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Luis Ramirez v. Kings Mortgage Services

November 8, 2012


The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge



On July 10, 2012, Plaintiff Luis Ramirez ("Plaintiff") field a complaint against Kings Mortgage Services, Inc., North American Title, Wells Fargo Bank, N.A., Mortgage Electronic Registration Systems, Inc. and DOES 1 through 20 (collectively, "Defendants"). Plaintiff's complaint alleges claims for wrongful foreclosure, fraud, quiet title, violation of the Real Estate and Settlement Procedures Act ("RESPA"), violation of the Trust in Lending Act ("TILA"), and seeks declaratory relief. (Doc. 1.) For the reasons set forth below, Plaintiff's complaint is DISMISSED without prejudice and with 30 days leave to amend.


Plaintiff contends that he is the owner of property located at 504 Descanso Bay Circle, Tulare, California, 93291 (the "Property"). (Doc. 1, ¶ 13.) Although Plaintiff does not plead any facts regarding when a Promissory Note ("Note") secured by a Deed of Trust on the Property was executed and recorded, he asserts that "Defendants unlawfully sold, assigned and/or transferred their ownership and security interest in a Promissory Note and Deed of Trust related to the Property, and thus, do not have lawful ownership or a security interest in Plaintiff's Home which is described in detail herein." (Doc. 1, ¶ 3.) Plaintiff contends that Kings Mortgage Service, Inc. ("Kings Mortgage") is the originator of "the loan," and that Wells Fargo Bank, N.A. ("Wells Fargo") is the present "Master Servicer" of "the mortgage." (Doc. 1, ¶¶ 9- 10.) Plaintiff identifies "DOE 4" as "Real Estate Mortgage Investment Conduit Trust ("REMIC"), and asserts that DOE 5 is the Trustee for REMIC; both were apparently participants in securitization of the Note. (Doc. 1, ¶ 11.) Defendant Mortgage Electronic Registration Systems, Inc. ("MERS") is the alleged beneficiary under the Deed of Trust associated with Plaintiff's Note. (Doc. 1, ¶ 12.) As to DOE 2 and DOE 3, Plaintiff alleges that Kings Mortgage "sold, assigned and/or transferred its ownership interest in the [Note] related to the Property to DOE 2 at or about the time the original Note was executed by Plaintiff. Thereafter, DOE 2 sold the Note to DOE 3. Finally the Note was sold to DOE 4 . . . . " (Doc. 1, ¶ 22.)

Plaintiff asserts that Kings Mortgage attempted to assign the Note, but did so in a manner that separated the Note from the Deed of Trust. "As a result of this separation, the Deed of Trust or mortgage no longer secures the original note." (Doc. 1, ¶ 29.) Plaintiff fails to set forth any facts indicating when the Property will be or has been foreclosed upon, but asserts that because of the "separation of ownership of [the] Note after sale by [Kings Mortgage], the beneficiary of the Deed of Trust no longer had any legal relationship with the Note. Therefore[,] neither the original beneficiary of the Deed of Trust nor any purported assignees of the Deed of Trust to any other parties have the legal right to foreclose on the [P]roperty." (Doc. 1, ¶ 31.)

Plaintiff also alleges that MERS is not legally entitled to transact any business in the State of California because it is no longer a valid legal entity having changed or amended its corporate name to MERSCORP, Inc. on May 12, 2003. (Doc. 1, ¶ 32.) Thus, any and all actions taken by "MERS" after 2004 are legally void because it was required to transact all business as "MERSCORP." (Doc. 1, ¶ 32.)

Plaintiff contends, further, that the Note was not securitized properly when it was transferred to DOE 5, who was acting as the Trustee for the "Securitized Trust." (Doc. 1, ¶ 33.) Plaintiff asserts that the "PSA" required that "each Note or Deed of Trust had to be endorsed and assigned, respectively to the trust and executed by multiple intervening parties before it reached the Trust. Here, neither the Note nor the Deed of Trust was assigned to the Securitized Trust by the closing date. Therefore, according to Plaintiff, under the PSA, any assignments of the Deed of Trust beyond the specified closing date for the Trust are void.

