The United States District Court for the Eastern District of California in Candelo et al v. NDEX West, LLC et al., No. CV F 08-1916 LJO DLB (E.D.Cal. 2008) dismissed the plaintiff’s action.
In dismissing the plaintiff’s claims, the court upheld the decision that there was no requirement under the statutory framework for the mandatory production or possession of the original note, by the foreclosing party, to initiate non-judicial foreclosure.
The court in deciding Pruss v. Bank of Am. Na, 2013 U.S. Dist. LEXIS 157286 (W.D. Wash. Nov. 1, 2013) found that the plaintiff’s claims were barred by time and or otherwise inadequately pleaded. Therefore, the court granted the defendants’ motion to dismiss.
Pruss, the plaintiff, alleged he had been injured financially by unfair and deceptive lending practices, and brought a complaint with five causes of action. The 5 causes included: (1) predatory lending; (2) violations of the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”); (3) slander of title; (4) breach of duty; and (5) Consumer Protection Act violations. Defendants subsequently filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), which the court granted.
In regards to the plaintiff’s predatory lending claim, the court noted that the plaintiff failed to present any case law or Washington state statute recognizing a claim for “predatory lending.” Further, because all of plaintiff’s other claims were time-barred or were deemed by the court as failing to state a claim, the court granted the defendants’ motion, thus dismissing the plaintiff’s claims.
The Eastern District of California in deciding Bogdan v. Countrywide Home Loans, CIV-F-09-1055 AWI SMS (E.D. Cal. 2010), found that MERS was not required to register to do business in California. Based off of this finding the court subsequently dismissed fraud and unfair competition claims against MERS.
Plaintiff brought a litany of claims; (1) violation of Truth-in-Lending Act (“TILA”) against Decision One; (2) violation of California’s Rosenthal Fair Debt Collection Practices Act (“RFDCPA”) against Countrywide, Select Portfolio, Decision One, and Recontrust; (3) negligence against all Defendants; (4) violation of Real Estate Settlement Procedures Act (“RESPA”) against Countrywide, Select Portfolio, and Decision One; (5) breach of fiduciary duty against Morales, Home Sweet, Decision One, and Roman; (6) fraud against all Defendants; (7) violation of California’s Business & Professions Code § 17200 (“UCL”) against all Defendants ; (8) breach of contract agains Countrywide and Decision One; (9) breach of implied covenant of good faith and fair dealing against Countrywide and Decision One; and (10) wrongful foreclosure against Countrywide, Select Portfolio, and Recontrust.
Upon review the court reviewed the claims and subsequently dismissed them, finding that MERS was not required to
Deloitte has issued a report, CFPB’s Consumer Complaint Database: Analysis Reveals Valuable Insights, that provides valuable — but superficial insights — into the CFPB’s massive database of consumer complaints.
Deloitte’s main insights are
As to the second insight — customer misunderstanding may create more complaints than financial institution error — Deloitte notes that
Financial institutions have a number of options for resolving consumer complaints. They can close a complaint in favor of the consumer by offering monetary or non-monetary relief, or they can close the complaint not in favor of the consumer, perhaps providing only an explanation. The percentage of complaints closed in favor of consumers declined during the analysis period, falling from 30.9 percent in June 2012 to 18.0 percent in April 2013,6 a trend that was reflected in the monthly complaint [resolutions] for all products. (4)
The report continues, “In spite of fewer complaints closed with relief, consumers have been disputing fewer resolutions. In aggregate, the percentage of resolutions that were disputed fell from a peak of 27.9 percent in January 2012 to 18.6 percent in January 2013.” (5) Deloitte finds that “the data suggests that many complaints may be the result of customer misunderstanding or frustration rather than actual mistakes or operational errors by financial institutions.” (5)
This conclusion seems like a big leap from the data that Deloitte has presented. I can imagine many alternative explanations for the decrease in disputes other than customer misunderstanding. For instance,
To be clear, I am not saying that customer misunderstanding plays an insignificant role in customer complaints. Nor am I saying that the reasons I propose are the real reasons that that complaints do not proceed further. I am only saying that Deloitte has not presented sufficient evidence to support its claim that “customer misunderstanding may create more complaints than financial institution error.” Given that these are fightin’ words in the context of consumer protection, I would think that Deloitte would choose its words more carefully.
