BACKGROUND

This case presents an unusual situation in which a party alleging wrongful

foreclosure is affiliated with the entity that allegedly had no authority to foreclose.

IVE, the party alleging wrongful foreclosure, is an entity controlled by Mark

Weiner. In 2004 and 2005, IVE purchased thirty-one of the forty-nine lots in the

Gold Strike Heights Subdivision from the developer, Westwind Development Inc.

As a condition of his purchase, Weiner required Westwind to appoint him and Don

Lee to the board of the homeowners’ association governing the subdivision, the

** The Honorable Joseph F. Bataillon, United States District Judge for the District of Nebraska, sitting by designation. 2 Gold Strike Heights Association (Gold Strike 1). However, after learning that

Gold Strike 1 was a suspended corporation for failure to file a Statement of

Information with the Secretary of State and failure to pay taxes to the Franchise

Tax Board, Weiner and Lee formed a new homeowners’ association in 2007. They

added one word to Gold Strike 1’s name and called the new homeowners’

association the Gold Strike Heights Homeowners Association (Gold Strike 2).

Weiner amended Gold Strike 1’s Declaration of Restrictions (CC&R’s) to make

Gold Strike 2 the “full successor in interest” to Gold Strike 1 and to transfer “full

control” of the subdivision to Gold Strike 2. Weiner knew that, because Gold

Strike 1’s and Gold Strike 2’s names were so similar, the names were often

confused and were used interchangeably on board meeting minutes and agendas,

including agendas prepared by Lee.

In 2010, Weiner and Lee were ousted from the board of Gold Strike 2,

leading to litigation between Gold Strike 2 and IVE, Weiner, and Lee. Pursuant to

a 2011 settlement agreement, IVE agreed to allow only local residents to serve as

board members in exchange for paying reduced association dues and assessments

to Gold Strike 2.1 In 2012, IVE unilaterally decided to stop paying association

1 Weiner “was a developer who lived outside the area.” 3 dues and assessments, purportedly due to Gold Strike 2’s financial

mismanagement.

Mike Cooper, the president of Gold Strike 2’s board of directors, contacted

CARS to collect the delinquent dues and assessments from IVE on Gold Strike 2’s

behalf. In July 2012, Gold Strike 2 entered into a contract with CARS for the latter

to collect the delinquent dues and assessments and to act as trustee for nonjudicial

foreclosure proceedings on the property owned by IVE.

Pursuant to California statutes governing nonjudicial foreclosures,2 CARS

sent IVE notices of intent to file a notice of delinquent assessment on IVE’s

property, and in March 2013, CARS filed and served thirty-one notices of

delinquent assessment regarding IVE’s property. The notices stated that CARS

represented “Gold Strike Heights Association,” and that notice was given pursuant

to the CC&R’s of “Gold Strike Heights Association.”

Weiner wrote a letter to CARS on IVE’s behalf, stating that the Gold Strike

Heights Association (Gold Strike 1) no longer governed the Gold Strike Heights

2 “California’s nonjudicial foreclosure scheme is set forth in Civil Code §§ 2924–2924k, which ‘provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.’” Gomes v. Countrywide Home Loans, Inc., 121 Cal. Rptr. 3d 819, 823 (Ct. App. 2011) (quoting Moeller v. Lien, 30 Cal. Rptr. 2d 777, 782 (Ct. App. 1994)).

4 subdivision and that the Gold Strike Heights Homeowners Association (Gold

Strike 2) had taken over management of the subdivision. He challenged CARS’

authority to collect money on behalf of Gold Strike 1 that was “allegedly owed to

another corporate entity,” Gold Strike 2. Although not acknowledged in this letter,

Weiner knew that it was not Gold Strike 1 that initiated the foreclosure because he

remained on the board of Gold Strike 1. Weiner also knew that IVE owed the

delinquent dues and assessments to Gold Strike 2, and he never challenged the

computation of the amounts past due. Nor did Weiner challenge any aspect of the

foreclosure process other than the name of the homeowners’ association.

The CARS representative forwarded Weiner’s letter to Cooper, who said

that the association’s attorney advised him that the Gold Strike Heights

Association and Gold Strike Heights Homeowners Association “were the same

entity.” CARS relied on this assurance to continue with the foreclosure process.

In October 2013, CARS filed foreclosure notices and served copies on IVE.

The notices of default indicated that the lien was executed by Gold Strike 1. The

notices of trustee’s sale similarly indicated that Gold Strike 1 was the claimant, and

the certificates of foreclosure sale indicated that Gold Strike 1 was the

association/judgment creditor, Weiner and Lee wrote four more letters to CARS,

5 asking for the legal basis for CARS’ authority to collect money on behalf of Gold

Strike 1 that “allegedly” was owed to Gold Strike 2.

