Arvizu v. GMAC Mortgage, LLC, FKA GMAC Mortgage Corporation et al

Filing 62

ORDER on Motion to Dismiss First Amended Complaint, signed by Judge Oliver W. Wanger on 4/18/11. Plaintiff's federal claims are DISMISSED, with prejudice; The remainder of Plaintiff's claims are REMANDED to the Superior Court of California, County of Kern. (Verduzco, M)

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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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FRESNO DIVISION
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13 MATTHEW ARVIZU,
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Case No.: 1:10-cv-00990-OWW-JLT

Plaintiff,
vs.

16 GMAC MORTGAGE, LLC FKA GMAC
MORTGAGE CORPORATION;
17 GREENPOINT MORTGAGE FUNDING,
INC.; MORTGAGE ELECTRONIC
18 REGISTRATION SYSTEMS, INC.; ETS
SERVICES, LLC; EXECUTIVE TRUSTEE
19 SERVICES; CONNIE R. MELVIN d/b/a
ACTION LEGAL SUPPROT SERVICE;
20 MERRITT LAW, INC.; and Does 1 to 200,
inclusive,
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.
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ORDER ON MOTION TO DISMISS
FIRST AMENDED COMPLAINT
Date:
Time:
Dept:
Judge:

Monday, February 14, 2011
10:00 AM
Courtroom 3, 7th Floor
The Hon. Oliver W. Wanger

Complaint filed: March 26, 2010

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The motions by (1) Defendants GMAC Mortgage, LLC, Mortgage Electronic Registration

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Systems, Inc, and Executive Trustee Services, LLC (incorrectly sued as “ETS Services, LLC” and

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“Executive Trustee Services”); and (2) Greenpoint Mortgage Funding, Inc. (“Greenpoint”)

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(collectively, “Moving Defendants”) to dismiss the First Amended Complaint pursuant to Rule

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ORDER
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12(b)(6) of the Federal Rules of Civil Procedure, came on for hearing in this Court on Monday,

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March 7, 2011 before the Hon. Oliver W. Wanger. Appearances are noted on the record.

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After considering the moving and opposition papers, as well as oral argument, and good
cause appearing, the Court ruled as follows:
I.

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INTRODUCTION

Plaintiff Matthew Arvizu (“Plaintiff”) asserts eighteen causes of action against various
Defendants involved in transactions related to a loan secured by Plaintiff’s real property.
Plaintiff filed a first amended complaint (“FAC”) on November 4, 2010. (Doc. 42).
Defendant Greenpoint Mortgage Funding, Inc. (“Greenpoint”) filed a motion to dismiss the FAC

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on November 19, 2010. (Doc. 42). Defendant Executive Trustee Services, LLC (“ETS”),

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GMAC Mortgage, LLC (“GMAC”), and Mortgage Electronic Registration Systems, Inc.

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(“MERS”) also filed a motion to dismiss on November 19, 2010. (Doc. 44).

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Plaintiff filed opposition to the motions to dismiss on February 9, 2011. (Doc. 52).

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Defendants filed replies on February 18, 2011. (Docs. 53, 54).

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II.

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FACTUAL BACKGROUND

On or about November 21, 2006, Plaintiff purchased a residence (“the Property”) using

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funds acquired through a loan from Defendant Greenpoint. The terms of the loan were

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memorialized in a promissory note, which was secured by a Deed of Trust, and Adjustable Rate

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Note, and Interim Interest Addendum to Note.

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The Deed of Trust appears to have been executed on November 21, 2006; however, the

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Uniform Residential Loan Application was completed on November 27, 2006. Plaintiff contends

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that Greenpoint manipulated the lending process to the detriment of Plaintiff.

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Plaintiff alleges he did not receive the required documents and disclosure upon
consummation of the [loan].
On or about March 17, 2009, a Notice of Default on the Property was recorded. Plaintiff

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alleges he never received the Notice of Default. The notice was signed by Maria DeBelen on

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behalf of “ETS Services LLC as Agent for Beneficiary.” Plaintiff alleges that he never received

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the Notice of Default. Also on March 17, 2009, GMAC recorded a Substitution of Trustee
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ORDER
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purporting to designate ETS as Trustee under the Deed of Trust; in this document, MERS

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identified itself as the present beneficiary under the Deed of Trust.

