In Ruiz v. Suntrust Mortg., Inc., 2012 U.S. Dist. LEXIS 103239 (E.D. Cal. July 24, 2012), Plaintiff Florida Ruiz brought action against Sun Trust Mortgage, Inc. (SunTrust), MERS, Fannie Mae, and the Wolf Law Firm to challenge the foreclosure of her Bakersfield, California property. Defendants SunTrust, MERS, and Fannie Mae filed a F.R.Civ.P. 12(b)(6) motion to dismiss the claims brought against them.
Plaintiff had taken out two loans from SunTrust secured by deeds of trust (DOT) in April 2007 with MERS identified as beneficiary under both. Following default and failure to cure, Plaintiff’s property was sold at foreclosure in March 2010, though the sale was rescinded. In August 2011, MERS assigned its interest in the first DOT to Sun Trust. In September 2011, the Wolf Law Firm, acting as trustee, recorded a second notice of default and substituted as trustee. The Wolf Law Firm recorded a notice of trustee’s sale of the property in February 2012.
There were many claims within the Plaintiff’s complaint, which are detailed below.
1) Wrongful Foreclosure Claims:
Failure to Tender: Plaintiff alleged that SunTrust, via the Wolf Firm, did not have authority to initiate foreclosure proceedings, because MERS was the proper beneficiary of the deed of trust. The court noted that to properly challenge a foreclosure proceeding, Plaintiff was required to tender the amount owed on her loan, “nothing short of the full amount due the creditor.” Rauer’s Law etc. Co. v. S. Proctor Co. 40 Cal.App. 524,525, 181 P. 71 (1919). As the record demonstrated that Plaintiff had defaulted, failed to cure, and no evidence was proffered to demonstrate a tender offer, Plaintiff’s attempt to stop foreclosure based on MERS’s alleged status was an “empty remed(y), not capable of being granted.”
Foreclosure Irregularities: Plaintiff alleged that foreclosure irregularities should preclude foreclosure. In California, a lender may proceed with non-judicial foreclosure when a default occurs and the deed of trust contains a power of sale clause. McDonald v. Smoke Creek Live Stock Co., 209 Cal. 231, 236-237, 286 P. 693 (1930). Per Cal Civ Code § 2924, a “trustee, mortgagee or beneficiary of authorized agents” can conduct the foreclosure. There is a presumption that a foreclosure “(is) conducted regularly and fairly.” Melendrez v. D & I Investment, Inc., 127 Cal.App.4th 1238, 1258, 26 Cal.Rptr.3d 413 (2005).
Robo-Signing: Specifically, Plaintiff claimed that MERS Vice President Mr. Mitchell “robo-signed” various documents. The court stated that Plaintiff failed to establish statutory violations such an action would violate, or how such an action, if it occurred, would prevent foreclosure.
Standing: Plaintiff also boldly claimed that Defendants did not have proper standing to foreclose, because the foreclosure sale of her property in March 2010 had divested Defendants of an interest in the property. As the March foreclosure was rescinded and Plaintiff claimed no other irregularities, Plaintiff’s standing allegations were unconvincing.
Securitization / Original Note: Plaintiff alleged that Defendants’ securitization of the loan was unlawful and thereby precluded foreclosure – an argument the court found unsupported by law and case history. Similarly, Plaintiff’s argument that Defendants needed the original note and joint possession of the note and deed of trust to foreclose was not substantiated by California law.
MERS Authority: Plaintiff claimed that MERS lacked authority to execute certain documents relating to the transfer of the mortgage note. The court stated that prejudice is required to prevent a wrongful foreclosure. “Prejudice is not presumed from mere irregularities in the process.” Meux v. Trezevant, 132 Cal. 487, 490, 64 P. 848 (1901). As Plaintiff failed to allege the prejudice she suffered from foreclosure, given her loan obligations, such a claim does not preclude foreclosure.
Plaintiff’s second claim alleged that Mr. Mitchell fraudulently signed a deed of trust claiming to be a MERS employee when employed by SunTrust. The elements of a fraud claim in California are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th631, 638, 49 Cal.Rptr.2d 377 (1996). Fraud claims are also subject to the heightened pleading standard under F.R.Civ.P. 9(b). Plaintiff’s conclusory allegations not only failed to meet the burden of the heightened standard, but also lacked facts or specifics to support the basic elements of a fraud claim.
3) Slander of Title:
Plaintiff’s third claim alleged that Defendants slandered the title of her property, through preparing, publishing and recording documents including the notice of trustee’s sale and trustee’s deed, actions Defendants knew were improper. The court noted that Plaintiff failed to allege facts to support slander of title claim, because, among other reasons, the documents sent to defendant were not false given her default.
4) Quiet Title:
Plaintiff’s fourth claim, to quiet title, was also found by the court to be lacking. Quiet title claims first require plaintiff to allege that she is the rightful owner of the property. Kelley v. Mortgage Electronic Registration Systems, Inc., 642 F.Supp.2d 1048, 1057 (N.D. Cal. 2009). As the Plaintiff was in default and could not pay the amount owed, her claim to quiet title failed.
5) Declaratory Relief:
Plaintiff’s fifth claim was for declaratory relief. The court noted that since declaratory relief is not an independent claim, and no viable claim existed, relief could not be granted.
6) California Civil Code Violation:
Plaintiff’s sixth claim alleged violations of Cal Civ Code § 2932.5, resulting from Fannie Mae’s failure to record its interest in the deed of trust. The court ruled that a deed of trust assignment is not required for a judicial foreclosure, Plaintiff lacked standing to challenge the transfer, and Plaintiff offered no support for any claim under Cal Civ Code §2932.5.
7) Unfair Competition Claim:
Plaintiff’s seventh claim alleged various violations of California’s Unfair Competition Law, but failed to support such allegations with facts required for UCL relief. The court conveyed that any alleged damages suffered by the Plaintiff were “self-inflicted” as they resulted from her default.
8) Punitive Damages:
Plaintiff’s eighth claim, for punitive damages, failed because this assertion was unsupported by facts and nothing sufficient in the complaint alleged anything sufficient to impose punitive relief.
The court dismissed the complaint with prejudice and denied Plaintiff the right to amend. The court determined that Plaintiff brought this action in the absence of good faith solely to delay the foreclosure of her property, as evidenced by untrue material allegations of fact in its complaint. The court ordered Plaintiff to file papers with the court within a week to show why claims against the remaining defendant, the Wolf Law Firm, should not be dismissed. As Plaintiff did not do so, in Ruiz v Suntrust Mortg. Inc., CV F 12-0878 LJO BAM, 2012 WL 3150081 [ED Cal Aug. 1, 2012], the court dismissed the complaint against the Wolf Law Firm.