The Rhode Island magistrate judge in Cosajay v. Mortgage Electronic Registration Systems, Inc., C.A. No. 10-442-M (D.R.I. June 23, 2011) issued “Reports and Recommendations,” holding that according to Rhode Island law a mortgagor “lacks standing to challenge the propriety of mortgage assignments and the effect those assignments, if any, could have on the underlying obligation.”
The Plaintiff challenged the validity of the assignments on multiple grounds, including MERS’ authority to execute the assignment. The magistrate however determined that under Rhode Island law, only parties to a contract may seek to have rights declared under a contract.
Last week, I discussed a NYLJ article about the “Show Me The Note” argument in New York. The article discussed a recent case, Bank of N.Y. Mellon v. Deane, 2013 Slip Op. 23244 (Sup. Ct. Kings Country July 11, 2013). Brad and I have earlier noted that “many scholars and leaders of the bar are befuddled by courts’ failure to do a comprehensive analysis under the UCC as part of their reasoning in mortgage enforcement cases . . ..” As if to prove us wrong, Judge Battaglia has taken on the UCC in Deane even while acknowledging that “quotation of the Code, or even its citation, has virtually disappeared from the caselaw on this part of negotiable instruments law, at least where addressed in mortgage foreclosure actions.” (5) Judge Battaglia also notes how NY mortgage enforcement caselaw diverges from the contemporary UCC caselaw.
Judge Battaglia framed the issue of standing as follows:
As recently summarized by the Second Department:”In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the subject mortgage…A plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note prior to commencement of the action with the filing of the complaint…Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident.” (GRP Loan, LLC v. Taylor, 95 AD3d at 1173 [internal quotation marks and citations omitted] [emphasis added].) (2)
He continued, “the cursory treatment of the standing question in the memorandum of law evidences a misunderstanding of the general law of negotiable instruments in its equation of the status as “holder” to mere possession of the instrument. The core of the law of negotiable instruments is found in Article 3 of the Uniform Commercial Code . . ..” (3) He finds that the plaintiff has not established that it is a holder or a nonholder in possession who has the rights of a holder. He states that
To allow an assignee to sue without possession of the note, therefore, would be inconsistent with Revised Article 3, and put New York out-of-step with the 49 states that have adopted the revision, including, in particular, a conception of “transfer” as “deliver[y] by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument” (see Revised UCC §3-203 [1].) That misstep, however, if such it is, has apparently already been taken. (7)
Doing its best to reconcile the the mortgage enforcement and UCC caselaw, Judge Battaglia concludes that
in the usual case, a plaintiff has “standing” to prosecute a mortgage foreclosure action where, at the time the action is commenced: (1) the plaintiff is the holder of the note (see NYUCC §1-201 [20]); or (2) the plaintiff has possession of the note by delivery (see NYUCC §1-201[14]), from a person entitled to enforce it, for the purpose of giving the plaintiff the right to enforce it; or (3) the plaintiff has been assigned the note, by a person entitled to enforce it, for the purpose of giving the plaintiff the right to collect the debt evidenced by the note, and the plaintiff tenders the note at the time of any judgment. (8)
New York’s law in this area is not satisfying and it looks to me like courts need to make a concerted effort to synthesize UCC law with foreclosure law. Otherwise, mortgage litigants are left to wander like Cain in the land of Nod, east of Eden, not knowing what law governs their disputes.
The United States District Court of the Northern District of California in deciding Lomboy v. SCME Mortgage Bankers, Inc. et al, No. C-09-1160 SC (N.D. Cal. 2009) held that under California law, MERS was not required to register to do business in California. The court also ruled that MERS is able to foreclose.
As her first cause of action, Plaintiff sought declaratory relief against SCME, MERS, Quality, and Aurora. Plaintiff asserted that she was the true equitable owner of the house, that the defendants were not holders of the promissory note, which should accompany the deed of trust, and that MERS has no right to foreclose on the house.
Plaintiff Imelda Lomboy also brought an action alleging various improprieties surrounding the then-imminent foreclosure of property that was used as security for a loan. Plaintiff alleges that the defendants “fraudulently obtained the deed of trust.”
The court in rejecting the plaintiff’s contentions note that MERS, as the beneficiary on the deed of trust, had the authority to make a substitution of trustee. The court further noted, that the substitute trustee appointed by MERS was able to carry out the foreclosure.
