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Brink v. Alternative Loan Trust 2006-39Cb

United States District Court, E.D. California

May 8, 2014

DAVID L. BRINK, Plaintiff,
v.
ALTERNATIVE LOAN TRUST 2006-39CB; BANK OF NEW YORK MELLON, Defendants.

FINDINGS AND RECOMMENDATIONS

DALE DROZD, Magistrate Judge.

This matter came before the court on January 24, 2014, for hearing of defendant's motion to dismiss plaintiff's amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff David Brink, proceeding pro se in this action, appeared telephonically on his own behalf. Attorney Rachel Wintterle appeared telephonically on behalf of the defendant The Bank of New York Mellon fka Bank of New York as Trustee for the Certificate Holders of the CWALT Inc., Alternative Loan Trust 2006-39CB, Mortgage Pass-Through Certificates, Series 2006-39CB (erroneously sued as Alternative Loan Trust 2006-39CB and Bank of New York Mellon).

Upon consideration of the arguments on file and at the hearing, and for the reasons set forth below, the undersigned will recommend that defendant's motion to dismiss be granted.

BACKGROUND

Plaintiff David Brink commenced this action on May 2, 2013, by paying the required filing fee and filing a complaint. (Dkt. No. 1.) On November 5, 2013, plaintiff requested leave to file an amended complaint, (Dkt. No. 28), along with a proposed amended complaint naming as defendants The Bank of New York Mellon, ("BNYM"), and New Penn Financial dba Resurgent Mortgage Servicing, Inc.[1] (Dkt. No. 29.) On November 13, 2013, plaintiff's request for leave to file the amended complaint was granted and the amended complaint filed November 5, 2013, was deemed the operative complaint. (Dkt. No. 30.)

On November 25, 2013, defendant BNYM filed the motion to dismiss now pending before the court. (Dkt. No. 31.) Plaintiff filed an opposition on December 9, 2013, (Dkt. No. 33), and defendant filed a reply on January 8, 2014. (Dkt. No. 34.)

STANDARDS

I. Legal Standards Applicable to Motions to Dismiss Pursuant to Rule 12(b)(6)

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n , 720 F.2d 578, 581 (9th Cir. 1983). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege "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 , 556 U.S. 662, 678 (2009).

In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. Hishon v. King & Spalding , 467 U.S. 69, 73 (1984); Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1989). In general, pro se complaints are held to less stringent standards than formal pleadings drafted by lawyers. Haines v. Kerner , 404 U.S. 519, 520-21 (1972). However, the court need not assume the truth of legal conclusions cast in the form of factual allegations. United States ex rel. Chunie v. Ringrose , 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal , 556 U.S. at 678. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly , 550 U.S. at 555. See also Iqbal , 556 U.S. at 676 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."). Moreover, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the 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).

In ruling on a motion to dismiss brought pursuant to Rule 12(b)(6), the court is permitted to consider material which is properly submitted as part of the complaint, documents that are not physically attached to the complaint if their authenticity is not contested and the plaintiff's complaint necessarily relies on them, and matters of public record. Lee v. City of Los Angeles , 250 F.3d 668, 688-89 (9th Cir. 2001).

ANALYSIS

In his amended complaint plaintiff alleges that the "[d]efendants are strangers to a Deed of Trust and Note claiming a right or interest to Plaintiff[s] home via an ex post facto assignment of a Deed of Trust.... to a New York Trust years after the Trust's closing date...." (Am. Compl. (Dkt. No. 29) at 2.)[2] Additionally, the amended complaint alleges as follows. On or about October 28, 2011, an "Assignment of Deed of Trust... was executed in California and recorded in Sacramento County Record's Office on November 1, 2011...." ( Id. at 12.) The assignment was executed by Mortgage Electronic Registrations Systems, Inc., ("MERS"), and purported to transfer to the Alternative Loan Trust 2006-39CB, ("Trust"), which was controlled by defendant BNYM acting as the trustee, the deed of trust to plaintiff's home. (Id.) "[U]nder color of this assignment, " defendants are now "threatening an imminent taking of plaintiff's property." (Id.)

However, the assignment of plaintiff's deed of trust did not "comport with the requirements" of the Trust's Pooling and Servicing Agreement, ("PSA"), and the law of the state of New York, which governed the Trust. ( Id. at 13.) Specifically, the Trust's closing date was November 30, 2006, and thus the October 28, 2011 transfer of plaintiff's deed to the Trust came "years after the closing date of the trust." ( Id. at 15.) Moreover, "[a]ccording to the PSA only the depositor may make assignments to the trust, " (id. at 13), and thus "[u]nder the PSA, MERS as a Nominee lacks authority to transfer deed or notes to the trustee of the trust fund." ( Id. at 15.)

In this regard, plaintiff alleges that "[t]he attempt by MERS to assign the deed... is... a strict violation of the PSA, " (id. at 14), the assignment is "fake, " (id. at 15), and "improper under the terms required by [the] PSA." ( Id. at 16.) Moreover, the "record was created to forge a (false) impression in the public record that defendant [BNYM] would pretend that they had a legal right to foreclose on Plaintiff's property." ( Id. at 14.)

