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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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Exhibit 1.
2. As part of its opinion, the Gomes Court discussed at length a related
case from district court entitled Ohlendorf v. Am. Home Mortgage Servicing (E.D
Cal. 2010, Mar. 31, 2010, No. CIV. S-09-2081 LKK/EFB) 2010 U.S. Dist. Lexis
31098 (Ohlendorf).) A true and correct copy of the opinion as obtained from
Pacer docket is attached herewith as Exhibit 2.
3. Although the Ohlendorf case was not a controlling authority, the
Gomes Court cited it as persuasive and incorporated the opinion of the
Ohlendorf Court in its opinion. Therefore, Gomes holdings contained in the
District Courts opinion is controlling.
4. The Ohlendorf court dealt with the issue of wrongful foreclosure on
the ground of improper assignments of the Deed of Trust. Thus, the party
seeking to foreclose was a wrong party.
5. In contrast, the Gomes case dealt with Mortgage Electronic
Registration Systems, Inc. (MERS) authority to initiate foreclosures pursuant
to the term of the Deed of Trust and the operation of the California Civil Code
2924.
6. Deutsche Bank National Trust Company (hereinafter DBNTC)
previously brought its Motion for Relief from the Automatic Stay. This Court
denied DBNTCs motion on the basis of standing pursuant to Fawn Ridge
Partners, LP v. BAC Home Loans Servicing, LP BAP No. CC-09-1396 HPDu (9th
Cir. BAP, unpublished memorandum decision dated 03/2009). The true and
correct copy is attached herewith as Exhibit 3.
II. RELEVANT STATEMENT OF FACTS.
7. DBNTC brought their first Motion for Relief from Automatic Stay on
9/21/2010. SeePacer Doc 14.
8. In a hearing held on 10/19/2010, this court denied DBNTC's firstwww.S
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16. In support of the Motion for Relief from the automatic stay, DBNTC,
through their alleged attorney BDFTW, submitted into evidence a Deed of Trust
recorded on 01/19/2006 with the Orange County Recorder as Instrument
number 2006000043242.
17. Such Deed of Trust named PHH Home Loans, LLC dba First Capital
as Lender and Equity Title Company as Trustee.
18. MERS was NOT a party to such Deed of Trust. SeePacer Doc
45-1, Page 2 to 17 of 29 [Exhibit 1].
19. On 02/07/2006, PHH Home Loans, LLC purportedly assigned
the Deed to Trust together with NOTE to MERS as follows:
FOR VALUE RECEIVED, the undersigned hereby grants, assigns and transfer toMORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR
INDYMAC BANK, F.S.B. A FEDERALLY CHARTERED SAVINGS BANK2.
20. On 02/07/2006, Debtor never consented to MERS acting as a
nominee for IndyMac Bank, FSB, or anyone else.
21. It is common knowledge that on July 11, 2008, IndyMac Bank,
F.S.B. was closed by the Office of Thrift Supervision and the FDIC was named
conservator. The FDIC transferred all assets of IndyMac Bank, F.S.B to IndyMac
Federal Bank, FSB. A true and correct copy of the FDIC press release is
available via the internet at
http://www.fdic.gov/news/news/press/2008/pr08056.html and is attached
herein as Exhibit 4.
22. On 12/21/2009, an employee of NDEx West, LLC, executed an
Assignment of Deed of Trust on the behalf of MERS, and purportedly assigned
MERS interest in the Deed of Trust together with the NOTE to DBNTC. See
Pacer Doc 45-1, Page 26 of 29.
23. As of 12/21/2009, IndyMac Federal Bank, FSB ceased to exist.
2See Pacer Doc 45-1, Page 25 of 29.
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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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24. Assuming arguendothat MERS acted on behalf of IndyMac Banks
assignee; such assignment would still be invalid because MERS could only act as
Nominee for IndyMac Bank, FSB and NOT its assigns.
25. DBNTCs redo Motion for Relief from the Automatic Stay contained
copies of 2 Allonges that were not part of the NOTE produced in previous motion
26. The first Allonge contained an endorsement to IndyMac Bank, F.S.B
Assuming arguendothat such endorsement was valid, it would have been made
on or about 02/07/2006 as part of assignment of the Deed of Trust. SeePacer
Doc 45-1, Page 21 of 29.
27. Again, IndyMac Bank, FSB ceased to exist on July 11, 2008.
28. Thus, there was nothing for IndyMac Bank, FSB or any purported
nominee to assign to anyone as of 12/21/2009.
29. The second Allonge was a blank page on IndyMac Bank letterhead,
contained no information relating to the subject loan with a blank endorsement
purportedly made by IndyMac Bank, FSB. See Pacer Doc 45-1, Page 22 of 29.
30. Assuming arguendothat such endorsement was valid, this
endorsement would be made part of the assignment of Deed of Trust on
12/21/2009.
31. Again, IndyMac Bank, FSB ceased to exist on July 11, 2008 and
could not possibly make any assignment on 12/21/2009.
III. GOMES V. COUNTRYWIDE HOME LOANS, INC.
A. PROCEDURAL SUMMARY
a. In connection with the purchase money loan, the deed of trust
identified MERS as a nominee for lender with the consent of the borrower,
Gomes.
b. MERS is a private corporation tracking ownership interest and
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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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c. Gomes defaulted on his loan and a Notice of Default was sent by
Reconstruct, an agent of MERS.
d. Gomes initiated a lawsuit contending that he did not know the
identity of the Notes beneficial owner and believed that the original lender sold
the loan on the secondary mortgage market.
e. MERS was a party to the Deed of Trust (hereinafter DOT) and had a
right to foreclose under the terms of the DOT. Gomes agreed to MERS as being
the nominee of the lender and beneficiary under the security instruments when
he signed the DOT.
f. The Gomes Court stated that Californias nonjudicial foreclosure
scheme is set forth in Civil Code sections 2924 through 2924k, which "provides a
comprehensive framework for the regulation of a nonjudicial foreclosure sale
pursuant to a power of sale contained in a deed of trust."
g. MERS, as party to the DOT, could act under its terms and the Court
honored the mutual assent of the parties and the right of the parties to enter into
a private contract, which was enforceable by the terms of the DOT.
h. The Gomes Court cited Ohlendorf v. Am. Home Mortgage Servicing
(E.D. Cal. 2010, Mar. 31, 2010, No. CIV. S-09-2081 LKK/EFB) 2010 U.S. Dist.
Lexis 31098, which held that the party foreclosing lacked standing because there
was a wrongful foreclosure based on improper assignment of DOT.
i. In the case of Gomes, MERS acted within the terms of the DOT and
was in compliance with Civil Code sections 2924.
B. APPLICATION OF GOMES TO THIS CASE.
a. Unlike GOMES, MERS was not a party to the DOT in this case.
b. MERS purportedly acted as Nominee for IndyMac Bank, FSB by
virtue of the assignment of the DOT by PHH Home Loans on 02/07/2006
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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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c. Assuming arguendothat MERS could legally act as Nominee for
IndyMac Bank, FSB on 02/07/06, in GOMES, MERS acted as nominee for the
lender and its assign; whereas in this case, the Assignment of DOT specifically
stated that MERS acted as nominee for IndyMac Bank, FSB only.
d. As of 12/21/09, IndyMac Bank, FSB ceased to exist; therefore, any
agency relationship between MERS and IndyMac Bank, FSB also ceased to exist.
e. MERS authority derived from the IndyMac Bank, FSBs rights.
f. Since, IndyMac Bank ceased to exist since July 11, 2008, MERS had
nothing to assign to DBNTC.
g. At issue in Debtors opposition to DBNTCs Motion for Relief from the
Automatic Stay was STANDING and whether DBNTC received valid assignment
from MERS.
h. It is clear from FAWN RIDGE, as well as GOMES, which incorporated
opinions in OHLENDORF, that constitutional and prudential standings cannot
be waived.
i. Such opinion was correctly cited and applied by this Court in its
prior opinion where it cited Fawn Ridge Partners, LP v. BAC Home Loans
Servicing, LP.
