Case4:10-cv-02602-SBA Document33 Filed11/08/10 Page1 of 13

1 Richard Hurlburt, SBN 179072

Benjamin Humphreys, SBN 244768
2 LAW OFFICES OF RICHARD HURLBURT
870 Market Street, Suite 315
3 San Francisco, CA 94102-3008
Telephone: 415-391-6496
4 Facsimile: 415-391-6497

5 Attorneys for plaintiff,

EARL A. DANCY
6

8 UNITED STATES DISTRICT COURT

9 NORTHERN DISTRICT OF CALIFORNIA

10
EARL A. DANCY, ) No. C10-02602 SBA
11 )
Plaintiff, )
12 ) FIRST AMENDED COMPLAINT
vs. )
13 )
AURORA LOAN SERVICES, LLC; )
14 MORTGAGE ELECTRONIC )
REGISTRATION SYSTEMS, INC.; )
15 and DOES 1-20, )
)
16 Defendants. )
______________________________)
17

18 Plaintiff EARL A. DANCY alleges:

19 1. At all pertinent times plaintiff was a citizen of the

20 State of California and was the true owner of the real property

21 commonly known as 200 Lagunitas Road, Lagunitas, CA 94938,

22 California (subject property). The subject property is more fully

23 described in the attached Exhibit A.

24 2. JURISDICTION. AURORA LOAN SERVICES, LLC (“AURORA”) is a

25 limited liability company organized under the laws of the State

26 of Delaware, and having its principal place of business and home

27 office in the State of Delaware. MORTGAGE ELECTRONIC

28 REGISTRATION SYSTEMS, INC. (“MERS”) is a corporation incorporated

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First Amended Complaint

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1 under the laws of the State of Delaware, and having its principal

2 place of business in the State of Delaware. This Court has

3 original jurisdiction under 28 USC § 1332, in that it is a civil

4 action between citizens of different states in which the matter

5 in controversy exceeds, exclusive of interest and costs, fifty

6 thousand dollars.

7 3. VENUE. Venue is proper in the Northern District of

8 California in that a substantial part of the events or omissions

9 giving rise to the claim occurred there and a substantial part of

10 property that is the subject of the action is situated there.

11 4. INTRADISTRICT ASSIGNMENT. On July 16, 2010, this action

12 was reassigned to the Honorable Saundra Brown Armstrong in the

13 Oakland Division. The property at issue in this action is

14 located in the County of Marin.

15 5. Plaintiff is ignorant of facts concerning the liability

16 of and/or does not know the true names of DOE defendants 1-20.

17 All defendants were agents of one another with regard to the acts

18 and omissions alleged in this Complaint.

19 6. On or about July 25, 2005, plaintiff executed a Note in

20 favor of American Sterling Bank. MERS was not mentioned in the

21 Note. MERS did not execute the Note. AURORA was not mentioned

22 in the Note. AURORA did not execute the Note. The parties to

23 the Note were plaintiff and American Sterling Bank.

24 7. Plaintiff also signed a Deed of Trust on or about July

25 25, 2005. The Deed of Trust purported to identify the parties

26 thereto as: American Sterling Bank, a Missouri Corporation,

27 lender; First Trustee Services, Inc., a Missouri Corporation,

28 trustee; and Mortgage Electronic Registration Systems, Inc. as “a

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First Amended Complaint

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1 separate corporation that is acting solely as a nominee for

2 Lender and Lender’s successors and assigns. MERS is the

3 beneficiary under this security instrument.”

4 8. MERS drafted the Deed of Trust. Plaintiff took no part in

5 drafting the Note or Deed of Trust. The Deed of Trust is an

6 adhesion contract. The Deed of Trust was drafted in a manner

7 intended to bifurcate the loan (Note) from the security (Deed of

8 Trust) to facilitate the loan being pooled with other loans to

9 form certain theoretical investment vehicles. However, any such

10 bifurcation is impossible as a matter of law.1

11 9. When they executed the Deed of Trust plaintiff’s actual

12 and reasonable expectation was he was signing a security

13 agreement with the parties being (1) plaintiff, (2) the lender,

14 American Sterling Bank, and (3) the trustee. Plaintiff had no

15 expectation MERS would be a party. Plaintiff made no promises of

16 any kind to MERS. MERS was never an owner, holder, mortgagee or

17 obligee of the Note as those terms are commonly understood in

18 California law. [C.C. § 2932.5] MERS was never the “beneficiary”

19 of the Deed of Trust. Nor was MERS at any time entitled to

20 payments of the money secured by the Deed of Trust. MERS was not

21 a party to the Note and did not sign the Note. Nor was MERS a

22 party to the Deed of Trust. MERS did not sign the Deed of Trust.

