Debbie Alice Thompson v. JPMorgan Chase Bank, N.A. et al

Filing 37

ORDER GRANTING 10 MOTION TO DISMISS. Signed by Judge Beth Labson Freeman on 3/7/2017. (blflc4, COURT STAFF) (Filed on 3/7/2017)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5

SAN JOSE DIVISION

6
7

DEBBIE ALICE THOMPSON,
Plaintiff,

8

ORDER GRANTING MOTION TO
DISMISS

v.

9
10

JPMORGAN CHASE BANK, N.A., et al.,

11
United States District Court
Northern District of California

Case No. 16-cv-06134-BLF

Defendants.

[Re: ECF 10]

12
Plaintiff Debbie Alice Thompson (“Thompson”) brings this suit against JP Morgan Chase

13
14

Bank, N.A. and U.S. Bank, N.A. (“Defendants”) for injunctive relief against mistaken and

15

erroneous foreclosure. Ex. A to Notice of Removal ¶ 6 (“Compl.”), ECF 1-1. Before the Court is

16

Defendants’ motion to dismiss the complaint. After reviewing the parties’ briefing and holding a

17

hearing on January 26, 2017, the Court GRANTS the motion to dismiss.

18

I.

BACKGROUND

19

Based on Defendants’ evidence, which the Court judicially notices and Thompson’s

20

allegations and exhibits to her complaint, the following facts and allegations are provided as

21

background.

22

In this case, Thompson has alleged a single claim for “Injunctive Relief, Damages and

23

Other Relief.” Compl. Thompson claims that Defendants lack authority to institute foreclosure

24

proceedings against her property. See generally Compl.; id. ¶¶ 6 et seq. In her opposition,

25

Thompson clarifies that this is an action for wrongful foreclosure. Opp’n 3, ECF 18. Certain

26

events leading up to this suit are as follows.

27
28

On June 14, 2006, Thompson obtained a loan in the amount of $1,770,000 from
Washington Mutual Bank, FA (“WaMu”), secured by a Deed of Trust (the “DOT”) on real

1

property located at 18285 Constitution Avenue, Monte Sereno, CA 95030. DOT and Adjustment

2

Rate Note (the “Note”), Exs. 1 and 12 to Compl. The DOT names Thompson as the borrower,

3

WaMu as the lender, and California Reconveyance Company as the trustee. DOT, Ex. 1 to

4

Compl. Paragraph 22 of the DOT provides that the Lender retains the right to invoke the power of

5

sale and to direct the trustee to initiate foreclosure in the event of default. Id. ¶ 22. DOT also

6

states that the Note could be sold one or more times without prior notice to Thompson. Id. ¶ 20.

7

In 2006, WaMu sold a group of mortgages to a securitized trust, the WaMu Mortgage
Pass-Through Certificates Series 2006-AR9 (the “Trust”) but Thompson disputes whether her loan

9

was included in the Trust. Compl. ¶¶ 3-4; Opp’n 10; RJN, Ex. B (“Trust’s Pooling and Service

10

Agreement (“PSA”); RJN, Ex. C (Mortgage Loan Schedule of loans sold to Trust). Pursuant to

11
United States District Court
Northern District of California

8

the PSA, WaMu retains the right to service the loans and foreclose on mortgaged properties. PSA

12

§§ 3.01, 3.09. PSA also designated LaSalle Bank, N.A. as the trustee. Id. at 1.

13

When the financial crisis unfolded in 2008, WaMu was taken into receivership by the

14

Federal Deposit Insurance Corporation. RJN, Ex. A (“P&A Agreement”). With certain

15

exceptions, JP Morgan Chase Bank, N.A. (“Chase”) purchased all of WaMu assets, including all

16

the mortgage servicing rights. Id. § 3.1.

17

In January 2010, Thompson defaulted on her loan. Compl. ¶ 24. A notice of Trustee’s

18

sale was scheduled on June 3, 2015 and the notice states that the amount of unpaid balance and

19

other charges amounted to $2,322,685,05. RJN, Ex. F. However, Thompson does not allege that

20

her property has been foreclosed and still resides at the property. Compl. ¶ 2.

