Barbieri v. PWFG Reo Owner, LLC et al
Filing
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ORDER GRANTING IN PART DEFENDANTS' MOTION TO DISMISS; DENYING AS MOOT MOTION TO STRIKE; DENYING MOTION FOR ATTORNEY'S FEES; VACATING HEARING by Judge Alsup finding as moot 10 Motion to Strike ; granting in part and denying in part 12 Motion to Dismiss (whalc2, COURT STAFF) (Filed on 1/2/2013) (Additional attachment(s) added on 1/2/2013: # 1 Certificate/Proof of Service) (dt, COURT STAFF).
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California
United States District Court
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No. C 12-05252 WHA
RONALD JAMES BARBIERI,
Plaintiff,
v.
PWFG REO OWNER, LLC; PHILIP
ZAMPIELLO, ESQ.; MCGARRIGLE,
KENNY & ZAMPIELLO, APC; PATRICK
C. MCGARRIGLE; RESIDENTIAL
INVESTMENTS; CONSUMER
SOLUTIONS 3, LLC; DOES 1–10, inclusive;
ORDER GRANTING IN PART
DEFENDANTS’ MOTION TO
DISMISS; DENYING AS MOOT
MOTION TO STRIKE; DENYING
MOTION FOR ATTORNEY’S FEES;
VACATING HEARING
Defendants.
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INTRODUCTION
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In this foreclosure action, defendants moved to dismiss the complaint and to strike
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portions thereof. Defendants also seek attorney’s fees. For the reasons stated below,
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defendants’ motion to dismiss is GRANTED IN PART. The motion to strike is DENIED AS MOOT.
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The motion for attorney’s fees is DENIED.
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STATEMENT
Pro se plaintiff Ronald James Barbieri filed a complaint against a number of defendants
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seeking to quiet title and alleging wrongful foreclosure of his house. Defendants PWFG REO
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Owner, LLC, Phillip Zampiello, Esq., McGarrigle, Kenney & Zampiello, APC (erroneously sued
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as McGarrigle, Kenny & Zampiello, APC), and Patrick McGarrigle previously filed an unlawful
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detainer action against Barbieri in state court for possession of the subject property. Barbieri
removed that action to federal court, where it was remanded for lack of subject-matter
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jurisdiction by the undersigned judge (Dkt. No. 26, No. 12-2590). He apparently eventually lost
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the unlawful detainer action, and judgment was entered against him (RJN Exh. 4).
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Barbieri now seeks to attack the foreclosure sale as invalid. It appears that, despite the
rent or mortgage payments. The 89-page complaint alleges that Barbieri entered into a mortgage
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agreement with Bank United, FSB. Following its bankruptcy, Bank United FSB was acquired by
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BankUnited, which subsequently sold the original promissory note to an investment fund. The
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note was then pooled with other mortgages and securitized into a mortgage-backed security
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(specifically, Wamu Mortgage Pass-Through Certificates Series 2006-AR2). Meanwhile, the
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deed of trust was assigned by Bank United FSB to BankUnited, then to Consumer Solutions 3,
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For the Northern District of California
judgment against him, he is still living at the subject property, presumably without paying either
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United States District Court
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LLC, and finally to Residential Investments, LLC. Plaintiff alleges that “there is no evidence”
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that BankUnited had possession of the promissory note at the time the deed of trust was assigned
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to Consumer Solutions. Plaintiff contends that “the note cannot be assigned to one party while
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the Deed of Trust is assigned to another. If the Note and Deed of Trust are split the note
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becomes unenforceable” (Compl. ¶ 6). Defendant Consumer Solutions and Residential
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Investments are therefore not “genuine creditors and they are not in possession of the note
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because the note is held by an undisclosed third party . . . .” (id. at ¶ 9). Plaintiff alleges that all
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defendants acted fraudulently in foreclosing on his house as none had standing to collect on his
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debt, transfer any property interest, or foreclose on the property.