IV. OHLENDORF V. AMERICAN HOME MORTGAGE SERVICING, et.al.
A. PROCEDURAL SUMMARY
a. The GOMES Court incorporated the opinion of the OHLENDORF
Court from US District Court, for the Eastern District of California.
b. This case dealt with wrongful foreclosure being conducted by an
alleged wrong party.
c. This Court discussed in detail California Civil Code sections 2924an
that possession of the NOTE was not the prerequisite to foreclosure.
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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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standing, can result in wrongful foreclosure.
B. APPLICATION OF OHLENDORF TO THIS CASE
a. The issue in OHLENDORF and its holdings are exactly on point in
this case.
b. Similar to OHLENDORF, Debtors opposition is based on DBNTC s
lack of legal standing to even bring the motion.
c. MERS was a stranger to the transaction. MERSs purported
Nominee status for IndyMac Bank, FSB ceased to exist on 12/21/2009 because
IndyMac Bank, FSB ceased to exist since 02/07/06.
d. MERS had nothing to assign to DBNTC.
e. Therefore, the conveyance by MERS to DBNTC constituted a
fraudulent conveyance.
V. LEGAL STANDING IS NOT WAIVABLE AND CONTINUES TO BE THE
LAWS AS HELD BY THE US SUPREME COURT.
As previously held by the US Supreme Court, "[Movant] must have both
constitutional and prudential standing and be the real party in interest under
Fed.R. Civ.P. 17, in order to be entitled to lift-stay relief [citing: Kowalski v.
Tesmer, 543 U.S. 125, 128-29 (2004) (quoting Warth v. Seldin, 422 U.S. 490,
498 (1975)].
"Constitutional standing under Article III requires, at a minimum, that a
party must have suffered some actual or threatened injury as a result of the
defendant's conduct, that the injury be traced to the challenged action, and that
it is likely to be redressed by a favorable decision. Valley Forge Christian Coll. V.
Am. United for Separation of Church and State, 454 U.S. 464, 472 (1982).
"Beyond the Article III requirements of injury in fact, causation, and
redress ability, [Movant] must also have prudential standing, which is a
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SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE
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may invoke the courts' powers. SeeWarth v. Seldin, 422 U.S. 490, 499 (1975).
Such legal principals continue to be in effect in both GOMES and
OHLENDORF. A party seeking to foreclose under California Civil Code section
2924 must still have standing to do so. In the case of MERS, its standing derive
from the terms of the DOT in which a borrower consented to. However, in the
case, assignment of beneficial interest, there must be a valid assignment to allow
party with standing to foreclose.
In this case, DBNTC clearly had no standing to bring the motion. Debtors
never consented to MERS to act as Nominee under the terms of the DOT. Even i
one assumes that MERS had authority to assign IndyMac Banks beneficial
interest to DBNTC, IndyMac Bank ceased to exist at the time MERS purportedly
made an assignment to DBTNC. DBNTC received nothing by virtue of the
assignment; the assignment constitutes a fraudulent conveyance.
For the foregoing reasons, Debtors respectfully request the Court to make
findings of fact and to deny DBNTCs second Motion for Relief from the Automati
Stay with prejudice. Debtors further request this Court to award attorney fees
incurred by Debtors against DBNTC and its attorney for bringing this frivolous
motion.
Dated: 03/14/2011 Global Capital Law, P.C.
_______________________________
By: Gary Harre, Esq.Attorneys for Debtors,
Thuan X. Nguyen & Tammy H. Nguyen
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Filed 2/18/11
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
JOSE GOMES,
Plaintiff and Appellant,
v.
COUNTRYWIDE HOME LOANS, INC., etal.,
Defendants and Respondents.
D057005
(Super. Ct. No. 37-2009-00090347-CU-OR-CTL)
APPEAL from a judgment of the Superior Court of San Diego County, Steven R.
Denton, Judge. Affirmed.
Gersten Law Group and Ehud Gersten for Plaintiff and Appellant.
Severson & Werson, Jan T. Chilton, Philip Barilovits and Jon D. Ives for
Defendants and Respondents.
Jose Gomes appeals from a judgment entered following the trial court's order
sustaining, without leave to amend, a demurrer filed by defendants Countrywide Home
Loans, Inc. (Countrywide); Mortgage Electronic Registration Systems, Inc. (MERS); and
ReconTrust Company, N.A. (ReconTrust) (collectively "Defendants").
Exhibit 1
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2
As we will explain, we conclude that the trial court properly sustained the
demurrer without leave to amend.
I
FACTUAL AND PROCEDURAL BACKGROUND
In February 2004 Gomes borrowed $331,000 from lender KB Home Mortgage
Company to finance the purchase of real estate. In connection with that transaction, he
executed a promissory note (the Note), which was secured by a deed of trust. The deed
of trust identifies KB Home Mortgage Company as the "Lender" and identifies MERS as
"acting solely as a nominee for Lender and Lender's successors and assigns," and states
that "MERS is the beneficiary under this Security Instrument."1
The role of MERS is central to the issues in this appeal. As case law explains,
"MERS is a private corporation that administers the MERS System, a national electronic
registry that tracks the transfer of ownership interests and servicing rights in mortgage
loans. Through the MERS System, MERS becomes the mortgagee of record for
participating members through assignment of the members' interests to MERS. MERS is
listed as the grantee in the official records maintained at county register of deeds offices.
The lenders retain the promissory notes, as well as the servicing rights to the mortgages.
The lenders can then sell these interests to investors without having to record the
transaction in the public record. MERS is compensated for its services through fees
1 Similarly, the deed of trust states: "The beneficiary of this Security Instrument isMERS (solely as nominee for Lender and Lender's successor and assigns) and thesuccessors and assigns of MERS."
Exhibit 1
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charged to participating MERS members." (Mortgage Elec. Registration Sys. v.
Nebraska Dept. of Banking & Fin. (2005) 270 Neb. 529, 530 [704 N.W.2d 784, 785].)
"A side effect of the MERS system is that a transfer of an interest in a mortgage loan
between two MERS members is unknown to those outside the MERS system." (Jackson
v. Mortgage Elec. Registration Sys., Inc. (Minn. 2009) 770 N.W.2d 487, 491.)
The deed of trust that Gomes signed states that "Borrower [i.e., Gomes]
understands and agrees that MERS holds only legal title to the interests granted by
Borrower in this Security Instrument, but, if necessary to comply with law or custom,
MERS (as nominee for Lender and Lender's successors and assigns) has the right: to
exercise any or all of those interests, including, but not limited to, the right to foreclose
and sell the Property . . . ."
Gomes defaulted on his loan payments, and he was mailed a notice of default and
election to sell recorded on March 10, 2009 which initiated a nonjudicial
foreclosure process. The notice of default was sent to Gomes by ReconTrust, which
identified itself as an agent for MERS. Accompanying the notice of default was a
declaration signed by an employee of Countrywide, which apparently was acting as the
loan servicer.2
2 The deed of trust states that a loan servicer is the entity that "collects PeriodicPayments due under the Note and this Security Instrument and performs other mortgageloan servicing obligations."
Exhibit 1
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4
In May 2009 Gomes filed a lawsuit against Countrywide, MERS and ReconTrust,
alleging several causes of action and attaching as exhibits the deed of trust and the notice
of default.
The only causes of action at issue in this appeal are the first and second causes of
action, which are asserted against all Defendants.3
The first cause of action is titled "Wrongful Initiation of Foreclosure." In that
cause of action, Gomes states that he "does not know the identity of the Note's beneficial
owner" as he believes that KB Home Mortgage Company sold it on the secondary
mortgage market. He alleges on information and belief that "the person or entity who
directed the initiation of the foreclosure process, whether through an agent of MERS or
otherwise, was neither the Note's rightful owner nor acting with the rightful owner's
authority." In short, the first cause of action alleges, on information and belief, that
MERS did not have authority to initiate the foreclosure because the current owner of the
Note did not authorize MERS to proceed with the foreclosure. As a remedy, the first
cause of action states that Gomes seeks damages in an amount "not less than $25,000."4
3 The remaining causes of action were for (1) quiet title against Defendants;(2) violation of the Rosenthal Fair Debt Collection Practices Act (Civ. Code, 1788.10 etseq.) against Countrywide; (3) violation of Civil Code section 2943, subdivision (b)(1)
against Countrywide; and (4) unfair competition against Countrywide and MERS (Bus. &Prof. Code, 17200). These causes of action were all disposed of in connection with thedemurrer.
