Ogilvie v. Select Portfolio Servicing et al

Filing 28

ORDER by Magistrate Judge Donna M. Ryu granting 16 Motion to Dismiss with Leave to Amend (hlkS, COURT STAFF) (Filed on 7/23/2012)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

11
For the Northern District of California

United States District Court

10
ANDREW R. OGILVIE,

12

Plaintiff,

13
14
15
16

No. 12-CV-001654-DMR
ORDER GRANTING MOTION TO
DISMISS WITH LEAVE TO AMEND

v.
SELECT PORTFOLIO SERVICING, FKA
FAIRBANKS CAPITAL CORPORATION,
et al.,
Defendants.
___________________________________/

17
18

Defendants Select Portfolio Servicing, FKA Fairbanks Capital Corporation (“Select

19

Portfolio”), U.S. Bank National Association (“U.S. Bank”), as trustee on behalf of the holders of the

20

Credit Suisse First Boston Mortgage Securities Corporation Home Equity Pass Through Certificates,

21

Series 2006-8 (“the Trust”), National Default Servicing Corporation (“National Default”), and

22

Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively, “Defendants”) filed a

23

motion to dismiss Plaintiff Andrew R. Ogilvie’s first amended complaint pursuant to Federal Rule of

24

Civil Procedure 12(b)(6). Plaintiff timely filed an opposition to the motion. The court conducted a

25

hearing on July 12, 2012. For the reasons below, Defendants’ motion is granted, and Plaintiff’s first

26

amended complaint is dismissed with leave to amend.

27

\\\

28

1

I. BACKGROUND

2

On July 13, 2006, Plaintiff recorded a Deed of Trust in the Contra Costa County Recorder’s

3

Office against 891 Marin Road, El Sobrante, CA 94803 (“the Property”) to secure an Adjustable

4

Rate Note in the amount of $288,750.00 in favor of Ownit Mortgage Solutions, Inc. (Am. Compl.

5

¶ 15; Req. for Judicial Notice in Supp. of Defs.’ Notice of Mot. to Dismiss Pl.’s Am. Compl.

6

(“RJN”), Ex. 1.) The Deed of Trust names Stewart Title of California as Trustee and MERS as

7

“Nominee” for Lenders. (Am. Compl. ¶ 15; RJN, Ex. 1.) Ownit Mortgage Solutions, Inc.

8

securitized the Deed of Trust, and sold it to the Trust, with U.S. Bank as the Trustee and Select

9

Portfolio as the loan servicer. (Am. Compl. ¶ 16.)
On April 3, 2009, a Corporate Assignment of Deed of Trust (“Corporate Assignment”) was

11
For the Northern District of California

United States District Court

10

recorded purporting to transfer the beneficial interest of the Deed of Trust from MERS to U.S. Bank.

12

(Am. Compl. ¶ 18; RJN, Ex. 2.) Bill Koch signed the document as Assistant Secretary of MERS.

13

(Am. Compl. ¶ 18; RJN, Ex. 2.) However, Koch is listed as an Assistant Secretary of Select

14

Portfolio in the document’s Notary Public acknowledgment. (Am. Compl. ¶ 18; RJN, Ex. 2.) On

15

the same day, a recorded Substitution of Trustee indicates that U.S. Bank made a substitution of

16

Trustee under the Deed of Trust in favor of National Default. (Am. Compl. ¶ 19; RJN, Ex. 3.)

17

Olivia A. Todd signed the document as President of Select Portfolio, servicing agent for U.S. Bank,

18

but Todd allegedly is President of National Default. (Am. Compl. ¶¶ 19, 29; RJN, Ex. 3.)

19

Select Portfolio later recorded a Notice of Default and Election to Sell Under Deed of Trust.

20

(Am. Compl. ¶ 17; RJN, Ex. 4.) On January 24, 2011, National Default recorded a Notice of

21

Trustee’s Sale. (Am. Compl. ¶ 20; RJN, Ex. 5.) On January 9, 2012, National Default recorded a

22

Trustee’s Deed Upon Sale to convey the Property to U.S. Bank. (Am. Compl. ¶ 21; RJN, Ex. 6.)

23

Plaintiff filed his complaint in state court on March 1, 2012. Defendants removed the action

24

on April 3, 2012. Plaintiff filed his first amended complaint on April 17, 2012, alleging two causes

25

of action: 1) slander of title, and 2) wrongful foreclosure. Defendants move to dismiss the first

26

amended complaint in its entirety.

