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MERS lost its petition for review to the Texas Supreme Court: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENPOINT FUNDING v. NANCY GROVES

MERS lost its petition for review to the Texas Supreme Court: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENPOINT FUNDING v. NANCY GROVES


Here is the Link: http://www.supreme.courts.state.tx.us

ORDERS ON PETITIONS FOR REVIEW

THE FOLLOWING PETITIONS FOR REVIEW ARE DENIED:

11/ 0555

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENPOINT FUNDING v. NANCY GROVES; from Harris County; 14th district (14/10/00090/CV, ___ SW3d ___, 04/12/11)

In The
Fourteenth Court of Appeals

NO. 14-10-00090-CV

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENSPOINT FUNDING, Appellant

V.

NANCY GROVES, Appellee

On Appeal from the 334th District Court
Harris County, Texas
Trial Court Cause No. 2009-29112

EXCERPT:

A justiciable controversy between the parties must exist at every stage of the legal proceedings. Williams v. Lara, 52 S.W.3d 171, 184 (Tex. 2001). We cannot decide moot controversies. Nat’l Collegiate Athletic Ass’n v. Jones, 1 S.W.3d 83, 86 (Tex. 1999). In order to maintain a suit to quiet title, there must be an assertion by the defendant of a claim to some interest adverse to plaintiff‘s title; and the claim must be one that, if enforced, would interfere with the plaintiff‘s enjoyment of the property. Mauro v. Lavlies, 386 S.W.2d 825, 826–27 (Tex. Civ. App.—Beaumont 1964, no writ) (internal quotation omitted) (no justiciable controversy existed because the judgments defendants obtained against plaintiffs asserted no claims against plaintiffs‘ property and defendants made no attempt to create a lien upon property or to have property sold to satisfy judgments).

Groves alleged in her petition that MERS‘s deed of trust purported to create a lien for security purposes on Plaintiff‘s property as described.? This alleged lien constitutes an adverse interest to Groves‘s title, which, if enforced, would interfere with her enjoyment of the property. See id. Therefore, a justiciable controversy existed, and the trial court had subject matter jurisdiction over the case. See Williams, 52 S.W.3d at 184; Mauro, 386 S.W.2d at 826–27.4

We overrule MERS‘s second issue.

CONCLUSION

Having overruled both of MERS‘s issues on appeal, we affirm the trial court‘s judgment.

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EMERALD GARDENS CONDO v. U.S. BANK | Washington State Appeals Court “QUIET TITLE BY DEFAULT”

EMERALD GARDENS CONDO v. U.S. BANK | Washington State Appeals Court “QUIET TITLE BY DEFAULT”


IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

EMERALD GARDENS
CONDOMINIUM ASSOCIATION,
Appellant,

v.

U.S. BANK N.A., AS TRUSTEE FOR
THE REGISTERED HOLDERS OF
MASTR ASSET BACKED
SECURITIES TRUST, 2006-AM1,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2006-AM1,
Respondent.

Leach, A.C.J. — Emerald Greens Condominium Association (Association)
appeals a trial court’s decision setting aside an order of default and vacating a
decree quieting title in real property. Because U.S. Bank failed to appear in the
Association’s quiet title action for reasons other than mistake, inadvertence,
surprise, or excusable neglect, and failed to present prima facie evidence of a
defense to the Association’s claim, we reverse and direct the trial court to
reinstate the order of default and decree quieting title in the Association.

FACTS

Elizabeth Swanson secured a purchase money loan from Aames Funding
Corporation, d/b/a Aames Home Loan (Aames), with a deed of trust, recorded in
a first lien position against her condominium unit.

In April 2007, Ocwen Loan Servicing LLC recorded a notice of trustee’s
sale for this property that identified U.S. Bank as the current beneficiary of the
deed of trust. The notice recited that Swanson’s condominium was

subject to that certain Deed of Trust dated 9/9/2005, recorded
10/3/2005, . . . from ELIZABETH SWANSON . . . as Grantor(s), to
KAREN L. GIBBON, PS, as Trustee, to secure an obligation in
favor of AAMES FUNDING CORPORATION DBA AAMES HOME
LOAN, as Beneficiary, . . . the beneficial interest in which was
assigned by AAMES FUNDING CORPORATION DBA AAMES
HOME LOAN to U.S. Bank, N.A., as Trustee for the registered
holders of MASTR Asset Backed Securities Trust.

But this recital was not true. Instead, on May 25, 2007, Accredited Home
Lenders Inc., successor by merger to Aames, assigned “[a]ll beneficial interest”
in the deed of trust to Ocwen Loan Servicing. Then, on June 1, 2007, Ocwen
assigned its interest to U.S. Bank. These two assignments were recorded with
the Snohomish County Auditor on June 15, 2007.

Earlier, on May 15, the Association filed a complaint against Swanson
and Aames, seeking to foreclose a lien for unpaid condominium assessments on
Swanson’s unit. Three days later, the Association recorded a lis pendens
against the property.

The Association served Aames, but it failed to appear in the action. On
July 6, 2007, the Association obtained entry of an order of default against
Aames. On October 12, 2007, the court entered a “Stipulated/Default Judgment,
Order and Foreclosure Decree.” Swanson stipulated to its entry through
counsel. The decree (1) awarded judgment to the Association and declared its
lien valid and exempt from homestead protection, (2) foreclosed the lien and
directed the sheriff to sell the property if the judgment was not promptly paid,
and (3) declared the rights of Aames and all persons claiming under it to be
subordinate to the Association’s lien and foreclosed those rights, except for any
right of redemption.

The Association purchased the condominium unit at a sheriff’s sale held
in February 2009. After the one-year redemption period expired without
redemption by any party, the Association received a sheriff’s deed conveying the
property to it.

U.S. Bank claims that it first became aware of the lien foreclosure
proceedings in February 2010, after it completed foreclosure of its deed of trust.1
Shortly afterward, U.S. Bank’s attorney Kelly Sutherland sent the Association’s
attorney, Patrick McDonald, a letter, stating, “Pursuant to our telephone
conversation, this office is representing [U.S. Bank,] successor beneficiary
holders of the 1st [Deed of Trust] on . . . the subject loan. My clients are
disputing the priority of the Sheriff’s Deed.” Sutherland also asked McDonald to
“provide . . . [a] breakdown of your client’s total amount of Judgment, including
any attorney fees and advances for taxes and other liens on . . . the subject
loan.” McDonald responded by letter a few days later. He wrote,

As you know, Emerald Gardens Condominium Association . . .
properly served the lender of record and foreclosed the lender’s
interest in the above-referenced condominium unit . . . .
As a result, my client bid the full judgment amount at the
sheriff’s sale, the redemption period expired without redemption by
any party, a sheriff’s deed was issued to the Association, and the
Association now owns the property free and clear. Therefore,
there is no judgment balance upon which to give a payoff as you
request.

Two months later, in an effort to remove any potential cloud on the title,
the Association served U.S. Bank with a summons and complaint to quiet title to
the subject property.2 U.S. Bank, the only defendant in the action, failed to
appear or file an answer within the 20 days allowed by CR 4. The Association
then obtained entry of an order of default and an order and decree quieting title
in its favor.

U.S. Bank moved to set aside the default and vacate the decree under
CR 55 and CR 60. A court commissioner granted the relief requested. The trial
court denied the Association’s motion for revision.
The Association appeals.

STANDARD OF REVIEW

When a party appeals an order denying revision of a court
commissioner’s decision, this court reviews the superior court’s decision, not the
commissioner’s.3 We review a trial court’s decision on both a motion for default
judgment and a motion to vacate a default judgment for an abuse of discretion.4
Discretion is abused if it is based on untenable grounds or reasons,5 and a
decision is untenable if it rests on an erroneous application of law.6 We review
questions of law de novo.7

ANALYSIS

We must decide whether the trial court abused its discretion when it
denied the Association’s motion for revision. This requires resolution of three
underlying issues: (1) whether U.S. Bank was entitled to notice of the
Association’s motion for default under CR 55(a)(3), (2) whether U.S. Bank
presented substantial evidence of a prima facie defense available to it in the
quiet title action, and (3) whether U.S. Bank’s failure to appear in the quiet title
action was due to surprise or excusable neglect.

A court will set aside a default judgment entered against a party entitled to
notice who did not receive it.8 The Association argues that U.S. Bank was not
entitled to notice of the motion for default because neither U.S. Bank nor
Sutherland appeared in the quiet title action. In response, U.S. Bank asserts
that Sutherland’s prelitigation contacts with McDonald substantially complied
with any appearance requirement. Thus, according to U.S. Bank, it was entitled
to notice of the Association’s motion for default. We agree with the Association.
CR 55(a)(3) requires notice of a motion for default be given to any party
who has appeared in the action. It states,

Any party who has appeared in the action for any purpose shall be
served with a written notice of motion for default and the supporting
affidavit at least 5 days before the hearing on the motion. Any
party who has not appeared before the motion for default and
supporting affidavit are filed is not entitled to a notice of the motion.

Washington courts apply a substantial compliance test to determine whether CR
55(a)(3) requires notice.9

In Morin v. Burris,10 our Supreme Court held that prelitigation contacts
alone are not sufficient to establish substantial compliance with the appearance
requirements of CR 55(a)(3). Instead, those who are properly served with a
summons and complaint must in some way appear and acknowledge the
jurisdiction of the court after they are served and litigation commences.11
Otherwise, “any party to a dispute [could] simply write a letter expressing intent
to contest litigation, then ignore the summons and complaint or other formal
process and wait for the notice of default judgment before deciding whether a
defense is worth pursuing.”12

As Morin makes clear, Sutherland’s prelitigation contact with McDonald
by itself is not sufficient to show substantial compliance with CR 55(a)(3), even
though it expressed an intent to defend. U.S. Bank had no contact with the
Association or its counsel between the time it was served with the summons and
complaint and the order of default entered. U.S. Bank’s failure to appear during
this interval relieved the Association of any obligation to provide the bank with
written notice of a motion for default.

U.S. Bank disagrees. Citing Sacotte Construction, Inc. v. National Fire &
Marine Insurance Co.13 and Old Republic National Title Insurance Co. v. Law
Office of Robert E. Brandt, PLLC,14 the bank claims it substantially complied with
any appearance requirement because McDonald had prior dealings with
Sutherland and knew that Sutherland represented the bank in related matters.15
But neither case supports U.S. Bank’s position. Instead, Sacotte and Old
Republic apply the rule announced in Morin and rely upon contacts made after
the commencement of litigation to establish substantial compliance with
appearance requirements.

In both Sacotte and Old Republic, the defaulted party made an informal
appearance after the plaintiff commenced the action. In Sacotte, the court held
that a telephone call made after litigation had commenced established
substantial compliance with the appearance requirements of CR 55(a)(3)16
Citing Morin, the court stated, “[S]ubstantial compliance can be accomplished
with an informal appearance if the party shows intent to defend and
acknowledges the court’s jurisdiction over the matter after the summons and
complaint are filed.”17 Old Republic is similar. There, the court also held that a
telephone call made after litigation had commenced substantially complied with
the appearance requirements of CR 55(a)(3).18 The court observed that
enforcement of a default judgment would be inequitable where the defendant’s
attorney called the plaintiff’s attorney after the commencement of the legal action
and informed him of his intent to defend.19

Because the bank was not entitled to notice of the motion for default, we
address whether the bank established grounds for vacating the decree under CR
60(b)(1). Generally a default judgment “will [be] liberally set aside . . . pursuant
to CR 55(c) and CR 60 and for equitable reasons in the interests of fairness and
justice.”20 CR 55(c) provides that default judgment may be set aside “in
accordance with rule 60(b).” Grounds for vacating a default judgment under CR
60(b)(1) include “[m]istake, inadvertence, surprise, excusable neglect or
irregularity.” In White v. Holm,21 our Supreme Court announced four factors
which must be shown by a moving party. These factors are whether (1) there is
substantial evidence to support the moving party’s claim of a prima facie
defense; (2) the moving party’s failure to timely appear in the action was
occasioned by mistake, inadvertence, surprise, or excusable neglect; (3) the
moving party acted with due diligence after notice of entry of the default
judgment; and (4) vacating the default judgment would result in a substantial
hardship to the nonmoving party.22 Where a party fails to provide evidence of
factors (1) and (2), no equitable basis exists for vacating a judgment.23 A trial
court abuses its discretion when it vacates a judgment without evidence of these
two factors.24

U.S. Bank failed to present substantial evidence of a prima facie defense.
The Association recorded its lis pendens for its original foreclosure action on
May 18, 2007. The record shows that U.S. Bank acquired its beneficial interest
in the deed of trust later, on June 1, 2007. U.S. Bank presented no evidence
that it acquired any interest before that date. A party that acquires an interest in
real property after a lis pendens is recorded has “constructive notice” of the
proceeding and “shall be bound by all proceedings taken after the filing of such
notice to the same extent as if he or she were a party to the action.”25 U.S.
Bank, therefore, had constructive notice of the Association’s foreclosure action,
and it is bound by those proceedings. In that proceeding, the court foreclosed
the interest of the bank’s predecessor in interest, Aames, and all persons
claiming under it, subject only to a right of redemption. Thus, U.S. Bank cannot
show that it has any defense to the Association’s quiet title action.

Also, the record does not support U.S. Bank’s claim that its failure to
appear in the quiet title action was due to surprise or excusable neglect. As
explained above, neither U.S. Bank nor Sutherland had any contact with the
court or the Association between the time the bank was served and default
entered. Moreover, U.S. Bank admitted to the trial court that it did not appear
within 20 days because it “uses numerous outside counsel to handle its matters,
[and] it took several weeks before the quiet title pleadings were properly routed
to Mr. Sutherland’s office.” U.S. Bank cites no authority supporting the
proposition that a large corporation’s failure to timely route pleadings to its
attorney is somehow excusable or otherwise warrants setting aside an order of
default. Implicit in the bank’s argument is a notion that large organizations are
entitled to more time to respond to litigation. This notion finds no support in a
legal system that strives to treat all litigants equally.

CONCLUSION

We reverse and remand to the trial court to reinstate the order of default
and decree quieting title to the Association.

WE CONCUR

1 U.S. Bank’s foreclosure proceedings stopped and started several times
due to agreements with Swanson, Swanson’s bankruptcy filing, and efforts to
obtain relief from an automatic stay.

2 The record shows that the Association effected service on May 17 and
filed its complaint on June 10.

3 In re Marriage of Williams, 156 Wn. App. 22, 27, 232 P.3d 573 (2010).
4 Morin v. Burris, 160 Wn.2d 745, 753, 161 P.3d 956 (2007); Hwang v.
McMahill, 103 Wn. App. 945, 949, 15 P.3d 172 (2000).
5 Morin, 160 Wn.2d at 753.
6 State v. Rafay, 167 Wn.2d 644, 655, 222 P.3d 86 (2009) (quoting State
v. Rohrich, 149 Wn.2d 647, 654, 71 P.3d 638 (2003)).
7 Morin, 160 Wn.2d at 753.

8 Morin, 160 Wn.2d at 749.
9 Morin, 160 Wn.2d at 749.
10 160 Wn.2d 745, 757, 161 P.3d 956 (2007).
11 Morin, 160 Wn.2d at 749.

12 Morin, 160 Wn.2d at 757.
13 143 Wn. App. 410, 177 P.3d 1147 (2008).
14 142 Wn. App. 71, 174 P.3d 133 (2007).
15 U.S. Bank alleges that Sutherland represented it in a dispute regarding
the wrongful foreclosure of the property. However, U.S. Bank never filed a
motion to vacate or otherwise challenged the foreclosure decree, which was
adjudicated some three years earlier. Thus, contrary to U.S. Bank’s implication,
no legal action was pending in February 2010.

16 Sacotte, 143 Wn. App. at 416.
17 Sacotte, 143 Wn. App. at 415 (emphasis added).
18 Old Republic, 142 Wn. App. at 73.
19 Old Republic, 142 Wn. App. at 73, 75.

20 Morin, 160 Wn.2d at 749.
21 73 Wn.2d 348, 352, 438 P.2d 581 (1968).
22 White, 73 Wn.2d at 352.
23 Little v. King, 160 Wn.2d 696, 706, 161 P.3d 345 (2007).
24 Little, 160 Wn.2d at 706.

25 RCW 4.28.320; see also Snohomish Reg’l Drug Task Force v. 414
Newberg Rd., 151 Wn. App. 743, 752, 214 P.3d 928 (2009) (once a lis pendens
is filed, any party who subsequently acquires an interest in the property does so
subject to the property’s ultimate disposition in the pending suit), review denied,
168 Wn.2d 1019, 228 P.3d 17 (2010).

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Court rulings complicate evictions for lenders in Oregon

Court rulings complicate evictions for lenders in Oregon


“Those issues give credence to Defendan’t argument that this case is better brought as one to quiet title and then for ejectment.”

 

OregonLive-

Another Oregon woman successfully halted a post-foreclosure eviction after a judge in Hood River found the bank could not prove it held title to the home.

Sara Michelotti’s victory over Wells Fargo late last week carries no weight in other Oregon courts, attorneys say. But it illustrates a growing problem for banks  — if the loans’s ownership history isn’t recorded properly, foreclosed homeowners might be able to fight even an eviction.

“There’s this real uncertainty from county to county about what that eviction process is going to look like for the lender,” said Brian Cox, a real estate attorney in Eugene who represented Wells Fargo.

Michelotti’s case revolved around a subprime mortgage lender, Option One Mortgage Corp., that went out of business during the housing crisis. Circuit Court Judge Paul Crowley ruled that it was not clear when or how Option One transferred Michelotti’s mortgage to American Home Mortgage Servicing Inc., which foreclosed on her home and later sold it to Wells Fargo.

[OREGON LIVE]

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U.S. Bank Natl. Assn. v Mayala | NY Appeals Court 2nd Jud. Dept. Affirms, Consolidated Case “That certain mortgages held by MERS on the subject real property are invalid in their entirety”

U.S. Bank Natl. Assn. v Mayala | NY Appeals Court 2nd Jud. Dept. Affirms, Consolidated Case “That certain mortgages held by MERS on the subject real property are invalid in their entirety”


Decided on August 23, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

REINALDO E. RIVERA, J.P.
JOSEPH COVELLO
ANITA R. FLORIO
PLUMMER E. LOTT, JJ.
2010-00422
2010-00454
2010-08578
(Index Nos. 12884/06, 13809/07)

[*1]U.S. Bank National Association, etc., appellant,

v

Wentz Mayala, et al., defendants, Juan Vega, et al., respondents. (Action No. 1)

Juan Vega, et al., respondents,

v

Wentz Mayala, et al., defendants, MERS, etc., et al., appellants (and a third-party action). (Action No. 2)

Moss & Kalish, PLLC, New York, N.Y. (Mark L. Kalish, Gary
N. Moss, and James Schwartzman of counsel), for appellants.
Simon & Gilman, LLP, Elmhurst, N.Y. (Barry Simon of
counsel), for respondents.

DECISION & ORDER

In an action to foreclose mortgages on certain real property (Action No. 1), and a related action, inter alia, for declaratory relief and the partition and sale of that real property (Action No. 2), which have been consolidated for appeal, (1) the plaintiff in Action No. 1 appeals, as limited by the appellants’ brief, from so much of an order and judgment (one paper) of the Supreme Court, Kings County (Schmidt, J.), dated September 25, 2009, as granted those branches of the motion of the defendants Juan Vega and Sonia Martinez which were for summary judgment on their counterclaim to quiet title to the extent of declaring that they are the owners of a two-thirds interest in the subject real property and that the subject mortgages are invalid in their entirety, and to dismiss the complaint in Action No. 1, and, thereupon, in effect, declared that those defendants are the owners of a two-thirds interest in the subject real property and that the subject mortgage is invalid, and dismissed the complaint in Action No. 1, and (2) MERS and First Central Savings Bank, defendants in Action No. 2 appeal, as limited by the appellants’ brief, from (a) so much of an order and judgment (one paper) of the same court, also dated September 25, 2009, as granted the motion of the plaintiffs in Action No. 2, in effect, for summary judgment on the complaint to the extent of, in effect, declaring that the plaintiffs in Action No. 2 are the owners of a two-thirds interest in the subject real property and that certain mortgages held by MERS on the subject real property are invalid in their entirety, and, thereupon, declared that the plaintiffs in Action No. 2 are the owners of a two-thirds interest in the subject real property and that the mortgages are invalid in its entirety, and (b) so much of an order of the same court dated July 7, 2010, as directed the sale of the subject real property and that two-thirds of the net proceeds of such sale be distributed to the plaintiffs. [*2]

ORDERED that the orders and judgments, and the order, are affirmed insofar as appealed from, with one bill of costs.

Contrary to the appellants’ contention, in opposition to the respondents’ prima facie showing in both Action No. 1 and Action No. 2 that they are and have been the owners of a two-thirds interest in the subject real property since September 1991, the appellants, in their respective opposition papers, failed to raise a triable issue of fact as to the affirmative defenses of adverse possession (see RPAPL 541; Myers v Bartholomew, 91 NY2d 630, 633-635; Culver v Rhodes, 87 NY 348, 355; Perez v Perez, 228 AD2d 161, 162; Perkins v Volpe, 146 AD2d 617, 617-618; Knowlton Bros. v New York Air Brake Co., 169 App Div 324, 334) or laches (see Kraker v Roll, 100 AD2d 424, 432-435). Also contrary to the appellants’ contention, under the circumstances, the Supreme Court properly declared the subject mortgages invalid in their entirety (see Cruz v Cruz, 37 AD3d 754, 754; see also First Natl. Bank of Nev. v Williams, 74 AD3d 740, 742; Johnson v Melnikoff, 65 AD3d 519, 520-521; see generally Filowick v Long, 201 AD2d 893, 893).
RIVERA, J.P., COVELLO, FLORIO and LOTT, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court

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IN RE CRUZ | CA BK Court “2932.5, Foreclosure of the Property was wrongful due to MERS’ unauthorized substitution of trustee”

IN RE CRUZ | CA BK Court “2932.5, Foreclosure of the Property was wrongful due to MERS’ unauthorized substitution of trustee”


In re: CIRILO E. CRUZ JUANA CRUZ, Chapter 13, Debtors,

CIRILO E. CRUZ, Plaintiff,

v.

