Flores, et al. v. EMC Mortgage, et al.
Filing
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ORDER to DISMISS Certain Defendants and JUDGMENT Thereon 5 , signed by District Judge Lawrence J. O'Neill on 2/18/14: Deadline set for February 25, 2014 for Plaintiffs to submit dismissal papers as to remaining defendants. (Hellings, J)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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VINCENT ELIJAH FLORES,
et al.,
CASE NO. CV F 14-0047 LJO GSA
Plaintiffs,
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ORDER TO DISMISS CERTAIN
DEFENDANTS AND JUDGMENT
THEREON
(Doc. 5.)
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vs.
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EMC MORTGAGE COMPANY, et al.,
Defendants.
______________________________/
PRELIMINARY STATEMENT TO PARTIES AND COUNSEL
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Judges in the Eastern District of California carry the heaviest caseload in the nation,
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and this Court is unable to devote inordinate time and resources to individual cases and
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matters. This Court must best manage its voluminous caseload without incurring needless
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delay and misuse of its limited resources. As such, this Court cannot address all arguments,
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evidence and matters raised by parties and addresses only the arguments, evidence and matters
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necessary to reach the decision in this order given the shortage of district judges and staff. The
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parties and counsel are encouraged to contact United States Senators Dianne Feinstein and
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Barbara Boxer to address this Court’s inability to accommodate the parties and this action.
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INTRODUCTION
Defendants Bank of New York Mellon ("Mellon"), National Default Servicing ("NDS")
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and Mortgage Electronic Registration Systems Inc. ("MERS")1 seek to dismiss as meritless and
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legally barred plaintiffs Vincent Elijah Flores ("Mr. Flores") and Joe Flores' (collectively
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"plaintiffs'") wrongful foreclosure and related claims arising from Mr. Flores' loan default and
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foreclosure of his Visalia, California property ("property"). Plaintiffs respond that invalid
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assignment of Mr. Flores' loan documents entitles plaintiffs to pursue their claims. This Court
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considered defendants' F.R.Civ.P. 12(b)(6) motion to dismiss on the record and VACATES the
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February 20, 2014 hearing, pursuant to Local Rule 230(g). This Court construes plaintiffs'
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action as an attempt to thwart, delay and complicate property foreclosure and, for further
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reasons discussed below, DISMISSES this action against defendants.
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BACKGROUND
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Mr. Flores' Property Loan And Default
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Mr. Flores obtained from BSM Financial, L.P. ("BSM Financial") a $208,000 loan
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secured by a deed of trust ("DOT") record August 19, 2005 against the property. 2 The DOT
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identifies Mr. Flores as borrower, BSM Financial as lender, First American Title Company as
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trustee, and MERS as beneficiary. By an assignment of deed of trust recorded on May 19,
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2010, MERS assigned to Mellon all beneficial interest under the DOT.
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After Mr. Flores defaulted on his loan, a notice of default and election to sell under
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deed of trust was recorded on June 19, 2012. On September 24, 2012, a substitution of trustee
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was recorded to substitute NDS as DOT trustee and a notice of trustee's sale of the property
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was recorded. On October 29, 2012, a Trustee's Deed Upon Sale was recorded to grant the
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property to Mellon after an October 17, 2012 auction.
Plaintiffs' Claims
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On November 4, 2013, prior to removal to this Court, plaintiffs filed their 86-page
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complaint ("complaint"), excluding exhibits, to purport to allege "unlawful conduct" and
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This Court will refer to Mellon, NDS and MERS collectively as "defendants."
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Documents pertaining to Mr. Flores' loan and default were recorded with the Official Records
County of Tulare.
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"illegal practices" committed by defendants and others.3 The complaint appears to take issue
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with assignment of the DOT to Mellon and in turn the trustee's sale to Mellon. The complaint
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appears to assert that DOT assignment violated a consent judgment ("consent judgment")
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entered in a U.S. District Court action in the District of Columbia and that Mr. Flores is a third-
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party beneficiary to the consent judgment. The complaint further appears to allege that Mellon
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violated a pooling and servicing agreement ("PSA") because Mellon lacks possession of Mr.
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Flores' promissory note and DOT and/or failed to securitized the promissory note.
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complaint concludes that the "Property was wrongfully was [sic] sold at a non-judicial
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foreclosure auction" and alleges federal and California statutory claims and common law
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claims which will be addressed below.
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DISCUSSION
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F.R.Civ.P. 12(b)(6) Motion To Dismiss Standards
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A F.R.Civ.P. 12(b)(6) dismissal is proper where there is either a “lack of a cognizable
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legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.”
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Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990); Graehling v. Village of
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Lombard, Ill., 58 F.3d 295, 297 (7th Cir. 1995). A F.R.Civ.P. 12(b)(6) motion “tests the legal
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sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).
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In addressing dismissal, a court must: (1) construe the complaint in the light most
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favorable to the plaintiff; (2) accept all well-pleaded factual allegations as true; and (3)
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determine whether plaintiff can prove any set of facts to support a claim that would merit
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relief. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9th Cir. 1996). Nonetheless, a
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court is not required “to accept as true allegations that are merely conclusory, unwarranted
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deductions of fact, or unreasonable inferences.” In re Gilead Sciences Securities Litig., 536
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F.3d 1049, 1055 (9th Cir. 2008) (citation omitted). A court “need not assume the truth of legal
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conclusions cast in the form of factual allegations,” U.S. ex rel. Chunie v. Ringrose, 788 F.2d
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The record is unclear as to why Joe Flores appears as a plaintiff. As such, this Court refers to
"plaintiffs," rather than simply "Mr. Flores" when addressing certain of the complaint's claims and allegations.
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638, 643, n. 2 (9th Cir.1986), and must not “assume that the [plaintiff] can prove facts that it
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has not alleged or that the defendants have violated . . . laws in ways that have not been
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alleged.” Associated General Contractors of California, Inc. v. California State Council of
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Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897 (1983). A court need not permit an attempt to
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amend if “it is clear that the complaint could not be saved by an amendment.” Livid Holdings
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Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).
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A plaintiff is obliged “to provide the ‘grounds’ of his ‘entitlement to relief’ [which]
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requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
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of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554,127 S. Ct. 1955, 1964-65
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(2007) (internal citations omitted). Moreover, a court “will dismiss any claim that, even when
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construed in the light most favorable to plaintiff, fails to plead sufficiently all required
elements of a cause of action.” Student Loan Marketing Ass'n v. Hanes, 181 F.R.D. 629, 634
(S.D. Cal. 1998). In practice, a complaint “must contain either direct or inferential allegations
respecting all the material elements necessary to sustain recovery under some viable legal
theory.” Twombly, 550 U.S. at 562, 127 S.Ct. at 1969 (quoting Car Carriers, Inc. v. Ford
Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).
In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009), the U.S. Supreme
Court explained:
. . . a complaint must contain sufficient factual matter, accepted as true, to
“state a claim to relief that is plausible on its face.” . . . A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged. . . . The plausibility
standard is not akin to a “probability requirement,” but it asks for more than a sheer
possibility that a defendant has acted unlawfully. (Citations omitted.)
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After discussing Iqbal, the Ninth Circuit summarized: “In sum, for a complaint to
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survive [dismissal], the non-conclusory ‘factual content,’ and reasonable inferences from that
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content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S.
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Secret Service, 572 F.3d 962, 989 (9th Cir. 2009) (quoting Iqbal, 556 U.S. 662, 129 S.Ct. at
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1949).
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The U.S. Supreme Court applies a “two-prong approach” to address dismissal:
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First, the tenet that a court must accept as true all of the allegations contained in
a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice. . . . Second,
only a complaint that states a plausible claim for relief survives a motion to dismiss. . . .
Determining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense. . . . But where the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged – but it
has not “show[n]”-“that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2).
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In keeping with these principles a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.
When there are well-pleaded factual allegations, a court should assume their veracity
and then determine whether they plausibly give rise to an entitlement to relief.
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Iqbal, 556 U.S. 662, 129 S.Ct. at 1949-1950.
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Moreover, a court may consider exhibits submitted with the complaint. Durning v.
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First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987); Van Winkle v. Allstate Ins. Co., 290
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F.Supp.2d 1158, 1162, n. 2 (C.D. Cal. 2003). A “court may consider evidence on which the
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complaint ‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is
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central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached
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to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). A court may
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treat such a document as “part of the complaint, and thus may assume that its contents are true
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for purposes of a motion to dismiss under Rule 12(b)(6).” United States v. Ritchie, 342 F.3d
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903, 908 (9th Cir.2003).
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12(b)(6) motion by deliberately omitting reference to documents upon which their claims are
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based.” Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998).4
Such consideration prevents “plaintiffs from surviving a Rule
A “court may disregard
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"We have extended the 'incorporation by reference' doctrine to situations in which the plaintiff's
claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the
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allegations in the complaint if contradicted by facts established by exhibits attached to the
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complaint.” Sumner Peck Ranch v. Bureau of Reclamation, 823 F.Supp. 715, 720 (E.D. Cal.
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1993) (citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987)).
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Lastly, under F.R.Evid. 201, a court may take judicial notice of “matters of public
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record.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001); MGIC Indem. Corp. v.
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Weisman, 803 F.2d 500, 504 (9th Cir. 1986) (“On a motion to dismiss, we may take judicial
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notice of matters of public record outside the pleadings); Mack v. South Bay Beer Distrib., 798
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F.2d 1279, 1282 (9th Cir.1986).
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With these standards in mind, this Court turns to defendants' challenges to the
complaint's claims against them.
Failure To Satisfy F.R.Civ.P. 8
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The complaint is subject to global attack for failure to satisfy F.R.Civ.P. 8, which
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requires a plaintiff to “plead a short and plain statement of the elements of his or her claim,
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identifying the transaction or occurrence giving rise to the claim and the elements of the prima
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facie case.” Bautista v. Los Angeles County, 216 F.3d 837, 840 (9th Cir. 2000).
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F.R.Civ.P. 8(d)(1) requires each allegation to be “simple, concise, and direct.” This
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requirement “applies to good claims as well as bad, and is the basis for dismissal independent
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of Rule 12(b)(6).” McHenry v. Renne, 84 F.3d 1172, 1179 (9th Cir. 1996). “Something labeled
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a complaint but written more as a press release, prolix in evidentiary detail, yet without
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simplicity, conciseness and clarity as to whom plaintiffs are suing for what wrongs, fails to
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perform the essential functions of a complaint.” McHenry, 84 F.3d at 1180. “Prolix, confusing
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complaints . . . impose unfair burdens on litigants and judges.” McHenry, 84 F.3d at 1179.
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Moreover, a pleading may not simply allege a wrong has been committed and demand
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relief. The underlying requirement is that a pleading give “fair notice” of the claim being
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asserted and the “grounds upon which it rests.” Yamaguchi v. United States Department of Air
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Force, 109 F.3d 1475, 1481 (9th Cir. 1997). Despite the flexible pleading policy of the Federal
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parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the
contents of that document in the complaint." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (citing Parrino,
146 F.3d at 706).
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Rules of Civil Procedure, a complaint must give fair notice and state the elements of the claim
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plainly and succinctly. Jones v. Community Redev. Agency, 733 F.2d 646, 649 (9th Cir. 1984).
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A plaintiff must allege with at least some degree of particularity overt facts which defendant
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engaged in to support plaintiff’s claim. Jones, 733 F.2d at 649. A complaint does not suffice
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“if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at
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678, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). The U.S.
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Supreme Court has explained:
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While, for most types of cases, the Federal Rules eliminated the cumbersome
requirement that a claimant “set out in detail the facts upon which he bases his claim,”
Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (emphasis added),
Rule 8(a)(2) still requires a “showing,” rather than a blanket assertion, of entitlement to
relief. Without some factual allegation in the complaint, it is hard to see how a claimant
could satisfy the requirement of providing not only “fair notice” of the nature of the
claim, but also “grounds” on which the claim rests.
Twombly, 550 U.S. at 556, n. 3, 127 S.Ct. 1955.
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The complaint fails to satisfy F.R.Civ.P. 8 and lacks requisite simplicity, conciseness
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and clarity to assert claims against defendants. The complaint's 86 pages of text is duplicative
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and lacks necessary cohesion and organization to decipher claims against defendants and
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others. The rambling complaint lacks facts of defendants’ specific wrongdoing to provide fair
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notice as to what each defendant is to defend. The complaint lacks cognizable claims or legal
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theories upon which to support defendants' liability and rests on overbroad conclusions that
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defendants were prohibited to foreclose on the property.
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references and conclusions without supporting facts as to "pattern and practice of defrauding
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plaintiff," failure "to properly credit payments," "robo-signers," "illegal, deceptive, and
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unlawful collection," "fabricated substitution of trustees," "fraudulent lien claim," and
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"fabricated assignment."
