## Facts

- Borrower Barbara Chiu (with Shimin Xu) obtained a $975,000 loan secured by a first deed of trust on a Los Altos residence; the deed of trust was later assigned through intermediaries and ultimately to Deutsche Bank National Trust Company, with Saxon Mortgage Services as servicer/agent.
- Stephen George Debrunner and other investors made a $675,000 loan secured by a second deed of trust on the same property.
- After borrower default, Debrunner (as junior lienholder) conducted a nonjudicial foreclosure under the second deed of trust and acquired title by trustee’s deed in March 2009 after bankruptcy stay issues were resolved.
- In February 2010, Old Republic recorded a notice of default under the first deed of trust; the associated debt-collection notice identified Deutsche Bank as creditor and Saxon as attorney-in-fact, and provided Saxon’s cure/contact information.
- Debrunner alleged Deutsche Bank lacked authority to foreclose because the note was not properly transferred with the deed of trust, and alleged the notice of default was defective because it insufficiently identified the beneficiary and identified Old Republic as trustee before a recorded substitution of trustee.

## Issues

1. Whether California’s nonjudicial foreclosure statutes require the foreclosing beneficiary/assignee to prove possession or ownership of the promissory note (or a valid note transfer) as a condition to initiating foreclosure.
2. Whether the 2010 notice of default was statutorily defective because it inadequately identified the beneficiary and/or because Old Republic was identified as trustee before a substitution of trustee was executed or recorded.

## Decision

- The Court of Appeal affirmed the judgment after the trial court sustained defendants’ demurrer without leave to amend.
- The court held California’s nonjudicial foreclosure scheme does not require the foreclosing party to produce the original note or plead/prove note ownership to initiate foreclosure.
- The court held the recorded assignment of the deed of trust to Deutsche Bank was sufficient to authorize foreclosure activity under the statutory scheme.
- The court held the notice of default, read with the accompanying notice, adequately identified Deutsche Bank and Saxon and satisfied statutory requirements.
- The court held the notice was not invalid merely because Old Republic was named before formal substitution, because the statute permits recording by the trustee, beneficiary, or their authorized agent and does not require the substitution to precede the notice.

## Legal Principles

- California’s nonjudicial foreclosure process is governed by Civil Code §§ 2924 et seq., and courts generally do not add extra-statutory prerequisites to foreclosure initiation.
- The statutes permit a notice of default to be recorded by the trustee, mortgagee/beneficiary, or any of their authorized agents; the statutory scheme does not create a “produce the note” requirement.
- A recorded assignment of a deed of trust may authorize the assignee to proceed with nonjudicial foreclosure without litigating chain-of-title to the note as a precondition.
- A notice of default is sufficient if it substantially complies with statutory requirements and reasonably informs the debtor who is asserting default and how to cure; technical sequencing objections (including trustee-substitution timing) do not alone invalidate the notice absent a statutory defect.

## Conclusion

The court held that a junior lienholder could not block a senior nonjudicial foreclosure by demanding proof of note possession or by asserting technical objections to beneficiary/trustee identification where the recorded assignment and notice of default complied with California’s nonjudicial foreclosure statutes.


Debrunner v. Deutsche Bank Nat’l Trust Co., 204 Cal. App. 4th 433, 138 Cal. Rptr. 3d 830 (Cal. Ct. App. 2012)