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Plaintiff’s complaint contains two claims for relief against all defendants: (1) quite title
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and (2) wrongful foreclosure. Defendants PWFG, Phillip Zampiello, McGarrigle, Kenney &
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Zampiello, and Patrick McGarrigle now move to dismiss the claims against them and to strike
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portions of the complaint. For the reasons stated below, defendants’ motion to dismiss is
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GRANTED IN PART.
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ANALYSIS
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To survive a motion to dismiss, a complaint must contain sufficient factual matter,
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accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S.
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662 (2009). A claim is facially plausible when there are sufficient factual allegations to draw a
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reasonable inference that the defendant is liable for the conduct alleged. While a court “must
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take all of the factual allegations in the complaint as true,” it is “not bound to accept as true a
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legal conclusion couched as a factual allegation.” Id. at 1949–50 (quoting Bell Atl. Corp. v.
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Twombly, 550 U.S. 544, 555 (2007)) (internal quotation marks omitted). “[C]onclusory
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allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for
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failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)
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(citation omitted). Pro se complaints are held to less stringent standards than complaints drafted
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by attorneys. Erickson v. Pardus, 551 U.S. 89, 94 (2007).
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REQUESTS FOR JUDICIAL NOTICE.
Pursuant to Federal Rule of Evidence 201, defendants request judicial notice be taken of
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For the Northern District of California
United States District Court
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the (1) the trustee’s deed upon sale recorded on April 3, 2012, in Sonoma County Recorder’s
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Officer as Instrument Number 12032059, (2) the grant deed recorded on April 6, 2012, in
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Sonoma County Recorder’s Officer as Instrument Number 12033653, (3) judgment for
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possession entered in Sonoma County Superior Court in favor of PWFG and against Barbieri,
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and (4) an unpublished order in Castle v. MERS, Inc., No. 11-538, 2011 WL 3626560 (C.D. Cal.
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Aug. 16, 2011). Documents two and three are matters of public record and the proper subject of
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judicial notice. Thus, the request for judicial notice of these documents is GRANTED. Document
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one is appended as an exhibit to the complaint, such that the request for judicial notice is MOOT.
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As this order does not rely on the unpublished district court decision, the request for judicial
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notice of this document is DENIED AS MOOT.
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2.
PHYSICAL POSSESSION AND “SPLITTING” THE NOTE AND DEED.
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The complaint alleges that the foreclosure proceedings and subsequent sale were void
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because, despite the sale of the promissory note, defendants failed to transfer the physical
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promissory note. Plaintiff further alleges that the promissory note and deed of trust were
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separated before they were properly assigned, such that the note is unenforceable. Consumer
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Solutions, therefore, had no right to foreclose on the property. Defendant contends that
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plaintiff’s claims to quiet title and for wrongful foreclosure fail because plaintiff has not offered
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to tender the full amount of his debt. Plaintiff’s opposition does not address defendants’
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argument that the failure to allege tender is fatal to his complaint.
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The tender rule does not apply to a void, as opposed to a voidable, foreclosure sale.
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Martinez v. Am.’s Wholesale Lender, 446 F. App’x 940, 943 (9th Cir. 2011) (unpublished)
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(internal quotation marks and citations omitted). This Court has previously held that the tender
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rule does not apply where the plaintiff has adequately alleged that a foreclosure sale was void
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because the purported trustee was not properly substituted as trustee, had no interest in the
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subject property, and thus was not authorized to initiate a non-judicial foreclosure when it
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recorded the notice of default. Avila v. Wells Fargo Bank, No. 12-01237, 2012 WL 2953117,
*15 (N.D. Cal. July 19, 2012). Here, plaintiff has alleged that the transfer of the deed of trust to
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For the Northern District of California
United States District Court
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the foreclosing party was invalid. Plaintiff has not, however, alleged any additional facts that
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would establish whether Consumer Solutions was improperly substituted as trustee for
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BankUnited or had no interest in plaintiff’s property. Indeed, the assignment of the deed of trust,
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appended to the complaint as Exhibit A and dated December 30, 2009, states that Consumer
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Solutions was assigned “all beneficial interest” under the deed of trust “together with the
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Promissory Note secured by said Deed of Trust and also all rights accrued or to accrue under
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said Deed of Trust . . . .” Plaintiff’s claims that the foreclosure and subsequent sale were invalid
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are based solely on an erroneous legal theory, as discussed below.
