Velasco v. Security National Mortgage Co.
823 F. Supp. 2d 1061
D. Haw.2011Background
- Plaintiffs secured a mortgage on 534 Kuikahi Drive, Wailuku, Hawaii; Security was lender and MERS was nominee.
- MERS executed an Assignment transferring its interest to BAC, recorded January 12, 2010; BAC sent a Notice of Foreclosure in December 2009.
- Plaintiffs filed suit in April 2010 alleging predatory lending; multiple prior dismissals and an amended complaint followed.
- SAC asserts four counts: slander of title, conspiracy to slander title, UDAP, and breach of contract.
- Courts granted motions to dismiss the SAC with prejudice; the court also sua sponte dismissed the breach of contract claim as to all defendants.
- The court invoked Cervantes v. Countrywide to evaluate the legitimacy of MERS’s role and authority under the MERS system.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count I states a slander of title claim. | Velasco asserts the Assignment is false and malicious, harming title. | Assignment merely reflects MERS's limited rights as nominee; plaintiffs lack standing and can't challenge it. | Count I dismissed for lack of standing and failure to plead falsity or malice. |
| Whether Count II states a conspiracy to slander title claim. | Defendants conspired to record false documents and suppress information. | No underlying tort; allegations are conclusory and insufficient under Rule 8 and Twombly/Iqbal. | Count II dismissed. |
| Whether Count III states a UDAP claim under HRS § 481A-3(a). | Recording the Assignment is deceptive and would mislead the public about BAC’s interest. | Assignment is not false; UDAP requires factual support beyond conclusory claims. | Count III dismissed. |
| Whether Count IV states a breach of contract claim. | Doe 1 and Doe 6 breached a PSA affecting ownership/foreclosure rights. | Plaintiffs lack standing as third-party beneficiaries and fail to identify the PSA or provisions; pleadings are vague. | Count IV sua sponte dismissed; without prejudice to amendment but dismissed with prejudice as per Cervantes-influenced reasoning. |
Key Cases Cited
- Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir.2011) (validates MERS role and precludes fraud-based critiques of MERS authority)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must contain nonconclusory factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (claims must be pleaded with plausible factual context)
- McGlinchy v. Shell Chemical Co., 845 F.2d 802 (9th Cir.1988) (conclusory allegations insufficient to state a claim)
- Livonia Property Holdings, LLC v. 12810-12976 Farmington Road Holdings, LLC, 717 F. Supp. 2d 724 (E.D. Mich.2010) (standing to challenge assignments requires party to be bound by contract)
- Southcott v. Pioneer Title Co., 203 Cal.App.2d 673 (Cal. App. 1962) (elements of slander of title require falsity, malice, damages)
- Newtown Meadows v. Venture 15, Inc., 167 P.3d 225 (Haw. 2007) (third-party beneficiary standing requires intended benefit)