Morgan v. U.S. Bank Nat'l Ass'n, C 12-03827 CRB
| Decision Date | 07 December 2012 |
| Docket Number | No. C 12-03827 CRB,C 12-03827 CRB |
| Parties | KELVIN MORGAN, Plaintiff, v. US BANK NATIONAL ASSOCIATION, ET AL., Defendants. |
| Court | U.S. District Court — Northern District of California |
This is a motion to dismiss Plaintiff Kelvin Morgan's action against Defendants US Bank National Association, Mortgage Electronic Registration Systems, Inc. (MERS), and Wells Fargo Bank. Plaintiff alleges thirteen causes of action against Defendants, but the overall theory of his case is that Defendants did not own the Note and therefore had no right to foreclose. Compl. (dkt. 1) ¶ 18. Because that theory has been thoroughly rejected by courts in this District, and because Plaintiff fails to state a claim for the specific causes of action he alleges, the Court GRANTS the motion to dismiss on all counts, with leave to amend only as to the negligence claim.
Defendants in this case have already foreclosed on Plaintiff's home and now seek to evict him. Id. Plaintiff brings suit contending that "the foreclosure is/was void in effectbecause Defendants did not actually own Plaintiff's Note." Id. The Complaint attaches none of the loan documents, but Defendants filed the relevant loan documents as a Request for Judicial Notice. RJN (dkt. 8), Exs. A-M.
Plaintiff owned a home at 53 Via Pescara in American Canyon, California. Compl. ¶ 8. Plaintiff claims that on or around June 23, 2005, he obtained a mortgage loan from Advantix Lending, Inc. and executed a Note and Deed of Trust "in favor of Advantix and MERS as a nominal beneficiary." Id. ¶ 8, 19. Then, Advantix allegedly securitized the Note by transferring the "Note and Deed of Trust to the Sasco 2005-WF4 trust" (Trust). Id. ¶ 3, 20. Plaintiff claims that the Trust was formed by Pooling and Servicing Agreements (PSAs) and closed on or around August 31, 2005. Id. ¶ 28. US National Bank (Trustee) purportedly acted as trustee and retained Wells Fargo (Servicer) to service the trust loans. Id. ¶ 8. However, according to Plaintiff, Defendants failed to register the Trust with the Securities and Exchange Commission, so copies of the PSA are allegedly not available to Plaintiff. Id. Fidelity National Title company (Foreclsoing Trustee) ultimately foreclosed on Plaintiff's property. Id.
Plaintiff states that it is Defendant's position that the Trust owns the mortgage. Id. ¶ 26. Conversely, Plaintiff contends that the Trust does not own the mortgage, lacks standing to foreclose, and "should be required to prove that they are in fact the owner of the Plaintiff's mortgage note and that they had the right to foreclose." Id. It is Plaintiff's belief that "Advantix still has the rights conveyed, including the right to a non-judicial foreclosure, under the deed of trust." Id. ¶ 29.
According to Plaintiff, the Note was never securitized because "the Note and Deed of Trust were not assigned to the Trust until July 29, 2009, well past the August 31, 2005 Closing date." Id. This was allegedly a violation of the PSA and prevented the loan from becoming part of the Trust. Id. Similarly, Plaintiff claims that his Note was not "properly endorsed, transferred, accepted, and deposited in the Trust on or before the 'closing dates,'" id. ¶ 37, and that the Note lacks a complete chain of endorsements. Id. ¶ 32. This allegedly violated the terms of the PSA. Id. ¶ 37.
Plaintiff brings thirteen causes of action: (1) Declaratory Relief pursuant to 28 U.S.C. §§ 2201, 2202; (2) Negligence; (3) Quasi Contract; (4) violation of the Helping Families Save Their Homes Act of 2009 (TILA), 15 U.S.C. § 1641(g); (5) violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq.; (6) violation of Cal. Business & Professions Code §§ 17200, 17500; (7) Accounting; (8) Constructive Trust; (9) Wrongful Foreclosure and Set Aside Trustee's Sale; (10) Void or Cancel Trustee's Deed Upon Sale; (11) Quiet Title; (12) Breach of Contract; and (13) Civil Conspiracy.
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in a complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." "Detailed factual allegations" are not required, but the Rule does call for sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). According to the Supreme Court, "a claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In determining facial plausibility, whether a complaint states a plausible claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. Allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).
A complaint should not be dismissed without leave to amend unless it is clear that the claims could not be saved by amendment. Swartz v. KPMG LLP, 476 F.3d 756, 760 (9th Cir. 2007).