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On or about June 19, 2009, ETS recorded a Notice of Trustee’s Sale, stating a foreclosure

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sale date of July 15, 2009. Following the sale, ETS executed a Trustee’s Deed Upon Sale which

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stated that GMAC, as foreclosing beneficiary, acquired title to the Property as grantee pursuant to

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the foreclosure sale. Plaintiff alleges that GMAC is not and was not the holder of the Note, and

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that GMAC had no right to initiate foreclosure under the Deed of Trust. Plaintiff alleges that

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Defendants engage in a pattern and practice of unlawfully foreclosing on properties.

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After learning of the foreclosure proceedings, Plaintiff sent GMAC a “Qualified Written
Request” pursuant to 12 U.S.C. 2605(e)(1)(B); GMAC failed to respond.
III.

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LEGAL STANDARD.

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A.

Rule 12(b)(6)

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Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks sufficient facts to

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support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th

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Cir.1990). To sufficiently state a claim to relief and survive a 12(b) (6) motion, the pleading

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“does not need detailed factual allegations” but the “[f]actual allegations must be enough to raise

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a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127

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S.Ct. 1955, 167 L.Ed.2d 929 (2007). Mere “labels and conclusions” or a “formulaic recitation of

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the elements of a cause of action will not do.” Id. Rather, there must be “enough facts to state a

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claim to relief that is plausible on its face.” Id. at 570. In other words, the “complaint must

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contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its

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face.” Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal

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quotation marks omitted).

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The Ninth Circuit has summarized the governing standard, in light of Twombly and Iqbal,

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as follows: “In sum, for a complaint to survive a motion to dismiss, the nonconclusory factual

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content, and reasonable inferences from that content, must be plausibly suggestive of a claim

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entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009)

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(internal quotation marks omitted). Apart from factual insufficiency, a complaint is also subject
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to dismissal under Rule 12(b)(6) where it lacks a cognizable legal theory, Balistreri, 901 F.2d at

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699, or where the allegations on their face “show that relief is barred” for some legal reason,

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Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007).

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In deciding whether to grant a motion to dismiss, the court must accept as true all “well-

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pleaded factual allegations” in the pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not,

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however, “required to accept as true allegations that are merely conclusory, unwarranted

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deductions of fact, or unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d

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979, 988 (9th Cir.2001). “When ruling on a Rule 12(b)(6) motion to dismiss, if a district court

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considers evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a

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Rule 56 motion for summary judgment, and it must give the nonmoving party an opportunity to

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respond.” United States v. Ritchie, 342 F.3d 903, 907 (9th Cir.2003). “A court may, however,

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consider certain materials-documents attached to the complaint, documents incorporated by

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reference in the complaint, or matters of judicial notice-without converting the motion to dismiss

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into a motion for summary judgment.” Id. at 908.

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B.

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Rule 9(b) imposes an elevated pleading standard with respect to certain claims. Rule 9(b)

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Rule 9(b)

provides:
In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged
generally.

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“To comply with Rule 9(b), allegations of fraud must be specific enough to give defendants

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notice of the particular misconduct which is alleged to constitute the fraud.” Swartz v. KPMG

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LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal quotation marks omitted). Allegations of fraud

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must include the “time, place, and specific content of the false representations as well as the

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identities of the parties to the misrepresentations.” Id. (internal quotation marks omitted). The

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“[a]verments of fraud must be accompanied by the who, what, when, where, and how of the

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misconduct charged.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (internal

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quotation marks omitted). A plaintiff alleging fraud “must set forth more than the neutral facts
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necessary to identify the transaction. The plaintiff must set forth what is false or misleading

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about a statement, and why it is false.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th

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Cir. 2003) (emphasis and internal quotation marks omitted).
IV.

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A.

