TIMOTHY L. MCCANDLESS, ESQ.

SBN 147715
1
LAW OFFICES OF TIMOTHY L. MCCANDLESS
2 13240 Amargosa Road
Victorville, California 92392
3
(760) 951-3663 Telephone
4
(909) 382-9956 Facsimile
5

6 Attorney for Plaintiffs

7
Fernando D. Tepora,
and Agnes Tepora
8

9
SUPERIOR COURT FOR THE STATE OF CALIFORNIA
10
IN AND FOR COUNTY OF SANTA CLARA
11

12 FERNANDO D. TEPORA
CASE NO:
13
and AGNES TEPORA,
Plaintiffs, COMPLAINT FOR:
14
MONETARY DAMAGES
15 V. STATUTORY DAMAGES, PUNITIVE
DAMAGES, INJUNCTIVE RELIEF AND
16 DECLARATORY RELIEF

17 1. VIOLATION OF CALIFORNIA CIVIL

OPTION 1 MORTGAGE CORP.; CODE §2923.6;
18 AMERICAN HOME MORTGAGE 2. VIOLATION OF BUSINESS AND
SERVICING INC.; HSBC BANK USA, PROFESSIONS CODE §17200;
19 3. BREACH OF COVENANT OF GOOD
NATIONAL ASSOCIATION AS TRUSTEE AND FAIR DEALING;
20 FOR SG MORTGAGE SECURITIES 4. INJUNCTIVE RELIEF;
TRUST 2005-OPT1; T.D. SERVICE 5. VIOLATION OF CIVIL CODE §1572;
21 COMPANY; AHMSI DEFAULT 6. FRAUD;
SERVICES, INC.; BENLI INVESTMENTS, 7. DECLARATORY RELIEF;
22 8. INTENTIONAL MISREPRESENTATION;
LLC.;
9. TO SET ASIDE FORECLOSURE
23
10. VIOLATION OF CALIFORNIA CIVIL
and DOES 1 through 50 inclusive CODES §2923.5 AND §2924.
24

25
Defendants.

26

27
Plaintiffs, FERNANDO D. TEPORA and AGNES TEPORA, (Hereinafter referred as
28 “Plaintiffs”) allege herein as follows:

1
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COMPLAINT
1 I.
2

3 GENERAL ALLEGATIONS

4 1. Plaintiffs, FERNANDO D. TEPORA and AGNES TEPORA at all times relevant have
5
been residents of the County of Santa Clara, State of California and the owners of Real
6
Property, including but not limited to the property at issue herein, 883 Cape Vincent
7

8
Place, San Jose, CA 95133-1531.

9 The Legal descriptions are as follows:

10 APN: 254-42-013
11
LOT 278, AS SHOWN ON THAT CERTAIN MAP OF TRACT NO. 5817, WHICH
12 MAP WAS FILED FOR RECORD IN THE OFFICE OF THE COUNTY
RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA
13
ON JANUARY 6, 1977, IN BOOK 386 OF MAPS, PAGES 37 TO 40.
14
2. Defendant, OPTION 1 MORTGAGE CORP., (hereinafter “OPTION 1”) at all times
15
herein mentioned was doing business in the County of Santa Clara, State of California
16

17 and was the original Lender for Plaintiff’s Trust Deed and Note.

18 3. Defendant AMERICAN HOME MORTGAGE SERVICING, INC., (hereinafter

19
“AMERICAN HOME MORTGAGE”) at all times herein mentioned was presumed to
20
being doing business in the County of Santa Clara, State of California and alleged to be
21
on the Deed of Trust.
22

23 4. Defendant, T.D. SERVICE COMPANY, (hereinafter “T.D. SERVICE”) at all times

24 herein mentioned was doing business in the County of Santa Clara, State of California
25
and was listed on the Notice of Default for the above named Real Property. (See
26
Exhibit “A”)
27

28

2
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COMPLAINT
 5. Defendant, AHMSI DEFAULT SERVICES, INC., (hereinafter “AHMSI”) at all times
1

2 herein mentioned was doing business in the County of Santa Clara, State of California

3 and was listed on the Notice of Trustee’s Sale for the above named Real Property. (See
4
Exhibit “B”)
5
6. Defendant, BENLI INVESTMENT, LLC., (hereinafter “BENLI”) at all times herein
6

7
mentioned was doing business in the County of Santa Clara, State of California and

8 bought the above named Real Property and received a Trustee’s Deed Upon Sale.
9 7. Defendant, HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR SG
10
MORTGAGE SECURITIES TRUST 2005-OPT1, (hereinafter “HSBC BANK”) at all
11
times herein mentioned was doing business in the County of Santa Clara, State of
12

13 California and was assigned the Deed of Trust from AMERICAN HOME

14 MORTGAGE and OPTION 1 on March 19, 2009. (See Exhibit “D”)

15
8. Plaintiffs are ignorant of the true names and capacities of defendants sued herein as
16
DOES 1 through 50, inclusive, and therefore sues these defendants by such fictitious
17
names and all persons unknown claiming any legal or equitable right, title, estate, lien,
18

19 or interest in the property described in the complaint adverse to plaintiff(s title, or any

20 cloud on Plaintiffs title thereto. Plaintiff will amend this complaint to allege their true
21
names and capacities when ascertained.
22
9. Plaintiffs are informed and believe and thereon allege that, at all times herein
23

24
mentioned each of the defendants sued herein was the agent and employee of each of

25 the remaining defendants. Plaintiffs allege that each and every defendant alleged herein
26 ratified the conduct of each and every other defendant. Plaintiffs further allege that at
27

28

3
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COMPLAINT
 all times said defendants were was acting within the purpose and scope of such agency
1

2 and employment.

3 10. Plaintiffs purchased the foregoing Real Property and on or about July 21, 2005
4
financed their purchase through OPTION 1 by virtue of a Trust Deed and Notes
5
securing the Loans.
6

7
11. Plaintiffs further allege that on or about February 13, 2009, Defendants allege that

8 Plaintiffs became in default of their loan. (See Exhibit “A”) However this default of
9 the loan was occasioned by the high payments, the structure of the loan and interest
10
rate. Furthermore, Plaintiffs were not in default because of the prior breach of the
11
terms of the notes by Defendants, and each of them, and therefore, the performance of
12

13 Plaintiffs is excused. In addition, the required Declaration of Due Diligence is not

14 attached to the Notice of Default, therefore, making the Notice invalid.

15
12. Plaintiffs allege that the loan contract was procedurally and substantively
16
unconscionable because while the Plaintiffs’ stated income at the time of making the
17
loan was unknown to plaintiff, whereas, the payment on the loan exceeded the
18

19 Plaintiffs’ entire spendable income, the employees and/or agents of OPTION 1did not

20 disclose to Plaintiffs the terms and conditions of the repayment, and Plaintiffs executed
21
documents without any explanation whatsoever.
22
13. Plaintiffs allege that the employees and/or agents of OPTION 1represented that said
23

24
employees and/or agents could work-around the fact that Plaintiffs’ credit was not in

25 good standing and could get Plaintiffs approved for the loan. Defendants did not
26 disclose at any time to Plaintiffs that the initial loan payment would exceed their entire
27

28

4
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COMPLAINT
 income. Plaintiffs allege that the loan contract, deed of trust and accompanying
1

2 documents were offered to Plaintiffs on a take it or leave it basis.

3 14. Further, on information and belief, Plaintiffs allege that the Defendants charged and
4
obtained improper fees for the placement of their loan as “sub-prime” when they
5
qualified for a prime rate mortgage which would have generated less in fees and
6

7
interest.

8 15. On information and belief, Plaintiffs allege that the service of the purported note was,
9 without their knowledge, by some means transferred from or by Defendant OPTION 1
10
either completely or by association to unknown defendants in various forms to be
11
determined to others which were of such a nature to render them a “Servicer.”
12

13 16. Plaintiff alleges that Defendant OPTION 1and a superior bargaining strength over

14 Plaintiff, and that Plaintiffs was relegated only the opportunity to adhere to the contract
15
or reject it, that OPTION 1drafted all of the documents related to the loan, that no
16
negotiations were possible between Plaintiffs and OPTION 1 and that the contract was
17
a contract of adhesion.
18

19 17. Plaintiff alleges that the loan was unconscionable in that the repayment terms were

20 unfair and unduly oppressive, because the payments exceeded Plaintiffs entire
21
combined income and as such, Defendants, and each of them, cannot enforce the terms
22
and conditions of the loan against Plaintiffs, and any non-judicial foreclosure arising
23

24
there from is void.

25 18. Plaintiff is informed and believes and thereupon alleges that Defendants, and each of
26 them, entered into a fraudulent scheme, the purpose of which was to make a loan to
27

28

5
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COMPLAINT
 Plaintiff, which Defendants, and each of them, were keenly aware that Plaintiff could
1

2 not afford, at a cost way above the then prevailing market rate, made loans to Plaintiff

3 and falsely represented to Plaintiff that they could not qualify for any other financing,
4
that Plaintiff could not qualify under any reasonably underwriting guidelines, that such
5
scheme was devised to extract illegal and undisclosed compensation from Plaintiff by
6

7
virtue of an undisclosed yield spread premium and which Defendants, and each of

8 them, shared in some presently unknown percentage.

