Monteforte, et al., v. Bank of New York Mellon Trust Co., et al.,

Filing 14

MEMORANDUM and ORDER re 4 Defendants' Motion to Dismiss signed by Senior Judge William B. Shubb on 11/14/2016: IT IS ORDERED that defendants' Motion to dismiss plaintiffs' Complaint be, and the same hereby is, GRANTED. Plaintiffs' Complaint is DISMISSED WITHOUT PREJUDICE. Plaintiffs have twenty days from the date this Order is signed to file an amended complaint, if they can do so consistent with this Order. (Kirksey Smith, K)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
----oo0oo----

11
12
13

LAWRENCE P. MONTEFORTE,
MICHELLE R. MONTEFORTE, EN K.
CU, and SEN VAN NGUYEN,

14
15

Plaintiffs,

CIV. NO. 2:16-1675 WBS EFB
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.

16
17
18
19
20
21
22
23
24
25

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.

----oo0oo----

26
27
28

Plaintiffs Lawrence Monteforte, Michelle Monteforte, En
Cu, and Sen Nguyen (collectively “plaintiffs”) brought this
1

1

action against defendants the Bank of New York Mellon Trust

2

Company, Wells Fargo Bank, and Clear Recon Corp. (collectively

3

“defendants”), alleging wrongful foreclosure, breach of contract,

4

and slander of title in connection with defendants’ initiation of

5

foreclosure proceedings against them.

6

Compl. (Docket No. 1).)

7

defendants’ Motion to dismiss plaintiffs’ Complaint.

8

Mot. (Docket No. 4).)

9

I.

(Notice of Removal Ex. A,

Presently before the court is
(Defs.’

Factual and Procedural Background
In November 2004, plaintiffs Nguyen and Cu1 recorded a

10
11

deed of trust (“DOT”) in favor of National City Mortgage for real

12

property located in Stockton, CA (“subject property”).

13

¶¶ 7, 13.)

14

(Compl.

Plaintiffs allege that shortly after the DOT was

15

recorded, National City Mortgage attempted to sell its interest

16

in the DOT to JP Morgan Chase Bank NA (“Chase”) pursuant to a

17

Pooling and Servicing Agreement (“PSA”).2

(Id. ¶ 14.)

The Bank

18
19
20
21
22
23
24
25
26
27
28

1

Plaintiffs Nguyen and Cu are the borrowers in this
action. (Compl. ¶ 7.) Plaintiffs Lawrence and Michelle
Monteforte are successors to a 95% interest in the subject
property; Nguyen and Cu retain a 5% interest. (Id. ¶ 8.)
2

PSAs are agreements that govern trusts that pool
mortgages together to form marketable securities (i.e., mortgagebacked securities). See What is a Pooling and Servicing
Agreement (PSA) in the Mortgage Industry?,
http://www.nolo.com/legal-encyclopedia/what-pooling-servicingagreement-psa-the-mortgage-industry.html (last visited Oct. 10,
2016). Chase, and later the Bank of New York Mellon, was trustee
to a mortgage-backed securities trust to which National City
Mortgage tried to sell the DOT. (See Compl. ¶ 14.) The PSA and
mortgage-backed trust in this case were “formed under the laws of
the state of New York.” (Id. ¶ 15.)
2

1

of New York Mellon is successor to Chase’s interest in the DOT.

2

(Id.)

3

Plaintiffs allege that transfer of the DOT from

4

National City Mortgage to Chase, and by extension the Bank of New

5

York Mellon, never took place because National City Mortgage did

6

not deliver certain documents--including the loan note, the

7

recorded DOT, and documentation of the assignment--to Chase

8

within ninety days after execution of the PSA, as the PSA

9

required.

(Id. ¶ 17.)

Wells Fargo, successor to National City

10

Mortgage’s interest in the DOT, allegedly did not attempt to

11

transfer the DOT to the Bank of New York Mellon until May 23,

12

2014, nearly ten years after the PSA’s transfer deadline had

13

passed.

14

to plaintiffs, is void under the PSA.

15

(Id. ¶ 19.)

The attempted transfer in 2014, according
(Id. ¶ 23.)

