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Ancheta v. Mortgage Electronic Registration Systems, Inc.

United States District Court, N.D. California

March 29, 2017

Kelly Grace Ancheta, Plaintiff,
v.
Mortgage Electronic Registration Systems, Inc., et al., Defendants

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND Re: Dkt. No. 11

          Yvonne Gonzalez Rogers United States District Court Judge

         Plaintiff Kelly Grace Ancheta (“Ancheta”) brings this wrongful foreclosure action against defendants Mortgage Electronic Registration Systems, Inc. (“MERS”); Bank of America, N.A. (“BANA”), and The Bank of New York Mellon fka The Bank of New York, as Trustee for the CWALT, INC., Alternative Loan Trust 2006-0A9, Mortgage Pass-Through Certificates, Series 2006-0A9 (“BNYM”). Ancheta alleges two claims: wrongful foreclosure and violation of the California Unfair Competition Law, Business & Professions Code section 17200. The action was initially filed on September 20, 2016, in the Superior Court of the State of California, County of San Mateo, and was removed to this Court on November 9, 2016, based upon diversity. Defendants have filed a Motion to Dismiss the complaint under Rule 12(b)(6) for failure to state a claim based upon the statute of limitations and failure to allege a claim sufficiently. (Dkt. No. 11.)

         Having carefully considered the papers submitted[1] and the pleadings in this action, and for the reasons set forth below, the Court Grants the Motion to Dismiss With Leave To Amend.

         I. Summary of Allegations

         Ancheta alleges that on April 14, 2006, she executed an adjustable rate mortgage including a Deed of Trust (“DOT”), relating to a residential property in San Mateo, California. The DOT identified American Mortgage Express Corporation (“AME”) as the lender, defendant MERS as the nominal beneficiary and Chicago Title as the trustee. The original loan servicer was Countrywide Home Loans Servicing, LP. Subsequent servicers include Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP. (Dkt. No. 1, Exh. 1 [Complaint] ¶¶ 7, 8.) Shortly after origination, AME sold the loan was sold to Countrywide Home Loans, Inc. (“Countrywide”) but without an accompanying assignment of the DOT. (Id. ¶9.) Countrywide later sold the loan to CWALT, Inc., and the loan was subsumed within a mortgage-backed securities trust (Alternative Loan Trust 2006·OA9) established by CWALT, Inc. (Id. ¶¶ 10, 11.) The trust was established under New York law. (Id. ¶ 11.)

         On September 20, 2011, MERS as “nominee for AME” executed an Assignment of Deed of Trust to assign the beneficial interest in Ancheta's mortgage to the The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the CWALT, INC., Alternative Loan Trust 2006-0A9, Mortgage Pass-Through Certificates, Series 2006-0A9 (“BNYM”) (Complaint at Exh. C.)[2] On October 7, 2011, MERS, as “present beneficiary, ” executed a Substitution of Trustee in which Recontrust Company, N.A. (“Recontrust”) was substituted as the trustee of the DOT securing the Subject Loan. (Compl. ¶ 26, Exh. E.) That same day, MERS executed a second assignment to BNYM. (Id. ¶ 27, Exh. F.) Also on October 7, 2011, Recontrust executed a a Notice of Default and Election to-Sell under Deed of Trust (“NOD”) which stated Ancheta was $63, 702.35 in arrears on the Subject Loan. (Id. ¶ 28, Exh. H.)

         On January 17, 2012, Recontrust recorded a Notice of Trustee's Sale (“NOTS”) which stated the total amount of the unpaid balance plus interest of the Subject Loan, plus expenses related to the publication of the Notice was $630, 777.94. (Id. ¶ 29, Exh. I.) On February 17, 2012, Recontrust recorded a Trustee's Deed Upon Sale (“TDUS”) that stated defendant BNYM has purchased the Subject Property on February 7, 2012, for $423, 000. (Id. ¶ 29, Exh. J.)

         Ancheta filed her complaint for wrongful foreclosure and violation of Business & Professions Code section 17200 in the state court on September 20, 2016. Thereafter, on November 9, 2016, defendants removed the action to this Court based upon diversity of citizenship.

         II. Analysis

         Defendants move to dismiss Ancheta's claims on three grounds: (1) the wrongful foreclosure claim is time-barred; (2) the wrongful foreclosure claim fails as a matter of law for lack of standing to challenge the securitization issues, lack of prejudice from any defects in the foreclosure procedure, and failure to tender the amount of her indebtedness; and (3) the UCL claim fails as a matter of law

         A. Statute of Limitations

         Defendants move to dismiss on the grounds that Ancheta's claims, brought four years and eight months after the foreclosure sale of the property, are barred by the applicable statute of limitations. Ancheta contends that “there is no statute of limitations applicable to a wrongful foreclosure action” (Oppo. at 6:4-5), that the statute of limitations is not the three-year statute of limitations under California Code of Civil Procedure section 338 (as defendants contend), and that, even if it were, it should be equitably tolled for her delayed discovery of the facts in support of her claim. These arguments all fail.

         First, Ancheta's argument that no statute of limitations applies to a wrongful foreclosure action is completely without merit and lacks legal authority.[3] California Code of Civil Procedure section 312 provides that “[c]ivil actions, without exception, can only be commenced within the periods prescribed in this title, after the cause of action shall have accrued, unless where, in special cases, a different limitation is prescribed by statute.” Cal. Code Civ. Proc. § 312. Moreover, Ancheta's argument runs counter to the policies underlying statutes of limitation, including protecting parties from defending stale claims where the passage of time causes loss of evidence and presents unfair handicaps. Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 806, 110 P.3d 914, 919-20 (2005).

         Second, based on the allegations of the complaint, the wrongful foreclosure claim falls within the three-year limitations period set forth in California Code of Civil Procedure section 338. Under California law, “the nature of the right sued upon, not the form of action or the relief demanded, determines the applicability of the statute of limitations.” Jefferson v. J. E. French Co., 54 Cal. 2d 717, 718 (1960). Section 338 provides a three-year statute of limitations for a variety of claims, including: “[a]n action upon a liability created by statute, other than a penalty or forfeiture;” “[a]n action for trespass upon or injury to real property;” “[a]n action for relief on the ground of fraud or mistake;” and “slander of title to real property.” Cal. Code. Civ. Proc. § 338 (a), (b), (d), (g).[4] Ancheta's claim is based upon allegations that the various documents recorded to effectuate the foreclosure sale were recorded fraudulently and contrary to the California non-judicial foreclosure statutes. (Complaint ¶¶ 33-38.) Courts examining claims similar to Ancheta's have concluded that the three-year statute of limitations in section 338 applies. See, e.g., Engstrom v. Kallins, 49 Cal.App.4th 773, 781-83 (1996) (wrongful foreclosure claim based upon defendants' failure to comply with statutory requirements regarding notice covered by section 338(a)); Hatch v. Collins, 225 Cal.App.3d 1104, 1110 (1990) (wrongful foreclosure claim based upon alleged fraudulent conspiracy between trustee and beneficiaries covered by section ...


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