Based on these allegations, plaintiff in his amended complaint purports to state causes of action for the violation of California Business and Professions Code § 17200, "cancellation of instrument, " declaratory relief, injunctive relief, negligent misrepresentation, "statutorily defective foreclosure, " and violation of California's Homeowners Bill of Rights.[3]

In its motion to dismiss defendant argues, in part, that plaintiff lacks standing to challenge the securitization process because plaintiff is not a party to, or a third party beneficiary of the PSA. (MTD (Dkt. No. 31-1) at 13.) Plaintiff concedes in his opposition to the pending motion that courts have held that a non-party to the PSA lacks standing to challenge the PSA, but he argues that he is simply trying to "use the breaches [of the PSA] as evidence that the Defendants are not the owner of his note." (Pl.'s Opp'n (Dkt. No. 33 at 8-9.)

"It is well settled that mortgagees who are not parties to a PSA lack standing to allege violations of a PSA or to otherwise bring claims on the basis that a PSA was violated."[4] Kramer v. Bank of America, N.A., No. 1:13-CV-1499-AWI-MJS, 2014 WL 1577671, at *4 (E.D. Cal. Apr. 17, 2014). See, e.g., Gutierrez v. Bank of America, N.A., No. 2:13-cv-1695-TLN-AC, 2014 WL 1379883, at *6 (E.D. Cal. Apr. 4, 2014) ("The Court adopts the majority view that Plaintiffs do not have standing to challenge the PSA."); Sabherwal v. Bank of N.Y. Mellon, No. 11cv2874 WQH-BGS, 2013 WL 101407, at *7 (S.D. Cal. Jan. 8, 2013) ("Plaintiffs are not investors of the loan trust and lack standing to challenge the validity of the securitization of the loan."); Dinh v. Citibank, N.A., No. SA CV 12-1502-DOC (RNBx), 2013 WL 80150, at *3-4 (C.D. Cal. Jan. 7, 2013) (finding the argument that defendants failed to comply with PSA "fails, as this Court, as well as numerous others, have addressed and rejected similar arguments."); Armstrong v. Chevy Chase Bank, FSB, No. 5:11-cv-5664 EJD , 2012 WL 4747165, at *2 (N.D. Cal. Oct. 3, 2012) ("Plaintiffs theory of liability fails to support a plausible claim because Plaintiffs lack standing to allege a breach of the PSA. Indeed, they are neither direct parties to nor third-party beneficiaries of that agreement."); Hale v. World Sav. Bank, No. CIV 2:12-cv-1462-GEB-JFM (PS), 2012 WL 4675561, at *6-7 (E.D. Cal. Oct. 1, 2012) ("Finally, to the extent plaintiffs base their claims on the theory that defendants allegedly failed to comply with the terms of the PSA, the court notes that they lack standing to do so because they are neither a party to, nor a third party beneficiary of, that agreement").

In this regard, plaintiff's argument that he is simply trying to establish that the defendant cannot foreclose on his home because it is not the owner of the note is premised on the argument that the transfer of his note to the Trust violated the PSA.[5] As another judge of this court has observed in response to a similar argument:

Plaintiff attempts to sidestep case law by arguing failure to securitize his Note makes it impossible' for Defendants to enforce in any manner whatsoever.' Plaintiff's failure-to-securitize argument rests on a PSA violation. The Court rejects this argument because Plaintiff does not have standing to bring a claim based on a PSA violation.

Kramer, 2014 WL 1577671 at *4.

Plaintiff also acknowledges in his opposition that, "[a] number of cases have held that defects in the securitization process cannot be raised by a mortgagee." (Pl.'s Opp'n (Dkt. No. 33) at 8.) Plaintiff, however, encourages this court to follow the holdings of Glaski v. Bank of America, N.A ., and a subsequent decision which relied upon Glaski in part, Wells Fargo Bank, N.A. v Erobobo.

In Glaski v. Bank of America, N.A. , 218 Cal.App.4th 1079 (2013), the California Court of Appeal for the Fifth Appellate District found that a borrower

may challenge the securitized trust's chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust's closing date. Transfers that violate the terms of the trust instrument are void under New York law, and borrowers have standing to challenge void assignments of their loans....

Id. at 1083.

This holding by the state appellate court in Glaski, however, has been rejected by the California Court of Appeal for the Fourth Appellate District, which concluded that

[a]s an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks standing to enforce any agreements, including the investment trust's pooling and servicing agreement, relating to such transactions.

Jenkins v. JP Morgan Chase Bank, N.A. , 216 Cal.App.4th 497, 515 (2013).