Later in 2014, the Bank of New York Mellon authorized

16

its foreclosure representative, Clear Recon, to record notices of

17

default and sale of the subject property against plaintiffs.

18

(Id. ¶¶ 20-21.)

19

default on the DOT.

20

Instead, they argue that the Bank of New York Mellon’s initiation

21

of foreclosure proceedings against them is unlawful because the

22

Bank does not hold any beneficial interest in the DOT.

23

22.)

24

Plaintiffs do not allege that they are not in
(Defs.’ Mot., Mem. at 8 (Docket No. 5).)

(Compl. ¶

On October 8, 2015, plaintiffs brought the present

25

action against defendants, alleging: (1) wrongful foreclosure,

26

Cal. Civ. Code § 2924; (2) breach of express agreement; (3)

27

breach of the implied duty of good faith; (4) slander of title;

28

and (5) unlawful recording of notice of default, Cal. Civ. Code
3

1

§§ 2923.5, 2934a.

2

to this court on July 20, 2016.

3

before the court is defendants’ Motion to dismiss plaintiffs’

4

Complaint in its entirety.

5

II.

(Id. at 6-17.)

Defendants removed the action
(Notice of Removal.)

Presently

(Defs.’ Mot.)

Legal Standard

6

On a motion to dismiss for failure to state a claim

7

under Rule 12(b)(6), the court must accept the allegations in the

8

pleadings as true and draw all reasonable inferences in favor of

9

the plaintiff.

See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),

10

overruled on other grounds by Davis v. Scherer, 468 U.S. 183

11

(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).

12

motion to dismiss, a plaintiff must plead “only enough facts to

13

state a claim to relief that is plausible on its face.”

14

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

15

To survive a

Bell

“While a complaint attacked by a Rule 12(b)(6) motion

16

to dismiss does not need detailed factual allegations, a

17

plaintiff’s obligation to provide the ‘grounds’ of his

18

‘entitle[ment] to relief’ requires more than labels and

19

conclusions . . . .”

20

omitted).

21

action, supported by mere conclusory statements, do not suffice,”

22

and “the tenet that a court must accept as true all of the

23

allegations contained in a complaint is inapplicable to legal

24

conclusions.”

25

III. Discussion

26

A.

Twombly, 550 U.S. at 555 (citation

“Threadbare recitals of the elements of a cause of

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Plaintiffs Fail to Allege Standing for their Wrongful

27

Foreclosure Claim

28

California Civil Code section 2924 states: “No entity
4

1

shall . . . initiate the foreclosure process unless it is the

2

holder of the beneficial interest under the mortgage or deed of

3

trust, the original trustee or the substituted trustee under the

4

deed of trust, or the designated agent of the holder of the

5

beneficial interest.”

6

allege that the Bank of New York Mellon does not hold any

7

beneficial interest in the DOT because Wells Fargo’s attempt to

8

transfer the DOT to the Bank in 2014 was void under the PSA.

9

(See Compl. ¶¶ 23, 33.)

Cal. Civ. Code § 2924(a)(6).

Plaintiffs

On that basis, plaintiffs bring a

10

wrongful foreclosure claim against the Bank of New York Mellon

11

and its foreclosure representative, Clear Recon.

12

(Id. ¶ 33.)

Defendants correctly note, however, that “California

13

courts do not allow . . . preemptive suits” in the housing

14

foreclosure context.

15

Cal. App. 4th 808, 814 (4th Dist. 2016), review denied (July 13,

16

2016); see also Kan v. Guild Mortg. Co., 230 Cal. App. 4th 736,

17

743 (2d Dist. 2014) (“[A] preforeclosure, preemptive action is

18

not authorized by [California’s] foreclosure statutes.”), as

19

modified (Oct. 15, 2014), review denied (Jan. 28, 2015).

20

California law, borrowers must wait until after a foreclosure has

21

taken place to bring a wrongful foreclosure claim.

22

245 Cal. App. 4th at 814 (a “borrower seeking remedies for

23

wrongful foreclosure” may not “bring[] a preforeclosure suit

24

challenging Defendant’s ability to foreclose”); Kan, 230

25

App. 4th at 743 (holding the same).

