Jackson v. Specialized Loan Servicing, LLC
| Decision Date | 31 October 2014 |
| Docket Number | CASE NO. CV 14-05981 MMM (PLAx) |
| Court | U.S. District Court — Central District of California |
| Parties | HERTIS JACKSON, an individual; JOHN T. BORENIN, an individual; KASSEM DICKENS, an individual; DIANE DIEMER, an individual; DEBORAH KAMBICH, an individual; EDWARD MARTINEZ, an individual; RAY MENDOZA, an individual; LINDA PRICE, an individual; IAN SIMANGO, an individual; ANDREA SOMERVILLE, an individual; ESEQUIEL VENEGAS, an individual; and BRIAN WOODS, an individual, Plaintiffs, v. SPECIALIZED LOAN SERVICING, LLC, a Colorado Limited Liability Company; and DOES 1 through 25, inclusive, Defendant. |
On April 2, 2014, Hertis Jackson, John T. Borenin, Kassem Dickens, Diane Diemer, Deborah Kambich, Edward Martinez, Ray Mendoza, Linda Price, Ian Simango, Andrea Somerville, Esequiel Venegas, and Brian Woods (collectively "plaintiffs") filed this action in LosAngeles Superior Court against Specialized Loan Servicing, LLC ("SLS") and various fictitious defendants.1 After being served on July 1, 2014,2 SLS timely removed the action to this court on July 30, 2014, invoking the court's diversity jurisdiction under 28 U.S.C. § 1332(a). On August 5, 2014, SLS filed a motion to dismiss the complaint,3 which plaintiffs oppose.4 Plaintiffs filed a motion to remand on August 12, 2014,5 which SLS opposes.6
Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the court finds this matter appropriate for decision without oral argument. The hearing calendared for November 3, 2014 is therefore vacated, and the motions are taken off calendar.
Lenders purportedly securitize home loans because they desire to convert non-liquid thirty-year mortgage loans into relatively safe, liquid securities that can be bought, sold, and traded on the stock market, e.g., certificates, bonds, and stock.8 As part of the securitization process, lenders allegedly originate mortgage loans and pool them so that they can be sold together as residential mortgage-backed securities ("RMBS's"); this purportedly creates a steady flow ofrevenue for the funding of new mortgage loans.9 Lenders who securitize non-liquid mortgages and deeds of trust allegedly enjoy favorable tax benefits under the Real Estate Mortgage Investment Conduit ("REMIC") Act.10 Plaintiffs assert that the REMIC Act allows lenders and investment banks to "operate without the hindrance of banking regulations, avoid liability and tax issues," and increase profits by pooling and reselling home loans to investors in Real Estate Investment Trusts ("REIT's").11
Plaintiffs contend that the REMIC Act allows RMBS's to achieve "bankruptcy remoteness" if two "true sales" of the loan occur.12 To effect a "true sale" under the REMIC Act, a lender purportedly must transfer the physical note and have it endorsed by the assignee.13 The lender must also allegedly observe: (1) New York state law; (2) the express terms of the REIT's Pooling and Servicing Agreement ("PSA"); (3) the Mortgage Loan Purchase Agreement ("MLPA"); and (4) the Uniform Commercial Code ("UCC").14
Plaintiffs contend that Mortgage Electronic Registration Systems ("MERS") is a shell corporation formed by mortgage lenders to circumvent the REMIC Act's "true sale" requirements and avoid having physically to endorse, assign, transfer, or record the note following securitization of the loan.15 They assert that SLS and other lenders have utilized MERS to conceal the identity of the holder in due course ("HIDC") of the note, leaving borrowers with no way toascertain the note holder.16 Because the HIDC is the party that can demand payment of the loan, and the HIDC's identity is concealed, plaintiffs allege that they do not know whether an entity demanding payment is the holder of the note and has the right to demand payment.17
The gravamen of plaintiffs' claims is best summarized in paragraph sixteen of the complaint:
18
Plaintiffs are twelve individuals, each with a home mortgage loan that is being serviced by SLS.19 SLS is a loan servicing company that conducts business in all fifty states and holds itself out as "a nationally recognized leader in the residential mortgage servicing business [that]specializes in the servicing of single-family residential mortgage loans [and] has been in business since 2003."20
