Lomely v. JP Morgan Chase Bank, National Association
Filing
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ORDER granting Motion to Dismiss by Judge Edward J. Davila. (ejdlc3, COURT STAFF) (Filed on 9/17/2012)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
United States District Court
For the Northern District of California
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ANGEL S. LOMELY,
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Plaintiff,
v.
JP MORGAN CHASE BANK, NATIONAL
ASSOCIATION, and Does 1–5, inclusive,
Defendants.
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO
DISMISS
[Re: Docket Item No. 10]
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Presently before the Court is Defendant JPMorgan Chase Bank, N.A.’s (“Chase”) Motion
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to Dismiss the Complaint filed by Plaintiff Angel S. Lomely (“Lomely”). See Docket Item No. 10.
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Having fully reviewed Chase’s moving papers which were filed unopposed, the Court will grant
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Chase’s motion for reasons described below.
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I. BACKGROUND
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A. Factual History
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On or around October 13, 2005, Lomely obtained a loan for $1,288,999.00 to secure the
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purchase of real property located at 20096 Almaden Road in San Jose, California (“the Loan”). See
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Notice of Removal and Removal, hereafter “Removal,” Docket Item No. 1, Ex. A, Compl. ¶ 1–2,
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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10, hereafter “Compl.”; Def’s. Req. for Judicial Notice (hereafter “RJN”), Docket Item No. 11, Ex.
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A, Deed of Trust. The loan was obtained from lender Washington Mutual Bank (“WaMu”), which
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was also listed as the beneficiary to the Loan, and California Reconveyance Company (“CRC”)
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was the trustee of the Deed. Compl. ¶ 10; RJN, Ex. A. Lomely alleges that in or around December
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2005 his promissory note on the Loan was securitized and became part of various loan pools and
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investment trusts. Compl. ¶ 11–13, Ex. E, Security Bond Description.
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On or around September 25, 2008, WaMu was declared insolvent whereupon the Federal
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Deposit Insurance Corporation (“FDIC”) was appointed Receiver for WaMu. RJN, Ex. B. Affidavit
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of Federal Insurance Corporation recorded on October 3, 2008; see also Miller v. Calif.
United States District Court
For the Northern District of California
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Reconveyance Co., No. 10-CV-421-IEG, 2010 WL 2889103, at *2 (S.D. Cal. July 22, 2010) (“As a
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receiver, the FDIC steps into the shoes of the failed [financial institution] and operates as its
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successor. . . . The FDIC then has broad powers to allocate assets and liabilities, such as through a
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[Purchase and Assumption Agreement].” (internal quotations marks and citations omitted)).
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Pursuant to a Purchase and Assumption Agreement (“P&A Agreement”) dated September 25,
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2008, the FDIC transferred to Chase “all right, title, and interest of the Receiver in and to all of the
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assets” of WaMu, including the Loan. RJN, Ex. C.
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By March 21, 2011, Lomely had failed to meet his loan obligations whereupon a Notice of
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Default was issued and recorded on March 25, 2011 by CRC acting on behalf of Chase with the
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Santa Clara County Recorders’ Office. RJN, Ex. D. In or around May 2011, Lomely contacted
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Chase and applied for a loan modification; this and several other applications from May to
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December 2011 were rejected by Chase. Compl. ¶ 26–29. As Lomely remained in default on his
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loan, a Notice of Trustee’s Sale was issued and recorded on June 27, 2011. RJN, Ex. E.
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B. Procedural History
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Lomely filed the Complaint underlying this action against Chase in Santa Clara Superior
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Court on January 25, 2012. The Complaint asserts six claims for relief: (1) wrongful foreclosure;
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(2) quiet title; (3) violation of California Business & Professions Code § 17200; (4) declaratory and
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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injunctive relief; (5) violations of California Civil Code § 2923.5; and (6) quasi contract. See
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Compl. On March 9, 2012 Chase removed the action to this Court pursuant to 28 U.S.C. § 1332,
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1441, and 1446 based upon diversity of citizenship. See Removal. On April 16, 2012, Chase
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moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and requested
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judicial notice of certain relevant publicly available documents. See Def’s. Mot. to Dismiss
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Compl., Docket Item No. 10; RJN.
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II. LEGAL STANDARD
Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient
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United States District Court
For the Northern District of California
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specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which it
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rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A
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complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim
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upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is
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appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a
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cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.
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2008). Moreover, the factual allegations “must be enough to raise a right to relief above the
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speculative level” such that the claim “is plausible on its face.” Twombly, 550 U.S. at 556–57.
