Mortgage Electronic Registration Systems v. Robinson, 45 F. Supp. 3d 1207

Background

In 2005 the Robinsons borrowed to buy a Northridge property; a recorded deed of trust named United Pacific Mortgage as lender and MERS as nominee/beneficiary with rights including the power to foreclose.
In January 2012 the Robinsons filed a quiet title action and recorded a lis pendens; they alleged the promissory note had been assigned to U.S. Bank but named only United Pacific Mortgage and "persons or entities unknown," and did not serve MERS.
The Robinsons obtained default judgment and an order expunging the deed of trust; that judgment was recorded in Los Angeles County.
MERS and MERSCORP filed this federal action seeking to set aside the quiet title judgment, assert procedural due process violations, cancel recorded instruments (notice of lis pendens and the judgment), and claim slander of title.
Defendants moved for judgment on the pleadings under Rule 12(c), arguing: MERS was not required to be named in the quiet title action; the federal court lacks subject-matter jurisdiction; Plaintiffs lack Article III standing; and Plaintiffs are not the real party in interest.
The Court denied the Rule 12(c) motion, concluding on the pleaded facts that MERS held an adverse, recorded claim (a lien/right to foreclose) that required naming in the quiet title action, and rejecting defendants’ jurisdictional, standing, and Rule 17 arguments.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether MERS had to be named in the Robinsons' quiet title action	Deed of trust designations gave MERS a recorded adverse claim (legal title to security interest and power to foreclose); therefore MERS was required to be named	MERS’s beneficiary status is a "fiction"/nominal; its identification as nominee means it need not be named	Held: MERS held a recorded adverse claim (a lien/right of sale) and thus should have been named; defendants’ argument rejected (Fontenot and other authorities support MERS status)
Subject-matter jurisdiction (diversity and federal-question)	Plaintiffs invoked diversity and a federal due process claim; federal court jurisdiction is proper	Robinsons argued state-court remedies made federal jurisdiction improper or claims unripe; invoked Rooker–Feldman as barring review	Held: Court retains jurisdiction — state remedies do not preclude diversity; ripeness/exhaustion arguments unpersuasive; Rooker–Feldman inapplicable because Plaintiffs were not parties to the state action
Article III standing	Alleged injuries: loss of MERS’s business model/revenue and deprivation of legal interests under the deed (legal title to security interest/ability to foreclose); relief would redress those injuries	Robinsons argued Plaintiffs alleged no concrete injury (no right to loan payments) and injuries were speculative	Held: Allegations suffice at pleading stage — both business injury and loss of legally protected interests (legal title/lien/right of sale) are cognizable for standing
Real party in interest (Rule 17)	Plaintiffs assert their own substantive rights under the deed of trust and seek to vindicate those rights	Robinsons contended Plaintiffs are not the real parties in interest	Held: Plaintiffs are proper real parties in interest because the suit seeks to redress injuries to MERS’s own substantive rights

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must allege enough facts to state a plausible claim)
Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542 (9th Cir. 1989) (standard for Rule 12(c) motions)
Sinaloa Lake Owners Ass'n v. City of Simi Valley, 864 F.2d 1475 (9th Cir. 1989) (not always required to exhaust state remedies for due process claims)
Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256 (Cal. Ct. App.) (deed naming MERS as beneficiary/nominee establishes MERS’s beneficiary status)
Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (Cal. Ct. App.) (deeds materially identical to the one at issue authorize MERS to foreclose)
Monterey S.P. P’ship v. W.L. Bangham, Inc., 49 Cal.3d 454 (1989) (security interest created by deed of trust is in practical effect a lien)
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 (1935) (right to enforce a lien/power of sale is a substantive property right)
Sprint Commc’ns Co. v. APCC Servs., Inc., 554 U.S. 269 (2008) (standing principles regarding legal title to claims)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing elements)