9 19. Plaintiff is informed and believes and therefore alleges that their loans after they were
10
originated and funded were sold on multiple occasions, bundled into a group of Trust
11
Deeds and subsequently sold to investors as a Derivative, “Mortgage Backed Security”,
12

13 and that therefore none of these defendants, and each of them, owned this loan, or Note

14 and cannot be and are not the Beneficiary, or lawfully appointed trustee, and have no
15
right to declare a default, to cause notices of default to issue or to be recorded, or to
16
foreclose on Plaintiffs interest in the subject property, Defendants, and each of them,
17
were not the note Holder or the Note holder in due course or any Beneficiary at any
18

19 time in regards to this loan.

20 20. That none of these Defendants, and each of them, were ever disclosed as the
21
beneficiary in accordance with California Code of Civil Procedure section 2924 et seq.
22
Moreover The California Legislature passed Senate Bill 1137, impacting residential
23

24
mortgage lenders, foreclosure procedures and eviction procedures. The Governor has

25 signed this law into effect and it has taken effect as Urgency Legislation. The law has
26 three pertinent parts. It amends California Code of Civil Procedure Section 1161(b)
27
regarding notice of an eviction. It adds a provision strengthening the right of local
28

6
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COMPLAINT
 governments to adopt “blight” ordinances and moreover, it modifies the non-judicial
1

2 foreclosure procedures set forth in California Civil Code Section 2924. The legislature

3 recognized that the need for such legislation by stating as follows:

4

5
“…It is essential to the economic health of California for the state to ameliorate
6 the deleterious effects on the state economy and local economies and the
California housing market that will result from the continued foreclosures of
7 residential properties in unprecedented numbers by modifying the foreclosures
8
process to require mortgagees, beneficiaries, or authorized agents to contact
borrowers and explore options that could avoid foreclosure…”
9

10 This law is effective immediately and extends on to January 1, 2013. This law
11
impacts owner-occupied primary residences only and only loans made on January 1, 2003
12
and December 3, 2007. California Civil Code Section 2924 states in part:
13

14 Foreclosure:

15 The primary purpose for the Statute is foreclosure procedures and imposes an
16
unprecedented duty upon lenders relating to contact with borrowers. The Statute amends
17
provisions of the non-judicial foreclosure procedures found in California Code of Civil
18
Procedure §2924, by adding requirements for meetings, due diligence, and notification of
19

20 counseling. Some of the more important provisions include all of the following:

21
• The lender, beneficiary or authorized agent must wait thirty (30) days after contact is
22

23 made with the borrower, or thirty days (30) after satisfying the due diligence requirements

24 set forth in the Statute, in order to commence the filing of a Notice of Default.
25
• The contact requires that the borrower’s financial situation be assessed and requires that
26
the borrower and lender explore options for the borrower to avoid foreclosure.
27

28
This was not done by plaintiff or the lender.

7
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COMPLAINT
 • The Statute requires the lender or their authorized agent to advise the borrower that the
1

2 borrower has the right to a subsequent meeting within fourteen (14) days of the initial

3 contact.
4
• The borrower is to be provided a toll free telephone number available at HUD for
5
certified housing counseling agencies.
6

7
• The borrower may designate an authorized agent, such as a counseling service,

8 REALTOR® or attorney, to act as their authorized agent but must expressly approve any
9 workout agreement reached by that agent.
10
• The Notice of Default must include a declaration indicating that the lender has made the
11
contact or made a diligent effort to make the contact and will not apply in the event of
12

13 surrender of the property.

14 • If the Notice of Default was already recorded prior to the date of the Statute, this
15
declaration must be included in Notices of Sale.
16
• In the event that the lender is initially unable to contact the borrower, they must attempt
17
telephone contact on three separate occasions at three different times.
18

19 • The lender must provide the borrower with an (800) number that will be answered by a

20 live person during normal business hours and provide certain links to web pages. The web
21
page must be a prominent link and must link to the following information:
22
- Options for borrowers who cannot afford their payments.
23

24
- A list of financial documents to gather when discussing their options.

25 - A toll-free telephone number available by HUD for certified counseling services.

26 - A toll-free telephone number for borrower’s to discuss options to avoid foreclosure with
27
the lender or lender’s representative.
28

8
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COMPLAINT
 Defendants did not fully comply with this code therefore the title is not duly
1

2 perfected.

4
21. Plaintiffs further allege on information and belief that none of these alleged

5 beneficiaries or representatives of the Beneficiary have the original note to prove that
6
they are in fact the party authorized to conduct the foreclosure.
7
22. Plaintiffs further allege that the foreclosure sale of the Subject Property was not
8
executed in accordance with the requirements of California Civil Code Sections
9

10 2923.5, 2932.5 and Commercial Code section 3302 et seq.

11 23. That the notices and foreclosure failed to conform with the provisions of California
12
Civil Code Sections 2923.5, 2932.5 et seq., and Commercial Code section 3302
13
et seq. Furthermore, the Notice of Default did not have the required declaration as
14
required. Therefore, it is not a valid Notice of Default.
15

16 24. Plaintiffs further allege that California Civil Code section 2924 et seq. and its subparts

17 are being applied to Plaintiffs in a manner that is unlawful, because at least in part the
18
party acting as the Trustee proceeded with the foreclosure of Plaintiffs Subject
19
Property notwithstanding the fact that the Trustee was not in possession of the original
20

21
Note, that the Note when it was assigned, the assignment by OPTION 1 and its assigns,

22 did not covey the power of sale because it violated the terms of California Civil Code
23
section 2932.5, that the assignment when it was made, that the Note executed by
24
Plaintiff was no longer a negotiable instrument because the assignment was not
25
physically applied to the Note pursuant to the holding of Pribus v. Bush, (1981) 118
26

27 Cal.App.3d 1003, 173 Cal.Rptr. 747, although there was sufficient room on the back of

28

9
_________________________________________________
COMPLAINT
 the Note to complete the assignment, and as such the foreclosure of Plaintiff’s subject
1

2 property did not conform to the strict mandates of Civil Code section 2924.76.

3 25. Plaintiffs allege that the employees and/or agents of OPTION 1 represented that said
4
employees and/or agents could work-around the fact that Plaintiffs’ credit was not in
5
good standing and could get Plaintiffs approved for the loan. Defendants did not
6

7
disclose at any time to Plaintiffs that the initial loan payment would exceed their entire

8 income.
9 26. Plaintiffs allege that the loan contract, deed of trust and accompanying documents
10
were offered to Plaintiffs on a take it or leave it basis.
11
27. That by virtue of the method and manner of Defendants carrying out Civil Code
12

13 section 2924 et seq., the foreclosure of the Subject Property is void ab initio as a matter

14 of law.
15
28. Plaintiff alleges that Defendants, and each of them, are engaged in and continue to
16
engage in violations of California law including but, not limited to: Civil Code section
17
2924 et seq. and 2932.5 et seq., and unless restrained will continue to engage in such
18

19 misconduct, and that a public benefit necessitates that Defendants be restrained from

20 such conduct in the future.

21
II.
22
CALIFORNIA LEGISLATURE FINDINGS
23

24 29. Recently, the California Legislature found and declared the following in enacting
25
California Civil Code 2923.6 on July 8, 2008:
26

27

28

10
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COMPLAINT
1 (a) California is facing an unprecedented threat to its state economy because
2 of skyrocketing residential property foreclosure rates in California. Residential
3 property foreclosures increased sevenfold from 2008 to 2007, in 2007, more than
4 84,375 properties were lost to foreclosure in California, and 254,824 loans went
5 into default, the first step in the foreclosure process.
6

7 (b) High foreclosure rates have adversely affected property values in

8 California, and will have even greater adverse consequences as foreclosure rates
9 continue to rise. According to statistics released by the HOPE NOW Alliance the
10 number of completed California foreclosure sales in 2007’ increased almost
11 threefold from 2002 in the first quarter to 5574 in the fourth quarter of that year.
12 Those same statistics report that 10,556 foreclosure sales, almost double the
13 number for the prior quarter, were completed just in the month of January 2008.
14 More foreclosures means less money for schools, public safety, and other key
15 services.
16

17 (c) Under specified circumstances, mortgage lenders and servicers are

18 authorized under their pooling and servicing agreements to modify mortgage loans
19 when the modification is in the best interest of investors. Generally, that
20 modification may be deemed to be in the best interest of investors when the net
21 present value of the income stream of the modified loan is greater than the amount
22 that would be recovered through the disposition of the real property security
23 through a foreclosure sale.
24

25 (d) It is essential to the economic health of California for the state to

26 ameliorate the deleterious effects on the state economy and local economies and
27 the California housing market that will result from the continued foreclosures of
28 residential properties in unprecedented numbers by modifying the foreclosure

11
_________________________________________________
COMPLAINT
1 process to require mortgagees, beneficiaries, or authorized agents to contact
2 borrowers and explore options that could avoid foreclosure. These Changes in
3 accessing the state's foreclosure process are essential to ensure that the process
4 does not exacerbate the current crisis by adding more foreclosures to the glut of
5 foreclosed properties already on the market when a foreclosure could have been
6 avoided. Those additional foreclosures will further destabilize the housing market
7 with significant, corresponding deleterious effects on the local and state economy.
8
(e) According to a survey released by the Federal Home Loan Mortgage
9
Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-
10
paying borrowers do not know their lenders may offer alternative to help them
11
avoid foreclosure.
12

13
(f) As reflected in recent government and industry-led efforts to help troubled
14
borrowers, the mortgage foreclosure crisis impacts borrowers not only in
15
nontraditional loans, but also many borrowers in conventional loans.
16

17
(g) This act is necessary to avoid unnecessary foreclosures of residential
18
properties and thereby provide stability to California's statewide and regional
19
economies and housing market by requiring early contact and communications
20
between mortgagees, beneficiaries, or authorized agents and specified borrowers
21
to explore options that could avoid foreclosure and by facilitating the modification
22
or restructuring of loans in appropriate circumstances.
23

24
30. “Operation Malicious Mortgage’ is a nationwide operation coordinated by the U.S.
25
Department of Justice and the FBI to identify, arrest, and prosecute mortgage fraud
26
violators.” San Diego Union Tribune, June 19, 2008. As shown below, Plaintiffs were
27

28 victims of such mortgage fraud.

