Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-00077/USCOURTS-casd-3_11-cv-00077-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 15:1692 Fair Debt Collection Act

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1 3:11-cv-0077

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SHARON J. MADRID,

Plaintiff,

v.

BANK OF AMERICA CORPORATION

doing business as BAC Home Loan

Servicing, LP, MERS, DOES 1 through 50,

inclusive,

Defendants. 

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Case No.: 3:11-cv-0077 AJB (WVG)

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS AND DENYING

PLAINTIFF’S MOTION FOR A

PRELIMINARY INJUNCTION AS MOOT

(Doc.10 and Doc. 15)

Pending is Plaintiff’s Motion for Temporary Restraining Order and Preliminary Injunction (Doc.

No. 10), filed February 3, 2011, and Defendants’ Motion to Dismiss the First Amended Complaint (Doc.

No. 15), filed February 16, 2011. 

BACKGROUND

On June 7, 2005, Plaintiff obtained a loan from Countrywide Home Loans, Inc. (“Countrywide”)

and executed a promissory note in the amount of $1,555,000. (Am. Compl. Ex. C). As security for the

note, Plaintiff signed a Deed of Trust that was recorded on June 23, 2005. (Am. Compl. Ex. B). The

Case 3:11-cv-00077-AJB-WVG Document 27 Filed 04/26/11 Page 1 of 7
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2 3:11-cv-0077

Deed of Trust identifies Countrywide as the lender, ReconTrust Company, N.A. (“Recon”) as the

trustee, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary and nominee

for the lender. (Id.). Bank of America Corporation doing business as BAC Home Loan Servicing, LP

(“BAC”) purchased Countrywide. (Am. Compl. ¶ 8).

Plaintiff subsequently defaulted on the loan. (Am. Compl. Ex. D). Recon, acting as an agent

for MERS, issued a Notice of Default beginning foreclosure proceedings against Plaintiff in September

2010. (Id.). Plaintiff received two letters from Recon, dated September 2, 2010, and September 23,

2010, verifying the indebtedness on the note and identifying Countrywide as the original creditor of the

underlying debt. (Am. Compl. Ex. C). 

On January 13, 2011, Plaintiff filed this action against BAC, MERS, and Does 1-50. Specifically, Plaintiff alleges that MERS served solely as the nominee for the lender and could not be the

beneficiary of the Deed of Trust. (Id. at ¶¶ 9, 11). Plaintiff argues that MERS, while serving a limited

capacity as nominee on the Deed of Trust, had no authority to transfer any beneficial interest in the

Deed of Trust. (Am. Compl. ¶¶ 11, 12). Plaintiff contends that the current beneficiary of the note is

unknown because there are “no recorded documents that transfer, convey, or assign any rights, title or

interest as beneficiary holding legal title to a different present beneficiary.” (Id. at ¶ 9). Thus, Plaintiff

alleges that Recon lacks the authority necessary to institute foreclosure proceedings on Plaintiff’s

property. Based on these allegations, the First Amended Complaint contains the following five counts: 

Count One - Fraud and Fraud in the Inducement against BAC and MERS; Count Two - Declaratory

Relief against BAC; Count Three - Negligence against BAC and MERS; Count Four - Negligent

Misrepresentation against BAC and MERS; and Count Five - Fair Debt Collection Practices Act

(“FDCPA”), 15 U.S.C. § 1692 against BAC. 

LEGAL STANDARD FOR MOTION TO DISMISS

A complaint must contain “a short and plain statement of the claim showing that the pleader is

entitled to relief.” Fed. R. Civ. P. 8(a). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal

Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ.

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3 3:11-cv-0077

P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual

allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences

from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337–38 (9th

Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations,

rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007). A claim has “facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949 (2009) (citing Twombly,

550 U.S. at 556).

However, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires

more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not

do.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in

original). A court need not accept “legal conclusions” as true. Iqbal, 129 S.Ct. at 1949. In spite of the

deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume

that “the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the ...

laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State

Council of Carpenters, 459 U.S. 519, 526 (1983). “Where a complaint pleads facts that are ‘merely

consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of

entitlement to relief.’ “ Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557).

For a Rule 12(b)(6) motion, a court generally cannot consider material outside the complaint. See

Branch v. Tunnell, 14 F.3d 449, 453–54 (9th Cir.1994), overruled on other grounds by Galbraith v.

County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). A court may, however, consider exhibits

submitted with the complaint. Van Winkle v. Allstate Ins. Co., 290 F.Supp.2d 1158, 1162 n. 2 (C.D.Cal.