The complaint makes passing
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The complaint lumps defendants (and apparently others) together and fails to
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distinguish adequately claims and alleged wrongs among defendants and others. A plaintiff
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suing multiple defendants “must allege the basis of his claim against each defendant to satisfy
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Federal Rule of Civil Procedure 8(a)(2), which requires a short and plain statement of the claim
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to put defendants on sufficient notice of the allegations against them.” Gauvin v. Trombatore,
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682 F.Supp. 1067, 1071 (N.D. Cal. 1988).
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activities alleged by the plaintiffs is required in this action to enable the defendant to plead
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intelligently.” Van Dyke Ford, Inc. v. Ford Motor Co., 399 F.Supp. 277, 284 (D. Wis. 1975).
“Specific identification of the parties to the
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The complaint lacks specific, clearly defined allegations of each defendant's alleged
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wrongs to give fair notice of claims plainly and succinctly to warrant dismissal of this action.
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Moreover, the complaint’s claims are subject to defenses and are based on legally deficient
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theories to further warrant dismissal, as discussed below.
Loan Securitization - Standing
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Defendants globally attack the complaint's claims based on securitization of Mr. Flores'
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loan given plaintiffs' lack of standing to pursue such claims. Plaintiffs assert that they have
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standing because they question the validity of assignment of Mr. Flores' loan documents.
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“Because a promissory note is a negotiable instrument, a borrower must anticipate it
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can and might be transferred to another creditor." Herrera v. Federal Nat. Mortg. Assn., 205
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Cal.App.4th 1495, 1507, 141 Cal.Rptr.3d 326 (2013) ("As to plaintiff, an assignment merely
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substituted one creditor for another, without changing her obligations under the note”).
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The “request for declaratory relief is based on the erroneous theory that all defendants
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lost their power of sale pursuant to the deed of trust when the original promissory note was
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assigned to a trust pool. This argument is both unsupported and incorrect.”
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Greenpoint Mortg. Funding, Inc., 652 F.Supp.2d 1039, 1043 (N.D. Cal. 2009). “[C]ourts have
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uniformly rejected that securitization of a mortgage loan provides the mortgagor a cause of
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action.” Velez v. The Bank Of New York Mellon, 2011 WL 572523, at *4 (D. Hi. 2011) (“The
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court also rejects Plaintiff's contention that securitization in general somehow gives rise to a
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cause of action – Plaintiff points to no law or provision in the mortgage preventing this
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practice, and otherwise cites to no law supporting that securitization can be the basis of a cause
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of action”).
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///
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Hafiz v.
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Plaintiffs appear to assert standing to challenge void assignment of Mr. Flores' loan 5 in
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that "the entity claiming to be the noteholder was not the true owner of the note," "foreclosure
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was not concluded at the direction of the correct party," and "the assignment to the securitized
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trust was at the outset invalid."
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Association, 218 Cal.App.4th 1079, 1082-1083, 160 Cal.Rptr.3d 449 (2013):
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Plaintiffs rely on Glaski v. Bank of America, National
We conclude that, although the borrower's allegations are somewhat confusing and may
contain contradictions, he nonetheless has stated a wrongful foreclosure claim under the
lenient standards applied to demurrers. We conclude that a borrower may challenge the
securitized trust's chain of ownership by alleging the attempts to transfer the deed of
trust to the securitized trust (which was formed under New York law) occurred after the
trust's closing date. Transfers that violate the terms of the trust instrument are void
under New York trust law, and borrowers have standing to challenge void assignments
of their loans even though they are not a party to, or a third party beneficiary of, the
assignment agreement.
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Plaintiffs' reliance on Glaski is unavailing. Glaski addressed neither federal pleading
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requirements nor a F.R.Civ.P. 12(b)(6) challenge. Glaski addressed New York trust law,
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which plaintiffs fail to demonstrate applies here. Of key importance, numerous courts disagree
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with and refuse to follow Glaski, including this Court. See Snell v. Deutsche Bank Nat. Trust
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Co., 2014 WL 325147, at *5 (E.D. Cal. 2014) ("Until either the California Supreme Court, the
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Ninth Circuit, or other appellate courts follow Glaski or address the discrepancy between
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Glaski and Jenkins, this Court will continue to follow the Jenkins rule. Therefore, Plaintiff's
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claims based on alleged violation of the PSA [pooling and servicing agreement] are not
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viable"); Newman v. Bank of New York Mellon, 2013 WL 5603316, at *3, n. 2 (E.D. Cal. 2013)
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("the court held that a borrower like Newman has standing to assert a violation of a PSA.
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However, no courts have yet followed Glaski and Glaski is in a clear minority on the issue.
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Until either the California Supreme Court, the Ninth Circuit, or other appellate courts follow
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Glaski, this Court will continue to follow the majority rule").
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Plaintiffs' opposition papers make numerous references to invalid assignment of Mr. Flores' loan
documents. However, neither the opposition papers nor complaint sufficiently identify such assignments to
validate plaintiffs' assertion of invalid assignments.
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Defendants validly challenge plaintiffs' standing to pursue claims arising from
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securitization of Mr. Flores' loan. "As an unrelated third party to the alleged securitization, and
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any other subsequent transfers of the beneficial interest under the promissory note, Jenkins
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[plaintiff borrower] lacks standing to enforce any agreements, including the investment trust's
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pooling and servicing agreement, relating to such transactions." Jenkins v. JP Morgan Chase
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Bank, N.A., 216 Cal.App.4th 497, 515, 156 Cal.Rptr.3d 912 (2013); see In re Correia, 452
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B.R. 319, 324–325 (1st Cir. BAP 2011) (debtors lacked standing to raise violations of pooling
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and service agreement). "To the extent Plaintiff challenges the securitization of his loan
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because Freddie Mac [defendant] failed to comply with the terms of its securitization
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agreement, Plaintiff has no standing to challenge the validity of the securitization of the loan as
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he is not an investor of the loan trust." Bascos v. Federal Home Loan Mortg. Corp., 2011 WL
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3157063, at *6 (C.D. Cal. 2011).
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The complaint's claims arising from allegations as to securitization of Mr. Flores' loans
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fail as legally deficient given plaintiffs' absence of standing.
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plaintiffs' opposition papers point to facts to suggest improper transfer of Mr. Flores' loan or
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breach of a relevant pooling and servicing agreement. Plaintiffs' attempt to contest assignment
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of Mr. Flores' loan fails to invoke their standing in the absence of meaningful legal authority
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for their position.
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Neither the complaint nor
Consent Judgment – Standing
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The complaint asserts claims based on defendants' purported violation of the consent
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judgment, which was among the United States and several financial institutions. Defendants
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challenge plaintiffs' standing to pursue such claims in that plaintiffs are neither parties to nor
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third-party beneficiaries of the consent judgment.
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“[A] well-settled line of authority from this Court establishes that a consent decree is
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not enforceable directly or in collateral proceedings by those who are not parties to it even
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though they were intended to be benefitted by it.” Blue Chip Stamps v. Manor Drug Stores,
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421 U.S. 723, 750, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). "Only the Government can seek
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enforcement of its consent decrees . . . therefore, even if the Government intended its consent
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decree to benefit a third party, that party could not enforce it unless the decree so provided."
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Beckett v. Air Line Pilots Ass'n, 995 F.2d 280, 288 (D.C. Cir. 1993). “Parties that benefit from
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a government contract are generally assumed to be incidental beneficiaries, and may not
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enforce the contract absent a clear intent to the contrary. Government contracts often benefit
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the public, but individual members of the public are treated as incidental beneficiaries unless a
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different intention is manifested.” Klamath Water Users Protective Ass'n v. Patterson, 204
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F.3d 1206, 1211 (9th Cir.1999) (quotation omitted). More recently, the Ninth Circuit stated:
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[P]arties that benefit from a government contract are generally assumed to be incidental
beneficiaries, rather than intended ones, and so may not enforce the contract absent a
clear intent to the contrary. This clear intent hurdle is not satisfied by a contract's
recitation of interested constituencies, vague, hortatory pronouncements, statements of
purpose, explicit reference to a third party, or even a showing that the contract operates
to the third parties' benefit and was entered into with them in mind. Rather, we examine
the precise language of the contract for a clear intent to rebut the presumption that the
third parties are merely incidental beneficiaries.
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County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1244 (9th Cir.2009) (quotations
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omitted), rev'd on other grounds by Astra USA, Inc. v. Santa Clara County, Cal., __ U.S. __,
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131 S.Ct. 1342, 179 L.Ed.2d 457 (2011).
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Turning to the consent judgment at issue here, a fellow district court concluded that
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"individual borrowers are merely incidental beneficiaries of the National Mortgage Settlement,
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and so have no right to bring third-party suits to enforce the Consent Judgment. Thus, any
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claims that allege a violation of the Consent Judgment should be dismissed." Rehbein v.
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CitiMortgage, Inc., 937 F.Supp.2d 753, 762 (E.D. Va. 2013); see Jurewitz v. Bank of America,
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N.A.,938 F.Supp.2d 994, 998 (S.D. Cal. 2013) ("Plaintiff has failed to allege sufficient facts
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indicating that she has standing to enforce the Consent Judgment").
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The complaint's claims arising out of the consent judgment are legally barred to warrant
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their dismissal. Plaintiffs offer no legitimate points to support their standing in connection
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with the consent judgment.
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Failure To Tender Indebtedness
Defendants assert as a global defense the complaint's failure to allege credibly
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plaintiffs' ability to tender the amount due under Mr. Flores' loan to invoke plaintiffs' standing
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to challenge the foreclosure sale of the property. Plaintiffs assert that they are relieved of the
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tender requirement because the trustee's deed upon sale was "void on its face when the
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foreclosure [was] conducted without authorization to sell."
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”When a debtor is in default of a home mortgage loan, and a foreclosure is either
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pending or has taken place, the debtor must allege a credible tender of the amount of the
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secured debt to maintain any cause of action for wrongful foreclosure." Alicea v. GE Money
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Bank, 2009 WL 2136969, at *3 (N.D. Cal. 2009).
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“A tender is an offer of performance made with the intent to extinguish the obligation.”
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Arnolds Management Corp. v. Eischen, 158 Cal.App.3d 575, 580, 205 Cal.Rptr. 15 (1984)
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(citing Cal. Civ. Code, § 1485; Still v. Plaza Marina Commercial Corp., 21 Cal.App.3d 378,
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385, 98 Cal.Rptr. 414 (1971)). “A tender must be one of full performance . . . and must be
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unconditional to be valid.” Arnolds Management, 158 Cal.App.3d at 580, 205 Cal.Rptr. 15.
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“Nothing short of the full amount due the creditor is sufficient to constitute a valid tender, and
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the debtor must at his peril offer the full amount.” Rauer's Law etc. Co. v. S. Proctor Co., 40
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Cal.App. 524, 525, 181 P. 71 (1919).
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A defaulted borrower is “required to allege tender of the amount of [the lender's]
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secured indebtedness in order to maintain any cause of action for irregularity in the sale
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procedure.” Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1109, 51 Cal.Rptr.2d 286
20
(1996), cert. denied, 519 U.S. 1081, 117 S.Ct. 746 (1997). “A party may not without payment
21
of the debt, enjoin a sale by a trustee under a power conferred by a deed of trust, or have his
22
title quieted against the purchaser at such a sale, even though the statute of limitations has run
23
against the indebtedness.” Sipe v. McKenna, 88 Cal.App.2d 1001, 1006, 200 P.2d 61 (1948).
24
25
26
27
28
In FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021, 255
Cal.Rptr. 157 (1989), the California Court of Appeal explained:
. . . generally “an action to set aside a trustee's sale for irregularities in sale notice or
procedure should be accompanied by an offer to pay the full amount of the debt for
which the property was security.” . . . . This rule . . . is based upon the equitable maxim
that a court of equity will not order a useless act performed. . . . “A valid and viable
tender of payment of the indebtedness owing is essential to an action to cancel a
12
3
voidable sale under a deed of trust.” . . . The rationale behind the rule is that if
plaintiffs could not have redeemed the property had the sale procedures been proper,
any irregularities in the sale did not result in damages to the plaintiffs. (Citations
omitted.)
4
An action to set aside a foreclosure sale, unaccompanied by an offer to redeem, does
5
not state a cause of action which a court of equity recognizes. Karlsen v. American Sav. &
6
Loan Assn., 15 Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971). The basic rule is that an offer of
7
performance is of no effect if the person making it is not able to perform. Karlsen, 15
8
Cal.App.3d at118, 92 Cal.Rptr. 851 (citing Cal. Civ. Code, § 1495). Simply put, if the offeror
9
“is without the money necessary to make the offer good and knows it” the tender is without
10
legal force or effect. Karlsen, 15 Cal.App.3d at118, 92 Cal.Rptr. 851 (citing several cases). “It
11
would be futile to set aside a foreclosure sale on the technical ground that notice was improper,
12
if the party making the challenge did not first make full tender and thereby establish his ability
13
to purchase the property.” United States Cold Storage v. Great Western Savings & Loan Assn.,
14
165 Cal.App.3d 1214, 1224, 212 Cal.Rptr. 232 (1985).
15
integrated’ with the irregular sale fails unless the trustor can allege and establish a valid
16
tender.” Arnolds Management, 158 Cal.App.3d at 579, 205 Cal.Rptr. 15.
