The Second Appellate District of the California Court of Appeals, Division One, rendered a decision in April which stands for the proposition that a borrower who executes a note cannot seek to quiet title to the property she previously bought without first tendering funds necessary to cure her default.
Tsvetana Yvanova signed a promissory note in 2006 in the amount of $483,000 secured by a deed of trust on her residence in Woodland Hills, California. The lender and beneficiary or holder of the Note was New Century Mortgage Corporation and the identified trustee was Stewart Title Company. Under the express terms of the note, the trustee could be replaced and the note could be transferred to a third party without need for notice to the borrower. Also the trustee, or its successor, could sell or auction off the property in the event of a default.
After Ms. Yvanova purportedly went in to default on the loan by August 2008, the trustee issued a Notice of Default to her which included an election to sell. It claimed she had failed to pay the amount of $14,711.79 which had become due. By that time, an assignment of the note to Deutsche Bank National Trust Company as trustee for the Morgan Stanley ABS Capital I Inc. had occurred. Later at the beginning of 2012 a second notice of default and election to sell, claiming she was in default on the note in the amount of $63,960.80 was issued to her by Deutsche Bank. Deutsche Bank later in February 2013 substituted Western Progressive, LLC as trustee. This company had already proceeded in August 2012 to execute a notice of trustee’s sale, claiming plaintiff had an unpaid loan balance in the amount of $537,934.03. One month later it sold the property to THR California, LLC for $355,000.01 and recorded a trustee’s deed upon sale as Ms. Yvanova continued to reside on the property.
But even before those events, Ms. Yvanova had filed pro se in March 2012 a Complaint seeking to quiet title to the land. She claimed, in a subsequent Second Amended Complaint, that she still retained ownership interest in the property because the assignment of the note to Deutsche Bank was predated, the substitution of Western Progressive was void due to back dating and the subsequent sale was defective because of the recording defects. Defendants responded that the plaintiff failed to state a cause of action for quiet title because she did not make a tender of funds to cure her default and because the Note itself authorized its assignment to other parties.
Both the trial court and the Court of Appeals in Yvanova v. New Century Mortgage Corp. No. B247188 (Calif. Ct. App. 2nd App. Dist. 2014) found the dismissal of the Complaint to be appropriate for two primary reasons: (1) a plaintiff may not quiet title in herself without discharging her debt citing Aguilar v. Bocci (1974) 39 Cal.App.3d 475, 477; and (2) because the plaintiff would not be the victim of such invalid transfers because her obligations under the note remained unchanged. She is required to remit the payments due under the Note regardless of who the beneficiary or Holder of the Note may be. The issue of chain of title to the Note affects which party may collect but not whether the Borrower must comply with its terms.
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