27

\\\

28

2

1

II. LEGAL STANDARDS

2

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in

3

the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When

4

reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the

5

factual allegations contained in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per

6

curiam) (citation omitted), and may dismiss the case “only where there is no cognizable legal

7

theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to

8

relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing

9

Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir.
2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff “pleads factual

11
For the Northern District of California

United States District Court

10

content that allows the court to draw the reasonable inference that the defendant is liable for the

12

misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged

13

must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a

14

cause of action will not do.” Bell Atl. Corp. v. Twomby, 550 U.S. 554, 555 (2007) (citing Papasan v.

15

Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001),

16

overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

17

As a general rule, a court may not consider “any material beyond the pleadings” when ruling

18

on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However,

19

“a court may take judicial notice of ‘matters of public record’” pursuant to Federal Rule of Evidence

20

201. Id. at 688-89 (9th Cir. 2001) (quoting Mack v. S. Bay Beer Distribs., 798 F.2d 1279, 1282 (9th

21

Cir. 1986), overruled on other grounds by Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104

22

(1991)); see Holder v. Holder, 305 F.3d 854, 866 (9th Cir. 2002).

23
24

III. ANALYSIS
A. Defendant’s Request for Judicial Notice

25

Defendants request judicial notice of foreclosure-related documents recorded in the Contra

26

Costa County Recorder’s Office. (RJN at 2-3.) The court takes judicial notice of the documents as

27

matters of public record pursuant to Federal Rule of Evidence 201.

28

\\\

3

1

B. The Slander of Title Claim

2

“The recordation of an instrument facially valid but without underlying merit will give rise

3

to an action for slander of title.” Stamas v. Cnty. of Madera, 795 F. Supp. 2d 1047, 1068 (E.D. Cal.

4

2011) (citing Seely v. Seymour, 190 Cal. App. 3d 844, 857 (1987)). In California, the Plaintiff must

5

establish: “(1) a publication, (2) which is without privilege or justification, (3) which is false, and

6

(4) which causes direct and immediate pecuniary loss.” Lykkeberg v. Bank of Am., N.A., No. C-12-

7

00772-JW, 2012 WL 1099773, at *6 (N.D. Cal. Apr. 2, 2012) (citing Manhattan Loft, LLC v.

8

Mercury Liquors, Inc., 173 Cal. App. 4th 1040, 1051 (2009)).

9

Plaintiff sufficiently pleads two of the four elements: publication and falsity. The
publication element is satisfied because the foreclosure documents in question are matters of public

11
For the Northern District of California

United States District Court

10

record. (Am. Compl. ¶¶ 15-21; RJN, Exs. 1-6.) As to falsity, Plaintiff alleges that the recorded

12

documents are false because the Corporate Assignment and the Substitution of Trustee, which

13

purport to transfer the beneficial interests of the Deed of Trust, do not legally transfer those

14

interests. Plaintiff’s falsity allegation relies on two theories, only one of which Plaintiff adequately

15

pleads.

16

Plaintiff first alleges that the Corporate Assignment is false because MERS did not have the

17

authority to transfer the beneficial interest. (Am. Compl. ¶¶ 23-26.) This theory fails as a matter of

18

law. Under California law, “MERS, as nominal beneficiary, has the power to assign its interest

19

under a deed of trust.” Herrera v. Fed. Nat’l Mortg. Ass’n., 205 Cal. App. 4th 1495, 1498 (2012).

20

Herrera looked to the language in a Deed of Trust, which gave express authorization to MERS to

21

take certain actions as nominee for the Lender:

22
23
24
25
26
27

The beneficiary of this Security Instrument is MERS (solely as nominee for Lender
and Lender’s successors and assigns) and the successors and assigns of MERS. This
Security Instrument secures to the Lender: (i) the repayment of the Loan, and all
renewals, extensions and modifications of the Note; and (ii) the performance of
Borrower’s covenants and agreements under this Security Instrument and the Note.
For this purpose, Borrower irrevocably grants and conveys to Trustee, in trust, with
power of sale, the following described property . . .
Borrower understands and agrees that MERS holds only legal title to the interests
granted by Borrower in this Security Instrument, but, if necessary to comply with
law or custom, MERS (as nominee for Lender and Lender’s successors and assigns)
has the right: to exercise any or all of those interests, including, but not limited to,

28

4

1

the right to foreclose and sell the Property; and to take any action required of Lender
including, but not limited to, releasing and cancelling this Security Instrument.

