Barone v. Chase Home Finance LLC et al

Filing 6

ORDER that Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc.'s Motion to Dismiss (MDL 09-2119, Doc. 1640) and Defendant JP Morgan Chase Bank, N.A.'s Joinder thereto (MDL 09-2119, Doc. 1642) are granted. The Clerk shall enter judgment for Defendants. The Clerk shall file a copy of this Order in MDL 09-2119-PHX-JAT and CV 11-8085-PCT-JAT. Signed by Judge James A Teilborg on 5/25/12. (LSP)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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IN RE Mortgage Electronic Registration )
Systems (MERS) Litigation
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MDL 09-2119-PHX-JAT
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_________________________________ )
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This Order applies to:
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CV 11-8085-PCT-JAT
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Lady Jennifer Barone, individually and on)
behalf of a class of similarly situated)
individuals,
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Plaintiff,
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v.
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MERSCORP Incorporated, a Delaware)
corporation, Mortgage Electronic)
Registration Systems, Incorporated, a)
Delaware corporation,
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Defendants.
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_________________________________ )

MDL 09-2119-PHX-JAT
ORDER

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Pending before the Court is Mortgage Electronic Registration Systems, Inc. and

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MERSCORP, Inc.’s (collectively, “MERS”) Motion to Dismiss (MDL 09-2119, Doc. 1640).1

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The Court now rules on the Motion.

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I.

FACTUAL BACKGROUND

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Defendant JPMorgan Chase Bank, N.A. filed a joinder to the Motion to Dismiss
(Doc. 1642).

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In 2005, Carmine Barone, Plaintiff’s ex-husband entered into a loan transaction,

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secured by a Deed of Trust, with Ampro Mortgage to purchase property located at 7058 East

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Horizon Way, Prescott Valley, Arizona (the “Property”). MERS, acting solely as nominee

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for the Lender, was listed as beneficiary under the Deed of Trust. Carmine and Plaintiff

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became joint tenants of the property in 2007. Following a divorce in 2008, Carmine

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quitclaimed his interest in the property to Plaintiff and Plaintiff was awarded exclusive title

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to the property pursuant to a divorce decree. Plaintiff, however, was not a signatory on the

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note or Deed of Trust and does not allege that she ever became the obligor under the

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promissory note or the trustor on the Deed of Trust.

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In her Complaint, Plaintiff alleges that the promissory note on the loan originally

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secured by the Deed of Trust became unsecured because the Note was separated from the

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Deed of Trust through the process of the Note being securitized, transferred and/or assigned

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to mortgage-backed security pools rendering the obligation under the Note unsecured.

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Plaintiff alleges that, because the Deed of Trust is no longer security for the note because of

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the securitization of the note, her residence is not subject to foreclosure proceedings.

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Plaintiff further alleges that, because MERS was not listed in the promissory note, it had no

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power to assign any beneficial interest in the note.

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Plaintiff also alleges that Defendant MERS and/or Defendant Chase Home Finance

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violated Arizona Revised Statutes section 33-420 because they recorded a Corporate

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Assignment of Deed of Trust on the Property, wherein MERS attempted to assign all

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beneficial interest in the Deed of Trust together with the notes or notes therein described.

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Plaintiff alleges that Jennifer Hamlin, acting as assistant secretary for MERS, Inc. signed the

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document, but she was not employed by MERS and did not have authority to assign the

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document as an assistant secretary for MERS and had no knowledge of any of the

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representations contained in the document.

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Plaintiff alleges that Defendant Chase Home Finance recorded a Substitution of

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Trustee related to the property, which was false because it was based on an invalid

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assignment of the beneficial interest in the Deed of Trust to Chase and Chase did not have

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requisite authority to appoint the successor trustee. Plaintiff alleges that the Substitution of

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Trustee and Notice of Trustee’s Sale were notarized in blank prior to being signed, and the

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signatures that appear on those documents were not actually signed by the parties that the

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signatures claim to represent.

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II.

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Plaintiff brought this action against Chase, MERSCORP Inc., and Mortgage

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Electronic Registration Systems, Inc. Thereafter, the case was transferred to the consolidated

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multidistrict litigation. After reviewing the complaint and motion to bifurcate, this Court

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remanded claims 1-3 and 6 of Plaintiff’s Complaint and retained jurisdiction over claim 4

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(wrongful foreclosure), claim five (false documents), claim 7 (declaratory relief), and claim

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8 (injunctive relief). Defendants now move to dismiss the remaining claims in this case for

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failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil

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Procedure 12(b)(6).

PROCEDURAL BACKGROUND

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III.

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To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet

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the requirements of Rule 8. Rule 8(a)(2) requires a “short and plain statement of the claim

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showing that the pleader is entitled to relief,” so that the defendant has “fair notice of what

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the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S.