2003). A court may disregard allegations in the complaint if they are contradicted by facts established

by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.

1987).

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ANALYSIS

California Civil Code section 2924 provides the “comprehensive statutory framework established to govern nonjudicial foreclosure sales [and] is intended to be exhaustive.” Moeller v. Lien, 25

Cal. App. 4th 822, 834 (1994); I.E. Assoc. v. Safeco Title Ins. Co., 39 Cal. 3d 281 (1985). Under section

2924(a)(1), a “trustee, mortgagee, or beneficiary or any of their authorized agents” may conduct the

foreclosure process. The Deed of Trust names Recon as the trustee and MERS as nominee for the

lender and beneficiary. (Am. Compl. Ex. C at 2). While the Amended Complaint argues that MERS

does not have the capacity to act as a beneficiary, Plaintiff has not provided the Court with any legal

basis for this proposition. In fact, Plaintiff agreed to MERS’ designation as nominee and beneficiary

with the power to foreclose when she executed the Deed of Trust. That document clearly states that

“Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower

in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for

Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests,

including, but not limited to, the right to foreclose and sell the Property....” ( Id. at 3-4.). Thus,

pursuant to the Deed of Trust, MERS had authority to assign its interest beneficial interest to another

party. Castaneda v. Saxon Mortg. Servs., Inc., 687 F. Supp. 2d 1191, 1198 (E.D. Cal. 2009); Lane, 713

F. Supp. 2d at 1099 (“MERS has standing to foreclose as the nominee for the lender and beneficiary of

the Deed of Trust and may assign its beneficial interest to another party”). As discussed further below,

Plaintiff’s claims to the contrary are unsupported. 

Count One alleges that BAC and MERS engaged in fraud by intentionally omitting the fact that

“MERS had no authority to convey or transfer its beneficial interest to any party because it lacked the

substantive rights and ... had no legal beneficial interest to begin with.” (Am. Compl. ¶ 30). Plaintiff

claims that “[t]hrough MERS’s invalid transfer of the Deed of Trust to BAC, a scheme was borne [sic]

wherein BAC, as the purported/beneficiary of the Note is now attempting to collect the debt and

foreclose on the Subject Property as though it has legal authority to do so.” (Id. at ¶ 28). As an initial

matter, Plaintiff’s allegations that BAC is foreclosing on the loan contradict the Notice of Default

attached to the Amended Complaint. (Am. Compl. Ex. D). The Notice of Default clearly states that

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1

 It should be noted that Plaintiff provided no authority for the proposition that BAC or MERS

owed a duty to Plaintiff in their capacities as lender, beneficiary, or servicer of the loan. Generally,

absent special circumstances a loan transaction is at arms-length and no duties arise from the loan

transaction outside of those in the agreement. Castaneda v. Saxon Mortg. Servs., Inc., 687 F. Supp. 2d

1191, 1198 (E.D. Cal. 2009); Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006). 

5 3:11-cv-0077

Recon acting as an agent for MERS is foreclosing on Plaintiff’s property. Both Recon as the trustee and

MERS as the beneficiary under the Deed of Trust have authority to foreclose following Plaintiff’s

default by virtue of section 2924(a)(1). Additionally, Plaintiff has not pled her fraud claim with

particularity as required under Fed. R. Civ. P. 9(b). While Plaintiff argues that Defendants fraudulently

failed to inform her of MERS’ capabilities, Plaintiff has not offered any support for her claim that

MERS could not legally serve as beneficiary under the Deed of Trust or the specific nature of the

alleged omissions by the Defendants. For these reasons, Count One is dismissed for failure to state a

claim upon which relief may be granted. 

Counts Three and Four are based upon allegations nearly identical to those in Count One and,

thus, fail for the same reason. Count Three asserts a negligence claim against BAC and MERS. 

Plaintiff claims the Defendants breached their duty of care to Plaintiff by acting carelessly when filing,

transferring, and assigning loan-related documents without regard to whether the documents reflected

the truth and by wrongfully instituting the foreclosure sale.1

 (Id. at ¶¶ 46, 47, 50). Similarly, Count

Four alleges that BAC and MERS made negligent misrepresentations and omissions “causing Plaintiff

to believe any transfers, sales or assignments of the Note would be made in a legal manner consistent

with prevailing state law.” (Id. at ¶ 55). Counts Three and Four allege, in essence, that BAC and MERS

negligently failed to inform Plaintiff that MERS could not legally serve as beneficiary on the Deed of

Trust or make valid transfers of its interest under the Deed of Trust. Once again, Plaintiff has not

offered any support for her claim that MERS could not legally serve as beneficiary. Pursuant to the

Deed of Trust, Plaintiff authorized MERS to serve as nominee for the lender and as the beneficiary. 