12
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COMPLAINT
 31. "Home ownership is the foundation of the American Dream. Dangerous mortgages
1

2 have put millions of families in jeopardy of losing their homes.” CNN Money,

3 December 24, 2007. The Loan which is the subject of this action to Plaintiff is of such
4
character.
5
32. "Finding ways to avoid preventable foreclosures is a legitimate and important concern
6

7
of public policy. High rates of delinquency and foreclosure can have substantial

8 spillover effects on the housing market, the financial markets and the broader
9 economy. Therefore, doing what we, can to avoid preventable foreclosures is not just
10
in the interest of the lenders and borrowers. It's in everybody's best interest." Ben
11
Bernanke, Federal Reserve Chairman, May 9, 2008.
12

13 33. Plaintiff alleges that Defendants had the duty to prevent such foreclosure, but failed to

14 so act.
15
34. "Most of these homeowners could avoid foreclosure if present loan holders would
16
modify the existing loans by lowering the interest rate and making it fixed, capitalizing
17
the arrearages, and forgiving a portion of the loan. The result would benefit lenders,
18

19 homeowners, and their communities.” CNN Money, id.

20 35. On behalf of President Bush, Secretary Paulson has encouraged lenders to voluntarily
21
freeze interest rates on adjustable-rate mortgages. Mark Zandl, chief economist for
22
Mood’s commented, “There is no stick in the plan. There are a significant number of
23

24
investors who would rather see homeowners default and go into foreclosure.” San

25 Diego Union Tribune, id.

26

27

28

13
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COMPLAINT
 36. “Fewer than l%· of homeowners have experienced any help "from the Bush-Paulson
1

2 plan.” San Diego Union Tribune, id. Plaintiffs' are not of that sliver that have

3 obtained help.
4
37. The Gravamen of Plaintiff's complaint is that Defendants violated State laws which
5
were specifically enacted to protect such abusive, deceptive, and unfair conduct by
6

7
Defendants, and that Defendants cannot legally enforce a non-judicial foreclosure.

8 38. Plaintiff is a "debtor" as defined by the Rosenthal Act, California Civil Code
9 1788.2(h).
10
39. Defendants are engaged in the collection of debts from consumers using the mail and
11
telephone.
12

13 40. Defendants regularly attempt to collect consumer debts alleged to be due to another.

14 41. Defendants are "debt collectors" as defined by the Rosenthal Act, California Civil
15
Code §1788.2(c).
16
42. The purported debt which Defendants attempted to collect from Plaintiff was a
17
"consumer debt" as defined by the Rosenthal Act, California Civil Code §1788.2(f).
18

19

20
Defendants Are Not Holders In Due Course Since Plaintiff Was Duped Into An
21
Improper Loan And There Is No Effective Endorsement:
22

23 43. Plaintiff incurred a "debt" as that term is defined by California Civil 17 Code

24 §1788(d), when he obtained a Loan on their Personal Residence.

25
44. The loan is memorialized via a Deed of Trust and Promissory Note, each of which
26
contain an attorney fees provision for the lender should they prevail in the enforcement
27

28
of their contractual rights.

14
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COMPLAINT
 45. Plaintiff has no experience beyond basic financial matters.
1

2 46. Plaintiff was never explained the full terms of their loan, including but not limited to

3 the rate of interest how the interest rate would be calculated, what the payment
4
schedule should be, the risks and disadvantages of the loan, the prepay penalties, the
5
maximum amount the loan payment could arise to.
6

7
47. Certain fees in obtaining the loan, were also not explained to the Plaintiff, including

8 but not limited to "underwriting fees," "registration fee," "appraisal fees," "broker
9 fees”, “loan tie in fees," etc.
10
48. A determination of whether Plaintiff would be able to make the payments as specified
11
in the loan was never truly made.
12

13 49. Plaintiff's income was never truly verified.

14 50. Plaintiff was rushed when signing the documents; the closing process provided no
15
time for review and took minutes to accomplish.
16
51. Plaintiff could not understand any of the documents and signed them based on
17
representations and the trust and confidence the Plaintiff placed in Defendants’
18

19 predecessors.

20 52. Plaintiff is informed and believes that Defendants and/or Defendants' predecessors
21
established and implemented the policy of failing to disclose material facts about the
22
Loan, failing to verify Plaintiff's income, falsifying Plaintiff's income, agreeing to
23

24
accept a Yield Spread Premium, and causing Plaintiff's Loan to include a penalty for

25 early payment.
26

27

28

15
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COMPLAINT
 53. Plaintiff is informed and believes that Defendants and/or Defendants’ predecessors
1

2 established such policy so as to profit, knowing that Plaintiff would be unable to

3 perform future terms of the Loan.

4
54. Plaintiff was a victim of Fraud in the Factum since the forgoing misrepresentations
5
caused them to obtain the home loan without accurately realizing, the risks, duties, or
6

7
obligations incurred.

8 55. The Promissory Note contains sufficient space on the note itself for endorsement
9 whereby any assignment by allonge is ineffective pursuant to Pribus v. Bush, 118 Cal.
10
App. 3d 1003 (May 12, 1981).
11
56. Defendants are not holders in due course due to Fraud in Factum and ineffective
12

13 endorsement.

14
Defendants’ Lack Standing To Conduct A Non-Judicial Foreclosure
15
Pursuant To California Civil Code 2932.5
16

17
57. Defendants have no standing to enforce a non-judicial foreclosure.
18
58. Defendants are strangers to this transaction, and have no authority to go forward with
19
the foreclosure and Trustee's Sale.
20

21 59. Plaintiff executed a Promissory Note (hereinafter the “Note”) and a Deed of Trust to

22 OPTION 1.
23
60. OPTION 1is the Lender and only party entitled to enforce the Note and any security
24
interest with it.
25

26
61. T.D. SERVICE and AHMSI and BENLI are not listed anywhere in the Deed of Trust

27 or Promissory Note.
28

16
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COMPLAINT
 62. In California, California Civil Code § 2932.5 governs the Power of sale under an
1

2 assigned mortgage, and provides that the power of sale can only vest in a person

3 entitled to money payments: "Where a power to sell real property is given to a

4
mortgagee, or other encumbrancer, in an instrument intended to secure the payment of
5
money, the power is part of the security and vests in any person who by assignment
6

7
becomes entitled to payment of the money secured by the instrument. The power of

8 sale may be exercised by the assignee if the assignment is duly acknowledged and
9 recorded.”
10
63. The Santa Clara County Recorder's Office contains an “Assignment of Deed of Trust”
11
recorded assignment from AMERICAN HOME MORTGAGE and OPTION 1 to
12

13 HSBC dated March 19, 2009. (See Exhibit “D”) The Assignment of Deed of Trust

14 made on March 19, 2009 was made after the Notice of Default on February 13, 2009
15
and there was no Amended Notice of Default recorded.
16
64. According to California Real Estate 3d §10:182, “when the beneficiary assigns the note
17
after the notice of default has been recorded, the information identifying the
18

19 beneficiary is no longer accurate. A party who takes an assignment of a security

20 interest after a notice of default is recorded is required to record and mail an

21
amended notice of default. The recorded amended notice does not start a new period,
22
but it must be recorded within a reasonable time prior to sale.”
23

24
65. The power of sale may not be exercised by any of the Defendants since there was

25 never an amended Notice of Default filed and recorded.

26

27

28

17
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COMPLAINT
 66. Since the Defendants did not comply with California Civil Code§2932.5, the Notice
1

2 of Default provisions of California Civil Code § 2924 and Notice of Trustee’s Sale

3 were likewise never complied with.

4
67. T.D. SERVICE never complied with the Notice of Default provisions of California
5
Civil Code §2924. (See Exhibit “B”)
6

7
68. AHMSI never complied with the Notice of Trustee’s Sale provisions of California

8 Civil Code §2924. (See Exhibit “C”)

9
Defendants’ Lack of Standing to Enforce A Non-Judicial Foreclosure Pursuant To
10
California Commercial Code § 3301
11

12 69. A promissory note is person property and the deed of trust securing a note is a mere
13
incident of the debt it secures, with no separable ascertainable market value.
14
California Civil Code §§ 657, 663. Kirby v. Palos Verdes Escrow Co., 183 Cal. App.
15

16 3d 57, 62.