Plaintiff's complaint is based on four related theories. First, that the loan was improperly securitized because Defendants violated the terms of the PSA and they therefore have no enforceable rights as to the property. Compl. ¶¶ 29-33, 37-38, 55. Secondly, that "none of Defendants were present holders in due course of Plaintiff's Note such that they can enforce Plaintiff's obligation and demand mortgage payments." Id. ¶ 41. Third, that substitution of the Foreclosing Trustee was void because it was executed not by Advantix, but by Defendants in this case. Id. ¶ 47. Accordingly, Plaintiff alleges that "Foreclosing Trustee did not have standing to initiate a foreclosure action . . . ." Id. ¶ 62. Finally, Plaintiff alleges that "Trustee has already been paid in full on Plaintiff's debt obligation" because the Trust has been "dismantled due to the disbursement and receipt of mortgage insurance payouts to Trustee . . . ." Id. ¶ 43.
Plaintiff claims that the Note was not properly securitized because (1) the loan was assigned to the Trust on July 29, 2009, but the Trust's closing date was long before — around August 31, 2005; and (2) no chain of endorsements was put in place at the closing date as purportedly required by the PSA. Id. ¶¶ 28-32. With respect to the first reason, Plaintiff states that "[b]y the PSA's own likely1 terms, Plaintiff's Note could not have been a part of the Trust." Id. ¶ 29. Apparently, this is because the "PSA requires [a] complete chain of endorsements to be in place by the Trust's Closing Date or under no circumstances later than 90 days after the Trust's Closing Date." Id. ¶ 31. However, "[t]o the extent Plaintiff bases [his] claims on the theory that [Trustee] allegedly failed to comply with the terms of the PSA, the court finds that [he] lacks standing to do so because [he] is neither a party to, nor a third party beneficiary of, that agreement." Sami v. Wells Fargo Bank, No. C 12-00108 DMR, 2012 WL 967051, at *6 (N.D. Cal. Mar. 21, 2012); Robinson v. BAC Home LoansServicing, LP, No. CV11-1920-PHX-JAT, 2012 WL 1520125, at *4 (D. Ariz. May 1, 2012) (same); Frazer v. Deutsche Bank Nat'l Trust Co., No. 11-CV-5454 RBL, 2012 WL 1821386, at *2 (W.D. Wash. May 18, 2012) (same). Accordingly, the theory lacks merit.
Plaintiff points to California Commercial Code Section 3301's limitations on persons entitled to enforce a negotiable instrument to allege that "none of [the] Defendants were present holders in due course of Plaintiff's Note . . . ." Compl. ¶¶ 40-41. Defendants correctly point out that this argument has been repeatedly rejected by the courts.
California Civil Code §§ 2924 et seq. comprehensively regulates non-judicial foreclosure under deeds of trust. Cilluffo v. Washington Mut., No. C09-02518 HRL, 2010 WL 431896, at *3 (N.D. Cal. Feb. 2, 2010) (citing Moeller v. Lien, 25 Cal. App. 4th 822, 830 (Ct. App. 1994)). "California courts have consistently held that the Civil Code provisions cover every aspect of the foreclosure process and are 'intended to be exhaustive.'" Gardner v. Am. Home Mortg. Servicing, Inc., 691 F. Supp. 2d 1192, 1202 (E.D. Cal. 2010) (internal quotations and citations omitted). Under California Civil Code section 2924(a)(1), a non-judicial foreclosure may be initiated by a "trustee, mortgagee, or beneficiary, or any of their authorized agents . . . ." Cal. Civ. Code § 2924(a)(1). "Contrary to Plaintiff's assertions, the party initiating the foreclosure process need not be in possession of the note." Gardner, 691 F. Supp. 2d at 1202; Cilluffo, 2010 WL 431896, at *3 (). Furthermore, "even if defendants lack a beneficial interest in plaintiff['s] note[], such an interest is unnecessary 'to commence a non-judicial foreclosure sale.'" Rosas v. Carnegie Mortg., LLC, No. CV 11-7692 CAS CWX, 2012 WL 1865480, at *7 (C.D. Cal. May 21, 2012) (quoting Lane v. Vitek Real Estate Indus. Group, 713 F.Supp.2d 1092, 1099 (E.D. Cal. 2010). Accordingly, this theory lacks merit.
Plaintiff also claims that "Advantix failed to file a valid Substitution of Trustee, substituting Foreclsoing Trustee as the new trustee" in violation of Provision 24 of the Deed of Trust and Cal. Civ. Code section 2934(a). Compl. ¶ 47. The...
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