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Richard Hurlburt, SBN 179072 Benjamin Humphreys, SBN 244768 LAW OFFICES OF RICHARD HURLBURT 870 Market Street, Suite 315 San Francisco, CA 94102-3008 Telephone: 415-391-6496 Facsimile: 415-391-6497 Attorneys for plaintiff, EARL A. DANCY

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA EARL A. DANCY, ) ) Plaintiff, ) ) vs. ) ) AURORA LOAN SERVICES, LLC; ) MORTGAGE ELECTRONIC ) REGISTRATION SYSTEMS, INC.; ) and DOES 1-20, ) ) Defendants. ) ______________________________) Plaintiff EARL A. DANCY alleges: 1. At all pertinent times plaintiff was a citizen of the State of California and was the true owner of the real property commonly known as 200 Lagunitas Road, Lagunitas, CA 94938, California (subject property). The subject property is more fully described in the attached Exhibit A. 2. JURISDICTION. AURORA LOAN SERVICES, LLC (“AURORA”) is a No. C10-02602 SBA FIRST AMENDED COMPLAINT

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limited liability company organized under the laws of the State of Delaware, and having its principal place of business and home office in the State of Delaware. MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC. (“MERS”) is a corporation incorporated
-1First Amended Complaint

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under the laws of the State of Delaware, and having its principal place of business in the State of Delaware. This Court has

original jurisdiction under 28 USC § 1332, in that it is a civil action between citizens of different states in which the matter in controversy exceeds, exclusive of interest and costs, fifty thousand dollars. 3. VENUE. Venue is proper in the Northern District of

California in that a substantial part of the events or omissions giving rise to the claim occurred there and a substantial part of property that is the subject of the action is situated there. 4. INTRADISTRICT ASSIGNMENT. On July 16, 2010, this action

was reassigned to the Honorable Saundra Brown Armstrong in the Oakland Division. The property at issue in this action is

located in the County of Marin. 5. Plaintiff is ignorant of facts concerning the liability of and/or does not know the true names of DOE defendants 1-20. All defendants were agents of one another with regard to the acts and omissions alleged in this Complaint. 6. On or about July 25, 2005, plaintiff executed a Note in favor of American Sterling Bank. Note. MERS was not mentioned in the AURORA was not mentioned The parties to

MERS did not execute the Note.

in the Note.

AURORA did not execute the Note.

the Note were plaintiff and American Sterling Bank. 7. Plaintiff also signed a Deed of Trust on or about July 25, 2005. The Deed of Trust purported to identify the parties thereto as: American Sterling Bank, a Missouri Corporation, lender; First Trustee Services, Inc., a Missouri Corporation, trustee; and Mortgage Electronic Registration Systems, Inc. as “a
-2First Amended Complaint

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separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the beneficiary under this security instrument.” 8. MERS drafted the Deed of Trust. Plaintiff took no part in drafting the Note or Deed of Trust. The Deed of Trust is an adhesion contract. The Deed of Trust was drafted in a manner intended to bifurcate the loan (Note) from the security (Deed of Trust) to facilitate the loan being pooled with other loans to form certain theoretical investment vehicles. However, any such bifurcation is impossible as a matter of law.1 9. When they executed the Deed of Trust plaintiff’s actual and reasonable expectation was he was signing a security agreement with the parties being (1) plaintiff, (2) the lender, American Sterling Bank, and (3) the trustee. Plaintiff had no expectation MERS would be a party. Plaintiff made no promises of any kind to MERS. MERS was never an owner, holder, mortgagee or obligee of the Note as those terms are commonly understood in California law. [C.C. § 2932.5] MERS was never the “beneficiary” of the Deed of Trust. Nor was MERS at any time entitled to payments of the money secured by the Deed of Trust. MERS was not a party to the Note and did not sign the Note. Nor was MERS a party to the Deed of Trust. MERS did not sign the Deed of Trust.