21

Between Thompson’s default in January 2010 and the June 2015 scheduled foreclosure

22

sale, the DOT underwent several assignments. According to Thompson, the assignments

23

demonstrate that Defendants have no right to initiate a foreclosure proceeding on her property as

24

the assignments were erroneous or made by entities without authority to make such assignments.

25

Compl. ¶¶ 9-11. Thompson also alleges that the assignments are invalid because they constitute

26

fraud or illegal conduct, citing to articles discussing bad bank practices. Id. ¶¶ 17-28.

27
28

Specifically, Thompson alleges that the assignment of DOT made on November 29, 2010
from Chase to Bank of America was invalid. Ex. 3 to Compl.; Compl. ¶ 11. According to
2

1

Thompson, this assignment was signed by Colleen Irby, who had no authority to make the

2

assignment as an employee of the California Reconveyance Company, the trustee named on the

3

DOT at the time. Compl. ¶¶ 9-11. In an attempt to correct the erroneous naming of Bank of

4

America as the trustee, Chase filed a corrective assignment of the DOT, assigning the DOT back

5

to itself on June 28, 2016. Ex. 4 to Compl. According to Thompson, this assignment is

6

meaningless as Chase was assigning the DOT to itself and is further an admission that the

7

previous assignments were erroneous. Compl. ¶ 16. On the same day, Chase also assigned the

8

DOT to U.S. Bank, N.A., as the trustee. Ex. 5 to Compl.

9

II.

LEGAL STANDARD
“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a

10

United States District Court
Northern District of California

11

claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation

12

Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d

13

729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts

14

as true all well-pled factual allegations and construes them in the light most favorable to the

15

plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the

16

Court need not “accept as true allegations that contradict matters properly subject to judicial

17

notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or

18

unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)

19

(internal quotation marks and citations omitted). While a complaint need not contain detailed

20

factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to

21

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.

22

Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the

23

court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

24

III.

25
26

DISCUSSION
Before turning to the merits of the parties’ arguments, the Court addresses Defendants’

request for judicial notice.

27

A.

28

Defendants have requested judicial notice of six documents, attached to the request as

Judicial Notice

3

1

Exhibits A through F: (A) Purchase and Assumption Agreement between Federal Deposit

2

Insurance Corporation (“FDIC”) and JPMorgan Chase Bank, N.A. (“Chase”); (B) Excerpts from

3

the Pooling and Servicing Agreement (“PSA”) for WaMu Mortgage Pass-Through Certificates

4

Series 2006-AR9; (C) Excerpts from the Mortgage Loan Schedule included as part of the

5

Prospectus for WaMu Mortgage Pass-Through Certificates Series 2006-AR9; (D) Limited Power

6

of Attorney from U.S. Bank, N.A., as Trustee for WaMu Mortgage Pass-Through Certificates

7

Series 2006-AR9 Trust; (E) Substitution of Trustee executed by Chase appointing Quality Loan

8

Service Corporation; and (F) Notice of Trustee’s Sale. RJN, ECF 11.

9

Judicial notice is appropriate with respect to Exhibits A, B, and C because they are
printouts from a government website. See Cachil Dehe Band of Wintun Indians of the Colusa

11
United States District Court
Northern District of California

10

Indian Comm’ty v. Cal., 547 F.3d 962, 969 n.4 (9th Cir. 2008) (taking judicial notice of

12

information located on California Gambling Control Commission website). Judicial notice is also

13

appropriate with respect to Exhibits D, E, and F because they are documents publicly filed with

14

the Middlesex County, Middlesex North Registry of Deeds, and with the Santa Clara County

15

Recorder. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988) (court may take

16

judicial notice of matters of public record).

17

Thompson makes a number of objections to Exhibits B, C, and D. Thompson first objects

18

to Exhibits B and C as irrelevant because they do not concern her loan. E.g., Opp’n 10, ECF 18.

19

However, Thompson alleges in the Complaint that U.S. Bank, N.A. as trustee for WaMu

20

Mortgage Pass-Through Certificates Series 2006-AR9 Trust (the “Trust”) wrongly enforced a

21

contract against her property. Compl. ¶ 6. Other allegations relating to the assignments of deed of

22

trust also concern the Trust. Id. ¶¶ 8-13. As such, the Court overrules this objection to the

23

relevance of the documents as they concern ownership and rights of the Trust and the loans

24

backing the trust may also be relevant to the case here.