The foreclosure sale was conducted on September 30, 2014. Gold Strike 2

bought all thirty-one lots. In January 2015, CARS recorded the Trustee’s Deeds

Upon Sale, indicating that the property was conveyed to Gold Strike 2.

IVE’s state court action against CARS, Gold Strike 1, and Gold Strike 2 was

removed to bankruptcy court. The bankruptcy court conducted a trial and made

detailed factual and credibility findings, and conclusions of law. The bankruptcy

court found in favor of CARS and the Trustee and entered judgment in their favor.

The court entered judgment quieting title to the thirty-one lots in favor of Gold

Strike 2 and its successor bankruptcy estate. IVE appealed to the district court,

which affirmed the bankruptcy court in full after a thorough review of the factual

findings and legal determinations. IVE timely appealed.

DISCUSSION

“[W]e review a bankruptcy court’s decision independently and without

deference to the district court’s decision.” Kirkland v. Rund (In re EPD Inv. Co.),

821 F.3d 1146, 1149–50 (9th Cir. 2016). The bankruptcy court’s findings of fact

are reviewed for clear error and its conclusions of law are reviewed de novo. Id. at

1150.

6 IVE’s wrongful foreclosure claim was based solely on the fact that the

foreclosure notices listed Gold Strike 1, rather than Gold Strike 2, as the

beneficiary. The bankruptcy court aptly characterized the error as a “name

misidentification” rather than, as IVE contends, a matter of the wrong entity

foreclosing. The cases on which IVE relies present very different circumstances

from those presented here.3

Under California law, “‘[a] nonjudicial foreclosure sale is presumed to have

been conducted regularly and fairly; one attacking the sale must overcome this

common law presumption “by pleading and proving an improper procedure and the

resulting prejudice.”’ ‘Prejudice is not presumed from “mere irregularities” in the

process.’” Kalnoki v. First Am. Tr. Servicing Sols., LLC, 214 Cal. Rptr. 3d 292,

311 (Ct. App. 2017) (quoting, first, Knapp v. Doherty, 20 Cal. Rptr. 3d 1, 8 n.4 (Ct.

3 IVE relies on Yvanova v. New Century Mortgage Corporation, 365 P.3d 845 (Cal. 2016), for the proposition that “[a] foreclosure initiated by one with no authority to do so is wrongful for purposes of [a wrongful foreclosure] action.” Id. at 851. However, this begs the question of whether the foreclosing entity here had authority to do so. Moreover, Yvanova emphasized that its holding was narrow: “We hold only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment.” Id. at 848. The court specifically stated that, “[i]n deciding the limited question on review, we are concerned only with prejudice in the sense of an injury sufficiently concrete and personal to provide standing, not with prejudice as a possible element of the wrongful foreclosure tort.” Id. at 857. Yvanova is not relevant here. 7 App. 2004), then Herrera v. Fed. Nat’l Mortg. Ass’n, 141 Cal.Rptr.3d 326, 336

(Ct. App. 2012)).

IVE contends it has established prejudice by the fact that its properties were

foreclosed upon, citing Kalnoki and Sciarratta v. U.S. Bank N.A., 202 Cal. Rptr. 3d

219 (Ct. App. 2016), but those cases do not support IVE. Sciarratta held that an

allegedly wrongful foreclosure was a sufficient allegation of prejudice to survive

demurrer where it was also alleged that the foreclosing entity’s beneficiary interest

in the deed of trust was void.4 Id.at 229–30.

Under Sciarratta, IVE’s contention that it suffered a wrongful foreclosure

may be a sufficient allegation to survive a demurrer (equivalent to a Rule 12(b)(6)

motion to dismiss). However, IVE not only must plead, but must prove, that it was

prejudiced. Kalnoki, 214 Cal. Rptr. 3d at 311. Merely being foreclosed upon is

not sufficient, especially given the circumstances presented here.

Sciarratta explained that “‘[m]ere technical violations of the foreclosure process

will not give rise to a tort claim; the foreclosure must have been entirely

4 The complaint in Sciarratta alleged the assignment of the interest in the deed of trust was void, not merely voidable, because when the lender purported to assign the promissory note to Bank of America, the lender “had nothing to assign, having previously . . . assigned the promissory notes and deed of trust” to a different bank. Sciarratta, 202 Cal. Rptr. 3d at 228. The complaint therefore alleged that Bank of America, the foreclosing entity, had no valid interest in the deed of trust and thus no right to foreclose. 8 unauthorized on the facts of the case.’” Sciarratta, 202 Cal. Rptr. 3d at 226

(quoting Miles v. Deutsche Bank Nat’l Tr. Co., 186 Cal. Rptr. 3d 625, 636 (Ct.