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544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

LEGAL STANDARD

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Although a complaint attacked for failure to state a claim does not need detailed

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factual allegations, the pleader’s obligation to provide the grounds for relief requires “more

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than labels and conclusions, and a formulaic recitation of the elements of a cause of action

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will not do.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). The factual

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allegations of the complaint must be sufficient to raise a right to relief above a speculative

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level. Id.

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Rule 8’s pleading standard demands more than “an unadorned, the-defendant-

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unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing

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Twombly, 550 U.S. at 555). A complaint that offers nothing more than blanket assertions

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will not suffice. To survive a motion to dismiss, a complaint must contain sufficient factual

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matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Id..

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Facial plausibility exists if the pleader pleads factual content that allows the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged. Id.

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Plausibility does not equal “probability,” but plausibility requires more than a sheer

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possibility that a defendant has acted unlawfully. Id. “Where a complaint pleads facts that

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are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between

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possibility and plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557).

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In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

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alleged in a complaint in the light most favorable to the drafter of the complaint, and the

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Court must accept all well-pleaded factual allegations as true. Shwarz v. United States, 234

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F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true a legal

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conclusion couched as a factual allegation, Papasan, 478 U.S. at 286, or an allegation that

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contradicts facts that may be judicially noticed by the Court, Shwarz, 234 F.3d at 435.

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IV.

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At the outset, the Court notes that Plaintiff’s claims, at least in part, are based on the

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premise that the promissory note has been split from the deed of trust as a result of the

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securitization of the Note, and thus Defendant must prove that it holds the note in order to

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conduct a non-judicial foreclosure. This argument has been rejected by the Arizona Supreme

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Court. See Hogan v. Washington Mutual Bank, N.A., No. CV-11-0115-PR, ___ P.3d___,

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2011 WL 7905162, at *1 (Ariz. May 18, 2012) (“We hold that Arizona’s non-judicial

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foreclosure statutes do not require the beneficiary to prove its authority or ‘show the note’

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before the trustee may commence a non-judicial foreclosure.”). Further, in Cervantes, the

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Ninth Circuit Court of Appeals recognized “the notes and deeds are not irreparably split: the

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ANALYSIS

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split only renders the mortgage unenforceable if MERS or the trustee, as nominal holders of

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the deeds, are not agents of the lenders.” Cervantes v. Countrywide Home Loans, Inc., 656

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F.3d 1034, 1044 (9th Cir. 2011). Plaintiff attempts to distinguish Cervantes, by arguing that

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she alleged that there was no agency relationship between MERS and the lender.

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In Cervantes, the plaintiffs claimed that “all transfers of the interests in the home loans

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within the MERS system are invalid because the designation of MERS as a beneficiary is a

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sham and the system splits the deed from the note.” 656 F.3d at 1044. The Court of Appeals

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rejected such a widespread attack on the MERS system, stating “[e]ven if we were to accept

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the plaintiffs’ premises that MERS is a sham beneficiary and the note is split from the deed,

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we would reject the plaintiffs’ conclusion that, as a necessary consequence, no party has the

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power to foreclose. The legality of MERS’s role as a beneficiary may be at issue where

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MERS initiates foreclosure in its own name, or where the plaintiffs allege a violation of state

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recording and foreclosure statutes based on the designation.” Id. at 1044.

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failed to distinguish this case from Cervantes through her conclusory allegation that an

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agency relationship did not exist between MERS and the lender due to the securitization of

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the Note. As in Cervantes, the Deed of Trust in this case likewise stated that MERS was

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acting “solely as a nominee for Lender and Lender’s successors and assigns.” Id. at 1042.

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Further, this Court has previously rejected the argument that “as a lender’s nominee,

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MERS cannot act as a lender’s agent.” Bean v. BAC Home Loans Servicing, L.P., No CV11-

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553-PHX-GMS, 2012 WL 171435, at *1 -2 (D. Ariz. Jan. 20, 2012) (citing Fontenot v. Wells

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Fargo Bank, N.A., 129 Cal.Rptr.3d 467, 479–80 (2011)).

Plaintiff has

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Accordingly, to the extent that Plaintiff’s claims rely on her theory that the promissory

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note has been split from the deed of trust because of the securitization of the promissory note

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or that MERS lacked authority to assign the deed of trust, Plaintiff has failed to state a claim

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upon which relief can be granted with respect to this theory.

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The Court will now individually discuss Defendants arguments as to why each Claim
should be dismissed for failure to state a claim upon which relief can be granted.
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A.

Claim Four - Wrongful Foreclosure

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Defendants argue that Plaintiff has failed to state a claim for wrongful foreclosure

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under Arizona law because Arizona has not recognized the tort of wrongful foreclosure,

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Plaintiff’s claim for wrongful foreclosure is based on the premise that MERS lacked the

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authority to assign the Deed of Trust, which is a meritless legal theory, and Plaintiff cannot

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state a claim for wrongful foreclosure because she was in default on her loan.

