Farren et al. v. Select Portfolio Servicing, Inc. et al.

Filing 34

ORDER signed by District Judge John A. Mendez on 11/22/16; GRANTING 25 Motion to Dismiss as to JPMorgan Chase Bank, N.A. only. (Washington, S)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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BETTINA L. FARREN; STEVE
FARREN,

No.

2:16-cv-01077-JAM-DB

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Plaintiffs,
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ORDER GRANTING JPMORGAN CHASE
BANK’S MOTION TO DISMISS

v.
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SELECT PORTFOLIO SERVICING,
INC.; US BANK AS TRUSTEE ON
BEHALF OF THE HOLDERS OF THE
WAMU MORTGAGE PASS-THROUGH
CERTIFICATES SERIES 2007-HY6;
JPMORGAN CHASE BANK, N.A.;
QUALITY LOAN SERVICE
CORPORATION; and Does 1
through 50, inclusive,

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Defendants.
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This matter is before the court on defendant JPMorgan Chase

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Bank’s (“Chase”) Motion to Dismiss Bettina and Steve Farren’s

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(“Plaintiffs”) First Amended Complaint with respect to Chase

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only.

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Defendants Motion to Dismiss with prejudice. 1

For the reasons explained below, the Court grants

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The following allegations are taken as true for the purposes
of this motion:

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On March 23, 2007, Plaintiffs executed a Deed of Trust

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(“DOT”) in favor of Washington Mutual Bank, FA, securing a loan

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of $1,464,000 with their property located at 2045 Salmon Falls

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Road, El Dorado Hills, CA 95862 (“Property”).

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Complaint (“FAC”) at ¶¶ 2, 12; see DOT, FAC at Exh. 1.

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defined the “Borrower” as “Steven Farren and Bettina L. Farren,

First Amended
The DOT

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husband and wife and Stephen R. Hinrichs and Janine G. Hinrichs,

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husband and wife by deed which recites ‘as to an undivided 50%

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interest, all as tenants in common[.]’”

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believe that they executed an Adjustable Rate Note (“Note”) as a

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part of the transaction; however, Plaintiffs do not have a copy

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of the Note they signed.

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of an Adjustable Rate Note signed by Stephen R. Henrichs and

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Janine G. Henrichs.

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executed a Fixed/Adjustable Rate Rider and a Second Home Rider,

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which they also have signed copies of and on which Plaintiffs are

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listed as Borrowers.

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they executed the Second Home Rider to acknowledge that the

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Property is a Second Home to the Henrichs.

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Plaintiffs claim that the home was their primary residence.

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FAC at ¶ 9.

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FAC at ¶ 12.

FAC at Exh. 8.

Plaintiffs

Plaintiffs do have a copy

Additionally, Plaintiffs

FAC at ¶ 12; Exh. 2, 3.

Plaintiffs allege

FAC at ¶ 62.
Id.;

At some point after that transaction, but before December 8,
2008, Chase became the successor to Washington Mutual Bank, FA.

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DOT at 1.

scheduled for October 4, 2016.
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FAC at ¶ 17.

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Default to be issued against the Property.

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December 9, 2008, Chase assigned the Deed of Trust and Note to

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LaSalle Bank NA as trustee for WaMu Mortgage Pass-Through

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Certificates, Series 2007—HY6.

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Bank NA succeeded LaSalle Bank in interest as trustee for the

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WaMu Mortgage Pass-Through Certificates.

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continued to be the servicer of the loan throughout these

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transfers until, at a date unknown to Plaintiffs, Select

Then, on December 8, 2008, Chase caused a Notice of
FAC at ¶ 18.

On

FAC at ¶¶ 19, 32; Exh. 5.

FAC at ¶ 21.

US

Chase

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Portfolio Servicing, Inc. (“SPS”) became the servicer. Id. at

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¶¶ 20, 22.

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(“Quality”) became the successor trustee of the DOT.

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¶ 24.

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recorded a Notice of Trustee’s Sale of the Property on March 18,

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2016.

