Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-00077/USCOURTS-casd-3_11-cv-00077-1/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

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. 

)

)

)

)

)

)

)

)

)

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

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS PLAINTIFF’S

SECOND AMENDED COMPLAINT

On April 26, the Court dismissed Plaintiff’s First Amended Complaint (Doc. No. 9) without

prejudice and granted Plaintiff leave to file a second amended complaint. (Doc. No. 27.) Plaintiff filed

her Second Amended Complaint (“SAC”) on May 16, 2011. (Doc. No. 28.) Pending is Defendants’

Motion to Dismiss the SAC, filed June 3, 2011. (Doc. No. 34.)

FACTUAL 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. (SAC Ex. C). As security for the note,

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 3:11-cv-0077

Plaintiff signed a Deed of Trust that was recorded on June 23, 2005. (SAC Ex. B). The 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. (SAC ¶ 7).

Plaintiff subsequently defaulted on the loan. (SAC 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. (SAC ¶ 21; SAC 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. (SAC ¶¶ 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. (Id. at ¶¶ 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 SAC contains the following four counts: Count One - Fraud and

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

Three - Negligent Misrepresentation against BAC and MERS; and Count Four - 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.

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

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).

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 3:11-cv-0077

ANALYSIS

There are two primary differences between the SAC and the previously dismissed FAC. First, 

the SAC does not include the negligence claim found in Count Three of the FAC. Second, the SAC

contains four new paragraphs, ¶¶ 8, 9, 11, and 12, in which Plaintiff alleges that there is no recorded

document conveying any beneficial interest in the Deed of Trust to BAC from Countrywide and thus

BAC cannot foreclose on the Deed of Trust through Recon. Beyond these two changes, the SAC does

not differ significantly from the FAC and the allegations in the four remaining causes of action remain

the same.

As explained in the Court’s prior order, 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. (SAC. Ex. C at 2). Pursuant to

section 2924(a)(1), both Recon and MERS have the ability to initiate the foreclosure process. Plaintiff’s

additions to the SAC relate to the propriety of BAC foreclosing on the property; however, the Notice of

Default clearly states that Recon acting as an agent for MERS is foreclosing on Plaintiff’s property. 

(SAC Ex. D.) Plaintiff has not added any allegations to the SAC explaining why Recon acting as an

agent for MERS should be prohibited from foreclosing upon the property. 

Similarly, Plaintiff has yet to provide the Court with any legal basis for the proposition that

MERS does not have the capacity to act as a beneficiary of the Deed of Trust. The SAC continues to

base its claims on MERS’ alleged inability to serve as a beneficiary despite the Court dispelling this

theory with regard to the FAC. As previously noted, 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

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 3:11-cv-0077

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 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. 

Inasmuch as the four causes of action in Plaintiff’s SAC are those set forth in the FAC, the

analysis set forth in the Court’s previous order dismissing the FAC remains applicable. Accordingly,

the following analysis is taken largely from the Court’s previous opinion. (Doc. No. 27.)

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.” (SAC ¶ 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. (SAC Ex. D). The Notice of Default clearly states that 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. 

Count Three is based upon allegations nearly identical to those in Count One and, thus, fail for

the same reason. Count Three 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 ¶ 47). Count Three alleges, in essence, that

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6 3:11-cv-0077

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, Count Three is 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 SAC. (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 of that sale because no

breach occurred by Plaintiff.” (SAC 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 Four 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 ¶ 51). 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. (SAC Ex. D at 2). Nothing in the SAC suggests that BAC had any communication with

Plaintiff in an attempt to collect on the mortgage debt. Accordingly, Count Four is dismissed for failure

to state a claim upon which relief may be granted. 

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7 3:11-cv-0077

CONCLUSION

Based on the foregoing, Defendants’ Motion to Dismiss the SAC is GRANTED. Plaintiff was

previously granted the opportunity to amend her complaint in order to remedy the deficiencies noted by

the Court in its previous order. Despite the changes made by Plaintiff, the SAC’s allegations are

insufficient under Rule 12(b)(6). Accordingly, it is ORDERED that Plaintiff’s claims be, and they

hereby are, DISMISSED WITH PREJUDICE, as any further amendment is futile at this point. 

DATED: July 13, 2011

Hon. Anthony J. Battaglia

U.S. District Judge

Case 3:11-cv-00077-AJB-WVG Document 37 Filed 07/13/11 Page 7 of 7