4 The complaint's general prayer for relief also seeks an order rescinding the noticeof default, along with other relief, but it is not clear whether those remedies are sought forthe first cause of action.
Exhibit 1
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The second cause of action seeks declaratory relief on the issue of whether "[Civil
Code section 2924, subdivision (a)] allows a borrower, before his or her property is sold,
to bring a civil action in order to test whether the person electing to sell the property is, or
is duly authorized to so by, the owner of a beneficial interest in it." Although designated
a cause of action for declaratory relief, the second cause of action appears to serve simply
as a legal argument in support of the first cause of action. Specifically, the second cause
of action alleges that section 2924, subdivision (a) provides the legal authority for Gomes
to assert the claim he has made in the first cause of action, namely that MERS lacks the
authority to initiate the foreclosure process because it was not authorized to do so by the
owner of the Note.
Defendants filed a demurrer. Demurring to the first cause of action, Defendants
argued, among other things, that (1) to maintain a cause of action for wrongful
foreclosure, Gomes must allege that he is able to tender the full amount due under the
loan; (2) California's nonjudicial foreclosure statute sets forth an exhaustive framework
that does not provide for the type of relief that Gomes seeks; (3) the terms of the deed of
trust authorize MERS to initiate a foreclosure proceeding; and (4) if Gomes is arguing
that "he is entitled to avoid foreclosure until a defendant has produced the note," such a
claim has been uniformly rejected. Demurring to the second cause of action for
declaratory relief, Defendants argued that it was "nothing more than a repeat of the legal
theory" asserted in the first cause of action and should be rejected on the same basis.
The trial court sustained the demurrer, without leave to amend, and entered
judgment in favor of Defendants.
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II
DISCUSSION
A. Standard of Review
"'On appeal from an order of dismissal after an order sustaining a demurrer, our
standard of review is de novo, i.e., we exercise our independent judgment about whether
the complaint states a cause of action as a matter of law.'" (Los Altos El Granada
Investors v. City of Capitola (2006) 139 Cal.App.4th 629, 650.) "A judgment of
dismissal after a demurrer has been sustained without leave to amend will be affirmed if
proper on any grounds stated in the demurrer, whether or not the court acted on that
ground." (Carman v. Alvord(1982) 31 Cal.3d 318, 324.) In reviewing the complaint,
"we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those
that are judicially noticeable." (Howard Jarvis Taxpayers Assn. v. City of La Habra
(2001) 25 Cal.4th 809, 814.)
Further, "[i]f the court sustained the demurrer without leave to amend, as here, we
must decide whether there is a reasonable possibility the plaintiff could cure the defect
with an amendment. . . . If we find that an amendment could cure the defect, we
conclude that the trial court abused its discretion and we reverse; if not, no abuse of
discretion has occurred. . . . The plaintiff has the burden of proving that an amendment
would cure the defect." (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081,
citations omitted (Schifando).) "[S]uch a showing can be made for the first time to the
reviewing court . . . ." (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93
Cal.App.4th 700, 711, citation omitted.)
Exhibit 1
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B. The Demurrer Was Properly Sustained
1. Gomes Has Not Identified a Legal Basis for an Action to DetermineWhether MERS Has Authority to Initiate a Foreclosure Proceeding
California's nonjudicial foreclosure scheme is set forth in Civil Code sections 2924
through 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."
(Moeller v. Lien (1994) 25 Cal.App.4th 822, 830 (Moeller).) "These provisions cover
every aspect of exercise of the power of sale contained in a deed of trust." (I. E.
Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285.) "The purposes of this
comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick,
inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the
debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly
conducted sale is final between the parties and conclusive as to a bona fide purchaser."
(Moeller, at p. 830.) "Because of the exhaustive nature of this scheme, California
appellate courts have refused to read any additional requirements into the non-judicial
foreclosure statute." (Lane v. Vitek Real Estate Industries Group (E.D. Cal. 2010) 713
F.Supp.2d 1092, 1098; see also Moeller, at p. 834 ["It would be inconsistent with the
comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to
incorporate another unrelated cure provision into statutory nonjudicial foreclosure
proceedings."].)5
5 Although "California courts have repeatedly allowed parties to pursue additionalremedies for misconduct arising out of a nonjudicial foreclosure sale when not
Exhibit 1
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By asserting a right to bring a court action to determine whether the owner of the
Note has authorized its nominee to initiate the foreclosure process, Gomes is attempting
to interject the courts into this comprehensive nonjudicial scheme. As Defendants
correctly point out, Gomes has identified no legal authority for such a lawsuit. Nothing
in the statutory provisions establishing the nonjudicial foreclosure process suggests that
such a judicial proceeding is permitted or contemplated.
In his declaratory relief cause of action, Gomes sets forth the purported legal
authority for his first cause of action, alleging that Civil Code section 2924,
subdivision (a), by "necessary implication," allows for an action to test whether the
person initiating the foreclosure has the authority to do so. We reject this argument.
Section 2924, subdivision (a)(1) states that a "trustee, mortgagee, or beneficiary, or any
of their authorized agents" may initiate the foreclosure process. However, nowhere does
the statute provide for a judicial action to determine whether the person initiating the
foreclosure process is indeed authorized, and we see no ground for implying such an
action. (See Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 596 [legislative
intent, if any, to create a private cause of action is revealed through the language of the
statute and its legislative history].) Significantly, "[n]onjudicial foreclosure is less
expensive and more quickly concluded than judicial foreclosure, since there is no
inconsistent with the policies behind the statutes" (California Golf, L.L.C. v. Cooper(2008) 163 Cal.App.4th 1053, 1070), Gomes is not seeking a remedy for misconduct. Heis seeking to impose the additional requirement that MERS demonstrate in court that it isauthorized to initiate a foreclosure. As we will explain, such a requirement would beinconsistent with the policy behind nonjudicial foreclosure of providing a quick,inexpensive and efficient remedy. (See Moeller, supra,25 Cal.App.4th at p. 830.)
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oversight by a court, '[n]either appraisal nor judicial determination of fair value is
required,' and the debtor has no postsale right of redemption." (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1236.) The recognition of the right to bring a lawsuit
to determine a nominee's authorization to proceed with foreclosure on behalf of the
noteholder would fundamentally undermine the nonjudicial nature of the process and
introduce the possibility of lawsuits filed solely for the purpose of delaying valid
foreclosures.
Gomes cites three federal district court cases two of which are unpublished
which he says recognize a right to bring a legal challenge to an entity's authority to
initiate a foreclosure process. (Weingartner v. Chase Home Finance, LLC(D. Nev.
2010) 702 F.Supp.2d 1276 (Weingartner); Castro v. Executive Trustee Services, LLC(D.
Ariz. 2009, Feb. 23, 2009, No. CV-08-2156-PHX-LOA) 2009 U.S. Dist. Lexis 14134
(Castro); Ohlendorf v. Am. Home Mortgage Servicing (E.D. Cal. 2010, Mar. 31, 2010,
No. CIV. S-09-2081 LKK/EFB) 2010 U.S. Dist. Lexis 31098 (Ohlendorf).)6 The cases
are not controlling on us and, in any event, they are not on point, as none recognize a
cause of action requiring the noteholder's nominee to prove its authority to initiate a
foreclosure proceeding. For instance, in Ohlendorf, the plaintiff alleged wrongful
foreclosure on the ground that assignments of the deed of trust had been improperly
6 "Although we may not rely on unpublished California cases, the California Rulesof Court do not prohibit citation to unpublished federal cases, which may properly becited as persuasive, although not binding, authority." (Landmark Screens, LLC v.Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 251, fn. 6, citing Cal. Rulesof Court, rule 8.1115.)