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When deciding whether to grant a motion to dismiss, the court generally “may not consider
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any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d
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1542, 1555 n.19 (9th Cir. 1990). The court must accept as true all “well-pleaded factual
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allegations.” Ashcroft v. Iqbal, 556 U.S. 662 (2009). The court must also construe the alleged facts
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in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir.
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1988). “[M]aterial which is properly submitted as part of the complaint may be considered.”
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Twombly, 550 U.S. at 555. But “courts are not bound to accept as true a legal conclusion couched
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as a factual allegation.” Id.
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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III. REQUEST FOR JUDICIAL NOTICE
In support of its motion to dismiss, Chase had requested that the Court take judicial notice
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of various documents. See RJN. These documents include the following: the Deed of Trust,
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recorded October 17, 2005 with the Santa Clara County Recorder (Ex. A); Affidavit of Federal
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Insurance Corporation recorded October 3, 2008 with the Washington State King County Recorder
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(Ex. B); the Purchase and Assumption Agreement dated September 25, 2008 and available on the
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FDIC’s website at http://http://www.fdic.gov/about/freedom/Washington_mutual_p_and_a.pdf
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(Ex. C); Notice of Default and Election to Sell Under Deed of Trust recorded March 25, 2011 with
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the Santa Clara County Recorder (Ex. D); and Notice of Trustee’s Sale, recorded June 27, 2011
United States District Court
For the Northern District of California
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with the Santa Clara County Recorder (Ex. E).
For a motion to dismiss, the court does not generally look beyond the complaint as doing so
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may enter the purview of summary judgment. See Fed. R. Civ. P. 12(d); Hal Roach Studios, 896
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F.2d at 1555 n.19. There are, however, two exceptions to this rule. First, the court may properly
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take judicial notice of material which is attached as part of the complaint or relied upon by the
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complaint. See Lee v. City of Los Angeles, 250 F.3d 668, 688–69 (9th Cir. 2001). Second, the
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court may properly take judicial notice of matters in the public record pursuant to Federal Rule of
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Evidence 201(b). Id. Rule 201(b) requires a “judicially noticed fact must be one not subject to
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reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the
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trial court; or (2) capable of accurate and ready determination by resort to sources whose accuracy
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cannot reasonably be questioned.” A court “shall take judicial notice if requested by a party and
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supplied with the necessary information.” See Fed. R. Evid. 201(d).
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Here, Lomely does not challenge the authenticity of the documents contained in Chase’s
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Request for Judicial Notice. The Exhibits contained therein are therefore judicially noticeable as
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matters of public record. As such, Defendant’s Request for Judicial Notice is granted in its entirety.
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IV. DISCUSSION
In his Complaint, Lomely has asserted six causes of action. Each will be addressed below.
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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A. Claims 1, 2 and 4: Wrongful Foreclosure, Quiet Title, and Declaratory and Injunctive
Relief
Lomely’s claims of wrongful foreclosure (claim 1) and quiet title (claim 2) are predicated
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on the securitization of the promissory note underlying the Loan and the transfer of the benefits of
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the Loan from WaMu to Chase. In addition to money damages, Lomely also seeks declaratory and
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injunctive relief (claim 4). Lomely asserts that neither WaMu nor CRC recorded a transfer of
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beneficial interest in the note to Chase. Compl. ¶ 35. He supports this by arguing that when WaMu
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securitized the loan in December 2005, which was shortly after Lomely executed the Deed of
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Trust, all beneficial interest in the loan was transferred to an unknown private investor. Id. at ¶ 34,
United States District Court
For the Northern District of California
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41. Therefore, he contends, Chase is neither the owner of the note, a holder of the note, nor a
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beneficiary of the note; and it merely acts, if at all, as the loan servicer. Id. ¶ 36–37. Lomely
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contends that Chase did not acquire any rights vis-à-vis the Loan under the P&A Agreement of
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September 2008 because by that time, the interest had already been transferred to a separate party
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via the securitization. Id. ¶ 37.
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Ultimately, Lomely argues that because Chase was not the note holder or beneficiary, it
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cannot seek to enforce the Deed of Trust let alone foreclose on the property in question nor did it
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have ownership or any legal interest in the property. Id. ¶ 42, 45, 46. This contention is erroneous
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for several reasons.
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First, the allegation that securitization of the Deed of Trust renders it unenforceable is an
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incorrect proposition under California law, which has rejected the notion that parties lose their
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interest in a loan when it is securitized or sold and assigned into a pool of trust. See Hafiz v.