On January 4, 2016, Quality Loan Service Corporation
FAC at

At SPS’s direction, Quality issued and caused to be

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FAC at ¶ 25.
Plaintiffs originally filed suit in the Superior Court of

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the State of California for the County of El Dorado on April 12,

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2016.

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case to federal court on May 19, 2016, after which Plaintiffs

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requested, but were denied, a Temporary Restraining Order to

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enjoin the foreclosure trustee’s sale.

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Plaintiffs submitted their First Amended Complaint, the operative

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complaint in this proceeding, on July 22, 2016.

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Motions to Dismiss from Defendants and Chase followed soon after.

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ECF Nos. 20, 25.

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Notice of Removal at ¶ 1, ECF No. 1.

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Chase removed the

ECF Nos. 1, 13, 16.

ECF No. 17.

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II.

OPINION

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A.

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This Order addresses the claims only as they pertain to

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Chase.

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Analysis

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Count 1: Declaratory Relief

Plaintiffs seek declaratory relief to resolve whether the

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defendants have an enforceable interest in the Property so that

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Plaintiffs can determine their own rights, duties, and title to

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the Property.

FAC at ¶ 41.

Specifically, Plaintiffs challenge

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the validity of Chase’s transfer of the “Subject Loan” (the Note

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and/or DOT) into a Real Estate Mortgage Investment Conduit

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(“REMIC”) Trust (the WaMu Mortgage Pass-Through Certificates,

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Series 2007—HY6).

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Assignment of Deed of Trust, which purported to assign all

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beneficial interest under the DOT and Note to La Salle Bank NA as

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trustee, was recorded on December 9, 2008, more than 90 days

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after the May 23, 2007, closing date of the REMIC Trust.

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¶¶ 33–35; FAC Exh. 5.

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this “contravention of the trust” makes the conveyance void.

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at ¶¶ 35-36.

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because the Internal Revenue Code governs REMIC trusts, the late

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transfer also violates federal law.

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they have standing to challenge the defendants’ interest in their

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loan on this basis.

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FAC at ¶¶ 28–30.

Plaintiffs allege that the

FAC at

Plaintiffs claim that under New York law
FAC

Further, in their Opposition, Plaintiffs argue that

Opp. at 4.

They claim that

FAC at ¶ 44.

A plaintiff can seek declaratory relief from an Article III

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court under 28 U.S.C. § 2201, the Declaratory Judgment Act. The

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decision to grant such relief rests in the discretion of the

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court.

Natural Res. Def. Council, Inc. v. U.S. E.P.A., 966 F.2d
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1292, 1299 (9th Cir. 1992).

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relief in cases that meet Article III’s case or controversy

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requirement.

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Cir. 1994).

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foremost, must have standing.

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504 U.S. 555, 560 (1992).

The court is limited to issuing

Am. States Ins. v. Kearns, 15 F.3d 142, 143 (9th
Pursuant to this requirement, a plaintiff, first and
Lujan v. Defenders of Wildlife,

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Plaintiffs claim there is an actual controversy between

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Plaintiffs and each defendant, including Chase, concerning their

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respective rights and duties to the Property.

FAC at ¶ 34.

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Chase argues that there is no controversy between Plaintiffs and

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Chase because Chase has no interest in the Property since it

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assigned the DOT over to LaSalle Bank NA seven years ago. MTD at

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3.

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themselves and Chase because Chase’s action in transferring the

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DOT and Note to LaSalle are the subject of the challenge to the

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others defendants’ interest in the Property.

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Plaintiffs argue that there is a controversy between

Opp. at 1–2.

Plaintiffs filed the FAC in July 2016, before any

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foreclosure trustee’s sale occurred.

In California, “such

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preemptive suits [are not permitted] because they would result in

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the impermissible interjection of the courts into a nonjudicial

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scheme enacted by the California Legislature.”

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JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 814 (2016)

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(quotations marks omitted; citing Jenkins v. JP Morgan Chase

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Bank, N.A., 216 Cal. App. 4th 497, 513 (2013) (disapproved on

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other grounds)).