1
2
“A cause of action ‘implicitly
17
“It is settled in California that a mortgagor cannot quiet his title against the mortgagee
18
without paying the debt secured.” Shimpones v. Stickney, 219 Cal. 637, 649, 28 P.2d 673
19
(1934); see Mix v. Sodd, 126 Cal.App.3d 386, 390, 178 Cal.Rptr. 736 (1981) (“a mortgagor in
20
possession may not maintain an action to quiet title, even though the debt is unenforceable”);
21
Aguilar v. Bocci, 39 Cal.App.3d 475, 477, 114 Cal.Rptr. 91 (1974) (trustor is unable to quiet
22
title “without discharging his debt”).
23
Moreover, to obtain “rescission or cancellation, the rule is that the complainant is
24
required to do equity, as a condition to his obtaining relief, by restoring to the defendant
25
everything of value which the plaintiff has received in the transaction. . . . The rule applies
26
although the plaintiff was induced to enter into the contract by the fraudulent representations of
27
the defendant.” Fleming v. Kagan, 189 Cal.App.2d 791, 796, 11 Cal.Rptr. 737 (1961). “A
28
valid and viable tender of payment of the indebtedness owing is essential to an action to cancel
13
1
a voidable sale under a deed of trust.” Karlsen, 15 Cal.App.3d at 117, 92 Cal.Rptr. 851.
2
Analyzing “trust deed nonjudicial foreclosure sales issues in the context of common law
3
contract principles” is “unhelpful” given “the comprehensive statutory scheme regulating
4
nonjudicial foreclosure sales.” Residential Capital v. Cal-Western Reconveyance Corp., 108
5
Cal.App.4th 807, 820, 821, 134 Cal.Rptr.2d 162 (2003).
“The rules which govern tenders are strict and are strictly applied.”
6
Nguyen v.
7
Calhoun, 105 Cal.App.4th 428, 439, 129 Cal.Rptr.2d 436 (2003). “The tenderer must do and
8
offer everything that is necessary on his part to complete the transaction, and must fairly make
9
known his purpose without ambiguity, and the act of tender must be such that it needs only
10
acceptance by the one to whom it is made to complete the transaction.” Gaffney v. Downey
11
Savings & Loan Assn., 200 Cal.App.3d 1154, 1165, 246 Cal.Rptr. 421 (1988).
12
bears “responsibility to make an unambiguous tender of the entire amount due or else suffer the
13
consequence that the tender is of no effect.” Gaffney, 200 Cal.App.3d at 1165, 246 Cal.Rptr.
14
421.
The debtor
15
Neither the complaint nor record references plaintiffs' credible, legitimate tender of
16
indebtedness or meaningful ability to do so. The complaint attempts to obscure tender by
17
alleging "Plaintiff is ready, willing, and able to unconditionally tender his obligation to the true
18
holder in due course of Note and Deed of Trust." Plaintiffs cannot avoid tender requirements
19
by relying on invalid claims as to loan securitization as an excuse from tender requirements.
20
As discussed more fully below, plaintiffs fail to demonstrate that the property foreclosure was
21
void or unauthorized. Plaintiffs' failure to indicate a credible, legitimate tender of or ability to
22
tender amounts outstanding is construed as their concession of inability to do so. Given Mr.
23
Flores' continuing default, the ability to tender is unsupported. Without plaintiffs' credible,
24
legitimate tender, they seek empty remedies, not capable of being granted.
25
Plaintiffs point to nothing to avoid tender requirements, and failure to require a tender
26
of Mr. Flores' indebtedness would provide plaintiffs an unjustified windfall. Moreover, the
27
complaint's purported attack on the underlying debt does not excuse tender given the
28
complaint's admission that "Mr. Flores does not dispute that he owes money on his mortgage
14
1
obligation." Without plaintiffs' credible, legitimate tender, the complaint's purported claims
2
are doomed.
3
4
5
6
Presumption Of Foreclosure Propriety/Absence Of Prejudice
The complaint's claims fail given the unrebutted presumption of foreclosure propriety
and absence of facts to support prejudice to plaintiffs.
Comprehensive Statutory Framework
7
Under California law, a lender may pursue non-judicial foreclosure upon default with a
8
deed of trust with a power of sale clause. “Financing or refinancing of real property is
9
generally accomplished in California through a deed of trust. The borrower (trustor) executes a
10
promissory note and deed of trust, thereby transferring an interest in the property to the lender
11
(beneficiary) as security for repayment of the loan.” Bartold v. Glendale Federal Bank, 81
12
Cal.App.4th 816, 821, 97 Cal.Rptr.2d 226 (2000). A deed of trust “entitles the lender to reach
13
some asset of the debtor if the note is not paid.” Alliance Mortgage Co. v. Rothwell, 10 Cal.4th
14
1226, 1235, 44 Cal.Rptr.2d 352 (1995).
15
If a borrower defaults on a loan and the deed of trust contains a power of sale clause,
16
the lender may non-judicially foreclose. See McDonald v. Smoke Creek Live Stock Co., 209
17
Cal. 231, 236-237, 286 P. 693 (1930). “California's nonjudicial foreclosure scheme is set forth
18
in Civil Code sections 2924[, et seq.], which provide a comprehensive framework for the
19
regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of
20
trust." Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994). The California
21
Court of Appeal has explained nonjudicial foreclosure's comprehensiveness:
22
23
24
The comprehensive statutory framework established to govern nonjudicial
foreclosure sales is intended to be exhaustive. . . . It includes a myriad of rules relating
to notice and right to cure. It would be inconsistent with the comprehensive and
exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another
unrelated cure provision into statutory nonjudicial foreclosure proceedings.
25
26
Moeller v. Lien, 25 Cal.App.4th 822, 834, 30 Cal.Rptr.2d 777 (1994); see I.E. Assoc. v. Safeco
27
Title Ins. Co., 39 Cal.3d 281, 285, 216 Cal.Rptr. 438 (1985) (“These provisions cover every
28
aspect of exercise of the power of sale contained in a deed of trust.”)
15
1
Authority To Foreclose
2
Under California Civil Code section 2924(a)(1), a “trustee, mortgagee or beneficiary or
3
any of their authorized agents” may conduct the foreclosure process. Under California Civil
4
Code section 2924b(4), a “person authorized to record the notice of default or the notice of
5
sale” includes “an agent for the mortgagee or beneficiary, an agent of the named trustee, any
6
person designated in an executed substitution of trustee, or an agent of that substituted trustee.”
7
“Upon default by the trustor, the beneficiary may declare a default and proceed with a
8
nonjudicial foreclosure sale.” Moeller, 25 Cal.App.4th at 830, 30 Cal.Rptr.2d 777.
Lack of authorization to initiate foreclosure does not support a wrongful foreclosure
9
10
claim.
In Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1154, 121
11
Cal.Rptr.3d 819 (2011), the California Court of Appeal explained:
By asserting a right to bring a court action to determine whether the owner of
the Note has authorized its nominee to initiate the foreclosure process, Gomes [plaintiff
borrower] is attempting to interject the courts into this comprehensive nonjudicial
scheme. As Defendants correctly point out, Gomes has identified no legal authority for
such a lawsuit. Nothing in the statutory provisions establishing the nonjudicial
foreclosure process suggests that such a judicial proceeding is permitted or
contemplated.
12
13
14
15
16
17
California Civil Code section 2924(a) does not "provide for a judicial action to
18
determine whether the person initiating the foreclosure process is indeed authorized, and we
19
see no ground for implying such an action." Gomes, 192 Cal.App.4th at 1155, 121 Cal.Rptr.3d
20
819. "The recognition of the right to bring a lawsuit to determine a nominee's authorization to
21
proceed with foreclosure on behalf of the noteholder would fundamentally undermine the
22
nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the
23
purpose of delaying valid foreclosures." Gomes, 192 Cal.App.4th at 1155, 121 Cal.Rptr.3d
24
819.
25
Presumption Of Propriety
26
“A properly conducted nonjudicial foreclosure sale constitutes a final adjudication of
27
the rights of the borrower and lender.” Moeller, 25 Cal.App.4th at 831, 30 Cal.Rptr.2d 777.
28
“As a general rule, a trustee's sale is complete upon acceptance of the final bid.” Nguyen v.
16
1
Calhoun, 105 Cal.App.4th 428, 440-441, 129 Cal.Rptr.2d 436 (2003).
2
recites that all statutory notice requirements and procedures required by law for the conduct of
3
the foreclosure have been satisfied, a rebuttable presumption arises that the sale has been
4
conducted regularly and properly; this presumption is conclusive as to a bona fide purchaser.”
5
Moeller, 25 Cal.App.4th at 831, 30 Cal.Rptr.2d 777 (citations omitted).
6
foreclosure sale is accompanied by a common law presumption that it ‘was conducted
7
regularly and fairly.’” Melendrez v. D & I Investment, Inc., 127 Cal.App.4th 1238, 1258, 26
8
Cal.Rptr.3d 413 (2005) (quoting Brown v. Busch, 152 Cal.App.2d 200, 204, 313 P.2d 19
9
(1957)).
10
“If the trustee's deed
“A nonjudicial
“This presumption may only be rebutted by substantial evidence of prejudicial
procedural irregularity.” Melendrez, 127 Cal.App.4th at 1258, 26 Cal.Rptr.3d 413.
11
To challenge foreclosure, “it is necessary for the complaint to state a case within the
12
code sections for which reason it is essential to allege the facts affecting the validity and
13
invalidity of the instrument which is attacked.” Kroeker v. Hurlbert, 38 Cal.App.2d 261, 266,
14
101 P.2d 101 (1940).
Prejudice
15
16
17
18
19
20
21
22
23
Moreover, the California Court of Appeal has explained that prejudice is required for a
wrongful foreclosure claim:
We also note a plaintiff in a suit for wrongful foreclosure has generally been required to
demonstrate the alleged imperfection in the foreclosure process was prejudicial to the
plaintiff's interests. . . . Even if MERS lacked authority to transfer the note, it is difficult
to conceive how plaintiff was prejudiced by MERS's purported assignment, and there is
no allegation to this effect. Because a promissory note is a negotiable instrument, a
borrower must anticipate it can and might be transferred to another creditor. As to
plaintiff, an assignment merely substituted one creditor for another, without changing
her obligations under the note. . . . If MERS indeed lacked authority to make the
assignment, the true victim was not plaintiff but the original lender, which would have
suffered the unauthorized loss of a $1 million promissory note.
24
25
Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 272, 129 Cal.Rptr.3d 467 (2011);
26
see Knapp v. Doherty, 123 Cal.App.4th 76, 86, n. 4, 20 Cal.Rptr.3d 1 (2004) (“A nonjudicial
27
foreclosure sale is presumed to have been conducted regularly and fairly; one attacking the sale
28
must overcome this common law presumption ‘by pleading and proving an improper procedure
17
1
and the resulting prejudice.’”); Angell v. Superior Court, 73 Cal.App.4th 691, 700, 86
2
Cal.Rptr.2d 657 (1999) (failure to comply with procedural requirements must cause prejudice
3
to plaintiff).
4
5
Prejudice is not presumed from “mere irregularities” in the process. Meux v. Trezevant,
132 Cal. 487, 490, 64 P. 848 (1901).
6
A “trustee or mortgagee may be liable to the trustor or mortgagor for damages
7
sustained where there has been an illegal, fraudulent or wilfully oppressive sale of property
8
under a power of sale contained in a mortgage or deed of trust.” Munger v. Moore, 11
9
Cal.App.3d 1, 7, 89 Cal.Rptr. 323 (1970).
10
The complaint lacks meaningful facts of a specific statutory irregularity or misconduct
11
in foreclosure proceedings attributable specifically to defendants. The complaint's unsupported
12
conclusory claims to the effect of absence of authority to foreclose fail to substantiate a
13
discrepancy in the foreclosure process.
14
engaged in conduct to cause Mr. Flores prejudice to preclude foreclosure. Plaintiffs' claim of
15
prejudice resulting from foreclosure in illogical in that their failure to pay Mr. Flores' loan
16
resulted in foreclosure. Nothing relieved plaintiffs to make Mr. Flores' payments, for which
17
the complaint acknowledges Mr. Flores was responsible. There are no facts that Mr. Flores
18
was current on his loan payments or could have become current had defendants not committed
19
wrongdoing. The complaint fails to allege facts that Mr. Flores was not credited for made
20
payments or attempted payments or that more than one entity attempted to foreclose on the
21
property concurrently. There are no allegations that plaintiffs were not provided notice of the
22
foreclosure sale.
23
correspondence to challenge the foreclosure sale to indicate their notice of it.