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backdated, and thus the wrong party had initiated the foreclosure process. (Ohlendorf,
supra, 2010 U.S. Dist. Lexis at *22-23.) No such infirmity is alleged here. Moreover,
the district court cases from outside of California are inapposite because they do not
apply California nonjudicial foreclosure law. The court in Weingartner, supra, 702
F.Supp.2d 1276, 1282-1283, allowed a plaintiff's claim for injunctive relief to proceed
when he produced evidence that the trustee that initiated the foreclosure was not in fact
the trustee at the time and thus could not proceed under Nevada law. In Castro, supra,
2009 U.S. Dist. Lexis 14134, the court allowed a claim for declaratory relief to proceed
to determine whether the defendants were entitled to enforce a promissory note through
nonjudicial foreclosure when the documents before the court indicated that the entities
initiating the foreclosure process may not have had the rights of the holder of the note as
required by Arizona law. (Id. at *15-16.) It is also significant that in each of these cases,
the plaintiff's complaint identified a specific factual basis for alleging that the foreclosure
was not initiated by the correct party. Gomes has not asserted any factual basis to suspect
that MERS lacks authority to proceed with the foreclosure. He simply seeks the right to
bring a lawsuit to find out whetherMERS has such authority. No case law or statute
authorizes such a speculative suit.7
7 As we understand Gomes's first and second causes of action, he is alleging thatMERS might not have been authorized by the current holder of the Note to initiateforeclosure proceedings, and he is entitled to bring a lawsuit to determine whether MERSwas in fact authorized. Although we focus on this legal theory in addressing whether thedemurrer was properly sustained, we note that certain portions of Gomes's appellatebriefing suggest he may be arguing that even if MERS was authorized by the noteholderto initiate a foreclosure, MERS would not have standing to do so. For example, Gomes
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Gomes appears to acknowledge that California's nonjudicial foreclosure law does
not provide for the filing of a lawsuit to determine whether MERS has been authorized by
the holder of the Note to initiate a foreclosure. He argues, however, that we should
nevertheless interpret the statute to provide for such a right because the "Legislature may
not have contemplated or had time to fully respond to the present situation." That
argument should be addressed in the first instance to the Legislature, not the courts.
Because California's nonjudicial foreclosure statute is unambiguously silent on any right
to bring the type of action identified by Gomes, there is no basis for the courts to create
such a right. We therefore conclude that the trial court properly sustained Defendants'
demurrer to the first and second causes of action in Gomes's complaint.8
cites a Kansas case holding that MERS did not have standing to intervene in a judicial
foreclosure case. (Landmark Nat'l Bank v. Kesler(Kan. 2009) 216 P.3d 158, 166.)Gomes also contends that other out-of-state cases have found that "MERS' limited rolemeans it lacks independent standing to foreclose, or independent power to conveystanding by transferring a note." If, by citing these cases, Gomes means to argue thatMERS lacks standing in California to initiate a nonjudicial foreclosure, the argument iswithout merit because under California law MERS may initiate a foreclosure as thenominee, or agent, of the noteholder. As we have explained, Civil Code section 2924,subdivision (a)(1) states that a "trustee, mortgagee, or beneficiary, or any of theirauthorized agents" may initiate the foreclosure process. (Italics added.)
8 As we sustain the demurrer on another ground, we need not and do not considerwhether, as the trial court ruled, the first cause of action fails on the ground that Gomeshas not pled that he is prepared to tender the amount owing on the Note. (See ArnoldsManagement Corp. v. Eischen (1984) 158 Cal.App.3d 575, 578 ("It is settled that anaction to set aside a trustee's sale for irregularities in sale notice or procedure should beaccompanied by an offer to pay the full amount of the debt for which the property wassecurity."].)
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2. Gomes Agreed in the Deed of Trust That MERS Is Authorized to Initiate aForeclosure Proceeding
As an independent ground for affirming the order sustaining the demurrer, we
conclude that even if there was a legal basis for an action to determine whether MERS
has authority to initiate a foreclosure proceeding, the deed of trust which Gomes has
attached to his complaint establishes as a factual matter that his claims lack merit. As
stated in the deed of trust, Gomes agreed by executing that document that MERS has the
authority to initiate a foreclosure. Specifically, Gomes agreed that "MERS (as nominee
for Lender and Lender's successors and assigns) has . . . the right to foreclose and sell the
Property." The deed of trust contains no suggestion that the lender or its successors and
assigns must provide Gomes with assurances that MERS is authorized to proceed with a
foreclosure at the time it is initiated.9 Gomes's agreement that MERS has the authority to
9 The parties debate in their briefing whether MERS should be considered a"beneficiary" of the deed of trust and thus authorized to initiate a foreclosure proceeding,regardless of whether it is authorized by the holder of the note, under the statutoryprovision stating that the beneficiary is entitled to initiate a foreclosure. (Civ. Code, 2924, subd. (a)(1).) As the parties discuss, some federal district courts have observedthat although identified as a "beneficiary" in a deed of trust, the role of MERS is notacting as a beneficiary as that term is commonly used, and that MERS in fact acts as anominee, and thus an agentof the beneficiary. (See, e.g., Roybal v. Countrywide HomeLoans, Inc. (D. Nev., Dec. 9, 2010, No. 2:10-CV-750-ECR-PAL) 2010 U.S. Dist. Lexis131287, *11 ["there is a near consensus among district courts in this circuit that while
MERS does not have standing to foreclose as a beneficiary, because it is not one, it doeshave standing as an agent of the beneficiary where it is the nominee of the lender, who isthe true beneficiary"]; Weingartner, supra,702 F.Supp.2d at p. 1280 ["Calling MERS a'beneficiary' is both incorrect and unnecessary . . . ," and "[c]ourts often hold that MERSdoes not have standing as a beneficiary because it is not one, regardless of what a deed oftrust says, but that it does have standing as an agent of the beneficiary where it is thenominee of the lender (who is the 'true' beneficiary)."].) However, because Civil Codesection 2924, subdivision (a)(1) and the deed of trust permit MERS to initiate foreclosure
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foreclose thus precludes him from pursuing a cause of action premised on the allegation
that MERS does not have the authority to do so.
Relying on the terms of the applicable deeds of trust, courts have rejected similar
challenges to MERS's authority to foreclose. In Pantoja v. Countrywide Home Loans,
Inc. (N.D. Cal. 2009) 640 F.Supp.2d 1177, the federal district court pointed out that in the
deed of trust, the plaintiff "distinctly granted MERS the right to foreclose through the
power of sale provision, giving MERS the right to conduct the foreclosure process under
[Civil Code s]ection 2924," and therefore "[s]ince Plaintiff granted MERS the right to
foreclose in his contract, his argument that MERS cannot initiate foreclosure proceedings
is meritless." (Id. at pp. 1189, 1190.) Similarly, another court pointed out that "[u]nder
the mortgage contract, MERS has the legal right to foreclose on the debtor's property. . . .
MERS is the owner and holder of the note as nominee for the lender, and thus MERS can
enforce the note on the lender's behalf." (Morgera v. Countrywide Home Loans, Inc.
(E.D. Cal., Jan. 11, 2010, No. 2:09-cv-01476-MCE-GGH) 2010 U.S. Dist. Lexis 2037,
*22, citation omitted.) Following this same approach, we conclude that Gomes's first and
second causes of action lack merit for the independent reason that by entering into the
deed of trust, Gomes agreed that MERS had the authority to initiate a foreclosure.
as a nominee (i.e., agent) of the noteholder, we need not, and do not, decide whetherMERS is also a "beneficiary" as that term is used in California's nonjudicial foreclosurestatute.
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3. Gomes Has Not Established That He Can Cure the Defects in HisComplaint by Amending
We must also consider whether Gomes has shown that there is a reasonable
probability that he could cure the defects that we have identified in the first and second
causes of action. (Schifando, supra,31 Cal.4th at p. 1081.) Gomes contends that he
could amend his complaint to "plead more specific theories . . . on information and
belief" such as those theories discussed in Ohlendorf, supra, 2010 U.S. Dist. Lexis
31098, and Weingartner, supra, 702 F.Supp.2d 1276.
