Niranjan v. Bank of America , N.A. et al

Filing 35

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS by Judge William Alsup [granting 12 Motion to Dismiss]. Plaintiff may seek leave to amend the complaint and will have until May 3, 2013, to file a motion, noticed on the normal 35-day track, for leave to file an amended complaint. (whasec, COURT STAFF) (Filed on 4/18/2013)

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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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SNEH NIRANJAN,

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No. C 12-05706 WHA

Plaintiff,
v.
BANK OF AMERICA, N.A., RECONTRUST
COMPANY, DEUTSCHE BANK NATIONAL
TRUST COMPANY, AS TRUSTEE FOR THE
CERTIFICATE HOLDERS OF HARBOR VIEW
MORTGAGE LOAN TRUST 2004-11, ASSET
BACKED PASS-THROUGH CERTIFICATES,
SERIES 2004-11 INDIVIDUALLY, MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS,
INC., and DOES 1 through 100, inclusive,

ORDER GRANTING
DEFENDANTS’
MOTION TO DISMISS

Defendants.
/
INTRODUCTION
In this foreclosure action, defendants move to dismiss all of plaintiff’s claims. For the

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reasons stated below, the motion to dismiss is GRANTED.

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STATEMENT

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Plaintiff Sneh Niranjan’s claims arise out of an attempt to invalidate a pending

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foreclosure on the theories that (1) the note and deed of trust were improperly separated and

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thus are invalid; (2) MERS lacked authority to assign the deed of trust to the foreclosing entity;

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(3) the lender’s failure to transfer the physical, original note made later foreclosure impossible;

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(4) securitization of the note leaves no party with the right to foreclose; and (5) defendants

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fraudulently “robo-signed” various documents.

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The following facts are taken from the complaint and appended exhibits. In 2004,
plaintiff acquired from Countrywide Home Loans, Inc., a mortgage for $360,000 secured by

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residential real property in Hayward. The loan was recorded by a promissory note and secured

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by a deed of trust against the subject property listing a non-party as the trustee and defendant

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MERS as the nominal beneficiary. The deed explicitly granted MERS the power to foreclose.

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Immediately thereafter, Countrywide sold the loan to a series of financial services providers

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that transferred the loan into a mortgage-backed security pool, the Harborview Mortgage Loan

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2004-11, Asset-Backed, Pass-Through Certificates, Series 2001-11 (Compl. ¶¶ 9–12, Exh. B).

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For the Northern District of California

United States District Court

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In 2008, defendant Bank of America, N.A., acquired Countrywide. In 2011, MERS

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assigned the beneficial interest of the deed to BAC Home Loans Servicing, LP (a Bank of

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America subsidiary). At an unspecified time, plaintiff fell behind on her mortgage payments.

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In June 2012, Bank of America “tried with due diligence” to contact plaintiff regarding her

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missed payments (id., Exh. G). On July 10, 2012, Bank of America substituted ReconTrust as

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the trustee and assigned the deed to defendant Deutsche Bank. On the same day, ReconTrust

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recorded with Alameda County a notice of default indicating plaintiff was $17,597.55 behind

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on her mortgage payments (ibid.). ReconTrust then filed a notice of trustee’s sale to be held in

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October 2012 (id., Exh. H). The complaint does not allege that plaintiff intended or intends to

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cure the default or that a foreclosure sale has occurred.

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Plaintiff, who is represented by counsel, filed this complaint in November 2012.

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Defendants moved to dismiss, and plaintiff failed to respond. Defendants renoticed their motion

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to dismiss in late February 2013. After plaintiff again failed to respond, the undersigned issued

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an order to show cause why the action should not be dismissed for failure to prosecute (Dkt.

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No. 25). Plaintiff responded with inadequate excuses for the two missed deadlines, and

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instead of responding to the motion, attempted to file an amended complaint (Dkt. No. 27).

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The undersigned requested that plaintiff file a “redline” version of the proposed amended

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complaint showing the changes made, a request to which plaintiff never responded. Given the
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blown deadlines and the untimely attempt to file, without good cause shown, an amended

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complaint in contravention of Rule 15(a) (that made no effort to rectify the deficiencies

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identified in defendants’ motion), an order struck the amended complaint (Dkt. No. 30).

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Simultaneously, plaintiff filed a motion seeking to drop the only non-diverse defendant,

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ReconTrust (Dkt. No. 28). The clerk subsequently dismissed ReconTrust from the action.

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Finally, plaintiff responded to defendants’ motion, and a hearing was held.

