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Tjaden v. H.S.B.C. Bank Usa National Association

United States District Court, S.D. California

April 14, 2015



JEFFREY T. MILLER, District Judge.

This order addresses Defendants' motions to dismiss the second amended complaint, (Doc. Nos. 30 & 32), and their related requests for judicial notice, (Doc. Nos. 30-3 & 32-2). The motions were fully briefed and were found suitable for resolution without oral argument pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the court dismisses the second amended complaint without leave to amend.


In this case, Plaintiffs assert that Defendants are not entitled to collect payment or foreclose because Plaintiffs' mortgage note was assigned to a trust that was void under New York law. Defendants are HSBC Bank USA ("HSBC"), [1] the trustee of the trust; EverBank;[2] and MTC Financial, Inc. ("MTC"), doing business as Trustee Corps. Plaintiffs' allegations in the second amended complaint ("SAC"), (Doc. No. 28), the attached exhibits, (Doc. No. 28-1), and the publicly recorded documents the court took judicial notice of in its order dismissing the previous complaint, unopposed by Plaintiffs, (Doc. No. 27 at 2 n.3), [3] provide the following account:[4]

In 2004, the Opteum Mortgage Acceptance Corporation ("OMAC") Asset-Backed Pass-Through Certificates Series 2005-4 Trust ("the trust") was organized, with HSBC as trustee. (SAC ¶ 6.) The trust agreements, including the pooling and service agreement, required all pooled notes and mortgages to be transferred to HSBC within thirty days of the closing date of the trust, which was in August 2005. (Id. ¶ 9.) An SEC Form 8-K filed by the trust in September 2005 reported that the original principal balance of the loans in the trust totaled 1.3 billion dollars. (Id. ¶ 10.) Plaintiffs claim that the trust was
an illegal purpose trust having been formed and purposed to deceive investors that the investments were secured in accordance with federal law by 4, 870 residential mortgage notes and mortgages when it was in fact vested with no residential mortgage property by conveyance or transfer or otherwise rendering H.S.B.C. as trustee having no holder status under New York commercial law to cure and/or ratify non-conforming defects arising in the securitization process. It was also formed and purposed to deceive homeowners that their loans were part of the trust estate holdings authorizing its trustee and servicing agents to collect payments from them.

(Id. ¶ 30 (footnote omitted).) In fact, Plaintiffs claim, none of the loans identified by the 8-K had actually been conveyed or transferred to the trust as required by the trust agreements. (Id. ¶ 34.) Instead, they were scanned into a database maintained by Mortgage Electronic Registration Systems, while the original notes were shredded or warehoused elsewhere. (Id.)

In May 2005, Plaintiffs obtained a loan for $548, 000 secured by a deed of trust on their property located at 1930 Alta Vista Drive in Vista, California. (Id. ¶ 11; RJN, Exh. A.) The lender was Provident Savings Bank, F.S.B. ("Provident"); the trustee was Provident Financial Corp. ("Provident Financial"); and the beneficiary was Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for the lender and the lender's successors and assigns. (RJN, Exh. A.) The deed of trust was recorded on May 9, 2005. (Id.)

The deed of trust contains a choice-of-law provision, which provides: "This Security Instrument shall be governed by federal law and the law of the jurisdiction in which the Property is located." (Id. at 11.) It also states: "This Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to the Borrower." (Id.) It further provides that a sale of an interest in the note may not result in a change of loan servicer, that a change in loan servicer may not be related to a sale of the note, and that the borrower will be notified of any change in servicer and given the address to which payments should be sent. (Id.)

According to Plaintiffs, Provident originated Plaintiffs' loan with the intent of turning a profit. (SAC ¶ 22.) Almost immediately after originating the loan, Provident assigned Plaintiffs' loan to the trust "for the immediate return in full of the sum loaned plus margin profit." (Id. ¶ 21.)

Provident was the servicer of the loan from the origination date until August 1, 2005, when Opteum Financial Services, LLC ("Opteum") became the servicer. (Id. ¶ 27.) Plaintiffs were notified of the change in two notices, dated June 21 and July 6, 2005, respectively. (Id.) Opteum remained the servicer until June 1, 2007, when Everhome Mortgage Company ("Everhome") became the servicer. (Id. ¶ 28.) Plaintiffs received notice of this change in a notice dated May 10, 2007. (Id.)

On February 3, 2009, MERS purported to assign its interest to HSBC. (Id. ¶ 29; RJN, Exh. C.) The assignment was signed by Christina Allen, who signed as "VP" of MERS. (Id. ¶ 29; RJN, Exh. C.) Also on February 3, 2009, HSBC substituted Regional Service Corporation ("Regional") as trustee in place of Provident Financial. (RJN, Exh. D.) Both documents were recorded on May 11, 2009. (RJN, Exhs. C & D.) Plaintiffs claim that the assignment by MERS to HSBC was forged because Christina Allen was a robo-signer who was an employee of Lender Processing Services, not MERS. (SAC ¶ 29.)

On February 4, 2009, Regional issued a notice of default and election to sell on behalf of Everhome, which was a subdivision of EverBank. (Id. ¶ 61; RJN, Exh. B.) The notice, which was recorded on February 5, 2009, stated that Plaintiffs were in arrears $24, 510 at the time. (RJN, Exh. B.) Three months later, on May 6, 2009, Regional, acting on behalf of HSBC and EverBank, issued a notice of trustee's sale. (SAC ¶ 61; RJN, Exh. E.) The notice was recorded on May 11, 2009, (RJN, Exh. E), the same day the February 3, 2009 assignment by MERS to HSBC and the substitution of Regional for Provident Financial were recorded.