17 70. Any transfers of the notice and mortgage fundamentally flow back to the note:
18
"The assignment of a mortgage without a transfer of the Indebtedness confers no right,
19
since debt and security are inseparable and the mortgage alone is not a subject of
20
transfer, " Hyde v. Mangan (1891) 88 Cal. 319, 26 P 180, 1891 Cal LEXIS 693;
21

22 Johnson v, Razy (1919)181 Cal 342, 184 P 657; 1919 Cal LEXIS 358;

23 Bowman v. Sears (1923, Cal App) 63 Cal App 235, 218 P 489, 1923 Cal App LEXIS
24
199; Treat v. Burns (1932) 216 Cal 216, 13 P2d,724, 1932 Cal LEXIS 554.
25
71. ''A mortgagee's purported assignment of the mortgage without an assignment of the
26

27
debt which is secured is a legal nullity.” Kelley V. Upshaw (1952) 39 Cal 2d 179,

28 246 P2d 23, 1952 Cal. LEXIS 248.

18
_________________________________________________
COMPLAINT
 72. ''A trust deed has no assignable quality independent of the debt; it may not be
1

2 assigned or transferred apart from the debt; and an attempt to assign the trust deed

3 without a transfer of the debt is without effect.” Domarad v. Fisher & Burke, Inc.
4
(1969 Cal. App. 1st Dist) 270 Cal. App. 2d 543, 76 Cal. Rptr. 529, 1969 Cal. App.
5
LEXIS 1556.
6

7
73. The Promissory Note is a negotiable instrument.

8 74. Transferring a Deed of Trust by itself does not allow enforcement of the instrument
9 unless the Promissory Note is properly negotiated.
10
75. Where an instrument has been transferred, enforceability is determined based upon
11
possession.
12

13 76. California Commercial Code § 3301 limits a negotiable instrument's enforcement to

14 the following:
15
"Person entitled. to enforce" an Instrument means (a) the holder of the instrument,
16
(b) a nonholder in possession of the instrument who has the rights of a holder, or
17
(c) a person not in possession of the instrument who is entitled to enforce the
18

19 instrument pursuant to

20 Section 3309 or subdivision (d) of Section 3418. A person may be a person entitled
21
to enforce the instrument even though the person is not the owner of the instrument
22
or is in wrongful possession of the instrument.
23

24
77. None of the Defendants are present holders of the instrument.

25 78. None of the Defendants are nonholders in possession of the instrument who has rights
26 of the holder.
27

28

19
_________________________________________________
COMPLAINT
 79. None of the Defendants are entitled to enforce the instrument pursuant to section
1

2 3309 or subdivision (d) of Section 3418.

3 80. Defendants have no enforceable rights under California Commercial Code 3301(a) to
4
enforce the negotiable instrument.
5
81. Since there is no right to enforce the negotiable instrument, the Notice of Default
6

7
provisions of California Civil Code § 2924 and Notice of Sale provisions of California

8 Civil Code § 2924(f) were likewise never complied with, and there is no subsequent
9 incidental right to enforce any deed of trust and conduct a non-judicial foreclosure.
10
82. That the Trustee and the loan servicer are acting as agents of the Beneficiary and
11
signing documents as the agent of the agent of the agent of the Beneficiary for
12

13 Plaintiffs Notes and the notices therein, notwithstanding the fact that the Notes were

14 not negotiable prior to the sale of the Subject Property.

15
83. That by virtue of the method and manner of Defendants carrying out Civil Code
16
section 2924 et seq., the foreclosure of the Subject Property is void ab initio as a matter
17
of law.
18

19

20 III.
21
FIRST CAUSE OF ACTION
22
VIOLATION OF CALIFORNIA CIVIL CODE §2923.6
23
(As Against All Defendants)
24

25

26
84. Plaintiffs reallege and incorporate by reference the above paragraphs 1 through 83 as
27
though set forth fully herein.
28

20
_________________________________________________
COMPLAINT
 85. Defendants’ Pooling and Servicing Agreement (hereinafter “PSA”) contains a duty to
1

2 maximize net present value to its investors and related parties.

3 86. California Civil Code 2923.6 broadens and extends this PSA duty by requiring
4
servicers to accept loan modifications with borrowers.
5
87. Pursuant to California Civil Code 2923.6(a), a servicer acts in the best interest of all
6

7
parties if it agrees to or implements a loan modification where the (1) loan is in

8 payment default, and (2) anticipated recovery under the loan modification or workout
9 plan exceeds the anticipated recovery through foreclosure on a net present value basis.
10
88. California Civil Code 2923.6(b) now provides that the mortgagee, beneficiary, or
11
authorized agent offer the borrower a loan modification or workout plan if such a
12

13 modification or plan is consistent with its contractual or other authority.

14 89. Plaintiffs’ loan is presently in an uncertain state.

15
90. Plaintiffs are willing, able, and ready to execute a modification of their loan on a
16
reasonable basis
17

18 (a) New Loan Amount: $506,565.00

19 (b) New Interest Rate: 4%
20 (c) New Loan Length: 30 years
21 (d) New Payment: $2,418.42
22
91. The present fair market value of the property is $584,500.00.
23

24 92. The Joint Economic Committee of Congress estimated in June, 2007, that the average

25 foreclosure results in $77, 935.00 in costs to the homeowner, lender, local government,
26
and neighbors.
27

28

21
_________________________________________________
COMPLAINT
 93. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress
1

2 estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial

3 foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the

4
property to a third party. Freddie Mac places this loss higher at $58,759.00.
5
94. Pursuant to California Civil Code §2823.6, Defendants are now contractually bound
6

7
to accept the loan modification as provided above and tender is deemed made pursuant

8 to Defendants’ Pooling and Service Agreement, California Civil Code 2923.6(a), and
9 California Civil Code 2923.6(b), taken individually or entirely. Plaintiffs invoke the
10
remedies embodied in the aforementioned agreement and/or codes with a willingness
11
to execute a modification of their loan.
12

13 95. Alternatively, Plaintiffs allege that tender, if any, is excused by obstruction or

14 prevention or imposition of unwarranted conditions by the person or corporate entity to

15
whom it was to be made.
16
96. Alternatively, Plaintiffs allege that obstruction or imposition of unwarranted conditions
17
by defendants occurred when defendants evaded the plaintiffs’ attempts to provide
18

19 tender as specified and encouraged by defendants’ pooling agreement, California Civil

20 Code 2923.6(a), and California Civil Code 2923.6(b). [Hudson v. Morton, 231 Ala.
21
392, 165 So. 227 (1936); Loftis v. Alexander, 139 Ga. 346, 77 S.E. 169 (1913);
22
Kennedy v. Neil, 333 Ill. 629, 165 N.E. 148 (1929); Borden v. Borden, 5 Mass. 67,
23

24
1809 WL 989 (1809); Loughney v. Quigley, 279 Pa. 396, 123 A. 84 (1924); Montague

25 Corp. v. E.P. Burton Lumber Co., 136 S.C. 40, 134 S.E. 147 (1926); Stansbury V.
26 Embrey, 128 Tenn. 103, 158 S.W. 991 (1913); Loehr v. Dickson, 141 Wis. 332, 124
27
N.W. 293 (1910)]
28

22
_________________________________________________
COMPLAINT
 97. Alternatively, Plaintiffs further allege that obstruction or imposition of unwarranted
1

2 conditions by defendants occurred when defendants manifested to the Plaintiffs that

3 tender, if made, will not be accepted, the Plaintiffs are excused from making tender as
4
it would be a futile gesture, and the law will not require the doing of a useless act.
5
[Simmons v. Swan, 275 U.S. 113, 48 S. Ct. 52, 72 L. Ed. 190 (1927); Lee v. Joseph E.
6

7
Seagram & Sons, Inc., 552 F.2d 447 (2d Cir. 1977); Buckner v. Tweed, 157 F.2d 211

8 (App. D.C. 1946); Peterson v. Hudson Ins. Co., 41 Ariz. 31, 15 P.2d 249 (1932);
9 Woods-Drury, Inc. v. Superior Court in and for City and County of San Francisco, 18
10
Cal. App. 2d 340, 63 P.2d 1184 (1st District 1936); Chesapeake Bay Distributing Co. v.
11
Buck Distributing Co., Inc. 60 Md. App. 210, 481 A.2d 1156 (1984); Issacs v.
12

13 Caterpillar, Inc., 765 F. Supp. 1359 (C.D. Ill. 1991); Platsis v. Diafokeris, 68 Md. App.

14 257, 511 A.2d 535 (1986)]

15
98. Alternatively, Plaintiffs further allege that obstruction or imposition of unwarranted
16
conditions by defendants occurred when defendants’ objection for want of actual
17
tender of money is waived by defendants’ refusal to receive the money if produced.
18

19 [Shaner v West Coast Life Ins. Co, 73F.2d 681 (C.C.A. 10th Cir. 1934); Buell v. White,

20 908 P.2d 1175 (Colo. Ct. App. 1995) (when party, who is willing and able to pay,
21
offers to pay another a sum of money and is advised that it will not be accepted, offer
22
amounts to tender even though money is not produced); Hall v. Norwalk Fire Ins. Co.,
23

