Bever v. Cal-W. Reconveyance Corp.

• Decision Date: 01 October 2013
• Docket Number: 1:11-CV-1584 AWI SKO
• Parties: GLENN W. BEVER, Plaintiff, v. CAL-WESTERN RECONVEYANCE CORP., CITIMORTGAGE, INC., and MORTGAGE ELECTRONIC REGISTRATION SERVICES, INC., Defendants.
• Court: U.S. District Court — Eastern District of California

GLENN W. BEVER, Plaintiff, v. CAL-WESTERN RECONVEYANCE CORP., CITIMORTGAGE, INC.,and MORTGAGE ELECTRONIC REGISTRATION SERVICES, INC., Defendants.

1:11-CV-1584 AWI SKO

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: October 1, 2013

ORDER ON DEFENDANTS'

MOTIONS TO DISMISS

(Doc. No. 47)

This is a mortgage related case brought by PlaintiffGlenn Bever("Bever") against Cal-Western Reconveyance Corp.("Cal-Western"), Citi Mortgage, Inc.("Citi"), and Mortgage Electronic Registration Services, Inc.("MERS").The active complaint is the First Amended Complaint ("FAC"), which was filed following the Court's order granting a Rule 12(b)(6) motion to dismiss.The FAC alleges five causes of action: (1) quiet title; (2)15 U.S.C. § 1692;(3)12 U.S.C. § 2605;(4) unjust enrichment; and (5) fraud and injurious falsehood.Cal-Western has filed a Rule 12(b)(6) motion to dismiss, and MERS and Citi have filed a separate motion to dismiss.For the reasons that follow, Citi and MERS's motion will be granted and Cal-Western's motion will be stayed.

BACKGROUND¹

In June 2003, Bever obtained a loan for approximately $212,000 on real property locatedin Fresno County.The loan was secured by deed of trust.The deed of trust identified First Pacific Financial, Inc. as the lender, Carriage Escrow, Inc. as the trustee, and MERS as the beneficiary and nominee of First Pacific Financial.The deed of trust was recorded in the Fresno County Recorder's Office on June 20, 2003.

On March 20, 2006, Bever and his wife deeded the real property to themselves in the capacity of trustees of The Bever Family Trust.

On May 27, 2011, an assignment of deed of trust was recorded in the Fresno County Recorder's Office.The assignment purports to assign MERS's beneficial interest in the deed of trust to Citi.The assignment is signed by Brenda Enriquez as an Assistant Secretary of MERS.

On June 1, 2011, a Substitution of Trustee was executed by Citi.This document substituted Cal Western as the trustee.The Substitution of Trustee was recorded in the Fresno County Recorder's Office on June 28, 2011.

On June 3, 2011, a notice of default and election to sell was sent to Bever by Cal Western.

On September 6, 2011, Cal-Western sent Bever a notice of trustee's sale, which set sale of Bever's property for September 27, 2011.The sale was later moved to October 27, 2011.

On October 26, 2011, the Court granted Bever's application for a temporary restraining order and set a briefing schedule for a preliminary injunction.²

RULE12(b)(6) FRAMEWORK

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted."Fed. R. Civ. P. 12(b)(6).A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory.Conservation Force v. Salazar, 646 F.3d 1240, 1242(9th Cir.2011);Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121(9th Cir.2008).In reviewing a complaint under Rule 12(b)(6), all allegations ofmaterial fact are taken as true and construed in the light most favorable to the non-moving party.Faulkner v. ADT Sec. Servs., 706 F.3d 1017, 1019(9th Cir.2013);Johnson, 534 F.3d at 1121.However, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences."Willson v. Hewlett-Packard Co., 668 F.3d 1136, 1145 n. 4(9th Cir.2012);Sprewell v. Golden State Warriors, 266 F.3d 979, 988(9th Cir.2001).To "avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949(2009);seeBell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570(2007)."A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged."Iqbal, 129 S.Ct. at 1949.The Ninth Circuit has distilled the following principles from Iqbaland Twombly:

First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.