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Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1043 (N.D. Cal. 2009) (“[Plaintiff’s claim]
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is based on the erroneous theory that all defendants lost their power of sale pursuant to the deed of
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trust when the original promissory note was assigned to a trust pool.”); Nguyen v. Bank of Am.
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Nat’l Ass’n, No. 11-CV-03318, 2011 WL 5574917, at *9 (N.D. Cal. Nov. 15, 2011) (“[C]ourts
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have uniformly rejected the argument that securitization of a mortgage loan provides the mortgagor
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with a cause of action.” (quoting Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 898 (D. Haw.
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ORDER GRANTING MOTION TO DISMISS
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2011))); Benham v. Aurora Loan Servs., No. C-09-2059, 2009 WL 2880232, at *3 (N.D. Cal. Sept.
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1, 2009) (rejecting plaintiff’s argument that a beneficiary of a mortgage note loses its power of sale
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in deed where the note is securitized and assigned to a trust pool). Moreover, the language of the
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Deed of Trust itself allows for securitization: “The Note or a partial interest in the Note (together
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with this Security Instrument) can be sold one or more times without prior notice to Borrower.”
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RJN, Ex. A ¶ 20.
Secondly, California, a non-judicial foreclosure state, does not require that the original note
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be produced in order for the foreclosure proceedings to be valid. Karimi v. GMAC Mortg., No. 11-
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CV-00926, 2011 WL 5914006, at *4 (N.D. Cal. Nov. 28, 2011) (finding that plaintiff’s argument
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United States District Court
For the Northern District of California
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that defendant cannot validly foreclose on the property without the original note to be “contrary to
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California law”); Hafiz, 652 F. Supp. 2d at 1043 (“California law does not require possession of
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the note as a precondition to non-judicial foreclosure under a deed of trust.”); see also Cal. Civ.
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Code § 2924b(4) (“A ‘person authorized to record the notice of default or the notice of sale’ shall
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include an agent for the mortgagee or beneficiary, an agent of the named trustee, any person
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designated in an executed substitution of trustee, or an agent of that substituted trustee.”). As such,
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the fact that Chase was not the holder of the original note did not mean that its foreclosure on the
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property was improper.
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Third, Lomely has failed to show that Chase had no right to foreclose on the loan. As noted,
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Chase acquired the interest in the Deed of Trust and the right to initial non-judicial foreclosure
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proceedings on September 25, 2008 pursuant to the P&A Agreement. RJN, Ex. C; see also Gomes
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v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1154 (2011). Along with this interest
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came the right to foreclose on the property in the event of a default. Lomely does not deny that he
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was in default on his mortgage nor does he challenge the validity of the Notice of Default.
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Because Lomely’s claims for wrongful foreclosure, quiet title, and his arguments in support
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of his request for declaratory and injunctive relief are based on the erroneous notion that Chase had
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no interest in the Loan or right to initiate foreclosure proceedings, each of these causes of action
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are dismissed without leave to amend.
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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B. Claims 3 and 5: Violations of California Business & Professions Code § 17200 and
California Civil Code § 2923.5
Lomely alleges that Chase violated California Civil Code § 2923.5 by failing to contact him
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in order to explore alternative options to foreclosure sufficiently prior to issuing a notice of default
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and initiating foreclosure proceedings (claim 5). Compl. ¶ 68–69. Lomely further contends that this
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and other actions amount to a violation of California Business & Professions Code § 17200 as well
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(claim 3).
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Section 2923.5 requires that a mortgagee, beneficiary, or authorized agent contact the
mortgagor in order to “assess the borrower’s financial situation and explore options for the
United States District Court
For the Northern District of California
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borrower to avoid foreclosure.” Cal. Civ. Code § 2923.5(a)(2). A notice of default may not be filed
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until thirty days after this contact is made. Id. § 2923.5(a)(1). In cases involving an attack on a non-
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judicial foreclosure sale, the challenger-borrower must overcome a presumption of propriety.
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Davenport v. Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 877 (2010); Knapp v. Doherty, 123
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Cal. App. 4th 76, 86 n.4 (2004). Even in the event that a foreclosure procedure was improper, a
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challenger must still show resulting prejudice. Davenport, 725 F. Supp. 2d at 877.