AURORA LOAN SERVICES LLC; SCME MORTGAGE BANKERS, INC.; ING BANK, F.S.B.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; and DOES 1 to 100, Defendants,

Bankruptcy No. 11-01133-MM13, AP: 11-90116-MM.

United States Bankruptcy Court, S.D. California.

August 11, 2011.

MEMORANDUM DECISION ON MOTIONS TO DISMISS SECOND AMENDED COMPLAINT

MARGARET M. MANN, Bankruptcy Judge.

I. INTRODUCTION

The Court has considered the Motions (“Motions”) to Dismiss the Second Amended Complaint (“SAC”) of debtor and plaintiff Cirilo E. Cruz[1] (“Cruz”) brought pursuant to Fed. R. Bankr. P. 7012, incorporating by reference Fed. R. Civ. P. 12(b)(6), by Defendants Aurora Loan Services (“Aurora”), Mortgage Electronic Registration Systems, Inc. (“MERS”), and ING Bank, F.S.B. (“ING”).[2] The Court grants the Motions in part and denies them in part for the reasons set forth in this Memorandum Decision.

All Truth-In-Lending-Act (“TILA”) related causes of action are dismissed with prejudice. The Court concludes that Cruz cannot state a cause of action under any theory challenging the TILA disclosure because his claims are either unripe or barred by the statute of limitations. The TILA allegations cannot be stated as state law claims because of federal preemption as an alternative ground for dismissal. The Motions are granted to the additional extent they assert the foreclosure of the Property was wrongful due to MERS’ unauthorized substitution of trustee.

The Court denies the Motions to the extent that they assert ING was not required to record its assignment of beneficial interest before it foreclosed. The Motions request the Court reconsider its holding in U.S. Bank N.A. v. Skelton (In re Salazar), 448 B.R. 814, 822-24 (Bankr. S.D. Cal. 2011), that California Civil Code § 2932.5[3] pertains to both mortgages and deeds of trust. For the additional reasons set forth in this Memorandum Decision, the Court reaffirms its analysis in Salazar and concludes that ING’s failure to record its beneficial interest rendered its foreclosure sale void.

II. FACTUAL ANALYSIS

A. Standard of Review

The Court assumes the allegations of the SAC are true for purposes of the Motions and construes them liberally in favor of Cruz. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007); Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9th Cir. 1997). However, the Court must also find that the SAC pleads sufficient facts to state a claim of relief that is “plausible on its face.” Twombly, 550 U.S. at 570; Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949 (2009) (citing Twombly). The SAC allegations must “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555; see also Iqbal, 129 S. Ct. at 1950 (citing Fed. R. Civ. P. 8(a)(2)).

B. Factual Summary

The SAC allegations relate to the 2004 financing of Cruz’s residence located at 3148 Toopal Drive, Oceanside, CA 92054 (” Property”), by a loan provided by SCME (“Loan”) documented by a variable interest rate note (“Note”) and deed of trust (” DOT”). Aurora was the servicer of the Loan and MERS was the initial nominal beneficiary of the Loan. Cruz claims the TILA disclosure provided to him when the Loan was made was misleading by understating its total cost through maturity, which caused him to forego less expensive financing alternatives.

After Cruz defaulted on the Loan, Defendants commenced the foreclosure process. ING had become the successor beneficiary under the DOT at some time before, but never recorded an assignment of beneficial interest. Cruz then entered into a forbearance agreement with Aurora. ING foreclosed on the Property on June 2, 2010 during the extended forbearance period agreed to by Aurora, even though Cruz was current on his payments at the time. ING’s interest, as assignee beneficiary, first appeared of record in the Trustee’s Deed Upon Sale (“Trustee’s Deed”), recorded a few weeks after the foreclosure. The Trustee’s Deed identified ING as the foreclosing beneficiary.

C. Procedural History

Cruz and his wife filed their joint Chapter 13 bankruptcy petition on January 25, 2011, and Cruz filed his First Amended Complaint (“FAC”) about a month thereafter. Defendants responded to the FAC with motions to dismiss brought pursuant to Fed. R. Bankr. P. 7012, incorporating by reference Fed. R. Civ. P. 12(b)(6) (“First Motions”). These were denied in part and granted in part in this Court’s order entered May 24, 2011 (” FAC Order”). The First Motions were denied to the extent they related to Aurora’s forbearance agreement. The Court also denied the First Motions pertaining to whether causes of action were stated under TULA and under California Business and Professions Code § 17200 (“Section 17200”). The Court granted the First Motions with leave to amend as to whether the TILA causes of action were barred by the statute of limitations; whether MERS had authority to substitute the trustee under the DOT; whether ING’s interest was required to be of record; and whether Cruz could allege facts to tender the Loan amount to set aside the foreclosure under TILA or to claim damages. The Court also granted leave to amend for Cruz to clarify which Defendants were named in the different causes of action.

In response to the FAC Order, Cruz filed his SAC,[4] to which Defendants responded with these Motions.

III. LEGAL ANALYSIS

A. The First Third and Tenth Causes of Action of the SAC are Preempted.

Cruz attempts in the first, third and tenth causes of action to allege his TILA claims indirectly under Section 17200, and as state law fraud and negligent misrepresentation claims. Since these causes of action rely upon the TILA disclosures made to Cruz when the Loan was made, they must be dismissed with prejudice due to federal preemption. In Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1003 (9th Cir. 2008), the Section 17200 claims were alleged based upon TILA disclosures. The Ninth Circuit dismissed these claims, finding Congress intended for TILA to preempt the field. Id. at 1004-06. Here as well, although the deceit and Section 17200 claims do not reference TILA, they are based solely upon the representations mandated by TILA. As in E*Trade Mortg. Corp., id., attempts to camouflage these claims from TILA scrutiny cannot save them from dismissal.

B. The First. Third and Tenth Causes of Action Relating to TILA Disclosures are Not Timely.

Even if the preemption bar did not apply, the Court concludes the first, third and tenth causes of action should still be dismissed. The FAC Order at ¶¶ 12-14 granted leave to amend the TILA causes of action to specify when Cruz discovered, or should have discovered, the harm of the alleged TILA inaccuracy. Gutierrez v. Mofid, 39 Cal. 3d 892, 897-98 (1985) (relevant discovery time is of the nature of the harm, not the existence of legal remedies). This is the date of discovery under state law for statute of limitations tolling purposes. See Grisham v. Philip Morris USA, Inc., 40 Cal. 4th 623, 646 (2007) (personal injury claim for a tobacco company’s misrepresentation accrued at the time that “the physical ailments themselves were, or reasonably should have been, discovered”).

Rather than providing more detail on when the harm was discovered, as required by the FAC Order, the SAC hedges the issue. It alleges that Cruz could not have discovered the understatement of the cost of the 2004 Loan until the TILA disclosure was reviewed by an expert in 2010. Alternatively, the SAC alleges that the harm could not be discovered until 2015, when the interest rate will become variable. SAC ¶ 23. But under either discovery date, Cruz cannot state a cause of action.

If the alleged harm occurred when the Loan was made in 2004 by misleading Cruz into a bad financing choice, then the cause of action is barred by the three year statute of limitations for state law deceit claims. Cal. Code Civ. Pro. § 338(d). Even though a complicated analysis is required, it is possible to discern from the Loan documents attached to the SAC that the total cost of financing on the TILA disclosure differed from the stated interest rate. Although Cruz only alleges state law deceit claims, the Court finds persuasive Ninth Circuit authority that addressed when the harm of TILA misrepresentations should be discovered. Although these claims are alleged under state law, both federal and state courts have applied TILA to assess related state law claims. See e.g. Pacific Shore Funding v. Lozo, 138 Cal. App. 4th 1342, 1347 (2006); Rubio v. Capital OneBank, 613 F.3d 1195, 1203 (9th Cir. 2010). Under Meyer v. Ameriquest Mortgage Co., 342 F.3d 899, 902 (9th Cir. 2003), because the plaintiffs “were in full possession of all information relevant to the discovery of a TTLA violation and a § 1640(a) damages claim on the day the loan papers were signed,” they could not toll the statute of limitations.

Cruz was in full possession of the Loan documentation in 2004. Because there are no allegations of fraudulent concealment, or any other action on the part of any Defendant to cover up the misrepresentations, the deceit causes of action accrued when the Loan was made. Id. This was the date the harm to Cruz could have been determined from the face of the Loan documents.

The alternative explanation of the discovery of the harm is that it has not yet occurred and will not occur, if at all, until the interest rate on the Loan becomes variable in 2015. SAC ¶ 23-33. Whether the Loan will be more or less expensive than either the stated 5.85% initial contract rate, or the projected variable index rate of 4.85% starting in 2015, cannot be known until 2015. It is beyond the capabilities of this Court, or any expert or jury, to speculate about future interest rates. If interest rates drop below the index assumption used when the Loan was made, Cruz will receive a windfall. If they rise, Cruz will suffer loss assuming he is still paying on the Loan. This lack of a concrete impact on the parties renders these claims unripe for resolution. See Thomas v. Union Carbide Agricultural Prod. Co., 413 U.S. 568, 580 (1985) (ripeness doctrine prevents premature adjudication where the impact of a claim against the parties cannot be known); see also Exxon Corp. v. Heinze, 32 F.3d 1399, 1404 (9th Cir. 1994).

The first, third and tenth causes of action, to the extent they are related to the TTLA disclosures,[5] are accordingly dismissed with prejudice because they are either barred by the statute of limitations or are unripe.

C. The Eighth and Ninth Causes of Action for Wrongful Foreclosure and Quiet Title Cannot Be Based upon a Wrongful Substitution of Trustee. But Only upon Section 2932.5.

There are two separate factual scenarios alleged in the wrongful foreclosure causes of action: 1) that MERS lacked authority to substitute Quality as trustee of the DOT; and 2) that ING had no recorded beneficial interest at the time it foreclosed. The second scenario, but not the first, alleges a viable cause of action.

1. The Substitution of Trustee by MERS was Valid.

In the FAC Order, Cruz was directed to specifically allege why MERS, as the nominee of the Lender under the DOT and the beneficiary of record, lacked authority under § 2934a(a)(1)(A) to substitute the trustee. The Court earlier ruled in the FAC Order that if MERS was authorized by the Lender under the DOT to substitute the trustee, this substitution would be valid.

Instead of alleging specific facts that MERS was not authorized by the Lender to substitute the trustee, Cruz relies upon general allegations that two parties cannot both be the beneficiary. SAC ¶ 101. These allegations seem to leave the resolution of whether MERS was authorized to substitute the trustee to the outcome of the litigation. But California law does not provide a cause of action to determine whether or not a party has authority to institute foreclosure proceedings. Gomes v. Countrywide Home Loans, 192 Cal. App. 4th 1149, 1154-56 (2011).

Cruz separately alleges that ING was the beneficiary throughout the foreclosure process.[6] He argues in his opposition that the DOT follows the Note, and MERS could not have been the beneficiary once ING was assigned the Note. This argument ignores that once ING was entitled to enforce the Note, it became the Lender under the DOT, even if its interest was not yet of record. As such, ING could direct MERS, as the beneficiary of record and as the Lender’s nominee, to substitute Quality as the trustee of the DOT. Ferguson v. Avelo Mortgage LLC, 195 Cal. App. 4th 1618, 1628 (2011) (authorized beneficiary may substitute the trustee). Avelo relied upon § 2934a which specifically authorizes substitutions of trustees to be recorded after the substituted trustee takes action. Id.

Leave to amend the substitution of trustee claim will not be granted because Cruz’ allegations that ING was the beneficiary throughout the foreclosure process disprove this claim. Abagninin v. AMVAC Chem. Corp., 545 F.3d 733, 742 (9th Or. 2008) (leave to amend may be denied if the allegation of other facts, consistent with those plead, cannot cure the deficiency).

2. Section 2932.5 Applies to Deeds of Trust.

Although Cruz’s other causes of action are fatally defective, Cruz has properly stated claims for wrongful foreclosure and quiet title based upon ING’s non-judicial foreclosure of the DOT.[7] Section 2932.5 required that ING’s interest be of record at the time of the foreclosure sale, and it was not. MERS was the beneficiary of record when ING foreclosed, but ING was the actual foreclosing beneficiary.[8] The Trustee’s Deed identified ING as the foreclosing beneficiary, and that recital is a binding statement of fact. Bank of America v. La Jolla Group II, 129 Cal. App. 4th 706, 731-32 (2005). Because ING lacked an interest of record, it was not authorized to proceed with the foreclosure sale under § 2932.5, rendering the sale void. Dimock v. Emerald Properties, 81 Cal. App. 4th 868, 874 (2000) (sale under deed of trust by former trustee void, and tender of the amount due is unnecessary); Bank of America, 129 Cal. App. 4th at 712.[9]

To reevaluate whether § 2932.5 concerns both mortgages and deeds of trust, the Court has carefully considered the” intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance . . .” to attempt to determine how the California Supreme Court would rule. Lewis v. Tel. Employees Credit Union, 87 F.3d 1537, 1545 (9th Cir. 1996). The Court remains convinced that the highest court in this state would hold that § 2932.5 requires an assignee trust deed beneficiary to record its interest before it non-judicially forecloses.

a. The Plain Language of § 2932.5 Can Be Applied to Deeds of Trust.

Defendants first contend the plain language of § 2932.5[10] cannot accommodate deeds of trust within its ambit. Starting with a review of the statutory language, and considering its legislative history, see Conservatorship of Whitley, 50 Cal. 4th 1206, 1214 (2010), the Court finds the plain language of § 2932.5 easily pertains to deeds of trust:

Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.

(Emphasis added). The statute does not only apply to mortgagees but also to other encumbrancers. That a beneficiary under a deed of trust is an encumbrancer is confirmed by the California Supreme Court. “(M)ortgagees and trust deed beneficiaries alike hold security interests in property encumbered by mortgages and deeds of trust.” Monterey S. P. P’ship v. W. L. Bangham, 49 Cal. 3d 454, 461 (1989) (rejecting that a deed of trust conveyed true title to the trustee). Section 2932.5 further provides that the “power [of sale] is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument.” As the assignee of the Note, ING was the party entitled to the payment of money. It took title to the Property in satisfaction of the secured debt at the time of the foreclosure sale. Each of the clauses of § 2932.5 applies comfortably to deeds of trust.

The legislative history of § 2932.5 also supports its application to deeds of trust as well as mortgages. Section 2932.5 succeeded to § 858 verbatim as part of the 1986 technical revisions to California trust law. See Recommendation Proposing the Trust Law (Dec. 1985) 18 Cal. Law Revision Rep. (1985) p. 764; Selected 1986 Trust and Probate Legislation, (Sept. 1986) 18 Cal. Law Revision Com. Rep. (1986) p. 1483, available at http://www.clrc.ca.gov/Mreports-publications.html#V18. These technical revisions included two changes to California foreclosure law pertaining to deeds of trust-to renumber § 2932.5 as part of the non-judicial foreclosure statute, and to add § 2934b to apply Probate Code §§ 15643 (vacancy in the office of trustee) and 18102 (protections for third persons dealing with former trustee.) Had § 2932.5 been limited to mortgages, there would have been no need to revise it at the time of the other revisions to California trust law.

Strike v. Trans-West Discount Corp., 92 Cal. App. 3d 735, 742 (1979) cited the predecessor to § 2932.5; i.e., § 858 to validate the exercise of the power of sale by a trust deed beneficiary of record. Tamburri v. Suntrust Mortg., Inc., 2011 U.S. Dist. LEXIS 72202 * 12-13 (N.D. Cal. July 6, 2011) recognized that whether § 2932.5 applies to deeds of trust raises a serious question sufficient to grant a preliminary injunction against the sale of foreclosed property. The two authoritative treatises that discuss § 2932.5 also agree that deeds of trust fall within its purview. 4 Harry D. Miller & Marvin B. Starr, California Real Estate, §§ 10.2, 10:38, 10:39[11] (3d ed. 2010); and Cal Jur 3d (Rev) Deeds of Trust § 112.[12]

Defendants do not discuss the interpretation of § 2932.5 by these persuasive treatises and other authorities. They point instead to the conveyance language of the DOT, which conveys title to the Property, “with power of sale,” to the trustee, to claim the beneficiary cannot be the “encumbrancer” in whom a power of sale is vested. Not only does this contention ignore that the power of sale in the DOT is controlled and must be invoked by the beneficiary, it seeks to revive the outdated title distinction between mortgages and deeds of trust rejected by the California Supreme Court.

b. Defendants’ Primary Authority is Out-Dated.

Defendants primarily[13] rely on Stockwell v. Barnum, 7 Cal. App. 413, 416-17 (1908), and the District Court cases[14] that follow it, to assert the power of sale in a deed of trust is held by the trustee, not the beneficiary. Stockwell is not a sound basis to determine how the California Supreme Court would apply § 2932.5 because it relies upon the archaic title theory of deeds of trust rather than the modern lien theory. 4 Witkin Sum. Cal. Law STRP § 6(2) (10th ed.) (“In most situations, the title theory has been disregarded, and the deed of trust has been deemed to create a mere lien on the property.”).

In Stockwell, id. at 415, an assignee of a note and deed of trust failed to record her interest before the property was sold at a foreclosure sale. Before the foreclosure sale, the borrower had conveyed the property to someone else. Stockwell held that the purchaser at the foreclosure sale had superior title over the successor owner because the predecessor statute to § 2932.5 only applied to mortgages. Id. Its reason for the distinction was that a deed of trust “instead of creating a lien only, as in the case of a mortgage, passes the legal title to the trustee, thus enabling him in executing the trust to transfer to the purchaser a marketable record title.” Id. at 417.[15]

This reasoning of Stockwell is now inapposite. Under Monterey, 49 Cal. 3d at 461, a deed of trust is no longer a conveyance of actual title to the Property, but merely a lien. The borrower now retains actual title to the property. Bank of Italy Nat. Trust & Sav. Assn. v. Bentley, 217 Cal. 644, 656 (1933). That this title theory is discredited by the Supreme Court is recognized by the Ninth Circuit. Olympic Federal Sav. & LoanAsso. v. Regan, 648 F.2d 1218, 1221 (9th Cir. 1981) (mortgages and deeds of trust are “legally identical,” so that the borrower retains actual title to the property that the Internal Revenue Service can redeem despite the presence of a junior deed of trust). See also Aviel v. Ng, 161 Cal. App. 4th 809, 816 (2008) (to interpret a subordination clause in a lease, the terms mortgages and deeds of trust were treated as synonymous based upon Bank of Italy, 217 Cal. at 656).

This Court finds the California Supreme Court is likely to overrule Stockwell’s holding that the trustee of a deed of trust holds actual legal title, rather than a lien. It has done so before. Monterey, 49 Cal. 3d at 463 (overruling Johnson v. Curley 83 Cal. App. 627 (1927), which held that beneficiaries under a deed of trust were not necessary parties to an action to have that deed declared void for fraud).

c. The Beneficiary, Not the Trustee. Holds the Power of Sale.

A better predictor than Stockwell, 7 Cal. App. at 416-17, of whether the California Supreme Court would apply § 2932.5 to deeds of trust, is that Court’s analysis of the respective roles of trust deed trustees and beneficiaries found in Monterey, 49 Cal. 3d at 463. The trustee merely holds bare legal title to the extent necessary to reconvey the lien if the debt is paid, or to foreclose the security interest if it is not. Id. at 460. The trustee is bound by no fiduciary duties, and has no duty to defend the rights of the beneficiary, or authority to appear in the suit in its behalf. Id. at 462. The trustee of a deed of trust serves merely as a common agent of both parties. Vournas v. Fidelity Nat. Tit. Ins. Co. 73 Cal. App. 4th 668, 677 (1999). Because the beneficiary’s economic interests are threatened when the existence or priority of the deed of trust is challenged, it is the real party in interest under a deed of trust. Monterey, 49 Cal. 3d at 461 (trust deed beneficiary must be named in a mechanics lien foreclosure suit since trustee does not protect its interests). See also Diamond Heights Village Assn., Inc. v. Financial Freedom Senior Funding Corp., 196 Cal. App. 4th 290, 304 (2011) (beneficiary is the real party in interest in a fraudulent conveyance action to void the security).

To claim the trustee, rather than the beneficiary, is the party who holds the power of sale under the deed of trust, elevates form over substance. The beneficiary is the real party in interest and should comply with § 2932.5.

d. Section 2932.5 Protects Borrowers’ Rights.

The California Supreme Court is clear that the distinction between mortgages and deeds of trust is inapplicable where necessary to protect a borrower’s rights. Bank of Italy, 217 Cal. at 658. Even though other statutes address the notices required to be sent to the borrower,[16] who no longer has a right to redeem the property after any foreclosure,[17] the borrower still has a right to strict construction of all of the non-judicial foreclosure statutes, including § 2932.5, to prevent an improper sale of its property. See System Inv. Corp. v. Union Bank, 21 Cal. App. 3d 137, 153 (1971) (harshness of non-judicial foreclosure justifies strict compliance with statutes); Bank of America, 129 Cal. App. 4th at 712 (“Statutory provisions regarding the exercise of the power of sale provide substantive rights to the trustor and limit the power of sale for the protection of the trustor,” citing Miller & Starr, § 10:123 (3d ed. 2003)). Deeds of trust are “far more widely used in this state” than mortgages. 4 Witkin Sum. Cal. Law STRP § 4 (10th ed.) (Citations omitted). Application of § 2932.5 to deeds of trust advances California’s broader statutory scheme to protect borrowers, consumer and otherwise, from a wrongful foreclosure.

MERS argues that the assignee beneficiary need not record its interest to prevent a gap in title. It again confuses the title to the lien of the deed of trust with title to the Property. That MERS was the beneficiary of record even though ING was the foreclosing beneficiary created a gap in title to the lien. ING was a stranger to the record before the foreclosure giving rise to suspicion that the sale was not authorized. This is the very risk that § 2932.5 was intended to safeguard. Stockwell, 7 Cal. App. at 416-17 (“the record should correctly show the authority of a mortgagee or his assigns to sell” to ensure that the title so conveyed be free from suspicion).

