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Suruki v. Ocwen Loan Servicing LLC

United States District Court, N.D. California

July 22, 2016

TSUNEYOSHI SURUKI, Plaintiff,
v.
OCWEN LOAN SERVICING, LLC, et al., Defendants.

          ORDER GRANTING MOTIONS TO DISMISS

          JON S. TIGAR United States District Judge.

         Before the Court is Defendants Ocwen Loan Servicing, LLC (“Ocwen”), Mortgage Electronic Registration Systems, Inc. (“MERS”), and HSBC Bank USA’s (“HSBC”) Motion to Dismiss Plaintiff’s Complaint, ECF No. 43, as well as Defendant First American Trustee Servicing Solutions, LLC’s (“First American”) Motion to Dismiss Plaintiff’s Complaint, ECF No. 41. Both motions will be granted with leave to amend.

         I. BACKGROUND

         A. Allegations in the Complaint

         On April 20, 2006, Plaintiff Tsuneyoshi Suruki obtained a mortgage loan in the amount of $740, 000, consisting of a Deed of Trust (“DOT”) and 30-year Adjustable Rate Note (“Note”) from Fremont Investment and Loan to purchase real property in Foster City, California. ECF No. 1 ¶ 7; ECF No. 38 at 2. The DOT named Fremont General Credit Corporation as trustee and MERS as the beneficiary, and was recorded in San Mateo County on April 28, 2006. ECF No. 1 ¶ 7. The original loan servicer, Fremont Investment and Loan, was acquired by Litton Loan Servicing, LP, which was later succeeded by Ocwen. Id. ¶ 8. Plaintiff subsequently defaulted on the loan, and the property was sold at a trustee’s sale in 2012. ECF No. 38 at 2.

         Plaintiff’s six causes of action arise from alleged irregularities in the assignment and securitization of his mortgage loan, which, he claims, invalidated Defendants’ right to engage in foreclosure proceedings. Specifically, Plaintiff alleges that Fremont Investment and Loan bundled Plaintiff’s mortgage into a pool with other mortgages and sold it to its affiliate Fremont Mortgage Securities Corporation on August 1, 2006. Id. ¶ 9. Plaintiff claims that this sale was done without an effective assignment and transfer from Fremont Investment and Loan to Fremont Mortgage Securities in violation of the terms of the Mortgage Loan Purchase Agreement (“MLPA”) agreed to by both parties and filed with the U.S. Securities and Exchange Commission. Id.

         Plaintiff further alleges that Fremont Mortgage Securities formed a mortgage-backed securities trust (the “Fremont Home Loan Trust 2006-B”) pursuant to a Pooling and Servicing Agreement (“PSA”) dated August 1, 2006. Id. ¶ 10. Fremont Mortgage Securities then “sold and securitized each of the pooled mortgage loans (including the Subject Loan)” into the Fremont Home Loan Trust 2006-B, which was sold to HSBC. Id. ¶ 11. The PSA sets forth a closing date of “August 3, 200[6], or 90 days thereafter[, which served as] the absolute deadline for HSBC as Trustee for the FREMONT HOME LOAN TRUST 2006-B to legally receive and accept contribution of any mortgage loan asset into its trust fund.” Id. ¶ 12.

         Plaintiff claims that the official records of the San Mateo County Recorder do not show any assignment of the DOT from Fremont Investment and Loan to any entity by August 3, 2006 or “90 days thereafter, ” and that there is, therefore, no record of the required intervening assignment of the DOT from the original lender to Fremont Mortgage Securities, as well as from Fremont Mortgage Securities to HSBC, as required by the MLPA and PSA. Id. ¶¶ 14-15. Plaintiff asserts that this undocumented transfer was a material breach of the MLPA and PSA, resulting in a break in the chain of title of the mortgaged property. Id. ¶¶ 16-18.

         Plaintiff further claims that the only mortgage assignment found on record with the San Mateo County Recorder is from MERS, acting as agent on behalf of the original lender, to HSBC, dated January 6, 2011. Id. ¶¶ 22-24, 68. Plaintiff alleges that this assignment was made after the PSA closing date and that MERS lacked the authority to assign the Note and DOT. Id. ¶ 22-24. Finally, Plaintiff alleges numerous violations of California and New York trust law, id. ¶ 26-30, based on the theory that the assignment of the DOT to HSBC was void and HSBC, therefore, did not have legal standing to authorize Litton or Ocwen to service Plaintiff’s loan or to allow First American Trustee to pursue foreclosure activities against Plaintiff.

         B. Procedural Background

         On February 19, 2015, Plaintiff filed a complaint, asserting claims for (1) wrongful foreclosure; (2) fraud; and (3) violations of the California Business and Professions Code § 17200 et seq. against all Defendants. Plaintiff further asserts claims for (4) unjust enrichment against Ocwen and HSBC; (5) quiet title; and (6) “accounting” against MERS, Ocwen, and HSBC.

         On April 3, 2015, Defendants HSBC, MERS, and Ocwen filed a Motion to Dismiss Plaintiff’s Complaint. ECF No. 17. On June 22, 2015, the Court stayed the case pending the California Supreme Court’s decision in Yvanova v. New Century Mortgage Corp., 331 P.3d 1275 (Cal. 2014). ECF No. 34. The stay was subsequently lifted on February 29, 2016 after the Yvanova opinion issued. ECF No. 40. On March 25, 2016, Defendant First American Trustee and Defendants HSBC, MERS, and Ocwen filed separate amended Motions to Dismiss Plaintiff’s Complaint, ECF Nos. 41 & 43, which motions the Court now considers.

         II. JURISDICTION

         The Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. The parties are diverse because Plaintiff is domiciled in California and none of the defendants are either incorporated in or have their primary places of business in California. ECF No. 1 ¶¶ 1-5. The amount in controversy ...


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