Nogaliza et al v. U.S. Bank, N.A., et al.,

Filing 26

Order by Hon. Samuel Conti granting in part and denying in part 12 Motion to Dismiss.(sclc1, COURT STAFF) (Filed on 7/24/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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ANGELITO V. NOGALIZA AND ANGELA )
F. NOGALIZA,
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Plaintiffs,
)
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v.
)
)
U.S. BANK, N.A., AS SUCCESSOR
)
TRUSTEE TO BANK OF AMERICA BY
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MERGER TO LaSALLE BANK, N.A.,
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AS TRUSTEE FOR MORGAN STANLEY
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MORTGAGE LOAN TRUST 2007-11AR;
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REGIONAL TRUSTEE SERVICES
)
CORPORATION; AND MORTGAGE
)
ELECTRONIC REGISTRATION
)
SYSTEMS, INC.,
)
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Defendants.
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)
)

Case No. 12-1383 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS'
MOTION TO DISMISS

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I.

INTRODUCTION

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Plaintiffs Angelito V. Nogaliza and Angela F. Nogaliza

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("Plaintiffs") bring this action to challenge the foreclosure of

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their home in Hercules, California.

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("U.S. Bank") and Mortgage Electronic Registration Systems, Inc.

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("MERS") (collectively, "Defendants") now move to dismiss the

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action pursuant to Federal Rule of Civil Procedure 12(b)(6).

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No. 12 ("MTD").

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attached to Plaintiffs' First Amended Complaint ("FAC") and to

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expunge a lis pendens filed by Plaintiffs in connection with this

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action.

Id.

Defendants U.S. Bank N.A.

ECF

Defendants also move to strike an affidavit

The motion is fully briefed.

ECF Nos. 14 ("Opp'n"),

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18 ("Reply").

Pursuant to Civil Local Rule 7-1(b), the Court finds

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this matter appropriate for determination without oral argument.

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As detailed below, Defendants' motion is GRANTED in part and DENIED

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in part.

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II.

BACKGROUND
In March 2007, Plaintiffs borrowed $453,700, secured by a Deed

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of Trust against their home in Hercules, California (the

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"Property").

See ECF No. 1 (First Amended Complaint ("FAC")) ¶ 3;

United States District Court

For the Northern District of California

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ECF No. 13 (Request for Judicial Notice ("RJN")) Ex. 1 ("Deed of

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Trust") at 1.

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favor of Alliance Bancorp.

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beneficiary under the Deed of Trust.

The Deed of Trust was executed by Plaintiffs in
Deed of Trust at 1.

MERS acted as the

Id.

A notice of default was recorded on March 26, 2009, which was

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later rescinded.

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recorded on November 20, 2011.

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declaration attached to the second notice of default stated that,

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pursuant to California Civil Code § 2923.5(a)(2), the beneficiary

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had contacted Plaintiffs on three occasions -- July 15, 2011,

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August 19, 2011, and September 10, 2011 -- to assess Plaintiffs'

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financial situation and explore options to avoid foreclosure.

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A third notice of default was recorded on November 21, 2011.

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Ex. 6 ("3rd NOD").

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default represented that the beneficiary or its authorized agent

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had sent Plaintiffs a certified letter as required by California

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Civil Code section 2923.5(g)(3).1

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RJN Exs. 2, 3.

A second notice of default was

RJN Ex. 5 ("2nd NOD").

A

Id.
RJN

A declaration attached to the third notice of

Id.

Section 2923.5(g)(3) provides that, "[i]f the borrower does not
respond within two weeks after the telephone call requirements of
paragraph (2) have been satisfied, the mortgagee, beneficiary, or

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In November 2011, several documents were recorded reflecting

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changes in the beneficiary and trustee on the Deed of Trust.

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November 10, 2011, an Assignment of Deed of Trust was recorded,

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through which MERS assigned its beneficial interests in the Deed of

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Trust to U.S. Bank.

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Trustee was recorded, substituting Regional Service Corporation2 as

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trustee under the Deed of Trust.

Six days later, a Substitution of

RJN Ex. 7.

The substituted trustee recorded a Notice of Trustee's Sale on

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RJN Ex. 4.

February 23, 2012, setting a sale date of March 15, 2012.

United States District Court

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For the Northern District of California

On

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The sale date was later postponed to April 26, 2012.