D. MERS Remains a Party to the Eighth and Tenth Causes of Action.

MERS seeks to dismiss the only two causes of action against it in the SAC, the eighth (wrongful foreclosure) and the tenth (Section 17200). MERS remains a party to the wrongful foreclosure cause of action due to this Court’s ruling on § 2932.5, even though the substitution of trustee claims found in that cause of action are dismissed. Because MERS may be liable for wrongful foreclosure on that basis, Cruz has also stated a viable 17200 claim as well.

Section 17200 establishes a disjunctive three part definition prohibiting any “unlawful, unfair, or fraudulent business practice.” “Each of these three adjectives captures a `separate and distinct theory of liability.'” Rubio, 613 F.3d at 1203, citing Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009). As amended by Proposition 64, Section 17200 is applicable to protect consumers who have suffered an injury in fact as well as business competitors. Californians for Disability Rights v. Mervyns’LLC, 39 Cal. 4th 223, 228 (2006).

Since MERS is not alleged to have participated in any fraudulent activity, the last prong is not at issue. Under its “unlawful” prong, Section 17200 borrows violations of other laws and makes them independently actionable. Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999). Although not a criminal statute, violation of other civil statutes can satisfy Section 17200. State Farm Fire & Casualty Co. v. Superior Court, 45 Cal. App. 4th 1093, 1103 (1996) (unlawful prong includes “anything that can properly be called a business practice and that at the same time is forbidden by law,” including antidiscrimination laws, antitrust laws, environmental protection laws, fish and game laws, housing laws, labor laws, vehicle laws, and criminal laws (citations omitted)); Rubio, 613 F.3d at 1204 (TILA violation). The “unfair” prong is measured by the alternative public policy test adopted by Rubio, 613 F.3d at 1205, citing Gregory v. Albertson’s, Inc., 104 Cal. App. 4th 845, 854 (2002). This test looks to whether the practice violates public policy as declared by “specific constitutional, statutory or regulatory provisions.” Rubio, 613 F.3d at 1205. In Rubio, the Ninth Circuit simply noted that the statutory policy behind TILA would satisfy the “unfair” prong of the test. It in effect collapsed the two prongs where statutory violations are alleged. Id.

The allegations of the SAC support MERS’ involvement in the violation of § 2932.5. MERS was the beneficiary of record, even though ING was the foreclosing beneficiary. The “unlawful” prong is met; as is the “unfair prong” under these allegations, and MERS will not be dismissed from either the eighth or tenth causes of action.

IV. CONCLUSION

The distinction between mortgages and deeds of trust is more one of terminology than substance as Monterey, 49 Cal. 3d at 464 stated: “Regrettably, it appears to be too late in the development of our vocabulary to rename deeds of trust and the `trustees’ who act under those instruments.” Weighing the dubious continuing viability of the Stockwell case against the other authority cited in this Memorandum Decision, the Court concludes that ING as the foreclosing beneficiary under the DOT is as subject to the mandates of § 2932.5 as if it held a mortgage. The DOT gives the authority to exercise the power of sale to ING, who is the real party in interest by law for foreclosure matters. For the same reasons as a mortgagee must record its interest before it forecloses, so must a beneficiary of a deed of trust under § 2923.5. The ministerial role of the trustee does not justify any distinction between the two instruments for purposes of § 2932.5 because the trustee as agent simply acts at the direction of the beneficiary.

This Memorandum Decision will constitute the Court’s findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052. Counsel for Cruz is directed to prepare an order in accordance with this Memorandum Decision within ten days of the date of entry.

IT IS SO ORDERED.

[1] The Court rules on the Motions despite the recent death of plaintiff Cruz. His demise does not abate this adversary proceeding, which pursues claims which now either belong to his estate or successor. Fed. R. Civ. P. 25 applies to allow the substitution of the successor of the deceased party in this case. Hawkins v. Eads, 135 B.R. 380, 384 (Bankr. E.D. Cal. 1991); see Fed. R. Bankr. P. 7025. The Court will decide any motion of substitution by any party or by the successors of Cruz at a later time. Hawkins, 135 B.R. at 384. The Chapter 13 case remains pending as Cruz’s wife is a co-debtor, and its status will be addressed in the bankruptcy case in chief pursuant to Fed. R. Bankr. P. 1016.

[2] Defendant SCME Mortgage Bankers, Inc. (“SCME”) has been defunct since 2007 and has not responded in any way to the complaints filed by Cruz. Quality Loan Service Corporation (“Quality”) has been deleted as a Defendant in the SAC, likely due to its filing of a Declaration of Nonmonetary Status pursuant to Cal. Civ. Code § 29241 (“Status Declaration”) to which Cruz did not timely object. In the Status Declaration, Quality stated it did not hold title to the Property and only served as the parties’ agent. Quality also agreed to be bound by any nonmonetary order or judgment of this Court. The Court will thus address the SAC only as it pertains to the moving parties Aurora, ING and MERS (collectively “Defendants”).

[3] All references to a statutory section are references to the California Civil Code unless otherwise specified.

[4] The SAC alleges ten causes of action: 1) intentional misrepresentation as to SCME and ING; 2) intentional misrepresentation as to Aurora and ING; 3) negligent misrepresentation as to SCME and ING; 4) negligent misrepresentation as to Aurora and ING; 5) breach of contract as to Aurora and ING; 6) breach of implied covenant of good faith and fair dealing as to ING and Aurora; 7) promissory estoppel as to ING and Aurora; 8) wrongful foreclosure as to ING, Aurora and MERS; 9) quiet title as to ING; and 10) violation of Section 17200 as to all Defendants.

[5] Cruz argued that since the Court denied the First Motions to dismiss the Section 17200 cause of action, MERS is precluded from challenging it again. But the Court’s analysis of the ripeness of this dispute is based upon new allegations of the SAC found in paragraph 23-that Cruz “would have discovered the interest rate discrepancy in the year 2015 when his payments would have deviated significantly from what the TILA disclosure statement reflected.”

[6] In SAC ¶ 100, Cruz alleges that “ING claims that they are and were the beneficiary of the Deed of Trust throughout the foreclosure process.” Cruz also alleges in SAC ¶ 61 that “Aurora was acting as agent for ING,” including when Aurora entered into the “Forbearance Contract” in October 2009. SAC ¶ 83.

[7] Although not the focus of his SAC, which is instead on the substitution of trustee under the DOT, Cruz alleges sufficient facts to assert this claim in SAC ¶ 106.

[8] Defendants do not contest that § 2932.5, if applicable, was not complied with by ING’s foreclosure without its interest being of record. They merely contest whether the statute applies to deeds of trust, or only to mortgages.

[9] Avelo, 195 Cal. App. 4th at 1628, on which Aurora relies for the broad statement that tender is required in any case seeking to set aside a completed sale, is not to the contrary. Avelo recognized that an unauthorized foreclose sale was void, but did not find the sale at issue was unauthorized. There, the substitution of trustee was signed by a lender before it was assigned any interest in the deed of trust. Because § 2934a retroactively validates a substitution of trustee by an unauthorized beneficiary, the substitution of trustee was deemed valid as of the time the deed of trust was assigned. Id., citing Dimock, 81 Cal. App. 4th at 876-78.

[10] Aurora and ING also direct the Court to a portion of § 2920(b) asserting that mortgages and deeds of trust are mutually exclusive under the foreclosure statute. This assertion ignores that § 2920(b) by its express terms only applies “(f)or purposes of Sections 2924 to 2924h, inclusive . . .” This limited exclusion of a deed of trust from the definition of a mortgage is patently inapplicable to § 2932.5.

[11] MERS incorrectly cites 4 Harry D. Miller & Marvin B. Starr, California Real Estate, §§ 10:2, 10:38, 10:39 (3d ed. 2010) (“Miller & Starr”) despite it being cited by MERS as an authoritative source on real estate. MERS quotes Miller & Starr to state that (“An assignment of the note and deed of trust need not be recorded to be effective. . . .”). The text quoted by MERS pertains only to the effectiveness of assignments between the assignee and assignor, but not to § 2932.5. Miller & Starr in the same section, § 10:39, proceed to specifically apply § 2932.5 to deeds of trust as well as mortgages: “In the case of a deed of trust or mortgage with a power of sale, an assignee can only enforce the power of sale if the assignment is recorded, because the assignee’s authority to conduct the sale must appear in the public records.”

[12] Cal Jur 3d (Rev) Deeds of Trust § 112 cites § 2932.5 and other authority for the following:

The assignment of a note and trust deed ordinarily vests in the assignee all the rights and interest of the beneficiary. The assignee becomes the equitable owner of the security and is entitled, as successor to the beneficiary, to all that is equitably due on the trust deed including interest on the amount secured to the date of payment or tender. The assignee has a right to bring a foreclosure action and may exercise the power of sale in a security instrument if the assignment is duly acknowledged and recorded.

[13] Defendants also cite two cases, neither of which supports that a deed of trust grants the power of sale to the trustee, rather than the beneficiary. Garretson v. Post, 156 Cal. App. 4th 1508, 1516 (2007) was actually a SLAPP case against the beneficiary arising from a claim of wrongful foreclosure, which summarily described the non-judicial foreclosure process. Py v. Pleitner, 70 Cal. App. 2d 576, 579 (1945) involved an obsolete difference between the right of redemption between mortgages and deeds of trust, rather than whether the trustee or beneficiary held the power of sale. Since Code of Civil Procedure § 729.010 now provides for a right of redemption following a judicial sale under either a mortgage or a deed of trust, Civ. Proc. § 729.010 (Deering 2011), it is particularly inapposite here.

[14] This Court respectfully is not bound by these District Court decisions. See State Compensation Ins. Fund v. Zamora (In re Silverman), 616 F.3d 1001, 1005 (9th Cir. 2010) (reserving whether bankruptcy courts are bound by district court decisions within the district where the bankruptcy court sits, but recognizing problems with a non-uniform body of law might result).

[15] Stockwell, 7 Cal. App. at 417, secondarily based its holding on its conclusion that “[i]t is immaterial who holds the note,” a conclusion recognized by Defendants as erroneous. In fact, they assert who holds the Note is dispositive, rather than “immaterial.” Defendants claim that because ING was the holder of the Note at the time of the foreclosure, it was unnecessary for it to record the assignment, because when the Note was transferred to ING, the beneficial interest in the DOT automatically transferred with it. Polhemus v. Trainer, 30 Cal. 686, 688 (1866) (interest in the collateral subject to the mortgage “does not pass unless the debt itself [is] assigned”). That ING is entitled to enforce the Note does not alone obviate compliance with § 2932.5, which also requires the assignment be recorded before the power of sale is exercised by the beneficiary.

[16] MERS correctly points out that notice requirement for borrowers are also addressed by other statutes. See §§ 2924b(b)(1) (trustor and mortgagee must receive copy of recorded notice of default via mail), 2924b(b)(2) (trustor and mortgagee must receive copy of recorded notice of sale via mail) and 2937 (trustor and mortgagee of residential property must receive notice of assignment of servicing of mortgage of trust deed via mail). This does not change the Court’s view addressed in Salazar, 448 B.R. at 821, that § 2932.5 helps ensure borrowers know who actually owns the loan and is the real party in interest during the foreclosure process. Id. at 818.

[17] See footnote 13, infra.

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MERS v. JACOBY | CA 4DCA Div. 1 Affirms JGMT “QUIET TITLE, Foreclosure Sale, Companion case Nacif v. White-Sorenson”

MERS v. JACOBY | CA 4DCA Div. 1 Affirms JGMT “QUIET TITLE, Foreclosure Sale, Companion case Nacif v. White-Sorenson”


COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE

STATE OF CALIFORNIA

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS et al.,

Plaintiffs, Cross-defendants and             Appellants,

v.

SCOTT JACOBY,

Defendant, Cross-complainant and             Respondent.

D054010

(Super. Ct. No. GIC828794)

APPEAL from a judgment of the Superior Court of San Diego County, Judith F. Hayes, Judge.  Affirmed.

Scott Jacoby purchased property previously owned by J. Ross White-Sorensen at a court-ordered judicial foreclosure sale.  White-Sorensen and several entities with interests in two extinguished deeds of trusts brought an action against Jacoby, seeking to invalidate the sale and/or obtain declaratory relief providing that Jacoby holds the property subject to these deeds of trust.  Jacoby cross-complained seeking to quiet title to the property and for a judgment that he is the owner of unencumbered title to the property.

The court granted Jacoby’s summary judgment motion on the claims against him and on his affirmative quiet title claim.  White-Sorensen and two entities named on the extinguished deeds of trust appeal from the judgment.[1] We affirm.

FACTUAL AND PROCEDURAL SUMMARY

Overview

This appeal arises from an action filed by Linda Nacif against White-Sorensen resulting in a default judgment against White-Sorensen.  In the default judgment, the court found Nacif proved her claims and ordered a judicial foreclosure sale of White-Sorensen’s property.  The final judgment stated the proceeds of the sale shall be paid to Nacif for the judgment amount ($209,187 plus interest), and any surplus shall be paid to junior secured lenders who recorded interests after Nacif recorded her lis pendens.  Accredited was a lienholder who had recorded two deeds of trust securing loans to White-Sorensen after Nacif filed her lis pendens.

At the court-ordered judicial foreclosure sale conducted by the San Diego County Sheriff’s Office (Sheriff), Jacoby was the highest bidder at $222,524.  Pursuant to the court’s judgment, the Sheriff paid this amount to Nacif and there was no remaining surplus.  The Sheriff transferred title of the property to Jacoby, and Accredited’s later-recorded deeds of trust were extinguished, leaving Accredited with unsecured notes against White-Sorensen.  (Code Civ. Proc., § 701.630.)[2]

As explained in more detail below, White-Sorensen and the Accredited parties then filed claims against Jacoby seeking to set aside the sale or seeking an order that Jacoby purchased the property subject to Accredited’s deeds of trust.  Jacoby filed a cross-complaint seeking to quiet title to his property.

Jacoby moved for summary judgment, arguing his purchase at the court-ordered sale was conclusive and could not be challenged.  In opposing the motion, the Accredited parties argued the facts showed that before he bid on the property Jacoby had notice of their deeds of trust and that they were in the process of challenging the default judgment in the Nacif action.  The trial court found that even assuming Jacoby was aware of these facts, Jacoby was entitled to quiet title to the property because the statutes provide a judicial foreclosure sale to a party other than the judgment creditor is “absolute” and “may not be set aside for any reason.”  (§ 701.680, subd. (a).)  The court further found Jacoby did not purchase the property subject to Accredited’s deeds of trust because these instruments were not recorded when Nacif commenced her action and recorded the lis pendens.  The court thus granted Jacoby summary judgment.  As explained below, we agree with the court’s conclusions and affirm the judgment.

We note that we are concurrently filing an opinion in a companion case involving appellants’ disputes with Nacif.  (Nacif v. White-Sorensen (August 8, 2011, D056993 (Nacif II).) We also previously filed an opinion involving Accredited’s claims against Nacif.  (Accredited Home Lenders, Inc. v. Nacif (July 26, 2007, D048938) (Nacif I).) For clarity, we have made an effort to include facts in this opinion only to the extent they are relevant to the issues and/or appellate contentions asserted in this (the Jacoby) case.  A more detailed background of the underlying factual circumstances can be found in the Nacif I and Nacif II opinions.

Summary of Events Leading to Judicial Foreclosure Sale

In April 2004, Nacif filed an action against White-Sorensen, claiming White-Sorensen breached a contract to repay a loan and sought to impose an equitable mortgage on his property (the White-Sorensen property).  On the same day, Nacif recorded a lis pendens on the White-Sorensen property, giving notice of her equitable mortgage claim affecting the property.

Five months later, in September 2004, Accredited recorded two deeds of trust on the White-Sorensen property securing Accredited’s $675,000 loan to White-Sorensen.  The deeds of trust identified First American as the trustee and MERS as the nominee and nominal beneficiary.  White-Sorensen obtained this refinancing loan to fund a settlement with Nacif.  Although Nacif and White-Sorensen signed a settlement agreement in August 2004, Nacif later amended her complaint and continued her action against White-Sorensen based on allegations that he engaged in fraud in inducing her to agree to the settlement.  White-Sorensen then defaulted on the amended complaint.

In June 2005, the court entered a $209,187 default judgment against White-Sorensen on Nacif’s amended complaint.  The court also imposed an equitable mortgage on the White-Sorensen property and ordered the property sold at a foreclosure sale.  The amended final judgment, dated July 8, 2005, stated that all interests in the White-Sorensen property recorded “subsequent to the filing of notice of the pendency of this action” would be extinguished after the sale of the property.  (Italics added.)  Specifically, the judgment stated:  “[A]fter delivery of a deed by the levying officer to the purchaser at the sale, [White-Sorensen] and . . . all persons claiming to have acquired any estate or interest in the property subsequent to the filing of notice of the pendency of this action with the county recorder, are forever barred and foreclosed from all equity of redemption in, and claim to, the property and every part of it.”  (Italics added.)

Two weeks later, on July 22, 2005, the trustee on Accredited’s deeds of trust recorded a notice of trustee’s sale on the White-Sorensen property, based on claims that White-Sorensen had failed to make required payments on the $675,000 refinance loan.

On August 5, 2005, Nacif recorded an abstract of the July 8, 2005 final judgment, giving notice that the court had determined her judgment lien was superior to all interests in the property recorded after April 2004.

On August 12, 2005, the superior court issued a writ of execution on the July 8, 2005 final judgment.

On September 2, 2005, the Sheriff received instructions to levy upon the White-Sorensen property with a copy of the writ of sale.  One week later, on September 9, the Sheriff recorded a Notice of Levy and a copy of the writ of sale.

At some point between August 2005 and October 2005, Accredited learned of Nacif’s abstract of judgment which indicated that all liens (including Accredited’s deeds of trust) would be extinguished by the court-ordered judicial foreclosure sale.  Based on this information, Accredited retained White-Sorensen’s former counsel (S. Todd Neal) to “immediately file a Complaint for Declaratory Relief against Nacif on behalf of Accredited and MERS to protect the priority of the deeds of trust.”

In November 2005, Accredited filed a separate lawsuit against Nacif seeking a declaration that its deeds of trust had priority over Nacif’s July 8, 2005 final judgment.  In January 2006, Accredited filed a motion in Nacif’s case against White-Sorensen, seeking to vacate the entry of default and default judgment against White-Sorensen and for leave to intervene in this action.  Superior Court Judge Linda Quinn presided over the Nacif/White-Sorensen action.

While Accredited’s motions were pending in the Nacif/White-Sorensen action, on February 23, 2006, the Sheriff held a judicial foreclosure sale.  Jacoby, a third party, offered the highest bid at $222,524.  Based on Jacoby’s bid, the Sheriff determined Jacoby was the purchaser of the property.  One of Accredited’s attorneys (Neal) did not receive prior notice of the precise date of the sale.

Two weeks after the sale, on March 10, 2006, Judge Quinn issued a tentative ruling granting Accredited’s motion to set aside the White-Sorensen entry of default and default judgment, and granting Accredited’s motion for leave to file a complaint in intervention.

On March 15, 2006, the Sheriff recorded a “Sheriff’s Deed Under Execution” reflecting the conveyance of the White-Sorensen property to Jacoby.

On March 22, 2006, Judge Quinn confirmed the tentative ruling and entered an order vacating the default and the default judgment against White-Sorensen to permit Accredited to litigate its claims against Nacif.  Nacif appealed.  In her appeal, Nacif conceded Accredited’s rights to litigate its disputes with her in the Nacif/White-Sorensen action, but argued that Judge Quinn erred in vacating the entry of default and default judgment with respect to White-Sorensen.  (Nacif I, supra, D048938.)

Claims Between Appellants and Jacoby

While Nacif’s appeal was pending, in May 2006, Accredited, White-Sorensen and MERS filed a complaint in intervention against Jacoby, seeking declaratory relief that the “Sheriff [never had], and did not pass, good title” of the White-Sorensen property to Jacoby; Jacoby was “not a good faith purchaser for value”; and Jacoby did not acquire any valid interest in the property.  These parties alternatively sought a declaration that Jacoby’s ownership of the property was subject to Accredited’s deeds of trust.  The next month, Jacoby filed a cross-complaint seeking to quiet title against the Accredited parties and White-Sorensen, and seeking to confirm the validity of the Sheriff’s sale.

While these pleadings were pending, in July 2007, this court filed its decision reversing in part and affirming in part the court’s order vacating the entry of default and default judgment.  (Nacif I, supra, D048938.) We held the court properly vacated the judgment because the judgment affected Accredited’s rights, and the court would be required to determine the appropriate remedies (if any) as between Accredited and Nacif.  (Ibid.)  However, we reversed the portion of the judgment vacating the entry of default as to White-Sorensen, explaining that an entry of default has independent significance and is not void merely because the default judgment is later vacated.  (Ibid.)

Summary Judgment Proceedings

In March 2008, Jacoby moved for summary judgment on the intervention complaint and on his cross-complaint against White-Sorensen and the Accredited parties.  In support, he presented the evidence summarized above pertaining to the official actions leading to his purchase of the White-Sorensen property at the Sheriff’s sale.  Jacoby argued that because he was a third party purchaser at a court-ordered judicial foreclosure sale pursuant to a court judgment, the sale was final and was not subject to challenge “for any reason.”  (See § 701.680, subd. (a).)

In opposing the summary judgment, appellants did not dispute the chronology of events presented by Jacoby, but submitted additional facts in an attempt to create a basis for an exception to the general finality rules pertaining to judicial foreclosure sales.

First, appellants argued that the sale could be set aside because Jacoby was not a good faith purchaser based on facts showing:  (1) an appraisal in 2004 (about 18 months before the sale) valued the White-Sorensen property at $690,000 and Jacoby purchased the property for $222,524; (2) before the sale Jacoby knew of Nacif’s lis pendens and that Accredited had two deeds of trust on the property; and (3) before the sale Jacoby asked Nacif’s attorney about the priority of Accredited’s liens, and Nacif’s attorney responded that the Accredited parties had filed a motion challenging the White-Sorensen default judgment.