A mortgage is a mere security for the debt, and it cannot pass without a transfer of the debt. [Johnson v. Razey (1919) 181 Cal. 342, citing Civil Code § 2936] The assignment of a debt secured by mortgage carries with it the security. [Civil Code § 2936] The term “mortgage” in Civil Code § 2936 encompasses “deeds of trust.” [Seidell v. Tuxedo Land Co. (1932) 216 Cal. 165, 166; Domarad v. Fisher & Burke, Inc. (1969) 270 Cal.App.2d 543, 554] The purported assignment of a mortgage without an assignment of the debt secured is a legal nullity. [Kelley v. Upshaw (1952) 39 Cal.2d 179, 192] -3First Amended Complaint

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10. Within the first six months of when the subject loan was originated, the lender conveyed the Note to a third party. The third party was not AURORA or MERS. The Note has since been traded in a manner such that the owner/holder/obligee of the Note cannot be identified and the Note is not enforceable by AURORA or MERS. When the Note was conveyed to the third party, whatever authority MERS had relating to the Deed of Trust, if any, was extinguished. [Civil Code § 2936] At all pertinent times MERS knew or should have known the facts alleged in this paragraph and the legal consequences thereof. 11. AURORA was never an owner, holder, mortgagee or obligee of the Note as those terms are defined under California law. Nor was AURORA ever entitled to payment of the money secured by the Deed of Trust. AURORA was not a party to the Note and did not sign the Note. Nor was AURORA a party to the Deed of Trust. AURORA did not sign the Deed of Trust. Plaintiff never borrowed money from AURORA or MERS, nor did plaintiff enter into a contract with AURORA or MERS. Now, AURORA and MERS falsely claim to have been beneficiaries of the Deed of Trust. 12. At no time did MERS have the legal right to transfer any interest in the Note or Deed of Trust. There never was any written agency agreement sufficient to empower MERS to assign the Note or Deed of Trust. No valid or lawful assignment of the Deed of Trust ever existed and none was ever recorded at the Marin County Recorder. There was never a written agency agreement between the original lender and MERS. If there had been an agency agreement between the original lender and MERS, it terminated when the Note was transferred to the third party, described above
-4First Amended Complaint

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in paragraph 10. [Civil Code §§ 2296, 2304, 2309] 13. There never was a lawful or valid substitution of trustee empowering Quality Loan Service Corporation (“Quality”) to act as trustee under the Deed of Trust. MERS did purport to issue a substitution of trustee dated March 12, 2008 (and recorded on April 28, 2008 at the Marin County Recorder’s Office as Document No. 2008-0019429) but the substitution is void for reasons including but not limited to: The document falsely indicates MERS was the “original Beneficiary” when in fact MERS was never the beneficiary. The document was issued by MERS “as nominee for Aurora Loan Services, LLC”. However, by this time

ownership and possession of the underlying Note had been transferred from the original lender to a third party. The

substitution of trustee is therefore void because MERS had no power to issue it, and under Civil Code § 1095 because the name of the true beneficiary is not stated. Nor was MERS an agent of the true beneficiary when the purported substitution was issued. 14. Because the March 12, 2008 Substitution of Trustee is void, Quality was never the trustee. Quality never had legal power or authority to conduct a trustee sale or take any other action concerning the subject property under Civil Code § 2924 or the Deed of Trust. All acts by Quality with regard to the subject property are void. All documents issued by Quality with regard to the subject property or subject loan are void. 15. On or about March 12, 2008 a purported Notice of Default was issued and on March 13, 2008 it was recorded with the Marin County Recorder, instrument No. 2008-0011929. The Notice of Default was purportedly issued by “Quality Loan Service Corp., as
-5First Amended Complaint

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agent for beneficiary by: Fidelity National Title Insurance Company.” The Notice of Default fails to identify the present beneficiary. The Notice of Default indicates, falsely, that: ... the present beneficiary under such deed of trust, has executed and delivered to said duly appointed Trustee, a written Declaration of Default and Demand for same, and has deposited with said duly appointed Trustee, such deed of trust and all documents evidencing obligations secured thereby, and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the trust property to be sold to satisfy the obligations secured thereby. 16. Despite any false statements to the contrary in the Notice of Default, for purposes of Civil Code § 2924(a)(1)(C), no “beneficiary” under the Deed of Trust ever declared a default or lawfully elected to cause the subject property to be sold. At no time during March 2008 did MERS or AURORA have authority to elect to conduct the sale under C.C. § 2924(a)(1)(C) or to exercise the power of sale under the Deed of Trust. The Notice of Default was void when issued because Quality was never the Trustee and lacked any authority to issue the Notice of Default, and because AURORA, MERS and Quality all lacked the authority to elect to conduct the sale under § 2924(a)(1)(C). 17. On June 17, 2008 Quality recorded what it purported to be a “Notice of Trustee Sale” with the Marin County Recorder, document No. 2008-0028454. That instrument is void as Quality was not the trustee and had no other legal authority to issue it. The document also fails to identify the true beneficiary. 18. On December 29, 2008 Quality purported to sell the subject property at a public auction and on the same day purported to issue a Trustee’s Deed Upon Sale whereby it claims to have granted title to the subject property to “AURORA LOAN
-6First Amended Complaint