Nothing in the record indicates that defendants
In fact, the complaint alleges that plaintiffs' counsel submitted
24
Moreover, the complaint's claims as to securitization of Mr. Flores' promissory note are
25
an improper attempt to interject this Court into comprehensive non-judicial foreclosure devised
26
by the California Legislature. "Because of the exhaustive nature of this scheme, California
27
appellate courts have refused to read any additional requirements into the non-judicial
28
foreclosure statute." Lane v. Vitek Real Estate Industries Group, 713 F.Supp.2d 1092, 1098
18
1
(E.D.Cal.2010); see also Moeller, 25 Cal.App.4th at 834, 30 Cal.Rptr.2d 777 ("It would be
2
inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial
3
foreclosures to incorporate another unrelated cure provision into statutory nonjudicial
4
foreclosure proceedings"). The complaint lacks allegations to overcome the presumption of
5
foreclosure validity. As such, the complaint's claims attacking property foreclosure are barred.
6
Moreover, the complaint's individual claims are subject to dismissal for additional
7
reasons discussed below.
Declaratory Relief
8
The complaint's (first) declaratory relief claim appears to seek a determination whether
9
10
defendants are authorized to foreclose on the property.
General Principles
11
The Declaratory Judgment Act (“DJA”), 28 U.S.C. §§ 2201, 2202, provides in pertinent
12
13
14
15
16
part:
In a case of actual controversy within its jurisdiction . . . any court of the United
States, upon the filing of an appropriate pleading, may declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further relief is
or could be sought. Any such declaration shall have the force and effect of a final
judgment or decree and shall be reviewable as such.
17
18
28 U.S.C. §2201(a).
19
The DJA’s operation “is procedural only.” Aetna Life Ins. Co. of Hartford, Conn. v.
20
Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463 (1937). “A declaratory judgment is not a
21
theory of recovery.” Commercial Union Ins. Co. v. Walbrook Ins. Co., Ltd., 41 F.3d 764, 775
22
(1st Cir. 1994). The DJA “merely offers an additional remedy to litigants.” Nat’l Union Fire
23
Ins. Co. v. Karp, 108 F.3d 17, 21 (2nd Cir. 1997) (italics in original). A DJA action requires a
24
25
26
district court to “inquire whether there is a case of actual controversy within its jurisdiction.”
American States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994).
Declaratory relief is appropriate “(1) when the judgment will serve a useful purpose in
clarifying and settling the legal relations in issue, and (2) when it will terminate and afford
27
relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Bilbrey
28
by Bilbrey v. Brown, 738 F.2d 1462, 1470 (9th Cir.1984). A declaratory relief claim operates
19
1
"prospectively," not to redress past wrongs.
2
F.Supp.2d 1142, 1173 (E.D. Cal. 2009).
3
4
5
6
7
8
9
10
Britz Fertilizers, Inc. v. Bayer Corp., 665
As to a controversy to invoke declaratory relief, the question is whether there is a
“substantial controversy, between parties having adverse legal rights, or sufficient immediacy
and reality to warrant the issuance of a declaratory judgment.” Maryland Cas. Co. v. Pacific
Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512 (1941). The U.S. Supreme Court has
further explained:
A justiciable controversy is thus distinguished from a difference or dispute of a
hypothetical or abstract character; from one that is academic or moot. . . . The
controversy must be definite and concrete, touching the legal relations of parties having
adverse legal interests. . . . It must be a real and substantial controversy admitting of
specific relief through a decree of a conclusive character, as distinguished from an
opinion advising what the law would be upon a hypothetical state of facts.
11
12
13
Haworth, 300 U.S. at 240-241, 57 S.Ct. at 464 (citations omitted).
A declaratory relief action “brings to the present a litigable controversy, which
14
otherwise might only be tried in the future.” Societe de Conditionnement v. Hunter Eng. Co.,
15
Inc., 655 F.2d 938, 943 (9th Cir. 1981).
16
“dependent upon a substantive basis for liability” and has “no separate viability” if all other
17
causes of action are barred. Glue-Fold, Inc. v. Slautterback Corp., 82 Cal.App.4th 1018, 1023,
18
n. 3, 98 Cal.Rptr.2d 661 (2000).
As an equitable remedy, declaratory relief is
19
The complaint seeks to redress past alleged wrongs in connection with authority to
20
foreclose on the property, not prospective wrongdoing. The complaint fails to allege facts to
21
22
support an actual controversy and in turn fails to support declaratory relief subject to the DJA.
Moreover, purported declaratory relief fails given dismissal of other claims. "[D]eclaratory
relief does not serve to 'furnish a litigant with a second cause of action for the determination of
23
24
identical issues.'” Gayduchik v. Countrywide Home Loans, Inc., 2010 WL 1737109, at *4
(E.D. Cal. 2010) (quoting General of Am. Ins. Co. v. Lilly, 258 Cal.App.2d 465, 470, 65
25
Cal.Rptr. 750 (1968)). The complaint fails to substantiate an independent claim for declaratory
26
relief, and such claim is subject to dismissal.
27
28
Note Possession
Defendants fault an attempt at declaratory relief based on a claim that possession of Mr.
20
1
Flores' original note is a prerequisite to property foreclosure. According to plaintiffs, although
2
"possession of the note may not be a statutory prerequisite to conduct foreclosure in California,
3
in order for the defendants to have standing and be the real party in interest in any legal action
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
to enforce those terms they must be in possession of the note."
“Under California law, there is no requirement for the production of an original
promissory note prior to initiation of a nonjudicial foreclosure. . . . Therefore, the absence of an
original promissory note in a nonjudicial foreclosure does not render a foreclosure invalid.”
Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D. Cal. 2009).
“Pursuant to section 2924(a)(1) of the California Civil Code, the trustee of a Deed of Trust has
the right to initiate the foreclosure process. Production of the original note is not required to
proceed with a non-judicial foreclosure.” Hafiz, 652 F.Supp.2d at 1043 (citation omitted).
“Under Civil Code section 2924, no party needs to physically possess the promissory
note.” Sicairos v. NDEX West, LLC, 2009 WL 385855, *3 (S.D. Cal. 2009) (citing Cal. Civ.
Code, § 2924(a)(1)). Rather, “[t]he foreclosure process is commenced by the recording of a
notice of default and election to sell by the trustee.” Moeller, 25 Cal.App.4th at 830, 30
Cal.Rptr.2d 777. “The trustee has the power and the duty to initiate foreclosure proceedings on
the property upon the trustor's default, resulting in a sale of the property.”
Hafiz, 652
F.Supp.2d at 1043 (citation omitted). An “allegation that the trustee did not have the original
note or had not received it is insufficient to render the foreclosure proceeding invalid.” Neal v.
Juarez, 2007 WL 2140640, *8 (S.D. Cal. 2007).
Plaintiffs' suggestions as to inability to foreclose are unavailing given the absence of
need to produce Mr. Flores' original promissory note. Plaintiffs' assertion that note possession
is required to pursue legal action is nonsensical as defendants pursued nonjudicial foreclosure,
not court action.
The clear authority is that production of original promissory notes is
unnecessary to initiate foreclosure. Purported declaratory relief based on promissory note
possession fails.
In sum, the complaint's (first) declaratory relief claim is legally barred and subject to
dismissal with prejudice.
21
1
Negligence
2
The complaint's (second) negligence claim appears to allege that by foreclosing on the
3
property, defendants breached duties "to abide by the Consent Judgment," "to exercise
4
reasonable care and skill to follow Federal and California law with regard to enforcement of
5
monetary obligations, and to refrain from taking or failing to take any action against Plaintiff
6
that they did not have the legal authority to do."
7
8
Defendants challenge the complaint's failure to allege facts that breach of an actionable
duty caused plaintiffs damages.
9
“The elements of a cause of action for negligence are (1) a legal duty to use reasonable
10
care, (2) breach of that duty, and (3) proximate [or legal] cause between the breach and (4) the
11
plaintiff's injury.” Mendoza v. City of Los Angeles, 66 Cal.App.4th 1333, 1339, 78 Cal.Rptr.2d
12
13
14
525 (1998) (citation omitted). “The existence of a duty of care owed by a defendant to a
plaintiff is a prerequisite to establishing a claim for negligence.” Nymark v. Heart Fed. Sav. &
Loan Assn, 231 Cal.App.3d 1089, 1095, 283 Cal.Rptr. 53 (1991). “[A]bsent a duty, the
defendant's care, or lack of care, is irrelevant.” Software Design & Application, Ltd. v. Hoefer
15
& Arnett, Inc., 49 Cal.App.4th 472, 481, 56 Cal.Rptr.2d 756 (1996). “The existence of a legal
16
duty to use reasonable care in a particular factual situation is a question of law for the court to
17
decide.” Vasquez v. Residential Investments, Inc., 118 Cal.App.4th 269, 278, 12 Cal.Rptr.3d
18
846 (2004) (citation omitted).
19
“The 'legal duty' of care may be of two general types: (a) the duty of a person to use
20
ordinary care in activities from which harm might reasonably be anticipated [, or] (b) [a]n
21
affirmative duty where the person occupies a particular relationship to others. . . . In the first
22
23
situation, he is not liable unless he is actively careless; in the second, he may be liable for
failure to act affirmatively to prevent harm.” McGettigan v. Bay Area Rapid Transit Dist., 57
Cal.App.4th 1011, 1016-1017, 67 Cal.Rptr.2d 516 (1997).
24
There is no actionable duty between a lender and borrower in that loan transactions are
25
arms-length. A lender “owes no duty of care to the [borrowers] in approving their loan.
26
Liability to a borrower for negligence arises only when the lender ‘actively participates’ in the
27
financed enterprise ‘beyond the domain of the usual money lender.’” Wagner v. Benson, 101
28
Cal.App.3d 27, 35, 161 Cal.Rptr. 516 (1980) (citing several cases). “[A]s a general rule, a
22
1
financial institution owes no duty of care to a borrower when the institution's involvement in
2
the loan transaction does not exceed the scope of its conventional role as a mere lender of
3
money.” Nymark, 231 Cal.App.3d at 1096, 283 Cal.Rptr. 53; see Myers v. Guarantee Sav. &
4
5
6
Loan Assn., 79 Cal.App.3d 307, 312, 144 Cal.Rptr. 616 (1978) (no lender liability when lender
did not engage “in any activity outside the scope of the normal activities of a lender of
construction monies”).
“Public policy does not impose upon the Bank absolute liability for the hardships which
7
may befall the [borrower] it finances.” Wagner, 101 Cal.App.3d at 34, 161 Cal.Rptr. 516. The
8
success of a borrower’s investment “is not a benefit of the loan agreement which the Bank is
9
under a duty to protect.” Wagner, 101 Cal.App.3d at 34, 161 Cal.Rptr. 516 (lender lacked duty
10
to disclose “any information it may have had”). “It is simply not tortious for a commercial
11
lender to lend money, take collateral, or to foreclose on collateral when a debt is not paid.”
12
Sierra-Bay Fed. Land Bank Assn. v. Superior Court, 227 Cal.App.3d 318, 334, 277 Cal.Rptr.
13
753 (1991).
14
15
16
17
Moreover, “loan servicers do not owe a duty to the borrowers of the loans they
service.” Shepherd v. American Home Mortg. Services, Inc., 2009 WL 4505925, at *2 (E.D.
Cal. 2009); see Huerta v. Ocwen Loan Servicing, Inc., 2010 WL 728223, at *4 (N.D. Cal.
2010) (“a loan servicer has no fiduciary duty to a borrower when its involvement in the
transaction does not exceed the scope of its conventional role as a loan servicer”).
18
Turning to loan modification, “[n]umerous cases have characterized a loan modification
19
as a traditional money lending activity, warranting application of the rule articulated in Nymark
20
v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089, 283 Cal.Rptr. 53 (1991), that a
21
financial institution in general owes no duty of care to a borrower.” Settle v. World Sav. Bank,
22
F.S.B., 2012 WL 1026103, at *8 (C.D. Cal. 2012). In Alvarado v. Aurora Loan Services, LLC,
23
2012 WL 4475330, at *6 (C.D. Cal. 2012), a fellow district judge explained:
24
25
26
27
28
. . . offering loan modifications is sufficiently entwined with money lending so
as to be considered within the scope of typical money lending activities. If money
lending institutions were held to a higher standard of care by offering a service that
could benefit borrowers whose circumstances have changed, the money lender[s] would
be discouraged from leniency and would assert their rights to reclaim the property upon
the borrower's default. The conventional-moneylender test shall be sufficient to
determine that there is no duty of care owed in servicing Plaintiff's mortgage loan and
loan modification. As the Plaintiff is unable to establish a duty, it is unnecessary to
23
1
discuss the elements of breach, causation, and damages.
2
3
4
5
6
Plaintiffs lack a negligence claim based on defendants’ lender and/or servicer roles,
particularly in the absence of a duty to forego foreclosure or to provide loan modification. “No
such duty exists . . . to determine the borrower's ability to repay the loan. . . . The lender's
efforts to determine the creditworthiness and ability to repay by a borrower are for the lender's
protection, not the borrower's.” Renteria v. United States, 452 F.Supp.2d 910, 922-923 (D.
