Borrower's "Show Me The Note" Argument Fails To Halt Foreclosure


[authors: Alejandro Moreno and Shannon Petersen]

In Debrunner v. Deutsche Bank Nat. Trust Co. (Cal.App. 6 Dist., 2012) --- Cal.Rptr.3d ----, 2012 WL 883128, the California Court of Appeal affirmed the dismissal of a complaint for wrongful foreclosure with prejudice, holding that a beneficiary under a deed of trust need not possess the original promissory note to commence foreclosure and that a borrower cannot avoid foreclosure based on a technical deficiency without showing actual prejudice.

Plaintiff Debrunner was a private investor who extended credit to two borrowers secured by a second deed of trust on real property. The borrowers had previously obtained a loan from Quick Loans Funding, Inc. Quick Loans assigned the deed of trust and promissory note to Option One Mortgage Corporation, which later assigned them to FV-1, Inc., which later assigned them to Deutsche Bank, which appointed Saxon Mortgage Services, Inc. to service the loan.

The borrowers defaulted. Deutsche Bank recorded a notice of default naming itself as the creditor but providing the contact information for Saxon Mortgage. The plaintiff filed suit to halt the foreclosure, claiming Deutsche Bank had no right to foreclose because it did not physically possess the original promissory note and had not provided the correct contact information.

The Court rejected both arguments. It held that "nothing in the applicable statutes . . . precludes foreclosure when the foreclosing party does not possess the original promissory note." The plaintiff's attempted reliance on provisions of the California Commercial Code regarding negotiable instruments was misplaced because those provisions did not "displace the detailed, specific, and comprehensive set of legislative procedures … established for nonjudicial foreclosures." The Court also held that, even if the notice of default was defective because it did not provide contact information for Deutsche Bank, the plaintiff did not and could not show prejudice as required to halt the foreclosure.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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