McBride et al v. First California Mortgage Company et al
Filing
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ORDER GRANTING MOTION TO DISMISS WITHOUT LEAVE TO AMEND. Signed by Judge Richard Seeborg on 7/1/13. (cl, COURT STAFF) (Filed on 7/1/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SAN FRANCISCO DIVISION
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For the Northern District of California
United States District Court
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No. C 12-04054 RS
GREGORY S. MCBRIDE and
CONCETTA MCBRIDE,
Plaintiff,
ORDER GRANTING MOTION TO
DISMISS WITHOUT LEAVE TO
AMEND
v.
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FIRST CALIFORNIA MORTGAGE
COMPANY, et al.,
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Defendants.
____________________________________/
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I.
INTRODUCTION
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Plaintiffs filed an action in Monterey Superior Court advancing claims which include
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violations of the federal Truth in Lending Act, and the Real Estate and Settlement Procedures
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Act. Defendants removed the action to federal court and defendant First California Mortgage
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Company moved to dismiss the complaint in its entirety. The complaint was dismissed with
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leave to amend. Plaintiffs submitted a First Amended Complaint (“FAC”) against all defendants
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except First California Mortgage Company. Plaintiffs unsuccessfully moved for entry of default
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judgment with respect to defendants Mortgage Electronic Registration Systems, Inc. (“MERS”),
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HSBC Bank USA, and Luminent Mortgage Trust 2006-6. Defendant Aurora Loan Services,
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NO. 12-CV-04054 RS
ORDER
LLC (“Aurora”) then moved to dismiss under Rule 12(b)(6). The motion was granted on
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January 14, 2013. Defendant MERS now moves to dismiss under Rule 12(b)(6). Pursuant to
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Civil Local Rule 7-1(b), this matter is suitable for disposition without oral argument. For the
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reasons set forth below, the motion to dismiss is granted without leave to amend.
II.
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BACKGROUND1
This action arises out of the foreclosure of plaintiffs’ residence at 471 Salinas Hwy in
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Salinas, California. Plaintiffs dispute the current deed of trust reflecting title to the property and
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allege defendants cannot establish possession and proper transfer of the Promissory Note or
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assignment of the mortgage. Plaintiffs obtained a securitization audit showing that First
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California Mortgage Company extended a loan to them, but shortly thereafter the promissory
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For the Northern District of California
United States District Court
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note was sold to Luminent Mortgage Loan Trust 2006-6 and HSBC Bank USA, N.A., became its
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Trustee. According to the Pooling and Servicing Agreement associated with the note, the Trust
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purchased mortgage default insurance. Plaintiffs aver the Trustee applied for an insurance pay-
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out of the loan balance after plaintiffs did not make three consecutive payments. As a result,
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plaintiffs claim the promissory note has been paid in full. Plaintiffs go on to state MERS cannot
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assign any rights to the mortgage or deed of trust to a third party, and that MERS is not a true
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beneficiary of the loan. Thus, they claim, any transfer assignment of the mortgage is invalid
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under state and federal law. Finally, plaintiffs allege that, in order for the Trustee to have a valid
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and enforceable claim against plaintiffs’ home, it must prove that there was a complete and
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unbroken chain of endorsements and transfers of the Note and that the Trustee has physical
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possession of it. On the basis of these allegations, plaintiffs seek cancellation of the mortgage
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instruments. Accordingly, plaintiffs bring this action for Quiet Title, Declaratory Relief,
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Wrongful Foreclosure, and Fraud.
III.
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A complaint must contain “a short and plain statement of the claim showing that the
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LEGAL STANDARD
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “Pleadings must be so construed so as to do
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The facts recited above derive from Plaintiffs’ First Amended Complaint, filed on October 15,
2012, which must be taken as true for the purposes of a motion to dismiss.
NO. 12-CV-04054 RS
ORDER
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justice.” Fed. R. Civ. P. 8(e). While “detailed factual allegations are not required,” a complaint
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must have sufficient factual allegations to “state a claim to relief that is plausible on its face.”
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Ashcroft v. Iqbal, 566 U.S. 652, 678 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570
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(2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw
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the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This
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standard asks for “more than a sheer possibility that a defendant acted unlawfully.” Id. This
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determination is a context-specific task requiring the court “to draw in its judicial experience and
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common sense.” Id. at 1950.
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A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil
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Procedure tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of
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For the Northern District of California
United States District Court
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Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal under Rule 12(b)(6) may
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be based on either the “lack of a cognizable legal theory” or on “the absence of sufficient facts
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alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699
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(9th Cir. 1990). When evaluating such a motion, the court must accept all material allegations in
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the complaint as true, even if doubtful, and construe them in the light most favorable to the non-
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moving party. Twombly, 550 U.S. at 570. “[C]onclusory allegations of law and unwarranted
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inferences,” however, “are insufficient to defeat a motion to dismiss for failure to state a clam.”
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Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at
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555 (“threadbare recitals of the elements of the claim for relief, supported by mere conclusory
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statements,” are not taken as true).
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In dismissing a complaint, leave to amend must be granted unless it is clear that the
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complaint’s deficiencies cannot be cured by amendment. Lucas v. Dep’t of Corporations, 66
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F.3d 245, 248 (9th Cir. 1995). When amendment would be futile, however, dismissal may be
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ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996).