"District courts in the Ninth Circuit have generally rejected Glaski, and sided with Jenkins, noting Glaski is a minority view." Lanini v. JPMorgan Chase Bank, No. 2:13-CV-0027 KJM EFB, 2014 WL 1347365, at *5 (E.D. Cal. Apr. 4, 2014). See, e.g., Flores v. EMC Mortg. Co., No. CV F 14-0047 LJO GSA, 2014 WL 641097, at *6 (E.D. Cal. Feb. 18, 2014) ("Of key importance, numerous courts disagree with and refuse to follow Glaski, including this Court."); Snell v. Deutsche Bank Nat. Trust Co., No. 2:13-cv-2178-MCE-DAD, 2014 WL 325147, at *4 (E.D. Cal. Jan. 29, 2014) ("Numerous courts have subsequently expressed their disagreement with Glaski and have continued to follow the Jenkins approach."); Haddad v. Bank of America, N.A., No. 12cv3010 WQH JMA, 2014 WL 67646, at *4 (S.D. Cal. Jan. 8, 2014) ("This Court finds the reasoning in the above-cited caselaw to be more persuasive than the reasoning in Glaski."); Rivac v. Ndex West LLC, No. C 13-1417 PJH, 2013 WL 6662762, at *4 (N.D. Cal. Dec. 17, 2013) ("This court is persuaded by the majority position of courts within this district, which is that Glaski is unpersuasive, and that plaintiffs lack standing to challenge noncompliance with a PSA in securitization unless they are parties to the PSA or third party beneficiaries of the PSA."); Apostol v. CitiMortgage, Inc., Case No. 13-cv-1983, 2013 WL 6328256, at *7 (N.D. Cal. Nov. 21, 2013) ("Moreover, courts in this District have expressly rejected Glaski and adhered to the majority view that individuals who are not parties to a PSA cannot base wrongful foreclosure claims on alleged deficiencies in the PSA/securitization process."); Newman v. Bank of New York Mellon, No. 1:12-CV-1629 AWI GSA , 2013 WL 5603316, at *3 (E.D. Cal. Oct. 11, 2013) ("However, no courts have yet followed Glaski and Glaski is in a clear minority on the issue. Until either the California Supreme Court, the Ninth Circuit, or other appellate courts follow Glaski, this Court will continue to follow the majority rule.").

In Erobobo, 972 N.Y.S.2d 147, 2013 WL 1831799 (Sup.Ct. Apr. 29, 2013), a New York state trial court held that because the mortgage at issue was transferred into the trust after the trust's closing date the assignment was in contravention of the PSA and was void, and not simply voidable, resulting in a question of fact as to who owned the mortgage. 2013 WL 1831799 at *9. However, as is true with the decision in Glaski, this holding in Erobobo has also been the subject of criticism. See, e.g., Anh Nguyet Tran v. Bank of New York, No. 13 Civ. 580 (RPP), 2014 WL 1225575, at *5 (S.D. N.Y. Mar. 24, 2014) (finding Glaski and Erobobo "run counter to better-reasoned cases, which apply the rule that a beneficiary can ratify a trustee's ultra vires act"); Felder v. Countrywide Home Loans, Civil Action No. H-13-0282 , 2013 WL 6805843, at *19 (S.D. Tex. Dec. 20, 2013) ("The court finds Erobobo's reasoning unpersuasive."); Halacy v. Wells Fargo Bank, N.A., Civil Action No. 12-11447-TSH, 2013 WL 6152351, at *3 (D. Mass. Nov. 21, 2013) ("Erobobo has been criticized and multiple federal courts, including in this District, have held that under New York law, an assignment of a mortgage into a trust in violation of the terms of the PSA is voidable, not void.").

Therefore, based upon the weight of authority the undersigned concludes that unless or until the California Supreme Court or the Ninth Circuit embraces the holdings of Glaski and Erobobo, this court should continue to follow the majority rule. Application of that majority rule compels the finding that a plaintiff lacks standing to challenge the alleged noncompliance with a Trust's PSA unless the plaintiff is a party to the PSA or a third party beneficiaries of the PSA.

Accordingly, for the reasons stated above, the undersigned finds that plaintiff lacks standing to bring his alleged causes of action because those causes of action are premised on an alleged violation of the Trust's PSA to which plaintiff was neither a party nor a third party beneficiary.

LEAVE TO AMEND

For the reasons explained above, defendant's motions to dismiss should be granted. The undersigned has carefully considered whether plaintiff may further amend his complaint to state a claim upon which relief can be granted. "Valid reasons for denying leave to amend include undue delay, bad faith, prejudice, and futility." California Architectural Bldg. Prod. v. Franciscan Ceramics , 818 F.2d 1466, 1472 (9th Cir. 1988). See also Klamath-Lake Pharm. Ass'n v. Klamath Med. Serv. Bureau , 701 F.2d 1276, 1293 (9th Cir. 1983) (holding that while leave to amend shall be freely given, the court does not have to allow futile amendments). Here, given plaintiff's lack of standing granting further leave to amend would be futile.

CONCLUSION

Accordingly, IT IS HEREBY RECOMMENDED that:

1. Defendant's November 25, 2013 Motion to Dismiss (Dkt. No. 31) be granted;

2. Plaintiff's November 5, 2013 amended complaint (Dkt. No. 29) be dismissed without leave to amend; and

3. This action be closed.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within seven days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst , 951 F.2d 1153 (9th Cir. 1991).


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