To attempt to state a claim as in Ohlendorf, Gomes would have to plead that the
specific party who initiated the foreclosure process was not the proper party to do so
because assignments of the deed of trust were improperly backdated. (Ohlendorf, supra,
2010 U.S. Dist. Lexis 31098 at *22-23.) To conform to the theory pled in Weingartner,
Gomes would have to plead that a trustee initiated the foreclosure proceeding but was not
actually the trustee at the time. (Weingartner, supra, 702 F.Supp.2d at p. 1282.)
However, Gomes has conceded that he cannot plead facts meeting those scenarios
"because respondents have not recorded any assignments" or provided any descriptions
of assignments. A "'[p]laintiff may allege on information and belief any matters that are
not within his personal knowledge, if he has information leading him to believe that the
allegations are true'" (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550, italics
added), and thus a pleading made on information and belief is insufficient if it "merely
assert[s] the facts so alleged without alleging such information that 'lead[s] [the plaintiff]
to believe that the allegations are true.'" (Id. at p. 551, fn. 5.) Because Gomes has
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conceded that he has no specific information about assignments of the Note, he would not
be able to plead on information and belief, based on facts leading him to believe they
were true, the theories alleged in Ohlendorfand Weingartner. We therefore conclude
that the trial court properly sustained the demurrer without leave to amend.
DISPOSITION
The judgment is affirmed.
IRION, J.
WE CONCUR:
NARES, Acting P. J.
MCINTYRE, J.
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1
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
CRAIG OHLENDORF,NO. CIV. S-09-2081 LKK/EFB
Plaintiff,
v.
AMERICAN HOME MORTGAGE O R D E RSERVICING, et al.,
Defendants.
/
This case involves the foreclosure of plaintiffs mortgage.
His First Amended Complaint (FAC) names thirteen defendants and
enumerates ten causes of action. Defendants American Home Mortgage
Servicing, Inc. (AHMSI), AHMSI Default Services, Inc. (ADSI),
Deutsche Bank National Trust Company (Deutsche), and Mortgage
Electronic Registration Systems, Inc. (MERS) move to dismiss all
claims against them, and in the alternative, for a more definite
statement of plaintiffs second and seventh causes of action. These
defendants also move to expunge a Lis Pendens recorded by plaintiff
on the subject property and request an award of attorney fees.
Case 2:09-cv-02081-LKK-EFB Document 43 Filed 03/31/10 Page 1 of 25
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These facts are taken from the allegations in the FAC unless1
otherwise specified. The allegations are taken as true for purposesof this motion only.
2
Defendant T.D. Service Company (T.D.) separately moves to dismiss
all claims against it. The court concluded that oral argument was
not necessary in this matter, and decides the motions on the
papers. For the reasons stated below, the motions to dismiss are
granted in part and denied in part, and the motion to expunge is
denied. Because the court grants plaintiff leave to file an amended
complaint, the alternative motion for a more definite statement is
denied.
I. BACKGROUND
A. Refinance of Plaintiffs Mortgage1
On or about February 1, 2007, plaintiff was approached by
defendant Ken Jonobi (Jonobi) of defendant Juvon, who introduced
plaintiff to defendant Anthony Alfano (Alfano), a loan officer
employed by defendant Novo Mortgage (Novo). FAC 24. Defendant
Alfano approached plaintiff, representing himself as the loan
officer for defendant Novo, and solicited refinancing of a loan
currently secured by plaintiffs residence in New Castle,
California. FAC 25. Defendant Alfano advised plaintiff that
Alfano could get plaintiff the best deal and best interest
rates available on the market. FAC 26.
In a loan brokered by Alfano, plaintiff then borrowed
$450,000, the loan being secured by a deed of trust on his
residence. FAC 28. Alfano advised plaintiff that he could get a
Case 2:09-cv-02081-LKK-EFB Document 43 Filed 03/31/10 Page 2 of 25
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fixed rate loan, but the loan sold to him had a variable rate which
subsequently adjusted. Id. At the time of the loan, plaintiffs
Fair Isaac Corporation (FICO) score, which is used to determine
the type of loans for which a borrower is qualified, should have
classified him as a prime borrower, but Alfano classified
plaintiff as a sub-prime borrower without disclosing other loan
program options. FAC 29. Plaintiff was advised by Alfano that if
the loan became unaffordable, Alfano would refinance it into an
affordable loan. FAC 31. Plaintiff was not given a copy of any
loan documents prior to closing, and at closing plaintiff was given
only a few minutes to sign the documents and, as a result, could
not review them. FAC 32. Plaintiff did not receive required
documents and disclosures at the origination of his refinancing
loan, including the Truth in Lending Act (TILA) disclosures and
the required number of copies of the notice of right to cancel. FAC
43. This new loan was completed on or about May 16, 2007.
The deed of trust identified Old Republic Title Company as
trustee, defendant American Brokers Conduit as lender, and
defendant Mortgage Electronic Registration Systems, Inc. (MERS)
as nominee for the lender and beneficiary. FAC 34-35. MERSs
conduct is governed by Terms and Conditions which provide that:
MERS shall serve as mortgagee of record withrespect to all such mortgage loans solely as anominee, in an administrative capacity, forthe beneficial owner or owners thereof fromtime to time. MERS shall have no rightswhatsoever to any payments made on account ofsuch mortgage loans, to any servicing rightsrelated to such mortgage loans, or to anymortgaged properties securing such mortgage
Case 2:09-cv-02081-LKK-EFB Document 43 Filed 03/31/10 Page 3 of 25
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loans. MERS agrees not to assert any rights(other than rights specified in the GoverningDocuments) with respect to such mortgage loans
or mortgaged properties. References herein tomortgage(s) and mortgagee of record shallinclude deed(s) of trust and beneficiary undera deed of trust and any other form of securityinstrument under applicable state law.
FAC 10. MERS was not licensed to do business in California and
was not registered with the state at the inception of the loan. FAC
35.
On or about April 17, 2009, a letter was mailed to defendant
AHMSI which plaintiff alleges was a qualified written request
(QWR) under the Real Estate Settlement Procedures Act (RESPA),
identifying the loan, stating reasons that plaintiff believed the
account was in error, requesting specific information from
defendant, and demanding to rescind the loan under the Truth in
Lending Act (TILA). FAC 36. Plaintiff alleges that AHMSI never
properly responded to this request. Id.
B. Events Subsequent to Refinance of Plaintiffs Loan
On or about June 23, 2009, defendant T.D. filed a notice of
default in Placer County, identifying Deutsche as beneficiary and
AHMSI as trustee. FAC 46. In an assignment of deed of trust dated
July 15, 2009, MERS assigned the deed of trust to AHMSI.
Defendants Request for Judicial Notice in Support of Motion to
Dismiss Plaintiffs First Amended Complaint and Motion to Expunge
Notice of Pendency of Action (Defs. RFJN) Ex. 4. This assignment
of deed of trust purports to be effective as of June 9, 2009. Id.
A second assignment of deed of trust was executed on the same date
Case 2:09-cv-02081-LKK-EFB Document 43 Filed 03/31/10 Page 4 of 25
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as the first, July 15, 2009, but the time mark placed on the second
assignment of deed of trust by the Placer County Recorder indicates
that it was recorded eleven seconds after the first. Defs. RFJN
Exs. 4-5. In this second assignment of deed of trust, AHMSI
assigned the deed of trust to Deutsche. Defs. RFJN Ex. 5. This
assignment indicates that it was effective as of June 22, 2009. Id.
Both assignments were signed by Korell Harp. The assignment
purportedly effective June 9, 2009, lists Harp as vice president of
MERS and the assignment purportedly effective June 22, 2009, lists
him as vice president of AHMSI. Defs. RFJN Exs. 4-5. Six days
later, on July 21, 2009, plaintiff recorded a notice of pendency of
action with the Placer County Recorder. Defs. RFJN Ex. 6. In a
substitution of trustee recorded on July 29, 2009, Deutsche, as
present beneficiary, substituted ADSI as trustee. Defs. RFJN Ex.