2
3

Id. at 1499. The court determined that “[p]laintiffs granted MERS [the authority to assign the note]

4

by signing the deed of trust.” Id. at 1498-99, 1503-06; see Fontenot v. Wells Fargo Bank, N.A., 198

5

Cal. App. 4th 256, 270-73 (2011); Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th

6

1149, 1157-58 (2011) (citing Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177,

7

1189-90 (N.D. Cal. 2009)). The language of the Deed of Trust in the instant case is identical to the

8

Deed of Trust analyzed in Herrera. (See RJN, Ex. 1 at 2-3.) Thus, Plaintiff’s allegation that MERS

9

lacked authority to assign the interest in the Deed of Trust fails under Herrera.
Plaintiff’s second theory is that the Corporate Assignment and the Substitution of Trustee

11
For the Northern District of California

United States District Court

10

are false because both documents are signed by individuals who are not who they represent

12

themselves to be. The complaint alleges that Mr. Koch signed as Assistant Secretary of MERS,

13

when he is actually Assistant Secretary of Select Portfolio. (Am. Compl. ¶ 27.) Similarly, Plaintiff

14

alleges that Ms. Todd signed as President of Select Portfolio, when she is actually President of

15

National Default. (Am. Compl. ¶ 29.) The court must accept these allegations as true for purposes

16

of this motion. Plaintiff has sufficiently pled the falsity element of his slander of title claim.

17

Turning to the remaining elements of the slander of title claim, Plaintiff fails to adequately

18

plead that the publication is without privilege or justification. California Civil Code section

19

47(c)(1) states: “[a] privileged publication or broadcast is one made: (c) [i]n a communication,

20

without malice, to a person interested therein, (1) by one who is also interested.” Cal. Civ. Code

21

§ 47(c)(1). Nonjudicial foreclosure documents are subject to this privilege. See Cal. Civ. Code

22

§ 2924(d); Dubose v. Suntrust Mortg., Inc., No. 5:11-CV-03264-EJD, 2012 WL 1376983, at *3

23

(N.D. Cal. Apr. 19, 2012) (dismissing slander of title claim because notice of default, notice of

24

trustee sale, and substitution of trustee are subject to privilege); Lykkeberg, 2012 WL 1099773, at

25

*6 (dismissing slander of title claim because transfer of deed is subject to privilege); Ramirez v.

26

Right-Away Mortg. Inc., No. C-11-01839-WHA, 2011 WL 3515931, at *3 (N.D. Cal. Aug. 11,

27

2011) (not reported in F. Supp. 2d) (dismissing slander of title claim because notice of default is

28

subject to privilege).

5

1

An exemption to the section 47 privilege arises upon an allegation of malice. Permito v.

2

Wells Fargo Bank, N.A., No. C-12-00545-YGR, 2012 WL 1380322, at *8 (N.D. Cal. Apr. 20,

3

2012) (citing Kachlon v. Markowitz, 168 Cal. App. 4th 316 (2008)) (“Absent factual allegations of

4

malice, a trustee’s performance of the statutory procedures in a nonjudicial foreclosure is subject to

5

the qualified, common-interest privilege of California Civil Code § 47(c)(1).”)). Malice requires

6

“that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that

7

the defendant lacked reasonable ground for belief in the truth of the publication and therefore acted

8

in reckless disregard of the plaintiff’s rights.” Kachlon, 168 Cal. App. 4th at 336 (quoting Sanborn

9

v. Chronicle Pub. Co., 18 Cal. 3d 406, 413 (1976)) (emphasis in original) (quotation marks
omitted). Plaintiff alleges that Defendants acted in malice and reckless disregard for the truth when

11
For the Northern District of California

United States District Court

10

they formulated false documents. (Am. Compl. ¶ 31.) However, this allegation is conclusory; the

12

mere “formulation of false documents” is inadequate to plead malice.

13

Plaintiff also fails to plead sufficiently that Defendants caused direct and immediate

14

pecuniary harm. First, Plaintiff does not allege specific facts to support his bare assertion that the

15

Property’s vendibility was impaired. (See Am. Compl. ¶ 31.) Second, Plaintiff alleges that

16

attorneys’ fees and cost incurred in the current action constitute pecuniary harm. (Am. Compl.