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Federal Claims
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DISCUSSION

Plaintiff’s RESPA1 Claim

The RESPA claim alleged in Plaintiff’s original complaint was dismissed on two grounds:

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(1) it appeared to be time-barred; and (2) Plaintiff did not plead damages resulting from any

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alleged RESPA violations. The FAC does not correct either of the deficiencies that required

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dismissal of the original complaint.
Plaintiff alleges two RESPA violations. First, Plaintiff contends that his lender violated

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RESPA at the time of closing by failing to provide required documents and disclosures. (FAC at

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¶ 24). As noted in the Memorandum Decision dismissing Plaintiff’s original complaint, any

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claim for RESPA violations occurring at the loan closing is time-barred. (Doc. at ); 12 U.S.C.

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§ 2614 (providing either one or three year statute of limitations for RESPA actions). Plaintiff

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asserts he is entitled to equitable tolling. Plaintiff contends that because of Greenpoint’s alleged

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fraud, Plaintiff did not have reason to know of his RESPA claim until learning of the foreclosure

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proceedings and Trustee’s sale. (Opposition at 4-5). Plaintiff’s argument is unintelligible. There

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is no nexus between Greenpoint’s conduct and Plaintiff’s knowledge of the alleged RESPA

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violations that occurred at closing. Nor is there any nexus between the foreclosure proceedings

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and Plaintiff’s knowledge of the alleged RESPA violations. Plaintiff’s opposition represents that

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“there was a complete failure of providing any documents” at closing; Plaintiff had notice of the

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RESPA violations related to disclosures in 2006, more than three years before Plaintiff filed his

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original complaint in this action.

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Second, Plaintiff contends that Defendants violated RESPA by failing to respond to a
“qualified written request” (“QWR”) sent by Plaintiff in 2009. As in the original complaint, the

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The Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq.

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FAC does not allege any damages resulting from the purported failure to respond to Plaintiff’s

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QWR. As Plaintiff concedes, the Property had already been foreclosed at the time of Plaintiff’s

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QWR. Finally, Plaintiff’s conclusory statement “on information and belief” that Defendants

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engage in a pattern and practice of RESPA violations is insufficient to satisfy federal pleading

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standards. Each of the deficiencies requiring dismissal of the RESPA claim pled in the FAC is a

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deficiency Plaintiff was specifically instructed to correct in the memorandum decision dismissing

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Plaintiff’s original complaint. Plaintiff has not done so. Plaintiff’s RESPA claim is

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DISMISSED, WITH PREJUDICE.
2.

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Plaintiff’s Fair Debt Collection Act Claim

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The FAC alleges Defendants violated the federal Fair Debt Collection Practices Act

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(“FDCPA”). Plaintiff’s opposition to the motion to dismiss states that Plaintiff’s FDCPA claim is

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withdrawn. (Opposition at 7-8).

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In dismissing Plaintiff’s FDCPA claim in the original complaint, the court provided the
following analysis:
Plaintiff contends that Defendants violated California’s Rosenthal
Fair Debt Collection Practices Act (“RFDCPA”) and the federal
Fair Debt Collection Practices Act (FDCPA) by foreclosing on
Plaintiff’s property, filing an unlawful detainer action, falsely
stating the amount of debt, and increasing the amount of the debt by
including amounts not permitted by law or contract.

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Plaintiff’s contentions regarding misrepresentation and inflation of
the amount of debt at issue are not supported by sufficient factual
allegations in the complaint. Further, foreclosing on a property
pursuant to a deed of trust is not debt collection within the meaning
of the RFDCPA or the FDCA. See Izenberg v. ETS Servs., LLC,
589 F. Supp. 2d 1193, 1198-99 (C.D. Cal. 2008); Ines v.
Countrywide Home Loans, Inc., 2008 U.S. Dist. LEXIS 88739,
2008 WL 4791863, at *2 (S.D. Cal. Nov. 3, 2008). The complaint
fails to allege facts sufficient to support the inference that
Defendants are “debt collectors.” Plaintiff’s argument that because
the foreclosure proceeding was invalid, all the Defendants’ conduct
constituted “debt collection” lacks merit because, inter alia, the
complaint does not allege sufficient facts to establish the illegality
of the foreclosure proceeding.