Starr v. Baca, 652 F.3d 1202, 1216(9th Cir.2011).In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint, but it may take judicial notice of public records outside the pleadings, review materials which are properly submitted as part of the complaint, and review documents that are incorporated by reference in the Complaint if no party questions authenticity.SeeKnievel v. ESPN, 393 F.3d 1068, 1076(9th Cir.2005);Lee v. City of Los Angeles, 250 F.3d 668, 688-89(9th Cir.2001).If a motion to dismiss is granted, "[the]district court should grant leave to amend even if no request to amend the pleading was made . . . ."Henry A. v. Willden, 678 F.3d 991, 1005(9th Cir.2012).However, leave to amend need not be granted if amendment would be futile or if the plaintiff has failed to cure deficiencies despite repeated opportunities.SeeMueller v. Aulker, 700 F.3d 1180, 1191(9th Cir.2012);Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003(9th Cir.2010).

CITI & MERS'S MOTION

1.1st Cause of Action - Quiet Title (MERS & CITI)Defendants' Argument

Defendants argue that this cause of action should be dismissed for several reasons.First, the FAC does not properly allege that Bever can tender the debt owed.In fact, Bever attempted to send a check to Citi to pay off the debt, but the check could not be cashed because Bever wrote, "NOT FOR DEPOSIT."Second, Bever is improperly challenging the standing of the beneficiary to foreclose.There is no requirement that a foreclosing party possess the note and deed of trust at the same time.Further, MERS had the authority to assign its interest in the deed of trust, and its assignment to Citi was proper.Third, reliance on a "vapor money" theory is improper.Fourth, Bever's allegations regarding signatory authority are conclusory and speculative, and Bever does not have standing to challenge the assignment.Fifth, MERS's participation in the series of transactions is proper, and no defendant is required to posses or produce the original note in order to foreclose.

Plaintiff's Opposition

Bever argues that the FAC does not allege any amount owing for tender purposes.Nevertheless, Bever states that he is willing and able to tender the amount owed, provided Defendants establish their entitlement to receive monies under the deed of trust.Bever also argues that he can bring an action challenging the authority to foreclose where the wrong party has initiated foreclosure proceedings, and the FAC alleges that the entity that intends to foreclose is not the trustee, mortgagee, or beneficiary.Bever also argues that the FAC has alleged that the signatories of various documents did not hold the titles indicated or were not authorized agents.That is, he is broadly alleging that the signatories were not authorized by any means to do what they did.Further, relying on a bankruptcy case, Bever argues that MERS's transfer of the deed of trust was void because MERS is merely a nominee of the lender and did not transfer the note.Thus, Citi is not a beneficiary.Finally, Bever argues that he is not alleging a "vapor money" theory, rather he is contending that a national bank, Lehman Brothers, improperly lent its credit through the front man lender, "First Pacific Financial, Inc."

Legal Standard

Under California law, a claim for quiet title must be in a verified complaint and include: (1) a description of the property that is the subject of the action, (2) the title of the plaintiff as to which a determination under this chapter is sought and the basis of the title, (3) the adverse claims to the title of the plaintiff against which a determination is sought, (4) the date as of which the determination is sought, and (5) a prayer for the determination of the title of the plaintiff against the adverse claims.SeeCal. Code Civ. Pro. § 761.020;Kimball v. Flagstar Bank F.S.B., 881 F.Supp.2d 1209, 1220(S.D. Cal.2012);Hamilton v. Bank of Blue Valley, 746 F.Supp.2d 1160, 1177-78(E.D. Cal.2010);Rosenfeld v. JPMorgan Chase Bank, N.A., 732 F.Supp.2d 952, 975-76(N.D. Cal.2010)."A basic requirement of an action to quiet title is an allegation that plaintiffs are the rightful owners of the property, i.e. that they have satisfied their obligations under the deed of trust."Rosenfeld, 732 F.Supp.2d at 976.A "mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee."Kimball, 881 F.Supp.2d at 1220;Hamilton, 746 F.Supp.2d at 1177-78;Rosenfeld, 732 F.Supp.2d at 976;Shimpones v. Stickney, 219 Cal. 637, 649(1934).

Discussion

This cause of action depends largely on two premises - MERS did not have the authority or ability to assign the beneficial interest in the deed of trust, and MERS did not assign its interest in the deed of trust to Citi.

With respect to the first premise, California courts recognize that MERS as a nominee and beneficiary under a deed of trust has the authority to assign its interest in the deed of trust and that such an assignment is valid.SeeLane v. Vitek Real Estate Indus. Group, 713 F.Supp.2d 1092, 1099(E.D. Cal.2010);Siliga v. Mortgage Electronic Registration Systems, Inc., 219 Cal.App.4th 75, 83-85(2013);Herrera v. Federal Nat'l Mortg. Assn., ...