Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-03033/USCOURTS-cand-3_09-cv-03033-7/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1441 Petition for Removal

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1 All parties have consented to my jurisdiction for all

proceedings including entry of final judgment, pursuant to 28

U.S.C. § 636(c).

2 Concurrent with the motion to dismiss, defendant

filed a request for judicial notice of ten documents. The

Court takes judicial notice of Exhibit 1, the Deed of trust. 

Plaintiffs did not object to the request for judicial notice of

1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DEMONFORT R. CARTER and

LEANDRA L. CARTER,

Plaintiff(s),

v.

DEUTSCHE BANK NATIONAL TRUST

COMPANY, AS TRUSTEE, et al.,

Defendant(s).

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No. C09-3033 BZ

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT’S

MOTION TO DISMISS

Plaintiffs filed this action to prevent defendant

Deutsche Bank National Trust Company, as Trustee for Morgan

Stanley ABS Capital, Inc. Trust 2006-HE8's (“defendant”) from

foreclosing on their property.1 Defendant has moved under

Rule 12(b)(c) to dismiss four of plaintiffs’ causes of action

alleged in the Second Amended Complaint (“complaint”).2

Case 3:09-cv-03033-BZ Document 49 Filed 01/27/10 Page 1 of 7
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this document and repeatedly referenced this document in their

complaint. The Court declines to take judicial notice of

exhibits 2-10 as they are not relevant to the dispositive issue

in this motion.

2

Dismissal pursuant to Rule 12(b)(6) is appropriate if the

plaintiff is unable to articulate “enough facts to state a

claim to relief that is plausible on its face,” such that a

right to relief is raised “above the speculative level.” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, (2007). When

evaluating a motion to dismiss, the court accepts the facts as

stated by the nonmoving party and draws all reasonable

inferences in its favor. See Everest & Jennings, Inc. v. Am.

Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). The

Court may also rely on documents which are alleged in the

complaint and are properly the subject of judicial notice. 

See U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

From the facts alleged in the complaint and facts which

were judicially noticed, it appears that plaintiffs borrowed

$925,000 from New Century Mortgage Company and secured 80% of

the loan with a Deed of Trust on a piece of real property in

Castro Valley. The remaining 20% was secured by a second deed

of trust. The “Trustee” was Financial Title Company and the

“Beneficiary” was Mortgage Electronic Registration Systems,

Inc. or “MERS.”

Plaintiffs fell into arrears on their mortgage payments.

At New Century’s request, Old Republic, whom MERS substituted

in as Trustee, recorded a notice of default. Plaintiffs

failed to cure the default, resulting in a Trustee’s sale, at

which Deutsche Bank, to whom MERS had assigned the Deed of

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3 Earlier, defendant had claimed that the complaint was

defective because it violated the “tender” rule. Having

declined to submit further briefing on this issue, defendant’s

argument is rejected for reasons given at the earlier hearing.

4 Since plaintiffs assume, and defendant does not

dispute, that an action performed by a suspended corporation is

void, the Court does not address that issue.

3

trust, purportedly acquired the property. Deutsche Bank then

initiated foreclosure proceedings against plaintiffs, leading

to this suit.

Defendant’s motion to dismiss the first, second, and

fifth causes of action turns on whether MERS, a non-party, had

the ability to substitute Old Republic as trustee and assign

the Deed of Trust to defendant.3 Plaintiffs allege that MERS

could not take either action because at all relevant times it

was a California corporation and its corporate status was

“Suspended” according to the California Secretary of State. 

Any actions that MERS took would therefore be ultra vires and

void.4

Defendant does not dispute MERS’s suspension in

California. Instead, defendant claims first that MERS is a

Delaware corporation in good standing, relying on what it

identifies as a print out from the Delaware Secretary of

State’s website, of which I am asked to take judicial notice

for the truth of its contents. There are several problems

with what defendant proposes. Defendant’s printout is not a

document which plaintiffs referenced in the complaint. To the

contrary, they attached a document from the California

Secretary of State which states the MERS is a “Domestic

Corporation.” Since the Delaware document is not referenced

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in the complaint, and since there appears to be a dispute over

the status of MERS, this is not a matter which I can properly

resolve on a motion to dismiss. Moreover the Delaware

document itself states that “This is not a statement of good

standing,” so that even if the document were properly before

me, I would not accept it for the truth of the fact that MERS

is a Delaware corporation in good standing. 

Defendant next contends that plaintiffs have admitted

that MERS is a Delaware corporation when they referred to the

Deed of Trust in their complaint, since it recites that MERS

is a Delaware corporation. Defendant has cited no authority,

and the Court is aware of none, for the proposition that a

plaintiff whose suit is premised on what appears to be a

contract of adhesion, is deemed to have admitted the truth of

every fact that is recited in the contract. Given the

significance that MERS’ status has for many of the claims

raised in the complaint, it is better resolved pursuant to

Rule 56 on a proper evidentiary record. 