26

recently affirmed that rule in Yvanova v. New Century Mortgage

27

Corp., 62 Cal. 4th 919 (2016), where it expressed approval of

28

lower appellate cases that declined to find borrower standing in

Saterbak v. JPMorgan Chase Bank, N.A., 245

5

Under

See Saterbak,

Cal.

The California Supreme Court

1

preforeclosure suits.3

2

See id. at 941.

Here, plaintiffs do not allege that sale of the subject

3

property has actually taken place.

4

may “potentially los[e] legal title to their property based on”

5

defendants’ recording of notices of default and sale against

6

them.

7

standing to bring a wrongful foreclosure claim under California

8

law.

9

(Compl. ¶ 66.)

B.

They merely allege that they

Accordingly, plaintiffs have not alleged

Plaintiffs Fail to Plausibly Allege Breach of Express

10

Agreement

11

Plaintiffs allege that the Bank of New York Mellon

12

breached the DOT by initiating foreclosure on the subject

13

property.

14

“provides that only the Lender or Trustee could execute a valid

15

notice of default.”

16

the Bank of New York Mellon as lender and no valid transfer of

17

the DOT occurred, according to plaintiffs, the Bank breached the

18

DOT by initiating foreclosure.

19
20

(Compl. ¶ 40.)

According to plaintiffs, the DOT

(Id. ¶ 41.)

Because the DOT does not name

That argument is problematic for at least two reasons.
First, the DOT provision that plaintiffs appear to be directing

21
22
23
24
25
26
27
28

3

In Yvanova, a lender argued that Glaski v. Bank of Am.,
Nat’l Ass’n, 218 Cal. App. 4th 1079 (5th Dist. 2013), which found
that a borrower had standing to challenge a lender’s initiation
of foreclosure proceedings, was wrongly decided by citing Kan,
230 Cal. App. 4th 736, which declined to find borrower standing
in similar circumstances. Yvanova, 62 Cal. 4th at 941. The
Yvanova court distinguished Kan from Glaski by noting that Kan
was a “preforeclosure action” whereas Glaski was a
postforeclosure action and upheld Glaski’s result. Id. The
implication there was that postforeclosure actions are allowed
while preforeclosure actions are not.
6

1

the court’s attention to4 does not actually state that “only the

2

Lender or Trustee” may initiate foreclosure.

3

that “after Trustee or Lender duly records a notice of default,

4

the Trustee, Lender or other person authorized to take the sale

5

will give a notice of sale as required by law and will cause the

6

Property to be sold.”

7

9.)

8

is not a party to the DOT.

9

breach the DOT if it is not a party to it.

It merely states

(Notice of Removal Ex. B, Deed of Trust §

Second, plaintiffs allege that the Bank of New York Mellon
(Compl. ¶ 40.)

The Bank cannot
Accordingly,

10

plaintiffs have not plausibly alleged that the Bank of New York

11

Mellon breached the DOT.

12

Plaintiffs also allege that Wells Fargo and the Bank of

13

New York Mellon breached the PSA when they attempted to effect

14

transfer of the DOT ten years after the PSA’s transfer deadline

15

had passed.

16

parties to the PSA, they “allege that they are [entitled to

17

relief as] third-party beneficiaries under [the] PSA.”

18

44.)

19

conclusion.5

20

into the PSA and attempted to transfer the DOT pursuant to that

(Id. ¶ 46.)

Though plaintiffs are not express

(Id. ¶

Plaintiffs do not allege any facts supporting that
The Complaint merely states that defendants entered

21
22
23
24
25
26
27
28

4

Plaintiffs purport to quote “Section 22 of [their] Deed
of Trust.” (Compl. ¶ 34.) That section is left blank and does
not state what plaintiffs say it states. Section 9 appears to be
the relevant clause on default and foreclosure.
5

Determining “[w]hether [a] third party is an intended
beneficiary [under California law] . . . involves construction of
the intention of the parties, gathered from reading the contract
as a whole in light of the circumstances under which it was
entered.” Prouty v. Gores Tech. Grp., 121 Cal. App. 4th 1225,
1233 (3d Dist. 2004).
7

1

agreement.