17

¶ 32.) However, “in an action for slander of title fees incurred to quiet title are recoverable and fees

18

incurred prosecuting the slander of title are not.” Ryan v. Editions Ltd. W., Inc., No. C-06-4812-

19

PVT, 2007 WL 4577867, at *13 n.13 (N.D. Cal. Dec. 27, 2007) (not reported in F. Supp. 2d).

20

Because the alleged monetary loss is limited to attorneys’ fees and costs for pursuing the slander of

21

title action, the allegations fail to establish pecuniary harm as a matter of law.

22
23
24
25
26
27

Therefore, the court dismisses Plaintiff’s slander of title claim with leave to amend.
B. The Wrongful Foreclosure Claim
In Lona v. Citibank, N.A., the court set forth the elements of an equitable cause of action for
wrongful foreclosure:
(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale
of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the
party attacking the sale (usually but not always the trustor or mortgagor) was
prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the

28

6

1

sale, the trustor or mortgagor tendered the amount of the secured indebtedness or
was excused from tendering.

2
3

202 Cal. App. 4th 89, 104 (2011).

4

1. Illegal Sale

5

Plaintiff alleges several grounds for demonstrating an illegal, fraudulent, or willfully

6

oppressive sale, two of which he pleads adequately.

7

First, Plaintiff alleges that the foreclosure is oppressive and wrongful because U.S. Bank

8

was not the true beneficiary at the time of the Trustee’s Sale and could not legally be granted the

9

Property as foreclosing beneficiary. (Am. Compl. ¶ 36.) Plaintiff asserts that the Corporate
Assignment did not convey the beneficial interest to U.S. Bank for two reasons: (1) because MERS

11
For the Northern District of California

United States District Court

10

could not convey the beneficial interest; and (2) because Mr. Koch improperly signed the Corporate

12

Assignment as Assistant Secretary of MERS, when he is actually Assistant Secretary of Select

13

Portfolio. (Am. Compl. ¶¶ 27, 36.) While Plaintiff’s MERS allegations fail as a matter of law

14

because, as discussed above, MERS is authorized under the Deed of Trust to assign a beneficial

15

interest to U.S. Bank, Plaintiff’s false signatory allegation, taken as true, is sufficient to plead the

16

element of illegal sale in support of a claim for wrongful foreclosure.

17

Second, Plaintiff alleges that the foreclosure is invalid because National Default is not the

18

true Trustee and, therefore, did not have the power to legally convey the Property as Trustee in the

19

Trustee’s Deed Upon Sale. (Am. Compl. ¶ 37.) Plaintiff asserts that National Default is not the

20

true Trustee because Ms. Todd improperly signed the Substitution of Trustee as President of Select

21

Portfolio, when she is actually President of National Default. (Am. Compl. ¶¶ 29, 37.) These

22

allegations, taken as true, are sufficient to plead the element of illegal sale.

23

Third, Plaintiff alleges that the foreclosure violates California Civil Code section 2932.5.

24

(Am. Compl. ¶¶ 38-39.) Section 2932.5 states that the power to sell real property “vests in any

25

person who by assignment becomes entitled to payment of the money secured by the instrument.

26

The power of sale may be exercised by the assignee if the assignment is duly acknowledged and

27

recorded.” Cal. Civ. Code § 2932.5. Plaintiff alleges that “[b]ecause the attempted Assignment of

28

the Deed of Trust failed, Defendant U.S. Bank was not the true beneficiary under Plaintiff’s Deed

7

1

of Trust as reflected in the public chain of title.” (Am. Compl. ¶ 39.) In examining the

2

Assignment, Plaintiff again asserts that the Corporate Assignment did not convey the beneficial

3

interest to U.S. Bank because MERS could not convey the beneficial interest, and because Mr.

4

Koch improperly signed the Corporate Assignment. (Am. Compl. ¶¶ 27, 39.) As discussed above,

5

the allegation regarding MERS fails as a matter of law. Although Plaintiff adequately pleads an

6

illegal sale based upon the false signatory allegation, that allegation does not advance a claim for a

7

section 2932.5 violation. Section 2932.5 applies only to mortgages and not deeds of trust. Permito,

8

2012 WL 1380322, at *4 (“Plaintiff cannot base her wrongful foreclosure claim on failure to

9

comply with [section 2932.5] recording requirements that apply only to mortgages.”); see Roque v.
Suntrust Mortg. Inc., No. C-09-00040-RMW, 2010 WL 546896, at *3 (N.D. Cal. Feb. 10, 2010)

11
For the Northern District of California

United States District Court

10

(not reported in F. Supp. 2d); Herrera, 205 Cal. App. 4th at 1508-10; Selby v. Bank of Am., Inc.,

12

No. 09-CV-2079-BTM-JMA, 2010 WL 4347629, at *3 (S.D. Cal. Oct. 27, 2010) (not reported in F

13

Supp. 2d); Parcray v. Shea Mortg., Inc., No. CV-F09-1942-OWW-GSA, 2010 WL 1659369, at

14

*11-12 (E.D. Cal. Apr. 23, 2010) (not reported in F. Supp. 2d).

