016) __C4th__]
Editor’s note — The California Supreme Court distinguishes between a voidable and a void assignment. A voidable assignment is valid and enforceable until it is challenged and declared void by court order. A void assignment lacks any legal effect whatsoever. The court is only concerned with the legal standing of a foreclosed owner to challenge the assignment of a trust deed in a wrongful foreclosure action. They make no decision in this case concerning the validity of the assignment or the foreclosure. This case will now return to the appellate court to determine the validity of the foreclosure.