In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8,
2012), the Court of Appeal reversed the trial court's decision
to sustain a demurrer against plaintiff Andrea Skov's second
amended complaint, holding that she had stated a claim for
violation of Civil Code Section 2923.5, which requires a lender to
contact a defaulted borrower to discuss alternatives to foreclosure
before starting a nonjudicial foreclosure by recording a notice of
default. This opinion discusses issues of (1) judicial notice, (2)
MERS' ability to foreclose, and (3) the pleading of a violation
of Section 2923.5.
Skov defaulted on her $1.5 million residential mortgage loan, and
MERS began foreclosure proceedings (and later assigned the Deed of
Trust to U.S. Bank). Skov sued, alleging that "since U.S. Bank
and MERS were not assignees of the original note... they did not
have the right to exercise the power of sale." Skov also
alleged that U.S. Bank "did not contact or attempt to
contact" Skov before recording a Notice of Default. The trial
court sustained U.S. Bank's demurrer.
On appeal, the Court first tackled the issue of judicial notice
of the documents recorded as part of the foreclosure process. The
designation of various parties as "beneficiary" and
"lender" in those documents and statements contained in
those documents – particularly the declaration of
compliance with Section 2923.5 that accompanied the default notice
– were important in evaluating Skov's claims.
Following Fontenot v. Wells Fargo Bank, N.A.(2011) 198
Cal.App.4th 256, ,the Court held that "facts arising from the
legal effect of the documents, such as the status of an entity as
the beneficiary, trustee, or its agent," were properly subject
to judicial notice, but that "statements of fact . . , such as
whether there was statutory compliance with section 2923.5,"
Second, the Court rejected Skov's claim that "MERS
lacked authority to execute the notice of default and the
assignment of the deed of trust, and thus each of those foreclosure
documents was void." The Court noted that under Civil Code
section 2924, "[a] notice of default must be recorded by the
trustee, beneficiary, or an agent of either," and that MERS
was the beneficiary, and that NDEx West properly signed the notice
as MERS' agent. In short, "MERS was authorized to assign
the deed of trust and commence foreclosure."
Third, the Court concluded that Skov had specifically alleged
that U.S. Bank did not contact her to discuss her loan and
foreclosure avoidance options and had, therefore, properly stated a
claim under Section 2923.5. It held that the declaration of
compliance in the Notice of Default, i.e., that "the
requirements of section 2923.5 had been met," did not trump
Skov's allegations and, as noted above, the Court could not
take judicial notice of the facts stated in the declaration.
Consistent with Mabry v. Superior Court (2010) 185
Cal.App.4th 208, the Court held that Section 2923.5 provided a
private right of action and was not preempted by the National Bank
Act (so long as Section 2923.5 was "very narrowly
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In a recent decision characterizing precedent as a seven decade "aberration," the Supreme Court of California permitted plaintiff loan borrowers to introduce against a defendant banking institution parol evidence directly contradicting the very terms of the parties’ written loan agreement.