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The complaint alleges ten state and federal claims, including violations of the

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Truth-in-Lending Act, the Real Estate Settlement Procedures Act, California’s Unfair

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Competition Law, quiet title, constructive fraud, and unjust enrichment. Defendants’ motion
to dismiss is GRANTED.

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For the Northern District of California

United States District Court

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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 for relief that is plausible on its face. Rule 12(b)(6); Ashcroft v.

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Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when there are sufficient factual

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allegations to draw a reasonable inference that defendants are liable for the misconduct alleged.

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While a court “must take all of the factual allegations in the complaint as true,” it is “not bound

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to accept as true a legal conclusion couched as a factual allegation.” Bell Atl. Corp. v. Twombly,

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550 U.S. 544, 555 (2007). “[C]onclusory allegations of law and unwarranted inferences are

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insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy

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Co., 83 F.3d 1136, 1140 (9th Cir. 1996) (citation omitted). Rule 15(a) states that a court should

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freely grant leave to amend when justice so requires; however, a district court may deny leave to

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amend “if it appears to be futile or legally insufficient.” Miller v. Rykoff-Sexton, Inc., 845 F.2d

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209, 214 (9th Cir. 1988).

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Rule 9(b) requires that the circumstances constituting fraud must be stated with

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particularity. “Averments of fraud must be accompanied by ‘the who, what, when, where, and

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how’ of the misconduct charged.” Ness v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.

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2003) (citation omitted). Rule 9(b) serves to notify defendants of the specific fraudulent conduct

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against which they must defend. See Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir.

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2001).

courts in this district as well as the undersigned. First, neither our court of appeals nor the

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California Supreme Court has ruled on whether plaintiffs may challenge the mortgage

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securitization process, but the undersigned has held, in agreement with persuasive authority

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from this district, that there is no standing to challenge foreclosure based on a loan’s having been

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securitized. See Tall v. MERS, No. C 12-05348 WHA (N.D. Cal. Dec. 21, 2012). Second, courts

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in this district, including the undersigned, reject the “original note” theory. See Barbieri v.

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PWFG REO Owner, LLC, No. C 12-05252 WHA, 2013 WL 57865 (N.D. Cal. Jan. 2, 2013).

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For the Northern District of California

As an initial matter, several of plaintiff’s underlying theories have been rejected by

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United States District Court

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California law does not require the possession of the original note for non-judicial foreclosure

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under a deed of trust, and allows a trustee to initiate the foreclosure process. Id. at *3. Third,

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our court of appeals has limited foreclosure claims based on the “separation of the note” theory

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to times where the note and deed were “irreparably split.” Cervantes v. Countrywide Home

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Loans, Inc., 656 F.3d 1034, 1044 (9th Cir. 2011). Cervantes held that transfer of interests within

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the MERS system did not irreparably split the note and deed. Ibid. Fourth, courts in this

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district, as well as the undersigned, have rejected the notion that MERS lacks authority to initiate

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foreclosure where the deed of trust states otherwise. MERS may also transfer the right to

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foreclose. Tall, No. C 12-05348 WHA.
TILA CLAIM.

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1.

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The Truth-in-Lending Act “requires creditors to provide borrowers with clear and

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accurate disclosures of terms dealing with things like finance charges, annual percentage rates

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of interest, and the borrowers rights.” Beech v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998).

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A lender who fails to satisfy TILA’s requirements may be subject to “statutory and actual

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damages [that are] traceable to a lender’s failure to make the requisite disclosures.” Ibid.

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A TILA claim for damages must be brought “within one year from the date of the

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occurrence of the violation.” 15 U.S.C. 1640(e). Our court of appeals has held that the statute

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of limitations is triggered by entry into the loan transaction. King v. California, 784 F.2d 910,

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915 (9th Cir. 1986). The transaction at issue here was consummated “on or about October 5,

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2004” (Compl. ¶ 9). Plaintiff therefore had until October 2005 to file her TILA claim, but did

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not file it until November 2012. Plaintiff’s TILA claim is time-barred absent equitable tolling.

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Plaintiff’s opposition failed to respond to the TILA statute-of-limitations issue, and instead

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appeared to assert, without justification, that the TILA claim accrued upon assignment of the

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loan in August 2011. Even were this true, the statute of limitations would still have run by

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the time plaintiff filed her complaint. As no facts on the face of the complaint indicate any

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possibility that equitable tolling might apply, defendants’ motion to dismiss the TILA claim is

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GRANTED.
RESPA CLAIM.