7.
II. STANDARD
A. Standard for a Fed. R. Civ. P. 12(b)(6) Motion to Dismiss
A Fed. R. Civ. P. 12(b)(6) motion challenges a complaints
compliance with the pleading requirements provided by the Federal
Rules. In general, these requirements are provided by Fed. R.
Civ. P. 8, although claims that sound[] in fraud or mistake
must meet the requirements provided by Fed. R. Civ. P. 9(b). Vess
v. Ciba-Geigy Corp., 317 F.3d 1097, 1103-04 (9th Cir. 2003).
1. Dismissal of Claims Governed by Fed. R. Civ. P. 8
Under Fed. R. Civ. P. 8(a)(2), a pleading must contain a
short and plain statement of the claim showing that the pleader
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is entitled to relief. The complaint must give defendant fair
notice of what the claim is and the grounds upon which it rests.
Bell Atlantic v. Twombly, 550 U.S. 544, at 555 (2007) (internal
quotation and modification omitted).
To meet this requirement, the complaint must be supported by
factual allegations. Ashcroft v. Iqbal,___ U.S. ___, 129 S. Ct.
1937, 1950 (2009). While legal conclusions can provide the
framework of a complaint, neither legal conclusions nor
conclusory statements are themselves sufficient, and such
statements are not entitled to a presumption of truth. Id. at
1949-50. Iqbal and Twombly therefore prescribe a two step process
for evaluation of motions to dismiss. The court first identifies
the non-conclusory factual allegations, and the court then
determines whether these allegations, taken as true and construed
in the light most favorable to the plaintiffs, plausibly give
rise to an entitlement to relief. Id.; Erickson v. Pardus, 551
U.S. 89 (2007).
Plausibility, as it is used in Twombly and Iqbal, does not
refer to the likelihood that a pleader will succeed in proving
the allegations. Instead, it refers to whether the non-conclusory
factual allegations, when assumed to be true, allow[] the court
to draw the reasonable inference that the defendant is liable for
the misconduct alleged. Iqbal, 129 S.Ct. at 1949. The
plausibility standard is not akin to a probability requirement,
but it asks for more than a sheer possibility that a defendant
has acted unlawfully. Id. (quoting Twombly, 550 U.S. at 557). A
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complaint may fail to show a right to relief either by lacking a
cognizable legal theory or by lacking sufficient facts alleged
under a cognizable legal theory. Balistreri v. Pacifica Police
Dept, 901 F.2d 696, 699 (9th Cir. 1990).
2. Dismissal of Claims Governed by Fed. R. Civ. P. 9(b)
A Rule 12(b)(6) motion to dismiss may also challenge a
complaints compliance with Fed. R. Civ. P. 9(b). See Vess, 317
F.3d at 1107. This rule provides that In alleging fraud or
mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a persons mind may be alleged generally.
These circumstances include the time, place, and specific
content of the false representations as well as the identities of
the parties to the misrepresentations. Swartz v. KPMG LLP, 476
F.3d 756, 764 (9th Cir. 2007) (quoting Edwards v. Marin Park,
Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). In the context of a
fraud suit involving multiple defendants, a plaintiff must, at a
minimum, identif[y] the role of [each] defendant[] in the
alleged fraudulent scheme. Id. at 765 (quoting Moore v. Kayport
Package Express, 885 F.2d 531, 541 (9th Cir. 1989)). Claims
subject to Rule 9(b) must also satisfy the ordinary requirements
of Rule 8.
B. Standard for Motion for a More Definite Statement
"If a pleading to which a responsive pleading is permitted
is so vague or ambiguous that a party cannot reasonably be
required to frame a responsive pleading, the party may move for a
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more definite statement before interposing a responsive
pleading." Fed. R. Civ. P. 12(e). "The situations in which a
Rule 12(e) motion is appropriate are very limited." 5A Wright and
Miller, Federal Practice and Procedure 1377 (1990).
Furthermore, absent special circumstances, a Rule 12(e) motion
cannot be used to require the pleader to set forth "the statutory
or constitutional basis for his claim, only the facts underlying
it." McCalden v. California Library Ass'n, 955 F.2d 1214, 1223
(9th Cir. 1990). However, "even though a complaint is not
defective for failure to designate the statute or other provision
of law violated, the judge may in his discretion . . . require
such detail as may be appropriate in the particular case."
McHenry v. Renne, 84 F.3d 1172, 1179 (9th Cir. 1996).
C. Standard for Motion to Expunge Notice of Pendency of Action(Lis Pendens)
A lis pendens is a recorded document giving constructive
notice that an action has been filed affecting title or right to
possession of the real property described in the notice. Urez
Corp. v. Superior Court, 190 Cal. App. 3d 1141, 1144 (1987). Once
filed, a lis pendens prevents the transfer of that real property
until the lis pendens is expunged or the litigation is resolved.
BGJ Assoc., LLC v. Superior Court of Los Angeles, 75 Cal. App.
4th 952, 966-67 (1999).
A court must expunge a lis pendens without bond if the court
makes any of these findings: (1) plaintiffs complaint does not
contain a real property claim, which is defined as one
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affecting title or possession of specific real property, Cal.
Code. Civ. Pro. 405.4; (2) plaintiff has not established by a
preponderance of the evidence the probably validity of a real
property claim, where probably validity requires a showing that
it is more likely than not that the plaintiff will obtain a
judgment against the defendant on the claim, id. 405.3,
405.32; or (3) there was a defect in service or filing, id.
405.32. See Castaneda v. Saxon Mortgage Servs., Inc., No. 2:09-
01124 WBS DAD, 2010 WL 726903, *8 (E.D. Cal. Feb 26, 2010).
III. ANALYSIS
A. Failure to Allege Ability to Make Tender
Defendants AHMSI, ADSI, Deutsche, and MERS argue that all of
plaintiff claims are barred by plaintiffs failure to allege his
ability to tender the loan proceeds.Defendants assert that
Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101 (1996),
requires a valid tender of payment to bring any claim that arises
from a foreclosure sale. Abdallah, however, merely requires an
allegation to tender for any cause of action for irregularity in
the [foreclosure] sale procedure. Id. at 1109. Here, plaintiff
asserts no causes of action that rely on any irregularity in the
foreclosure sale itself. Indeed, the only claim addressed by the
motions that may concern irregularity in the foreclosure itself
is the wrongful foreclosure claim, which the court rejects below.
Accordingly, the court concludes that plaintiff need not allege
tender, and defendants motion is denied on this ground.
////
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Defendants also argue that California law requires a2
pleading of fraud against a corporation to be even more particular.However, as plaintiff points out, and defendants do not contest,pleading standards are a procedural requirement and while federalcourts are to apply state substantive law to state law claims, theymust always apply federal procedural law. Hanna v. Plumer, 380 U.S.460, 465 (1965).
10
B. Fraud
Plaintiff brings a claim for fraud against all defendants.
The elements of a claim for intentional misrepresentation under
California law are (1) misrepresentation (a false representation,
concealment or nondisclosure), (2) knowledge of falsity, (3)
intent to defraud (to induce reliance), (4) justifiable reliance,
and (5) resulting damage. Agosta v. Astor, 120 Cal. App. 4th 596,
603 (2004). Claims for fraud are subject to a heightened pleading
requirement under Fed. R. Civ. P. 9(b), as discussed above.2
The FACs allegations in support of the claim for fraud as
to moving defendants are that:
Defendant [AHMSI] misrepresented to Plaintiff that[AHMSI] has the right to collect monies from Plaintiffon its behalf or on behalf of others when Defendant[AHMSI] has no legal right to collect such moneys. []. . . Defendant MERS misrepresented to Plaintiff on theDeed of Trust that it is a qualified beneficiary with
the ability to assign or transfer the Deed of Trustand/or Note and/or substitute trustees under the Deedof Trust. Further, Defendant MERS misrepresented thatit followed the applicable legal requirements totransfer the Note and Deed of Trust to subsequentbeneficiaries. [] . . . Defendants T.D., [ADSI], andDeutsche misrepresented to Plaintiff that DefendantsT.D., AHMSI, and Deutsche were entitled to enforce thesecurity interest and has the right to institute a non-judicial foreclosure proceeding under the Deed of Trustwhen Defendant T.D. filed a Notice of Default on June23, 2009. . . .