24
57 Conn. 105, 17 A. 356 (1888); Lamar v. Sheppard, 84 Ga. 561, 10 S.E. 10984

25 (1890); Ventres v. Cobb, 105 Ill. 33, 1882 WL 10475 (1882); Metropolitan Credit
26 Union v. Matthes, 46 Mass. App. Ct. 326, 706 N.E.2d 296 (1999)].
27

28

23
_________________________________________________
COMPLAINT
1 SECOND CAUSE OF ACTION
2 (VIOLATION OF BUSINESS AND PROFESSIONS CODE §17200
3 (As Against All Defendants)
4

5 99. Plaintiffs reallege and incorporate by reference the allegations of paragraphs 1 through
6 98, inclusive, as though set forth at length herein again.
7 100. Beginning in July 21, 2005, and continuing to the present time, Defendants
8
committed acts of unfair competition as defined by Business and Professions Code §
9
17200, by engaging in the following practices:
10
101. These acts and practices, as described in the previous paragraphs, violate Business
11
and Professions Code § 17200 because their policies and practices described above
12
violate all the statutes as previously listed and California Civil Code § 1709, and
13
consequently, constitute and unlawful business act of practice within the meaning of
14
Business and Professions Code § 17200.
15

16
102. The harm to Plaintiffs and to members of the general public outweighs the utility of
17
Defendants’ policy and practices, consequently, constitute an unlawful business act of
18
practice within the meaning of Business and Professions Code §17200.
19

20 103. Further, the foregoing conduct threatens an incipient violation of a consumer law,

21 including or violates the policy or spirit of such law or otherwise significantly threatens
22
or harms competition. Defendants’ practices described above are likely to mislead
23
the general public, and therefore, constitute a fraudulent business act of practice within
24

25
the meaning of Business and Professions Code §17200. The Defendants’ unfair,

26 unlawful, and fraudulent business practices and false and misleading advertising
27
present a continuing threat to members of public in that other consumers will be
28

24
_________________________________________________
COMPLAINT
 defrauded into closing on similar fraudulent loans. Plaintiffs and other members of the
1

2 general public have no other adequate remedy of law.

3 104. As a result of the aforementioned acts, Plaintiffs have lost money or property and
4
suffered injury in fact. Defendants received and continue to hold Plaintiffs’ money and
5
other members of the public who fell victim to Defendants’ scheme.
6

8 THIRD CAUSE OF ACTION

9 BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
10 (Only Against OPTION 1)
11

12

13
105. Plaintiffs repeat and reallege Paragraphs 1 through 104 as though fully set forth

14 herein.
15 106. Plaintiffs allege that at all times there existed an implied covenant of good faith and
16
fair dealing requiring Defendants, and each of them, to safeguard, protect, or otherwise
17
care for the assets and rights of Plaintiffs. Said covenant prohibited Defendants from
18

19 activities interfering with or contrary to the rights of Plaintiffs.

20 107. Plaintiffs allege that the commencement of foreclosure proceedings upon the
21
property lawfully belonging to Plaintiffs without the production of documents
22
demonstrating the lawful rights for the foreclosure constitutes a breach of the covenant.
23
108. Defendants breach the provisions as contained within the “Deed of “Trust” which
24

25 cited the lender as OPTION 1.

26 109. Defendants breached the provisions as contained within the “Adjustable Rate Note”
27
promising to pay OPTION 1a monthly payment.
28

25
_________________________________________________
COMPLAINT
 110. Plaintiffs paid timely monthly payments in accordance with the “Adjustable Rate
1

2 Note” to OPTION 1or its agents.

3 111. As a consequence and proximate result, Plaintiffs has been damaged in a sum to be
4
proven at trial.
5

6 FOURTH CAUSE OF ACTION

7 INJUNCTIVE RELIEF

8 (Against all Defendants)

9
112. Plaintiffs repeat and reallege Paragraphs 1 through 111 as though fully set forth
10

11
herein.

12 113. Plaintiffs seek a determination as to the legal status of the parties as to the
13 Adjustable Rate Note and the Deed of Trust.
14
114. The Adjustable Rate Note states that the Lender is OPTION 1.
15
115. It also states, “Lender or anyone who takes this Note by transfer and who is entitled
16

17 to receive payment under this Note is called the “Note Holder.”

18 116. OPTION 1sent to Plaintiffs a statement with a coupon asking for payment.
19
117. Defendants should be required to provide the original note with the appropriate
20
endorsements thereon to Plaintiffs or this Honorable Court so that it may determine
21
under California law, who owns the right to receive payments and exercises the rights
22

23 relating to said ownership.

24 118. Only the Note Holder is authorized to collect payments and, in the event of a
25
default, commence foreclosure proceedings, including authorizing the substitution of a
26
Trustee.
27

28

26
_________________________________________________
COMPLAINT
 119. Until Defendants are able to provide Plaintiffs and this Honorable Court the
1

2 aforementioned documents, this Honorable Court should order that Plaintiffs are not

3 required to make any further payments on the Adjustable Rate Note and enjoin any
4
further collection activity on the Note, including staying the count down towards the
5
date a Notice of Trustee’s sale may be filed and served.
6

7 FIFTH CAUSE OF ACTION

8 VIOLATION OF CIVIL CODE §1572
9 (As to All Defendants)
10

11
120. Plaintiff realleges and incorporates by reference the above paragraphs 1 through
119 as though set forth fully herein.
12
121. The misrepresentations by Defendants’ and/or Defendants’ predecessors, failures to
13
disclose, and failure to investigate as described above were made with the intent to
14
induce Plaintiff to obligate himself on the Loan in reliance on the integrity of
15
Defendants and/or Defendants’ predecessors.
16
122. Plaintiff is an unsophisticated customer whose reliance upon Defendants
17 and/or Defendants’ predecessors was reasonable and consistent with the
18 Congressional intent and purpose of California Civil Code § 1572 enacted in 1872 and
19 designed to assist and protect consumers similarly situated as Plaintiff in this action.
20 123. As an unsophisticated customer, Plaintiff could not have discovered the true nature

21
of the material facts on their own.
124. The accuracy by Defendants and/or Defendants’ predecessors of representation is
22
important in enabling consumers such as Plaintiff to compare market lenders in order
23
to make informed decisions regarding lending transactions such as a loan.
24
125. Plaintiff was ignorant of the facts which Defendants and/or Defendants’
25
predecessors misrepresented and failed to disclose.
26
126. Plaintiff’s reliance on Defendants and/or Defendants’ predecessors was a
27 substantial factor in causing their harm.
28

27
_________________________________________________
COMPLAINT
 127. Had the terms of the Loan been accurately represented and disclosed by Defendants
1
and/or Defendants’ predecessors, Plaintiff would not have accepted the Loan nor been
2
harmed.
3
128. Had Defendants and/or Defendants’ predecessors investigated Plaintiff’s financial
4
capabilities, they would have been forced to deny Plaintiff on this particular loan.
5
129. Defendants and/or Defendants’ predecessors conspired and agreed to commit the
6 above mentioned fraud.
7 130. As a proximate result of Defendants and or Defendants’ predecessors fraud,
8 Plaintiff has suffered damage in an amount to be determined at trial.
9 131. The conduct of Defendants and/or Defendants’ predecessors as mentioned above

10 was fraudulent within the meaning of California Civil Code § 3294(c)(3), and by virtue
11
thereof Plaintiff is entitled to an award of punitive damages in an amount sufficient to
12
punish and make an example of the Defendants.
13

14

15
SIXTH CAUSE OF ACTION
16
FOR FRAUD
17 (Against All Defendants)
18 132. Plaintiff repeats and realleges Paragraphs 1 through 131 as though fully set forth
19
herein.
20
133. An unknown employee of T.D. SERVICE executed on behalf the alleged
21

22 Beneficiary a “Notice of Default” which stated that the payments were due. “Notice of

23 Breach and Default and of Election to Cause Sale of Real Property Under Deed of
24
Trust” (See Exhibit “A”)
25
134. On the Notice of Breach, it stated, in part, that Plaintiffs as Trustor, to secure
26
certain obligations in favor of Defendants, as beneficiary.
27

28 135. It further states that:

28
_________________________________________________
COMPLAINT
1 That by reason thereof of the present Beneficiary under such deed of
2 Trust has executed and delivered to said duly appointed Trustee a
3 written Declaration of Default and Demand for Sale and has
4 deposited with said duly appointed Trustee such Deed of Trust and
5 all documents evidencing obligations secured thereby and has
6 declared and does hereby declared all sums secured thereby
7 immediately due and payable and has elected and does hereby elect
8 to cause the trust property to be sold to satisfy the obligations served
9 thereby.
10
136. This representation was made by these defendants in order to induce reliance by
11

12 Plaintiffs.

13 137. Plaintiffs did rely on these representations and because of their reliance their
14
property has been foreclosed and Plaintiffs reliance was justified.
15
138. Plaintiffs is informed and believes that the representation as stated on the Notice of
16

17
Default were a false representation in the following particular(s)

18 A. Documents were not provided to the trustee that showed that OPTION 1 was the
19 Beneficiary and entitled to the payments.
20
B. At the time OPTION 1 made the representations they knew they were false and were made
21
for the sole purpose of inducing reliance.
22

