A recent appellate decision provides favorable rulings on numerous important issues affecting California mortgage foreclosure litigation. Kalnoki v. First American Trustee Solutions, LLC, 8 Cal. App. 5th 23 (2017) holds:

    • A notice of default and accompanying declaration are not invalid even if robo-signed.


    • A borrower who admitted default lacked standing under California’s Unfair Competition Law. While foreclosure and loss of the home was an economic loss, it was not caused by the procedural or technical flaws in the foreclosure documents that borrower alleged (i.e., the purported unfair competition), but rather the foreclosure was caused by the borrower’s default.


    • Foreclosure is not debt collection under California’s Rosenthal Fair Debt Collection Practices Act.


    • A borrower failed to state a viable claim based on alleged violations of a securitized trust’s pooling and servicing agreement in the transfer of the borrower’s loan to the trust, rejecting Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079 (2013).


    • A substitution of trustee may properly be executed by an agent of the lender/beneficiary without accompanying proof of the agency. Neither state law nor the standard Fannie-Freddie deed of trust forbids a lender from acting through agents in performing that act.


    • A court may take judicial notice of the date, parties and legal effect of a legally operative document that has been publicly recorded. (However, the court cannot take judicial notice of facts recited in recorded documents.)


  • The court affirms an award of attorney fees against borrowers who unsuccessfully challenged a completed foreclosure of their property. It holds that the attorneys’ fees provisions in the deed of trust were broad enough to encompass the borrowers’ implied covenant, rescission of the deed of trust and other claims. (The court did not address the one-form-of-action rule or other limitations.)

For more information regarding the Kalnoki decision, contact Michael J. Steiner at mjs@severson.com.