Defendant goes on to argue that even if MERS were a

foreign corporation which had been suspended in California,

its corporate status in California is irrelevant, relying on

provisions of the California Corporations Code which permit

foreign corporations to transact certain business in

California without qualifying to do business in California. 

Defendant initially relies on California Corporations Code 

§ 191(c)(7) which states that a foreign corporation shall not

be considered as doing business in this state based on

“creating evidences of debt or mortgages, liens or security

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5 The Court is aware of decisions that have held

differently. See Swanson v. EMC Mortg. Corp., 2009 WL 3627925,

*9 (E.D.Cal. 2009) (finding that MERS properly acted as a

beneficiary under Corporations Code sections 191(c)(7) and

(d)(3)); Lomboy v. SCME Mortg. Bankers, 2009 WL 1457738, *3

(N.D.Cal. 2009) (same). However, neither decision addressed

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interests on real or personal property.” Defendant contends

that when MERS assigned the Deed of Trust to Deutsche Bank or

when, as beneficiary under the Deed of Trust, MERS named a

successor trustee, it was creating such evidences. Neither

side has pointed to any authority on what this phrase means. 

However, it seems clear that whatever “creating evidences”

means, it is something other than the assignment of loans. 

The plain meaning of the term is to create evidence of a

transaction, such as an assignment, not to engage in the

transaction itself. See U.S. v. Mohrbacher, 182 F.3d 1041,

1048 (9 Cir. 1999)(undefined statutory term should be

construed according to its ordinary meaning). Moreover, the

Legislature provided in §191(d)(1) that a foreign lending

institution is not doing business in California solely by

“assignment of loans %%% if those activities are carried on

from outside the state by the lending institution.” Obviously

if the act of assignment was the same as creating evidence of

the assignment, §(d)(1) would have been unnecessary. U.S. v.

Mohrbacher, supra, at 1050 (statute should not be construed to

make any provision surplus). See Champlaie v. BAC Home Loans

Servicing, LP, 2009 WL 3429622, *10-11 (E.D.Cal. 2009)

(holding that based on the complaint, MERS could not invoke

sections 191(c)(7) and (d)(3) to exempt itself from the

registration requirement).5 The complaint alleges that MERS

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the threshold issues of (1) whether MERS’s activities solely

constituted “creating evidences of debt or mortgages” under

Section 191(c)(7) or (2) whether MERS qualifies as a “foreign

lending institution” under Section 191(d)(3). 

6 Because I have found that plaintiffs have adequately

pled that MERS could not conduct business in California, I do

not need to reach defendant’s argument that plaintiffs

specifically contracted with MERS to allow the allegedly

unlawful substitutions.

7 Unfair business practice is defined “very broadly”

and includes “anything that can be called a business practice

and that at the same time is forbidden by law.” Chabner v.

United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir.

2000) citing Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th

377 (1992). 

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“assigned” a deed of trust to defendant without legal

authority. Compl. ¶ 8. Section 191(c)(7) does not exempt

assignment of mortgages. Section (d)(3), which does apply to

assignments, would only apply to MERS if it were a “foreign

lending institution,” which is not claimed by defendant. 

Based on the allegations of the complaint, plaintiffs have

stated a claim that MERS did not have the authority to

substitute Old Republic in as trustee or assign the Deed of

Trust to defendant. Therefore, plaintiffs have stated a claim

in their first, second, and fifth causes of action.6 

Defendant also moved to dismiss plaintiffs’ sixth cause

of action for violation of California’s Unfair Business

Practices Act.7 Cal. Bus. & Prof. Code §17200 et seq. The

essence of this claim is that New Century, the original

lender, structured the loan to try to avoid California’s antideficiency laws and that Deutsche Bank, with knowledge of what

New Century had done, implemented the practice that New

Century had originated. The effect of this practice was to

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expose plaintiffs to the risk of a substantial deficiency

judgment and force plaintiffs to incur attorney’s fees and

sustain other damages. At oral argument, defendant asserted

that it has not sought a deficiency judgment from plaintiffs

and does not believe that it is legally capable of doing so. 

The plaintiffs did not dispute this assertion. Under these

circumstances, even assuming that the practice of which

plaintiffs complain violates § 17200, plaintiffs would be

entitled to no injunctive relief and to no monetary damages. 

See Bank of the West v. Superior Court, 2 Cal.4th 1254, 1266,

(1992) (damages are not available for a violation of the

Unfair Business Practices Act). The motion to dismiss the

sixth cause of action as to Deutsche Bank is therefore

GRANTED. 

For the foregoing reasons IT IS ORDERED that defendant’s

motion to dismiss the first, second, and fifth causes of

action is DENIED. The sixth cause of action is DISMISSED as

to this defendant. Defendant is ORDERED to file an answer by

FEBRUARY 5, 2010.

Dated: January 27, 2010 

 Bernard Zimmerman 

 United States Magistrate Judge

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