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John Hill and Letitia Bridges v. Mortgage Electronic Registration Systems

January 6, 2012

JOHN HILL AND LETITIA BRIDGES, PLAINTIFFS,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; AND DOES 1 THROUGH 5, INCLUSIVE, DEFENDANT (S).



The opinion of the court was delivered by: United States District Judge Hon. Otis D. Wright, II

I. INTRODUCTION

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [11]

Currently before the Court is Defendant Mortgage Electronic Registration System, Inc.'s ("Defendant") Motion to Dismiss Plaintiffs John Hill and Letitia Bridges' ("Plaintiffs") Complaint. (Dkt. No. 11.) After careful consideration, the Court deems the matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. For the following reasons, the Court GRANTS Defendant's Motion.

II. BACKGROUND

This mortgage action stems from a loan Plaintiffs obtained on April 6, 2006 in which they executed a promissory note for $920,000.00 and a Deed of Trust ("DOT") as security for the loan. MERS is listed as the beneficiary of the DOT. Plaintiffs eventually defaulted on the loan and a notice of default was recorded on May 6, 2008. On August 12, 2008 a Notice of Trustee's Sale was recorded.

Plaintiffs allege generally that the foreclosure proceedings were invalid largely due to Defendant's role leading up to the proceedings. Namely, Plaintiffs aver that in California, there can be no beneficial ownership in the DOT as it is nothing more than security for the Promissory Note. Plaintiffs, as a result, allege that MERS could not transfer any interest in the DOT to another. Accordingly, by engaging in a series of recordings and assignments, Plaintiffs contend that MERS engaged in unlawful mortgage transactions. In addition, Plaintiffs allege that MERS as a suspended corporation was not permitted to conduct business in California and actions committed during this period should be void as a matter of law.

Based on the foregoing, Plaintiffs instituted a lawsuit in state court on August 29, 2011 asserting the following claims: (1) Fraud; (2) Violation of California Penal Code §§ 115 & 115.5; (3) To Void or Cancel Assignment of Deed of Trust; and (4) Cancellation of a Voidable Contact Under California Revenue & Tax Code §§ 23304.1, 23305A and California Corporations Code § 191(C)(7). Defendants removed the state court action to this Court on September 28, 2011. At this time, Defendants move to dismiss Plaintiffs' Complaint in its entirety.

III. LEGAL STANDARD

"To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), a complaint generally must satisfy only the minimal notice pleading requirements of Rule 8(a)(2)." Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). For a complaint to sufficiently state a claim, its "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombley, 550 U.S. 554, 555 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action will not do." Id. Rather, to overcome a 12(b)(6) motion, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation and citation omitted). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. 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 of relief." Id. (internal quotation and citation omitted).

When considering a 12(b)(6) motion, a court is generally limited to considering materials within the pleadings and must construe "[a]ll factual allegations set forth in the complaint . . . as true and . . . in the light most favorable to [the plaintiff]." See Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001)(citing Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)). A court is not, however, "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Thus, the Ninth Circuit has summarized the governing standard, in light of Twombly and Iqbal, as follows: "In sum, for a complaint to survive a motion to dismiss, the nonconclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks omitted).

IV. DISCUSSION

The gravamen of of Plaintiffs' claims turn on their contention that naming MERS as a beneficiary on the DOT, and the subsequent operation of the MERS system, splits the DOT from the promissory note rendering the promissory note unsecured and unenforceable. With this backdrop, the Court addresses Plaintiffs' claims.

A. PLAINTIFFS'THIRD CLAIM:TO VOID OR CANCEL ASSIGNMENT OF DEED OF TRUST

There are no important factual disputes between the parties as to this claim. Mainly, either the operation of the MERS system, as it is alleged to operate, is unlawful in such a way to render all non-judicial foreclosure of any DOT naming MERS as a beneficiary illegal, or Plaintiffs have no ...


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