MTC Financial, Inc. v. Nationstar Mortgage

Filed 1/22/18 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

MTC FINANCIAL, INC., Plaintiff, A150916 v. NATIONSTAR MORTGAGE, (Contra Costa County Super. Ct. No. MSN16-1814) Defendant and Appellant; PAN SPARROW et al., Defendants and Respondents.

Defendant Nationstar Mortgage LLC (Nationstar) appeals an order denying its claim to surplus funds deposited with the court by plaintiff MTC Financial, Inc., doing business as Trustee Corps (trustee), after the trustee’s nonjudicial foreclosure sale of real property on which two deeds of trust were filed for recording simultaneously and indexed sequentially. Nationstar contends the court erred in concluding that although its deed of trust was indexed after the other deed of trust, it was the senior lienholder and under Civil Code section 2924k was not entitled to any of the sale proceeds. We conclude the trial court properly determined the relative priorities and, thus, shall affirm the court’s distribution order. Factual and Procedural Background In 2003, Pan Sparrow obtained two loans from Countrywide Home Loans, Inc. (Countrywide), each secured by a deed of trust on certain real property located in Hercules, California. One loan was a single family mortgage (mortgage) in the principal amount of $205,080 and the other loan was a home equity line of credit (HELOC or equity line) in the principal amount of $15,000. Both deeds of trust were recorded with

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the Contra Costa County Recorder’s Office on December 16, 2003. The deed of trust for the equity line received a recorder’s instrument number of 2003-0603657, and the deed of trust for the mortgage received a recorder’s instrument number of 2003-0603058. Through a series of transfers, the equity line subsequently was assigned to the Bank of New York Mellon and the mortgage was assigned to Nationstar. Following Sparrow’s default on the equity line, the trustee conducted a nonjudicial trustee sale of the property. The trustee received $105,000 from the sale. After payment of all funds due the Bank of New York Mellon and the fees and costs of the sale, a surplus of $73,085.50 remained. Three parties claimed entitlement to the surplus: Sparrow, the Wildwood At Village Park Owners’ Association (homeowners association), and Nationstar. The trustee deposited the surplus funds with the court and commenced the present action to resolve the conflict between the three claimants. The trustee explained, “In 2002, homeowner Sparrow borrowed $173,000 from Countrywide. On 12/6/03, Sparrow and Countrywide used an escrow and title insurance for a refinance. What should have happened is that the $173,000 would have been reconveyed, a new first of $205,080 recorded, with a $15,000 HELOC. [¶] Instead, . . . the $15,000 HELOC was recorded prior to the deed of trust for $205,080. It appears no one tendered the claim to [the title insurance company] and its does not appear the lender and its successors ever looked at title. . . . The documents do not say they are a first or a second, but it is obvious. Note that both deeds of trust were recorded at 8:00 am, which is an effective date and time. [¶] If these were from two different lenders, the two deeds of trust would have equal priority — First Bank vs. East West Bank, 199 Cal.App.4th 1309 (2011). However, because the same lender was involved, the HELOC should be treated as a second, not a first.” Following briefing and a hearing, the court ordered $13,572.79 distributed to the homeowners association and the balance distributed to Sparrow. The court determined that Nationstar, as a senior lienholder, was not entitled to any of the proceeds of the sale. Nationstar timely filed a notice of appeal.