Beginning on May 11, 2009, and continuing to the time they initiated this action, Plaintiffs applied for loan assistance. (SAC ¶ 44.) On August 3, 2010, MTC, as agent for HSBC, issued another notice of default and election to sell, which was recorded on August 9, 2010. (SAC ¶ 43; RJN, Exh. F.) Meanwhile, Plaintiffs claim, Defendants did not respond to their requests for validation of the debt and pressed for foreclosure, having calculated that foreclosure would be more profitable than modifying Plaintiffs' loan. (SAC ¶¶ 44-45.) Ultimately, Plaintiffs were coerced into paying $32, 129 and signing loan-modification documents with EverBank, which was acting in conjunction with MTC. (Id. ¶ 45.) After Plaintiffs agreed to the modification, on December 16, 2010, MTC rescinded the notice of default and election to sell and recorded the rescission on December 20, 2010. (Id. ¶ 45; RJN, Exh. G.) In the rescission, MTC identified itself as "Trustee or acting agent for Beneficiary." (Id. ¶ 45; RJN, Exh. G.) All the while, Plaintiffs assert, "Regional remained the duly recorded substituted trustee for Provident, the original trustee." (SAC ¶ 45.)

On July 22, 2013, HSBC assigned its interest to EverBank. (Id. ¶ 62; RJN, Exh. H.) The assignment was recorded on July 31, 2013. (RJN, Exh. H.) On July 29, 2013, EverBank, as successor by merger to Everhome, substituted MTC as trustee of the loan. (SAC ¶ 46; RJN, Exh. I.) The substitution was recorded on August 6, 2013. (RJN, Exh. I.) On July 31, 2013, EverBank became the servicer of Plaintiffs' loan. (SAC ¶ 28.)

On August 5, 2013, MTC issued a notice of default and election to sell. (RJN, Exh. J.) The notice, which was recorded on August 6, 2014, indicates that Plaintiffs were in arrears $91, 735. (Id.)

Meanwhile, on July 22 and August 8, 2013, Plaintiffs sent letters to Defendants asking them "to validate their legal status as the owners, holders, or representatives of the owners or holders of Plaintiffs' loan." (SAC ¶ 65 & Exhs. 10 & 11.)

On July 30, 2013, EverBank responded to Plaintiffs' letters, stating: "We are researching the inquiry and you will receive a reply shortly." (SAC ¶ 66.) HSBC's Mortgage Service Center also responded that day, stating: "This property cannot be located in the portfolio of loans we are servicing." (Id. ¶ 66 & Exh. 12.) On August 8 and August 14, 2013, MTC responded: "Requests for debt validation must be sent to the lender.... Accordingly, please address future correspondence to the appropriate parties rather than Trustee Corps. (MTC)." (SAC ¶ 66.)

On September 6, 2013, Plaintiffs mailed a letter to EverBank, captioned as a "QUALIFIED WRITTEN REQUEST." (SAC ¶ 66 & Exh. 13.) The letter requested nearly 30 types of information regarding the identity of the "current holder and owner of the original mortgage note." (SAC, Exh. 13 at 1.)

On September 17, 19, and 24, 2013, EverBank responded, stating: "Everhome services the loan on behalf of the loan's investor, Wells Fargo Bank." (SAC ¶ 66.) Plaintiffs claim that this statement was fraudulent and misleading because EverBank was "dissembling... their loan servicing for H.S.B.C. as trustee for the sham, illegal purposed OMAC Trust."[5] (Id.) The letter continued: "Regarding your general and specific requests for multiple items regarding this loan, be advised that for some of the information you requested, Everhome does not make available to the public nor does it directly relate to the loan." (Id.)

At some point, Plaintiffs petitioned for bankruptcy. (Id. ¶ 47.) On December 10, 2013, EverBank filed a declaration in Plaintiffs' bankruptcy case "purporting to show lawful right of beneficial title to Plaintiffs' mortgage note and deed of trust." (Id.) At that point, the bankruptcy stay was lifted as to EverBank so that it could proceed with foreclosure. (Id.)

Plaintiffs, who are represented by counsel, initiated this action in December 2013, but did not serve Defendants at that time. (Doc. No. 1.) After months of inaction, the court notified Plaintiffs of possible dismissal for failure to prosecute. (Doc. No. 3.) Plaintiffs requested additional time to effect service, claiming that additional time was needed to permit negotiations with EverBank. (Doc. No. 5.) The court granted the extension and required Plaintiffs to serve Defendants by July 11, 2014. (Doc. Nos. 6 & 7.) Plaintiffs then filed a first amended complaint ("FAC") and finally served Defendants. (Doc. Nos. 8-10.)

MTC moved to dismiss the FAC in August 2014, and EverBank and HSBC did the same in September 2014. (Doc. Nos. 11 & 20.) In December 2014, the court granted the motions, dismissing the FAC. (Doc. No. 27.) In doing so, the court explained that borrowers do not have standing to challenge assignments that are alleged to be defective because of robo-signing, and they also do not have standing to challenge the transfer of their note to a trust in violation of the trust's pooling and service agreement. (Id. at 7-9.) The court identified further flaws that required dismissal of Plaintiffs' federal claims, and it declined to exercise supplemental jurisdiction over ...

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