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(Doc. 39 at 9-10). Because the FAC does not remedy the deficiencies identified in the

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memorandum decision dismissing Plaintiff’s original FDCPA claim, the FDCPA claim is

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DISMISSED WITH PREJUDICE.
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3.

Plaintiff’s RICO Claim

Plaintiff’s opposition to the motion to dismiss states that Plaintiff’s RICO claim is

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withdrawn. In dismissing the RICO claim alleged in Plaintiff’s original complaint, the court

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provided the following analysis:

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Plaintiff’s RICO claims are based on Defendants’ alleged scheme to
wrongfully foreclose on Plaintiff’s property. (Complaint at 30-35).
To the extent that Plaintiff’s RICO claims rely on the predicate act
of initiating a foreclosure without having possession of the Note,
Plaintiff’s claims are untenable. See, e.g., Castaneda, 687 F. Supp.
2d at 1201 (E.D. Cal. 2009) (“Under California law, there is no
requirement for the production of the original note to initiate a nonjudicial foreclosure”). Plaintiff’s conclusory allegation that
Defendants attempted to acquire the subject Property through
“deception and fraud” is not supported by sufficient factual
allegations. Plaintiff’s RICO claims are dismissed, without
prejudice.

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(Doc. 39 at 13). The FAC fails to properly plead deception or fraud. Further, throughout his

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opposition to the motion to dismiss, Plaintiff repeats the discredited argument that “if you can

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‘carve out’ the power of sale from a deed of trust and give it to a ‘trustee’, you run afoul of

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century-old American jurisprudence that holds that the note and mortgage are inseparable because

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a deed of trust without an ability to be enforced lacks its ability to be a security instrument.”

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(Opposition at 11) (citations omitted). Because the FAC does not remedy the deficiencies

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identified in the memorandum decision dismissing Plaintiff’s original RICO claim, the RICO

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claim is DISMISSED WITH PREJUDICE.

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B.

State Law Claims

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In a case that is removed to federal court based on federal question jurisdiction, once all

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federal claims are eliminated from the action, federal courts have discretion to remand the

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remaining state law claims to the state court. E.g. Harrell v. 20th Century Ins. Co., 934 F.2d 203,

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205 (9th Cir. 1991). To make the remand decision, a court should consider factors such as

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judicial economy, convenience, fairness, comity, and forum manipulation. City of Chi. v. Int’l

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College of Surgeons, 522 U.S. 156, 173 (1997). Based on these factors, “it is generally preferable

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for a district court to remand remaining pendent claims to state court.” Harrell, 934 F.2d at 205.

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Unless considerations of judicial economy, convenience, and fairness weigh in favor of
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exercising pendent jurisdiction, federal courts should remand state law claims to avoid needless

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decisions of state law. United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966) superseded by

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statute on other grounds as stated in Berrios-Cintron v. Cordero, 976 F. Supp. 110, 111 n.2

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(D.P.R. 1997).

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Neither judicial economy, convenience, or fairness weighs in favor of exercising pendent

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jurisdiction in this case. The interest in comity weighs heavily in favor of remand, as Plaintiff’s

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state law causes of action implicate the propriety of a non-judicial foreclosure sale of real

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property under state law and a state court judgment in an unlawful detainer action concerning the

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Property, all maters inherently local in nature. Accordingly, Plaintiff’s remaining state law

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claims are REMANDED.

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ORDER

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For the reasons stated above:

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1)

Plaintiff’s federal claims are DISMISSED, with prejudice;

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2)

The remainder of Plaintiff’s claims are REMANDED to the Superior Court of

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California, County of Kern; and

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IT IS SO ORDERED.

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Dated: April 18, 2011

/s/ OLIVER W. WANGER
UNITED STATES DISTRICT JUDGE

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ORDER
Case No.: 1:10-cv-990-OWW-JLT