7
Ariz. 2006) (borrowers “had to rely on their own judgment and risk assessment to determine
8
whether or not to accept the loan”). “A commercial lender is not to be regarded as the
9
guarantor of a borrower's success and is not liable for the hardships which may befall a
10
borrower.” Sierra-Bay Fed., 227 Cal.App.3d at 334, 277 Cal.Rptr. 753. Defendants had “no
11
interest in the loan” in a role as loan servicer. See Cleveland v. Deutsche Bank Nat. Trust Co.,
12
2009 WL 250017, at *3 (S.D. Cal. 2009).
13
14
15
16
17
18
Defendants owed no actionable duty of care to plaintiffs arising from Mr. Flores' loan
and default to support a negligence claim. The complaint lacks facts of special circumstances
to impose duties on defendants in that the complaint depicts no more than an arms-length loan
transaction, Mr. Flores' subsequent default, and the ensuing property foreclosure. The
complaint fails to substantiate a special lending or other relationship or an actionable breach of
duty to substantiate a negligence claim.
The complaint's reliance on the consent judgment as a source of defendants' duty is
19
unavailing. A fellow district court dismissed negligence claims based on the consent judgment
20
and observed:
21
22
23
24
25
26
The Consent Judgment's enforcement provisions never reference the possibility
of an enforcement proceeding being brought by an individual borrower as a third-party
beneficiary. Instead they allow enforcement actions to be brought by parties to the
Consent Judgment or by the monitoring committee that the Consent Judgment
establishes. See Consent Judgment at 18–20, 22; see generally Settlement Terms. The
Court therefore finds that the decree's precise language does not establish “a clear intent
to rebut the presumption that the third parties [to the Consent Judgment] are merely
incidental beneficiaries.” Astra USA, 588 F.3d at 1244. The Consent Judgment does not
provide a basis for Plaintiffs' claims.
27
28
Sanguinetti v. CitiMortgage, Inc., 2013 WL 4838765, at *6 (N.D. Cal. 2013).
24
1
In short, the consent judgment provides no basis for a negligence claim against
2
defendants. The complaint insufficiently attempts to allege defendants' cognizable duty of care
3
let alone its breach to cause plaintiffs damage. Nothing remotely supports a purported claim
4
5
6
that defendants provided "substantial assistance" to a tortfeasor which somehow injured
plaintiffs.
The complaint's (second) negligence claim fails and is subject to dismissal with
prejudice.
7
8
Real Estate Settlement Procedures Act
The complaint's (fourth) claim appears to allege that defendants violated the Real Estate
9
Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601, et seq., based on unsatisfactory
10
responses to correspondence of plaintiffs' counsel near the time of the trustee's sale of the
11
property. The complaint appears to equate the correspondence of plaintiffs' counsel as a
12
qualified written request ("QWR") under RESPA. The RESPA claim faults defendants' failure
13
"to prove up the validity of the notice of trustee sale" given alleged invalidity of the notice of
14
default and election to sell under deed of trust.
Sending QWR To Servicer
15
16
17
18
19
20
21
22
23
RESPA addresses loan servicer duties to respond to borrower inquiries. A QWR is a
“written request from the borrower (or an agent of the borrower) for information relating to the
servicing of such loan” received by a "servicer of a federally related mortgage loan." 12
U.S.C. § 2605(e)(1)(A). Among other things, a QWR must include information to identify the
borrower’s name and account and a “statement of the reasons for the belief of the borrower, to
the extent applicable, that the account is in error or provides sufficient detail to the servicer
regarding other information sought by the borrower.” 12 U.S.C. § 2605(e)(1)(B)(ii).
The complaint bases its RESPA claims on correspondence of plaintiff's counsel to
NDS, the DOT trustee. NDS was not the servicer of Mr. Flores' loan and not obligated under
24
RESPA to respond to a purported QWR. Moreover, as defendants note, plaintiffs did not
25
direct correspondence to the loan servicer until after the foreclosure sale and thus the
26
extinguishment of Mr. Flores' loan. After foreclosure, Mr. Flores' loan was subject neither to
27
servicing nor a QWR.
28
25
1
Qualification As A QWR
2
Defendants challenge that the correspondence of plaintiffs' counsel qualified as a QWR.
3
Defendants note that a QWR must address loan servicing, which is defined "as receiving any
4
5
6
7
8
scheduled periodic payments from a borrower pursuant to the terms of any loan, including
amounts for escrow accounts described in [12 U.S.C.] section 2609 of this title, and making the
payments of principal and interest and such other payments with respect to the amounts
received from the borrower as may be required pursuant to the terms of the loan."
The complaint fails to allege facts that the correspondence of plaintiffs' counsel
qualifies as a QWR in that the correspondence addressed authority to foreclose on the property,
9
not plaintiffs' "scheduled periodic payments" or "making the payments of principal and
10
interest." The complaint’s conclusory allegations as to a QWR are insufficient. See Lemperle
11
v. Washington Mut. Bank, 2011 WL 197590, at *2 (S.D. Cal. 2011) (dismissing as factually
12
insufficient a RESPA claim which offered “no factual basis for his claim, merely reciting the
13
elements of the cause of action and the general required content of a QWR”); Lopez v. U.S.
14
15
16
17
18
19
20
Bank Nat. Ass'n, 2010 WL 3463622, at *2 (S.D. Cal. 2010) (plaintiff “does not allege when she
sent the QWR, to whom, or what she asked for, and for these reasons fails to state a claim
under RESPA”); Walker v. Equity 1 Lenders Group, 2009 WL 1364430, at *5 (S.D. Cal. 2009)
(“The Complaint does not otherwise allege facts to support that Plaintiff sent Aurora a
qualified written request”). The complaint lacks supporting facts of a sufficient or credible
QWR to doom further RESPA claims.
In sum, the complaint's (fourth) RESPA claim is subject to dismissal with prejudice,
and plaintiffs appear to concede as much in their opposition papers.
21
Fair Debt Collection Practices Act
22
The complaint's fifth claim purports to allege violation of the Fair Debt Collection
23
Practices Act ("FDCPA"), 15 U.S.C. §§ 1692, et seq., based on assertions that defendants
24
"[f]alsely represented the status of the debt" and engaged "in collection activities that cannot be
25
26
27
28
legally taken."
Defendants contest the FDCPA claim in that foreclosure is not debt collection subject
to the FDCPA.
The FDCPA makes it unlawful for debt collectors to use abusive tactics while
collecting debts for others. Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985),
26
1
mod. on other grounds, 761 F.2d 237 (5th Cir. 1985). The FDCPA defines a debt collector as
2
“any person . . . who regularly collects or attempts to collect . . . debts owed or due or asserted
3
to be owed or due another.” 15 U.S.C. § 1692a(6). A “debt collector” does not include a
4
person who collects or attempts to collect a debt “to the extent such activity . . . concerns a debt
5
which was not in default at the time it was obtained by such person.” 15 U.S.C. 1962a(6)(F).
6
“The legislative history of section 1692a(6) indicates conclusively that a debt collector
7
does not include the consumer's creditors, a mortgage servicing company, or an assignee of a
8
debt, as long as the debt was not in default at the time it was assigned.” Perry, 756 F.2d at
9
1208; see F.T.C. v. Check Investors, Inc., 502 F.3d 159, 172 (3rd Cir. 2007) ("an assignee of an
10
obligation is not a 'debt collector' if the obligation is not in default at the time of assignment").
11
The complaint fails to substantiate defendants as debt collectors subject to the FDCPA.
12
See Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 106 (6th Cir. 1996); Kloth v. Citibank
13
(South Dakota), N.A., 33 F.Supp.2d 115, 1998 (D. Conn. 1998) (“Generally, the FDCPA does
14
not apply to creditors.”). The complaint lacks a valid FDCPA claim and facts that defendants
15
engaged in conduct prohibited by the FDCPA, especially given that defendants do not qualify
16
as debt collectors.
17
Moreover, as a fellow district judge explained, "the activity of foreclosing on the
18
property pursuant to a deed of trust is not the collection of a debt within the meaning of the
19
FDCPA":
20
21
22
Foreclosing on a trust deed is distinct from the collection of the obligation to
pay money. The FDCPA is intended to curtail objectionable acts occurring in the
process of collecting funds from a debtor. But, foreclosing on a trust deed is an entirely
different path. Payment of funds is not the object of the foreclosure action. Rather, the
lender is foreclosing its interest in the property.
23
24
. . . Foreclosure by the trustee is not the enforcement of the obligation because it
is not an attempt to collect funds from the debtor.
25
26
Hulse v. Ocwen Federal Bank, FSB, 195 F.Supp.2d 1188, 1204 (D. Or. 2002) (actions "in
27
pursuit of the actual foreclosure may not be challenged as FDCPA violations").
28
The complaint's limited meaningful allegations address foreclosure, not debt collection
27
1
activities subject to the FDCPA. In the absence of facts of actionable debt collection, the
2
complaint's (fifth) FDCPA claim is subject to dismissal with prejudice, and plaintiffs appear to
3
concede as much in their opposition papers.
Unfair Business Practices
4
5
6
The complaint's sixth claim purports to allege violation of California's Unfair
Competition Law ("UCL"), Cal. Bus. & Prof. Code, §§ 17200, et seq., based on defendants'
pursuit of property foreclosure and violation of RESPA and the consent judgment.
7
8
9
Standing – Injury In Fact
Defendants challenge plaintiffs' standing to pursue a UCL claim in the absence of an
"injury in fact" cognizable under the UCL.
10
California Business and Professions Code section 17204 limits standing to bring a UCL
11
claim to specified public officials and a private person “who has suffered injury in fact and has
12
lost money or property as a result of the unfair competition.”
13
[plaintiff] to show that she has lost ‘money or property’ sufficient to constitute an ‘injury in
14
15
16
17
18
19
20
21
22
“This provision requires
fact’ under Article III of the Constitution, see Birdsong v. Apple, Inc., 590 F.3d 955, 959–60
(9th Cir.2009), and also requires a ‘causal connection’ between [defendant's] alleged UCL
violation and her injury in fact, Hall v. Time Inc., 158 Cal.App.4th 847, 70 Cal.Rptr.3d 466,
471–72 (2008).” Rubio v. Capital One Bank, 613 F.3d 1195, 1204-1205 (9th Cir. 2010), cert.
denied, 131 S.Ct. 1817 (2011).
Business and Professions Code section 17203 addresses UCL relief and provides in
pertinent part:
Any person who engages, has engaged, or proposes to engage in unfair
competition may be enjoined in any court of competent jurisdiction. The court may
make such orders or judgments . . . as may be necessary to restore to any person in
interest any money or property, real or personal, which may have been acquired by
means of such unfair competition. (Bold added.)
23
24
25
26
27
28
“In a suit under the UCL, a public prosecutor may collect civil penalties, but a private
plaintiff's remedies are ‘generally limited to injunctive relief and restitution.’” Kasky v. Nike,
Inc., 27 Cal.4th 939, 950, 119 Cal.Rptr.2d 296 (2002) (quoting Cel-Tech Communications, Inc.
v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 83 Cal.Rptr.2d 548 (1999)).
The complaint lacks facts of plaintiffs' money or property allegedly lost to support a
UCL claim in that Mr. Flores was obligated to pay his loan and faced foreclosure if he failed to
28
1
meet his obligations. Contrary to plaintiffs' assertion, foreclosure of the property fails to
2
qualify as an injury in fact under the UCL. As such, the complaint lacks facts to connect
3
alleged damages to defendants. Foreclosure of the property fails to support a UCL claim in the
4
5
6
absence of allegations of plaintiffs' performance to avoid default. The complaint lacks facts to
support plaintiffs' standing to seek UCL relief to warrant dismissal of the UCL claim with
prejudice.
Unlawful, Unfair Or Fraudulent Practice
7
8
9
10
In addition, the complaint fails to allege facts to support UCL violations, and plaintiffs
offer no opposition to the contrary.
The UCL claim is subject to dismissal given the
complaint's failure to allege a predicate violation of law to support a UCL claim and to allege
facts to support an unlawful, unfair or fraudulent business practice.
11
“Unfair competition is defined to include 'unlawful, unfair or fraudulent business
12
practice and unfair, deceptive, untrue or misleading advertising.'” Blank v. Kirwan, 39 Cal.3d
13
311, 329, 216 Cal.Rptr. 718 (1985) (quoting Cal. Bus. & Prof. Code, § 17200). The UCL
14
15
16
17
establishes three varieties of unfair competition – “acts or practices which are unlawful, or
unfair, or fraudulent.”
Shvarts v. Budget Group, Inc., 81 Cal.App.4th 1153, 1157, 97
Cal.Rptr.2d 722 (2000). An “unlawful business activity” includes anything that can properly
be called a business practice and that at the same time is forbidden by law. Blank, 39 Cal.3d at
329, 216 Cal.Rptr. 718 (citing People v. McKale, 25 Cal.3d 626, 631-632, 159 Cal.Rptr. 811
18
(1979)). “A business practice is ‘unlawful’ if it is ‘forbidden by law.’” Walker v. Countrywide
19
Home Loans, Inc., 98 Cal.App.4th 1158, 1169, 121 Cal.Rptr.2d 79 (2002) (quoting Farmers
20
Ins. Exchange v. Superior Court, 2 Cal.4th 377, 383, 6 Cal.Rptr.2d 487 (1992)).
