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Clark v. Equity One, Inc.

United States District Court, D. Arizona

July 2, 2014

Michelle Clark, an individual, Plaintiff,
v.
Equity One, Inc; et al., Defendants.

ORDER

LESLIE A. BOWMAN, Magistrate Judge.

Pending before the court is a motion to dismiss filed by the defendants Aurora Commercial Corp., Lehman ABS Corporation, and Mortgage Electronic Registration Systems, Inc. (Doc. 11)

The plaintiff in this action, Michelle Clark, borrowed money from the defendant Equity One, Inc. to purchase residential property. She subsequently defaulted, and the property was sold at a non-judicial foreclosure trustee's sale. In the pending action, Clark claims that none of the defendants had "standing" to foreclose and she was fraudulently induced to borrow the money in the first place. In the pending motion, the defendants move that the complaint be dismissed with prejudice pursuant to Fed.R.Civ.P. 8, 9(b), and 12(b)(6).

The Magistrate Judge presides over this case pursuant to 28 U.S.C. ยง 636(c) having received the written consent of all appearing parties. See FED.R.CIV.P. 73; (Docs. 10, 21). The court finds the motion suitable for decision without oral argument. See Fed.R.Civ.P. 78(b).

Background

On November 21, 2003, Clark borrowed $181, 440 from Equity One to buy residential property. (Doc. 11, p. 3) She executed a promissory note in favor of the lender and a deed of trust securing the note. The deed of trust named Commonwealth Land Title Insurance Co. as the trustee. The defendant Mortgage Electronic Registration Systems, Inc. (MERS) was named the beneficiary and the nominee for the lender. Id.

The deed of trust explained that MERS held legal title to the interests granted by the borrower to the lender. (Doc. 11, pp. 3-4) Accordingly, MERS had the right to foreclose and sell the property in the event of default. Id. The deed further explained that the note or interest in the note could be sold without notice to the borrower. (Doc. 11, p. 4)

MERS is a private electronic database that tracks the transfer of the beneficial interest in a loan and any changes in the loan servicer. See Cervantes v. Countrywide Home Loans Inc., 656 F.3d 1034, 1038-39 (9th Cir. 2011). MERS facilitates the financial industry's practice of selling the notes, "bundling" them, and creating mortgage-backed securities for sale to third parties. Id. Before MERS, every time the note was sold, the new owner would have to record the transfer of the deed with the county recorder's office. Id. After MERS, this recording chore was eliminated because the nominal deed holder stayed the same no matter how many times the note was sold or assigned. Id.

MERS subsequently substituted Cal-Western Reconveyance Corporation (Cal-Western) as the trustee. (Doc. 11, p. 4) MERS also assigned the beneficial interest in the deed of trust to Aurora Loan Services LLC, which in turn conveyed that interest to Nationstar Mortgage LLC. Id.

Clark defaulted on her loan, and on February 15, 2013, Cal-Western gave notice of a trustee sale to be held on May 24, 2013. Id. The notice of sale was recorded on February 19, 2013. Id.

The property was sold at the trustee's sale in a non-judicial foreclosure. (Doc. 11, p. 4) The deed was recorded on July 15, 2013. Id.

On August 6, 2013, shortly after the sale, Clark filed the pending action in Pima County Superior Court. (Doc. 1-2, p. 5) Her complaint is divided into four claims: Lack of Standing to Foreclose, Fraud in Concealment, Fraud in Inducement, and Declaratory Relief. (Doc. 1-2, pp. 20-28)

Also included within the complaint is a request for injunctive relief. (Doc. 1-2, p. 28) Clark argues she is entitled to relief because she can establish "(A) a strong likelihood of success on the merits; (B) the possibility of irreparable injury not remediable by damages; (C) a balance of hardships in [her] favor; and (D) public policy favoring the requested relief." Id. On September 20, 2013, the action was removed to this court by the defendant Aurora Commercial Corp. based on diversity jurisdiction. (Doc. 1, p. 1) Clark was evicted on November 4, 2013. (Doc. 11, p. 4)

The defendants Aurora Commercial Corp., Lehman ABS Corporation, and Mortgage Electronic Registration Systems, Inc. filed the pending motion on December 19, 2013. (Doc. 11) They move that this court dismiss the complaint with ...


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