25

Thompson further objects to Exhibits B and C because they do not show her loan as

26

included in the assets backing the Trust. According to Thompson, the excerpt provided by

27

Defendants only shows a loan with an origination date of June 21, 2006, which is a different date

28

from when she signed the deed of trust on June 14, 2006. Opp’n 10-11. However, based on
4

1

exhibits attached by Thompson to her complaint, her loan number is *****7122, which

2

corresponds to the loan number included in the excerpt of the Mortgage Loan Schedule. Ex. 3 to

3

Compl. (“Assignment to Bank of Am.”); RJN, Ex. C. Not only is loan number ****7122 included

4

in the Mortgage Loan Schedule Based on the Trust’s prospectus downloaded from the Security

5

Exchange Commission, this loan also pertained to a property in Monte Sereno, with a principal

6

balance of 1,770,000, and an origination date of June 21, 2006.1 All the information is thus the

7

same as reflected in the terms of Thompson’s loan, numbered ****7122, confirmed by the

8

exhibits Thompson provided to the Court in support of her allegations in the complaint. Exs. 1

9

and 12 to Compl. Although the loan origination date is a few days after the date Thompson signed
the deed of trust, Thompson provides no reason why this loan is not the loan she obtained.

11
United States District Court
Northern District of California

10

Regardless, because this fact is disputed, the Court does not take judicial notice that the loan

12

shown in the excerpt provided by Defendants was indeed Thompson’s loan but only that such loan

13

exists in the Loan Schedule backing the Trust.

14

Thompson further objects to Exhibit D, arguing that the people who signed the document

15

had no authority to sign the document. Opp’n 11. The Court does not take judicial notice of the

16

disputed facts contained therein and makes no determination as to whether the signatories had

17

authority to sign the document. Rather, the Court takes judicial notice of the existence of this

18

document recorded in Middlesex North Registry of Deeds. E.g., Lee v. City of Los Angeles, 250

19

F.3d 668, 690 (9th Cir. 2001) (permitting a court to take judicial notice of another court’s opinion,

20

but not the truth of the facts recited therein).

21

A.

This Preemptive Suit Fails as a Matter of Law

22

Regardless of the cause of action Thompson is attempting to assert in the complaint, the

23

complaint fails as a matter of law because a preemptive suit to enjoin a foreclosure, such as the

24

one here, is not permitted. California courts generally do not permit preemptive suits to determine

25

the authority of entities initiating a non-judicial foreclosure because they “would result in the

26
27
28

1

Mortgage Loan Schedule for Trust,
https://www.sec.gov/Archives/edgar/data/1317069/000127727706000563/fwploantapewamu2006
_ar9.htm
5

1

impermissible interjection of the courts into a nonjudicial scheme enacted by the California

2

Legislature.” Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 814 (2016);

3

Lucioni v. Bank of Am., N.A., 3 Cal. App. 5th 150, 161 (2016) (holding that preemptive injunctive

4

relief is generally not available and that only post-foreclosure relief is available).

5

The plaintiff in Lucioni filed an action for injunctive relief from a foreclosure, alleging that
the “foreclosing lenders, lacked the authority to foreclose on the property because they were not

7

properly assigned an interest in the deed of trust.” Id. at 156-58 (citing Cal. Civ. Code §

8

2924(a)(6)). The court first held that “[a] private right of action to enjoin a nonjudicial trustee’s

9

sale is restricted to situations where a lender violates any one of nine statutory provisions,” most

10

of which relate to a lender’s duty to notify before recording a notice of default. Id. at 158. Then

11
United States District Court
Northern District of California

6

the court set forth section 2924(a)(6), which provides
No entity shall record or cause a notice of default to be recorded or
otherwise initiate the foreclosure process unless it is the holder of
the beneficial interest under the mortgage or deed of trust, the
original trustee or the substituted trustee under the deed of trust, or
the designated agent of the holder of the beneficial interest. No
agent of the holder of the beneficial interest under the mortgage or
deed of trust, original trustee or substituted trustee under the deed
of trust may record a notice of default or otherwise commence the
foreclosure process except when acting within the scope of
authority designated by the holder of the beneficial interest.