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First, as this Court has recently noted, the “original note” theory has been rejected by
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courts in this district, including the undersigned judge. See Tall v. MERS, Inc., No. 12-5348,
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2012 WL 6680183 *3 (N.D. Cal. Dec. 21, 2012). For example, in Hafiz v. Greenpoint Mortgage
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Funding, Inc., 652 F.Supp.2d 1039, 1043 (N.D. Cal. 2009), the plaintiff argued “the erroneous
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theory that all defendants lost their power of sale pursuant to the deed of trust when the original
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promissory note was assigned to a trust pool.” As stated in that decision, “California law does
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not require possession of the note as a precondition to non judicial foreclosure under a deed of
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trust . . . Pursuant to Section 2924(a)(1) of the California Civil Code, the trustee of a Deed of
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Trust has the right to initiate the foreclosure process. Production of the original note is not
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required to proceed with a non-judicial foreclosure.” Ibid. (citing Pagtalunan v. Reunion
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Mortgage, Inc., 2009 WL 961995, at *1 (N.D. Cal. Apr. 8, 2009) (Maj. Judge Elizabeth D.
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Laporte)).
promissory note and a deed are “irreparably split.” Cervantes v. Countrywide Home Loans,
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Inc., 656 F.3d 1034, 1044 (9th Cir. 2011). In Cervantes, the plaintiffs challenged the origination
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and foreclosure procedures for home loans maintained within the Mortgage Electronic
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Registration System. The plaintiffs then argued that because the MERS system split the deed
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from the note, all transfers of interests in the home loans within the MERS system were invalid.
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Therefore, no party was in a position to foreclose on the home loans. Ibid. The court of appeals
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disagreed with the plaintiffs and held that “the lenders would still be entitled to repayment of the
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Second, our court of appeals has indicated that a mortgage is unenforceable only if a
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loans.” Moreover, “the notes and deeds are not irreparably split: the split only renders the
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mortgage unenforceable if MERS or the trustee, as nominal holders of the deeds, are not agent of
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the lenders.” Ibid.
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Here, plaintiff’s lengthy complaint does not address whether the foreclosing party was
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acting on behalf of the lender. As in Cervantes, “[a]lthough it is unclear from the pleadings who
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the current lender is on [plaintiff’s] loan, the allegations do not raise any inference that the
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trustee [ ] lack[ed] the authority to act on behalf of the lender.” Ibid. Plaintiff has failed to
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allege how there has been any irreparable splitting of the promissory note and deed of trust, or
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why Consumer Solutions was not acting as an agent of the lender. Accordingly, the complaint is
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DISMISSED WITH LEAVE TO AMEND.
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3.
BONA FIDE PURCHASER.
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The complaint contains only a handful of references to PWFG and the law firm
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defendants (the law firm McGarrigle, Kenney & Zampiello and Attorneys Phillip Zampiello and
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Patrick McGarrigle). Based on those allegations, and the deed of sale and grant deed (Compl.
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Exh. C; RJN Exh. 2), it appears that defendant Residential Investments, LLC purchased the
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subject property after foreclosure. The trustee’s deed upon sale states that the amount of unpaid
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debt was $331,231.47 and the amount paid by Residential Investments was $255,215.28.
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Residential Investments subsequently conveyed the property to PWFG “for valuable
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consideration” (RJN Exh. 2). Defendants contend that PWFG was a bona fide purchaser for
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value, and thus immune from liability.