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RJN Ex.
It

appears that the Property has yet to go to sale.
On January 13, 2012, Plaintiffs commenced the instant action

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in the Superior Court of the State of California in and for the

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County of Contra Costa.

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same day, Plaintiffs recorded a lis pendens referring to the

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instant action.

ECF No. 1 ("Not. of Removal").

On the

RJN Ex. 9.

The case was subsequently removed to federal court on

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diversity grounds.

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FAC in federal court.

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lack legal standing to initiate foreclosure proceedings against the

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property.

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contrary to the statements made in the recorded documents, MERS was

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not the true beneficiary under the Deed of Trust and, thus, any

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purported assignment of the Deed of Trust from MERS is invalid.

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Id.

On April 6, 2012, Plaintiffs filed their

The gravamen of the FAC is that Defendants

See FAC ¶¶ 24, 26, 29, 41.

Plaintiffs allege that,

authorized agent shall then send a certified letter, with return
receipt requested."
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Regional Services Corporation's substitution was recorded by
Defendant Regional Trustee Services Corporation. RJN Ex. 7. The
two entities share the same address, id., but their relationship is
not explained in the papers.

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See id. ¶ 22.

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contact them in accordance with California Civil Code section

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2923.5 prior to initiating foreclosure proceedings.

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Plaintiffs assert four causes of action:

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wrongful foreclosure, (3) violation of California Civil Code

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section 2923.5, and (4) violation of California's Unfair

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Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq.

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Id. ¶¶ 20-43.

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prohibiting Defendants from proceeding with the foreclosure sale.

United States District Court

For the Northern District of California

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Plaintiffs also allege that Defendants failed to

See id. ¶ 41.

(1) slander of title, (2)

Plaintiffs seek damages and an injunction

Id. at 10.

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Attached to the FAC is an affidavit by Terri L. Petit

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("Petit") concerning her investigation of Plaintiffs' mortgage

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documents.

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promissory note has been securitized and sold.

Among other things, Petit concludes that Plaintiffs'

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 664 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

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Threadbare recitals of the

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1191, 1204 (9th Cir. 2011).

Id. at 663 (citing Bell Atl. Corp. v.
The allegations made in a

Starr v. Baca, 633 F.3d

United States District Court

For the Northern District of California

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IV.

DISCUSSION

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A.

Judicial Notice

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As an initial matter, Plaintiffs object to exhibits 1 through

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8 to Defendants' RJN, including the Deed of Trust, the notices of

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default, the Assignment of Deed of Trust, the Substitution of

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Trustee, and the Notice of Trustee's Sale.

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Obj.") at 1.

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judicial notice of the fact that these documents were recorded, it

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may not take judicial notice of disputed factual matters stated

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therein.

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they dispute.

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Id.

ECF No. 14-1 ("Pls.'

Plaintiffs argue that, while the Court may take

Plaintiffs do not identify which particular facts

Generally, a district court may not consider material outside

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the pleadings on a Rule 12(b)(6) motion to dismiss.

Hal Roach

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Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550

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(9th Cir. 1989).

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court may take judicial notice of matters of public record without

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converting a motion to dismiss into a motion for summary judgment."

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Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001)

However, under Federal Rule of Evidence 201, "[a]

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(internal quotations omitted).

There are limits.

For example, "a

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court may not take judicial notice of a fact that is 'subject to

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reasonable dispute.'"

Id.

Accordingly, the Court takes judicial notice of the fact that

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the documents attached to Defendants' RJN have been publicly

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recorded.

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facts asserted in those documents.

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takes judicial notice of the fact that Defendants recorded the

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Notice of Default, the Court does not take judicial notice of the

United States District Court

For the Northern District of California

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However, the Court does not assume the truth of the
For example, while the Court

fact that Plaintiffs defaulted on their loan.

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B.

Slander of Title and Wrongful Foreclosure

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Plaintiffs' claims for slander of title and wrongful

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foreclosure are based on the allegation that MERS never owned a

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beneficial interest in the promissory notes or the Deed of Trust

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and, therefore, MERS lacked the legal authority to assign

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Plaintiffs' Deed of Trust to U.S. Bank.

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Plaintiffs reason that because U.S. Bank cannot be the true

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beneficiary, it lacks standing to initiate foreclosure proceedings

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against the Property.

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allegations is any cogent explanation of why MERS was not the true

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beneficiary under the Deed of Trust.

Id. ¶¶ 24, 30.

FAC ¶¶ 21-22, 29-30.