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SERVICES, LLC.” The Trustee’s Deed Upon Sale indicates: “The grantee herein IS the foreclosing beneficiary.” AURORA is not a bona fide purchaser of the subject property. 19. For reasons including but not limited to the allegations in paragraph Nos. 6-18, above, the following instruments are void ab initio: (a) the Substitution of Trustee recorded on April 28, 2008 at the Marin County Recorder’s Office as document No. 20080019429; (b) the Notice of Default recorded March 13, 2008 at the Marin County Recorder’s Office as document No. 2008-0011929; (c) the Notice of Trustee’s Sale recorded June 17, 2008 at the Marin County Recorder’s Office as document No. 2008-0028454; and, (d) the Trustee’s Deed Upon Sale recorded January 7, 2009 at the Marin County Recorder’s Office as document No. 2009-0000526. 20. For the same reasons, the purported sale to AURORA is void and neither AURORA nor MERS holds any interest in the subject property. 21. Defendants’ lack of title, complained of herein, does not result from mere irregularities with the conduct of the sale. On the contrary, no party involved in the purported sale had substantive legal right under the Deed of Trust or Civil Code § 2924(a)(1)(C) to elect to invoke the power of sale. Accordingly, the sale is absolutely void, as opposed to being merely voidable. 22. At all pertinent times, officers, directors and managing agents of AURORA and MERS had actual knowledge that MERS and AURORA had no interest under the Deed of Trust and that Quality
-7First Amended Complaint

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was not legally empowered to conduct a trustee sale or carry out any other actions regarding the subject property under Civil Code § 2924. Certain officers, directors and managing agents of AURORA and MERS knew at every stage of the process such conduct was wrongful and nevertheless continued on such course with oppression, fraud and malice as those terms are defined under Civil Code § 3294(c). Ever since the purported Trustee’s Deed Upon Sal was issued, defendant AURORA has wrongfully exercised control over the subject property; with officers, directors and managing agents of AURORA authorizing this wrongful conduct and ratifying the previous wrongful conduct. 23. Since the purported trustee sale AURORA and it’s agents have harassed plaintiff, substantially interfered with plaintiff’s ability to use and enjoy the subject property and attempted to cause plaintiff to vacate the property involuntarily, all the while knowing AURORA has no legitimate interest in the property. Officers, directors and managing agents of AURORA had actual knowledge of such conduct and directed such conduct knowing it was wrongful. 24. At all pertinent times officers, directors and managing agents of AURORA and MERS actually knew AURORA and MERS had no true legal authority with regard to the Deed of Trust and the subject property. In carrying out the acts and omissions complained of herein, defendants acted toward plaintiff with malice. 25. The acts and omissions of defendants, described herein, were done with oppression, fraud and malice as defined in Civil Code § 3294. For reasons including but not limited to the
-8First Amended Complaint