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

Cal. Civ. Code § 2924(a)(6). The court first noted that the California legislature did not provide
for injunctive relief for a violation of section 2924(a)(6). Id. It then concluded that this statute
does not impose a preforeclosure duty on foreclosing entities to demonstrate that they have a right
to foreclose. Id.
Here, although Thompson does not invoke California Civil Code section 2924(a)(6) in her
complaint, Lucioni is on point. Thompson still resides at 18285 Constitution Ave., Monte Sereno,
California, the real property whose title is referenced in the DOT in this case. Compl. ¶ 2. A
foreclosure thus has not occurred and Thompson is attempting to set aside a foreclosure by filing a
preemptive suit. Such a preemptive suit is not permitted under California law, with a few
exceptions pertaining to notice procedures. Thompson’s complaint, however, does not concern
notice procedures but rather is based on allegedly erroneous assignment of the DOT, which
6

1

mirrors the allegations of the plaintiff in Lucioni and squarely falls within the scope of California

2

Civil Code section 2924(a)(6). Accordingly, Thompson’s request for injunctive relief fails as a

3

matter of law on this basis.

4

B.

5

Thompson’s claim for injunctive relief also fails on a separate ground in that it is not a

Declaratory Relief Claim

6

cause of action. In support of her declaratory relief claim, the only cause of action in the

7

complaint, Thompson alleges that U.S. Bank N.A. erroneously enforces a contract against her

8

property. Compl. ¶ 6. In the motion to dismiss, Defendants argue that the claim for injunctive

9

relief is not a cause of action as a matter of law. Mot. 9, ECF 10. Thompson nevertheless

10

United States District Court
Northern District of California

11

requests an opportunity to restate her claims “to make her claims clear.” Opp’n 3.
“Injunctive relief is a remedy and not, in itself, a cause of action, and a cause of action

12

must exist before injunctive relief may be granted.” Rockridge Trust v. Wells Fargo, N.A., 985 F.

13

Supp. 2d 1110, 1167 (N.D. Cal. 2013) (citations omitted). Thompson reiterates throughout the

14

complaint and her opposition that the foreclosure was “mistaken and erroneous.” E.g., Compl. ¶

15

6. The Court thus will make reasonable allowances for Thompson as she is pro se and will

16

liberally construe her pleadings as an attempt to support a wrongful foreclosure cause of action.

17

McCabe v. Arave, 827 F.2d 634, 640 n.6 (9th Cir. 1987). While the asserted injunctive relief

18

cause of action is an improper cause of action, the Court will analyze below the allegations in the

19

complaint, as well as Thompson’s arguments in opposition, as if they were in support of a

20

wrongful foreclosure cause of action.

21

C.

22

Setting aside the prohibition against preemptive suits, Thompson’s claims still fail when

Wrongful Foreclosure

23

construed as a wrongful foreclosure cause of action. “[T]he elements of an equitable cause of

24

action to set aside a foreclosure sale are: (1) the trustee or mortgagee caused an illegal, fraudulent,

25

or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of

26

trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was

27

prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the

28

trustor or mortgagor tendered the amount of the secured indebtedness or was excused from
7

1

tendering.” Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 104 (2011).

2

i.

Chase’s Enforcement of the DOT was not Illegal or Fraudulent.

Defendants argue that the entire complaint fails because Chase possesses the right to

3
4

foreclose on Thompson’s property as the lawful successor-in-interest of WaMu’s assets. Mot. 6.

5

Specifically, Defendants contend that the P&A Agreement provides Chase all the servicing rights

6

to enforce the security interest, including the Note and the DOT. Id. at 6-7 (citing Marques v. JP

7

Morgan Chase Bank, No. 14-615, 2014 U.S. Dist. LEXIS 143596, at *17 (C.D. Cal. Oct. 7, 2014).

