Perez et al v. Mortgage Electronic Registration Systems, Inc.

Filing 22

ORDER re 12 Motion to Dismiss. Amended pleadings due by 7/16/2018. Signed by Judge James Donato on 6/25/2018. (jdlc3S, COURT STAFF) (Filed on 6/25/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BELLA T. PEREZ, et al.,
Plaintiffs,

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Case No. 3:17-cv-04880-JD
ORDER RE MOTION TO DISMISS

v.

Re: Dkt. No. 12

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United States District Court
Northern District of California

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MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC., et al.,
Defendants.

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Plaintiffs Bella and Enrique Perez contend that they are entitled to terminate payments on a

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mortgage and receive an unencumbered title to their home in San Pablo, California, based on

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alleged procedural defects in the transfer of their loan and the underlying deed of trust to

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defendant Bank of New York Mellon (“BNYM”). See Dkt. No. 1. Plaintiffs filed this lawsuit in

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California Superior Court against BNYM and Mortgage Electronic Registration Systems, Inc. Id.

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Defendants removed to federal court based on diversity jurisdiction and move to dismiss the

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complaint for failure to state a plausible claim under Federal Rule of Civil Procedure 12(b)(6).

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The motion is granted.

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LEGAL STANDARDS
Straightforward standards govern the application of Rule 12(b)(6). To meet the pleading

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requirements of Rule 8(a) and to survive a Rule 12(b)(6) motion to dismiss, a claim must provide

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“a short and plain statement . . . showing that the pleader is entitled to relief,” Fed. R. Civ. P.

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8(a)(2), including “enough facts to state a claim . . . that is plausible on its face.” Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face if, accepting all factual

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allegations as true and construing them in the light most favorable to the plaintiff, the Court can

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reasonably infer that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556

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U.S. 662, 678 (2009). The plausibility analysis is “context-specific” and not only invites but

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“requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.

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On a motion to dismiss, the Court is limited to the “allegations contained in the pleadings,

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exhibits attached to the complaint, and matters properly subject to judicial notice.” Outdoor

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Media Grp., Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (internal quotation

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omitted). The Court may take judicial notice of undisputed matters of public record. Lee v. City

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of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

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DISCUSSION
The California Supreme Court recently clarified that a borrower subject to a nonjudicial
foreclosure “does not lack standing to sue for wrongful foreclosure based on an allegedly void

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United States District Court
Northern District of California

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assignment merely because he or she was in default on the loan and was not a party to the

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challenged assignment.” Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919, 924, 365 P.3d

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845, 848 (Cal. 2016). The California Supreme Court expressly noted that its holding did not

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extend to a borrower who “attempt[s] to preempt a threatened nonjudicial foreclosure by a suit

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questioning the foreclosing party’s right to proceed.” Id. It is undisputed that no one has

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attempted to foreclose on plaintiffs’ home.

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Both before and after Yvanova, California appellate courts have dismissed preemptive pre-

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foreclosure lawsuits for failure to state a plausible claim due to lack of standing. See, e.g.,

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Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 814 (Cal. Ct. App. 2016), reh’g

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denied (Apr. 11, 2016), review denied (July 13, 2016) (citing cases). Preemptive pre-foreclosure

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suits are not allowed because they “‘result in the impermissible interjection of the courts into a

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nonjudicial scheme enacted by the California Legislature.’” Id. (quoting Jenkins v. JP Morgan

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Chase Bank, N.A., 216 Cal. App. 4th 497, 513 (2013), disapproved on other grounds in Yvanova,

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62 Cal. 4th at 939 n. 13). In Saterbak, the Court of Appeal emphasized that Yvanova “is expressly

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limited to the post-foreclosure context” and “does not alter [a plaintiff’s] standing obligations” in a

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“preforeclosure suit challeng[ing] Defendant’s ability to foreclose.” Id. at 815.

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Saterbak squarely fits this case. All of plaintiffs’ claims -- declaratory relief, quiet title,

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and cancellation of instruments -- are predicated on the theory that plaintiffs may challenge the
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assignment of the deed of trust to BNYM before any foreclosure proceedings are under way.

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Plaintiffs have consequently failed to state any valid claims under California law.

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Plaintiffs misread Yvanova to permit preemptive lawsuits challenging assignments that are

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void. Dkt. No. 14 at 2. Yvanova says that a borrower has standing to challenge an assignment as

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void only once foreclosure proceedings have been initiated. In contrast, “disallowing the use of a

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lawsuit to preempt a nonjudicial foreclosure, is not within the scope of our review. . . . We do not

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address the distinct question of whether, or under what circumstances, a borrower may bring an

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action for injunctive or declaratory relief to prevent a foreclosure sale from going forward.”

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Yvanova, 62 Cal. 4th at 934. The weight of California appellate authority indicates that borrowers
lack standing to preemptively challenge the assignment of a deed of trust, whether or not the

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United States District Court
Northern District of California

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assignment is challenged as void or merely as voidable, and plaintiffs offer no persuasive reason

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why the Court should depart from those holdings. Plaintiffs’ heavy reliance on Glaski v. Bank of

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Am., Nat’l Ass’n, 218 Cal. App. 4th 1079 (Cal. Ct. App. 2013), is inapposite because that case

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concerned a post-foreclosure challenge.
CONCLUSION

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The motion to dismiss is GRANTED. The Court does not reach defendants’ remaining

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arguments. Although the Court has doubts that plaintiffs can save their complaint through

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amendment, they will be allowed an opportunity to state a plausible claim. An amended

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complaint is due by July 16, 2018.

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IT IS SO ORDERED.
Dated: June 25, 2018

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JAMES DONATO
United States District Judge

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