Plaintiffs assert that the PSAs governing the REITs in which their home loans were pooled required that all endorsements, transfers, and assignments of a note occur prior to the closing of the REIT.21 Despite this requirement, SLS and certain unnamed predecessors in interest purportedly failed to endorse, transfer, and assign plaintiffs' notes prior to the closing of the relevant REITs.22 Plaintiffs maintain that the failure to record any assignment of the loans to a REIT was also a violation of state recording statutes.23 They allege, on information and belief, that SLS and unnamed defendants routinely fail to endorse notes and record assignments until they seek to initiate non-judicial foreclosure proceedings years after the closing of the relevant REITs.24 They contend that the failure to record assignments of their loans prior to the REITs' closing date precludes subsequent assignees from asserting that they are the HIDC under the note, which in turn prevents them from demanding payment from plaintiffs.25 Due to SLS's purported failure properly to endorse the notes and record assignments, plaintiffs further allege, on information and belief, that SLS is not an HIDC of the notes.26
Plaintiffs contend that, to cure these defects in the chain of title, their loans have been unlawfully moved into and out of REITs in violation of the loans' PSAs and state statutes.27 Theyassert, on information and belief, that "based upon this common practice in the mortgage industry of losing track of the chains of title for mortgage notes as a result of securitization," SLS no longer owns the notes and deeds of trust related to plaintiffs' loans, and has no servicer rights or authority respecting the loans.28 They contend that, despite the fact that SLS "ha[s] no ownership interest in such loans, nor any 'servicer' rights," it has been collecting monthly loan payments from each plaintiff as a purported "servicer" of the loans for years.29 Because SLS has in this way fraudulently held itself out as a "servicer" of plaintiffs' mortgage loans, plaintiffs assert they have been "wrongfully dispossessed of thousands of dollars."30
Plaintiffs also allege that the purportedly "failed securitization process" has resulted in their notes being "irreparably split from their corresponding trust deeds."31 As a result, plaintiffs contend that MERS as principal, and SLS as the servicer, lack any authority to enforce the notes or collect payments thereunder.32 They assert there is "a serious question and dispute as to the very ownership and possession of the notes and deeds at issue."33
Plaintiffs' complaint alleges claims for fraud;34 conspiracy to commit fraud;35 conversion;36 conspiracy to convert;37 violation of the Rosenthal Fair Debt Collection Practices Act, California Civil Code § 1788 et seq.;38 violation of California's Unfair Competition Law ("UCL"), California Business and Professions Code § 17200 et seq.;39 and unjust enrichment.40 They seek general damages, special damages, restitutionary damages, and pre- and post-judgment interest.41 Each plaintiff expressly disclaims that his or her total damages exceed $75,000. Each also asserts that he or she is not seeking injunctive or declaratory relief.42
SLS requests that the court take judicial notice of sixteen documents related to plaintiffs' claims.43 All of the documents have either been recorded by a government office or are bankruptcy court filings.44 Plaintiffs do not oppose SLS's request.
A court can consider evidence proffered by the parties in deciding a remand motion, including documents that can be judicially noticed. See, e.g., Ryti v. State Farm General Ins. Co., No. C 12-01709 JW, 2012 WL 2339718, *1 n. 4 (N.D. Cal. May 30, 2012) (); Vasquez v. Arvato Digital Services, LLC, No. CV 11-02836 RSWL (AJWx), 2011 WL 2560261, *2 (C.D. Cal. June 27, 2011) (); Aniel v. TD Serv. Co., No. C 10-05323 WHA, 2011 WL 109550, *3 (N.D. Cal. Jan. 13, 2011) (); Deutsche Bank Nat. Trust Co. v. Sitanggang, No. 1:09cv01835 AWI DLB, 2010 WL 144439, * 1 n. 1 (E.D. Cal. Jan. 11, 2010) (...
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