21
The UCL prohibits “unlawful” practices “forbidden by law, be it civil or criminal,
22
federal, state, or municipal, statutory, regulatory, or court-made.” Saunders v. Superior Court,
23
27 Cal.App.4th 832, 838, 33 Cal.Rptr.2d 548 (1999). The UCL “thus creates an independent
24
action when a business practice violates some other law.” Walker, 98 Cal.App.4th at 1169,
25
26
121 Cal.Rptr.2d 79.
violations of other laws and treats them as unlawful practices independently actionable under
the UCL. Farmers Ins., 2 Cal.4th at 383, 6 Cal.Rptr.2d 487.
27
28
According to the California Supreme Court, the UCL “borrows”
A fellow district court has explained the borrowing of a violation of law other than the
UCL:
29
1
2
3
4
5
6
7
8
To state a claim for an “unlawful” business practice under the UCL, a plaintiff
must assert the violation of any other law. Cel-Tech Commc'ns, Inc. v. Los Angeles
Cellular Telephone Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999)
(stating, “By proscribing ‘any unlawful’ business practice, section 17200 ‘borrows'
violations of other law and treats them as unlawful practices that the unfair competition
law makes independently actionable.”) (citation omitted). Where a plaintiff cannot state
a claim under the “borrowed” law, she cannot state a UCL claim either. See, e.g., Smith
v. State Farm Mutual Automobile Ins. Co., 93 Cal.App.4th 700, 718, 113 Cal.Rptr.2d
399 (2001). Here, Plaintiff has predicated her “unlawful” business practices claim on
her TILA [Truth in Lending Act] claim. However, as discussed above, Plaintiff's
attempt to state a claim under TILA has failed. Accordingly, Plaintiff has stated no
“unlawful” UCL claim.
9
10
Rubio v. Capital One Bank, 572 F.Supp.2d 1157, 1168 (C.D. Cal. 2008), affirmed in part,
11
reversed in part, 613 F.3d 1195 (2010).
12
Moreover, "a plaintiff may not bring an action under the unfair competition law if some
13
other statutory provision bars such an action or permits the underlying conduct." Rothschild v.
14
15
16
Tyco Internat. (US), Inc., 83 Cal.App.4th 488, 494, 99 Cal.Rptr.2d 721 (2000).
“Unfair” under the UCL “means conduct that threatens an incipient violation of an
antitrust law, or violates the policy or spirit of one of those laws because its effects are
comparable to or the same as a violation of the law, or otherwise significantly threatens or
17
harms competition.” Cal-Tech Communications, Inc. v. Los Angeles Cellular Telephone, 20
18
Cal.4th 163,187, 83 Cal.Rptr.2d 548 (1999). A business practice is unfair when it “offends an
19
established public policy or when the practice is immoral, unethical, oppressive, unscrupulous
20
or substantially injurious to consumers.” Podolsky v. First Healthcare Corp., 50 Cal.App.4th
21
632, 647, 58 Cal.Rptr.2d 89 (1996) (internal quotations and citations omitted).
22
“unfairness” prong of the UCL “does not give the courts a general license to review the
23
fairness of contracts.” Samura v. Kaiser Found. Health Plan, 17 Cal.App.4th 1284, 1299 & n.
24
6, 22 Cal.Rptr.2d 20 (1993).
25
26
27
28
The
The “fraudulent” prong under the UCL requires a plaintiff to “show deception to some
members of the public, or harm to the public interest,” Watson Laboratories, Inc. v. RhonePoulenc Rorer, Inc., 178 F.Supp.2d 1099, 1121 (C.D. Ca. 2001), or to allege that “members of
the public are likely to be deceived,” Schnall v. Hertz Corp., 78 Cal.App.4th 1144, 1167, 93
Cal.Rptr.2d 439 (2000); Medical Instrument Development Laboratories v. Alcon Laboratories,
30
1
2005 WL 1926673, at *5 (N.D. Cal. 2005). A UCL “plaintiff need not show that he or others
2
were actually deceived or confused by the conduct or business practice in question.” Schnall,
3
78 Cal.App.4th at 1167, 93 Cal.Rptr.2d 439.
4
5
6
7
8
“A plaintiff alleging unfair business practices under these statutes [UCL] must state
with reasonable particularity the facts supporting the statutory elements of the violation.”
Khoury v. Maly's of California, Inc., 14 Cal.App.4th 612, 619, 17 Cal.Rptr.2d 708 (1993); see
People v. McKale, 25 Cal.3d 626, 635, 159 Cal.Rptr. 811 (1979) ("Without supporting facts
demonstrating the illegality of a rule or regulation, an allegation that it is in violation of a
specific statute is purely conclusionary and insufficient to withstand demurrer"). Moreover, a
9
UCL claim "cannot be predicated on vicarious liability." Emery v. Visa Internat. Service Ass'n,
10
95 Cal.App.4th 952, 960, 116 Cal.Rptr.2d 25 (2002). “The concept of vicarious liability has
11
no application to actions brought under the unfair business practices act.” People v. Toomey,
12
157 Cal.App.3d 1, 14, 203 Cal.Rptr. 642 (1984). "A defendant's liability must be based on his
13
personal 'participation in the unlawful practices' and 'unbridled control' over the practices that
14
15
16
17
18
are found to violate section 17200 or 17500." Emery, 95 Cal.App.4th at 960, 116 Cal.Rptr.2d
25 (quoting Toomey, 157 Cal.App.3d at 15, 203 Cal.Rptr. 642).
The complaint lacks facts of an unlawful, unfair or fraudulent business practice to
support a UCL claim, despite the complaint's references to overbroad, conclusory misconduct
without specific facts to connect alleged wrongdoing to defendants. The complaint lumps
defendants without facts to distinguish their individual alleged wrongs. As demonstrated
19
throughout this order, the complaint's claims fail and thus cannot serve as a predicate violation
20
for a UCL claim. The complaint lacks viable statutory or common law claims and lacks
21
reasonable particularity of facts to support a UCL claim. The complaint lacks exactitude of
22
fraudulent circumstances for a UCL claim. The complaint’s (sixth) UCL claim fails with its
23
other claims and is subject to dismissal with prejudice.
24
Accounting
25
26
27
28
The complaint's (seventh) accounting claim holds defendants to "a fiduciary duty to
Plaintiff to properly account for payments made by Plaintiff" and appears to seek a return of
Mr. Flores' loan payments.
An accounting action "is a proceeding in equity for the purpose of obtaining a judicial
settlement of the accounts of the parties in which proceeding the court will adjudicate the
31
1
amount due, administer full relief and render complete justice." Verdier v. Superior Court in
2
and for City and County of San Francisco, 88 Cal.App.2d 527, 531, 199 P.2d 325 (1948). An
3
accounting cause of action is equitable and may be sought where the accounts are so
4
5
6
7
8
complicated that an ordinary legal action demanding a fixed sum is impracticable. Civic
Western Corp. v. Zila Industries, Inc., 66 Cal.App.3d 1, 14, 135 Cal.Rptr. 915 (1977). A suit
for an accounting will not lie where it appears from the complaint that none is necessary or that
there is an adequate remedy at law. Civic Western, 66 Cal.App.3d at 14, 135 Cal.Rptr. 915.
An accounting will not be accorded with respect to a sum that a plaintiff seeks to recover and
alleges in his complaint to be a sum certain. Civic Western, 66 Cal.App.3d at 14, 135 Cal.Rptr.
9
915; see St. James Church of Christ Holiness v. Superior Court In and For Los Angeles
10
County, 135 Cal.App.2d 352, 359, 287 P.2d 387 (1955) ("If an action is for an amount which is
11
unliquidated and unascertained and which cannot be determined without an accounting, it is a
12
suit in equity"). Moreover, an accounting claim “need only state facts showing the existence of
13
the relationship which requires an accounting and the statement that some balance is due the
14
15
16
17
18
plaintiff.” Brea v. McGlashan, 3 Cal.App.2d 454, 460, 39 P.2d 877 (1934).
“A right to an accounting is derivative; it must be based on other claims.” Janis v.
California State Lottery Com., 68 Cal.App.4th 824, 833-834, 80 Cal.Rptr.2d 549 (1998).
Moreover, as an equitable matter, an accounting frequently “presents a fiduciary relation
between the parties in the nature of a trust which brings it especially within equitable
remedies.” Kritzer v. Lancaster, 96 Cal.App.2d 1, 6, 214 P.2d 407 (1950).
19
Lastly, a plaintiff, "as the party owing money, not the party owed money, has no right
20
to seek an accounting.” Quinteros v. Aurora Loan Services, 740 F.Supp.2d 1163, 1170 (E.D.
21
Cal. 2010).
22
The complaint lacks facts to support an accounting, especially given dismissal of the
23
complaint's other claims from which to derive an accounting and the complaint's admission
24
that Mr. Flores "owes money on his mortgage obligation." As the party owing money, Mr.
25
26
27
Flores lack standing to seek an accounting. Despite plaintiffs' assertion, there are no facts to
support complicated accounts, and presumably plaintiffs have the ability to ascertain what was
paid on Mr. Flores' loan. Nothing demonstrates that defendants, or any party to whom Mr.
Flores owed money, is subject to an accounting, especially given the lack of its fiduciary
28
32
1
obligations to Mr. Flores.6 The complaint fails to invoke equity for an accounting, and the
2
complaint's (seventh) accounting claim is subject to dismissal with prejudice.
Wrongful Foreclosure
3
The complaint's (eighth) wrongful foreclosure claim challenges the property
4
5
6
7
8
9
10
foreclosure based on alleged absence of authority to foreclose, violation of the consent
judgment, and securitization of Mr. Flores' loan. As discussed in detail above, plaintiffs lack
standing to invoke a claim based on violation of the consent judgment or PSA. The complaint
lacks facts to support irregularity in the property foreclosure, which is presumed proper.
Moreover, the record's absence of Mr. Flores' credible, legitimate tender of amounts owed bars
claims in connection with property foreclosure. The complaint's (eighth) wrongful foreclosure
claim is subject to dismissal with prejudice.
11
Quiet Title
12
The complaint's (tenth) quiet title claim seeks "to quiet title against the claims of
13
Defendants" and in "Mr. Flores [sic] name alone" based on apparent assertions that defendants
14
lack authority to foreclose on the property and violated the consent judgment.
Defendants challenge the quiet title claim in absence of a supporting factual or legal
15
16
17
18
19
20
21
basis.
California Code of Civil Procedure section 760.010 provides for an action “to establish
title against adverse claims to real or personal property or any interest therein.” California
Code of Civil Procedure section 761.020 mandates a “verified” complaint for a quiet title
action to include:
1.
A legal description and street address of the subject real property;
2.
The title of plaintiff as to which determination is sought and the basis of the
22
23
24
25
26
27
28
6
The “relationship between a lending institution and its borrower-client is not fiduciary in
nature.” Nymark, 231 Cal.App.3d at 1093, n. 1, 283 Cal.Rptr. 53 (1991) (citing Price v. Wells Fargo Bank, 213
Cal.App.3d 465, 476-478, 261 Cal.Rptr. 735 (1989)). A commercial lender is entitled to pursue its own economic
interests in a loan transaction. Nymark, 231 Cal.App.3d at 1093, n. 1, 283 Cal.Rptr. 53(citing Kruse v. Bank of
America, 202 Cal.App.3d 38, 67, 248 Cal.Rptr. 217 (1988)). Absent “special circumstances” a loan transaction is
“at arms-length and there is no fiduciary relationship between the borrower and lender.” Oaks Management, 145
Cal.App.4th at 466, 51 Cal.Rptr.3d 561 (“the bank is in no sense a true fiduciary”); see Downey v. Humphreys,
102 Cal.App.2d 323, 332, 227 Cal.Rptr. 484 (1951) (“A debt is not a trust and there is not a fiduciary relation
between debtor and creditor as such.”). The complaint fails to allege facts to impose fiduciary liability on
defendants in the absence of genuine supporting facts.
33
1
title;
3.
The adverse claims to the title of the plaintiff against which a determination is
4
4.
The date as of which the determination is sought; and
5
5.
A prayer for the determination of the title of the plaintiff against the adverse
2
3
6
sought;
claims.
7
The quiet title remedy “is cumulative and not exclusive of any other remedy, form or
8
right of action, or proceeding provided by law for establishing or quieting title to property.”
9
Cal. Code Civ. Proc., § 760.030.
10
The complaint lacks facts as to the legitimate title to which Mr. Flores seeks
11
determination and a legally supported basis for his purported title given his loan default and
12
inability to tender amounts due on his loan. The complaint fails to identify adverse claims with
13
which Mr. Flores has a genuine dispute. A quiet title claim requires an allegation that the
14
plaintiffs “are the rightful owners of the property, i.e., that they have satisfied their obligations
15
under the Deed of Trust.” See Kelley v. Mortgage Electronic Registration Systems, Inc., 642
16
F.Supp.2d 1048, 1057 (N.D. Cal. 2009). The complaint lacks genuine facts that Mr. Flores is
17
the property’s rightful owner, has satisfied DOT obligations and thus lacks a properly pled
18
quiet title claim.