23
1
A mortgage is a mere security for the debt, and it cannot pass without
24
a transfer of the debt. [Johnson v. Razey (1919) 181 Cal. 342, citing Civil
Code § 2936] The assignment of a debt secured by mortgage carries with it the
25
security. [Civil Code § 2936] The term “mortgage” in Civil Code § 2936
encompasses “deeds of trust.” [Seidell v. Tuxedo Land Co. (1932) 216 Cal. 165,
26
166; Domarad v. Fisher & Burke, Inc. (1969) 270 Cal.App.2d 543, 554]
27
The purported assignment of a mortgage without an assignment of the debt
secured is a legal nullity. [Kelley v. Upshaw (1952) 39 Cal.2d 179, 192]
28
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First Amended Complaint

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1 10. Within the first six months of when the subject loan was

2 originated, the lender conveyed the Note to a third party. The

3 third party was not AURORA or MERS. The Note has since been

4 traded in a manner such that the owner/holder/obligee of the Note

5 cannot be identified and the Note is not enforceable by AURORA or

6 MERS. When the Note was conveyed to the third party, whatever

7 authority MERS had relating to the Deed of Trust, if any, was

8 extinguished. [Civil Code § 2936] At all pertinent times MERS

9 knew or should have known the facts alleged in this paragraph and

10 the legal consequences thereof.

11 11. AURORA was never an owner, holder, mortgagee or obligee

12 of the Note as those terms are defined under California law. Nor

13 was AURORA ever entitled to payment of the money secured by the

14 Deed of Trust. AURORA was not a party to the Note and did not

15 sign the Note. Nor was AURORA a party to the Deed of Trust.

16 AURORA did not sign the Deed of Trust. Plaintiff never borrowed

17 money from AURORA or MERS, nor did plaintiff enter into a

18 contract with AURORA or MERS. Now, AURORA and MERS falsely claim

19 to have been beneficiaries of the Deed of Trust.

20 12. At no time did MERS have the legal right to transfer any

21 interest in the Note or Deed of Trust. There never was any

22 written agency agreement sufficient to empower MERS to assign the

23 Note or Deed of Trust. No valid or lawful assignment of the Deed

24 of Trust ever existed and none was ever recorded at the Marin

25 County Recorder. There was never a written agency agreement

26 between the original lender and MERS. If there had been an agency

27 agreement between the original lender and MERS, it terminated

28 when the Note was transferred to the third party, described above
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First Amended Complaint

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1 in paragraph 10. [Civil Code §§ 2296, 2304, 2309]

2 13. There never was a lawful or valid substitution of

3 trustee empowering Quality Loan Service Corporation (“Quality”)

4 to act as trustee under the Deed of Trust. MERS did purport to

5 issue a substitution of trustee dated March 12, 2008 (and

6 recorded on April 28, 2008 at the Marin County Recorder’s Office

7 as Document No. 2008-0019429) but the substitution is void for

8 reasons including but not limited to: The document falsely

9 indicates MERS was the “original Beneficiary” when in fact MERS

10 was never the beneficiary. The document was issued by MERS “as

11 nominee for Aurora Loan Services, LLC”. However, by this time

12 ownership and possession of the underlying Note had been

13 transferred from the original lender to a third party. The

14 substitution of trustee is therefore void because MERS had no

15 power to issue it, and under Civil Code § 1095 because the name

16 of the true beneficiary is not stated. Nor was MERS an agent of

17 the true beneficiary when the purported substitution was issued.

