United States District Court, E.D. California
LAWRENCE P. MONTEFORTE, MICHELLE R. MONTEFORTE, EN K. CU, and SEN VAN NGUYEN, Plaintiffs,
THE BANK OF NEW YORK MELLON TRUST COMPANY NA formerly known as THE BANK OF NEW YORK TRUST COMPANY NA as successor in interest to JP MORGAN CHASE BANK NA as trustee for MASTER ADJUSTABLE RATE MORTGAGES TRUST 2005-1, MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-1; WELLS FARGO BANK, NA; CLEAR RECON CORP.; and DOES 1 through 100 inclusive, Defendants.
MEMORANDUM AND ORDER RE: MOTION TO DISMISS FIRST
WILLIAM B.SHUBB UNITED STATES DISTRICT JUDGE
Lawrence Monteforte, Michelle Monteforte, En Cu, and Sen
Nguyen (collectively “plaintiffs”) brought this
action against defendants the Bank of New York Mellon Trust
Company (“Bank of New York”), Wells Fargo Bank,
and Clear Recon Corp. (collectively “defendants”)
based on defendants' initiation of foreclosure
proceedings against them. (Notice of Removal Ex. A, Compl.
(Docket No. 1).) After the court dismissed plaintiff's
original Complaint, plaintiffs filed their First Amended
Complaint asserting a single claim for “Cancellation of
Instruments” under California Civil Code §§
3412-3415, based on essentially the same facts as the
original Complaint. Presently before the court is
defendants' Motion to Dismiss Plaintiffs' First
Amended Complaint. (Docket No. 31.)
Factual and Procedural Background
November 2004, plaintiffs Nguyen and Cu recorded a Deed
of Trust in favor of National City Mortgage for real property
located in Stockton, California. (FAC ¶¶ 2, 7, 13.)
Plaintiffs allege that shortly after the Deed of Trust was
recorded, National City Mortgage attempted to sell its
interest in the Deed of Trust to JP Morgan Chase Bank NA
(“Chase”) pursuant to a Pooling and Servicing
Agreement (“Pooling Agreement”). (Id.
¶ 14.) The Bank of New York, which is successor to
Chase's interest in the Deed of Trust, initiated
foreclosure proceedings on the Deed of Trust in 2014 through
its foreclosure representative, Clear Recon. (Id.
¶¶ 14, 20-21.) Plaintiffs do not allege that they
are not in default on the Deed of Trust, and do not allege
that the property has been sold.
allege that transfer of the Deed of Trust from National City
Mortgage to Chase, and by extension the Bank of New York,
never took place because 1) National City Mortgage did not
deliver certain documents to Chase within ninety days after
execution of the Pooling Agreement, as the Pooling Agreement
required, and 2) no assignment of the Deed of Trust to the
pool was recorded until May 22, 2014, almost ten years after
the Pooling Agreement's transfer deadline had passed.
(Id. ¶¶ 16-19.) Thus, in their view, the
attempted transfer is void under the Pooling Agreement, and
the initiation of foreclosure proceedings against them is
unlawful because the Bank of New York does not hold any
beneficial interest in the Deed of Trust. (Id.
motion to dismiss for failure to state a claim under Rule
12(b)(6), the court must accept the allegations in the
pleadings as true and draw all reasonable inferences in favor
of the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236
(1974), overruled on other grounds by Davis v. Scherer, 468
U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To
survive a motion to dismiss, a plaintiff must plead
“only 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 complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff's
obligation to provide the ‘grounds' of his
‘entitle[ment] to relief' requires more than labels
and conclusions, ” Twombly, 550 U.S. at 555 (citation
omitted), and “the tenet that a court must accept as
true all of the allegations contained in a complaint is
inapplicable to legal conclusions, ” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
review of pleadings, the court finds that dismissal of
plaintiffs' First Amended Complaint is appropriate on
three independent bases.
plaintiffs do not have standing to challenge an assignment
before a foreclosure sale has occurred. In Yvanova v. New
Century Mortgage Corp., 62 Cal.4th 919 (2016), the California
Supreme Court held that a borrower has standing to challenge
an assignment of a deed of trust as void,  at least where a
foreclosure sale has occurred. Id. at 941
(“When a property has been sold at a trustee's sale
at the direction of an entity with no legal authority to do
so, the borrower has suffered a cognizable injury.”).
However, the Yvanova court expressed no opinion as to whether
a borrower has standing to challenge an assignment before a
foreclosure sale has occurred. The California Court of Appeal
in Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal.App.4th
808, 815 (4th Dist. 2016), explained that Yvanova “is
expressly limited to the post-foreclosure context, ”
and held that post-Yvanova, borrowers have no standing to
preemptively challenge a wrongful foreclosure based on an
alleged defect in an assignment. As no foreclosure sale has
occurred on the property at issue in this case, dismissal is
appropriate on that basis.
plaintiffs have no standing to challenge the assignment
because they are not parties to the assignment. As explained
by Saterbak, “Yvanova recognizes borrower standing only
where the defect in the assignment renders the assignment
void, rather than voidable, ” and “Yvanova
expressly offers no opinion as to whether, under New York
law, an untimely assignment to a securitized trust made after
the trust's closing date is void or merely
voidable.” Id. Where a transaction is merely
voidable, only the parties to the transaction may challenge
any defects in the transaction. Yvanova, 62 Cal.4th at 936.
New York law, an act in violation of a trust agreement
renders an assignment not void, but voidable. See Rajamin v.
Deutsche Bank Nat'l Tr. Co., 757 F.3d 79, 87-90 (2d Cir.
2014) (holding that “any failure to comply with the
terms of the PSAs” did not render the acquisition of
plaintiffs' mortgages void because, among other things,
under New York law, unauthorized acts by trustees are not
void but voidable); In Re Turner, 859 F.3d 1145 (9th Cir.
2017) (affirming dismissal of wrongful foreclosure claim
challenging assignment of deed of trust because any failure
to comply with pooling agreement's deadline rendered
transfer voidable but not void, applying New York and
California law and citing Rajamin and Saterbak); Saterbak,
245 Cal.App.4th at 815 (under New York law, untimely
assignment to a securitized trust made after trust's
closing date was merely void, and thus borrower had no
standing to challenge assignment, citing
Rajamin). Accordingly, plaintiffs in this case, who
are not parties to the assignment, have no standing to
challenge the assignment and subsequent foreclosure based on
any alleged defects in the assignment. Thus, dismissal is
appropriate on this second basis.
plaintiffs' cancellation of instruments claim fails
because they have not properly alleged that the assignment
caused them the requisite injury under the statute. A
borrower seeking to cancel an assignment under California
Civil Code § 3412 must allege that the assignment could
cause that borrower serious injury. As explained by Saterbak, an
assignment causes no serious injury if a borrower's
obligations remained unchanged after the assignment, even if
she faces the possibility of losing her home or harm to her
credit based on a subsequent foreclosure, as that harm is
caused by her default, not the assignment. 245 Cal.App.4th at
818-20. Here, plaintiffs cannot and have not alleged serious
injury under Section 3412, because their ...