23 139. Plaintiffs allege that Defendants, and each of them, were engaged in an illegal

24 scheme the purpose of which was to execute loans secured by real property in order to
25
make commissions, kick-backs, illegal undisclosed yield spread premiums, and
26
undisclosed profits by the sale of any instruments arising out of the transaction and to
27
make loans to borrowers that they could not afford to repay given their stated financial
28

29
_________________________________________________
COMPLAINT
 situation. Plaintiffs allege that Defendants, and each of them, have represented to
1

2 plaintiffs and to third parties that they were the owner of the Trust Deed and Note as

3 either the Trustee or the Beneficiary regarding Plaintiffs real property. Based on this
4
representation they caused a Notice of Default to be issued and recorded without
5
disclosing their true role, and thereafter a notice of intent to foreclose and finally they
6

7
executed a foreclosure, which was completed, permanently affecting Plaintiffs right,

8 title and interest in the Subject Property. In fact, Plaintiffs allege that the promissory
9 notes which was executed by Plaintiffs and which initially formed a basis of a security
10
interest in the subject property, was assigned in violation of Civil Code section 2932.5
11
et seq. because the assignment was not recorded, and as such the promissory note was
12

13 rendered as non-negotiable and no power of sale was conveyed with the note at the

14 time of the assignment, and therefore, Defendants, and each of them, had no lawful
15
security interest in the subject property.
16
140. On or about July 21, 2005, representatives, agents and/or employees of Defendants,
17
and each of them, made false representations to Plaintiffs in order to fund a loan, in
18

19 which the Plaintiffs’ personal residence was to be security therefore. Plaintiffs allege

20 that Defendants, and each of them, made certain representations regarding their
21
honesty, that they were experts in obtaining loans which borrower’s could afford and
22
that they would only offer Plaintiffs a loan which was in their best interests given their
23

24
credit history and financial needs and limitations and that Plaintiffs could trust the

25 representations of Defendants, and each of them. Plaintiffs allege that based upon the
26 representations made by Defendants, and each of them, Plaintiffs reasonably reposed
27
their trust in Defendants’ representations and disclosed their private financial
28

30
_________________________________________________
COMPLAINT
 information to Defendants, in order that Defendants could in keeping with their
1

2 representations, find a loan which was in the best interests of Plaintiffs given their

3 financial needs and limitations. More particularly, Defendants, and each of them,
4
represented that they would not make a loan to Plaintiffs unless he could afford the
5
loan, and that they would not make the loan unless and until he had passed the
6

7
underwriting guidelines of the lender, which further assured that the loan being

8 offered to Plaintiffs were in fact in the Plaintiff’s best interests, and that the loan was
9 within Plaintiffs’ financial needs and limitations.
10
141. Plaintiffs allege that the loans provided by Defendants, and each of them, contained
11
a repayment schedule, whereas, exceeded Plaintiffs’ total spendable income, and that
12

13 the loan contained excessive financing was approved to allow closing costs to be

14 financed, that Defendants failed to utilize adequate due diligence regarding Plaintiffs’
15
ability to repay the loan, Defendants’ as part of their continuing scheme intentionally
16
placed Plaintiffs’ in a sub-prime loan to the benefit of the Defendants with excessively
17
high interest rates, Defendants failed to provide Plaintiffs mandated disclosures, and
18

19 Defendants repeatedly employed coercive tactics in order to force Plaintiffs to sign the

20 loan documents.
21
142. Plaintiffs are informed and believe and thereupon allege that defendants OPTION 1
22
engaged in some degree in making the loan to Plaintiffs including, but not limited to:
23

24
made the loan to Plaintiffs by "marketing and extending adjustable-rate mortgage

25 ("ARM") products to Plaintiffs in an unsafe and unsound manner that greatly

26 increases the risk that Plaintiffs would default on the loan, because the initial
27
payments on the loan exceeded Plaintiffs’ established retirement income, and the loan
28

31
_________________________________________________
COMPLAINT
 terms offered to Plaintiffs included ARM products with one or more of the following
1

2 characteristics: without to utilize an adequate analysis of the Plaintiffs ability to repay

3 the debt at the fully-indexed rate; approving Plaintiffs without considering appropriate
4
documentation and/or verification of their income; including substantial prepayment
5
penalties and/or prepayment penalties that extend beyond the initial interest rate
6

7
adjustment period; providing Plaintiffs with inadequate and/or confusing information

8 relative to product choices, material loan terms and product risks, prepayment
9 penalties, and the Plaintiffs’ obligations for property taxes and insurance; approving
10
Plaintiffs for a loan with inadequate debt-to-income analyses
11
that did not properly consider the Plaintiffs’ ability to meet his overall level
12

13 indebtedness and common housing expenses; and/or approving Plaintiffs for loan

14 arrangements with loan-to-value ratios approaching or exceeding 100 percent of the

15
value of the collateral;" and making Plaintiffs a mortgage loan without adequately
16
considering the Plaintiffs’ ability to repay the mortgage according to its terms.
17
143. Plaintiffs allege that based upon the foregoing representations of Defendants, and
18

19 each of them, plaintiffs did in fact repose their trust in the representations of

20 Defendants, and each of them, and that such trust was reasonable.
21
144. Plaintiffs alleges that Defendants, and each of them, presented a loan to Plaintiffs
22
whereby Defendants represented that they did qualify for ordinary underwriting, and
23

24
that the loan was within Plaintiffs’ personal financial needs and limitations given the

25 confidential financial information that Plaintiffs shared with Defendants, however, the
26 true is that the loan payments exceeded Plaintiffs’ established retirement income.
27
145. Plaintiffs allege that Defendants, and each of them, had a duty to disclose the true
28

32
_________________________________________________
COMPLAINT
 cost of the loan which was made to Plaintiffs, and the fact that Plaintiffs could not
1

2 afford the loan in the first instance. Defendants, and each of them, provided Plaintiff a

3 loan through Defendant OPTION 1, and Defendants, and each of them, were secretly
4
compensated, however, they did not disclose for this loan that they were by being paid
5
for its services, and in a spread of the yield of an amount which has not yet been fully
6

7
ascertained as a Yield Spread Premium paid-outside and after the close of escrow.

8 146. Plaintiffs are informed and believes and thereupon allege that after the close of
9 escrow Defendant OPTION 1 paid the other Defendants herein fees above and beyond
10
the value of the services actually performed and an illegal kickback and added that
11
additional amount to the total amount being financed, however such amount was
12

13 never disclosed to Plaintiffs.

14 147. Plaintiffs acquire the foregoing property by virtue of the said funding through
15
OPTION 1 based on the representations of Defendants, and each of them, that the loan
16
was the best they could obtain for him, and that the loan was well within Plaintiffs’
17
financial needs and limitations.
18

19 148. Plaintiffs ARE informed and believe and thereupon alleges that Defendants, and

20 each of them, represented to Plaintiffs that Defendants, and each of them, were
21
working for the benefit of Plaintiffs and in their particular best interest to obtain for
22
him the best loan and at the best rates available.
23

24
149. That at the time Defendants, and each of them, made the foregoing false

25 representations to Plaintiffs they knew that they were untrue and that these
26 representations were material representations, and that no basis in fact existed to
27
support such fraudulent representations.
28

33
_________________________________________________
COMPLAINT
 150. That the foregoing representations were made in order to induce Plaintiff to act on
1

2 and take the said loan(s) in order for both defendants to make a substantial amount of

3 money thereby and there from.

4
151. Plaintiffs were in fact induced to and did take these loans based on the said
5
fraudulent representations.
6

7
152. That Plaintiffs were induced to rely and did rely on the representations of these

8 defendants through deception and their reliance was justified as they believed that
9 Defendants, and each of them, were working for their and in his best interests.
10
153. That by virtue of Plaintiff’s reasonable reliance and the increased interest they were
11
made to pay, they have been damaged in the loss of their good credit and a higher
12

13 payment and are now being involved in litigation that they did not bargain for, all to

14 their damage and injury.

15
154. Plaintiffs have relied on the representations of Defendant, and each of them, and
16
because of this reliance have made various moves to avoid foreclosure all to no avail,
17
while defendants knew all the time that they were deceiving Plaintiffs.
18

19 155. Plaintiff’s reliance was justified based upon the false representations of Defendants,

20 and each of them, and had no reason to believe that a party representing a bank would
21
go to such lengths to deceive and to convert Plaintiffs’ property by utilizing such a
22
fraud and artifice.
23

24
156. Plaintiffs are informed and believe that Defendants, and each of them, at the time of

25 execution of the Deed of Trust and Note maintained an interest in the Subject
26 Property, however at the time the Note and Deed of Trust were assigned to Defendant
27
OPTION 1, the Note was no longer negotiable and the power of sale was not
28

34
_________________________________________________
COMPLAINT
 conveyed during the assignment, notwithstanding the foregoing, Defendants, and
1

2 each of them, foreclosed on Plaintiffs’ Trust Deed, in concert with their scheme to

3 defraud Plaintiff out of their property.