18 14. Because the March 12, 2008 Substitution of Trustee is

19 void, Quality was never the trustee. Quality never had legal

20 power or authority to conduct a trustee sale or take any other

21 action concerning the subject property under Civil Code § 2924 or

22 the Deed of Trust. All acts by Quality with regard to the subject

23 property are void. All documents issued by Quality with regard to

24 the subject property or subject loan are void.

25 15. On or about March 12, 2008 a purported Notice of Default

26 was issued and on March 13, 2008 it was recorded with the Marin

27 County Recorder, instrument No. 2008-0011929. The Notice of

28 Default was purportedly issued by “Quality Loan Service Corp., as

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First Amended Complaint

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1 agent for beneficiary by: Fidelity National Title Insurance

2 Company.” The Notice of Default fails to identify the present

3 beneficiary. The Notice of Default indicates, falsely, that:

4 ... the present beneficiary under such deed of trust, has

executed and delivered to said duly appointed Trustee, a
5 written Declaration of Default and Demand for same, and has
deposited with said duly appointed Trustee, such deed of
6 trust and all documents evidencing obligations secured
thereby, and has declared and does hereby declare all sums
7 secured thereby immediately due and payable and has elected
and does hereby elect to cause the trust property to be sold
8 to satisfy the obligations secured thereby.

9 16. Despite any false statements to the contrary in the

10 Notice of Default, for purposes of Civil Code § 2924(a)(1)(C), no

11 “beneficiary” under the Deed of Trust ever declared a default or

12 lawfully elected to cause the subject property to be sold. At no

13 time during March 2008 did MERS or AURORA have authority to elect

14 to conduct the sale under C.C. § 2924(a)(1)(C) or to exercise the

15 power of sale under the Deed of Trust. The Notice of Default was

16 void when issued because Quality was never the Trustee and lacked

17 any authority to issue the Notice of Default, and because AURORA,

18 MERS and Quality all lacked the authority to elect to conduct the

19 sale under § 2924(a)(1)(C).

20 17. On June 17, 2008 Quality recorded what it purported to

21 be a “Notice of Trustee Sale” with the Marin County Recorder,

22 document No. 2008-0028454. That instrument is void as Quality was

23 not the trustee and had no other legal authority to issue it. The

24 document also fails to identify the true beneficiary.

25 18. On December 29, 2008 Quality purported to sell the

26 subject property at a public auction and on the same day

27 purported to issue a Trustee’s Deed Upon Sale whereby it claims

28 to have granted title to the subject property to “AURORA LOAN

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First Amended Complaint

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1 SERVICES, LLC.” The Trustee’s Deed Upon Sale indicates: “The

2 grantee herein IS the foreclosing beneficiary.” AURORA is not a

3 bona fide purchaser of the subject property.

4 19. For reasons including but not limited to the allegations

5 in paragraph Nos. 6-18, above, the following instruments are void

6 ab initio:

7 (a) the Substitution of Trustee recorded on April 28, 2008

8 at the Marin County Recorder’s Office as document No. 2008-

9 0019429;

10 (b) the Notice of Default recorded March 13, 2008 at the

11 Marin County Recorder’s Office as document No. 2008-0011929;

12 (c) the Notice of Trustee’s Sale recorded June 17, 2008 at

13 the Marin County Recorder’s Office as document No. 2008-0028454;

14 and,

15 (d) the Trustee’s Deed Upon Sale recorded January 7, 2009 at

16 the Marin County Recorder’s Office as document No. 2009-0000526.

17 20. For the same reasons, the purported sale to AURORA is

18 void and neither AURORA nor MERS holds any interest in the

19 subject property.

20 21. Defendants’ lack of title, complained of herein, does

21 not result from mere irregularities with the conduct of the sale.

22 On the contrary, no party involved in the purported sale had

23 substantive legal right under the Deed of Trust or Civil Code §

24 2924(a)(1)(C) to elect to invoke the power of sale. Accordingly,

25 the sale is absolutely void, as opposed to being merely voidable.

