The California Court of Appeal Again Rejects a Claim For Wrongful Foreclosure at the Pleading Stage

The recent published decision of Fontenot v. Wells Fargo Bank, N.A. (Cal.App.1 Dist., August 11, 2011) --- Cal.Rptr.3d ----. 2011 WL 3506177, adds several more arrows to a secured lender's quiver of arguments challenging wrongful foreclosure claims at the pleading stage. First, the Court explains in detail how and why publicly recorded documents can be judicially noticed to defeat contradictory allegations. Second, the Court holds MERS properly has all the authority to act on behalf of a lender or beneficiary under the terms of the agency agreement between MERS and the lender. Third, plaintiffs must plead "actual prejudice" to set aside a foreclosure sale based on irregularities in the foreclosure process. Here, even if MERS lacked authority to assist with the foreclosure, the only prejudice would be to the lender or the beneficiary, not the borrower. Fourth, if a plaintiff pleads breach of contract, it cannot also plead promissory estoppel based on that contract. If the contract claim fails, the estoppel claim must also fail.

In Fontenot, the plaintiff alleges that she obtained a $1 million promissory note, secured by a deed of trust on real property. MERS was the nominee of the lender in the deed of trust. After the plaintiff defaulted, Wells Fargo (the servicer on the plaintiff's loan) foreclosed on the property and sold it. Wells Fargo and MERS filed demurrers, which the trial court sustained without leave to amend.

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Published In: Civil Procedure Updates, General Business Updates, Finance & Banking Updates, Residential Real Estate Updates

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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