4
157. Plaintiffs have recently learned that Defendants, and each of them, are not the legal
5
owners of the Note and TRUST DEED and will not be at the time they issued the
6

7
notices and commenced the foreclosure process, notwithstanding the fact that the note

8 was not negotiable and did not contain a valid power of sale.
9 158. Plaintiffs allege that Defendants, and each of them, knew at the time they made
10
these representations to Plaintiffs that they were untrue, and defendants know at the
11
time that they were attempting to foreclose on Plaintiffs’ Trust Deeds and notes that
12

13 they had no right to do so.

14 159. Plaintiffs allege Defendants, and each of them, intentionally and fraudulently
15
converted Plaintiffs’ right, title and interest to his property, and any equity therein.
16
160. Plaintiffs allege that due to their reliance on Defendants representations he has been
17
damaged in an amount that currently exceeds $25,000.00 and additionally costs of
18

19 moving out of Plaintiffs’ property and the costs to relocate back to the subject

20 Property.
21
161. Defendants’ conduct as set forth above was intentional, oppressive fraudulent and
22
malicious so as to justify an award of punitive damages in an amount sufficient that
23

24
such conduct will not be repeated.

25 162. Plaintiffs are damaged in having their home wrongfully foreclosed and a slander of
26 their title, and being required to become involved in this litigation all to their damages
27
and injuries the amount of which is subject to proof at the time of trial.
28

35
_________________________________________________
COMPLAINT
 163. The actions of Defendants and each of them were fraudulent oppressive and
1

2 malicious so as to warrant the imposition of exemplary damages, and that by virtue of

3 Defendants conduct as set forth herein Plaintiff is entitled to exemplary damages.

4

5
SEVENTH CAUSE OF ACTION
6
FOR DECLARATORY RELIEF
7
(Against all Defendants)
8

10
164. Plaintiffs repeat and realleges Paragraphs 1 through 163 as though fully set forth

11 herein.
12 165. A dispute has arisen between and among Plaintiffs and Defendants and each of
13
them as to the duties and obligations of the respective parties with regard to the loan
14
or the foreclosure.
15

16 166. These disputes concern but are not limited to the ownership rights and the validity of

17 the commencement of the foreclosure process.

18
167. As to these issues, Plaintiff(s) are required to seek this relief.
19
168. Plaintiffs further alleges that a declaration of rights and duties of the parties herein
20
are essential to determine the actual status and validity of the loan, deed of trust,
21

22 nominated beneficiaries, actual beneficiaries, loan servicers, trustees instituting

23 foreclosure proceedings and related matter.

24

25
EIGHTH CAUSE OF ACTION
26
FOR INTENTIONAL MISREPRESENTATION
27
(Against all Defendants)
28

36
_________________________________________________
COMPLAINT
 169. Plaintiffs repeat and realleges Paragraphs 1 through 168 as though fully set forth
1

2 herein.

3 170. Plaintiffs are informed and believe that the representation as stated on the Notice of
4
Default and each of them were a false representation in the following particulars(s):
5
[A] Documents were not provided to the trustee that showed that any of the
6

7
Defendants was the Beneficiary and entitled to the payments.

8 [B] At the time Defendants made the representations they knew they were false and
9 were made for the sole purpose of inducing reliance and confusing Plaintiffs.
10

11

12 NINTH CAUSE OF ACTION

13 TO SET ASIDE A DEFECTIVE AND WRONGFUL FORECLOSURE

(Against all Defendants)
14

15

16 171. Plaintiffs repeat and reallege Paragraphs 1 through 170 as though fully set forth
17
herein.
18
Recording of an Assignment Prior to Foreclosure
19
172. Cal. Civ. Code section 2932.5 provides a condition precedent for an assignee of a
20

21 Deed of Trust prior to commencing a foreclosure:

22 Where a power to sell real property is given to a mortgagee, or other

23
encumbrancer, in an instrument intended to secure the payment of money, the
24
power is part of the security and vests in any person who by assignment becomes
25

26
entitled to payment of the money secured by the instrument. The power of sale

27 may be exercised by the assignee if the assignment is duly acknowledged and

28 recorded. (Emphasis added)

37
_________________________________________________
COMPLAINT
 173. Defendants drafted the Deed of Trust, Plaintiff had no opportunity to negotiate
1

2 the terms of the instrument.

3 174. Defendants failed to record and send a Amended Notice of Default after recording
4
the assignment since it was after original Notice of Default and therefore the foreclosure as
5
such was not conducted in accordance with Cal Civ. Code Sec 2924 and 2932.5.
6

8 Invalid Notice of Default

9 175. There is in existence a certain written instrument which purports to be a Notice of
10
Default that is in the possession of Defendants, and each of them. (See Exhibit “A”)
11
176. The written instrument alleged in Paragraph "175" was procured as follows:
12

13 Defendants cannot prove that the nonjudicial foreclosure which occurred, strictly complied

14 with the tenets of California Civil Code Sections 2923.5 and 2924 in order to maintain an
15
action for possession pursuant to California Code of Civil Procedure section 1161. As of
16
September 6, 2008, California Civil Code Section 2923.5 applies to loans made from
17
January 1, 2003, to December 31, 2007, and loans secured by residential real property that
18

19 are for owner-occupied residences. For purposes of Section 2923.5, “owner-occupied”

20 means that the residence is the principal residence of the borrower. Prior to filing a Notice
21
of Default, Section 2923.5 of the California Civil Code provides in pertinent part:
22
(1) A trustee may not file a notice of default pursuant to Section 2924 until 30 days after
23

24
contact is made as required by paragraph (2) or 30 days after satisfying the due

25 diligence requirements as described in subdivision (g).

26 (2) An authorized agent shall contact the borrower in person or by telephone in order to
27
assess the borrower’s financial situation and explore options for the borrower to
28

38
_________________________________________________
COMPLAINT
 avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized
1

2 agent shall advise the borrower that he or she has the right to request a subsequent

3 meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall

4
schedule the meeting to occur within 14 days.
5
(3) A notice of default filed pursuant to Section 2924 shall include a declaration from
6

7
the mortgagee, beneficiary, or authorized agent that it has contacted the borrower,

8 tried with due diligence to contact the borrower as required by this section, or the
9 borrower has surrendered the property to the mortgagee, trustee, beneficiary, or
10
authorized agent.
11
Invalid Declaration on Notice of Default and/or Notice of Trustee’s Sale
12

13 177. The purpose of permitting a declaration under penalty of perjury, in lieu of a sworn

14 statement, is to help ensure that declarations contain a truthful factual representation

15
and are made in good faith. (In re Marriage of Reese & Guy, 73 Cal. App. 4th 1214, 87
16
Cal. Rptr. 2d 339 (4th Dist. 1999).
17
178. In addition to California Civil Code §2923.5, California Code of Civil Procedure
18

19 §2015.5 states:

20 Whenever, under any law of this state or under any rule, regulation, order or
21
requirement made pursuant to the law of this state, any matter is required or permitted
22
to be supported, evidenced, established, or proved by the sworn statement,
23

24
declaration, verification, certificate, oath, or affidavit, in writing of the person making

25 the same, such matter may with like force and effect be supported, evidenced,
26 established or proved by the unsworn statement, declaration, verification, or
27
certificate, in writing of such person which recites that is certified or declared by him
28

39
_________________________________________________
COMPLAINT
 or her to be true under penalty of perjury, is subscribed by him or her, and (1), if
1

2 executed within this state, states the date and place of execution; (2) if executed at any

3 place, within or without this state, states the date of execution and that is so certified or
4
declared under the laws of the State of California. The certification or declaration must
5
be in substantially the following form:
6

7
(a) If executed within this state:

8 “I certify (or declare) under penalty of perjury that the foregoing is true and correct”:
9 _____________________ _______________________
10
(Date and Place) (Signature)

11
For our purposes we need not look any farther than the Notice of Default to find the
12

13 declaration is not signed under penalty of perjury; as mandated by new Civil Code

14 §2923.5(c). (Blum v. Superior Court (Copley Press Inc.) (2006) 141 Cal App 4th 418, 45
15
Cal. Reptr. 3d 902 ). The Declaration is missing from the Notice of Default and therefore,
16
it is void. However, the Declaration on Notice of Trustee’s Sale is also invalid because it
17
is also missing the declaration. (See Exhibit “B”)
18

19 No Personal Knowledge of Declarant

20 According to Giles v. Friendly Finance Co. of Biloxi, Inc., 199 So. 2nd 265 (Miss.
21
1967), “an affidavit on behalf of a corporation must show that it was made by an
22
authorized officer or agent, and the officer him or herself must swear to the facts.”
23

24
Furthermore, in Giles v. County Dep’t of Public Welfare of Marion County (Ind.App. 1

25 Dist.1991) 579 N.E.2d 653, 654-655 states in pertinent part, “a person who verified a
26 pleading to have personal knowledge or reasonable cause to believe the existence of the
27

28

40
_________________________________________________
COMPLAINT
 facts stated therein.” Here, the Declaration for the Notice of Default by the agent does not
1

2 state if the agent has personal knowledge and how he obtained this knowledge.