26 22. At all pertinent times, officers, directors and managing

27 agents of AURORA and MERS had actual knowledge that MERS and

28 AURORA had no interest under the Deed of Trust and that Quality
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First Amended Complaint

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1 was not legally empowered to conduct a trustee sale or carry out

2 any other actions regarding the subject property under Civil Code

3 § 2924. Certain officers, directors and managing agents of AURORA

4 and MERS knew at every stage of the process such conduct was

5 wrongful and nevertheless continued on such course with

6 oppression, fraud and malice as those terms are defined under

7 Civil Code § 3294(c). Ever since the purported Trustee’s Deed

8 Upon Sal was issued, defendant AURORA has wrongfully exercised

9 control over the subject property; with officers, directors and

10 managing agents of AURORA authorizing this wrongful conduct and

11 ratifying the previous wrongful conduct.

12 23. Since the purported trustee sale AURORA and it’s agents

13 have harassed plaintiff, substantially interfered with

14 plaintiff’s ability to use and enjoy the subject property and

15 attempted to cause plaintiff to vacate the property

16 involuntarily, all the while knowing AURORA has no legitimate

17 interest in the property. Officers, directors and managing agents

18 of AURORA had actual knowledge of such conduct and directed such

19 conduct knowing it was wrongful.

20 24. At all pertinent times officers, directors and managing

21 agents of AURORA and MERS actually knew AURORA and MERS had no

22 true legal authority with regard to the Deed of Trust and the

23 subject property. In carrying out the acts and omissions

24 complained of herein, defendants acted toward plaintiff with

25 malice.

26 25. The acts and omissions of defendants, described herein,

27 were done with oppression, fraud and malice as defined in Civil

28 Code § 3294. For reasons including but not limited to the

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First Amended Complaint

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1 following, plaintiff should recover punitive damages:

2 (a) defendants’ conduct was so unreasonable they knew or should

3 have known it was highly probable that substantial harm would

4 result to plaintiff; (b) the acts and omissions of defendants

5 included intentional trespasses on plaintiff’s rights and

6 nuisances calculated to harm plaintiff.

7 26. As a direct and proximate result of defendants’ acts and

8 omissions, alleged above, plaintiff has wrongfully been deprived

9 of record title to the subject property; plaintiff’s title to the

10 subject premises has been disparaged; plaintiff has suffered

11 reduced enjoyment of the premises and physical injury including

12 but not limited to: stress, fright, shock, inability to sleep,

13 severe emotional distress and anxiety; costs and attorney fees;

14 as well as other damages.

15 27. The Deed of Trust contains attorney fee provisions at

16 paragraph Nos. 9 & 14.

17 First Cause of Action

TORTIOUS VIOLATION OF STATUTORY DUTIES
18 (against AURORA and MERS)

19 28. Plaintiff incorporates in this cause of action the

20 allegations of paragraphs 1 through 27, above.

21 29. Defendants’ acts and omissions as described above in

22 paragraph Nos. 6-25, and each of them, constituted substantial

23 violations of applicable laws, including but not limited to the

24 following: Civil Code §§ 1091, 1095, 1558, 1573, 1624(a), 1708,

25 2296, 2304, 2305, 2309, 2924, 2924(a)(1)(C), 2932.5, 2933, 2934a,

26 2934a(c) & 2936.

27 30. These laws were intended to prevent the type of harm

28 suffered by plaintiff. Plaintiff is the type of person such laws

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First Amended Complaint

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1 were intended to protect.

2 31. Defendants’ failure to obey these laws constituted per

3 se negligence and was a substantial factor in causing and/or was

4 the direct and proximate cause of damages to plaintiff. Said

5 damages include but are not limited to: those damages described

6 above in paragraph No. 26.

7 Second Cause of Action

SLANDER OF TITLE
8 (against AURORA and MERS)

9 32. Plaintiff incorporates in this cause of action the

10 allegations of paragraphs 1 through 27, above.

11 33. AURORA, MERS and their agent Quality recorded documents

12 which contained materially false information and/or were issued

13 without any legal or contractual authority, including but not

14 limited to: the Substitution of Trustee, the Notice of Default

15 and Election To Sell Under Deed of Trust, the Assignment of Deed

16 of Trust, the Notice of Trustee Sale and the Trustee’s Deed Upon

17 Sale.

18 34. The recording and other publication of these false

19 documents was not privileged. AURORA and MERS had no legal

20 interest in the subject loan or property. Said publication was

21 made with malice in that defendants knew such statements were

22 false or acted in reckless disregard of their truth or falsity

23 and defendants should have recognized publication of these

24 falsehoods was likely to cause harm to plaintiff.