Thus, Counts Three and Four are dismissed. 

Count Two requests declaratory relief because the “scheduled foreclosure and sale [of Plaintiff’s

property] will be wrongful and should be enjoined by virtue of the facts alleged” in the Amended

Complaint. (Id. at ¶ 44). Plaintiff specifies in her prayer for relief that she seeks a declaration that

“trustee had no right to foreclose and conduct the trustee sale, and has no right to transfer title as a result

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2

 Plaintiff expresses concern throughout her Amended Complaint that “it is unclear how [Recon]

has been given authority to collect payments, or foreclose on the Subject Property” and that Recon

failed to provide any “evidence or clarification as to who the current beneficiary/real party in interest

is.” (Am. Compl. ¶¶ 25, 21). However, the Notice of Default clearly provides that Recon was acting on

behalf of MERS. Section 2924 authorizes Recon to initiate foreclosure proceedings while serving in its

capacity as either the named trustee or as agent for the named beneficiary under the Deed of Trust. Cal.

Civ. Code § 2924(a)(1). As to the Plaintiff’s suggestion that Recon had some sort of obligation to

disclose the current beneficiary of the loan, Plaintiff has provided no authority to support this

proposition and the Deed of Trust contains “no suggestion that the lender or its successors and assigns

must provide [Plaintiff] with assurances that MERS is authorized to proceed with a foreclosure at the

time it is initiated.” See Gomes, 192 Cal. App. 4th at 1157. 

6 3:11-cv-0077

of that sale because no breach occurred by Plaintiff.” (Am. Compl. Prayer ¶ 1). As discussed above, a

“trustee, mortgagee, or beneficiary or any of their authorized agents” may conduct the foreclosure

process. Inasmuch as Recon had authority to foreclose as both either the trustee or as the beneficiary’s

agent under section 2924(a)(1), Count Two is dismissed.

 Count Five alleges that BAC violated the FDCPA “in that it should have informed Plaintiff that

it was the legal owner or had authority from the legal owner to collect and pursue payment on the debt

tied to the Note secured to the Deed of Trust.” (Id. at ¶ 60). The FDCPA prohibits certain unfair and

oppressive methods of collecting debt. 15 U.S.C. § 1692e. In order to be liable under the FDCPA, BAC

must fall under its definition of “debt collector.” 15 U.S.C. § 1692a(6). A “debt collector” under the

FDCPA is “any person who uses any instrumentality of interstate commerce or the mails in any business

the principal purpose of which is the collection of any debts, or who regularly collects or attempts to

collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Id. However, it

was Recon “acting as an agent for the Beneficiary” MERS that filed the Notice of Default under the

Deed of Trust.2

 (Am. Compl. Ex. D at 2). Nothing in the Amended Complaint suggests that BAC had

any communication with Plaintiff in an attempt to collect on the mortgage debt. Accordingly, Count

Five is dismissed for failure to state a claim upon which relief may be granted. 

As Plaintiff may wish to amend her Complaint, the Court also notes that Count Five fails to

identify the specific sections of the FDCPA that BAC allegedly violated. It is not the role of the Court

to construct Plaintiff’s claims based upon the general nature of her pleadings. In order to survive a

motion to dismiss, Count Five needs to provided more direction as to the nature of Plaintiff’s FDCPA

claim. 

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Having dismissed each of Plaintiff’s claims for the reasons set forth above, the Court need not

address Defendants’ remaining arguments in favor of dismissal, though Plaintiff may wish to consider

them when contemplating an amended complaint.

CONCLUSION

Based on the foregoing, Defendants’ Motion to Dismiss the First Amended Complaint is

GRANTED without prejudice. Plaintiff may file an amended complaint consistent with this Order

within twenty (20) calendar days from the date of this Order. If Plaintiff chooses to amend the

complaint, no additional parties or causes of action shall be included without first filing a motion for

leave to amend. 

Inasmuch as the Court granted Defendants’ Motion to Dismiss the First Amended Complaint, it

is further ORDERED that Plaintiff’s Motion for Temporary Restraining Order and Preliminary

Injunction is DENIED as moot. 

DATED: April 26, 2011

Hon. Anthony J. Battaglia

U.S. District Judge

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