Jose Gomes appeals from a judgment entered following the trial court's order sustaining, without leave to amend, a demurrer filed by defendants Countrywide Home Loans, Inc. (Countrywide); Mortgage Electronic Registration Systems, Inc. (MERS); and ReconTrust Company, N.A. (ReconTrust) (collectively Defendants).
As we will explain, we conclude that the trial court properly sustained the demurrer without leave to amend.
FACTUAL AND PROCEDURAL BACKGROUND
In February 2004 Gomes borrowed $331,000 from lender KB Home Mortgage Company to finance the purchase of real estate. In connection with that transaction, he executed a promissory note (the Note), which was secured by a deed of trust. The deed of trust identifies KB Home Mortgage Company as the "Lender" and identifies MERS as "acting solely as a nominee for Lender and Lender's successors and assigns," and states that "MERS is the beneficiary under this Security Instrument."
The role of MERS is central to the issues in this appeal. As case law explains, "MERS is a private corporation that administers the MERS System, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the mortgagee of record for participating members through assignment of the members' interests to MERS. MERS is listed as the grantee in the official records maintained at county register of deeds offices. The lenders retain the promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to investors without having to record the transaction in the public record. MERS is compensated for its services through fees charged to participating MERS members." (Mortgage Electronic Registration Systems v. Nebraska Dept. of Banking & Finance (2005) 270 Neb. 529, 530 [704 N.W.2d 784, 785].) "A side effect of the MERS system is that a transfer of an interest in a mortgage loan between two MERS members is unknown to those outside the MERS system." (Jackson v. Mortgage Electronic Registration Systems, Inc. (Minn. 2009) 770 N.W.2d 487, 491.)
The deed of trust that Gomes signed states that "Borrower [(i.e., Gomes)] understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property. . . ."
Gomes defaulted on his loan payments, and he was mailed a notice of default and election to sell—recorded on March 10, 2009—which initiated a nonjudicial foreclosure process. The notice of default was sent to Gomes by ReconTrust, which identified itself as an agent for MERS. Accompanying the
In May 2009 Gomes filed a lawsuit against Countrywide, MERS and ReconTrust, alleging several causes of action and attaching as exhibits the deed of trust and the notice of default.
The only causes of action at issue in this appeal are the first and second causes of action, which are asserted against all Defendants.
The first cause of action is titled "Wrongful Initiation of Foreclosure." In that cause of action, Gomes states that he "does not know the identity of the Note's beneficial owner"—as he believes that KB Home Mortgage Company sold it on the secondary mortgage market. He alleges on information and belief that "the person or entity who directed the initiation of the foreclosure process, whether through an agent of MERS or otherwise, was neither the Note's rightful owner nor acting with the rightful owner's authority." In short, the first cause of action alleges, on information and belief, that MERS did not have authority to initiate the foreclosure because the current owner of the Note did not authorize MERS to proceed with the foreclosure. As a remedy, the first cause of action states that Gomes seeks damages in an amount "not less than $25,000."
The second cause of action seeks declaratory relief on the issue of whether "[Civil Code section 2924, subdivision (a)] allows a borrower, before his or her property is sold, to bring a civil action in order to test whether the person electing to sell the property is, or is duly authorized to so by, the owner of a beneficial interest in it." Although designated a cause of action for declaratory relief, the second cause of action appears to serve simply as a legal argument in support of the first cause of action. Specifically, the second cause of action alleges that section 2924, subdivision (a) provides the legal authority for Gomes to assert the claim he has made in the first cause of action, namely that MERS lacks the authority to initiate the foreclosure process because it was not authorized to do so by the owner of the Note.
The trial court sustained the demurrer, without leave to amend, and entered judgment in favor of Defendants.
A. Standard of Review
"`On appeal from an order of dismissal after an order sustaining a demurrer, our standard of review is de novo, i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law.'" (Los Altos El Granada Investors v. City of Capitola (2006) 139 Cal.App.4th 629, 650 [43 Cal.Rptr.3d 434].) "A judgment of dismissal after a demurrer has been sustained without leave to amend will be affirmed if proper on any grounds stated in the demurrer, whether or not the court acted on that ground." (Carman v. Alvord (1982) 31 Cal.3d 318, 324 [182 Cal.Rptr. 506, 644 P.2d 192].) In reviewing the complaint, "we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those that are judicially noticeable." (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814 [107 Cal.Rptr.2d 369, 23 P.3d 601].)