25 35. The recording and other publication of these false

26 documents caused plaintiff’s title to the subject property to be

27 disparaged which proximately caused damage to plaintiff.

28 ///
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First Amended Complaint

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1 Third Cause of Action

NUISANCE
2 (against AURORA and MERS)

3 36. Plaintiff incorporates in this cause of action the

4 allegations of paragraphs 1 through 27, above.

5 37. Each of the actions and omissions of defendants, as

6 described above, and all of them taken together, constitute a

7 continuing nuisance, substantially depriving plaintiff of the

8 beneficial use and enjoyment of the premises.

9 38. As a direct and proximate result of defendants having

10 maintained said nuisance and having failed to abate said

11 nuisance, plaintiff has suffered and continues to suffer general

12 and special damages, as described above in paragraph No. 26.

13 Fourth Cause of Action

QUIET TITLE
14 (against AURORA only)

15
39. Plaintiff incorporates in this cause of action the
16
allegations of paragraphs 1 through 27, above.
17
40. Since approximately late December 2008 or early January
18
2009 AURORA has falsely claimed title to the subject property
19
under the Trustee’s Deed Upon Sale, recorded on January 7, 2009.
20
41. Plaintiff seeks a determination that as of the date of
21
filing this action that plaintiff owns title to the subject
22
property in fee simple absolute, free of any interest by AURORA.
23
Fifth Cause of Action
24 UNFAIR BUSINESS PRACTICES
(against AURORA and MERS)
25
42. Plaintiff incorporateS in this cause of action the
26
allegations of paragraphs 6 through 31, above.
27
43. Plaintiff bringS this action under Business and
28
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First Amended Complaint

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1 Professions Code § 17200 et seq. as a private person affected by

2 defendants’ unfair business practices.

3 44. At all times relevant herein, defendants were conducting

4 business under the laws of the State of California. In conducting

5 said business, defendants were obligated to comply with the laws

6 of the State of California.

7 45. It is the regular practice of defendants to record false

8 instruments, issue and record instruments they have no legal

9 authority to issue, make false allegations, conduct wrongful

10 foreclosures and disregard applicable laws relating to non-

11 judicial foreclosures and the title to real property, in ways

12 which include but are not limited to those described above. By

13 said acts and failures to act defendants have engaged in unfair

14 business practices in violation of Business and Professions Code

15 sections 17200 et seq.

16 46. By said unlawful business practices defendants have

17 without legal justification deprived plaintiff of record title to

18 the subject property and substantially deprived plaintiff of the

19 use and enjoyment of the property.

20 WHEREFORE, plaintiff prays for judgment as follows:

21 1. General damages,

22 2. Special damages,

23 3. Punitive damages,

24 4. Appropriate order(s) of abatement,

25 5. Reasonable attorney fees,

26 6. Costs,

27 7. Setting aside as void the following instruments:

28 (A) the Substitution of Trustee recorded on April 28, 2008

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First Amended Complaint

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1 at the Marin County Recorder’s Office as document No. 2008-

2 0019429;

3 (B) the Notice of Default recorded March 13, 2008 at the

4 Marin County Recorder’s Office as document No. 2008-0011929;

5 (C) the Notice of Trustee’s Sale recorded June 17, 2008 at

6 the Marin County Recorder’s Office as document No. 2008-0028454;

7 and,

8 (D) the Trustee’s Deed Upon Sale recorded January 7, 2009 at

9 the Marin County Recorder’s Office as document No. 2009-0000526.

10 8. For a determination of plaintiff’s interest in the

11 subject property against AURORA’s adverse claim; and,

12 9. Such other relief the Court deems just and proper.

13

14

15

16 Respectfully submitted,

17 Dated: November 8, 2010

____________________________
18 Richard Hurlburt
Attorney for plaintiff,
19 Earl A. Dancy

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