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alone.

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argument concerning the late transfer; Plaintiffs indicate in

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their Opposition that their home has now been sold and therefore

Saterbak v.

Standing might be defeated on this ground

Nevertheless, the Court will consider Plaintiffs’

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the parties’ arguments related to standing in the post-

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foreclosure context are relevant.

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4th at 814 (finding that a plaintiff lacked standing both because

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the property had not yet been sold and because the late transfer

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of the property did not void the transaction).

See Saterbak, 245 Cal. App.

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Whether or not Plaintiffs are correct that something was

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amiss in the belated transfer, Plaintiffs do not have standing to

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pursue relief on that basis.

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the California Supreme Court’s recent decision in Yvanova v. New

This Court’s analysis begins with

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Century Mortg. Corp., 62 Cal.4th 919 (2016).

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held that a “borrower has standing to claim that a nonjudicial

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foreclosure was wrongful because an assignment by which the

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foreclosing party purportedly took a beneficial interest in the

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deed of trust was not merely voidable but void, depriving the

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foreclosing party of any legitimate authority to order a

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trustee’s sale.”

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carefully distinguished between void and voidable transactions,

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and expressed no opinion as to whether, under New York law, an

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assignment to a securitized trust made after the trust’s closing

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date is void or merely voidable.

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Yvanova, 62 Cal.4th at 943.

The Yvanova court

The court

Id. at 940–41.

The parties’ dispute centers on the question the Yvanova

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court refrained from answering.

Plaintiffs argue that the plain

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language of the relevant New York trust law, N.Y. Estates, Powers

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& Trusts Law § 7-2.4, mandates that a conveyance in contravention

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of the trust is void. 2

Opp. at 4.

Plaintiffs ask this Court to

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Plaintiffs allege that Section 11.04 of the Trust Agreement
states that the Trust is governed under the laws of the State of
New York. FAC at ¶ 32.
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adopt the analysis set forth in Glaski v. Bank of Am., N.A., 218

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Cal. App. 4th 1079 (2013), which gave the law its literal

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construction.

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follow the Second Circuit’s decision in Rajamin v. Deutsche Bank

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Nat’l Trust Co., 757 F.3d 79 (2d Cir. 2014), which held that

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unauthorized acts by the trustee under a Pooling and Services

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Agreement are voidable, not void.

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Id.

Chase argues that this Court should instead

This Court finds that Rajamin controls.

Although the

California Court of Appeal adopted the contrary position in

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Glaski, Glaski “has been widely rejected.”

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N.A., No. 13-556631, 593 Fed. Appx. 730, 731 (9th Cir. 2015).

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Federal courts in the Ninth Circuit have accepted Rajamin as

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controlling authority.

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LCC, No. 14-55203, 646 Fed. Appx. 546, 550 (9th Cir. 2016);

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Meixner v. Wells Fargo Bank, N.A., No. 2:14-cv-02143, 2016 WL

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3277262 (E.D. Cal. June 14, 2016).

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California Appellate Court adopted the Rajamin court’s holding,

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concluding that “an untimely assignment to a securitized trust

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made after the trust’s closing date . . . is merely voidable.”

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Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 815

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(2016).

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late transfer into the trust renders the trust agreement

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voidable, not void.

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Hunt v. U.S. Bank

See id.; Morgan v. Aurora Loan Services,

Further, following Yvanova, a

The weight of authority clearly favors a finding that a

Accordingly, Plaintiffs lack standing to challenge the

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assignment.

“California law does not give a party personal

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standing to assert rights or interests belonging solely to

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others.”

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merely voidable, the power to ratify or avoid the transaction

Yvanova, 62 Cal. 4th at 936.

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“When an assignment is

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lies solely with the parties to the assignment; the transaction

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is not void unless and until one of the parties takes steps to

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make it so.”

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id.

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Id.

The interest is not Plaintiffs’ to assert. See

Plaintiffs’ argument that Rajamin should not apply to the

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REMIC Trust because the REMIC Trust is governed by federal law is

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also unavailing.