Case 2:09-cv-02081-LKK-EFB Document 43 Filed 03/31/10 Page 10 of 25
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FAC 110-12. As to plaintiffs claims against AHMSI and MERS,
plaintiff failed to plead the time, place or identities of the
parties of the misrepresentation. Accordingly, the fraud claim is
dismissed as to these defendants. Further, as to defendant
Deutsche, plaintiff has not alleged any misrepresentation made by
these defendants, but rather relies on alleged misrepresentations
made by another defendant concerning them. A claim for fraud
requires that plaintiff plead that the defendant made a
misrepresentation. As such, here, where plaintiff alleges no
statements by defendants ADSI and Deutsche, plaintiff has not
pled a claim against them, and thus, the fraud claims against
them are likewise dismissed. Plaintiffs claim against T.D.,
while pleading the time and place of the alleged
misrepresentation, nonetheless fails to allege the identity of
the parties to the alleged misrepresentation, mainly who made the
statement(s) on behalf of T.D. The court further notes, as
described below, that to the extent that plaintiffs claim relies
on defendants possession of the note prior to foreclosure, this
court recently decided that California law does not impose a
requirement of production or possession of the note prior to
foreclosure, and sees no reason to depart from this reasoning.
Champlaie v. BAC Home Loans Serv., No. S-09-1316 LKK/DAD, 2009 WL
3429622, at *12-14 (E.D. Cal. Oct. 22, 2009). Thus, plaintiffs
fraud claim is dismissed without prejudice as to all moving
defendants.
////
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C. Real Estate Settlement Procedures Act
Plaintiff argues that AHMSI has violated the Real Estate
Settlement Procedures Act (RESPA) by failing to meet its
disclosure requirements and failing to respond to a QWR. FAC
90-91. Defendant AHMSI argues that plaintiff has failed to attach
the alleged QWR or to allege its full contents and that any QWR
must inquire as to the account balance and relate to servicing of
the loan, while plaintiffs alleged QWR was nothing more than a
request for documents. 12 U.S.C. 2605(e)(1) defines a QWR as
written correspondence that identifies the name and account of
the borrower and includes a statement of reasons the borrower
believes the account is in error or provides sufficient detail
regarding other information sought. Here, plaintiff alleges that
its communication with AHMSI identified plaintiffs name and loan
number and included a statement of reasons for plaintiffs belief
that the loan was in error. FAC 91. This is a sufficient
allegation of a violation of 12 U.S.C. 2605(e). Further, a
plaintiff need not attach a QWR to a complaint to plead a
violation of RESPA for failure to respond to a QWR.
AHSMI also argues that plaintiff must factually demonstrate
that written correspondence inquired as to the status of his
account balance and related to servicing of the loan, citing
MorEquity, Inc. v. Naeem, 118 F. Supp. 2d 885 (N.D. Ill. 2000).
This case held that allegations of a forged deed and irregularity
with respect to recording did not relate to servicing as it is
defined in 12 U.S.C. Section 2605(i)(3), and that only servicers
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are required to respond to a QWR under 12 U.S.C. Section
2605(e)(1)(A). Morequity, 118 F. Supp. 2d at 901. Section
2605(i)(3) defines servicing as the receiving [of] any scheduled
periodic payments from a borrower pursuant to the terms of any
loan, including amounts for escrow accounts described in section
2609 of this title, and making [of] the payments of principal and
interest and such other payments with respect to the amounts
received from the borrower as may be required pursuant to the
terms of the loan.
AHMSI does not contend that it is not a servicer but rather
argues that the purported QWR here did not relate to servicing
because it was merely a request for documents. However, 12 U.S.C.
Section 2605(e)(1)(A) requires only that a QWR be received by a
servicer, enable the servicer to identify the name and account of
the borrower, and include a statement of reasons for the
borrowers belief that the account is in error or provide
sufficient detail regarding other information sought. Here,
plaintiff allegedly stated reasons for believing the account was
in error and AHMSI does not contest that it was the servicer of
plaintiffs loan, distinguishing this case from MorEquity.
Accordingly, plaintiff has stated a claim against AHMSI for
violation of RESPA in failing to respond to a QWR.
Plaintiff also alleges that AHMSI violated RESPA by failing
to provide notice to plaintiff of the assignment, sale, or
transfer of servicing rights to plaintiffs loan. FAC 89.
Notice by the transferor to the borrower is required by 12 U.S.C.
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Section 2605(b). AHMSI counters that plaintiff has failed to
allege that servicing rights were actually transferred, that
plaintiff is not even certain which defendant was actually
servicer at any given time, and plaintiffs allegations that
AHMSI is responsible for responding to a QWR creates an inference
that plaintiff believes it is responsible for servicing (and
therefore did not transfer servicing rights). However, moving
defendants themselves ask this court to take judicial notice of
an assignment of deed of trust in which AHMSI purports to assign
the deed of trust to Deutsche. Defs. RFJN ex. 5. This document
is judicially noticeable as a public record. Thus, despite
plaintiffs uncertainty about who held servicing rights when,
AHMSI cannot both ask us to take judicial notice of a transfer of
their rights and contend that a claim that they failed to give
requisite notice pursuant to said transfer is non-cognizable.
Accordingly, the motion to dismiss plaintiffs RESPA claim
with respect to AHMSI is denied.
D. Violations of Californias Rosenthal Fair Debt CollectionPractices Act
Californias Rosenthal Fair Debt Collection Practices Act
(Rosenthal Act) prohibits creditors and debt collectors from,
among other things, making false, deceptive, or misleading
representations in an effort to collect a debt. Cal. Civ. Code
1788, et seq. Pursuant to Cal. Civ. Code Section 1788.17, the
Rosenthal Act incorporates the provisions of the federal Fair
Debt Collection Practices Act prohibiting [c]ommunicating or
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threatening to communicate to any person credit information which
is known or which should be known to be false. 15 U.S.C.
1692e(8).
Plaintiff alleges that AHMSI violated the Rosenthal Act by
making false reports to credit reporting agencies, falsely
stating the amount of debt, falsely stating a debt was owed,
attempting to collect said debt through deceptive letters and
phone calls demanding payment, and increasing plaintiffs debt by
stating amounts not permitted including excessive service fees,
attorneys fees, and late charges. FAC 73-75. AHMSI argues that
foreclosing on a property is not collection of a debt, and so is
not regulated by the Rosenthal Act, that the alleged prohibited
activities resulted from plaintiffs default, and plaintiff has
not alleged when the violations occurred. AHMSI correctly points
out that foreclosure on a property securing a debt is not debt
collection activity encompassed by Rosenthal Act. Cal. Civ. Code
2924(b), Izenberg, 589 F. Supp. 2d at 1199. However,
plaintiffs allegations with respect to this cause of action do
not mention foreclosure, instead alleging violations related to
payment collection efforts. See Champlaie v. BAC Home Loans
Servicing, LP, 2009 WL 3429622 at *18 (E.D. Cal. October 22,
2009). Further, the actions of debt collectors under the act are
not immunized if plaintiff actually owed money. Rather, the
Rosenthal Act prohibits conduct in collecting a debt, whether
valid or not. Accordingly, AHMSIs second argument is without
merit. Lastly, as to AHMSIs third argument, plaintiff has
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AHMSI only appears to move under Federal Rule of Civil3
Procedure 8, and not 9(b).
Defendants only move to dismiss this claim based upon the4
first theory of liability. As such, plaintiff's claim is notdismissed insofar as it depends on these other theories ofliability articulated in his complaint.
16
sufficiently alleged the general time of the conduct he claims
violates the Rosenthal Act. Specifically, the court infers from3
the complaint, that the alleged conduct occurred after plaintiff
stopped making his loan payments. Thus, AHMSIs motion to dismiss
this claim is denied.