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The complaint alleges defendants “failed to notify [p]laintiff of her rights under RESPA

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and violated her rights in doing so” (Compl. ¶ 93). This conclusory statement utterly fails

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to provide facts from which it might reasonably be inferred that defendants violated RESPA.

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Furthermore, the statute of limitations for a RESPA claim generally begins to run upon closing

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for a period of one or three years depending on the type of violation. 12 U.S.C. 2614. As noted

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above, the loan closed in October 2004. Plaintiff did not file this action until 2012. The RESPA

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claim is time-barred, and plaintiff’s opposition fails to directly address this issue. Instead, as

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with the TILA claim, plaintiff appears to assert that the elements of a RESPA claim can accrue

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as of the assignment of a loan. Plaintiff provides no authority for this proposition. Defendants’

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motion to dismiss the RESPA claim is therefore GRANTED.
QUIET TITLE.

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3.

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The purpose of a quiet title action is to establish one’s title against adverse claims to

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real property or any interest therein. “[A] mortgagor of real property cannot, without paying

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his debt, quiet his title against the mortgagee.” Miller v. Provost, 26 Cal.App.4th 1703, 1707

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(1994). The complaint fails to allege that plaintiff made or would make “an offer to pay the

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full amount of the debt for which the property was security,” which is required. Arnolds Mgmt.

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Corp. v. Eischen, 158 Cal.App.3d 575, 578–79 (1984) (emphasis added). Additionally,

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plaintiff’s opposition did not address whether and how she would pay the $17,597.55 owing

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on the property, when this flaw was explicitly raised by defendants’ motion. The complaint

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fails to adequately allege compliance with this requirement, which is fatal to the quiet title claim.

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Wolf v. Wells Fargo Bank, N.A., No. C 11-01337 WHA (N.D. Cal. Oct. 12, 2011).

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Plaintiff argues that the tender requirement is waivable in her case, because she

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challenges the validity of the underlying debt, based upon the original note theory. As explained

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above, however, this Court does not ascribe to that theory. Defendants’ motion to dismiss the

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quiet title claim is GRANTED.

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4.

FRAUD CLAIMS.
A.

Constructive Fraud Claim.

California Code of Civil Procedure Section 338(d) imposes a three-year statute of

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For the Northern District of California

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limitations on fraud-based claims. To state a claim for constructive fraud under California law,

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a party must allege: (1) a fiduciary relationship; (2) an act, omission, or concealment involving

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a breach of that duty; (3) reliance; and (4) resulting damage. Assilzadeh v. California Federal

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Bank, 82 Cal.App.4th 399, 414 (2000). In addition, Rule 9(b) requires fraud to be pled with

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particularity. In short, the “who, what, when, where, and how” of the fraud must be alleged.

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Ness, 317 F.3d at 1106.

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It is unclear from the complaint what exactly defendants did that constituted fraud.

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The opposition does not identify any relevant facts alleged in the complaint and altogether fails

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to respond to defendants’ arguments for dismissal of this claim. The opposition states that “[a]ll

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named defendants are known in this mortgage crisis to routinely file and record robosigned and

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defective documents” (Br. at 10). But this statement does not provide guidance as to whether

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any defendant was a fiduciary of plaintiff’s or how exactly plaintiff relied to her detriment on

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any “robo-signed” or otherwise fraudulent documents. Instead plaintiff argues that it is

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defendants’ duty on a motion to dismiss to at least assert that the documents at issue are valid

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(id. at 11). Not so. The court’s job on a motion to dismiss is not to compare the parties’

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evidence; the present inquiry must focus instead on plaintiff’s alleged facts.

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Of particular relevance here, Rule 9(b) “does not allow a complaint to . . . lump multiple
defendants together but require[s] plaintiffs to differentiate their allegations when suing more

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than one defendant.” Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011) (citations omitted).

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This plaintiff fails to do. Furthermore, it appears that all plaintiff’s claims of fraud are grounded

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in her assertions that either (i) the deed and note were void as of the time the note was sold into

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the asset-backed securities pool; or (ii) MERS had no authority to transfer the deed because

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MERS was the beneficiary for Countrywide only, and Countrywide was long defunct. Neither of

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these theories is meritorious. As noted above, both have been rejected by the undersigned and

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courts of this district. The constructive fraud claim is insufficiently pled and therefore,

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defendants’ motion to dismiss this claim is GRANTED.
B.

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The complaint expressly limits this claim to “fraud” within the meaning of the Unfair

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For the Northern District of California

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California’s Unfair Competition Law Fraud Claim.

