Rivera v. Mortgage Electronic Registration Systems, Inc. (In re Rivera)

Rivera v. Mortgage Electronic Registration Systems, Inc. (In re Rivera), Case No. CC-13-1505-KuPaTa (B.A.P. 9th Cir. Dec. 23, 2014)
AFFIRM bankruptcy court's ruling, dismissing adversary proceeding pursuant to Fed. R. Civ. P. 12(b)(6) (made applicable by Fed. R. Bankr. P. 7012), holding that, under California law, a borrower in default is not permitted to challenge pending nonjudicial foreclosure proceedings by seeking an advance determination of the foreclosing party's right to foreclose.
Procedural context:
Appeal from bankruptcy court's dismissal of adversary proceeding pursuant to Fed. R. Civ. P. 12(b)(6).
The Debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code, along with a complaint commencing an adversary proceeding against certain lending parties, seeking to derail the foreclosure proceedings pending against his real property. Among other things, by the complaint, the Debtor asserted that the assignment from the original mortgagee to Wells Fargo, as the trustee for the mortgage securitization trust, was invalid and, thus, Wells Fargo had no right to foreclose. The Debtor also acknowledged that he was in default under the mortgage loan. The defendants filed motions to dismiss asserting, inter alia, that California law permits foreclosures to proceed without requiring the foreclosing party to first prove in a judicial action that they are entitled to forclose. The bankruptcy court, in adopting the defendants' argument, dismissed the complaint without leave to amend and dismissed the adversary proceeding with prejudice. The Debtor timely appealed. Addressing three arguments made by the Debtor, the Bankruptcy Appellate Panel for the Court of Appeals for the Ninth Circuit held (1) California law does not permit a borrower to attack a nonjudicial foreclsoure proceeding by invoking either the alleged failure or alleged success of the securitization process, (2) California law also does not permit a borrower to impede a nonjudicial foreclosure proceeding by demanding an advance judicial determinationof the foreclosing beneficiary's right to enforce the note, and (3) the Debtor's bare assertion that the assignment of the deed of trust was robo-signed, without more, did not meet the pleading standards for fraud (i.e. pleading with particularity, and the elements of fraud under California law that require allegations of a misrepresentation, knowledge of the falsity, intent to defraud, justifiable reliance, and a resulting injury), especially where the Debtor has not disputed he has defaulted on his loan obligations.
Vincent Zurzolo

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