3 The proper function of an affidavit is to state facts, not conclusions, ¹ and affidavits that
4
merely state conclusions rather than facts are insufficient. ² An affidavit must set forth facts
5
and show affirmatively how the affiant obtained personal knowledge of those facts. ³
6

7
Here, The Notice of Trustee’s Sale does not have the required declaration stating agent’s

8 personal knowledge of facts and if the Plaintiff borrower was affirmatively contacted in
9 person or by telephone to assess the Plaintiff’s financial situation and explore options for
10
the Plaintiff to avoid foreclosure.
11
Furthermore, “it has been said that personal knowledge of facts asserted in an affidavit
12

13 is not presumed from the mere positive averment of facts, but rather, a court should be

14 shown how the affiant knew or could have known such facts, and, if there is no evidence
15
from which the inference of personal knowledge can be drawn, then it is presumed that
16
such does not exist.” 4 The declaration signed by agent does not state anywhere how he
17
knew or could have known if Plaintiff was contacted in person or by telephone to explore
18

19 different financial options. It is vague and ambiguous if he himself called plaintiff.

20 This defendant did not adhere to the mandates laid out by congress before a foreclosure
21
can be considered duly perfected. For the aforementioned reasons, the Notice of Default
22
and Notice of Trustee’s Sale will be void as a matter of law.
23

24

25 ____________________________________________________________________________
¹ Lindley v. Midwest Pulmonary Consultants, P.C., 55 S.W.3d 906 (Mo. Ct. App. W.D. 2001).
26 ² Jaime v. St. Joseph Hosp. Foundation, 853 S.W.2d 604 (Tex. App. Houston 1st Dist. 1993).
27
³ M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403 (Tex. App. Corpus Chrisit 1999).
4 Bova v. Vinciguerra, 139 A.D.2d 797, 526 N.Y. S.2d 671 (3d Dep’t 1988).
28

41
_________________________________________________
COMPLAINT
1
Recording a False Document
2
179. Furthermore, according to California Penal Code § 115 in pertinent part:
3
(a) Every person who knowingly procures or offers any false or forged instrument
4

5 to be filed, registered, or recorded in any public office within this state, which

6 instrument, if genuine, might be filed, registered, or recorded under any law of this
7
state or of the United States, is guilty of a felony.
8
(b) Each instrument which is procured or offered to be filed, registered, or recorded
9

10
in violation of subdivision (a) shall constitute a separate violation of this section.

11 In addition, California Evidence Code § 669 states in pertinent part:

12
(a) The failure of a person to exercise due care is presumed if:
13
(1) He violated a statute, ordinance, or regulation of a public entity;
14
Here, as stated above the Declaration of Due Diligence as required by Section 2923.5 of
15

16 the California Civil Code is missing and/or improper for the Notice of Default and Notice

17 of Trustee’s Sale. Therefore, Defendants are guilty of a felony for recording the Notice of
18
Default and Notice of Trustee’s Sale with a false instrument according to California Penal
19
Code §115. Since Defendants have violated a statute, the failure of them to exercise due
20
care will be presumed.
21

22 180. The written instrument alleged in Paragraph "175" was also procured as follows:

23 By an invalid sale conducted on the part of Defendants, and each of them, in violation of
24
statutes including, but not limited to: Plaintiff is informed and believes and thereupon
25
alleges that the NOTE was invalid and unenforceable due to the intentional and willful
26

27
violations including but, not limited to: California Civil Code 2924b etc. et seq.,

28 California Civil Code §§§ 2924b(a), 2924b(d), 2924b(e) by failing and/or refusing to mail

42
_________________________________________________
COMPLAINT
 the Notice of Default within ten business days to Plaintiffs, by failing and/or refusing to
1

2 post and mail the Notice of Default; by failing and/or refusing to mail Plaintiffs the

3 Notice of Default within one month pursuant to California Civil Code § 2924b (c (1), (2);
4
by failing and/or refusing to properly set the sale date pursuant to California Civil Code §
5
2924f(b); by failing and/or refusing to publish the Notice of Sale twenty days prior to the
6

7
date set for sale pursuant to California Civil Code § 2924f(b); by failing and/or refusing to

8 record the Notice of Sale pursuant to California Civil Code § 2924g(d);

9 181. Since the enumerated law was effective as of September 06, 2008 the sale of the
10
property at issue is invalid pursuant to California Civil Code Sections 2923.5 and 2924,
11
and thus the Defendants’ claim of title and allegation thereto is erroneous.
12

13 182. Plaintiff alleges that Defendants, and each of them, willfully, wrongfully and

14 without justification, and without privilege conducted an invalid foreclosure sale against
15
the Plaintiff’s SUBJECT PROPERTY, thereby, slandering Plaintiff’s title thereto.
16
183. Furthermore, The California Foreclosure Prevention Act, states the following:
17
The California Foreclosure Prevention Action became effective June 15, 2009. This
18

19 new law delays the non-judicial foreclosure process by requiring an addition 90-day delay

20 (beyond the current three-month period) between recording a notice of default and a
21
notice of stay for certain residential properties. The law applies to:
22
1. Loans recorded between January 1, 2003 and January 1, 2008, inclusive,
23

24
2. The borrower occupies the property as his/her principal residence and occupied it

25 at the time the loan became delinquent;

26 3. A notice of default has been recorded on the property; and
27

28

43
_________________________________________________
COMPLAINT
 4. The loan is secured by a first lien on residential property that is located in
1

2 California.

3 184. In our case, Plaintiffs’ property was their principal place of residence and their deed
4
was dated on July 21, 2005. Therefore, the California Foreclosure Prevention Action applies
5
and they should be allowed an additional 90 days (plus the three-month period already)
6

7
after Notice of Default is recorded.

8 185. The Trustee's Deed Upon Sale obtained after the sale is false and causes a doubt
9 to be cast on Plaintiff’s title to the property described above. (See Exhibit “C”).
10
Furthermore, since the Notice of Default and Notice of Trustee’s Sale are invalid, the
11
Trustee’s Deed Upon Sale is after a invalid foreclosure and should be void.
12

13 186. The aforementioned Instrument directly impairs Plaintiff’s right to possession

14 and ownership of the Subject Property.

15
187. Furthermore, the aforementioned acts of Defendants, and each of them, were
16
motivated by oppression, fraud, malice in that Defendants, and each of them, by their
17
respective acts, omissions, nonfeasance, misfeasance and/or malfeasance executed an
18

19 invalid foreclosure sale of the Plaintiff’s SUBJECT PROPERTY, in order to deny Plaintiff

20 of his rights of possession and ownership, whereupon, the Foreclosure was defective as
21
such the Property must be restored to Plaintiff or Plaintiff is entitled to the value of thereof.
22

23

24
WHEREFORE, Plaintiffs having set forth the claims for relief against Defendants,

25 respectfully pray that this Court grant the following relief against the Defendants:
26 1. For exemplary and punitive damages;
27
2. Actual Economic and Non-Economic Damages;
28

44
_________________________________________________
COMPLAINT
 3. Costs and reasonable attorney’s fees pursuant to California Civil Code §1717,
1

2 §1788.30(b), §1788.30(c);

3 4. For a declaration of the rights of the parties relative to Plaintiff’s Home, including
4
a declaration that Defendants have no enforceable lien against Plaintiff’s Home;
5
5. For a preliminary injunction and permanent injunction enjoining all Defendants,
6

7
their agents, assigns, and all person acting under, for, or in concert with them, from

8 foreclosing on Plaintiff’s Home or from conducting at trustee’s sale or causing a trustee’s

9 sale to be conducted relative to Plaintiff’s Home.
10
6. Cancellation of the sale and restitution of the home to the Plaintiffs; and
11
7. For damages as provided by statute;
12

13 8. For an Order enjoining Defendants from continuing to violate the statutes alleged

14 herein;
15
9. For an Order, requiring Defendant to reinstate Plaintiff on title to his Property, and
16
or a restraining order preventing Defendants and his, hers, or its agents, employees,
17
officers, attorneys, and representatives from engaging in or performing any of the
18

19 following acts: (i) offering, or advertising this property for sale and (ii) attempting to

20 transfer title to this property and or (iii) holding any auction therefore;
21
10. For such other and further relief as the court may deem just and proper.
22

23
Dated: August 4, 2009
24
LAW OFFICES OF TIMOTHY MCCANDLESS ESQ.
25

26 ______________________________________________
27
Timothy L. McCandless, Esq.,
Attorney for Plaintiffs,
28 Fernando Tepora
and Agnes Tepora

45
_________________________________________________
COMPLAINT
1
VERIFICATION
2

3 I, TIMOTHY L. MCCANDLESS, am an attorney at law admitted to practice before all courts of

4 the State of California and have my office in San Bernardino County, California, and am the
5
attorney for the Plaintiff in this action, that all of the officers of the Plaintiff are unable to make the
6
verification because they are absent from said County and for that reason affiant makes this
7
verification on the Plaintiff’s behalf; that I have read the foregoing document and know its
8

9 contents. I am informed and believe and on that ground allege that matters stated herein are true.

10 Executed August 4, 2009, at Victorville, Californa.

11
I declare under penalty of perjury that under the laws of the State of California that the foregoing
12
is true and correct.
13

14
DATED: August 4, 2009
15
___________________________________
16 TIMOTHY L. MCCANDLESS, ESQ
17

18

19

20

21

22

23

24

25

26

27

28

46
_________________________________________________
COMPLAINT