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U.S.C. §§ 860A–860O—imposes requirements that REMIC trusts meet

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certain parameters in order to receive tax benefits.

Opp. at 4–7.

The Internal Revenue Code—at 26

A REMIC is

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defined, in part, as any entity “as of the close of the 3rd month

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beginning after the startup day and at all times thereafter,

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substantially all of the assets of which consist of qualified

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mortgages and permitted investments.”

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“qualified mortgage”—as relevant here—is a mortgage transferred

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to the REMIC on the startup day or purchased by the REMIC within

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the 3-month period beginning on the startup day.

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860G.

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disqualification from tax benefits, but, contrary to Plaintiffs’

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position, nothing in the tax code declares the transfer void.

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Other courts have reached this conclusion in the face of similar

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third-party challenges to actions that may violate the tax code.

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Elliot v. Mortg. Elec. Registration Sys., Inc., No. 12-cv-4370

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YGR, 2013 WL 1820904 *3 (N.D. Cal. Apr. 30, 2013) (“[T]he alleged

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breach [of the PSA] seems to affect only the trust’s ability to

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claim a certain tax status, a matter wholly irrelevant to

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Plaintiffs’ claims.”); Williams v. GMAC Mortgage, Inc., No. 13

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Civ. 4315(JPO), 2014 WL 2560605 (S.D.N.Y. June 6, 2014) (“While

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transferring a note to the REMIC might have negative tax

26 U.S.C. § 860D.

A

26 U.S.C. §

Nonconformance with these parameters may lead to

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consequences for the REMIC investors, Plaintiffs have not argued

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any reason why such a transfer would be ‘meaningless and legally

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unenforceable.’”); see also Meixner, 2016 WL 3277262 (applying

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Rajamin in the REMIC context after noting the Tax Code argument).

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Furthermore, Plaintiffs have not provided any authority

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suggesting that the tax code confers a private right of action.

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For these reasons, this Court finds that Rajamin applies and

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Plaintiffs’ cause of action for declaratory relief will be

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dismissed without leave to amend.

Although district courts

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should grant leave to amend even if no request was made, it need

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not do so where the pleadings could not be cured by the

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allegation of other facts.

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(9th Cir. 2000).

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2.

Lopez v. Smith, 203 F.3d 1122, 1127

The Remaining Counts

Plaintiffs’ claims for violations of California’s Unfair

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Competition Law, intentional infliction of emotional distress,

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and interference with prospective advantage (Counts 7, 8, & 9)

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all fail with respect to Chase.

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against Chase is the late transfer, which has no causal

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connection to Plaintiffs’ alleged injuries.

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The only wrongdoing alleged

Plaintiffs’ final cause of action seeks to prove or

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establish the promissory note that Plaintiffs believe they signed

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but do not have a copy.

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necessary party to establish the Note.

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right or interest in the Note, nor is it alleged that Chase has

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such an interest.

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Declaratory Relief would result in a judicial declaration that

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Chase’s assignment of the Deed of Trust and Note are void, thus

FAC at ¶¶ 115–121.

Chase is not a

Chase does not claim any

Insofar as Plaintiffs believed their claim for

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making Chase an interested party once again, the Court’s

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dismissal of the Declaratory Relief claim settles the matter.

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While Plaintiffs may later need evidence from Chase in order to

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establish that the promissory note was lost, the establishment of

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the lost note would affect the rights and interests of the other

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defendants, not Chase.

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Chase has no right or interest in the subject of this

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litigation.

Chase has not committed any wrong that Plaintiffs

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have standing to challenge.

Plaintiffs have already amended the

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complaint once and any further attempt to amend to state a claim

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against Chase is futile.

See Lopez, 203 F.3d at 1127.

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III.

ORDER

For the reasons set forth above, the Court GRANTS Chase’s
Motion to Dismiss with prejudice:

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IT IS SO ORDERED.

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Dated:

November 22, 2016

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