Second, appellants presented the declaration of one of their attorneys (Neal), who stated that “Nacif proceeded with [the foreclosure] sale [without] provid[ing] any notice to me that a sale of the property was pending.”  (Italics added.)

Third, appellants presented the declarations of White-Sorensen and Neal Melton (Accredited’s mortgage broker/agent), who each discussed the events leading to the court’s July 8, 2005 amended default judgment against White-Sorensen, including Nacif’s execution of the 2004 settlement agreement with White-Sorensen and her failure to repay the settlement funds before filing her amended complaint against White-Sorensen.  Melton also asserted that “Accredited would not have refinanced the property without Ms. Nacif’s written assurances that the lis pendens would be released upon payment of the $115,000.”

Court’s Ruling on Jacoby’s Summary Judgment Motion

After considering the parties’ memoranda and supporting submissions, the court granted summary judgment in favor of Jacoby.  The court found the applicable statutes are “crystal clear” that when a third party purchases property at a judicial foreclosure sale, the sale “may not be set aside ‘for any reason.’ ”  The court also rejected appellants’ arguments that Jacoby held the property subject to Accredited’s deeds of trust, finding these arguments were not legally supported.  The court thereafter entered a judgment that Jacoby is the “owner of unencumbered title” of the White-Sorensen property, and that the opposing parties had “no right, title, estate, lien or interest in the Property adverse to” Jacoby.

White-Sorensen and the Accredited parties filed an appeal.  This court later stayed the appeal after Accredited advised the court it had filed for bankruptcy.  About one year later, Accredited and appellants requested that Accredited be dismissed from the appeal and “MERS and First American be substituted as appellants in Accredited’s place.”  We granted the request that Accredited be dismissed from the appeal, but denied the request that MERS and First American be substituted in Accredited’s place.  We found that the documents presented did not support a basis for a substitution in the case, but noted that MERS and First American were existing appellants in the appeal.

DISCUSSION

I.  Standard of Review

Jacoby moved for summary judgment on his affirmative pleadings and on the claims asserted against him.

When a defendant moves for summary judgment, the defendant “bears the burden of persuasion that there is no triable issue of material fact and that [the party] is entitled to judgment as a matter of law.”  (Aguilar v. Atlantic Richfield Co.Aguilar).)  A defendant satisfies this burden by showing one or more elements of the cause of action cannot be established or that there is a complete defense to that cause of action.  (Ibid.) (2001) 25 Cal.4th 826, 850 (

When a plaintiff or cross-complainant moves for summary judgment on its claims, the party bears the burden of proving each element of the cause of action entitling the party to judgment on that cause of action.  “[I]f a plaintiff who would bear the burden of proof by a preponderance of evidence at trial moves for summary judgment, [the plaintiff] must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.”  (Aguilar, supra, 25 Cal.4th at p. 851.)

If the moving party fails to present sufficient, admissible evidence to meet its initial burden, the court must deny the summary judgment motion.  This rule applies even if the opposing party does not object to the moving party’s evidence, presents defective declarations, or fails to present a sufficient counter showing.  (Rincon v. Burbank Unified School Dist. (1986) 178 Cal.App.3d 949, 954-956.)  However, once a party meets its initial summary judgment burden, ” ‘the burden shifts to the [opposing party] . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’ ”  (Aguilar, supra, 25 Cal.4th at p. 849.)  The opposing party may not rely upon the mere allegations or denials of its pleading to show the existence of a triable issue of material fact.  (Ibid.; see Chaknova v. Wilbur-Ellis Co. (1999) 69 Cal.App.4th 962, 974-975.)

We review a summary judgment de novo.  (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) We assume the role of the trial court and redetermine the merits of the motion.  In doing so, we view the factual record in the light most favorable to appellants, the parties opposing the summary judgment.  (See Garcia v. W&W Community Development, Inc. (2010) 186 Cal.App.4th 1038, 1041.)  We strictly scrutinize the moving party’s papers so that all doubts as to the existence of any material triable issues of fact are resolved in favor of the party opposing summary judgment.  (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)  “Because a summary judgment denies the adversary party a trial, [the motion] should be granted with caution.”  (Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305.)

II.  No Legal Basis to Set Aside Jacoby’s Purchase of White-Sorensen Property

Under section 701.680, a judicial foreclosure sale to a party other than the beneficiary is “absolute” subject only to the debtor’s right of redemption, and the sale “may not be set aside for any reason.”  (§ 701.680, subd. (a), italics added; see Arrow Sand & Gravel, Inc. v. Superior Court (1985) 38 Cal.3d 884, 890 (Arrow Sand) [a judicial foreclosure “sale ‘is absolute and may not be set aside for any reason’ “]; Amalgamated Bank v. Superior Court (2007) 149 Cal.App.4th 1003, 1018-1019 [“By purchasing the property at the sheriff’s auction, [the third party] became fee owner, subject only to the [debtor’s] right of redemption”]; First Federal Bank of California v. Fegen (2005) 131 Cal.App.4th 798, 800-801 [“the sale is ‘absolute and may not be set aside for any reason’ “]; Gonzalez v. Toews (2003) 111 Cal.App.4th 977, 981 [“section 701.680 is crystal clear—it states that [judicial foreclosure] sales are absolute and may not be set aside ‘for any reason’ unless the judgment creditor was the purchaser”]; see also 1 Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2011) § 3.84, pp. 237-238 [a judicial foreclosure sale “has finality and may not be set aside for any reason”]; 1 Greenwald & Asimow, Cal. Practice Guide:  Real Property Transactions (The Rutter Group 2010) ¶ 6:544.10, p. 6-112.11 [“judicial foreclosure sale to a party other than the beneficiary is ‘absolute,’ subject only to the trustor’s right of redemption”].)

The only exception to this rule is that a judgment debtor may challenge the sale if: (1) “the purchaser at the sale [was] the judgment creditor” and (2) “the sale was improper because of irregularities in the proceedings, because the property sold was not subject to execution, or for any other reason . . . .”  (§ 701.680, subds. (a), (c)(1); see First Federal Bank of California v. Fegen, supra, 131 Cal.App.4th at pp. 800-801.)  This exception is inapplicable here because the purchaser at the sale was a third party (Jacoby) and not the judgment creditor (Nacif).

In seeking to avoid this rule, respondents rely on two cases that were decided long before section 701.680 was enacted.  (See Riley v. Martinelli (1893) 97 Cal. 575; Hansen v. G & G Trucking Co. (1965) 236 Cal.App.2d 481.)  In 1982, the Legislature enacted section 701.680 as part of a comprehensive revision to the enforcement of judgments law, seeking to protect the purchaser’s title and ensure the finality of judicial foreclosure sales, and thus encourage fair bidding at judicial foreclosure sales.  (See Arrow Sand, supra, 38 Cal.3d at pp. 890-891; Amalgamated Bank v. Superior Court, supra, 149 CalApp.4th at p. 1018; Gonzalez v. Toews, supra, 111 Cal.App.4th at p. 980.)  Because the pre-1982 law did not contain provisions similar to section 701.680 barring all challenges to judicial foreclosure sales, Riley and Hansen, decided in 1893 and 1965, are unhelpful here.

Appellants alternatively contend the sale may be set aside because Jacoby was not a good faith purchaser based on facts showing that an appraisal in 2004 valued the property at $690,000 and Jacoby purchased the property for $222,524.  However, under section 701.680, subdivision (a), a court cannot set aside a judicial foreclosure sale to a third party based on the equities of the situation, including a substantial disparity between the fair market value and the sums successfully bid.  (See Amalgamated Bank v. Superior Court, supra, 149 Cal.App.4th at pp. 1008, 1009, 1018 [citing section 701.680, court declined to set aside a third party’s $2,000 successful bid for 57 acres of property with an approximate value of $6 million].)

Appellants additionally contend that if Jacoby had conducted a reasonable investigation, he would have discovered that appellants had intervened in the action and had moved to set aside the equitable judgment.  However, as recognized by the California Supreme Court, there is no exception to section 701.680, subdivision (a) based on facts showing the purchaser was aware of an existing challenge to the underlying judicial foreclosure judgment.  (See Arrow Sand, supra, 38 Cal.3d at pp. 887-891.)  In Arrow Sand, the issue was whether the fact that an appealing defendant has no statutory right to record a lis pendens pertaining to an appeal of a judicial foreclosure judgment violates the defendant’s equal protection rights because the applicable statutes permit plaintiffs and cross-complainants to record a lis pendens.  (Id. at p. 887.)  Relying on section 701.680, subdivision (a), the high court found no denial of equal protection because a lis pendens giving notice of an appeal of a judicial foreclosure judgment has no practical effect.  (Arrow Sand, supra, at pp. 890-891.)  The court explained that section 701.680, subdivision (a) “completely eliminate[s] the possibility that judicial sales [can] be set aside on reversal of the underlying judgment . . . .”  (Id. at p. 890.)  Thus, “unless a defendant titleholder seeks and receives a statutory stay of enforcement or supersedeas from a higher court, the judicial sale may proceed” (id. at p. 891), and thus “[a] recorded notice of lis pendens would not serve to vitiate the title of a purchaser at a judicial foreclosure sale” (id. at p. 887).  Under this holding, the fact that a third party purchaser knew of an existing challenge to a judicial foreclosure judgment is not a valid basis to later set aside the court-ordered judicial foreclosure sale.

We also reject appellants’ argument that they had a right to set aside the sale because the legislative history of section 701.680, subdivision (a) suggests the purpose of this code section was to limit a debtor’s right of redemption and there is no showing the statute was intended to limit challenges to a third party purchase.  In interpreting statutory language, the goal is to determine the legislative intent.  (See Esberg v. Union Oil Co. (2002) 28 Cal.4th 262, 268.)  To determine legislative intent, we must turn first to the words of the statute, giving them their usual and ordinary meaning.  (Ibid.)  When the language of a statute is clear, a court should enforce the statute according to these terms.  (Ibid.)  A court looks to legislative history only when the statute is ambiguous.  (Ibid.; see Niles Freeman Equipment v. Joseph (2008) 161 Cal.App.4th 765, 780.)

Here, the statutory language is clear:  section 701.680, subdivision (a) bars all challenges to a third party purchase at a judicial foreclosure sale.  (See Amalgamated Bank v. Superior Court, supra, 149 Cal.App.4th at p. 1018.)  Thus, even if the legislative history shows the Legislature was concerned primarily with the prior rule that provided debtors with expansive redemption rights and enacted the new legislation to limit these rights, this does not mean the Legislature did not also intend to bar other types of challenges to a purchase at a judicial foreclosure sale.  In this regard, appellants’ reliance on Yancey v. Fink (1991) 226 Cal.App.3d 1334 is misplaced.  Although the Yancey court discussed section 701.680, subdivision (a) in the context of a debtor’s statutory redemption rights, this does not mean the statute is limited to this subject matter.

III.  Jacoby’s Interests Are Not Subject to Accredited’s Deeds of Trust

Appellants also contend the court erred in quieting title in favor of Jacoby because Jacoby’s interest in the property is subject to Accredited’s two deeds of trust under section 726, subdivision (c).  This code section states in relevant part:  “Notwithstanding Section 701.630, the sale of the encumbered real property . . . does not affect the interest of a person who . . . has a lien thereon, if the conveyance or lien appears of record in the proper office at the time of the commencement of the action and the person holding the recorded conveyance or lien is not made a party to the action.”  (Italics added.)  Section 701.630 provides that:  “If property is sold pursuant to [a judicial foreclosure sale], the lien under which it is sold [and] any liens subordinate thereto . . . on the property sold are extinguished.”

Under these statutes, the general rule is that a judicial foreclosure sale extinguishes the lien under which the property is sold and all subordinate liens.  (See Little v. Community Bank (1991) 234 Cal.App.3d 355, 360; Mitchell v. Alpha Hardware & Supply Co. (1935) 7 Cal.App.2d 52, 57.)  However, an exception to this rule applies if the subordinate lienholder was not made a party to the judicial foreclosure action and this lien “appear[ed] of record . . . at the time of the commencement of the action.”  (§ 726, subd. (c), italics added.)  If these requirements are satisfied, the purchaser holds the property subject to the subordinate liens.

In this case, the undisputed facts show Accredited’s deeds of trust were not recorded in April 2004 when Nacif first commenced her action against White-Sorensen.  Thus, the section 726, subdivision (c) exception does not apply.  Appellants nonetheless urge us to hold that this statutory exception governs because Nacif filed the amended complaint after Accredited’s deeds of trust were recorded.  They posit that because the amended complaint did not “relate back” to the original complaint, the amended complaint—and not the original complaint—should be the operative pleading for purposes of determining when the action commenced under the section 726 subdivision (c) exception.

This argument is unsupported.  First, there is no basis for superimposing a statute-of-limitations relation-back theory onto section 726, subdivision (c).  Section 726, subdivision (c) reflects a legislative judgment that a party who records a lien on property after the filing of a lis pendens has the means to protect itself.  A lis pendens imparts constructive notice of an underlying judicial foreclosure action (and of the named parties in the action) to all subsequent encumbrancers.  (See § 405.24.)  Thus, a subsequently-recording lienholder has the information necessary to protect his or her rights by intervening in the action and seeking a stay of the foreclosure sale and/or participating at the foreclosure sale.  (See Arrow Sand, supra, 38 Cal.3d at p. 891.)

Under the statutory language and this underlying legislative policy, the commencement of the judicial foreclosure action, and not the filing of an amended complaint, is the critical trigger date for determining a lienholder’s interests.  If a junior lienholder records an interest after a lis pendens is recorded, these parties “need not be joined as defendants as long as the plaintiff records and serves a lis pendens immediately on filing the complaint.  The lis pendens binds such persons as effectively as if they had been joined in the action.”  (1 Bernhardt, Cal. Mortgages, Deeds of Trust and Foreclosure Litigation, supra, § 3.34, p. 205.)

Moreover, even assuming the relation-back theory was relevant to the application of section 726, subdivision (c) in this case, the amended complaint did relate back to the original complaint, at least with respect to the judicial foreclosure claim.  Under the relation-back doctrine, an amendment relates back to an original claim for purposes of the statute of limitations if the amendment:  (1) rests on the same general set of facts; (2) involves the same injury; and (3) refers to the same instrumentality.  (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-409; Barrington v. A. H. Robins Co. (1985) 39 Cal.3d 146, 150-151.) In determining whether the relation-back doctrine applies, the critical inquiry is whether the defendant had adequate notice of the claim based on the original pleading.  (See Garrison v. Board of Directors (1995) 36 Cal.App.4th 1670, 1678.)

In the original complaint, filed in April 2004, Nacif sued White-Sorensen for breach of contract and sought an order permitting her to foreclose on an equitable mortgage on the White-Sorensen property.  The caption on this original complaint stated:  “COMPLAINT TO FORECLOSE UNDER EQUITABLE MORTGAGE.”  The same day that she filed this complaint, Nacif recorded a lis pendens on the White-Sorensen property, giving notice of this foreclosure action.

In the amended complaint filed in November 2004, Nacif realleged her claims against White-Sorensen for breach of the loan agreement and again sought an equitable mortgage/judicial foreclosure of White-Sorensen’s property.  She also added new fraud allegations pertaining to the settlement.  The only substantive difference between the original complaint and the first amended complaint with respect to the equitable mortgage/judicial foreclosure cause of action, is that Nacif alleged she had been given a partial payment ($115,000), and thus that she was seeking only the remaining portion of the secured debt.

On this record, Nacif’s first amended complaint related back to the original complaint, at least with respect to the claim at issue here (the breach of contract claim seeking to impose an equitable mortgage and a judicial foreclosure sale).  The only factual difference between the complaints on this claim was the $115,000 payment made by White-Sorensen towards his debt.  Although this payment may have raised legal issues regarding Nacif’s ability to enforce the contract (see Myerchin v. Family Benefits, Inc. (2008) 162 Cal.App.4th 1526), this new legal issue did not preclude a finding that the Accredited parties had notice of the equitable mortgage claim when they recorded their deeds of trust.

Appellants argue that under the unique facts of this case, we should interpret section 726, subdivision (c) to mean that Nacif’s amended complaint was the “commencement” of the action because Nacif benefited from Accredited’s funding of her initial settlement with White-Sorensen and there were facts showing she wrongly refused to dismiss the complaint and withdraw the lis pendens.  However, under the statutory scheme, the issues regarding the propriety of Nacif’s conduct vis-à-vis Accredited does not affect the rights of Jacoby, who was a third party purchaser.  Moreover, the undisputed facts show that although Accredited may have disagreed with Nacif’s actions, the Accredited parties had actual knowledge of Nacif’s continuing lawsuit and judgment against White-Sorensen and of the fact that Nacif never withdrew the lis pendens.  Accredited’s counsel acknowledged in the proceedings below that based on this knowledge, the Accredited parties filed a declaratory relief action against Nacif and petitioned to intervene in Nacif’s continuing action against White-Sorensen before the judicial foreclosure sale took place.  Under these circumstances, the Accredited parties had the ability to protect themselves by filing for a stay of the judicial foreclosure sale and/or seeking some form of preliminary injunctive relief.

Finally, we find unavailing appellants’ challenge to the trial court’s statement at the conclusion of its summary judgment order that “the Accredited parties had ample notice of the pending judicial foreclosure sale, but took no action to protect its interests and did not seek a stay of the proceedings.”  Appellants assert that because in moving for summary judgment Jacoby did not specifically rely on the evidence that the Accredited parties had notice of the pending foreclosure sale, the court erred in relying upon this fact.  However, because the undisputed evidence established that Accredited had notice of the “pending judicial foreclosure sale” and had challenged the pending sale through a declaratory relief action, the court’s observation was appropriate.

Appellants argue that this notice finding contradicts statements in the Nacif I decision in which we observed that the trial court had a “sufficient factual basis” to conclude that Accredited did not unreasonably delay in filing its motion to vacate the default judgment and noted that the trial court could have credited evidence that Accredited denied receiving timely notice of the judgment or of the sale of the property.  (Nacif I, supra, D048938.)  These statements, however, were directed to Accredited’s notice of the precise date of the sale.  The fact that Accredited may not have had actual knowledge of the sale date is different from a conclusion that Accredited (and the parties asserting rights based on Accredited’s deeds of trust) knew or should have known that a sale was pending and they needed to act if they wanted to prevent a sale.  (Ibid.)  Moreover, our statement in the Nacif I decision was based on the limited record before us.  In the Nacif I opinion, we admonished that we were not intending to rule on any of the substantive issues pertaining to other matters in the case, including Nacif’s lis pendens and the effect of the lis pendens on the rights of the other parties.  (Ibid.)  Under these circumstances, we find unpersuasive appellants’ attempt to use a statement from the Nacif I opinion to suggest they had no notice of the pending foreclosure sale, when the undisputed facts show they did know of a pending sale and/or they had constructive knowledge of the pending sale based on recorded documents and their involvement in the lawsuit.

DISPOSITION

Judgment affirmed.  Appellants to bear respondent’s costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

McINTYRE, J.

AARON, J.



[1] These two entities are nominee/beneficiary Mortgage Electronic Registration Systems (MERS) and trustee First American Title Company (First American).  The original creditor/beneficiary on the deeds of trust, Accredited Home Lenders, Inc., also appealed from the judgment, but later filed for Chapter 11 bankruptcy.  We have since granted Accredited’s motion to be dismissed from the appeal.  For ease of reference, we collectively refer to Accredited, First American, and MERS as the Accredited parties.  We collectively refer to White-Sorensen, First American, and MERS as appellants.

[2] All further statutory references are to the Code of Civil Procedure.

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MERS: The Unreported Effects of Lost Chain of Title on Real Property Owners

MERS: The Unreported Effects of Lost Chain of Title on Real Property Owners


By: David E. Woolley

HARBINGER ANALYTICS GROUP

FORWARD

It has been widely reported that MERS1 has broken or severely diluted2 the chain of title for real property records, but what does this mean? To understand the importance of the chain of title to a property and the complexities of land boundaries we need to look no further than the advice given to practicing attorneys.

“To properly evaluate a case, counsel and survey experts often must examine chains of title for all properties subject to the dispute. In the case of a boundary dispute, it may be necessary to search the chain of title back to a patent to determine paramount title or to locate true boundaries.” 3

As is readily apparent, a broken chain of title will have adverse effects on adjoining properties and in many instances the boundaries of properties within an entire neighborhood. Attorneys are advised to “seriously consider not taking the case or withdrawing from it.” If attorneys are advised to “seriously consider” withdrawing, how will the common victim of MERS (by proxy) get relief?

The complexity of the problem is obvious. As lenders and title insurers pass responsibility back and forth, property owners who purchased a foreclosed property that had been in the MERS system (and now have broken chains of title) and their neighbors will be forced into expensive and complex litigation in order to determine their boundaries.

Who will be financially responsible for the litigation to quiet title?
This White Paper documents the importance of a chain of title and the far reaching effects of a lost chain of title.

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GAME CHANGER? | California Homeowner Challenges Wells Fargo, Could Set a Legal Precedent

GAME CHANGER? | California Homeowner Challenges Wells Fargo, Could Set a Legal Precedent


DEMUCHA v WELLS FARGO | California Appeals Court Reverses & Remands “QUIET TITLE, FRAUD & MISREPRESENTATION, SLANDER OF CREDIT”

A Bakersfield homeowner is taking on a bank, in a battle that could have sweeping implications for people facing foreclosure.

Mark Demucha wants Wells Fargo to prove it owns his home loan. And, if his lawsuit is successful, it could set a legal precedent that slows or even stops foreclosures across the state.

[KGET]

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DEMUCHA v WELLS FARGO | California Appeals Court Reverses & Remands “QUIET TITLE, FRAUD & MISREPRESENTATION, SLANDER OF CREDIT”

DEMUCHA v WELLS FARGO | California Appeals Court Reverses & Remands “QUIET TITLE, FRAUD & MISREPRESENTATION, SLANDER OF CREDIT”


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT

MARK DEMUCHA et al.,
Plaintiffs and Appellants,

v.

WELLS FARGO HOME MORTGAGE INC.,
Defendant and Respondent.