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NO. 12-CV-04054 RS
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DISCUSSION
A. Quiet Title (Claim One)
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Plaintiffs aver MERS has no right to title, estate, lien, or any other interest in the property
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and assert a quiet title claim against MERS. Plaintiffs recite the requisite elements of a quiet title
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claim and reassure this Court the promissory note obligations have been fulfilled, but do not
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bring forth any evidence showing a tender of payment in accordance with the terms of the
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promissory note. As discussed in the September 24, 2012 Order dismissing the first complaint, a
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foreclosure can only be set aside with evidence establishing performance of the promissory note
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through tender or the ability to effect tender. See Agbabiaka v. HSBC Bank USA Nat. Assc.,
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2010 WL 1609974, *6 (N.D. Cal. Apr. 20, 2010). Neither a plain assertion of such performance
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For the Northern District of California
United States District Court
IV.
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nor recitation of legal elements will suffice. See Id. Because plaintiffs have still not provided
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evidence supporting a right to title, estate, lien, or any other interest in the property, this claim
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must be dismissed without leave to amend.
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B. Declaratory Relief (Claim Two)
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As made clear in the September 24, 2012 Order, declaratory relief is an equitable remedy,
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not an independent claim. When the harm has already occurred, the party must seek damages
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rather than declaratory relief. Canova v. Trustees of Imperial Irr. Dist. Employee Pension Plan,
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150 Cal.App.4th 1487, 1497 (2007). “Declaratory relief operates prospectively to declare future
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rights, rather than to redress past wrongs.” Id. Plaintiffs’ FAC and Opposition to Defendant’s
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Motion to Dismiss reflect their misunderstanding of this prior Order, as the foreclosure sale
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occurred more than two years ago. Any wrongdoings regarding the assignment of MERS’s
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interest in the property, even if supported by evidence, would redress past wrongs and thus
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precludes plaintiffs from seeking declaratory relief. See Id. Since the last Order, plaintiffs have
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not averred any new facts suggesting declaratory relief is necessary to prevent future harms.
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Because plaintiffs were specifically instructed that, in order to support a claim for declaratory
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relief they must so aver, this claim is dismissed without leave to amend.
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NO. 12-CV-04054 RS
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C. Wrongful Foreclosure (Claim Three)
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Plaintiffs maintain MERS does not have the authority to transfer its interest in the
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property. Despite the September 24, 2012 Order explaining that MERS has the power to assign
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its interest under a deed of trust, plaintiffs continue to rely on technical arguments that MERS
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may not properly transfer the loan, that it may not foreclose, that the Note was not physically
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transferred when the loan was purchased from defendant, and that the owner of the loan was paid
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off by insurance after plaintiffs defaulted. As previously explained, even if there was a defect or
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irregularity in the assignment or foreclosure, such a defect cannot form the basis for setting aside
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the sale or for damages unless the borrower was prejudiced as a result. Herrera v. Federal
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National Mortgage Assn., 205 Cal.App.4th 1495, 1507-08 (2012). Any prejudice to plaintiffs
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For the Northern District of California
United States District Court
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cannot be assumed by procedural irregularities and must show how the borrower was prejudiced.
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Id. Plaintiffs only aver past and future suffering as a result of the foreclosure, but fail to describe
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how the alleged irregularities prejudiced them in any capacity. Moreover, in their Opposition to
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this Motion, plaintiffs fail to address why this claim should not be dismissed and focus solely on
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the first and second causes of action. Accordingly, their claim of wrongful foreclosure is
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dismissed without leave to amend.
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D. Fraud (Claim Four)
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Claims sounding in fraud are subject to heightened pleading requirements under Rule
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9(b) of the Federal Rules of Civil Procedure. “In allegations of fraud or mistake, a party must
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state with particularity the circumstances constituting fraud or mistake.” To satisfy this rule,
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plaintiff must allege the “who, what, where, when, and how” of the charged misconduct. Cooper
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v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). In other words, “the circumstances constituting the
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alleged fraud [must] be specific enough to give defendants notice of the particular misconduct ...
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so that they can defend against the charge and not just deny that they have done anything
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wrong.” Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir. 2003). However,
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unlike the circumstances of the fraud, “intent, knowledge, and other conditions of a person's
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mind may be alleged generally.” Fed. R. Civ. Proc. 9(b).
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Plaintiffs allege Aurora intentionally misrepresented its entitlement to receive mortgage
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payments from plaintiffs. This allegation, however, does not address any misrepresentation on
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behalf of MERS and it remains unclear as to why MERS was included as a defendant regarding
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this claim. Plaintiffs further assert defendant is guilty of malice, fraud and oppression in taking
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mortgage payments not due to them. These statements are nothing more than legal conclusions,
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and are unsupported by specific facts as required by the heightened standards of Rule 9(b). As
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discussed above, plaintiffs have not pled facts sufficient to sustain a claim of wrongful
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foreclosure or to quiet title. It follows that plaintiff cannot rely on assumptions of such
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wrongdoing in their claim of fraud. Additionally, plaintiffs have not alleged how such
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misrepresentations were made, nor the sections of law that defendant allegedly violated in its
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For the Northern District of California
United States District Court
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disclosure procedures. Furthermore, plaintiffs fail to address in their Opposition why this claim
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should not be dismissed. Thus, plaintiffs’ fourth claim for relief must be dismissed without leave
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to amend.
V.
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CONCLUSION
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For the foregoing reasons, MERS’s motion to dismiss is granted in its entirety. The
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Clerk is instructed to terminate MERS. On May 31, 2013, plaintiffs were directed either to
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correct the problems of service or to file a properly noticed motion addressing the validity of
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service. Plaintiffs have failed to take action as directed. As a result, remaining named
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defendants Luminent Mortgage Loan Trust and HSBC Bank, N.A. shall also be dismissed. As
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no defendants remain, the Clerk is instructed to close the case file.
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IT IS SO ORDERED.
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Dated: 7/1/13
RICHARD SEEBORG
UNITED STATES DISTRICT JUDGE
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