8

Thompson makes several arguments in support of her contention that the foreclosure

9

against her property was “mistaken and erroneous.” E.g., Compl. ¶ 6. First, Thompson argues
that Defendants have no right to enforce the DOT. While Thompson does not dispute that Chase

11
United States District Court
Northern District of California

10

acquired WaMu’s assets, Thompson insists that Chase does not hold an interest in her loan. Id. ¶

12

8; Opp’n 3. One reason proffered by Thompson is that WaMu sold her loan to a trust before

13

Chase acquired the assets. Opp’n 4, 12.
The Court finds that Defendants obtained the right to enforce the DOT when Chase

14
15

acquired WaMu’s assets and directed U.S. Bank, N.A. to act as a trustee.2 It is not disputed that

16

WaMu was the initial lender of Thompson’s loan, WaMu was taken into receivership by the

17

FDIC, and Chase acquired WaMu’s assets in 2008. The P&A Agreement provides that Chase

18

“hereby purchases . . . all right, title, and interest of the Receiver in and to all of the assets.” P&A

19

Agreement 9, § 3.1. As such, even assuming that Thompson’s Note was not sold to the Trust,

20

Chase would have obtained the Note pursuant to the P&A Agreement. E.g., Shkolnikov v.

21

JPMorgan Chase Bank, No. 12-03996-JCS, 2012 WL 6553988, at *14 (N.D. Cal. Dec. 14, 2012)

22

(assuming that the plaintiff’s loan was not part of the trust and finding that the P&A Agreement

23

gave Chase, the assuming bank, title to the loan itself, and not just the right to service). Numerous

24
25
26
27
28

2

Cal. Civ. Code § 2924b(b)(4) (“A ‘person authorized to record the notice of default or the notice
of sale’ shall include an agent for the mortgagee or beneficiary, an agent of the named trustee, any
person designated in an executed substitution of trustee, or an agent of that substituted trustee.”).
As such, even though U.S. Bank, N.A. is not the holder of right to service the loan, it does not
mean that its foreclosure on the property is improper as long as it is authorized by Chase. Ex. 5 to
Compl.
8

1

courts have recognized that the FDIC could validly transfer to Chase “all right, title, and interest of

2

the Receiver in and to all of the assets” of WAMU pursuant to a P&A Agreement, such as the one

3

here. See, e.g., Lomely v. JP Morgan Chase Bank, Nat. Ass’n, No. 12-01194-EJD, 2012 WL

4

4123403, at *4 (N.D. Cal. Sept. 17, 2012); Eng v. Dimon, No. 11-3173-MMC, 2012 WL 3659600,

5

at *2 (N.D. Cal. Aug. 24, 2012); Marques, 2014 U.S. Dist. LEXIS 143596, at *17 (citing cases).

6

As to Thompson’s contention that the Chase cannot own her Note because it was sold to

7

the Trust prior to Chase’s acquisition of WaMu’s assets, this contention is without merit.

8

Assuming that WaMu sold Thompson’s Note to the Trust, WaMu retained the right to service the

9

loan, including the right to foreclose on the property. PSA, 100, 108, §§ 3.01, 3.09. As such, the
right to service the loan remained with WaMu, until Chase purchased this right from the FDIC

11
United States District Court
Northern District of California

10

pursuant to the P&A Agreement.

12
13

ii.

California Law Does Not Require That an Assignment of a Deed of Trust be
Recorded.

Defendants further claim that the DOT assignments are irrelevant to the case here at least
14
because Thompson still owes a debt under her note and was not injured by the allegedly improper
15
assignment. Mot. 7-8. Moreover, according to Defendants, the DOT follows the promissory note
16

under California law, and the PSA provides that Thompson’s Note indorsed in blank is part of the

17
mortgages. Id. at 8-9. As such, Defendants conclude that regardless of the DOT assignments,
18

Chase is the rightful owner to foreclose on Thompson’s property. Id. at 9.