-ooOoo-

This case presents a classic example of the longstanding rule that “in passing upon the question of the sufficiency or insufficiency of a complaint to state a cause of action, it is wholly beyond the scope of the inquiry to ascertain whether the facts stated are true or untrue” as “[t]hat is always the ultimate question to be determined by the evidence upon a trial of the questions of fact.” (Colm v. Francis (1916) 30 Cal.App. 742, 752.)

The trial court dismissed this civil action after sustaining the demurrer of respondent Wells Fargo Home Mortgage, a division of Wells Fargo Bank, N.A. (Wells Fargo), to the first amended complaint of appellants Mark and Cheryl DeMucha. Appellants contended in the trial court, as they do on this appeal, that the allegations of their pleading were sufficient to survive demurrer. As we explain, we agree with appellants on all of their causes of action except the second (their attempt to state a cause of action for removal of a cloud on title) and the fourth (their attempt to state a cause of action for intentional infliction of emotional distress). We reverse the judgment, remand the matter to the trial court, and direct that court to overrule respondent’s demurrer as to all causes of action except the second and fourth.

[…]

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Oregon USDC “No right to foreclose, Granted to enjoin f/c” | STATON v. BAC, MERS, ReconTrust

Oregon USDC “No right to foreclose, Granted to enjoin f/c” | STATON v. BAC, MERS, ReconTrust


Civ. No.6:10-cv-01306-AA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

Dated: June 1, 2011

OPINION AND ORDER

Pamela K. Staton Pro se plaintiff

Russell L. Baldwin
Preparation attorney for plaintiff

Stephen P. McCarthy
Pilar C. French
Lane Powell PC
Attorneys for defendants

AIKEN, Chief Judge:

Defendants BAC Home Loans Servicing, L.P. (sued erroneously as Bank of America (BAC) Home Loans Servicing, L.P.), Mortgage Electronic Registration Systems, Inc., and ReconTrust, N.A. move to dismiss all of plaintiff Pamela Staton’s claims pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 8(a). Defendants’ motion is granted in part and denied in part.

In addition, plaintiff moves for partial summary judgment pursuant to Fed. R. Civ. P. 56, seeking an injunction. Plaintiff’s motion is denied.

BACKGROUND

In 2005, plaintiff took out a loan from Countrywide Home Loans, Inc. (“Countrywide”) in the amount of $735,500. Pursuant to this transaction, plaintiff executed a promissory note in favor of Countrywide. The note was secured by a Deed of Trust, which lists Countrywide as the lender, Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary, “acting solely as a nominee for Lender and Lender’s successors and assigns,” and Fidelity National Title Insurance as the trustee. The Deed of Trust was filed in Lane County, Oregon on November 29, 2005.

In September 2009, plaintiff stopped making payments required under the loan agreement. On October 19, 2009, Countrywide’s loan servicer, BAC Home Loans Servicing, L.P. (“BAC”), sent a Notice of Intent to Accelerate to plaintiff. The Notice of Intent to Accelerate advised plaintiff that she was required to make a payment of $8,915.61, plus other regular payments, by November 18, 2009, otherwise the default would not be considered cured and the mortgage payments would be accelerated with the full amount becoming due and payable. Plaintiff made a partial payment, but failed to fully cure the default.

On November 10, 2009, BAC sent plaintiff another Notice of Intent to Accelerate, relating to a home equity line of credit loan secured by the property. The second Notice of Intent to Accelerate advised plaintiff that she was required to make a payment of $719.61, plus other regular payments, by December 15, 2009, otherwise the default would not be considered cured and the mortgage payments would be accelerated with the full amount becoming due and payable. Plaintiff failed to cure the default.

Sometime prior to initiating foreclosure proceedings in 2010, Countrywide securitized, bundled and sold, or “tranched,” plaintiff’s promissory note. As a result of the “tranching,” one or more parties, including CWALT, Inc. (“CWALT”), gained a beneficial interest in the note.

On January 6, 2010, MERS, as nominee for Countrywide, assigned the Deed of Trust to The Bank of New York Mellon, fka

The Bank of New York (“BNY”), as trustee for certificate holder CWALT. On January 11, 2010, the Assignment of the Deed of Trust was recorded in the official records of Lane County.

On January 6, BNY by BAC appointed ReconTrust to serve as successor trustee for the Deed of Trust. This appointment was executed on January 6, 2010, and recorded in the official records of Lane County on January 11, 2010.

On January 6, 2010, ReconTrust executed a Notice of Default and Election to sell plaintiff’s property. On January 11, 2010, the Notice of Default and Election to Sell was recorded in the official records of Lane County. On June 1, 2010, ReconTrust recorded the following documents in the official records of Lane County: Affidavit of Mailing of Notice of Sale, Affidavit of Publication of Notice of Sale, Affidavit of Service, and a copy of the Notice of Sale.

On September 17, 2010, plaintiff filed a claim against defendants in Lane County Circuit Court. On September 25, 2010, plaintiff filed an amended complaint, alleging the following: 1) declaratory judgment, pursuant to Or. Rev. Stat. § 28.010, that the actions of defendants are void pursuant to Oregon’s Trust Deed Act and enjoining defendants from foreclosing plaintiff’s property; 2) fraud; 3) breach of the covenant of good faith and fair dealing; 4) breach of fiduciary duty; 5) declaratory judgment, pursuant to Or. Rev. Stat. §§ 28.010, 28.020, defining the rights and duties between plaintiff, defendants, and mortgage pass-through certificate holders; 6) quiet title; 7) remove cloud on title; and 8 statutory claim for invalid encumbrance. Plaintiff also seeks economic damages of $1,135,000, non-economic damages of $150,000, and “actual” damages in the amount of $1,060,000. On October 20, 2010, defendants removed this action to this Court.

On November 1, 2010, ReconTrust executed a new Notice of Default and Election to Sell the Property. On November 4, 2010, the Notice of Default and Election to Sell was recorded in the official records of Lane County. The Notice stated that the foreclosure sale was set to occur on March 16, 2011, at the Lane County Courthouse. A foreclosure sale has not yet occurred.

STANDARDS

Where the plaintiff “fails to state a claim upon which relief can be granted,” the court must dismiss the action. Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, the complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 For the purpose of the motion to dismiss, the complaint is liberally construed in favor of the plaintiff, and its allegations are taken as true. Rosen v. Walters, 719 F.2d 1422, 1424 (9th Cir. 1983. However, bare assertions that amount to nothing more than a “formulaic recitation of the elements” of a claim “are conclusory and not entitled to be assumed true.” Ashcroft v. Igbal. 129 S. Ct. 1937, 1951 (2009.

Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitles to a judgment as a matter of law.” Fed. R. Civ. P. 56(c) . Substantive law on an issue determines the materiality of a fact. T.W. Electrical Serv., Inc. v. Pacific Electrical Contractors Assoc., 809 F.2d 626, 630 (9th Cir. 1987. Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of a dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986.

DISCUSSION

Defendants contend that all of plaintiff’s claims fail to state a claim as a matter of law, and therefore should be dismissed. Defendants also assert that plaintiff’s declaratory relief claims should be dismissed because defendants had the authority to commence and prosecute a nonjudicial foreclosure action.

I. Preliminary Matters

To support their motion to dismiss, defendants request that this Court take judicial notice of MERS’ Terms and Conditions. The agreement outlines the relationship between MERS and its members, such as Countrywide or BNY, and permits MERS to initiate a foreclosure sale on behalf of a lender.

Plaintiff argues that this Court should not take judicial notice “for the purpose of determining whether defendants’ actions were permissible under Oregon law because plaintiff disputes the authenticity of the documents.” Plf.’s Resp. to Defs.’ Mot. For S.J. at pg. 8. The Court assumes that, by referring to “documents,” plaintiff is objecting to more than just the Terms and Conditions. The Court surmises from plaintiff’s response that plaintiff does not want this Court to take judicial notice of the Assignments of the Deed of Trust and Appointment of Successor Trustee, because plaintiff believes they were fraudulently executed.

Additionally, plaintiff requests that this Court take judicial notice of ReconTrust’s “debt collection activity.” In her response, plaintiff reprints a portion of a Notice of Sale issued by ReconTrust, which states that “[t]his is an attempt to collect a debt.” Id. at 15. Plaintiff seeks judicial notice of this document to support her claim that ReconTrust must be licensed with Oregon as a debt collector.

Review of a Rule 12(b)(6) motion is generally limited to the complaint. U.S. v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003. However, a court may consider extrinsic documents if they are integral to the plaintiff’s claims and their authenticity is undisputed. Parrino v. FHP, Inc. , 146 F.3d 699, 706 & n. 4 (9th Cir. 1998). Under the Federal Rules of Evidence, a “judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201; see also Ritchie, 342 F.3d at 909. Facts subject to judicial notice may be considered on a motion to dismiss. Mullis v. U.S. Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987.

Despite plaintiff s statement that she “disputes the authenticity” of MERS’ Terms and Conditions, plaintiff has alleged no facts suggesting that this agreement is counterfeit or false in any way. I find, however, that the Terms and Conditions are not integral to plaintiff’s claims, and therefore, defendants’ request for judicial notice is denied.

Further, regarding documents recorded with Lane County, the Court must take judicial notice if plaintiff intends on using these documents to establish that defendants fraudulently foreclosed on her property. Therefore, these documents are integral to plaintiff’s claims and should have been attached to her complaint. Plaintiff seems to implicitly recognize this fact, as she references these documents in great detail in her complaint, arguably incorporating them by reference. Since plaintiff now attaches these documents to her response, the Court presumes that plaintiff would like the Court to consider them, if only for the sake of establishing defendants’ fault. These documents are also part of the public record. Defendants make no objection to these documents. Thus, even though plaintiff disputes their validity, the Court takes judicial notice of documents recorded with Lane County, including the Assignments of the Deed of Trust and Appointment of Successor Trustee.

Finally, the Court declines to take judicial notice of plaintiff’s document relating to ReconTrust’s “debt collection activity.” The language that plaintiff incorporated into her response was an excerpt from a Notice of Sale for a property other than plaintiff’s. Here, plaintiff has provided no evidence that ReconTrust sent her a similar notice. Thus, the fact that ReconTrust sent a notice to another person in which it identified itself as a debt collector is not integral to plaintiff s claim. Further, the Court has no way to confirm the authenticity of this Notice, since the parties bound by it are not now before this Court. As such, plaintiff’s request for judicial notice is denied.

II. Plaintiff s First Claim for Declaratory Judgment

Plaintiff’s first claim for relief is unclear. It consists of a convoluted list of allegations and facts, supported by “information and belief.” Plaintiff seems to allege that any action of BAC, MERS and ReconTrust are void because they were not licensed under Oregon law. Further, plaintiff is seeking a declaration that defendants Recontrust and MERs are not qualified to act as trustees pursuant to Oregon’s Trust Deed Act, such that defendants’ foreclosure proceedings are invalid. Plaintiff, however, misconstrues the law and facts surrounding this case.

A. Oregon’s Licensing Requirements

BAC, MERS, or ReconTrust are not required to be licensed by the Oregon Secretary of State with respect to foreclosing the Deed of Trust. Moreover, ReconTrust is not required to be registered with the Oregon Department of Business and Consumer Services as a debt collector. As defendant correctly points out, Oregon law excludes corporations that engage in certain corporate business activities from state licensing requirements, and provides that the corporate acts of unlicensed foreign corporations are not invalid. See Or. Rev. Stat. §§ 60.701, 60.704.

Generally, a “foreign corporation may not transact business” in Oregon “until it has been authorized to do so by the Secretary of State.” Or. Rev. Stat. § 60.701(1). However, defendants argue that certain activities, even if conducted in Oregon, do not subject a foreign corporation to licensing requirements. Specifically, defendants cite to § 60.701(2), which states: “[t]he following activities among others, do not constitute transacting business . . . (g) Creating or acquiring indebtedness, mortgages and security interests in real or personal property; (h) Securities or collecting debts or enforcing mortgages and security interests in property securing the debts.” Or. Rev. Stat. § 60.701(2).

Here, defendants’ actions fall expressly within this exception, as they initiated foreclosure proceedings by enforcing plaintiff’s mortgage. Accordingly, I find that defendants were not required to receive a license from the Secretary of State in order to foreclose on plaintiff’s property.

Finally, contrary to plaintiff’s contentions, ReconTrust need not be qualified to act as a debt collector under Oregon law. Plaintiff cites to no authority that imposes such a requirement on an entity such as ReconTrust. Thus, plaintiff’s assertion that ReconTrust must be licensed as a debt collector is conclusory, and as such, this Court must not presume the statement to be true. Iqbal, 129 S.Ct. at 1951. In fact, upon the allegations contained in the complaint, ReconTrust’s conduct is merely that of a trustee seeking foreclosure and sale pursuant to a Deed of Trust, which is not a debt collecting activity. Hulse v. Ocwen Fed. Bank, FSB, 195 F.Supp.2d 1188, 1203-4 (D.Or. 2002). As such, defendants’ motion to dismiss is granted in part in regard to these aspects of plaintiff s first claim.

B. Oregon’s Trust Deed Act

ReconTrust, the only defendant who actually did act as a trustee in this case, does meet the definition of “trustee” under Oregon’s Trust Deed Act. The Act defines trustee as “a person, other than the beneficiary . . . [who] is qualified to be a trustee under ORS 86.790.” Or. Rev. Stat. § 86.705(6). Under § 86.790, a “financial institution or trust company, as defined by ORS 706.008, that is authorized to do business under the laws of Oregon or the United States” is qualified to be a trustee. Or. Rev. Stat. § 86.790 (1) (b) .

Here, all defendants conceivably could meet the definition of a “trustee,” because all are financial institutions authorized to do interstate business. See Or. Rev. Stat. § 706.008 (defining a “financial institution” as “insured institutions . . . and federal credit unions” including “the trust department of a bank”). Specifically, ReconTrust is a subsidiary of Bank of America, an FDIC insured, federally chartered bank. Therefore, as a matter of law, ReconTrust is qualified to act as a trustee.

In addition, plaintiff contends that Oregon’s Trust Deed Act does not permit MERS to be designated as beneficiary as nominee for the lender. Plaintiff relies on a number of cases outside of this district, the majority of which are factually distinct, in support of her claim. See MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81 (2006; Landmark Nat’l Bank v. Kesler, 289 Kan. 528, 216 P.3d 158 (2009), etc. Plaintiff contends that these cases hold that MERS can never acquire a beneficial interest in a promissory note or Deed of Trust, because MERS is merely an entity which tracks and records the sale of mortgage instruments. As such, plaintiff argues that MERS’ lacks authority to assign trust deeds, promissory notes, appoint successor trustees or institute foreclosure.

Further, plaintiff alleges that someone other than the holder of the note is proceeding against the security. Accordingly, plaintiff argues that, to the extent that MERS’ assignment had any effect, it is void, because the “assignment of a security interest without the assignment of the debt that it secures yields the assignee nothing.” Schleef v. Purdy, 107 Or. 71, 78, 214 P. 137 (1923) .

Oregon’s Trust Deed Act defines “beneficiary” as “the person named or otherwise designated in a trust as the person for whose benefit a trust deed is given.” Or. Rev. Stat. § 86.790(1)(d). Thus, nothing in the statute expressly prohibits MERS from being designated as a “beneficiary” under a trust deed.

Defendants argue that, under the broad language of Or. Rev. Stat. § 86.790(1)(d), MERS is an appropriate beneficiary as listed on the Deed of Trust. They contend that courts, both within and outside the Ninth Circuit, have recognized that MERS, acting as nominee for a lender, can serve as a beneficiary, and as such, has the authority to assign its interest under a Deed of Trust. See Vawter v. Quality Loan Serv. Corp. Of Wash., 707 F.Supp.2d 1115 (W.D.Wash., 2010); Stewart v. MERS, 2010 WL 10655131, *12 (D.Or. Feb. 9, 2010) ; In re Huacrins, 357 B.R. 180 (Bkrtcy. D.Mass. 2006); etc.

While neither party cites to it, this Court is aware of authority within this district that has questioned MERS’ authority to assign its beneficial interest under a Deed of Trust. See In Re Allman, 2010 WL 3366405, *9-10 (Bkrtcy.D.Or. Aug. 24, 2010). While not directly on point, Allman held that the relationship of MERS to the lender “is more akin to that of a straw man than to a party possessing all the rights given a buyer,” and accordingly the true “beneficiary” under the Deed of Trust remained the lender. Id.

Regardless, I find that it is inappropriate to resolve this issue at this stage in the proceedings. In the last several months, “a veritable tsunami of investigation into and litigation over mortgage foreclosure practices broke loose on a national scale.” Bertrand v. Suntrust Mortgage, Inc., Civ. No. 09-857, Opinion and Order at 2 (D.Or. Nov. 1, 2010) . Until case law within this jurisdiction is developed regarding MERS’ role as beneficiary, it is impossible to conclude whether plaintiffs’ complaint states a claim.

Moreover, plaintiff is correct that a foreclosure may be invalid where the entity commencing foreclosure is not the holder of the note. Despite plaintiff’s requests, defendants have failed to provide proof that the foreclosing bank owned the promissory note or can trace its assignment. Therefore, the foreclosure may have been improper independent of MERS’ general authority to assign the Deed of Trust.

Therefore, plaintiff’s claim for a judgement declaring that defendants’ actions are void for failure to be licensed by the state of Oregon or to comply with Oregon’s Trust Deed Act fail as a matter of law and are dismissed.

However, to the extent that plaintiff is seeking a declaration that MERS lacks the general authority to assign the Deed of Trust as beneficiary, or that the foreclosure was improper because the foreclosing bank did not own the underlying note or failed to track its assignment, defendants’ motion to dismiss is denied.

Finally, as an equitable matter, I find that it is necessary to enjoin defendants from completing foreclosure proceedings until all issues regarding the disputed property are resolved. As such, this Court finds it unnecessary to address plaintiff’s motion for partial summary judgment, since the result sought therein has now been reached.

III. Plaintiff’s Second Claim for Fraud

Plaintiff’s second claim alleges that BAC and ReconTrust made misrepresentations to plaintiff regarding ReconTrust’s authority to act as trustee under Oregon law. Further, plaintiff contends that BAC made material misrepresentations about a negotiated short sale, a forbearance, and its status as a holder in due course entitled to payment.

As discussed above, ReconTrust is qualified to act as a trustee under Oregon’s Trust Deed Act. Accordingly, any representations that were allegedly made by BAC or ReconTrust relating to ReconTrust’s role as trustee were not false and cannot support a claim for fraud. Therefore, defendants’ motion to dismiss is granted in part in regard to this aspect of plaintiff’s second claim.

Moreover, I find that the remainder of plaintiff’s fraud claim fails to meet Fed. R. Civ. P. 9(b)’s heightened pleading requirements. To satisfy Rule 9(b)’s standard, “the pleader ‘must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.'” Schreiber Distrib. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). A plaintiff must also “‘set forth what is false or misleading about a statement, and why it is false.'” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003. Additionally, “Rule 9(b) does not allow a complaint to merely lump multiple defendants together but ‘require[s] plaintiffs to differentiate their allegations . . . and inform each defendant separately of the allegations surrounding his alleged participation in fraud.'” Swartz v. KPMG LLP, 476 F.3d 756, 764-5 (9th Cir. 2007) .

Here, plaintiff failed to identify the time, place, specific content, and the parties that allegedly made false representations. Furthermore, if plaintiff is alleging fraud based in part on an agreement between the parties that BAC would accept payment of a lesser amount in full satisfaction of the loan, plaintiff needs to provide evidence of this agreement to the Court. I will, however, grant plaintiff leave to amend her First Amended Complaint to add pleadings sufficient to meet Fed. R. Civ. P. 9(b).

Finally, while not included in the second claim for relief, plaintiff alleges that defendants fraudulently recorded documents with Lane County. Specifically, plaintiff alleges that defendants impermissibly used a “robo-signer,” who was not authorized to act on defendants’ behalf, in order to endorse the Assignments of the Deed of Trust and the Notice of Default. Plaintiff seeks relief for this alleged wrongdoing in her eighth claim for invalid encumbrances. However, because the basis of that claim is defendants’ fraud, the Court suggests that plaintiff include these allegations instead in her second claim for relief, and plead them in accordance with Fed. R. Civ. P. 9(b).

IV. Plaintiff’s Third Claim for Breach of the Covenant of Good Faith and Fair Dealing

Plaintiff’s third claim for breach of the covenant of good faith and fair dealing appears to be asserted only against defendant BAC. Plaintiff’s claim must be dismissed for two reasons. First, the factual allegations supporting the claim are conclusory. The entirety of plaintiff’s third claim states merely that “BAC had a common law duty of good faith and fair dealing to plaintiff by virtue of the contract between defendant BAC and plaintiff. Defendant BAC breached its covenant of good faith and fair dealing as set forth above.” Amended Complaint ¶ 30-1. Because the pleadings amount to nothing more than bare assertions of the elements of a claim, they are not entitled to the presumption of truth. Ashcroft, 129 S.Ct. at 1951.

Second, plaintiff again misconstrues the law and facts surrounding this case. The basis of plaintiff’s claim appears to be that BAC breached its contract with plaintiff in bad faith. In fact, plaintiff first breached the contract by failing to pay her mortgage in accordance with the terms of the promissory note. Therefore, to the extent that defendants proceeded to foreclose pursuant to the express terms of the contract, there can be no claim for breach of the covenant of good faith and fair dealing. Uptown Heights Assocs. Ltd. P’ship v. Seafirst Corp., 320 Or. 638, 645, 891 P.2d 639 (1995) (“if a written contract between the parties expressly allows for a particular remedy by one of the parties, in the face of a specified breach, the parties’ objectively ‘reasonable expectations’ under the contract include the invocation of that remedy in the face of that breach. The party invoking its express, written contractual right does not, merely by so doing, violate its duty of good faith”).

Accordingly, defendants’ motion to dismiss is granted in part, and plaintiff’s third claim is dismissed.

