Zadrozny v. Bank of New York Mellon

Non-judicial foreclosures do not need to comport with the Uniform Commercial Code or do they require the production of the promissory note before a sale, and successor trustees are not unauthorized to initiate foreclosure proceedings.

The Zadroznys secured a promissory note with a deed of trust. The deed named a lender who transferred the deed to Bank of New York Mellon (“the Bank”). The Zadroznys defaulted and were notified of the initiation of a “non-judicial foreclosure.” They filed a complaint that argued that “non-judicial foreclosures require production of the promissory note prior to a sale” and must comply with the Uniform Commercial Code (“UCC”). Also, the appointments of the successor trustees were not authorized, so the successors were not authorized to initiate foreclosures. All the claims were dismissed. On appeal, the Ninth Circuit noted that the deed had “provisions … for selling the note and for appointing a successor trustee without prior notice to the borrowers.” The panel concluded that the deed’s provisions barred any claim based on not showing the note prior to a sale. The deed provided that “the note…could be sold or transferred” without notifying the borrowers, which allowed the transfer of the note to the successor trustees. Thus, the panel ruled that claims based on “the unauthorized appointment of a successor trustee…lacked legal and factual plausibility.” The claim that the Bank had failed to follow the requirements of the UCC was based on a report for the editorial board of the UCC. The panel reasoned that the report “does not create a viable cause of action” because it was preliminary and it recognized that state law controlled foreclosures. Since the Arizona Supreme Court had ruled that a trustee did not have to comply with the UCC in foreclosures and that the report was preliminary, the panel found that the claims based on a failure to follow the UCC lacked merit. Since all of the claims were found “factually and legally implausible,” the panel upheld the dismissal. AFFIRMED.