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Under California law, a lender may pursue non-judicial foreclosure upon default with a
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deed of trust with a power of sale clause. If a borrower defaults on a loan and the deed of trust
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contains a power of sale clause, the lender may non-judicially foreclose. See McDonald v.
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Smoke Creek Live Stock Co., 209 Cal. 231, 236–237, 286 P. 693 (1930). “If the trustee’s deed
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recites that all statutory notice requirements and procedures required by law for the conduct of
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the foreclosure have been satisfied, a rebuttable presumption arises that the sale has been
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conducted regularly and properly; this presumption is conclusive as to a bona fide purchaser.”
Moeller v. Lien, 25 Cal. App. 4th 822, 831 (1994) (citations omitted). Whereas the presumption
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For the Northern District of California
United States District Court
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is rebuttable as to purchasers other than bona fide purchasers, “[t]he conclusive presumption
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precludes an attack by the trustor on a trustee’s sale to a bona fide purchaser even though there
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may have been a failure to comply with some required procedure which deprived the trustor of
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his right of reinstatement or redemption.” Id. at 832.
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The trustee’s deed of sale includes a statement that the trustee complied with all
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applicable statutory requirements of the State of California and performed all duties required by
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the Deed of Trust including sending a notice of default and notice of sale (Compl. Exh. C).
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Residential Investments was both the foreclosing beneficiary and the purchaser at the foreclosure
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sale. Two weeks after the foreclosure sale, however, the property was conveyed by Residential
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Investments to PWFG “for valuable consideration” (RJN Exh. 2). PWFG thus falls within the
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rule creating a conclusive presumption in favor of bona fide purchasers.
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Plaintiff alleges no facts that would establish that PWFG was not a bona fide purchaser,
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and does not address this argument in his opposition brief. Plaintiff’s conclusory and general
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allegations that PWFG “is not the lawful owner of the subject property because of the defects
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and deficiencies in the loan administration and lack of disclosures and failure to properly
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acknowledge and record the assignment-of-deed-of-trust document” is not sufficient to avoid the
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application of the rule as to PWFG (Compl. ¶ 39). Accordingly, plaintiff’s claims against
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defendant PWFG are DISMISSED WITHOUT LEAVE TO AMEND. Further amendment would be
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futile.
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4.
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PWFG AND THE LAW FIRM DEFENDANTS WERE NOT INVOLVED IN THE
FORECLOSURE.
foreclosure sale, then initiated an unlawful detainer action for possession of the property.
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Plaintiff does not allege that PWFG or the law firm defendants were involved in the non-judicial
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foreclosure process. Rather, plaintiff alleges that PWFG’s purchase of the property was invalid
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and that PWFG and the law firm defendants wrongfully initiated an unlawful detainer action
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against him. Because these defendants were not involved in the loan origination, servicing,
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For the Northern District of California
PWFG purchased the subject property from Residential Investments following the
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foreclosure process, or foreclosure sale, plaintiff’s wrongful foreclosure claim against PWFG
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and the law firm defendants is DISMISSED WITHOUT LEAVE TO AMEND.
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5.
RES JUDICATA EFFECT OF UNLAWFUL DETAINER JUDGMENT.
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Defendants contend that the judgment entered in the unlawful detainer case precludes
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plaintiff from re-litigating the claims in this action. “A judgment in unlawful detainer usually
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has very limited res judicata effect and will not prevent one who is dispossessed from bringing a
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subsequent action to resolve questions of title or to adjudicate other legal and equitable claims
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between the parties.” Vella v. Hudgins, 20 Cal.3d 251, 255 (1977). As stated by our court of
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appeals, “for an unlawful detainer proceeding to provide res judicata or collateral estoppel effect
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to subsequent litigation, there must first be the opportunity for a full and fair litigation of the
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claim or issue before the unlawful detainer court.” Stein v. Braum Inv. & Dev., Inc., 244 F.