19
Moreover, a purported quiet title claim is doomed in the absence of a tender of amounts
20
owed. “It is settled in California that a mortgagor cannot quiet his title against the mortgagee
21
without paying the debt secured.” Shimpones v. Stickney, 219 Cal. 637, 649, 28 P.2d 673
22
(1934). “A party may not without payment of the debt, enjoin a sale by a trustee under a power
23
conferred by a deed of trust, or have his title quieted against the purchaser at such a sale, even
24
though the statute of limitations has run against the indebtedness.” Sipe v. McKenna, 88
25
Cal.App.2d 1001, 1006, 200 P.2d 61 (1948); see Mix v. Sodd, 126 Cal.App.3d 386, 390, 178
26
Cal.Rptr. 736 (1981) (“a mortgagor in possession may not maintain an action to quiet title,
27
even though the debt is unenforceable”); Aguilar v. Bocci, 39 Cal.App.3d 475, 477, 114
28
Cal.Rptr. 91 (1974) (trustor is unable to quiet title “without discharging his debt. The cloud
34
1
upon his title persists until the debt is paid”).
2
“A valid and viable tender of payment of the indebtedness owing is essential to an
3
action to cancel a voidable sale under a deed of trust.” Karlsen v. American Sav. & Loan
4
Ass'n., 15 Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971). An “action to set aside the sale,
5
unaccompanied by an offer to redeem, would not state a cause of action which a court of equity
6
would recognize.” Copsey v. Sacramento Bank, 133 Cal. 659, 662, 66 P. 7 (1901).
7
Mr. Flores is unable to quiet title in his favor without paying or tendering his
8
outstanding indebtedness.
The complaint and record lack facts to support a legitimate
9
exception from the tender requirements. With the complaint’s absence of a credible, legitimate
10
ability or willingness to tender the indebtedness, a purported quiet title claim fails. This Court
11
is not in a position to award plaintiffs a windfall.
12
Lastly, defendants correctly challenge Mr. Flores' standing to quiet title given his mere
13
equitable, not legal, interest in the property derived via the DOT. See Lewis v. Superior Court,
14
30 Cal.App.4th 1850, 1866, 37 Cal.Rptr.2d 63 (1994) (recorder of lis pendens "never had
15
standing to bring a quiet title action, because whatever interest it might have is only equitable,
16
and the holder of equitable title cannot maintain a quiet title action against the legal owner").
17
The complaint's (tenth) quiet title claim is subject to dismissal with prejudice.
Slander Of Title
18
19
The complaint's (eleventh) slander of title claim accuses defendants of recording
20
against the property default and foreclosure documents wrongfully and without privilege. The
21
slander of title claim asserts that Mellon has published matters "that they [sic] are the current
22
owners of the Subject Property which is untrue and disparaging to Plaintiff's interest in the
23
Subject Property."
24
The elements of slander of title are: (1) publication; (2) falsity; (3) absence of privilege;
25
and (4) disparagement of another's land which is relied upon by a third party and which results
26
in a pecuniary loss. Appel v. Burman, 159 Cal.App.3d 1209, 1214, 206 Cal.Rptr. 259 (1984).
27
28
Defendants point to the privileged nature of recording, mailing and delivering of default
and foreclosure notices.
Section 2924(d) renders as California Civil Code section 47
35
1
“privileged communications” the “mailing, publication, and delivery” of foreclosure notices
2
and “performance” of foreclosure procedures. “[W]e conclude that the protection granted to
3
nonjudicial foreclosure . . . is the qualified common interest privilege of section 47, subdivision
4
(c)(1).” Kachlon v. Markowitz, 168 Cal.App.4th 316, 341, 85 Cal.Rptr.3d 532 (2008); see
5
Consumer Solutions REO, LLC v. Hillery, 658 F.Supp.2d 1002, 1018 (N.D. Cal. 2009)
6
(conduct is “protected by the qualified privilege of § 47(c) so long as . . . not malicious”); see
7
also Hagberg v. California Federal Bank FSB, 32 Cal.4th 350, 361 81 P.3d 244 (2004) (“As
8
noted, the only tort claim we have identified as falling outside the privilege established by
9
section 47(b) is malicious prosecution.”).
10
Moreover, foreclosure notices do not slander title in that they do not disparage land.
11
See Ortiz v. Accredited Home Lenders, Inc., 639 F.Supp.2d 1159, 1168 (S.D. Cal. 2009) (“The
12
recorded foreclosure Notices do not affect Plaintiffs' title, ownership, or possession in the
13
Property.”)
14
The complaint lacks facts to support slander of title elements and allegations to address
15
how plaintiffs’ reliance on foreclosure documents caused pecuniary loss.
16
mailing and delivery of foreclosure documents are privileged to negate a necessary element of
17
the claim.
18
complaint's (eleventh) slander of title claim subject to dismissal with prejudice.
19
The recording,
Plaintiffs can plead no facts to revive a slander of title claim to render the
Breach Of Contract
20
The complaint's (twelfth) breach of contract claim accuses defendants of breach of the
21
consent judgment. Plaintiffs' reliance on Mr. Flores' promissory note and DOT are nonsensical
22
given that the claim is based on the consent judgment. As discussed above, plaintiffs lack
23
standing to pursue claims under the consent judgment to render the complaint's (twelfth)
24
breach of contract claim subject to dismissal with prejudice.
25
Emotional Distress
26
The complaint's (fourteenth) intentional and negligent infliction of emotional distress
27
claim accuses defendants of inflicting emotional distress on plaintiffs in that they lacked
28
authority to foreclose on the property.
36
1
No Tort Remedy
The complaint's claims chiefly arise out of contractual relationships to bar tort claims,
2
3
including intentional and negligent infliction of emotional distress.
In Hunter v. Up-Right, Inc., 6 Cal.4th 1174, 1180, 26 Cal.Rptr.2d 8 (1993), the
4
5
California Supreme Court distinguished contract and tort theories:
We noted that “[t]he distinction between tort and contract is well grounded in
common law, and divergent objectives underlie the remedies created in the two areas.
Whereas contract actions are created to enforce the intentions of the parties to the
agreement, tort law is primarily designed to vindicate 'social policy.' [Citation.]”
(Foley, supra, 47 Cal.3d at p. 683.)
6
7
8
9
10
In Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 517, 28
11
Cal.Rptr.2d 475 (1994), the California Supreme Court agreed with the following summary of
12
contract law:
18
“[W]hen two parties make a contract, they agree upon the rules and regulations
which will govern their relationship; the risks inherent in the agreement and the
likelihood of its breach. The parties to the contract in essence create a mini-universe for
themselves, in which each voluntarily chooses his contracting partner, each trusts the
other's willingness to keep his word and honor his commitments, and in which they
define their respective obligations, rewards and risks. Under such a scenario, it is
appropriate to enforce only such obligations as each party voluntarily assumed, and to
give him only such benefits as he expected to receive; this is the function of contract
law.”
19
The complaint's claims, especially those premised on the DOT and consent judgment,
20
present a case founded on contract and in turn a limited “contractual relationship" to bar
21
emotional distress claims. Plaintiffs' assertion that their alleged emotional distress arises from
22
loss of the property, rather an property damage, fails to negate the contract origins of their
23
claims.
13
14
15
16
17
24
Intentional Infliction Of Emotional Distress
25
The elements of an intentional infliction of emotional distress ("IIED") claim are: (1)
26
defendant’s outrageous conduct; (2) defendant’s intention to cause, or reckless disregard of the
27
probability of causing, emotional distress; (3) plaintiff’s suffering severe or extreme emotional
28
distress; and (4) an actual and proximate causal link between the tortious (outrageous) conduct
37
1
and the emotional distress. Nally v. Grace Community Church of the Valley, 47 Cal.3d 278,
2
300, 253 Cal.Rptr. 97, 110 (1988), cert. denied, 490 U.S. 1007, 109 S.Ct. 1644 (1989); Cole v.
3
Fair Oaks Fire Protection Dist., 43 Cal.3d 148, 155, n. 7, 233 Cal.Rptr. 308 (1987). The
4
“[c]onduct to be outrageous must be so extreme as to exceed all bounds of that usually
5
tolerated in a civilized community.” Davidson v. City of Westminister, 32 Cal.3d 197, 209, 185
6
Cal.Rptr. 252 (1982) (quoting Cervantez v. J.C. Penney Co., 24 Cal.3d 579, 593, 156
7
Cal.Rptr.198 (1979)). Conduct is extreme and outrageous when it is of a nature which is
8
especially calculated to cause, and does cause, mental distress. Liability does not extend to
9
mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. Fisher v.
10
San Pedro Peninsula Hosp., 214 Cal.App.3d 590, 617, 262 Cal.Rptr. 842, 857 (1989).
11
To support an intentional infliction of emotional distress claim, the conduct must be
12
more than “intentional and outrageous. It must be conduct directed at the plaintiff, or occur in
13
the presence of a plaintiff of whom the defendant is aware.” Christensen v. Superior Court, 54
14
Cal.3d 868, 903, 2 Cal.Rptr.2d 79 (1991).
15
explained:
16
17
18
19
20
21
22
The California Supreme Court has further
“The law limits claims of intentional infliction of emotional distress to
egregious conduct toward plaintiff proximately caused by defendant.” . . . The only
exception to this rule is that recognized when the defendant is aware, but acts with
reckless disregard, of the plaintiff and the probability that his or her conduct will cause
severe emotional distress to that plaintiff. . . . Where reckless disregard of the plaintiff's
interests is the theory of recovery, the presence of the plaintiff at the time the
outrageous conduct occurs is recognized as the element establishing a higher degree of
culpability which, in turn, justifies recovery of greater damages by a broader group of
plaintiffs than allowed on a negligent infliction of emotional distress theory. . . .
Christensen, 54 Cal.3d at 905-906, 2 Cal.Rptr.2d 79 (citations omitted.)
23
"An assertion of legal rights in pursuit of one's own economic interests does not qualify
24
as 'outrageous' under this standard." Yu v. Signet Bank/Virginia, 69 Cal.App.4th 1377, 82
25
Cal.Rptr.2d 304 (1999). “In the context of debt collection, courts have recognized that the
26
attempted collection of a debt by its very nature often causes the debtor to suffer emotional
27
distress.” Ross v. Creel Printing & Publishing Co., 100 Cal.App.4th 736, 745, 122 Cal.Rptr.2d
28
787 (2002) (citing Bundren v. Superior Court, 145 Cal.App.3d 784, 789, 193 Cal.Rptr. 671
38
1
(1983)). “Frequently, the creditor intentionally seeks to create concern and worry in the mind
2
of the debtor in order to induce payment.” Bundren, 145 Cal.App.3d at 789, 193 Cal.Rptr.
3
671. Such conduct is outrageous only if it exceeds “all reasonable bounds of decency.”
4
Bundren, 145 Cal.App.3d at 789, 193 Cal.Rptr. 671.
5
“The assertion of an economic interest in good faith is privileged, even if it causes
6
emotional distress.” Ross, 100 Cal.App.4th at 745, n. 4, 122 Cal.Rptr.2d 787 (citing Fletcher
7
v. Western National Life Ins. Co., 10 Cal.App.3d 376, 395, 89 Cal.Rptr. 78 (1970)); Cantu v.
8
Resolution Trust Corp., 4 Cal.App.4th 857, 888, 6 Cal.Rptr.2d 151 (1992). “In debtor/creditor
9
cases, the privilege is qualified, in that it can be vitiated where the creditor uses outrageous and
10
unreasonable means in seeking payment.”
11
Cal.Rptr.2d 787 (citing Symonds v. Mercury Savings & Loan Assn., 225 Cal.App.3d 1458,
12
1469, 275 Cal.Rptr. 871 (1990)); see Wislon v. Hynek, 207 Cal.App.4th 999, 1009, 144
13
Cal.Rptr.3d 4 (2012) (plaintiffs failed to plead outrageous conduct given "this was a
14
creditor/debtor situation, whereby the defendants were exercising their rights under the loan
15
agreements. There are no allegations that in conducting the foreclosure proceedings any of the
16
defendants threatened, insulted, abused or humiliated the [plaintiffs]").
Ross, 100 Cal.App.4th 736, 745, n. 4, 122
17
The complaint fails to allege defendants' outrageous conduct to support an IIED claim
18
in that the complaint addresses matters in which plaintiffs lack standing to pursue and
19
defendants' privileged actions. The complaint points to no conduct of defendants outside that
20
generally accepted in loan servicing and/or foreclosure, which is inherently stressful for
21
debtors. The complaint identifies no "severe" emotional distress which plaintiffs allegedly
22
suffered. The IIED claim fails on its merits to warrant its dismissal with prejudice, especially
23
given plaintiffs' failure provide meaningful support for the claim.
24
25
26
Negligent Infliction Of Emotional Distress – Absence Of Duty
A purported negligent infliction of emotional distress ("NIED") claim fails in the
absence of defendants' cognizable duty owed in relation to plaintiffs.