E. Wrongful Foreclosure
Plaintiff alleges wrongful foreclosure against AHMSI, T.D.,
ADSI, Deutsche, and MERS because they do not possess the note,
are not beneficiaries, assignees, or employees of the person or
entity in possession of the note, and are not otherwise entitled
to payment, such that they are not persons entitled to enforce
the security interest under Cal. Com. Code Section 3301. FAC
146. Plaintiff also alleges in his complaint that the foreclosure
is wrongful because defendants failed to give proper notice of
the notice of default under Cal. Civ. Code Section 2923.5 and
AHMSI allegedly failed to respond to a QWR. FAC 149-50.4
AHMSI, ADSI, Deutsche, and MERS assert that they need not be
in possession of the note in order to foreclose, and that
recorded documents establish that Deutsche is holder in due
course of the note and deed of trust and the foreclosing entity,
and is thus legally entitled to enforce the power of sale
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provisions of the deed of trust. Defendant T.D. contends that the
holder of the note theory is invalid, as a deed of trust is not a
negotiable instrument, and that the requirements of Cal. Civ.
Code Section 2923.5 have been met.
Californias non-judicial foreclosure process, Cal. Civ.
Code Sections 2924-29241, establishes an exhaustive set of
requirements for non-judicial foreclosure, and the production of
the note is not one of these requirements. Champlaie, 2009 WL
3429622 at *13. Accordingly, possession of the promissory note is
not a prerequisite to non-judicial foreclosure in that a party
may validly own a beneficial interest in a promissory note or
deed of trust without possession of the promissory note itself.
Id. at *13-14. Consequently, defendants need not offer proof of
possession of the note to legally institute non-judicial
foreclosure proceedings against plaintiff, although, of course,
they must prove that they have the right to foreclose. Thus,
plaintiff's wrongful foreclosure claim is dismissed insofar as it
is premised upon this possession of the note theory.
Nonetheless, plaintiff may have stated a claim against
defendants that they are not proper parties to foreclose.
Plaintiff and AHMSI, Deutsche, and MERS have requested that the
court take judicial notice of the assignment of deeds of trust
which purport to assign the interest in the deed of trust first
to AHMSI and then to Deutsche. As described above, the deed of
trust listed MERS as the beneficiary. On June 23, 2009, T.D.
recorded a notice of default that listed Deutsche as the
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beneficiary and AHMSI as the trustee. Nearly a month later, on
July 20, 2009, MERS first recorded an assignment of this mortgage
from MERS to AHMSI, which indicated that the assignment was
effective June 9, 2009. Eleven seconds later, AHMSI recorded an
assignment of the mortgage from AHMSI to Deutsche, which
indicated that the assignment was effective June 22, 2009. The
court interprets plaintiff's argument to be that the backdated
assignments of plaintiff's mortgage are not valid, or at least
were not valid on June 23, 2009, and therefore, Deutsche did not
have the authority to record the notice of default on that date.
Essentially, the court assumes plaintiff argues that MERS
remained the beneficiary on that date, and therefore was the only
party who could enforce the default.
While California law does not require beneficiaries to
record assignments, see California Civil Code Section 2934, the
process of recording assignments with backdated effective dates
may be improper, and thereby taint the notice of default.
Defendants have not demonstrated that these assignments are valid
or that even if the dates of the assignments are not valid, the
notice of default is valid. Accordingly, defendants motion to
dismiss plaintiff's wrongful foreclosure is denied insofar as it
is premised on defendants being proper beneficiaries. As
discussed below, defendant is invited, but not required, to file
a motion addressing the validity of the notice of default given
the suspicious dating in the assignments with respect to both
their motion to dismiss and their motion to expunge the notice of
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pendency.
Thus, Plaintiff has not stated a claim that defendants did
not possess the right to foreclose plaintiffs loan because (1)
defendants did not possess or produce the note or (2) Deutsche
lacked the authority to record a notice of default. For the
reasons described above, this claim is dismissed insofar as
liability is based upon defendants' not possessing the note.
F. Negligence
Plaintiff alleges negligence against all defendants, but
only T.D. has moved to dismiss this claim. Under California law,
the elements of a claim for negligence are (a) a legal duty to
use due care; (b) a breach of such legal duty; and (c) the breach
as the proximate or legal cause of the resulting injury. Ladd v.
County of San Mateo, 12 Cal. 4th 913, 917 (1996) (internal
citations and quotations omitted); see also Cal Civ Code
1714(a).
The other defendants do not directly counter the negligence
claim, but T.D. argues that it fails because the FAC does not
mention it by name or allege what it was supposed to do. The only
notice T.D. received of the negligence allegations against it
through plaintiffs complaint are the words Against all
Defendants and the incorporation of allegations set forth above.
When a defendant must scour the entire complaint to learn of the
basis of the charges against them, they have not received
effective notice. See Baldain v. American Home Mortg. Servicing,
Inc., No. CIV. S-09-0931, 2010 WL 582059, *8 (E.D.Cal. Jan. 5,
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2010). Accordingly, this claim is dismissed as to T.D., with
leave to amend.
G. Violations of California Business and Professions Code Sec.17200
Californias Unfair Competition Law, Cal. Bus. & Prof. Code
17200, (UCL) proscribes unlawful, unfair or fraudulent
business acts and practices. Plaintiff claims all defendants
violated the UCL. The claim against AHMSI is based on its alleged
violations of the Rosenthal Act, RESPA, negligence, fraud, and
illegal foreclosure activities. FAC 122. The claim against
T.D., Deutsche, and MERS is based on allegations of negligence,
fraud, and illegal foreclosure activities. FAC 124.
As discussed above, plaintiff has alleged valid causes of
action against AHMSI for violation of the Rosenthal Act and RESPA
and for negligence. Plaintiff has also stated valid claims
against Deutsche and MERS for negligence. However, the court has
dismissed the negligence claim against T.D. and the fraud and
wrongful foreclosure claims against all defendants, and thus,
these claims cannot form the basis of a violation of UCL under
the present complaint.
Plaintiff UCL claim is therefore dismissed as to T.D., and
as to the AHMSI, Deutsche, and MERS insofar as the claim is
predicated on fraud and wrongful foreclosure under the possession
or production of the note theory.
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26Plaintiff bears the burden of proof. Cal. Code Civ. Pro. 5
405.30.
21
H. Motion to Expunge Notice of Pendency of Action (Lis Pendens)
1. Merits of Motion
Defendants AHMSI, Deutsche, and MERS move to expunge notice
of pendency of action. As described above, in order to succeed in
opposing a motion to expunge a notice of pendency of action,
plaintiff must establish (1) that his complaint contains a real5
property claim, (2) that it is more likely than not that he will
obtain a judgment against the defendant, and (3) that there was a
defect in service or filing. See Castaneda v. Saxon Mortgage
Servs., Inc., No. 2:09-01124 WBS DAD, 2010 WL 726903, *8 (E.D.
Cal. Feb 26, 2010). Accordingly, plaintiff must tender evidence
to successfully demonstrate that he is more likely than not to
obtain a judgment against defendants. Because plaintiff must
prevail on all of these elements, the court need not resolve all
three. Rather, the court grants defendants motion on all claims
save one, because plaintiff has not established that it is more
likely than not that he will obtain a judgment against the
defendant.
As an initial matter, the only evidence plaintiff has
presented to establish he is more likely than not to succeed on
the merits of his claims are the recorded documents filed in
defendants' request for judicial notice. This in and of itself
supports the granting of defendants motion on most of his
claims. Instead of establishing his likelihood of success on the
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As noted above, plaintiff also alleges in his complaint that6
the foreclosure is wrongful because the defendants failed to giveproper notice of the notice of default. As further noted, thedocuments that the defendants requested the court to judiciallynotice raise questions about the propriety of the notice. Underthe circumstances, the court will not expunge the lis pendens.
RESPA only affords the following types of relief for7
individual plaintiffs:(A) any actual damages to the borrower as a result of
the failure; and(B) any additional damages, as the court may allow, in
the case of a patter
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