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Arlene Fontenot v. Wells Fargo Bank

August 11, 2011


Alameda County Super. Ct. No. RG09433189 Trial Court: Alameda County Superior Court Trial Judge: Hon. Ronni MacLaren

The opinion of the court was delivered by: Margulies, J.


Plaintiff Arlene Fontenot sued Wells Fargo Bank, N.A. (Wells Fargo), Mortgage Electronic Registration Systems, Inc. (MERS), and three other entities after she defaulted on a secured real estate loan and lost the property to foreclosure. In the fourth amended complaint, plaintiff alleged the foreclosure was unlawful because Wells Fargo had breached an agreement to forbear from foreclosure, and MERS made an invalid assignment of an interest in the promissory note relating to the property. Wells Fargo and MERS filed demurrers, based in part on recorded documents they contended demonstrated plaintiff's claims to be without factual foundation. The trial court took judicial notice of the requested documents and sustained the demurrers without leave to amend. We affirm.


On April 30, 2010, plaintiff filed her fourth amended complaint (complaint) against Wells Fargo, MERS, and three other defendants.*fn1 The complaint alleged that in 2006, plaintiff gave defendant Alliance Bancorp a $1 million promissory note, secured by a deed of trust in the purchased real property (property). MERS was identified as the "nominee" of the lender in the deed of trust. In November 2007, plaintiff was served with a notice of default by defendant NDEx West, LLC (NDEx), although NDEx was not substituted as trustee of the deed of trust until two months later. In December 2007, MERS assigned the deed of trust to defendant HSBC Bank USA, N.A. (HSBC). Several months later, Wells Fargo was alleged to have foreclosed on the property and sold it, although the complaint otherwise contained no explanation of Wells Fargo's relationship to the secured transaction.*fn2

The complaint asserted a single cause of action against all defendants for "Wrongful Foreclosure [Negligence per Se]." Within that cause of action, plaintiff alleged several different imperfections in the foreclosure process, including improper or ineffective transfers of the promissory note and security. Plaintiff sought an award of damages, as well as an order voiding the foreclosure sale and her debt.

The trial court had earlier sustained a demurrer to the third amended complaint.*fn3 In sustaining the demurrer without leave to amend as to three of four causes of action, the court found "allegations concerning improper or ineffective assignments" to be "inconsistent with recorded instruments or . . . with the law governing assignments." The court allowed amendment of the remaining cause of action, ruling "[p]laintiff has alleged the germ of a cause of action for wrongful foreclosure by alleging that she had a written forbearance agreement with [Wells Fargo]. Since the agreement is only effective if in writing, Plaintiff must attach the written agreement. . . ."

Responding to the latter portion of the court's order, the complaint alleged that in February 2008 plaintiff entered into a "SPECIAL FORBEARANCE AGREEMENT" (forbearance agreement) with Wells Fargo. Mindful of the court's instruction, plaintiff attached a copy to the complaint. The forbearance agreement stated that Wells Fargo would suspend further debt enforcement proceedings in return for plaintiff's making a series of five monthly payments, beginning in February 2008. The first four payments were between $8,000 and $8,500, while the last payment was a balloon payment of over $59,000. If plaintiff failed to make the required payments, Wells Fargo was entitled to terminate the forbearance agreement and reinstitute foreclosure proceedings.

Plaintiff alleged she made the first payment under the forbearance agreement as scheduled. Soon thereafter, on March 10, 2008, she received a letter from Wells Fargo (March letter) "stating that the monthly mortgage payments were being reduced effective May 1, 2008 from $7,395.82 to $4,895.82 for the next six months." The complaint alleged plaintiff made two more of the payments required by the forbearance agreement, but in May 2008, she "accepted the offer" contained in the March letter and submitted a payment of $4,895.82. Wells Fargo refused to accept the payment as satisfaction of plaintiff's obligations and foreclosed in August 2008.*fn4 Plaintiff did not attach a copy of the March letter to the complaint.

Wells Fargo filed a demurrer, arguing the complaint failed to state a claim and was uncertain. The court sustained the demurrer without leave to amend because it failed to demonstrate plaintiff complied with the forbearance agreement. The court rejected any reliance by plaintiff on the March letter as an amendment of the forbearance agreement because plaintiff had not attached a copy of the letter to the complaint. The court noted it had already rejected plaintiff's other alleged grounds for her cause of action against Wells Fargo and reaffirmed those rulings.

MERS also filed a demurrer. With respect to MERS, the complaint alleged MERS was not the "true" beneficiary under the deed of trust, never had ownership of the promissory note, and never held an assignable interest in the note or deed of trust. As a result, any assignment of the note by MERS to HSBC was invalid. In addition, plaintiff alleged the "trustee substitution" was "invalid due to the fact that the transmission of any interest in Plaintiff's note from MERS is void." In its demurrer, MERS argued plaintiff's allegations were contradicted by the judicially noticeable documents or otherwise legally flawed.

The MERS request for judicial notice attached a series of recorded documents related to the property, such as two deeds of trust, an assignment of a deed of trust, and documents required by the non-judicial foreclosure procedure, each bearing notarized signatures and the recorder's stamp of Alameda County. The first deed of trust, securing a debt of $1 million, contained a paragraph stating: " 'MERS' is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the beneficiary under this Security Instrument." A later paragraph entitled, "TRANSFER OF RIGHTS IN THE PROPERTY," confirms, "The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender's successors and assigns) and the successors and assigns of MERS. . . . [¶] . . . [¶] . . . 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; and to take any action required of Lender, including, but not limited to, releasing and canceling this Security Instrument."*fn5

A notice of default was recorded on November 9, 2007, by "NDEx West, LLC, as Agent for Beneficiary." Nearly two months later, on December 27, 2007, MERS recorded an assignment of the first deed of trust to "HSBC BANK USA . . . AS TRUSTEE FOR NOMURA ASSET ACCEPTANCE CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES." This assignment purported to assign "all beneficial interest" under the first deed of trust as well as the note and all monies due under the note. Several weeks later, HSBC, listing Wells Fargo as "its attorney in fact," recorded a substitution of trustee under the first deed of trust, naming NDEx as the new trustee. NDEx recorded a notice of trustee's sale on February 15, 2008, and the deed reflecting the sale of the property was recorded in August. Although she opposed the taking of judicial notice, plaintiff did not contest the authenticity of these documents.

The court granted MERS's request for judicial notice and sustained its demurrer without leave to amend, noting, "The only apparent grounds for suing MERS are the allegations that the deed of trust improperly named MERS as nominee and beneficiary, and that there was no physical delivery of the note to HSBC. . . . Those claims do not state a cause of action against MERS as a matter of law."


Plaintiff raises four primary grounds for reversing the trial court's rulings sustaining the two demurrers. With respect to MERS, she argues the trial court erred in taking judicial notice of the various recorded documents and the purported assignment of the note by MERS to HSBC in the assignment of deed of trust was invalid because MERS did not possess an interest in the note. Because the assignment of the note to HSBC was invalid, plaintiff argues, Wells Fargo had no authority to foreclosure. With respect to Wells Fargo, she argues the trial ...

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