17-CIV-04209 ROGELIO CORTEZ, et al. vs. NEW PENN FINANCIAL, LLC, et al.

ROGELIO CORTEZ MARK W. LAPHAM

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. DIANE P. CRAGG

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.’S demurrer TO PLAINTIFFS’ FIRST AMENDED COMPLAINT

TENTATIVE RULING:

Defendant’s Demurrer is sustained in its entirety as to the first, second and seventh causes of action.

A. The Complaint Fails to Allege that the Transfers by MERS

Were Void on Their Face.

Demurrer is sustained as to the first, second and seventh causes of action. Each cause of action is founded on allegations that MERS’s assignment of the deed of trust and the substitution of trustee were void.

Plaintiffs allege that the securitization of their loan resulted in MERS’s no longer possessing any interest as a nominee. Plaintiffs also allege that MERS lost all interest as nominee as a result of the original lender (Heritage) being dissolved. (FAC para. 13, 14, 54.) Plaintiffs’ legal theory is contrary to law. MERS retains its rights as the lenders’ nominee after the loan is sold or securitized. (See Dancy v. Aurora Loan Servs., LLC, (N.D. Cal. Mar. 4, 2011) No. C 10-2602 SBA, 2011 WL 835787, at *6.) The allegation that Heritage became defunct (FAC para. 54) does not preclude MERS from assigning the Deed of Trust. (Ghuman v. Wells Fargo Bank, NA. (E.D. Cal. 2013) 989 F.Supp.2d 994, 1002 [“Plaintiffs have provided no authority and the Court’s research reveals no authority to suggest this power is affected when a lender becomes defunct”].)

The First Amended Complaint alleges no facts to support the contention that MERS lacked authority to substitute Recontrust as trustee or to assign the deed of trust to Bank of New York Mellon. Since all causes of action rely on these allegations and legal theory, they fail to state a claim.

In addition, Demurrer is sustained as to the individual claims as follows.

The first cause of action (wrongful foreclosure) fails to state a claim. An unlawful or fraudulent sale is a required element of the cause of action. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112.) If the foreclosure sale has not occurred, there is no sale to set aside, and the damages that would have arisen from a sale have not been incurred. No claim for wrongful foreclosure exists unless a foreclosure sale has taken place. (Robinson v. Countrywide Home Loans, Inc. (2011) 199 Cal.App.4th 42, 46; Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155.) Also, in the absence of a sale, Plaintiffs have not alleged prejudice.

Since the Complaint fails to allege facts supporting the conclusion that MERS’s assignments were void, no justiciable controversy exists between Plaintiffs and MERS. For that reason, the second cause of action (declaratory relief) fails to state a claim.

Finally, the seventh cause of action (unfair business practice) fails to allege any unlawful, fraudulent or unfair acts by MERS. In addition, for purposes of standing, the injury to or loss of property must be caused by the allegedly unfair competition. Since no such wrongful acts occurred, any damage or loss suffered by Plaintiffs did not result from an unfair business practice.

The Court previously granted leave to amend. The First Amended Complaint does not add any allegations to cure the deficiencies of the original Complaint, which are the same ones described above. As a result, the Court does not grant leave to amend.