Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—SDCal: Mortgage Holder Failed to Show Trustee Sale Was Unlawful, (Jun 6, 2013)

By Jody Coultas, J.D.

A mortgage holder could not state California Unfair Competition Law (UCL) claims against GMAC Mortgage, LLC and Mortgage Electronic Registration System, Inc. (MERS) for allegedly unfair and deceptive business practices related to the foreclosure and trustee sale of the mortgage holder’s property, the federal district court in San Diego has held (Monreal v. GMAC Mortgage, LLC, June 4, 2013, Battaglia, A.).

The mortgage holder purchased a property in San Diego that was secured by a deed of trust that named MERS as the beneficiary. The trustee issued a notice of default and election to sell under the deed of trust. The Notice of Trustee’s Sale informed the mortgage holder of the unpaid balance on the loan and when the sale would take place. The mortgage holder sought restoration of all monies and property that may have been acquired as a result of the alleged UCL violations, restitution for out-of-pocket expenses and economic harm, and prejudgment interest.

The UCL prohibits three separate types of unfair competition: (1) unlawful acts or practices, (2) unfair acts or practices, and (3) fraudulent acts or practices. Violation of most federal, state, and local laws may serve as the basis for an unlawful claim under the UCL. Fraudulent acts under the UCL are those that are likely to deceive a reasonable public. An unfair business practice offends an established public policy or is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.

There was insufficient evidence to support the UCL unlawful prong claims, according to the court. The mortgage holder failed to clearly allege which laws or statutes were the predicate acts under the unlawful prong. Although the mortgage holder listed several statutes in different areas of the complaint, merely listing statutes without articulating specific facts to satisfy each element of the identified statute was insufficient. Also, the court dismisses each of the individual claims under the other statutes.

The court also dismissed the UCL claims under the fraud and unfair prongs. The mortgage holder alleged that the companies committed unfair and fraudulent acts by delivering and posting the Notice of Trustee’s Sale and proceeding with the sale without the legal authority to do so. None of the allegations meet the heightened pleading standard under Federal Rule of Civil Procedure 9(b) because there was no evidence of how each company participated in the alleged fraudulent scheme. The claims were dependent on allegations that the sale was void because the companies did not have standing to foreclose on the property. However, the mortgage holder failed to show that she was actually willing and able to pay the full amount due on the loan. Merely stating that she would tender the amount due was insufficient. The unfair and fraudulent prong claims that depended on the viability of the mortgage holder’s other claims were also dismissed based on the dismissal of those other claims.

The case is Civil No. 13cv743 AJB (NLS).

Attorneys: Joseph La Costa for Juana Monreal. Kenneth Sur Miller (Severson & Werson) for GMAC Mortgage, LLC.

Companies: GMAC Mortgage, LLC; Mortgage Electronic Registration System, Inc.

Cases: StateUnfairTradePractices CaliforniaNews