The U.S. District Court for the Northern District of California has issued an opinion in Spangler v. Selene Finance, LP, rejecting a borrower’s allegation that an assignment of a deed of trust recorded after a foreclosure sale was void and not merely voidable. In doing so, the court narrowly construed the California Supreme Court’s 2016 decision in Yvanova v. New Century Mortgage and joined a growing number of courts rejecting the California Court of Appeal's decision in Glaski v. Bank of America, N.A., which held that an assignment after the closing date of a securitized trust was void. Glaski defined the closing date as the date established in the trust document after which the trust may no longer accept loans.
The borrower, Spangler, alleged that she obtained a mortgage loan in 2007. After an earlier trustee’s sale and assignment were rescinded, the loan was foreclosed at a trustee’s sale on January 28, 2016. The trustee’s deed upon sale was recorded on February 4, 2016. The following day, on February 5, an assignment of the deed of trust to the foreclosing beneficiary, a securitized trust, was recorded. The assignment was executed more than six months before the sale, on June 29, 2015. Spangler sued for wrongful foreclosure, alleging that the assignment to the trust was void, because it occurred after the trust’s closing date. Spangler’s complaint specifically cited Yvanova as providing the basis for the wrongful foreclosure claim.
The court rejected Spangler’s allegations and dismissed the complaint without leave to amend. First, the court rejected the argument that an assignment of a deed of trust only becomes effective when recorded, noting that there is no recording requirement for a deed of trust or an assignment of a deed of trust.
The court then addressed the question of whether the assignment to the securitized trust was void because it took place after the trust’s closing date. The court rejected Spangler’s argument that Yvanova stands for the proposition that a wrongful foreclosure action can be based on an assignment that occurs after the trust’s closing date. The court found that "Yvanova does not hold that a late assignment creates a void foreclosure." The court -quoted Yvanova’s statement that it "express[es] no opinion" on "whether a postclosing date transfer into a . . . securitized trust is void or merely voidable."
The court emphasized that although Yvanova acknowledged that in Glaski, a panel of the California Court of Appeal held that a late assignment to a securitized trust was void, not voidable, the Supreme Court refused to comment on the correctness of that holding. The court agreed with a series of federal district court decisions finding that Glaski is an "outlier and not widely accepted law." The court further noted that Glaski was based on a New York decision that was subsequently overturned on appeal. The court concluded that "because an act in violation of a trust agreement is voidable—not void—under New York law, which governs the Pooling and Servic[ing] Agreement," Spangler lacked standing to bring a wrongful foreclosure claim.