V. Plaintiff s Fourth Claim for Breach of Fiduciary Duty

Plaintiff withdraws her claim for breach of fiduciary duty against defendant BAC, acknowledging that BAC s relationship with plaintiff is not fiduciary in nature. Uptown Heights, 320 Or. At Page 18 649-50. Therefore, plaintiff’s fourth claim is dismissed.

VI. Plaintiff’s Fifth Claim for Declaratory Judgment

Plaintiff’s fifth claim is for a declaratory judgment defining the rights of the parties. Plaintiff alleges that the securitization of her loan was in direct violation of the parties’ lending agreement. However, as stated above, plaintiff has failed to provide this Court with any documentation of the loan or its terms. Further, plaintiff’s allegations in the complaint regarding the terms of the agreement are unspecific and conclusory. Thus, it is impossible for this Court to determine whether defendants could have acted impermissibly in regard to selling investor certificates in plaintiff’s underlying note.

As stated above, if the foreclosing bank cannot show that they own the underlying note or cannot trace its assignment, in part or wholly due to the securitization of the note, plaintiff may have a right to a declaratory judgement. However, plaintiff’s fifth claim for relief currently fails to state a claim, and is therefore, dismissed. Defendants’ motion to dismiss is granted in that regard.

VII. Plaintiff’s Sixth Claim for Quiet Title

Plaintiff’s six claim seeks a decree from this Court that the property is free and clear of all encumbrances, including the Deed of Trust and promissory note. Here, the factual allegations supporting the complaint are once again conclusory. The entirety of plaintiff’s sixth claim states that ” [p]laintiff is the owner in possession of real property . . . Defendants . . . are not in possession of plaintiff’s real property . . . Defendants claim an interest adverse to plaintiff’s.” Amended Complaint ¶ 4751.

Plaintiff is merely alleging the elements of a claim to quiet title. See Or. Rev. Stat. § 105.605 (“Any person claiming an interest or estate in real property not in the actual possession of another may maintain a suit in equity against another who claims an adverse interest”). However, plaintiff has failed to allege any particular facts entitling her to relief.

In addition, even if plaintiff’s complaint did state a claim to quiet title, it would not be an appropriate remedy here. In general, a person may bring an equitable quiet title action to obtain resolution of a dispute relating to adverse or conflicting claims to real property. Spears v. Dizick, 235 Or. App. 594, 598, 234 P.3d 1037 (2010). While it is possible that defendants may have failed to follow the proper foreclosure procedures, it is undisputed that defendants had the right to foreclose based upon plaintiff’s default under the loan. Thus, because plaintiff is unable to cure the default, she no longer has a valid claim for entitlement to the property. As such, there are no conflicting claims to the property for this Court to resolve.

Further, “[e]quitable relief does not lie if there is an adequate remedy at law.” Alsea Veneer, Inc. v. State of Oregon, 318 Or. 33, 43, 862 P.2d 95 (1993). Here, plaintiff is seeking several other remedies, including over $2 million in monetary damages, an injunction against defendants from foreclosing on her property, and a declaration that she owns the property free of any mortgage. Based on her complaint, plaintiff clearly believes that there are other adequate remedies available at law. Further, this Court is enjoining defendants from commencing foreclosure proceedings until this matter is resolved. As such, plaintiff has failed to show that she is not entitled to further equitable relief.

Accordingly, plaintiff’s claim fails as a matter of law and defendants’ motion to dismiss is granted in part. plaintiff’s sixth claim is dismissed.

VIII. Plaintiff’s Seventh Claim to Remove Cloud on Title

Plaintiff’s seventh claim seeks the removal of cloud on title. Plaintiff’s claim fails for two reasons. First, the factual allegations supporting the complaint are conclusory. The entirety of plaintiff’s seventh claim states only that defendants “claim a lien or other encumbrance adverse to plaintiff’s interest in real property. The encumbrance is invalid because the beneficiary under the deed of trust is not entitled to payment on the note, as set forth above.” Amended Complaint SI 52-3. Once more, plaintiff is merely asserting the bare elements of a claim. Ashcroft, 129 S.Ct. at 1951. Further, because plaintiff “incorporates by reference [all] paragraphs,” it is difficult to even discern what relief plaintiff is seeking and the purported basis for that relief.

Second, as discussed above, MERS, the listed beneficiary under the deed of trust, is not seeking payment on the note. Rather, MERS’ role was limited to essentially recording the transfer of the Deed of Trust. Accordingly, plaintiff is not entitled to relief on that basis.

Therefore, plaintiff’s seventh claim for relief fails as a matter of law. Defendants’ motion to dismiss is granted in part and plaintiff’s seventh claim for relief is dismissed.

VIV. Plaintiff’s Eighth Claim for Invalid Encumbrance

Plaintiff’s final claim is for invalid encumbrances pursuant to Or. Rev. Stat. § 205.450 et seq. The factual allegations supporting the claim are again conclusory. Plaintiff’s eighth claim states only that “[d]efendant BAC knowingly filed, or directed defendants MERS and ReconTrust to file, an invalid claim of incumbrance against plaintiff’s real property.” Amended Complaint St 56. Plaintiff then goes on to list documents that were recorded in the Lane County Clerk’s Office. Amended Complaint SI 57. However, the fact that these documents were recorded in Lane County does not establish that they were in anyway invalid, much less that defendants knew that they were invalid. Thus, plaintiff is again merely asserting the elements of a claim, without identifying any particular facts entitling her to relief. See Or. Rev. Stat. 205.470 (“[a]ny person who knowingly files, or directs another to file, an invalid claim of encumbrance shall be liable to the owner of the property”). Accordingly, plaintiff fails to state a plausible claim upon which relief can be granted. Ashcroft, 129 S.Ct. at 1951.

Therefore, defendants’ motion to dismiss is granted in part, and plaintiff’s eighth claim for relief is dismissed.

CONCLUSION

For the reasons stated above, defendants’ motion to dismiss (doc. 10) is GRANTED in part and DENIED in part as follows: defendants’ motion is GRANTED as to plaintiff’s claims for fraud, breach of covenant of good faith and fair dealing, breach of fiduciary duty, fifth claim for declaratory judgment, quiet title, remove cloud on title, and invalid incumbrance; defendants’ motion is DENIED as to plaintiff’s’ first claim for declaratory judgment.

This Court, however, GRANTS plaintiff leave to amend her First Amended Complaint in order to allege facts sufficient to state a claim for relief, and to replead her fraud claim, such that it complies with Fed. R. Civ. P. 9(b)’s heightened pleading requirements. The parties’ requests for oral argument are DENIED as unnecessary.

Further, because this Court is enjoining defendants from foreclosing until the underlying dispute regarding the property is resolved, plaintiff’s motion for partial summary judgment (doc. 32), seeking an injunction, is DENIED.

Finally, this Court encourages the parties to pursue mediation via the U.S. District Court of Oregon’s Foreclosure Mediation Panel.

IT IS SO ORDERED.

Ann Aiken
United States District Judge

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QUIET TITLE | Ohio Appeals Court Precludes US BANK From Pursuing Any Further Action on the Note, Finds Unenforceable

QUIET TITLE | Ohio Appeals Court Precludes US BANK From Pursuing Any Further Action on the Note, Finds Unenforceable


COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT

~

U.S. BANK, N.A., AS TRUSTEE

Plaintiff-Appellee
-vs-

GIUSEPPE GULLOTTA, ET AL.

Defendant-Appellant

EXCERPT:

{¶24} Based on the foregoing, we find the two-dismissal rule of Civ.R. 41(A) applies and res judicata barred U.S. Bank’s complaint in this case. We find the practical effect of the same precludes U.S. Bank from pursuing any further action on the note. Because the mortgage draws its essence from the note, we find it unenforceable. We find the trial court erred in not granting Appellant’s motion for summary judgment to quiet title.2

{¶25} Appellant’s two assignments of error are sustained.

{¶26} The judgment of the Stark County Court of Common Pleas is reversed.

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MERS Loses Quiet Title Appeal in Texas, Affirms Trial Court Judgment of Voiding Deed of Trust: MERS v. GROVES

MERS Loses Quiet Title Appeal in Texas, Affirms Trial Court Judgment of Voiding Deed of Trust: MERS v. GROVES


Via: William A. Roper

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENSPOINT FUNDING, Appellant,
v.
NANCY GROVES, Appellee.

No. 14-10-00090-CV.

Court of Appeals of Texas, Fourteenth District, Houston.

Memorandum Opinion filed April 12, 2011.

Panel consists of Justices Brown, Boyce and Jamison.

MEMORANDUM OPINION

WILLIAM J. BOYCE, Justice.

Nancy Groves sued Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Greenspoint Funding, to invalidate a deed of trust securing MERS’s alleged lien on Groves’s property. The trial court entered a default judgment against MERS, which then filed this restricted appeal. We affirm.

BACKGROUND

Groves filed her original petition against MERS on May 8, 2009. She alleged that she owns a certain tract of land subject to a lien secured by a deed of trust “accepted and recorded” by MERS. She further alleged that the deed of trust is invalid and asked the trial court to remove it and quiet title in Groves. MERS was served with process but failed to file an answer, and Groves filed a motion for default judgment. The trial court signed a default judgment against MERS stating that (1) Groves owns the property in question; (2) the deed of trust is “void and of no force or effect;” and (3) the deed of trust be removed from the property title.

MERS filed a timely notice of restricted appeal, arguing that (1) “Groves failed to properly state a cause of action and such failure is plain on the face of Groves’s petition;” and (2) “no justiciable controversy is alleged in Groves’s petition.”

ANALYSIS

A restricted appeal is available when (1) it is filed within six months after the trial court signed the judgment; (2) by a party to the suit; (3) who, either in person or through counsel, did not participate at trial and did not timely file any post-judgment motions or requests for findings of fact and conclusions of law; and (4) error is apparent from the face of the record. Tex. R. App. P. 26.1(c), 30; Alexander v. Lynda’s Boutique, 134 S.W.3d 845, 848 (Tex. 2004). The face of the record consists of all papers on file in the appeal. Osteen v. Osteen, 38 S.W.3d 809, 813 (Tex. App.-Houston [14th Dist.] 2001, no pet.).

MERS, a party to this suit, did not participate in the trial court and did not file any post-judgment motion or request for findings of fact or conclusions of law. MERS filed its notice of restricted appeal on January 26, 2010, less than six months after the trial court signed the default judgment on September 25, 2009. Accordingly, the only issue in this restricted appeal is whether error is plain on the record’s face. See Tex. R. App. P. 26.1(c), 30; Alexander, 134 S.W.3d at 848.

I. Groves’s Pleadings

MERS argues in its first issue that error is plain on the record’s face because Groves’s pleading does not properly raise a claim for which the trial court could grant relief. According to MERS, Groves’s pleading does not raise a viable claim because Groves (1) failed to base her claim on the superiority of her own title to the property; and (2) requested only declaratory relief under the Declaratory Judgment Act.

Groves stated in her petition:

Nancy Groves, Plaintiff, petitions the court pursuant to the Declaratory Judgment Act . . . for a declaration of the invalidity of certain documents and claim held by the Defendant, [MERS], in order to quiet title to the property in which Plaintiff has an interest, and for cause of action shows:

* * *

3. Plaintiff’s Interest in Property. The plaintiff is the owner of a certain tract of land located in Harris County, Texas, as shown in the Assessment Lien Deed recorded under document number V230924 in the official Public records of Tarrant County, Texas, and more particularly described as Lot Thirteen (13), in Block Two (2), of Summerwood, Section 4, Seven Oaks Village, an addition in Harris County, Texas, according to the map or plat thereof recorded in Film Code No. 388 of the Map Records of Harris, County, Texas.

* * *

5. Invalidity of Defendant’s Claim. The Deed of Trust under which the Defendant or the Lender or Lender’s assigns asserts an interest that interferes with Plaintiff’s title, although appearing valid on its face, is in fact invalid and of no force or effect. The Plaintiff will show that Defendant nor the Lender’s assigns is not the holder of the original Real Estate Lien note that is secured by the Deed of Trust.

Groves also requested “other and further relief for which Plaintiff may be justly entitled” based on allegations that (1) she owns the property in question; (2) MERS accepted and recorded a deed of trust securing an alleged lien on the property; and (3) the deed of trust “is in fact invalid and of no force or effect.”

The trial court’s judgment states:

[T]he court Orders and Adjudges, that [Groves] is the owner of [the property].

The court further Orders and Adjudges that the Deed of Trust filed is void and has no force or effect.

The court further orders the deed of trust removed from the title to the property made the subject of this litigation.

A. Strength of Title

MERS first argues that the judgment was in error because Groves pleaded “a quiet title (or trespass-to-try-title) claim” but did not “base her claim solely on the strength of her own title.” MERS argues that suits to quiet title must be based on the strength of the claimant’s own title, rather than the weakness of the adverse claimant’s title. See, e.g., Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.-Corpus Christi 2001, no pet.). Resolution of this contention requires consideration of the different types of claims that have been characterized as suits to quiet title. The case law is not entirely consistent on this issue.

A suit to quiet title is equitable in nature, and the principal issue in such suits is “`the existence of a cloud on the title that equity will remove.'” Florey v. Estate of McConnell, 212 S.W.3d 439, 448 (Tex. App.-Austin 2006, pet. denied)Bell v. Ott, 606 S.W.2d 942, 952 (Tex. Civ. App.-Waco 1980, writ ref’d n.r.e.)). A “cloud” on legal title includes any deed, contract, judgment lien or other instrument, not void on its face, that purports to convey an interest in or makes any charge upon the land of the true owner, the invalidity of which would require proof. Wright v. Matthews, 26 S.W.3d 575, 578 (Tex. App.-Beaumont 2000, pet. denied). A suit to quiet title “`enable[s] the holder of the feeblest equity to remove from his way to legal title any unlawful hindrance having the appearance of better right.'” Florey, 212 S.W.3d at 448 (quoting Thomson v. Locke, 1 S.W.112, 115 (Tex. 1886)). (quoting

Courts have used the term “suit to quiet title” to refer to legal disputes regarding

(1) title to and possession of real property; and (2) the validity of other “clouds” on an undisputed owner’s title to real property. Compare Alkas v. United Sav. Ass’n of Tex., Inc., 672 S.W.2d 852, 855-56 (Tex. App.-Corpus Christi 1984, writ ref’d n.r.e.) (suit to adjudicate ownership of property to determine whether creditors of original owner retained interest in property purportedly conveyed to new owner was action “to quiet title”), with Sw. Guar. Trust Co. v. Hardy Rd. 13.4 Joint Venture, 981 S.W.2d 951, 956-57 (Tex. App.-Houston [1st Dist.] 1998, pet. denied) (undisputed property owner’s action to invalidate lien and deed of trust securing lien constituted suit “to quiet title”); see also Florey, 212 S.W.3d at 449 (distinguishing between “suits to quiet title that are equivalent to trespass-to-try-title actions” and suits to quiet title involving interests that only “indirectly impact” title to and possession of real property).[1]

The first type of claim, which involves title to and possession of real property, is essentially “the equivalent to [a] trespass-to-try-title action[].” See Florey, 212 S.W.3d at 449; see also Sani v. Powell, 153 S.W.3d 736, 746 (Tex. App.-Dallas 2005, pet. denied) (quiet title claim involving allegedly invalid tax sale of property characterized as trespass to try title action). “A trespass to try title action is the method of determining title to lands, tenements, or other real property.” Tex. Prop. Code Ann. § 22.001 (Vernon 2000). A trespass to try title action “is typically used to clear problems in chains of title or to recover possession of land unlawfully withheld from a rightful owner.” See Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004), superseded by statute, Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (Vernon 2008) (reversing Martin‘s holding that relief under the Declaratory Judgment Act was unavailable for boundary dispute). It is the exclusive remedy by which to resolve competing claims to property. Jordan v. Bustamante, 158 S.W.3d 29, 34 (Tex. App.-Houston [14th Dist.] 2005, pet. denied). Courts require claimants bringing this type of “suit to quiet title” to base their claims on the strength of their own title. See Kennedy Con., Inc. v. Forman, 316 S.W.3d 129, 135 (Tex. App.-Houston [14th Dist.] 2010, no pet.); Alkas, 672 S.W.2d at 857. To recover, a claimant must establish a prima facie right of title by proving one of the following: (1) a regular chain of conveyances from the sovereign; (2) a superior title out of a common source; (3) title by limitations; or (4) prior possession, which has not been abandoned. Kennedy Con., Inc., 316 S.W.3d at 135.

The second type of claim, which involves other “clouds” on an undisputed owner’s title to real property, challenges an adverse interest that impacts title and possession only indirectly. See Florey, 212 S.W.3d at 449; see also Max Duncan Family Inv., Ltd. v. NTFN Inc., 267 S.W.3d 447, 453-54 (Tex. App.-Dallas 2008, pet. denied) (undisputed property owner’s suit to invalidate promissory note and lien securing note “involve[d] more than just title and possession of real property”); Cadle Co. v. Ortiz, 227 S.W.3d 831, 837-38 (Tex. App.-Corpus Christi 2007, pet. denied) (undisputed property owner’s post-foreclosure suit to invalidate mechanic’s lien distinguished from trespass to try title action); Sw. Guar. Trust Co., 981 S.W.2d at 957 (undisputed property owner’s action to declare lien invalid was “really one to quiet title”). A claim is sufficiently adverse if its assertion would cast a cloud on the owner’s enjoyment of the property. See Katz v. Rodriguez, 563 S.W.2d 627, 629 (Tex. Civ. App.-Corpus Christi 1977, writ ref’d n.r.e.). To remove such a cloud, a plaintiff must “allege right, title, or ownership in herself with sufficient certainty to enable the court to see she has a right of ownership that will warrant judicial interference.” Wright, 26 S.W.3d at 578.

MERS does not dispute that Groves holds title to the property subject to the deed of trust; Groves does not dispute that the deed of trust securing the lien belongs to MERS. Groves’s claim that the deed is invalid does not directly implicate any issues to be resolved by a trespass to try title suit. See Tex. Prop. Code Ann. § 22.001 (Vernon 2000) (“A trespass to try title action is the method of determining title to lands, tenements, or other real property.”); Martin, 133 S.W.3d at 265 (trespass to try title statute is “typically used to clear problems in chains of title or to recover possession of land unlawfully withheld from a rightful owner”); see also Deutsche Bank Nat’l Trust Co. v. Stockdick Land Co., No. 14-09-00617-CV, 2011 WL 321742, at *10 (Tex. App.-Houston [14th Dist.] Feb. 3, 2011, no pet.) (“If the Bank succeeds in its arguments . . . then the Property is subject to the Bank’s lien. If not, then the Property is not subject to the lien. In any event, title to the Property or to the liens is not in question . . . . [The Bank] is not required to pursue a trespass-to-try-title action.”). Therefore, Groves’s claim is not in the nature of a trespass to try title action and she was not required to base her claim upon the strength of her own title.

Groves alleged in her pleading that she owns the property by virtue of her recorded deed. This satisfies the requirement that she “allege right, title, or ownership in herself with sufficient certainty to enable the court to see she has a right of ownership that will warrant judicial interference” in the issue of the deed of trust’s validity. Wright, 26 S.W.3d 575.[2] Therefore, Groves’s pleadings do not establish error on the face of the record.

B. Relief under Declaratory Judgment Act

MERS alternatively argues that “the trespass-to-try-title statutes [are] Groves’s sole remedy” and complains that Groves “did not raise a cause of action under those statutes” because she requested only declaratory relief under the Declaratory Judgment Act. MERS bases its argument on Martin v. Amerman, 133 S.W.3d at 267-68. The holding in Martin rested upon the court’s characterization of section 22.001 of the Texas Property Code as the exclusive remedy for trespass to try title actions. See id.

We need not decide whether Martin precludes Groves’s request for declaratory relief under the Declaratory Judgment Act in this case.[3] Groves requested relief under the Declaratory Judgment Act, as well as “other and further relief to which [she] may be justly entitled.” The trial court’s judgment does not indicate that it granted her request to “quiet title” exclusively under the Declaratory Judgment Act. Accordingly, no error appears on the face of this record. SeeAlexander, 134 S.W.3d at 848. Tex. R. App. P. 26.1(c), 30;

We overrule MERS’s first issue.

II. Justiciable Controversy

MERS argues in its second issue that the trial court lacked jurisdiction over the action because Groves “failed to allege a justiciable controversy under the Declaratory Judgment Act.”

A justiciable controversy between the parties must exist at every stage of the legal proceedings. Williams v. Lara, 52 S.W.3d 171, 184 (Tex. 2001). We cannot decide moot controversies. Nat’l Collegiate Athletic Ass’n v. Jones, 1 S.W.3d 83, 86 (Tex. 1999). “In order to maintain a suit to quiet title, there must be an assertion by the defendant of a claim to some interest adverse to plaintiff’s title; and the claim must be one that, if enforced, would interfere with the plaintiff’s enjoyment of the property.” Mauro v. Lavlies, 386 S.W.2d 825, 826-27 (Tex. Civ. App.-Beaumont 1964, no writ) (internal quotation omitted) (no justiciable controversy existed because the judgments defendants obtained against plaintiffs asserted no claims against plaintiffs’ property and defendants made no attempt to create a lien upon property or to have property sold to satisfy judgments).

Groves alleged in her petition that MERS’s deed of trust “purported to create a lien for security purposes on Plaintiff’s property as described.” This alleged lien constitutes an adverse interest to Groves’s title, which, if enforced, would interfere with her enjoyment of the property. See id. Therefore, a justiciable controversy existed, and the trial court had subject matter jurisdiction over the case. See Williams, 52 S.W.3d at 184; Mauro, 386 S.W.2d at 826-27.[4]

We overrule MERS’s second issue.

CONCLUSION

Having overruled both of MERS’s issues on appeal, we affirm the trial court’s judgment.

[1] Other decisions have stated that a suit to quiet title is distinct from a trespass to try title action. See, e.g., Longoria v. Lasater, 292 S.W.3d 156, 165 n.7 (Tex. App.-San Antonio 2009, pet. denied); Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.-Corpus Christi 2001, no pet.); McCammon v. Ischy, No. 03-06-00707-CV, 2010 WL 1930149, at *7 (Tex. App.-Austin May 12, 2010, pet. denied) (mem. op.).