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Lomely has failed to rebut this prescribed presumption of propriety. Attached to the Notice
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of Default is a Declaration of Compliance in which a representative of Chase specifically attested
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to compliance with section 2923.5 in the matter with Lomely. See RJN Ex. D. Furthermore, even
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if the proceeding was improper, Lomely has not shown that he was prejudiced by it nor has he
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shown that such a prejudice could exist. See Davenport, 725 F. Supp. 2d at 877.
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This claim is dismissed without leave to amend since there is no indication that Lomely
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would be able to rebut the presumption of propriety in light of the Declaration of Compliance and
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Lomely’s vague and conclusory allegations in his Complaint. Moreover, allegations pleaded in the
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Complaint may in fact negate this claim: Lomely states that he had conversations with Chase
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representatives regarding foreclosure alternatives. Compl. ¶ 27. This seems to indicate that Chase
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complied with the procedures and protections set up by section 2393.5, or, in the alternative, that
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Lomely has not been prejudiced. See Davenport, 725 F. Supp. 2d at 877–78 (dismissing a claim for
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ORDER GRANTING MOTION TO DISMISS
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violation of section 2392.5 without leave to amend where allegations pleaded in the complaint
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seem to indicate compliance with that code section).
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Section 17200 of the Business & Professions Code proscribes “unlawful, unfair or
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fraudulent business act or practice.” Lomely’s argument for this claim lies in the form of merely
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conclusory allegations that Chase has committed acts of unfair competition. Compl. ¶ 51. The only
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support for this notion, if any, is the allegation that Chase wrongfully foreclosed on the property in
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question or violated Cal. Civ. Code § 2923.5. Id. ¶ 54. Because the claims of wrongful foreclosure
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and violation of the California Civil Code have been dismissed, a claim of violation of the
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California Business & Professions Code predicated on those claims must be dismissed without
United States District Court
For the Northern District of California
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leave to amend as well.
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C. Claim 6: Equitable Relief under Quasi-Contract Theory
Lomely’s sixth and final claim for relief is based upon the theory of quasi-contract: that
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Chase has been unjustly enriched in accepting monthly mortgage payments from Lomely for over a
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year. Compl. ¶ 76. Lomely supports this argument, again, with the allegation that Chase was not a
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beneficiary to the Loan even after the assignment from WaMu via the September 25, 2008 P&A
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Agreement based on the securitization. Id. ¶ 77.
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A quasi-contract is a way of describing the “basis of equitable remedy of restitution when
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an unjust enrichment has occurred.” McBride v. Boughton, 123 Cal. App. 4th 379, 388 n.6 (2004).
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Recovery under quasi-contract theory is appropriate when there is no contract governing the
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situation or relationship between the parties. See Cal. Med. Ass’n, Inc. v. Aetna U.S. Healthcare of
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Cal., 94 Cal. App. 4th 151, 172–73 (2001).
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In that regard, Lomely’s claim for relief under quasi-contract theory fails for two reasons.
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First, as noted, Chase was entitled to receive the mortgage payments as the loan servicer and
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beneficiary to the Loan after the P&A Agreement of September 25, 2008. Secondly, the governing
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contractual documents—the original Deed of Trust and assignment by the P&A Agreement—
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define the parties’ rights and obligations, thus precluding recovery for unjust enrichment. See Cal.
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ORDER GRANTING MOTION TO DISMISS
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Med. Ass’n, Inc., 94 Cal. App. 4th at 172 (“[A]s a matter of law, a quasi-contract action for unjust
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enrichment does not lie where . . . express binding agreements exist and define the parties’
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rights.”). Contrary to Lomely’s contentions, the securitization of the Loan did not do away with
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WaMu’s rights as a beneficiary or affect the ability for those rights to be assigned to Chase.
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Therefore, Chase’s receipt of those payments was not an unjust enrichment, but rather one
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that it was entitled to under the Loan agreement via the P&A Agreement. As such, Lomely does
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not have an equitable claim for relief under the theory of quasi-contract, and such claim is
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dismissed without leave to amend.
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United States District Court
For the Northern District of California
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V. CONCLUSION AND ORDER
Because Lomely has failed to establish each of the causes of action he has alleged in his
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Complaint, Chase’s Motion to Dismiss is GRANTED WITHOUT LEAVE TO AMEND in its
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entirety.
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Since this Order effectively disposes of the entire case, the Clerk shall close this file upon
entry of Judgment.
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IT IS SO ORDERED.
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Dated: September 17, 2012
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_________________________________
EDWARD J. DAVILA
United States District Judge
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Case No.: 5:12-CV-01194-EJD
ORDER GRANTING MOTION TO DISMISS
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