Plaintiff's fraud cause of action is predicated on allegations that Wells Fargo has collected more than $19,000.00 in mortgage payments from Plaintiff, despite the fact that the Note is owned by DOE 4. (Doc. 1, ¶ 75.) Plaintiff alleges that Defendants materially misrepresented that Wells Fargo had the right to collect mortgage payments and did so to induce Plaintiff to rely on the misrepresentations and make mortgage payments to Wells Fargo. (Doc. 1, ¶ 76.)

Regarding Plaintiff's RESPA claim, Plaintiff asserts that Kings Mortgage paid to an unidentified defendant (labeled DOE 7 by Plaintiff) "a [yield spread premium] on Plaintiff's loans and no Defendant offered Plaintiff lower upfront fees for this YSP payment." (Doc. 1, ¶ 100.) Plaintiff asserts that this fraudulently placed Plaintiff into a more expensive loan than Plaintiff "was in prior to meeting the Defendants or should have been placed into based upon Plaintiff's credit score or income." (Doc. 1, ¶ 100.)

Finally, in support of Plaintiff's claim for violation of TILA, 15 U.S.C. § 1641(g), he alleges that Defendants failed to provide him with sufficient 30-day notice of the assignment of the Note and the Deed of Trust at issue. (Doc. 1, ¶ 113.)


A. Applicable Standards

1. Screening Standard

In cases where the plaintiffs are proceeding in forma pauperis, the Court is required to screen each case and shall dismiss the case at any time if the Court determines that the allegation of poverty is untrue, or the action or appeal is frivolous or malicious, fails to state a claim upon which relief may be granted, or seeks monetary relief against a defendant who is immune from such relief. 28 U.S.C. § 1915(e)(2). If the Court determines that the complaint fails to state a claim, leave to amend may be granted to the extent that the deficiencies of the complaint can be cured by amendment. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc).

2. Legal Standard

In determining whether a complaint fails to state a claim, the Court uses the same pleading standard used under Federal Rule of Civil Procedure 8(a). Under Rule 8(a), 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)(2). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 557). "[A] complaint [that] pleads facts that are 'merely consistent with' a defendant's liability . . . 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557). Further, although a court must accept as true all factual allegations contained in a complaint, a court need not accept a plaintiff's legal conclusions as true. Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (quoting Twombly, 550 U.S. at 555).

A court may also dismiss a complaint for failure to comply with Federal Rule 9(b). See Vess v. Ciba-Geigy Corp, USA, 317 F.3d 1097, 1107 (9th Cir. 2003). Rule 9 provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). Such circumstances include the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). Claims subject to Rule 9(b) pleading requirements must also satisfy the ordinary pleading requirements of Rule 8.

B. Plaintiff's Claims

1. First Cause of Action for Wrongful Foreclosure

Plaintiff's theory of his claim for wrongful foreclosure appears predicated on several grounds which are somewhat unclear. Plaintiff asserts that Kings Mortgage failed to transfer the physical Note to DOE 4 or to provide said Note to DOE 4 in bearer form. Therefore, Plaintiff alleges that the Defendants, and each of them, cannot show proper receipt, possession, transfer, assignment and/or ownership of the Plaintiff's original Promissory Note and Deed of Trust, resulting in an imperfect security interest and claim against Plaintiff's title. (Doc. 1, ¶ 24.) Plaintiff summarizes the facts upon which his claim is based as follows:

(a) After originating the loan, [Kings Mortgage] sold Plaintiff's Note to DOE 2 and does not own the Note originally signed by the Plaintiff.

(b) Thereafter, DOE 2 sold the Note to DOE 3. (c) After the sale of the Promissory Note to DOE 3, neither [Kings Mortgage] nor DOE 2 retained any interest in the subject Note. Therefore, the Deed of Trust/mortgage became invalid[.]

(d) After the sale of the Note to DOE 2, [Kings Mortgage] retained ownership of the Note due to the fact that the Note was never legally transferred to DOE 2 or to any other legal entity due to the negligent handling of the Note in question.

(e) Neither DOE 4 nor any other party to this transaction has legal ownership of the Note due to the fact that DOE 4 never received an endorsed assignment of the Note from [Kings Mortgage] or ever took legal possession of the Note[.]

(f) Plaintiff further alleges that the original Deed of Trust that secured the Promissory Note listed MERS as the beneficiary and [North ...

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