Missing from Plaintiffs'

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Indeed, Plaintiffs' position is inconsistent with the plain

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language of the Deed of Trust, which states: "MERS is a separate

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corporation that is acting solely as a nominee for Lender and

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Lender's successors and assigns.

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this Security instrument."3

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MERS is the beneficiary under

Deed of Trust at 1.

Faced with

MERS's status as the beneficiary is not subject to reasonable
dispute since it is set forth in the Deed of Trust, an agreement
signed by Plaintiffs. See Section IV.A supra.

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substantially similar language, courts have rejected the argument

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that MERS lacks the legal authority to record a notice of default.

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See, e.g., Parcray v. Shea Mortg. Inc., CV-F09-1942OWW/GSA, 2010 WL

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1659369, at *9-11 (E.D. Cal. Apr. 23, 2010).

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rejects Plaintiffs' position that MERS, which was named as the

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beneficiary under the Deed of Trust, lacked the authority to assign

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its interest to U.S. Bank.

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Likewise, the Court

The Court finds that MERS's assignment of the Deed of Trust
was valid and, therefore, that U.S. Bank had standing to initiate

United States District Court

For the Northern District of California

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foreclosure proceedings against the Property.

Accordingly, the

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Court DISMISSES Plaintiffs' claims for slander of title and

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wrongful foreclosure WITH PREJUDICE.

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C.

California Civil Code Section 2923.5

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California Civil Code section 2923.5 concerns the notice of

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default.

It requires the "mortgagee, trustee, beneficiary, or

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authorized agent" seeking to file a notice of default to first

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contact the borrower in person or by telephone "in order to assess

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the borrower's financial situation and explore options for the

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borrower to avoid foreclosure."

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default may not be filed until thirty days after this initial

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contact or after the statute's due diligence requirements are

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satisfied.

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must include a declaration that the mortgagee, beneficiary, or

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authorized agent has contacted the borrower.

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During this initial contact, the party seeking to file a notice of

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default must advise the borrower that he or she has the right to

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request a subsequent meeting and, if requested, schedule the

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meeting within fourteen days.

Id. § 2923.5(a)(1).

Id. § 2923.5(a)(2).

The notice of

Further, the notice of default

Id. § 2923.5(b).

Id. § 2923.5(a)(2).

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The remedy

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available under section 2923.5 is the postponement of a foreclosure

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sale until the requirements of the statute have been fulfilled.

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Mabry v. Super. Ct., 185 Cal. App. 4th 208, 214 (Cal. Ct. App.

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2010).

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Plaintiffs allege that Defendants violated California Civil

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Code section 2923.5 by failing to contact Plaintiffs at least

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thirty days prior to recording the Notice of Default.

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Plaintiffs also dispute the truth of the declaration attached to

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the second Notice of Default, which states that Defendants complied

United States District Court

For the Northern District of California

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with section 2923.5.

FAC ¶ 37.

Id.

Defendants argue that the declarations attached to the second

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and third notices of default show that Plaintiffs were contacted in

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accordance with section 2923.5 and that "Plaintiffs make no

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specific allegation that they were not contacted."

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argument lacks merit.

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the declarations cited by Defendants, it is not bound to assume the

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truth of the facts asserted in those declarations.

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at 689.

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these declarations and allege that "Plaintiffs were never

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contacted."

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must assume that Plaintiffs' allegations are true.

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Defendants argue that "Plaintiffs fail to allege how or why no

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phone calls were received on the dates specified [in the

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declarations]."

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facts.

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with section 2923.5.

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MTD at 9.

This

While the Court may take judicial notice of

Lee, 250 F.3d

In the FAC, Plaintiffs expressly dispute the veracity of

FAC ¶ 37.

As this is a motion to dismiss, the Court

Reply at 4.

In their reply,

Plaintiffs need not allege such

They have pled that they were not contacted in accordance
That is sufficient.

Defendants also argue that Plaintiffs have already been
afforded the only relief available under section 2923.5, a

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postponement of the noticed foreclosure sale.

MTD at 10.

The

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logic underlying this argument is flawed.

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remedy available for section 2923.5 violation is the postponement

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of a foreclosure sale.

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the purpose of such a postponement is to give the lender an

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opportunity to comply with the requirements of the statute.

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Shaterian v. Wells Fargo Bank, N.A., 829 F. Supp. 2d 873, 886-87

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(N.D. Cal. 2011).