[2] Even assuming for argument’s sake that Groves’s suit is properly characterized as a trespass to try title suit, the rule that a claimant in such an action must base her claim on the superiority of her own title concerns Groves’s burden of proof. See Kennedy Con., Inc., 316 S.W.3d at 135 (“To recover [in trespass to try title action], Forman must establish a prima facie right of title by proving [strength of Forman’s own title by one of four ways].”) (emphasis added). Any alleged error relating to this issue would be one of proof and is not apparent from Groves’s petition or on the face of this record. See Tex. R. App. P. 26.1(c), 30; Alexander, 134 S.W.3d at 848.

[3] Although Martin addressed exclusivity of relief under the Texas Property Code for trespass to try title claims, courts of appeals are split on whether exclusivity of relief under the Texas Property Code applies to all suits characterized as suits to quiet title. Compare Sw. Guar. Trust Co., 981 S.W.2d at 957 (action to quiet title brought to invalidate lien on property was governed exclusively by trespass to try title statute), with Florey, 212 S.W.3d at 449 (Martin does not preclude relief under the Declaratory Judgment Act for actions to quiet title that only indirectly impact title and possession and therefore are not not equivalent to trespass to try title actions).

[4] MERS also argues: “All Groves alleged is MERS lacked an enforceable security interest in the property at the time she filed her petition because MERS was not then holder of the original note secured by the deed of trust. . . . [T]his one fact shows Groves’s action is based entirely on facts subject to change” and therefore fails to manifest the “ripening seeds of a controversy” between Groves and MERS. MERS argues that a justiciable controversy does not exist because it “may or may not be required to hold the original note” to enforce the security interest and could “acquire noteholder status through assignment” if so required. This argument goes to the merits of Groves’s argument for invalidating the deed of trust and does not affect whether a controversy existed as to the validity of the deed of trust.

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GA Supreme Court Affirms | Quiet Title, Forged Deeds Cannot Vest Title AURORA LOAN SERVICES, LLC v. Veatch

GA Supreme Court Affirms | Quiet Title, Forged Deeds Cannot Vest Title AURORA LOAN SERVICES, LLC v. Veatch


“[A] forged deed is a nullity and vests no title in a grantee. [Cit.] As such, even a bona fide purchaser for value without notice of a forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey.” Brock v. Yale Mortgage Co

AURORA LOAN SERVICES, LLC
v.
JOHN MACELRAY VEATCH, ADMR., et al.

S10A1725.

Supreme Court of Georgia.

Decided: March 18, 2011.

HINES, Justice.

In this quiet title action, the trial court entered a final order ruling that fee simple title to the subject property was vested in John Macrelay Veatch (“Veatch”), as personal representative of the estate of Raymond Wesley Veatch, Jr., unencumbered by the security deed held by Aurora Loan Services, LLC (“Aurora”), and striking various deeds from the deed records of Fulton County. Aurora appeals, and for the reasons that follow, we affirm.

Elsie Veatch owned the subject property until her death in 1974; her sole heir was Raymond Wesley Veatch, Jr., Veatch’s father, who died on March 20, 2006. After his death, two forged deeds were recorded in the Fulton County deed records, purporting to convey title to the property to Antonio Simpson. One forged deed was styled “Quitclaim Deed,” purportedly executed on May 19, 2006 by Elsie Veatch, who had then been dead for 32 years; this purported deed was recorded on October 17, 2006. The other purported deed was styled “Executors Deed,” and was purportedly executed by Raymond Wesley Veatch, Jr., on March 15, 2006, a date on which he lay in a coma; it was recorded on November 6, 2006. After these forged deeds were executed and recorded, a warranty deed purportedly from Antonio Simpson to Darryl Matthews was recorded on November 8, 2006. Matthews then executed a security deed in favor of First Magnus Financial Corporation in connection with a loan for $187,500. The security deed was eventually assigned to Aurora.

On September 5, 2007, after Veatch discovered activity on the property and applied for, and was granted, letters of administration of the estate of Raymond Wesley Veatch, Jr., he filed in the Fulton County land records an affidavit stating that the Executor’s and Quitclaim deeds were false. He then filed in the superior court the present petition to quiet title. OCGA § 23-3-40 et seq. The trial court appointed a Special Master who concluded that Aurora was a bona fide purchaser for value. See Roop Grocery Co. v. Gentry, 195 Ga. 736, 745 (1) (25 SE2d 705) (1943). However, the trial court disagreed, finding that there was record notice that the forged deeds were fraudulent, and that in any event, a forged deed is a nullity and cannot convey title.

The trial court is correct. Aurora’s interest in the property is dependent upon the forged deeds made to Antonio Simpson. As the trial court noted, such a deed cannot convey title. “[A] forged deed is a nullity and vests no title in a grantee. [Cit.] As such, even a bona fide purchaser for value without notice of a forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey.” Brock v. Yale Mortgage Co., 287 Ga. 849, 852 (2) (700 SE2d 583) (2010). In that opinion, this Court specifically overruled prior precedent of this Court that extended “the bona fide purchaser for value doctrine to those acquiring title under a grantee in a forged deed.” Id. at 853 (2). Accordingly, it is of no moment whether the deed records provided notice of the forgeries at the time Matthews executed the security deed on which Aurora bases its claim; there was simply no title held by Simpson, Matthews, First Magnus Financial Corporation, or any subsequent assignee. Id. Accord, Second Refuge Church &c. v. Lollar, 282 Ga. 721, 726-727 (3) (550 SE2d 128) (2007). The trial court did not err in declaring title to be vested in Veatch, as personal representative of the estate of Raymond Wesley Veatch, Jr., unencumbered by the security deed held by Aurora.

Judgment affirmed. All the Justices concur.

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NEVADA Dist. Court “QUIET TITLE VIABLE” SIFRE v. Wells Fargo Bank

NEVADA Dist. Court “QUIET TITLE VIABLE” SIFRE v. Wells Fargo Bank


PAUL SIFRE, Plaintiff,
v.
WELLS FARGO BANK, Defendant.

No. 3:10-cv-00572-RCJ-VPC. United States District Court, D. Nevada.

January 19, 2011.

ORDER

ROBERT C. JONES, District Judge.

This case arises out of the foreclosure of Plaintiffs mortgage. The Court previously entered a temporary restraining order and set a preliminary injunction hearing, but the order expired and the Court vacated the hearing when Plaintiff failed to serve Defendant with the notice of the hearing within the time ordered by the Court. Plaintiff has now served “Wells Fargo Bank C/O Trustees Corps,” in Sacramento, California, and the Clerk has entered default against Defendant based on this service. The Court denied a motion for preliminary injunction, and Defendant has now moved to dismiss,

I. FACTS AND PROCEDURAL HISTORY

Plaintiff Paul Sifre owns real property located at 3660 Hawking Ct., Sparks, NV 89436 (the “Property”). (Mot. 1:16-17, Sept. 15, 2010, ECF No. 2).[1] The gravamen of the Complaint is that Plaintiff was fraudulently induced into signing a mortgage, although most of the Complaint is a generalized grievance against the mortgage industry. Plaintiff does not allege he is not in default but rather that Defendant does not have standing to foreclose and fraudulently induced him into entering into the mortgage contract. He also appears to plead claims for unjust enrichment, quiet title, breach of fiduciary duty, negligence, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, TILA, HOEPA, and RESPA.

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California BK Adversary Proceeding KENTON v. Bank of America, Wells Fargo, Florida Default Law Group

California BK Adversary Proceeding KENTON v. Bank of America, Wells Fargo, Florida Default Law Group


via: Brian Davies

ELIZABETH ANN KENTON, an Individual.
Plaintiff,

-vs.-

BANK OF AMERICA, N.A.; WELLS FARGO
BANK N.A. F/K/A WELLS FARGO BANK
MINNESOTA, N. A., as Trustee of BANK OF
AMERICAN SECURITIES INC.
ALTERNATIVE LOAN TRUST 2003-2;
FLORIDA DEFAULT LAW GROUP, P.I

Defendants.

COMPLAINT TO DETERMINE THE
NATURE, EXTENT AND VALIDITY
OF LIEN AND TO DISALLOW
SECURED CLAIM, TILA VIOLATION,
FRAUD, LIBEL, QUIET TILE, AND
INJUNCTIVE RELIEF.

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OHIO WELLS FARGO QUIET TITLE FAIL | GROVE COURT CONDOMINIUM UNIT OWNERS’ASSN. v. Hartman

OHIO WELLS FARGO QUIET TITLE FAIL | GROVE COURT CONDOMINIUM UNIT OWNERS’ASSN. v. Hartman


2011 Ohio 218
Grove Court Condominium Unit Owners’ Association, Plaintiff-Appellee,
v.
Dorothy M. Hartman, et al., Defendants-Appellees,
[Appeal by Appellant Wells Fargo Bank, N.A.]

No. 94910.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

RELEASED AND JOURNALIZED: January 20, 2011.

Deanna C. Stoutenborough, Romi T. Fox, M. Elizabeth Hils, Lerner, Sampson & Rothfuss, 120 E. Fourth Street, 8th Floor, Cincinnati, OH 45202, For Wells Fargo Bank, N.A. Scott A. King, Terry W. Posey, Jr., Thompson Hine LLP, P.O. Box 8801, 2000 Courthouse Plaza, N.E., Dayton, OH 45401-8801, Dale S. Smith, Thompson Hine LLP, 3900 Key Center, 127 Public Square, Cleveland, OH 44114, Attorneys for Appellant.

James C. Wrentmore, Singerman, Mills, Desberg & Kauntz Co., LPA, 3401 Enterprise Parkway, Suite 200, Beachwood, OH 44122, For Grove Court Condominium Unit Owners’ Association, Kevin M. Fields, Darcy Mehling Good, Robert E. Kmiecik, Kimberly L. Strauss, Kaman & Cusimano, LLC, 50 Public Square, Suite 2000, Cleveland, OH 44113, Elizabeth A. Meers, 1370 Ontario Street, Suite 2000, Cleveland, OH 44113-1726, For Dorothy M. Hartman, et al., Jason P. Hager, Douglass & Associates Co., LPA, 4725 Grayton Road, Cleveland, OH 44135, For Plymouth Park Tax Services, Alexander E. Goetsch, Megan R. Miller, Cavitch, Familo & Durkin Co., LPA, 1300 East Ninth Street, 20th Floor, Cleveland, OH 44114, For Dino Selvaggio, Third Federal Savings & Loan Association, Legal Department, 7007 Broadway Avenue, Cleveland, OH 44105, For Third Federal Savings & Loan Association, Attorneys for Appellees.

Before: Gallagher, P.J., Kilbane, A.J., and Celebrezze, J.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, P.J.

{¶ 1} Appellant Wells Fargo Bank, N.A. (“Wells Fargo”) appeals the judgment of the Cuyahoga County Court of Common Pleas that denied its emergency motion to intervene. For the reasons stated herein, we affirm.

{¶ 2} This is a foreclosure action that was instituted by plaintiff Grove Court Condominium Owners’ Association, Inc. (“Grove Court”), on December 28, 2006. At the time the action was filed, defendants Dorothy and Richard Hartman (“the Hartmans”) owned two condominiums, units 307 and 405, in the Grove Court condominium development, located at 1900 Grove Court in Cleveland. They acquired ownership to the units in 1986 through separate and distinct instruments. Unit 405 is the subject property in this matter.

{¶ 3} After purchasing the units, the Hartmans added an internal stairway to connect the units in accordance with Grove Court’s declaration and Ohio law. They did not combine the units into a single unit for legal and tax purposes. Rather, the units retained their separate addresses and parcel numbers.

{¶ 4} In 2005, the Hartmans obtained refinancing from Wells Fargo. The legal description on the mortgage and title commitment only included unit 307. There was no recorded interest on unit 405.

{¶ 5} On December 28, 2006, Grove Court filed this foreclosure action against the Hartmans. Grove Court sought to foreclose on a certificate of lien recorded against unit 405, for unpaid maintenance fees and condominium assessments. The parties named in the action were consistent with the preliminary judicial report, which did not show any mortgages of record on unit 405.

{¶ 6} On August 7, 2007, Grove Court filed an unopposed motion for summary judgment against the Hartmans. On October 22, 2007, the trial court adopted a magistrate’s decision, granted Grove Court judgment against the Hartmans, and issued a decree of foreclosure.

{¶ 7} In the meantime, Wells Fargo had initiated foreclosure proceedings on unit 307 on June 8, 2007. After discovering this action, Wells Fargo filed an emergency motion to intervene, motion for relief from judgment and to vacate sale, and motion to quiet title. The motion was filed two months after judgment had been granted to Grove Court, four days prior to the scheduled foreclosure sale, and almost a year after the case had commenced. Wells Fargo did not attach any pleading to the motion to intervene.

{¶ 8} In its motion, Wells Fargo asserted that it had issued a refinance loan to the Hartmans in October 2005, that the parties intended the loan to be secured by both units 307 and 405, and that as a result of a scrivener’s error, only unit 307 was identified in the legal description on the mortgage. Wells Fargo sought an order recognizing that it had a superior lien interest in unit 405.

{¶ 9} Before the motion was ruled upon, unit 405 was sold at a sheriff’s sale to Dino Selvaggio for $76,667. Thereafter, a court magistrate issued an order denying Wells Fargo’s motion to intervene. The trial court confirmed the sale on June 6, 2008.

{¶ 10} Various distributions were made from the proceeds of the sale, including $10,256.49 to Grove Court in satisfaction of its judgment. A portion of the funds remain pending with the clerk of court.

{¶ 11} Wells Fargo filed objections to the magistrate’s decision. On February 26, 2010, the trial court overruled the objections, adopted the magistrate’s decision, and denied Wells Fargo’s motion to intervene. The trial court, through the adopted decision, found that Wells Fargo’s motion failed to attach a pleading detailing its claim as required by Civ.R. 24(C). The court further found the motion raised a number of new liability issues that would operate to severely prejudice the ability of Grove Court to satisfy its judgment, that Wells Fargo did not maintain an interest in the subject property, and that the motion was untimely.

{¶ 12} Wells Fargo has appealed the trial court’s decision. In its sole assignment of error, Wells Fargo claims “[t]he trial court erred in denying the motion to intervene.”

{¶ 13} Wells Fargo asserts that it had a right to intervene in this action pursuant to Civ.R. 24(A)(2), which provides for intervention of right in civil cases. The rule provides as follows: “Upon timely application anyone shall be permitted to intervene in an action: * * * (2) when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.” Civ.R. 24(A)(2).[1]

{¶ 14} The rule is to be liberally construed in favor of intervention. State ex rel. Watkins v. Eighth Dist. Court of Appeals, 82 Ohio St.3d 532, 534, 1998-Ohio-190, 696 N.E.2d 1079. Nevertheless, the putative intervenor still bears the burden of establishing the right to intervene.

{¶ 15} In this case, Wells Fargo claims that it has an interest in the subject property. Although its alleged interest was not recorded and does not appear of record, Wells Fargo asserts that this was the result of a scrivener’s error and that it has a legal or equitable lien on the property that is superior to other interests.

{¶ 16} In interpreting analogous Fed.R.Civ.P. 24(a)(2), federal courts have stated that intervention of right requires the interest to be “direct, substantial, and legally protectable.” U.S. v. Vasi (Mar. 6, 1991), N.D. Ohio Nos. 5:90 CV 1167 and 5:90 CV 1168; Grubbs v. Norris (C.A. 6, 1989), 870 F.2d 343, 346. Ohio courts have found the same requirements implicit in Civ.R. 24(A)(2). Duryee v. PIE Mut. Ins. Co. (Dec. 1, 1998), Franklin App. No. 98AP-535; Fairview Gen. Hosp. v. Fletcher (1990), 69 Ohio App.3d 827, 591 N.E.2d 1312. Further, the Ohio Supreme Court specifically has stated that the claimed interest under Civ.R. 24(A)(2) must be one that is “legally protectable.” State ex rel. Dispatch Printing Co. v. Columbus, 90 Ohio St.3d 39, 2000-Ohio-8, 734 N.E.2d 797; In re Schmidt (1986), 25 Ohio St.3d 331, 336, 496 N.E.2d 952.

{¶ 17} In this case, the trial court determined that the documentation provided by Wells Fargo only demonstrates that its mortgage encumbers a wholly different parcel than the parcel at issue in this matter. The court found that without the exercise of the court’s equitable power of reformation, Wells Fargo has no interest in the subject property.

{¶ 18} We recognize that Wells Fargo does not have a present interest in the property and that its claimed interest is contingent on a determination of the merits of the issues it seeks to raise in the action.[2] However, even assuming that Wells Fargo’s claimed interest is a direct, substantial and legally protectable interest, we still find that the trial court did not error in denying the motion to intervene on the grounds that a required pleading was not attached to the motion and the motion was untimely.

{¶ 19} Civ.R. 24(C) mandates that the motion to intervene “shall be accompanied by a pleading, as defined in Civ.R. 7(A) setting forth the claim or defense for which intervention is sought.” Civ.R. 7(A) defines a pleading as a complaint, an answer, a reply to a counterclaim, an answer to a cross-claim, a third-party complaint, or a third-party answer. No such pleading accompanied the motion to intervene filed by Wells Fargo.

{¶ 20} The Ohio Supreme Court has repeatedly held that a motion to intervene is properly denied when the “motion is not accompanied by a pleading setting forth the claim or defense for which intervention is sought” as mandated by Civ.R. 24(C). State ex rel. Sawicki v. Court of Common Pleas of Lucas Cty., 121 Ohio St.3d 507, 2009-Ohio-1523, 905 N.E.2d 1192, ¶ 21; State ex rel. Polo v. Cuyahoga Cty. Bd. of Elections, 74 Ohio St.3d 143, 144, 1995-Ohio-269, 656 N.E.2d 1277.[3] Thus, we do not find that the trial court erred in denying the motion on this ground.

{¶ 21} “The timeliness of a motion to intervene pursuant to Civ.R. 24(A) is a matter within the sound discretion of the trial judge.” Univ. Hosps. of Cleveland, Inc. v. Lynch, 96 Ohio St.3d 118, 2002-Ohio-3748, 772 N.E.2d 105, ¶ 47. When determining the timeliness of the motion, the court should consider the following factors: “(1) the point to which the suit has progressed, (2) the purpose for which intervention is sought, (3) the length of time preceding the application during which the proposed intervenor knew or reasonably should have known of his interest in the case, (4) the prejudice to the original parties due to the proposed intervenor’s failure after he or she knew or reasonably should have known of his or her interest in the case to apply promptly for intervention, and (5) the existence of unusual circumstances militating against or in favor of intervention.” Id., quoting Triax Co. v. TRW, Inc. (C.A.6, 1984), 724 F.2d 1224, 1228.

{¶ 22} “Intervention after final judgment has been entered is unusual and ordinarily will not be granted.” Meagher, 82 Ohio St.3d at 504, 1998-Ohio-192, 696 N.E.2d 1058. However, intervention after final judgment may be allowed when the intervenor has no other alternative remedy and intervention is the only way to protect the intervenor’s rights. See Owens v. Wright (Feb. 18, 1993), Cuyahoga App. No. 64031; Likover v. Cleveland (1978), 60 Ohio App.2d 154, 159, 396 N.E.2d 491. Ultimately, the determination of whether a Civ.R. 24 motion to intervene is timely depends on the facts and circumstances of the case. Meagher, 82 Ohio St.3d at 503, 1998-Ohio-192, 696 N.E.2d 1058.

{¶ 23} In this case, Wells Fargo did not observe the alleged scrivener’s error at the time it received the title commitment or when the mortgage was recorded. It did not seek to intervene in this action until nearly a year after the case was filed, two months after final judgment was granted to Grove Court, and only four days before a scheduled sheriff’s sale of the subject property. Also, the motion was filed six months after Wells Fargo had filed its own foreclosure action against only unit 307. Wells Fargo sought to vacate the judgment, to interject newly contested issues into the matter, and to claim a potential superior interest in the subject property that would require the court to exercise its equitable powers to reform Wells Fargo’s mortgage. As a judgment had already been imposed, with priority interests established, allowing intervention would operate to prejudice the original parties. Further, the subject property was sold to Mr. Selvaggio.

{¶ 24} Considering the facts and circumstances of this case, we find the trial court did not abuse its discretion in denying Wells Fargo’s motion to intervene after judgment.[4] Accordingly, Wells Fargo’s sole assignment of error is overruled.

Judgment affirmed.

It is ordered that appellees recover from appellant costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the common pleas court to carry this judgment into execution. Case remanded to the trial court for execution of sentence.

Mary Eileen Kilbane, A.J., and Frank D. Celebrezze, Jr., J., concur.

[1] The Ohio Supreme Court has recognized that “Ohio courts have applied an abuse of discretion standard for all of the Civ.R. 24(A)(2) intervention of right requirements.” State ex rel. First New Shiloh Baptist Church v. Meagher, 82 Ohio St.3d 501, 503 fn. 1, 1998-Ohio-192, 696 N.E.2d 1058. However, we observe that there is in fact some split in authority as to whether the review for intervention of right is de novo.

[2] We note that “equity will allow reformation of a written instrument for the erroneous omission of a material provision so that the instrument will evince the actual intention of the parties.” Berardi v. Ohio Turnpike Comm. (1965), 1 Ohio App.2d 365, 368, 205 N.E.2d 23.

[3] Insofar as this court found that the failure to attach a pleading was not fatal to intervention in Crittenden Court Apt. Assoc. v. Jacobson/Reliance, Cuyahoga App. Nos. 85395 and 85452, 2005-Ohio-1993, that case is distinguishable. In that case, the purpose for intervention “did not include the addition of any new liability or damages issues to the litigation,” and the proposed intervenor explained in its motion its reason for not attaching an intervening complaint as follows: “`Because [proposed intervenor] has no separate and independent claims to assert in this litigation, it is neither necessary or appropriate that it submit a pleading in conjunction with this motion as described in [Civ.R. 24(C)].'” Id. at ¶ 6. These are not the circumstances presented herein.