19
Thompson counters that the DOT was assigned to Bank of America and not to Defendant
20

U.S. Bank, N.A. Compl. ¶ 9; Opp’n 8. Moreover, Thompson alleges that the assignment

21
executed by Colleen Irby was fraudulent as Collee Irby had no authority to make that assignment.
22
23
24

Compl. ¶¶ 10-11; Opp’n 3-4, 12. According to Thompson, any other assignments made by Chase
are also meaningless and further prove that the prior assignments were invalid. Opp’n 5.
The allegedly erroneous assignments of the deeds of trust do not affect Chase’s right to

25
service the loan, including the right to foreclose. As a preliminary matter, Chase was not even
26
obligated to record an assignment of DOT in this case. Mot. 3 n.3, 7. California Civil Code
27

section 2932.5 provides that “[t]he power of sale may be exercised by the assignee if the

28
9

1

assignment is duly acknowledged and recorded.” However, California courts have held that

2

section 2932.5 does not apply to deeds of trust, in which the power of sale is granted to a third

3

party, the trustee. E.g., Calvo v. HSBC Bank USA, N.A., 199 Cal. App. 4th 118, 123 (2011);

4

Roque v. Suntrust Mortg., Inc., No. 09-00040-RMW, 2010 WL 546896, at *3 (N.D. Cal. Feb. 10,

5

2010) (holding that “Section 2932.5 applies . . . only to mortgages that give a power of sale to the

6

creditor, not to deeds of trust which grant a power of sale to the trustee”); Marques, 2014 U.S.

7

Dist. LEXIS 143596, at *18 (citing cases).

8
9

Rather, assignments of the DOT may be recorded in order to serve as constructive notice to
the public. Cal. Civ. Code § 2934 (“Any assignment of a mortgage and any assignment of the
beneficial interest under a deed of trust may be recorded, and from the time the same is filed for

11
United States District Court
Northern District of California

10

record operates as constructive notice of the contents thereof to all persons”). Although Chase had

12

recorded several assignments, one of which was erroneously assigned to Bank of America and

13

signed by Colleen Irby, who allegedly had no authority according to Thompson, this erroneous

14

assignment does not affect Chase’s right to foreclose on the property. As noted above, “[a] deed

15

of trust need not be recorded to perfect an assignee’s interest, but rather will operate as

16

constructive notice of the assignee’s interest from the time of recordation.” Wyman v. First Am.

17

Title Ins. Co., No. 16-07079-WHA, 2017 WL 512869, at *4 (N.D. Cal. Feb. 8, 2017); Cal. Civ.

18

Code §§ 2932.5, 2934.

19

Another reason an assignment is not necessary is that under California law, the ownership

20

of a debt secured by a mortgage carries with it the security, which is the DOT in this case. As

21

discussed above, Chase has already obtained the rights to service Thompson’s loan pursuant to the

22

P&A Agreement and the right to enforce the debt automatically carries with it the right to enforce

23

the DOT. Like Thompson here, the plaintiffs in Sohal v. Fed. Home Loan Mortg. Corp. argued

24

that the wrong entity foreclosed on their property. No. 11-01941-JSW, 2013 U.S. Dist. LEXIS

25

17024, at *8 (N.D. Cal. Feb. 6, 2013). It was also undisputed in Sohal that the interest in the

26

promissory note was transferred to a second bank. Id. at *9. Even though no assignment was

27

recorded, the Court found that an assignment was not necessary as the “deed of trust is ‘a mere

28

incident of the debt it secures and that an assignment of the debt carries with it the security’ and ‘is
10

1

inseparable from the debt.’” Id. at *10 (citing Domarad v. Fisher & Burke, Inc., 270 Cal. App. 2d

2

543, 553 (1969)). See also Marques, 2014 U.S. Dist. LEXIS 143596, at *17 (finding that a failure

3

to record an assignment did not affect JP Morgan’s right to “enforce the note and, by operation of

4

law, the deed of trust”); Wyman, 2017 WL 512869, at *5 (holding that “[a] mere mistake in

5

recording is fixable and hardly voids an assignment).

6

Accordingly, Chase, despite the allegedly erroneous recording, remains the valid holder of

7

the rights to enforce the DOT, and therefore, U.S. Bank, N.A., as the servicing agent, has the right

8

to foreclose on the underlying property.

9
10

United States District Court
Northern District of California

11

iii.