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requirements of section 2923.5 merely by postponing a scheduled

It is true that the only

Mabry, 185 Cal. App. 4th at 235.

However,

See

A lender may not evade the procedural

United States District Court

For the Northern District of California

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foreclosure sale.

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empty gesture.

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postponed by several months, but there is no indication that

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Defendants have used this additional time to cure the alleged

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section 2923.5 violation by contacting Plaintiffs.

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If this were the case, postponement would be an

Here, the foreclosure sale of the Property has been

For these reasons, the Court DENIES Defendants' motion to
dismiss with respect to Plaintiffs' claim under section 2923.5.

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D.

Unfair Competition Law ("UCL")

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Defendants argue that the UCL claim fails for lack of

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specificity.

MTD at 10-11 (citing Khoury v. Maly's of California,

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Inc., 14 Cal. App. 4th 612, 618 (1993)).

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Plaintiffs' UCL claim are relatively clear.

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Defendants engaged in an unlawful practice by commencing

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foreclosure proceedings without first contacting Plaintiffs in

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accordance with section 2923.5 and filing a declaration with the

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Notice of Default which falsely states that Plaintiffs were

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contacted in accordance with section 2923.5.

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Defendants also argue that Plaintiffs improperly "lump both

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Defendants into one cause of action and allege[] facts that only

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But the specifics of
Plaintiffs allege that

Compl. ¶ 41.

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relate to lending and origination claims."

MTD at 11.

This

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argument misconstrues Plaintiffs' UCL claim, which is predicated on

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Defendants' foreclosure procedures, not their loan origination

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practices.

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respect to Plaintiffs' UCL claim.

Accordingly, the Court DENIES Defendants' motion with

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E.

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Defendants move to strike the Petit affidavit attached to the

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FAC.

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strike.

United States District Court

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For the Northern District of California

Motion to Strike

MTD at 11-12.

Plaintiffs do not challenge the motion to

Rule 12(f) provides that a court may, on its own or on a

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motion, "strike from a pleading an insufficient defense or any

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redundant, immaterial, impertinent, or scandalous matter."

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Civ. P. 12(f).

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a pleading "is a part of the pleading for all purposes."

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Civ. P. 10(c).

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10(c) is a document evidencing legal rights or duties or giving

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formal expression to a legal act or agreement, such as a deed,

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will, bond, lease, insurance policy or security agreement."

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DeMarco v. DepoTech Corp., 149 F. Supp. 2d 1212, 1220 (S.D. Cal.

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2001) (internal quotations omitted).

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other exhibits containing largely evidentiary material typically do

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not fall within Rule 10(c)'s category of 'written instruments.'"

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Montgomery v. Buege, CIV. 08-385 WBS KJM, 2009 WL 1034518, at *3

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(E.D. Cal. Apr. 16, 2009).

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not allowed as pleading exhibits unless they form the basis of the

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complaint."

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2003).

Fed. R.

A copy of a written instrument that is attached to
Fed. R.

"A written instrument within the meaning of Rule

"[W]itness affidavits and

"Affidavits and declarations . . . are

United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.

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Here, the Petit affidavit does not form the basis of the

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claims alleged in the FAC.

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affidavit and the central conclusion of the affidavit -- that

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Plaintiffs' loan was securitized -- appears to be irrelevant to the

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claims asserted in the FAC.

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constitute documentary evidence and, as such, is not a written

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instrument within the meaning of Rule 10(c).

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the affidavit to bolster their legal conclusions, not to document

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any agreement underlying their claims.

United States District Court

For the Northern District of California

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The FAC makes no mention of the Petit

Further, the Petit Affidavit does not

Plaintiffs attached

Accordingly, the Court

STRIKES the Petit Affidavit.

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V.

CONCLUSION
For the reasons set forth above, Defendants U.S. Bank and

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MERS's Motion to Dismiss is GRANTED in part and DENIED in part.

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The Court DISMISSES with prejudice Plaintiffs Angelito V. Nogaliza

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and Angela F. Nogaliza's claims for slander of title and wrongful

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foreclosure.

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Code § 2923.5 and the UCL remain undisturbed and, as such, the

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Court declines to expunge the lis pendens filed in connection with

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this action.

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Petit.

Plaintiffs' claims for violation of California Civil

The Court also STRIKES the declaration of Terri L.

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IT IS SO ORDERED.

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Dated:

July 24, 2012
UNITED STATES DISTRICT JUDGE

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