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App’x 816, 818 (9th Cir. 2007) (unpublished). “‘Full and fair’ litigation of an affirmative
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defense . . . if it is raised . . . and if a fair opportunity to litigate is provided will result in a
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judgment conclusive upon issues material to that defense.” Vella, 20 Cal.3d at 256–57. Unlike
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in Malkoskie v. Option One Mortgage Corporation, 188 Cal. App. 4th 968, 974 (2010), in which
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the plaintiff raised affirmative defenses that put the conduct of the sale and the validity of the
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resulting transfer of title “directly in issue in the unlawful detainer case,” here, the current record
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is insufficient to determine whether the judgment in the unlawful detainer action should have any
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preclusive effect in the current lawsuit.
LITIGATION PRIVILEGE AND ATTORNEY’S FEES.
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6.
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The law firm defendants contend that plaintiff’s claims are barred by the litigation
“publication or broadcast” made as part of a “judicial proceeding” is privileged. The privilege is
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“absolute in nature” and applies to “all publications, irrespective of their maliciousness.” Silberg
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v. Anderson, 50 Cal. 3d 205, 216 (1990). The privilege applies to any communication (1) made
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in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law;
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(3) to achieve the objects of the litigation; and (4) that have some connection or logical relation
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For the Northern District of California
privilege under Cal. Civ. Code Section 47(b). The litigation privilege provides that a
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United States District Court
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to the action. Id. at 212. The litigation privilege has been held to “immunize defendants from
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tort liability based on theories of abuse of process, intentional infliction of emotional distress,
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intentional inducement of breach of contract, intentional interference with prospective economic
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advantage, negligent misrepresentation, invasion of privacy, negligence and fraud.” Action
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Apartment Ass’n, Inc. v. City of Santa Monica, 41 Cal. 4th 1232, 1242 (2007) (quoting Silberg,
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50 Cal. 3d at 215) (internal citations omitted). The California Supreme Court has recognized an
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exception to the litigation privilege for the tort of malicious prosecution where “the requirements
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of favorable termination, lack of probable cause, and malice [have been] satisfied.” Id. at 1249.
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Here, the complaint alleges claims against the law firm defendants for preparing and
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filing the unlawful detainer action (Compl. ¶ 106). Plaintiff alleges that the law firm defendants
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“knew or should have known that they did not acquire proper title and are planning to proceed
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with eviction proceedings against Plaintiff homeowner anyway” (id. at ¶ 97). The law firm
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defendants’ filing of the unlawful detainer action falls within the litigation privilege. See, e.g.,
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Feldman v. 1100 Park Lane Associates, 160 Cal. App. 4th 1467, 1486 (2008); Action Apartment,
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41 Cal. 4th at 1249–50. Accordingly, the law firm defendants’ motion to dismiss is GRANTED.
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As further amendments would be futile, the claims against the law firm defendants are
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DISMISSED WITHOUT LEAVE TO AMEND.
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Defendants’ motion for attorney’s fees in the amount of $4,125.00 is DENIED. The Court
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will not at this point impose such heavy fees on a pro se litigant proceeding without the benefit
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of counsel.
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CONCLUSION
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For the reasons stated above, defendants’ motion to dismiss plaintiff’s complaint is
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GRANTED WITHOUT LEAVE TO AMEND,
except that plaintiff may seek leave to amend with
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respect to the claims against defendants Residential Investments and Consumer Solutions, as
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discussed above. The claims against the law firm defendants and PWFG are dismissed without
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leave to amend. The motion to strike and motion for attorney’s fees are DENIED. Plaintiff may
seek leave to amend and will have until JANUARY 23, 2013, to file a proposed amended
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For the Northern District of California
United States District Court
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complaint, which must be appended to the motion. Plaintiff must plead his best case. Any such
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motion should clearly explain how the amendments to the complaint cure the deficiencies
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identified herein. The hearing scheduled for January 10, 2013, is VACATED.
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IT IS SO ORDERED.
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Dated: January 2, 2013.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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