gomesbrief-dbntc- filed-1 w

8/7/2019 GomesBrief-DBNTC- FILED-1 w

1/54


2/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

SUPPLEMENTAL BRIEF RE DEUTSCHE BANK NATIONAL TRUST COMPANYS MOTION FOR RELIEF FROM THE

AUTOMATIC STAY

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Cir. BAP, unpublished memorandum decision dated 03/2009).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

topForec

losureF rau

d .com


3/54


4/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4


AUTOMATIC STAY

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.

www.S

topForec

losureF rau

d .com


5/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5


AUTOMATIC STAY

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

servicing rights in a mortgage loan.www.S

topForec

losureF rau

d .com


6/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6


AUTOMATIC STAY

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

without Debtors consent.www.S

topForec

losureF rau

d .com


7/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7


AUTOMATIC STAY

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.

d. However, improper assignment of DOT, which affected legalwww.S

topForec

losureF rau

d .com


8/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8


AUTOMATIC STAY

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

judicially-created set of principles that places limits on the class of persons whowww.S

topForec

losureF rau

d .com


9/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9


AUTOMATIC STAY

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

www.S

topForec

losureF rau

d .com


10/54

1

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

www.S

topForec

losureF rau

d .com


11/54

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

www.S

topForec

losureF rau

d .com


12/54

3

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

www.S

topForec

losureF rau

d .com


13/54

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

www.S

topForec

losureF rau

d .com


14/54

5

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.

Exhibit 1

www.S

topForec

losureF rau

d .com


15/54

6

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

www.S

topForec

losureF rau

d .com


16/54

7

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

www.S

topForec

losureF rau

d .com


17/54

8

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.)

Exhibit 1

www.S

topForec

losureF rau

d .com


18/54

9

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.)

Exhibit 1

www.S

topForec

losureF rau

d .com


19/54

10

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

Exhibit 1

www.S

topForec

losureF rau

d .com


20/54

11

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."].)

Exhibit 1

www.S

topForec

losureF rau

d .com


21/54

12

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

Exhibit 1

www.S

topForec

losureF rau

d .com


22/54

13

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.

Exhibit 1

www.S

topForec

losureF rau

d .com


23/54

14

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

Exhibit 1

www.S

topForec

losureF rau

d .com


24/54

15

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.

Exhibit 1

www.S

topForec

losureF rau

d .com


25/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

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

Exhibit 2

www.S

topForec

losureF rau

d .com


26/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

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


Exhibit 2

www.S

topForec

losureF rau

d .com


27/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

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


Exhibit 2

www.S

topForec

losureF rau

d .com


28/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

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


Exhibit 2

www.S

topForec

losureF rau

d .com


29/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

5

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


Exhibit 2

www.S

topForec

losureF rau

d .com


30/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

6

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


Exhibit 2

www.S

topForec

losureF rau

d .com


31/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

7

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


Exhibit 2

www.S

topForec

losureF rau

d .com


32/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

8

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


Exhibit 2

www.S

topForec

losureF rau

d .com


33/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

9

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.

////


Exhibit 2

www.S

topForec

losureF rau

d .com


34/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

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. . . .


Exhibit 2

www.S

topForec

losureF rau

d .com


35/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

11

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.

////


Exhibit 2

www.S

topForec

losureF rau

d .com


36/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

12

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


Exhibit 2

www.S

topForec

losureF rau

d .com


37/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

13

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.


Exhibit 2

www.S

topForec

losureF rau

d .com


38/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

14

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


Exhibit 2

www.S

topForec

losureF rau

d .com


39/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

15

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


Exhibit 2

www.S

topForec

losureF rau

d .com


40/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

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


Exhibit 2

www.S

topForec

losureF rau

d .com


41/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

17

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


Exhibit 2

www.S

topForec

losureF rau

d .com


42/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

18

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


Exhibit 2

www.S

topForec

losureF rau

d .com


43/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

19

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,


Exhibit 2

www.S

topForec

losureF rau

d .com


44/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

20

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.

////

////


Exhibit 2

www.S

topForec

losureF rau

d .com


45/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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


Exhibit 2

www.S

topForec

losureF rau

d .com


46/54

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

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