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In Response, Plaintiff argues that her wrongful foreclosure claim should survive the

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pleading stage because “[i]t is plausible that a computer-based registration system had no

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standing to foreclose, or that any assignee of such an entity similarly has no standing to

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foreclose.” This standing argument has been expressly rejected by the Arizona Supreme

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Court. See Hogan, 2011 WL 7905162, at * 1. Further, this Court has repeatedly held that,

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even if Arizona recognized a wrongful foreclosure cause of action, Plaintiff must allege lack

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of default for her wrongful foreclosure action to survive a motion to dismiss. See, e.g., In re

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Mortgage Elec. Registration Sys. (MERS) Litig., MDL Docket No. 09–2119–JAT, 2011 WL

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4550189, at *6 (D. Ariz. Oct. 3, 2011) (“even if Arizona recognizes this tort, the same

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common law requirement for plaintiff to allege lack of default remains.”).

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Because Plaintiff has admitted that her loan payments were not current and her loan

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was in default, she has failed to state a claim upon which relief can be granted for wrongful

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foreclosure and Claim Four will be dismissed. See, e.g., id. (“By failing to plead that their

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loans are not in default, Plaintiffs’ claim for wrongful foreclosure is barred as a matter of law

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and will be dismissed for failure to state a claim.”).

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B.

Claim Five - False Documents

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Defendants argue that Claim Five of Plaintiff’s Complaint should be dismissed

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because Arizona Revised Statutes section 33-420 does not apply to assignment of mortgages

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or deeds of trust and Plaintiff lacks standing to assert the robosigning allegations. This Court

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has repeatedly held that Arizona Revised Statutes section 33–420 does not apply to

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assignment of mortgages or deeds of trust and Plaintiff lacks standing to assert robosigning

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allegations. See, e.g., In re Mortgage Elec. Registration Sys. (MERS) Litig., MDL Docket

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No. 09–2119–JAT, 2011 WL 4550189, at *5 (D. Ariz. Oct. 3, 2011) (A.R.S. § 33–420 does

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not apply to assignments, substitution of trustees, and notices of trustee’s sales and plaintiffs

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lack standing on robosigning allegations, because “as third-party borrowers, [they] are

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uninvolved and unaffected by the alleged [recorded] [a]ssignments, and do not possess

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standing to assert a claim based on such”); Henkels v. JP Morgan Chase Bank, Nat’l Ass’n,

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No. CV 11–00299–PHX–JAT, 2012 WL 10380, at * 2–3 (D. Ariz. Jan. 3, 2012) (same).

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Plaintiff argues that every one of these cases misinterprets the false document statute.

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The Court disagrees. Accordingly, Claim Five of Plaintiff’s Complaint will be dismissed for

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failure to state a claim upon which relief can be granted.
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Claims Seven (Declaratory Relief) & Nine (Injunctive Relief)

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Plaintiff admits that her requests for injunctive and declaratory relief “are based on

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her claims for violations of state law as set forth in Counts 4 and 5 of the Complaint.” (Doc.

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1652 at 15). Accordingly, because Plaintiff has failed to state a claim upon which relief can

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be granted on Counts Four and Five, the subsidiary claims for relief must also be dismissed.

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Accordingly, Counts Seven and Nine will also be dismissed.

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V.

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Plaintiff requests leave to amend if the Court determines that her Complaint has failed

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to state a claim upon which relief can be granted. The Ninth Circuit has instructed district

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courts to grant leave to amend when dismissing a case for failure to state a claim, “unless the

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court determines that the pleading could not possibly be cured by the allegations of other

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facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000) (quoting Doe v. United States,

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58 F.3d 494, 497 (9th Cir.1995)). Because Plaintiff’s claims depend on legal theories that

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have repeatedly been rejected by this Court, and in light of the foregoing analysis, the Court

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finds that Plaintiff’s Complaint could not be cured by allegations of other facts and, thus,

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allowing Plaintiff to amend her Complaint would be futile. Accordingly, the Court will not

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grant Plaintiff leave to amend.

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LEAVE TO AMEND

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VII.

CONCLUSION

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Based on the foregoing,

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IT IS ORDERED that Mortgage Electronic Registration Systems, Inc. and

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MERSCORP, Inc.’s (collectively, “MERS”) Motion to Dismiss (MDL 09-2119, Doc. 1640)

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and Defendant JP Morgan Chase Bank, N.A.’s Joinder thereto (MDL 09-2119, Doc. 1642)

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are granted.

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The Clerk of the Court shall enter judgment for Defendants.

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The Clerk of the Court shall file a copy of this Order in MDL 09-2119-PHX-JAT and

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CV 11-8085-PCT-JAT.
DATED this 25th day of May, 2012.

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