27
NIED is a form of the tort of negligence, to which the elements of duty, breach of duty,
28
causation and damages apply. Huggins v. Longs Drug Stores California, Inc., 6 Cal.4th 124,
39
1
129, 24 Cal.Rptr.2d 587 (1993). California law recognizes that “there is no independent tort of
2
negligent infliction of emotional distress” in that “[t]he tort is negligence, a cause of action in
3
which a duty to the plaintiff is an essential element.” Potter v. Firestone Tire & Rubber Co., 6
4
Cal.4th 965, 984, 25 Cal.Rptr.2d 550 (1993). The existence of a duty is a question of law.
5
Marlene F. v. Affiliated Psychiatric Medical Clinic, Inc., 48 Cal.3d 583, 588, 257 Cal.Rptr. 98
6
(1989).
7
Negligent infliction of emotional distress includes “at least two variants of the theory” –
8
“bystander” cases and “direct victim” cases. Wooden v. Raveling, 61 Cal.App.4th 1035, 1037,
9
71 Cal.Rptr.2d 891, 892 (1998). “The distinction between the 'bystander' and the 'direct victim'
10
cases is found in the source of the duty owed by the defendant to the plaintiff.” Burgess v.
11
Superior Court, 2 Cal.4th 1064, 1072, 9 Cal.Rptr.2d 615 (1992). “Bystander” claims are
12
typically based on breach of a duty owed to the public in general (Christensen v. Superior
13
Court, 54 Cal.3d 868, 884, 2 Cal.Rptr.2d 79 (1991)), whereas a right to recover for emotional
14
distress as a “direct victim” arises from the breach of a duty that is assumed by the defendant
15
or imposed on the defendant as a matter of law, or that arises out of the defendant's preexisting
16
relationship with the plaintiff (Burgess, 2 Cal.4th at 1073-1074, 9 Cal.Rptr. 615; Marlene F.,
17
48 Cal.3d at 590, 257 Cal.Rptr. 98). “[B]ystander liability is premised upon defendant’s
18
violation of a duty not to negligently cause emotional distress to people who observe conduct
19
which causes harm to another.” Burgess, 2 Cal.4th at 1073, 9 Cal.Rptr. 615.
20
“‘Bystander’ cases are cases in which the plaintiff was not physically impacted or
21
injured, but instead witnessed someone else being injured due to defendant’s negligence.”
22
Wooden, 61 Cal.App.4th at 1037, 71 Cal.Rptr.2d at 892. “‘Direct victim’ cases are cases in
23
which the plaintiff’s claim of emotional distress is not based upon witnessing an injury to
24
someone else, but rather is based upon the violation of a duty owed directly to the plaintiff.”
25
Wooden, 61 Cal.App.4th at 1038, 71 Cal.Rptr.2d at 893-894. In “direct victim” cases, “well-
26
settled principles of negligence are invoked to determine whether all elements of a cause of
27
action, including duty, are present in a given case.” Burgess, 2 Cal.4th at 1073, 9 Cal.Rptr.2d
28
615. “[U]nless the defendant has assumed a duty to plaintiff in which the emotional condition
40
1
of the plaintiff is an object, recovery is available only if the emotional distress arises out of the
2
defendant’s breach of some other legal duty and emotional distress is proximately caused by
3
that breach of duty.” Potter, 6 Cal.4th at 985, 25 Cal.Rptr.2d 550.
4
The complaint fails to allege facts to support either the direct victim or bystander theory
5
and to support defendants' duty for a direct victim theory. The complaint fails to allege facts of
6
physical injury to plaintiffs or others to support a bystander theory. As discussed above, the
7
complaint alleges no facts to support defendants' actionable duty owed to plaintiffs and in turn
8
grounds to support a negligence recovery. A purported NIED claim fails.
9
10
11
In sum, the complaint's (fourteenth) emotional distress claim is subject to dismissal
with prejudice.
Immunities For Trustee NDS
12
Defendants contend that statutory immunities bar the complaint's claims, including for
13
breach of fiduciary duty, against NDS given its limited role as DOT trustee. Plaintiffs respond
14
15
16
that complaint overcomes the immunities based on allegations that NDS breached "duties of
loyalty, good faith, candor and independence."
As a reminder, non-judicial foreclosure sales “are governed by a ‘comprehensive’
statutory scheme. This scheme, which is found in Civil Code sections 2924[, et seq.], evidences
17
a legislative intent that a sale which is properly conducted ‘constitutes a final adjudication of
18
the rights of the borrower and lender.’” Royal Thrift and Loan Co. v. County Escrow, Inc., 123
19
Cal.App.4th 24, 32, 20 Cal.Rptr.3d 37 (2004) (quoting 6 Angels, Inc. v. Stuart-Wright
20
Mortgage, Inc., 85 Cal.App.4th 1279, 1283-1284, 102 Cal.Rptr.2d 711, fn. omitted (2001)).
21
Subsection (d) of California Civil Code section 2924 (“section 2924") renders as
22
California Civil Code section 47 “privileged communications” the “mailing, publication, and
23
delivery” of foreclosure notices and “performance” of foreclosure procedures. The section
24
25
26
27
28
2924(d) privilege extended through California Civil Code section 47 applies to tort claims
other than malicious prosecution. Hagberg v. California Federal Bank FSB, 32 Cal.4th 350,
361 81 P.3d 244 (2004) (“As noted, the only tort claim we have identified as falling outside the
privilege established by section 47(b) is malicious prosecution.”)
Section 2924(b) provides NDS, as DOT trustee, further protections: "In performing
acts required by this article, the trustee shall incur no liability for any good faith error resulting
41
1
from reliance on information provided in good faith by the beneficiary regarding the nature and
2
the amount of the default under the secured obligation, deed of trust, or mortgage."
3
4
5
6
7
8
9
A deed of trust trustee's limited liability is consistent with its limited duties. An
“ordinary trust deed conveys the legal title to the trustee only so far as may be necessary to the
execution of the trust.” Lupertino v. Carbahal, 35 Cal.App.3d 742, 748, 111 Cal.Rptr. 112
(1973). A deed of trust “carries none of the incidents of ownership of the property, other than
the right to convey upon default on the part of the debtor in the payment of his debt.”
Lupertino, 35 Cal.App.3d at 748, 111 Cal.Rptr. 112 (quoting Bank of Italy, etc. Assn. v.
Bentley, 217 Cal. 644, 656, 20 P.2d 940 (1933)).
The California Court of Appeal has
explained a deed of trust trustee’s limited authority:
18
The trustee under a deed of trust “is not a true trustee, and owes no fiduciary
obligations; [it] merely acts as a common agent for the trustor and beneficiary of the
deed of trust. [The trustee's] only duties are: (1) upon default to undertake the steps
necessary to foreclose the deed of trust; or (2) upon satisfaction of the secured debt to
reconvey the deed of trust.” (Vournas v. Fidelity National Title Ins. Co. (1999) 73
Cal.App.4th 668, 677, 86 Cal.Rptr.2d 490.) Consistent with this view, California courts
have refused to impose duties on the trustee other than those imposed by statute or
specified in the deed of trust. As our Supreme Court noted in I.E. Associates v. Safeco
Title Ins. Co. (1985) 39 Cal.3d 281, 216 Cal.Rptr. 438, 702 P.2d 596, “The rights and
powers of trustees in nonjudicial foreclosure proceedings have long been regarded as
strictly limited and defined by the contract of the parties and the statutes. . . . [¶] . . .
[T]here is no authority for the proposition that a trustee under a deed of trust owes any
duties with respect to exercise of the power of sale beyond those specified in the deed
and the statutes.” ( Id. at pp. 287-288, 216 Cal.Rptr. 438, 702 P.2d 596.)
19
Heritage Oaks Partners v. First American Title Ins. Co., 155 Cal.App.4th 339, 345, 66
20
Cal.Rptr.3d 510 (2007); see Monterey SP Partnership v. WL Bangham, 49 Cal.3d 454, 462-
21
463, 261 Cal.Rtpr. 587 (1989) (“The similarities between a trustee of an express trust and a
22
trustee under a deed of trust end with the name. . . . the trustee under a deed of trust does not
23
have a true trustee's interest in, and control over, the trust property. Nor is it bound by the
10
11
12
13
14
15
16
17
24
25
26
27
28
fiduciary duties that characterize a true trustee.”)
A “trustee has a general duty to conduct the sale ‘fairly, openly, reasonably, and with
due diligence,’ exercising sound discretion to protect the rights of the mortgagor and others.”
Hatch v. Collins, 225 Cal.App.3d 1104, 1112, 275 Cal.Rptr. 476 (1990)(citation omitted).
NDS’ alleged wrongs are subject to section 2924(b) and (d) immunity. In the absence
of allegations of NDS’ malice or other significant wrongdoing, section immunity 2924(d) bars
42
1
purported claims against NDS. No facts support that NDS acted in bad faith to erode section
2
2924(b) protection. There is nothing to suggest that NDS exceeded its DOT trustee authority
3
to initiate property foreclosure. As such, NDS is immunized from the complaint's claims,
4
which further fail for the reasons addressed above.
Attempt At Amendment And Malice
5
6
7
8
Since the complaint lacks actionable claims, plaintiffs are unable to cure claims by
allegation of other facts and thus are not granted an attempt to amend. No further facts are
apparent to attempt to support claims, and plaintiffs point to none.
The complaint and
plaintiffs' opposition papers raise meritless points, all of which this Court need not address
9
individually. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984) (“We perceive
10
no need to refute these arguments with somber reasoning and copious citation of precedent; to
11
do so might suggest that these arguments have some colorable merit.”)
12
Moreover, this Court surmises that plaintiffs brought this action in absence of good
13
faith and seek to exploit the court system solely for delay or to vex defendants, the foreclosure
14
15
16
17
18
process, and assumption of property possession.7 The test for maliciousness is a subjective one
and requires the court to “determine the . . . good faith of the applicant.” Kinney v. Plymouth
Rock Squab Co., 236 U.S. 43, 46 (1915); see Wright v. Newsome, 795 F.2d 964, 968, n. 1 (11th
Cir. 1986); cf. Glick v. Gutbrod, 782 F.2d 754, 757 (7th Cir. 1986) (court has inherent power to
dismiss case demonstrating “clear pattern of abuse of judicial process”). A lack of good faith
or malice also can be inferred from a complaint containing untrue material allegations of fact
19
or false statements made with intent to deceive the court. See Horsey v. Asher, 741 F.2d 209,
20
212 (8th Cir. 1984). The complaint comprises invalid claims. An attempt to vex or delay
21
provides further grounds to dismiss this action.
CONCLUSION, ORDER AND JUDGMENT
22
23
For the reasons discussed above, this Court:
24
1.
DISMISSES with prejudice this action and all claims against defendants;
25
26
27
28
7
This evaluation is supported by plaintiffs' failure to oppose dismissal of the complaint's RESPA
and FDCPA claims, the only means to support federal question jurisdiction and possible remand to state court
with subsequent delay if this Court declined to exercise supplemental jurisdiction over the remaining California
statutory and common law claims. See 28 U.S.C. § 1367(c)(2), (3).
43
1
2.
ENTERS this JUDGMENT in favor of defendants Bank of New York Mellon,
2
National Default Servicing, and Mortgage Electronic Registration Systems, Inc. and against
3
plaintiffs Vincent Elijah Flores and Joe Flores in that there is no just reason to delay to enter
4
5
6
7
8
such judgment given plaintiffs' claims against these defendants and that their alleged liability is
clear and distinct from claims against and liability of any other defendant. See F.R.Civ.P.
54(b). This JUDGMENT is subject to F.R.App.4(a)'s time limitations to file an appeal of this
JUDGMENT; and
3.
ORDERS plaintiffs, no later than February 25, 2014, to file papers either to: (a)
dismiss this action against any remaining defendants, including EMC Mortgage Corporation,
9
Cal-Western Reconveyance Corporation, JP Morgan, Chase Bank, N.A., Christina Trowbridge
10
and Whitney K. Cook; or (b) show good cause why this Court should not dismiss this action
11
against any remaining defendants, including EMC Mortgage Corporation, Cal-Western
12
Reconveyance Corporation, JP Morgan, Chase Bank, N.A., Christina Trowbridge and Whitney
13
K. Cook.
14
15
16
17
18
19
This Court ADMONISHES plaintiffs that this Court will dismiss this action
against any remaining defendants, including EMC Mortgage Corporation, Cal-Western
Reconveyance Corporation, JP Morgan, Chase Bank, N.A., Christina Trowbridge and
Whitney K. Cook, if plaintiffs fail to comply with this order and fail to file timely papers
as required by this order. This Court ADMONISHES plaintiffs' counsel of potential
liability under 28 U.S.C. § 1927 and other authorities. This admonishment is given
neither lightly, nor should it be taken lightly.
20
21
22
23
IT IS SO ORDERED.
Dated:
/s/ Lawrence J. O’Neill
February 18, 2014
UNITED STATES DISTRICT JUDGE
24
25
26
27
28
44
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