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following, plaintiff should recover punitive damages: (a) defendants’ conduct was so unreasonable they knew or should have known it was highly probable that substantial harm would result to plaintiff; (b) the acts and omissions of defendants included intentional trespasses on plaintiff’s rights and nuisances calculated to harm plaintiff. 26. As a direct and proximate result of defendants’ acts and omissions, alleged above, plaintiff has wrongfully been deprived of record title to the subject property; plaintiff’s title to the subject premises has been disparaged; plaintiff has suffered reduced enjoyment of the premises and physical injury including but not limited to: stress, fright, shock, inability to sleep, severe emotional distress and anxiety; costs and attorney fees; as well as other damages. 27. The Deed of Trust contains attorney fee provisions at paragraph Nos. 9 & 14. First Cause of Action TORTIOUS VIOLATION OF STATUTORY DUTIES (against AURORA and MERS) 28. Plaintiff incorporates in this cause of action the allegations of paragraphs 1 through 27, above. 29. Defendants’ acts and omissions as described above in paragraph Nos. 6-25, and each of them, constituted substantial violations of applicable laws, including but not limited to the following: Civil Code §§ 1091, 1095, 1558, 1573, 1624(a), 1708, 2296, 2304, 2305, 2309, 2924, 2924(a)(1)(C), 2932.5, 2933, 2934a, 2934a(c) & 2936. 30. These laws were intended to prevent the type of harm suffered by plaintiff. Plaintiff is the type of person such laws
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were intended to protect. 31. Defendants’ failure to obey these laws constituted per se negligence and was a substantial factor in causing and/or was the direct and proximate cause of damages to plaintiff. Said damages include but are not limited to: those damages described above in paragraph No. 26. Second Cause of Action SLANDER OF TITLE (against AURORA and MERS) 32. Plaintiff incorporates in this cause of action the allegations of paragraphs 1 through 27, above. 33. AURORA, MERS and their agent Quality recorded documents which contained materially false information and/or were issued without any legal or contractual authority, including but not limited to: the Substitution of Trustee, the Notice of Default and Election To Sell Under Deed of Trust, the Assignment of Deed of Trust, the Notice of Trustee Sale and the Trustee’s Deed Upon Sale. 34. The recording and other publication of these false documents was not privileged. AURORA and MERS had no legal interest in the subject loan or property. Said publication was made with malice in that defendants knew such statements were false or acted in reckless disregard of their truth or falsity and defendants should have recognized publication of these falsehoods was likely to cause harm to plaintiff. 35. The recording and other publication of these false documents caused plaintiff’s title to the subject property to be disparaged which proximately caused damage to plaintiff. ///
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Third Cause of Action NUISANCE (against AURORA and MERS) 36. Plaintiff incorporates in this cause of action the allegations of paragraphs 1 through 27, above. 37. Each of the actions and omissions of defendants, as described above, and all of them taken together, constitute a continuing nuisance, substantially depriving plaintiff of the beneficial use and enjoyment of the premises. 38. As a direct and proximate result of defendants having maintained said nuisance and having failed to abate said nuisance, plaintiff has suffered and continues to suffer general and special damages, as described above in paragraph No. 26. Fourth Cause of Action QUIET TITLE (against AURORA only) 39. Plaintiff incorporates in this cause of action the

16 allegations of paragraphs 1 through 27, above. 17 40. Since approximately late December 2008 or early January 18 2009 AURORA has falsely claimed title to the subject property 19 under the Trustee’s Deed Upon Sale, recorded on January 7, 2009. 20 41. Plaintiff seeks a determination that as of the date of 21 filing this action that plaintiff owns title to the subject 22 property in fee simple absolute, free of any interest by AURORA. 23 24 25 42. Plaintiff incorporateS in this cause of action the 26 allegations of paragraphs 6 through 31, above. 27 43. Plaintiff bringS this action under Business and 28
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Fifth Cause of Action UNFAIR BUSINESS PRACTICES (against AURORA and MERS)

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Professions Code § 17200 et seq. as a private person affected by defendants’ unfair business practices. 44. At all times relevant herein, defendants were conducting business under the laws of the State of California. In conducting said business, defendants were obligated to comply with the laws of the State of California. 45. It is the regular practice of defendants to record false instruments, issue and record instruments they have no legal authority to issue, make false allegations, conduct wrongful foreclosures and disregard applicable laws relating to nonjudicial foreclosures and the title to real property, in ways which include but are not limited to those described above. By said acts and failures to act defendants have engaged in unfair business practices in violation of Business and Professions Code sections 17200 et seq. 46. By said unlawful business practices defendants have without legal justification deprived plaintiff of record title to the subject property and substantially deprived plaintiff of the use and enjoyment of the property. WHEREFORE, plaintiff prays for judgment as follows: 1. General damages, 2. Special damages, 3. Punitive damages, 4. Appropriate order(s) of abatement, 5. Reasonable attorney fees, 6. Costs, 7. Setting aside as void the following instruments: (A) the Substitution of Trustee recorded on April 28, 2008
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at the Marin County Recorder’s Office as document No. 20080019429; (B) the Notice of Default recorded March 13, 2008 at the Marin County Recorder’s Office as document No. 2008-0011929; (C) the Notice of Trustee’s Sale recorded June 17, 2008 at the Marin County Recorder’s Office as document No. 2008-0028454; and, (D) the Trustee’s Deed Upon Sale recorded January 7, 2009 at the Marin County Recorder’s Office as document No. 2009-0000526. 8. For a determination of plaintiff’s interest in the subject property against AURORA’s adverse claim; and, 9. Such other relief the Court deems just and proper.

Respectfully submitted, Dated: November 8, 2010 ____________________________ Richard Hurlburt Attorney for plaintiff, Earl A. Dancy

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