[4] The facts and circumstances in Rokakis v. Martin, 180 Ohio App.3d 696, 2009-Ohio-369, 906 N.E.2d 1200, a case relied on by Wells Fargo, were different from this matter. In Martin, the intervenor was a valid lienholder with a junior interest in the property to those already named in the action, its interest could be paid out of the excess sale proceeds remaining on deposit with the court, and its intervention would not operate to prejudice the original parties to the foreclosure action.

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Posted in STOP FORECLOSURE FRAUDComments (1)

Utah’s “Quiet Title Law” Bypasses MERS, Awards Homes Free and Clear; One Homeowner Had $417,000 Debt Erased

Utah’s “Quiet Title Law” Bypasses MERS, Awards Homes Free and Clear; One Homeowner Had $417,000 Debt Erased


Mike “Mish” Shedlock

Monday, January 17, 2011 1:33 AM

The Salt Lake Tribune has an interesting article on Utah’s “Quiet Title Laws”, MERS, clouded titles, and record keeping. Several people won titles free and clear to their houses or condos when debts as great as $417,000 were dismissed in court. Here are a few snips.

A Utah court case in which the owner of a Draper townhouse got clear title to the property, even though he still owed $132,000 on it, raises new legal and financial questions about a property-records database created by mortgage bankers.

The award of a title free of liens means that whoever owns the promissory note on the Draper property — likely a group of faraway investors — no longer has the right to foreclose to collect on a delinquent loan. Indeed, the townhouse owner has sold the property and kept the money. Those who own the promissory note probably don’t even know what occurred.

Last year, the owner of the Draper property contacted attorney Walter T. Keane to help him deal with lenders, though Keane won’t say what the problem was and the owner declined an interview request.

The lawsuit over the title to the townhouse named Garbett Mortgage and Citibank FSB as the holders of promissory notes as recorded on trust deeds filed with the recorder’s office. Integrated Title Services was listed as trustee of the Garbett Mortgage trust deed, while First American Title was the trustee of the CitiBank trust deed.

But there also was another entity listed on the trust deeds called the Mortgage Electronic Registration Systems (MERS). The Mortgage Bankers Association, the Washington, D.C.-based trade group that represents major mortgage lenders, created MERS in the mid-1990s.

Under the state’s quiet title laws, Keane said he did not have to name MERS or serve it legal papers in the lawsuit because it was not the legal owner of title to the property. Those were title companies. In addition, attorneys contend, MERS cannot be the “beneficiary” or holder of the promissory note because it readily has admitted it has no financial interest in any notes or mortgages.

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Posted in STOP FORECLOSURE FRAUDComments (2)

Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory by Christopher L. Peterson

Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory by Christopher L. Peterson


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Christopher Lewis Peterson

University of Utah – S.J. Quinney College of Law
Real Property, Probate and Trust Law Journal, Forthcoming

Abstract:

Hundreds of thousands of home foreclosure lawsuits have focused judicial scrutiny on the Mortgage Electronic Registration System (“MERS”). This Article updates and expands upon an earlier piece by exploring the implications of state Supreme Court decisions holding that MERS is not a mortgagee in security agreements that list it as such. In particular this Article looks at: (1) the consequences on land title records of recording mortgages in the name of a purported mortgagee that is not actually mortgagee as a matter of law; (2) whether a security agreement that fails to name an actual mortgagee can successfully convey a property interest; and (3) whether county governments may be entitled to reimbursement of recording fees avoided through the use of false statements associated with the MERS system. This Article concludes with a discussion of steps needed to rebuild trustworthy real property ownership records.

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Posted in assignment of mortgage, bifurcate, Christopher Peterson, deed of trust, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, STOP FORECLOSURE FRAUDComments (1)

MORATORIUM BY 10/15?? Officials in 49 states launch foreclosure probe

MORATORIUM BY 10/15?? Officials in 49 states launch foreclosure probe


UPDATE: 49 ALL 50 State Attorney Generals…ALABAMA is signing up as well. CONFIRMED.

“What we have seen are not mere technicalities,” said Ohio Attorney General Richard Cordray. “This is about the private property rights of homeowners facing foreclosure and the integrity of our court system, which cannot enter judgments based on fraudulent evidence.”

Officials in 49 states launch foreclosure probe

By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer 1 min ago
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WASHINGTON – Officials in 49 states and the District of Columbia have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

The states’ attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly.

Alabama was the only state not to join the investigation.

Attorneys general have taken the lead in responding to a nationwide scandal that’s called into question the accuracy and legitimacy of documents that lenders relied on to evict people from the homes. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc. Another 3.3 million homes could be lost to foreclosure or distressed sale over the next four years, according to Moody’s Analytics.

The officials said they intend to use their investigation to fix these problems in the mortgage industry.

“This is not simply about a glitch in paperwork,” said Iowa Attorney General Tom Miller, who is leading the probe. “It’s also about some companies violating the law and many people losing their homes.”

Ally Financial Inc.’s GMAC Mortgage Unit, Bank of America and JPMorgan Chase & Co. already have halted questionable foreclosures. Other banks, including Citigroup Inc. and Wells Fargo & Co. have not stopped processing foreclosures, saying they did nothing wrong.

In a joint statement, the officials said they would look into evidence that legal documents were signed by mortgage company employees who “did not have personal knowledge of the facts asserted in the documents. They also said that many of those documents appear to have been signed without a notary public witnessing that signature, a violation of most state laws.

“What we have seen are not mere technicalities,” said Ohio Attorney General Richard Cordray. “This is about the private property rights of homeowners facing foreclosure and the integrity of our court system, which cannot enter judgments based on fraudulent evidence.”

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Posted in assignment of mortgage, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, MERS, MERSCORP, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., STOP FORECLOSURE FRAUDComments (1)

CALIFORNIA ‘QUIET TITLE’ VICTORY: PAUL NGUYEN V. CHASE et al

CALIFORNIA ‘QUIET TITLE’ VICTORY: PAUL NGUYEN V. CHASE et al


The yellow in the picture represents all the hard work and sweat Mr. Nguyen encountered for this victory.

Quiet Title, Rescission and Damages, and Unfair Business Practices

JUDGMENT


1. This Court has jurisdiction over the subject matter of this case and over the Defendants.

2. Venue as to the Defendants in the Central District of California is proper.

3. Default judgment is hereby entered against Chase Bank USA, N.A. and Chase Home Finance, LLC and in favor of Plaintiffs Paul Nguyen and Laura Nguyen on all claims in Plaintiffs’ SecondAmended Complaint.

4. IT IS THEREFORE ORDERED that the Deed of Trust recorded with Orange County Recorder as instrument No. 2007000731120 on 12/12/2007 is wholly voided as to plaintiff Laura Nguyen.

5. IT IS FURTHER ORDERED that Defendant First American Loanstar Trustee Services record a DEED OF RECONVEYANCE to reconvey unto Plaintiffs thereto all right, title and interest which was heretofore acquired by First American Loanstar Trustee Services under deed of trust recorded with Orange County Recorder as instrument No. 2007000731120 on 12/12/2007.

6. IT IS FURTHER ORDERED that all adverse claims against property known as 16141 Quartz Street, Westminster, CA 92683 are quieted.
The legal description of said property is:

LOT 44 TRACT NO. 8977, IN THE CITY OF WESTMINSTER, COUNTY OF ORANGE, STATE OF  CALIFORNIA, AS PER MAP RECORDED IN BOOK 369, PAGE(S) 46 AND 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. Assessor’s Parcel No.: 107-903-44.

7. IT IS FURTHER ORDERED that the Promissory Note dated 12/12/2007 executed by Plaintiff Paul Nguyen in favor of Chase Bank USA, N.A. rescinded pursuant to 15 U.S.C. §1635(i).

8. IT IS FURTHER ORDERED that pursuant to 15 U.S.C. §1635(b), Plaintiffs had made offer to tender the loan evidenced by promissory note dated 12/12/2007 and Defendant Chase Bank USA, N.A. did not take possession within 20 days after tender by the Plaintiffs. Therefore, ownership of the loan proceed is vested in the Plaintiffs without obligation on their part to pay for it.

9. IT IS FURTHER ORDERED that Defendant Chase Bank USA, N.A. within 20 days after entry of judgment shall return to the Plaintiffs any money or property given as earnest money, down payment, or otherwise pursuant to 15 U.S.C. §1635(b).

10. IT IS FURTHER ORDERED that Plaintiffs are awarded their costs of suit, to be paid by Defendants Chase Bank USA, N.A. and Chase Home Finance, LLC, in an amount to be determined by the Clerk of the Court.

DATED: September 15, 2010
____________________________
The Honorable A. Howard Matz
JS-6 United States District Judge

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Posted in chain in title, chase, conspiracy, deed of trust, foreclosure, foreclosure fraud, foreclosures, mortgage, quiet title, securitization, trustee, Trusts, Unfair Business PracticesComments (7)

NY JUDGE SPINNER DENIES Deutsche & MERS for NOT Recording Mortgage, Make up Affidavit and Assignment!

NY JUDGE SPINNER DENIES Deutsche & MERS for NOT Recording Mortgage, Make up Affidavit and Assignment!


MERS ‘QUIET TITLE’ FAIL

NY SUPREME COURT: SUFFOLK COUNTY

INDEX NO. 09-3 1067

Excerpts:

MERS alleges that the mortgage was never recorded, and upon information and belief, has been lost or inadvertantly destroyed. MERS commenced this action on August 1 1, 2009, with the filing of the summons, verified complaint, and notice of pendency.

Also, in support of its cross motion, MERS submits, inter alia, copies of the alleged note and mortgage, and the affidavit of John Burnett ( “Burnett”), a Vice President of Deutsche Bank National Trust Company as Trustee for the MLMI Trust Series 2007-MLNI (“Deutsche Bank”) who alleges that Deutsche Bank is the current owner and holder of the mortgage that is the subject of this action. Burnett claims that MERS’ mortgage has been assigned to Deutsche Bank by an unrecorded assignment of the mortgage acknowledged on September 4,2009, a copy of which has been submitted to the court. Burnett states that the assignment will be recorded once the mortgage has been established of record. Further, Burnett alleges that out of the loan proceeds that were secured by the mortgage, $641,441.54 was paid to Downey Savings and Loan to satisfy a prior mortgage Torr had given on the property, and the amount of $34,833.22 was paid directly to Torr. Burnett submits a copy of the alleged HUD- 1 A Settlement Statement from Torr’s closing.

Additionally, Burnett asserts that it has been discovered that the original mortgage was never recorded, cannot be located, and is presumed to be lost or inadvertantly destroyed. He claims that the original mortgage is not in Deutsche Bank’s files, and only a copy has been located. Burnett states that Interactive Abstract (“Interactive”) a title abstract company, presided over the November 17, 2006 closing of the mortgage and took the executed original for the purpose of recording it in the Suffolk County Clerk’s Office. He states that, upon information and belief, the mortgage was lost, misplace or destroyed while in Interactive‘s possession or after it had been submitted to the Clerk’s Office for recording. Burnett alleges that he has been advised that Interactive has ceased operating as a title abstract company and is out of business.

MERS alleges that by submitting the affidavit of Burnett, and copies of the affidavits of service, together with the relevant documentary evidence, it has satisfied the proof required by CPLR 321 5 setting forth the facts constituting the claim against Torr and establishing his default. Moreover, MERS alleges that the relief sought herein, a declaratory judgment, is necessary to enable it to realize the security interest in the property that was bargained for when MLN made its $695,000.00 loan to Torr and Torr gave the mortgage to secure the loan. MERS requests that the court render a judgment declaring that the plaintiff is the holder of a mortgage encumbering the premises under the terms and conditions set forth in the unrecorded plaintiffs mortgage, and directing the Suffolk County Clerk’s Office to record such a declaratory judgment, together with a copy of the plaintiffs mortgage.

As to Torr’s motion to dismiss the complaint for failure to state a cause of action, MERS has established that such motion is untimely. Torr was served by two different methods of service. One of the affidavits of service submitted indicates that Torr was served pursuant to CPLR 308(2) on September 2, 2009, by leaving the summons and verified complaint with a person of suitable age and discretion; mailing them to Torr’s residence on September 8,2009; and then filing proof of service with the Suffolk County Clerk’s Office on September 18, 2009. Therefore, under this method of service, Torr would have had to have served an answer or a notice of appearance by October 28,2009 (see CPLR 308[2]; CPLR 320; and CPLR 3012). The other affidavit of service submitted indicates that Torr was served pursuant to CPLR 308( 1) on September 2,2009, by personal delivery of the summons and verified complaint, and then fiIing proof of service with the Suffolk County Clerk’s Office on September 10, 2009. Thus, under this method of service, Torr would have had to have served an answer or a notice of appearance by September 22, 2009 (see CPLR 320 and CPLR 30 12). Furthermore, this motion to dismiss the complaint was made by Torr on December 2 1,2009, the date upon which it was served (see CPLR 221 1). Inasmuch as this motion was not interposed within the time required for service of responsive pleadings (see CPLR 32 1 1 [e]), no matter which of the two afl’ldavits of service submitted herein is used, the motion is untimely. Therefore, Torr’s motion to dismiss is denied.

As to MERS’ cross motion, it is well settledl that when applying for a default judgment, a plaintiff must submit evidence sufficient to demonstrate a prima facie case (see CPLR 32 lS[fl; Silberstein v Presbyterinn Hosp. in the City of New York, 96 AD2d 1096,463 NYS2d 254 [1983]). Thus, if a court finds that the allegations in a complaint or affidavit of facts fail to establish a prima facie case, a movant is not entitled to the requested relief; even on default (Dyno v Rose, 260 AD2d 694,687 NYS2d 497 [1999]; Green v Dolplzy Construction Co., Inc., 187 AD2d 635, 590 NYS2d 238 [1992]). Consistent with the foregoing, and upon review of t.he papers submitted, the court finds MERS’ application for a default judgment to be deficient.

An action to compel the determination of a claim to real property may be maintained where a plaintiff claims an estate or interest in real property (RPAPL § 150 I [ 11). Although the interest had by a mortgagee of real property or its successor in interest is an “interest in real property”(RPAPL tj 150 1 [ 5 ] ) , here MERS has failed to meet its burden by demonstrating that it has standing to maintain this action to quiet title (see Soscin v Soscin, 35 AD3d 841, 829 NYS2d 543 [2006]). MERS has failed to make a prima facie showing that it was the owner or holder of the note and the mortgage at the time this action was commenced (cc Mortgnge Elec. Registration Sys., Inc. v Conkley, 41 AD3d 674, 838 NYS2d 622 [2007]). In addition, the purported mortgage describes MERS as the nominee of MLN, and that for purposes of recording the mortgage, MERS is the mortgagee of record. Thus, MERS as nominee, is the agent of MLN, for limited purposes, “and has only those powers which are conferred to it and authorized by” MLN (Bank of New York v Aldernzi, 201 0 NE’ Slip Op. 20 167,900 NYS2d 82 1, 823 [Sup Ct, Kings County, 20101). There is no evidence that MLN, who is not a party herein, authorized MERS to bring this action’.

Moreover, the effectiveness of the assignment dated September 4, 2009, is unclear as there is no evidence that MLN ever directly assigned the note to MERS or expressly gave MERS the authority to act as MLN’s authorized agent to assign the subject note to Deutsche Bank (see In re Stralern, 303 AD2d 120, 758 NYS2d 345 [2003]; Teitz v Goettler, 191 AD 924, 181 NYS 956 [1920]).Without an effective transfer of MLN’s interest in the note to MERS or express authorization from MLN for MERS to assign the note on its behalf, the assignment of the mortgage is a nullity (see Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92 [1988]). Thus, it is also iinclear whether Deutche Bank’s Vice President had the authority to act in terms of satisfying the proof of facts constituting this claim (see CPLR 3215[fl; Wells Fargo Barzk, NA v Davilmar, 16 Misc3d 1 13 3A, 847 NYS2d 906 [2007]).

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© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in chain in title, conflict of interest, conspiracy, deutsche bank, dismissed, foreclosure, foreclosure fraud, foreclosures, MERS, MERSCORP, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., note, quiet title, rmbs, servicers, stopforeclosurefraud.com, trustee, Trusts, Wall StreetComments (0)

MERS: Open Letter from Nye Lavalle

MERS: Open Letter from Nye Lavalle


Dear MERS Executives:

As a shareholder in several companies that are MERS Corp owners, I will be sending a report to the board of directors and audit committees of each company in the coming 60 days outlining the plethora of fraudulent representations your company has made via its “certifying officers” to allow the masking of complex trades and financial transactions that assist these corporations that control your corporation to “cook their books.”

As you each know, your prior arguments to me about your policies and practices have been deemed to be incorrect by numerous judges and even state supreme courts that have sided with many of my arguments.

In order to protect the American Public; all land and property owners; the financial markets and investors; our banking system; and the citizens and tax payers of the United States, I ask that you request the disbandment of your company from the board of directors of MERS Corp.  Similar requests will be made by me and other shareholders in each company with shareholder ownership in MERS Corp.

In addition, quite title actions must be initiated in court rooms across America in order to clean up the morass of fraud you have directly helped perpetuate.  I would strongly advise you to preserve and protect every document and communication in your company’s and executive’s personal records (including hard drives and other storage devices) that contain any reference to my name, family, complaints, reports, business dealings, lawsuits, and data related to me in any manner whatsoever.

This information will be the subject of discovery upon ALL YOUR companies (MERS 1 to 3) in upcoming and pending litigation involving your firm.

To that end, please take note of the article below and govern yourselves accordingly!

Sincerely,

Federal Judge Sanctions Tech Company Over Handling of E-Discovery

August 27, 2010

A federal judge has sanctioned a leading developer of “flash drive” technology for its mishandling of electronic discovery in what the judge called a “David and Goliath-like” struggle.

Southern District Judge William H. Pauley ruled that he would instruct the jury to draw a negative inference from the fact that SanDisk Corp., a company with a market capitalization of $8.7 billion, had lost the hard drives from laptop computers it issued to two former employees who are the plaintiffs in Harkabi v. Sandisk Corp., 08 Civ. 8230.

SanDisk must be “mortif[ied]” by the ex-employees’ argument that the company, as a leading purveyor of electronic data storage devices, cannot claim that it made an “innocent” mistake in losing the hard-drive data, Pauley wrote.

That argument is on target, the judge concluded, noting that SanDisk’s “size and cutting edge technology raises an expectation of competence in maintaining its own electronic records.”

Pauley also awarded $150,000 in attorney’s fees to the two plaintiffs, Dan Harkabi and Gidon Elazar, because of delays the company caused in producing their e-mails during the 17 months they worked for SanDisk.

In 2004, the plaintiffs sold a software company they had founded in Israel to SanDisk for $10 million up front. An additional $4 million was to be paid depending on the level of sales SanDisk realized over the next two years on products “derived” from technology developed by the Israeli company. As part of the deal, Harkabi and Elazar moved to New York and began working for SanDisk.

At the end of the two-year period, SanDisk contended the threshold for the Israeli software developers to claim their “earn-out” fee had not been met, and offered them $800,000. When the developers continued to demand the full $4 million, SanDisk ended their employment.

One of the key issues in the suit is whether a SanDisk flash drive called “U3” contained software “derived” from a product the two plaintiffs developed in Israel.

Flash drives are compact data storage devices about the size of a stick of gum used to transport data from one computer to another.

The Israeli company had developed software that could be used to encrypt flash drives so the data would be secured for personal use only. The owner would not be able to transfer copyrighted data such as movies, computer applications, books or other materials.

The two developers claim that SanDisk sold 15 million U3 flash drives. Under their contract, SanDisk had to sell 3.2 million flash drives utilizing an encryption system derived from the product plaintiffs had developed in Israel.

The developers contend that the U3 is derived from the Israeli product. SanDisk disputes any connection.

As the dispute began to heat up in 2007, the developers’ lawyers at the time asked SanDisk to preserve information on their client’s laptops.

SanDisk’s in-house counsel issued a “do-not-destroy” letter, and the two laptops were stored in a secure area for more than a year. But at some point a decision was made to re-issue the two laptops to other employees after the data from the hard drives had been separately preserved.

SanDisk’s response in the initial round of electronic discovery was a declaration from an in-house lawyer that “I have no reason to believe” the April 2007 “do-not-destroy” memo “was not fully complied with.”

SanDisk also produced 1.4 million documents, which it described as “everything” found in response to the developers’ electronic discovery demands. Six weeks later, however, the company acknowledged it was unable to retrieve the data from the laptops’ hard drives. But the two developers created their own software to analyze the 1.4 million documents received in discovery and concluded that much of their e-mail correspondence had not been turned over, according to the opinion.

SanDisk subsequently conceded that it had not turned over all of the developers’ e-mails, but has since begun the process of retrieving the missing e-mails from backup files.

A negative inference with regard to the data on the lost hard drives, Pauley concluded, is warranted because “the undisputed facts reveal a cascade of errors, each relatively minor,” which added to a significant discovery failure.

The loss of the hard-drive data has deprived the two developers of the opportunity to present “potentially powerful evidence” on the key issue of whether the U3 flash drive was derived from encryption software developed by the pair in Israel.

Although the missing e-mails eventually will be available at trial, Pauley concluded, SanDisk should nonetheless pay the developers $150,000 to cover their added legal costs for discovery.

SanDisk’s “misrepresentations” about its initial electronic document production, he wrote, “obscured the deficiencies and stopped discovery in its tracks.”

He added, “But for plaintiffs’ forensic analysis and their counsel’s persistence those deficiencies may not have come to light.”

Charles E. Bachman, of O’Melveny & Myers, who represented SanDisk, said the company would have no comment.

Harkabi and Elazar were represented by Charles A. Stillman and Daniel V. Shapiro of Stillman, Friedman & Shechtman.

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in chain in title, concealment, conflict of interest, conspiracy, CONTROL FRAUD, corruption, discovery, foreclosure, foreclosure fraud, foreclosures, forensic document examiner, forensic mortgage investigation audit, insider, investigation, MERS, MERSCORP, mortgage, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., Mortgage Foreclosure Fraud, notary fraud, note, quiet title, R.K. Arnold, Real Estate, robo signers, sanctioned, securitization, servicers, stopforeclosurefraud.com, Trusts, Wall StreetComments (1)

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