Whether Thompson was Prejudiced or Harmed; and Whether Thompson
Tendered the Amount of the Secured Indebtedness or Was Excused from
Tendering

Since the first element of the wrongful foreclosure cause of action is not met, the wrongful

12

foreclosure cause of action cannot stand. Nevertheless, the Court also finds the other two

13

elements deficient – prejudice or harm; and whether the amount of secured indebtedness was

14

tendered or excused from tendering. The prejudice or harm element is met only if a plaintiff

15

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

16

Albano v. Cal-W. Reconveyance Corp., No. 12-4018-KAW, 2013 WL 772665, at *4 (N.D. Cal.

17

Feb. 28, 2013) (citation omitted). Prejudice is not presumed from “mere irregularities” in the

18

process. Flores v. EMC Mortg. Co., 997 F. Supp. 2d 1088, 1110 (E.D. Cal. 2014). First,

19

foreclosure has yet to happen so there can be no prejudice or harm. E.g., Avila v. Wells Fargo

20

Bank, Nat’l Ass’n, No. 16-05904-WHA, 2016 WL 7425925, at *5 (N.D. Cal. Dec. 23, 2016).

21

Second, Thompson admits that her loan has been in default since January 2010 so a foreclosure is

22

expected to occur. Compl. ¶ 24; Opp’n 7. However, the complaint has pled no facts, and

23

Thompson has offered none at the hearing, indicating that the foreclosure sale would be averted

24

but for the alleged erroneous assignment of the DOT. As such, the complaint is deficient for not

25

stating cognizable prejudice or harm in support of a wrongful foreclosure cause of action.

26

As to the last element, claims in support of a wrongful foreclosure generally cannot go

27

forward unless the plaintiff has at least alleged a credible offer to tender indebtedness. Reynoso v.

28

Paul Fin., LLC, No. 09-3225-SC, 2009 WL 3833298, at *5 (N.D. Cal. Nov. 16, 2009). Thompson
11

1

argues in her opposition that she had once attempted “to escrow a payoff in exchange for the note”

2

but the complaint contains no allegation that Thompson is still making that offer to tender the

3

indebtedness. Opp’n 1-2. Ordinarily, the Court would consider allowing leave to amend the

4

complaint to allege facts set forth in Plaintiff’s brief. But here, curing this deficiency alone will

5

not save the case.

6

D.

7

As to Thompson’s demand to have her promissory note produced for examination, the

8

Court finds no allegations and no potential cause of action in support of this relief. Opp’n 10.

9

California is a non-judicial foreclosure state and does not require that the original note be

Thompson’s Other Arguments and Allegations

produced in order for the foreclosure proceedings to be valid. Lomely v. JP Morgan Chase Bank,

11
United States District Court
Northern District of California

10

Nat. Ass’n, No. 5:12-CV-01194-EJD, 2012 WL 4123403, at *4 (N.D. Cal. Sept. 17, 2012).

12

Thompson also describes a litany of bad bank practices and summarizes a number of

13

articles on mortgage fraud. Compl. ¶¶ 17-28; Ex. 9 to Compl. (Szymoniak Decl.). According to

14

Thompson, certain loans were never properly assigned to a trust despite having been sold to the

15

trust. Id. ¶ 19. Thompson then claims that banks would commit fraud by assigning the loans to

16

the trust post-closing. Id. ¶¶ 28-29. However, it is unclear how these arguments and allegations

17

could support a cause of action in this case. According to the complaint and the exhibits provided

18

by Thompson, the incidents recounted by Thompson pertained to Long Beach Mortgage Loan

19

Trust 2006-2, or GSAMP Trust 2006-HE3 Mortgage Pass-Through Certificates. Compl. ¶ 17;

20

Szymoniak Decl. ¶ 8. The Court fails to see how these trusts are relevant to the present case.

21

Moreover, the allegedly fraudulent practices recounted by Thompson concerned assignment of

22

mortgages to a securitized trust, but the thrust of Thompson’s argument pertains to assignment of

23

her deed of trust. As such, not only are the trusts implicated in the allegedly bad bank practices

24

irrelevant to this case, but assignment of mortgages to trusts is also inapposite to the issue of the

25

assignment of Thompson’s DOT.

26

E.