2

court with a copy of the PSA nor allege any facts indicating that

3

the PSA was intended for their benefit.

4

statements, do not suffice” to state a plausible claim.

5

Ashcroft, 556 U.S. at 678.

6

alleging facts indicating they are entitled to relief under the

7

PSA, the court must dismiss their breach of PSA claim as well.

8

C.

9

(See id. ¶¶ 14-15.)

Plaintiffs neither supply the

“[C]onclusory

Because plaintiffs conclude without

Plaintiffs Fail to Plausibly Allege Breach of the
Implied Duty of Good Faith

10

Under California law, the implied duty of good faith

11

and fair dealing “imposes upon each contracting party the duty to

12

refrain from doing anything which would render performance of the

13

contract impossible” for the other party.

14

v. KTTV, 147 Cal. App. 3d 805, 816 (2d Dist. 1983) (citing Harm

15

v. Frasher, 181 Cal. App. 2d 405, 417 (4th Dist. 1960)).

16

Plaintiffs allege that “Defendants breached the implied duty of

17

good faith and fair dealing . . . by obscuring the identity of

18

the true holder of beneficial interest under the Deed of Trust,

19

and making it impossible for Plaintiffs to know who to make their

20

mortgage payments to.”

Apr. Enterprises, Inc.

(Compl. ¶¶ 53-54.)

21

Plaintiffs have not plausibly alleged that defendants

22

have made it “impossible” for them to know who to make mortgage

23

payments to.

24

Complaint, that the attempted transfer between Wells Fargo and

25

the Bank of New York Mellon in 2014 was invalid because the PSA

26

required the transfer to take place ten years prior to that

27

point.

28

and have an opinion as to who the current holder of the

Plaintiffs state, repeatedly and throughout the

(See id. ¶¶ 27-28, 61.)

Thus, plaintiffs are aware of

8

1

beneficial interest of the DOT may be.

2

with defendants as to who the holder of the interest is does not

3

mean that defendants have made it “impossible” for them to know

4

who it is.

5

plausible claim for breach of the implied duty of good faith.

6
7

D.

That they may disagree

Accordingly, plaintiffs have failed to state a

Plaintiffs Fail to Plausibly Allege Slander of Title
Under California law, slander of title “occurs when a

8

person, without a privilege to do so, publishes a false statement

9

that disparages title to property and causes pecuniary loss.”

10

Truck Ins. Exch. v. Bennett, 53 Cal. App. 4th 75, 84 (2d Dist.

11

1997) (citing Stalberg v. W. Title Ins. Co., 27 Cal. App. 4th

12

925, 929 (6th Dist. 1994)).

13

‘maliciously made with the intent to defame.’”

14

206 Cal. App. 4th 645, 651 (2d Dist. 2012) (quoting Howard v.

15

Schaniel, 113 Cal. App. 3d 256, 263 (4th Dist. 1980)).

16

“The false statement must be
Cyr v. McGovran,

Plaintiffs allege that “Defendants published a false

17

statement that disparaged Plaintiffs’ title to the Subject

18

Property when they recorded, and/or caused to be recorded a void

19

Notice of Default and a void Notice of Sale against the

20

Property.”

21

the form of having “to retain attorneys and to bring this action

22

to cancel the instruments casting doubt on Plaintiffs’ title.”

23

(Id. ¶ 68.)

24

(Compl. ¶ 60.)

Plaintiffs allege pecuniary loss in

Plaintiffs have not alleged that the notices are false

25

in the relevant sense, however.

To the extent the notices of

26

default and sale disparage plaintiffs’ title to the subject

27

property, they do so by asserting that plaintiffs are in default

28

on the DOT.

Plaintiffs do not allege they are not actually in
9

1

default on the DOT.

2

Bank of New York Mellon as holder of the beneficial interest on

3

the DOT does not, in itself, disparage plaintiffs’ title to the

4

subject property.

5

statement that disparages title to property,” they have not

6

stated a claim for slander of title based on defendants’

7

recording of the notices.