Further, "[i]f the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. . . . If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. . . . The plaintiff has the burden of proving that an amendment would cure the defect." (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [6 Cal.Rptr.3d 457, 79 P.3d 569], citations omitted (Schifando).) "[S]uch a showing can be
B. The Demurrer Was Properly Sustained
1. Gomes Has Not Identified a Legal Basis for an Action to Determine Whether MERS Has Authority to Initiate a Foreclosure Proceeding
By asserting a right to bring a court action to determine whether the owner of the Note has authorized its nominee to initiate the foreclosure process, Gomes is attempting to interject the courts into this comprehensive nonjudicial scheme. As Defendants correctly point out, Gomes has identified no legal authority for such a lawsuit. Nothing in the statutory provisions establishing the nonjudicial foreclosure process suggests that such a judicial proceeding is permitted or contemplated.
Gomes cites three federal district court cases—two of which are unpublished—which he says recognize a right to bring a legal challenge to an entity's authority to initiate a foreclosure process. (Weingartner v. Chase Home Finance, LLC (D.Nev. 2010) 702 F.Supp.2d 1276 (Weingartner); Castro v. Executive Trustee Services, LLC (D.Ariz. 2009, Feb. 23, 2009, No. CV-08-2156-PHX-LOA) 2009 U.S.Dist. Lexis 14134 (Castro); Ohlendorf v. American Home Mortgage Servicing (E.D.Cal., Mar. 31, 2010, No. CIV. S-09-2081 LKK/EFB) 2010 U.S.Dist. Lexis 31098 (Ohlendorf).)
Gomes appears to acknowledge that California's nonjudicial foreclosure law does not provide for the filing of a lawsuit to determine whether MERS has been authorized by the holder of the Note to initiate a foreclosure. He argues, however, that we should nevertheless interpret the statute to provide for such a right because the "Legislature may not have contemplated or had time to fully respond to the present situation." That argument should be addressed in the first instance to the Legislature, not the courts. Because California's nonjudicial foreclosure statute is unambiguously silent on any right to bring the type of action identified by Gomes, there is no basis for the courts to create such a right. We therefore conclude that the trial court
2. Gomes Agreed in the Deed of Trust That MERS Is Authorized to Initiate a Foreclosure Proceeding
As an independent ground for affirming the order sustaining the demurrer, we conclude that even if there was a legal basis for an action to determine whether MERS has authority to initiate a foreclosure proceeding, the deed of trust—which Gomes has attached to his complaint—establishes as a factual matter that his claims lack merit. As stated in the deed of trust, Gomes agreed by executing that document that MERS has the authority to initiate a foreclosure. Specifically, Gomes agreed that "MERS (as nominee for Lender and Lender's successors and assigns) has . . . the right to foreclose and sell the Property." The deed of trust contains no suggestion that the lender or its successors and assigns must provide Gomes with assurances that MERS is authorized to proceed with a foreclosure at the time it is initiated.
Relying on the terms of the applicable deeds of trust, courts have rejected similar challenges to MERS's authority to foreclose. In Pantoja v.
3. Gomes Has Not Established That he Can Cure the Defects in His Complaint by Amending
We must also consider whether Gomes has shown that there is a reasonable probability that he could cure the defects that we have identified in the first and second causes of action. (Schifando, supra, 31 Cal.4th at p. 1081.) Gomes contends that he could amend his complaint to "plead more specific theories . . . on information and belief" such as those theories discussed in Ohlendorf, supra, 2010 U.S.Dist. Lexis 31098, and Weingartner, supra, 702 F.Supp.2d 1276.
To attempt to state a claim as in Ohlendorf, Gomes would have to plead that the specific party who initiated the foreclosure process was not the proper party to do so because assignments of the deed of trust were improperly backdated. (Ohlendorf, supra, 2010 U.S.Dist. Lexis 31098 at pp. *22-*23.) To conform to the theory pled in Weingartner, Gomes would have to plead that a trustee initiated the foreclosure proceeding but was not actually the trustee at the time. (Weingartner, supra, 702 F.Supp.2d at p. 1282.) However, Gomes has conceded that he cannot plead facts meeting those scenarios "because respondents have not recorded any assignments" or provided any descriptions of assignments. A "`[p]laintiff may allege on information and belief any matters that are not within his personal knowledge, if he has information leading him to believe that the allegations are true'" (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 [67 Cal.Rptr.3d 330, 169 P.3d 559], italics added), and thus a pleading made on information and belief is insufficient if it "merely assert[s] the facts so alleged without alleging such information that `lead[s] [the plaintiff] to believe that the
The judgment is affirmed.
Nares, Acting P. J., and McIntyre, J., concurred.