27

In deciding whether to grant leave to amend, the Court must consider the factors set forth

28

Leave to Amend

by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the
12

1

Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2009). A district

2

court ordinarily must grant leave to amend unless one or more of the Foman factors is present: (1)

3

undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by

4

amendment, (4) undue prejudice to the opposing party, and (5) futility of amendment. Eminence

5

Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the opposing party that carries

6

the greatest weight.” Id. However a strong showing with respect to one of the other factors may

7

warrant denial of leave to amend. Id.
Three of the factors – undue delay, repeated failure to cure deficiencies by amendments

8

previously allowed, and undue prejudice to the opposing party – are not applicable to the present

10

case because an amendment to Thompson’s initial complaint would come at an early procedural

11
United States District Court
Northern District of California

9

stage.

12

As to the factor relating to bad faith or dilatory motive, Defendants claim that Thompson

13

has engaged in a series of filings in state, federal, and bankruptcy courts since September 2015, in

14

an attempt to stall foreclosure. Mot. 1. Defendants assert that Thompson had filed a state court

15

case against Chase in September 2015, only to dismiss it after Chase’s demurrer was fully briefed.

16

Id. Within a week of dismissing the state court action, Defendants claim that Thompson then filed

17

the instant case with a theory of liability different from her prior state court complaint. Id.

18

Defendants further aver that Thompson filed a bankruptcy action in April 2016 to leverage an

19

automatic stay against a scheduled foreclosure sale, only to voluntarily dismiss her petition five

20

weeks later. Id. Moreover, it appears that Thompson’s property was listed as an asset in two

21

unrelated bankruptcy proceedings by third-party debtors. In re Richter, No. 16-bk-12276 (C.D.

22

Cal. filed Aug. 8. 2016); In re Ha, No. 16-bk-52728 (N.D. Cal. filed Sept. 21, 2016); Freed Decl.,

23

ECF 10-1. Thompson argues that it was proper for her to seek protections of the law and that

24

Defendants’ claims are hearsay and irrelevant. Opp’n 15-17. The Court is concerned that

25

Thompson’s litigation conduct as claimed by Defendants evinces bad faith and dilatory motive.

26

However, because Thompson disputes these claims, the Court does not make a determination on

27

whether to grant leave to amend on this basis.

28

The Court, however, finds that the last factor – futility of the amendment – to be
13

1

dispositive. “[A] proposed amendment is futile only if no set of facts can be proved under the

2

amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Miller

3

v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). The Ninth Circuit has alternatively

4

stated that the test of whether amendment would be futile is “identical to the one used when

5

considering the sufficiency of a pleading challenged under Rule 12(b)(6).” Id.; see Utterkar v.

6

Ebix, Inc., No. 14-02250-LHK, 2015 WL 5027986, at *8 (N.D. Cal. Aug. 25, 2015).

7

As discussed above, California law prohibits filing of a preemptive suit seeking relief from

8

foreclosure, with a few exceptions pertaining to notice procedures. However, those exceptions do

9

not apply to Thompson’s case. Even if Thompson were to be permitted to file a preemptive suit,
Thompson’s allegations do not support a wrongful foreclosure cause of action. Thompson’s

11
United States District Court
Northern District of California

10

theory relating to assignments of DOT is not sound and without a proper basis in statutes or case

12

law. Although Thompson could amend the complaint to add allegations relating to her offer to

13

tender the debt in support of the third element of a wrongful foreclosure cause of action, the Court

14

finds no set of facts that could overcome the deficiency of the other two elements – fraudulent or

15

illegal foreclosure and prejudice resulting from the alleged misconduct because no foreclosure has

16

occurred. Thompson has also provided no other facts or alternative legal theories other than her

17

theory of erroneous assignment of DOT. Since Thompson has given no indication of any factual

18

or legal basis to render her claims viable, the Court DISMISSES the complaint with prejudice and

19

without leave to amend.

20

IV.

21
22

ORDER
For the foregoing reasons, IT IS HEREBY ORDERED that the complaint is DISMISSED

without leave to amend.

23
24
25
26

Dated: March 7, 2017
______________________________________
BETH LABSON FREEMAN
United States District Judge

27
28
14