8
9

That the notices may wrongly identify the

Because plaintiffs have not alleged “a false

Plaintiffs further allege that defendants slandered
title to their property by recording “false and void assignments”

10

that led Plaintiffs to “ma[ke] payments not credited to their

11

account to an entity that was not the true holder of beneficial

12

interest under their Deed of Trust.”

13

allegation also fails to constitute a claim for slander of title

14

because even if defendants’ assignments were void, the

15

assignments do not, in themselves, cast any doubt on plaintiffs’

16

title.

17

plaintiffs’ DOT, not title to the subject property.

18

plaintiffs have not plausibly alleged slander of title based on

19

defendants’ recording of assignments.

20

E.

(Id. ¶¶ 63, 66.)

That

The assignments concern the beneficial interest on
Accordingly,

Plaintiffs Fail to Plausibly Allege Unlawful Recording

21

of Notice of Default

22

Finally, plaintiffs allege that the Bank of New York

23

Mellon and Clear Recon violated sections 2923.5 and 2934a of the

24

California Civil Code when they recorded notice of default

25

against them.

(Id. ¶ 70.)

26

According to plaintiffs, section 2923.5 provides that

27

only the “mortgagee, trustee, beneficiary, or authorized agent”

28

may record a notice of default.

Because the Bank of New York
10

1

Mellon and Clear Recon were never validly made “mortgagee,

2

trustee, beneficiary, or authorized agent” to the DOT, plaintiffs

3

argue, they violated section 2923.5 by recording notice of

4

default.

5

As an initial matter, section 2923.5 does not actually

6

state that only the “mortgagee, trustee, beneficiary, or

7

authorized agent” may record notice of default.

8

that a “mortgage servicer, mortgagee, trustee, beneficiary, or

9

authorized agent may not record a notice of default” until it has

It merely states

10

complied with certain notice and due diligence requirements.

11

Cal. Civ. Code § 2923.5.

12

rights and duties of parties that are not “mortgage servicer[s],

13

mortgagee[s], trustee[s], beneficiar[ies], or authorized

14

agent[s].”

Nothing in section 2923.5 addresses the

15

Plaintiffs allege throughout their Complaint that the

16

Bank of New York Mellon and Clear Recon were never validly made

17

parties to the DOT.

18

of New York Mellon and Clear Recon cannot violate section

19

2923.5’s notice and due diligence requirements when they,

20

according to plaintiffs, are not the “mortgage servicer,

21

mortgagee, trustee, beneficiary, or authorized agent” to the DOT.

22

Accordingly, plaintiffs have failed to state a claim that the

23

Bank of New York Mellon and Clear Recon violated section 2923.5.

24

(See Compl. ¶ 23, 39-40, 46, 62.)

The Bank

With respect to section 2934a, plaintiffs argue that

25

Clear Recon had no authority to record a notice of default

26

because at the time it recorded notice, “it had not been properly

27

substituted in as Trustee under the Deed of Trust.”

28

That argument fails because section 2934a allows “substitution .
11

(Id. ¶ 34.)

1

. . after a notice of default has been recorded,” Cal. Civ. Code

2

§ 2934a(c), and a party recording notice on behalf of another

3

need not be officially substituted at the time of recording, see

4

Ram v. OneWest Bank, FSB, 234 Cal. App. 4th 1, 13-14 (1st Dist.

5

2015) (foreclosure company may record notice of default prior to

6

being substituted as trustee).

7

2934a argument fails as well.

8
9

Accordingly, plaintiffs’ section

For the reasons discussed above, the court will dismiss
each of plaintiffs’ claims without prejudice.

10

IT IS THEREFORE ORDERED that defendants’ Motion to

11

dismiss plaintiffs’ Complaint be, and the same hereby is,

12

GRANTED.

Plaintiffs’ Complaint is DISMISSED WITHOUT PREJUDICE.

13

Plaintiffs have twenty days from the date this Order is

14

signed to file an amended complaint, if they can do so consistent

15

with this Order.

16

Dated:

November 14, 2016

17
18
19
20
21
22
23
24
25
26
27
28
12