App. 2015)); see also Knapp, 20 Cal. Rptr. 3d at 16 (presumption that foreclosure

was conducted regularly and fairly must prevail when record lacks substantial

evidence of prejudicial procedural irregularity); Residential Capital v. Cal-Western

Reconveyance Corp., 134 Cal. Rptr. 2d 162, 173 (Ct. App. 2003) (there must be “a

substantial defect in the statutory procedure that is prejudicial to the interests of the

trustor and claimants”).

Nor does Kalnoki help IVE. There, the lender and beneficiary of the deed of

trust, Wells Fargo Home Mortgage, Inc., ceased to exist when it merged with

Wells Fargo Bank, N.A., which succeeded to the prior entity’s interests. Wells

Fargo executed a substitution of trustee, which the plaintiffs challenged on the

ground that “the omission of the word ‘Inc.’ after the words ‘Wells Fargo Home

Mortgage’ from the signature block” invalidated the substitution, rendering the

subsequent foreclosure proceedings invalid. Kalnoki, 214 Cal. Rptr. 3d at 302.

The court disagreed, stating that the omission was “obviously a mere inadvertence

or typographical error that was not material and did not affect the validity of the

Substitution.” Id.

9 The plaintiffs in Kalnoki challenged the validity of the foreclosure

proceedings on numerous grounds, but the court found it “difficult to conceive”

how they were prejudiced. Id. at 311. The court reasoned that the borrowers “do

not dispute that they defaulted on their loan. They have pleaded no facts indicating

that the foreclosure sale, which has already occurred, would have been averted but

for the alleged deficiencies in the foreclosure process nor that the original lender

would have refrained from foreclosure under the circumstances presented.” Id. at

312.

Similarly here, IVE has never disputed that it owed Gold Strike 2 the

delinquent assessments. Nor is there any evidence the foreclosure would have

been averted but for the alleged deficiency in the foreclosure process, which

consisted solely of the omission of the word “homeowners” in the name of the

beneficiary. As in Kalnoki, the alleged deficiency involved the omission of one

word, and there is no question that the successor entity, Gold Strike 2, had the

authority to foreclose.

It is undisputed that Weiner not only knew that IVE owed the money to

Gold Strike 2, but also that it was not Gold Strike 1 that was foreclosing because

Weiner himself was on the board of Gold Strike 1. It also is undisputed that

Weiner, having amended the CC&R’s himself, knew that Gold Strike 2 was the

10 “full successor in interest” to Gold Strike 1. Thus, the bankruptcy court’s findings

that IVE knew from the outset that Gold Strike 2 was the beneficiary and the

foreclosing entity, as well as the findings that IVE knew it owed delinquent

assessments to the beneficiary and chose not to pay them have ample support in the

record.

California’s extensive nonjudicial foreclosure system protects the borrower,

or trustor, by informing it “of the default and the nature of the default so that the

trustor has an opportunity to reinstate the secured obligation.” 5 Miller & Starr,

California Real Estate § 13:225 (4th ed. June 2020 update); see also Knapp, 20

Cal. Rptr. 3d at 8 (“The statutes provide the trustor with opportunities to prevent

foreclosure by curing the default.”). IVE clearly knew of the default and the nature

of the default and had the opportunity to cure the default. Rather than taking

advantage of the statutory provisions to avoid the foreclosure, IVE challenged the

process on the basis of what it clearly knew was a one-word mistake. It is

“difficult to conceive” how IVE was prejudiced by the omission of the word

“homeowners” in the name of the beneficiary. Kalnoki, 214 Cal. Rptr. 3d at 311.

California law requires prejudicial procedural irregularity in order to

invalidate a foreclosure sale. There is no evidence that IVE was prejudiced by the

name in the notices. See Knapp, 20 Cal. Rptr. 3d at 14 (“the slight procedural

11 irregularity in the service of the Sale Notice” did not prejudice the borrowers

where they had notice of the sale date and there was no evidence of injury); see

also Lehner v. United States, 685 F.2d 1187, 1190–91 (9th Cir. 1982) (rejecting

borrower’s argument that the foreclosure was invalid because the notice was

mailed to the wrong address, reasoning that “the record reveals clearly that she

knew the foreclosure sale was imminent” and “refus[ing] to elevate form over

substance”); Aceves v. U.S. Bank, N.A., 120 Cal. Rptr. 3d 507, 519 (Ct. App. 2011)

(finding no prejudice where notice of default misidentified the beneficiary because

the notice accurately identified the trustee whom the borrower could contact for

information about the foreclosure). Because the error in the name did not cause

any prejudice to IVE, it, accordingly, did not render the foreclosure proceedings

invalid.

The judgment is AFFIRMED.

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