Competition Law. Persons authorized to bring claims under the UCL are “those who have

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suffered injury in fact and lost money or property as a result of the unfair competition.”

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Cal. Bus. & Prof. Code § 17204. “Plaintiffs must plead that they were injured in fact ‘as a result’

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of defendants’ fraudulent conduct.” Harvey G. Ottovich Revocable Living Tr. Dated May 12,

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2006 v. Washington Mut., Inc., C 10-02842 WHA, 2010 WL 3769459 (N.D. Cal. Sept. 22,

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2010).

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The complaint, however, fails to state any details of any alleged “fraudulent business

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act or practice” committed by defendants. A “fraudulent” business practice under the UCL

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is one in which members of the public are likely to be deceived. In re Tobacco II Cases,

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46 Cal.4th 298, 312 (2009). The complaint alleges an undifferentiated group of defendants’

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overly aggressive and unfair loan servicing policies formed the base of a scheme to “defraud

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California consumers and enrich the Defendants” (Compl. ¶ 99). As explained above, fraud

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claims must at least identify which specific defendant allegedly performed which actions.

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Furthermore, the complaint does not contain any specific allegations of how defendants’

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behavior was likely to deceive the public. UCL claims sounding in fraud must be pled with

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heightened specificity; this order will not infer fraud where it has not been stated. Kearns v.

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Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Defendants’ motion to dismiss this

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claim must be GRANTED.

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Plaintiff seeks to cancel the original note and deed of trust (Compl. ¶ 77). She is far too

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late for this. The statute of limitations for a cancellation claim is only one year from entry into

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the agreement, and furthermore, California law requires a plaintiff seeking rescission to allege

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ability to tender the full loan amount. Wolf v. Wells Fargo Bank, N.A., No. C 11-01337 WHA

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(N.D. Cal. Oct. 12, 2011). As described above, plaintiff has not alleged any willingness or

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ability to pay the full balance of the loan. Inasmuch as the opposition attempts to reframe this

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claim to request cancellation of the 2011 assignments rather than the 2004 deed and note (Br. at

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10), this contradicts the face of the complaint and will not be considered. Defendants’ motion to
dismiss this claim is GRANTED.
VIOLATION OF CALIFORNIA CIVIL CODE SECTION 2934(a)(1)(A).

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CANCELLATION OF INSTRUMENTS.

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The complaint alleges defendants violated Section 2934(a)(1)(A) by failing to properly

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substitute ReconTrust as the trustee with all the required signatures. In relevant part, this

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Section provides: “The trustee under a trust deed upon real property . . . may be substituted

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by the recording in the county in which the property is located of a substitution executed

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and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors

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in interest.” Id. Plaintiff’s own exhibits contain a Substitution of Trustee document, naming

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ReconTrust as the new trustee and executed by Bank of America, the beneficiary. It appears to

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have been recorded in Alameda County on July 10, 2012, and neither party disputes its validity

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(Compl., Exh. E). Defendants’ motion to dismiss this claim is GRANTED.
REMAINING CLAIMS.

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Unjust enrichment, also known as restitution, is not a theory of recovery but is instead a

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result thereof. Jogani v. Superior Court, 165 Cal.App.4th 901, 911 (2008). Declaratory relief

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and injunctive relief are, as their names imply, forms of relief, not claims for relief. Without

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prejudice to later granting any form of relief, these three claims are DISMISSED. To the extent

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plaintiff’s opposition attempts to add additional claims under California law (Br. at 17–20), this

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attempt is improper and these claims will not be considered.

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This order notes plaintiff’s counsel twice missed deadlines to respond to the instant

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motion to dismiss. In addition, plaintiff improperly tried to file an untimely amended complaint

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instead of responding as directed, and failed to submit a redline copy of that document as

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requested by the Court. This order addresses the merits of the motion in the interest of justice,

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but plaintiff should take care to heed future orders and case management deadlines.
CONCLUSION

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For the foregoing reasons, defendants’ motion to dismiss is GRANTED. Plaintiff may

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seek leave to amend the complaint and will have until MAY 3, 2013, to file a motion, noticed on

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the normal 35-day track, for leave to file an amended complaint. A proposed amended
complaint must be appended to the motion. Plaintiff should plead her best case. The motion

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For the Northern District of California

United States District Court

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should clearly explain how the amendments to the complaint cure the deficiencies identified

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herein, and should include as an exhibit a redline or highlighted version identifying all changes.

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If such motion is not filed by the deadline, this case will be closed and judgment entered.

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IT IS SO ORDERED.

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Dated: April 18, 2013.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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