15

2. Prejudice or Harm

16

Plaintiff has not adequately pled prejudice or harm. Plaintiff alleges that he was prejudiced

17

and harmed because he lost his home, lost the equity in his home, and was forced to engage counsel

18

for this matter. (Am. Compl. ¶¶ 41-42.) Prejudice or harm is not established unless the plaintiff

19

demonstrates “that the foreclosure would have been averted but for [the] alleged deficiencies.”

20

Reynoso v. Paul Fin., LLC, No. 09-3225-SC, 2009 WL 3833298, at *4 (N.D. Cal. Nov. 16, 2009)

21

(not reported in F. Supp. 2d); see also Ghuman v. Wells Fargo Bank, N.A., No. 1:12-CV-00902-

22

AWI-BAM, 2012 WL 2263276, at *5 (E.D. Cal. Jun. 15, 2012) (“Plaintiffs would be hard pressed

23

to show any conceivable prejudice, given Plaintiffs have offered no facts to suggest the substitution

24

of NDEx (or the allegedly improper recording thereof) adversely affected their ability to pay their

25

debt or cure their default.”). Plaintiff does not allege that foreclosure would not have occurred but

26

for the supposed improper transfer of interest.

27

\\\

28

8

1

3. Tender or Excuse From Tender

2

The tender element of wrongful foreclosure is an equitable concept. The Court declines to

informed analysis of the equities, and where the claim is dismissed on other grounds with leave to

5

amend. See Tamburri v. Suntrust Mortg., Inc., No. C-11-2899-EMC, 2011 WL 6294472, at *5

6

(N.D. Cal. Dec. 15, 2011) (“These exceptions and qualifications counsel against a blanket

7

requirement of the tender rule at the pleading stage. The Court thus declines to dismiss the

8

complaint on the basis of her failure to allege tender.”); ING Bank v. Ahn, No. C-09-995-TEH, 2009

9

WL 2083965, at *2 (N.D. Cal. Jul. 13, 2009) (not reported in F. Supp. 2d) (“While the Ahns will

10

clearly need to demonstrate their ability to fully effectuate a rescission for the Court to enter an

11
For the Northern District of California

apply the tender rule at this early pleading stage without an opportunity to undertake a more

4

United States District Court

3

order of rescission, ING has offered no authority that requires this Court to dismiss the matter for

12

failure to demonstrate the ability to tender at [the pleading] stage of litigation.”); Chan & Tang v.

13

Bank of Am., N.A., No. SACV-11-2048-DOC-DTBX, 2012 WL 960373, at *7 (C.D. Cal. Mar. 19,

14

2012) (not reported in F. Supp. 2d) (“[T]his Court declines to apply the tender rule at the pleading

15

stage where Plaintiff’s have alleged a facially plausible violation . . . .”); Storm v. Am.’s Servicing

16

Co., No. 09-CV-1206-IEG-JMA, 2009 WL 3756629, at *6, *8 (S.D. Cal. Nov. 6, 2009) (not

17

reported in F. Supp. 2d) (“The Court finds that it need not make a determination on [the tender

18

rule], except to note that failure to allege tender is not decisive at [the pleading] stage. . . . [L]ack of

19

tender is not fatal to Plaintiff’s claim at this stage.”)

20
21

Plaintiff’s wrongful foreclosure claim is dismissed with leave to amend.
\\\

22
23
24
25
26
27
28

9

1
2
3

IV. CONCLUSION
For the foregoing reasons, Defendants motion to dismiss Plaintiff’s first amended complaint
is GRANTED and Plaintiff’s first amended complaint is DISMISSED with leave to amend.

4
5

IT IS SO ORDERED.

6
7

Dated: July 23, 2012

8
9
DONNA M. RYU
United States Magistrate Judge

11
For the Northern District of California

United States District Court

10

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

10