Phillips v. Wells Fargo Bank, N. A. et al

Filing 32

ORDER granting with prejudice 23 Motion to Dismiss. Because the Court concludes that an amendment cannot cure the deficiencies in the First Amended Complaint, Plaintiffs causes of action for violations of TILA, quiet title and wrongful foreclosure are dismissed with prejudice. Signed by Judge Marilyn L. Huff on 11/06/2009. (All non-registered users served via U.S. Mail Service)(ag) (av1).

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -109cv1486 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA BRIAN PHILLIPS, vs. Plaintiff, CASE NO. 09-CV-1486-H (BLM) ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE WELLS FARGO BANK, N.A., as trustee for the registered holders of structured asset securities corporation mortgage pass-through certificates, series 2007-OSI; OCWEN LOAN SERVICING LLC, Defendants. Plaintiff filed his First Amended Complaint ("FAC") in this action on September 17, 2009. (Doc. No. 21.) On October 1, 2009, Defendants filed a motion to dismiss Plaintiff's Amended Complaint for failure to state a claim. (Doc. No. 23.) Under Local Civil Rule 7.1(e)(2), Plaintiff's opposition to the motion to dismiss was due on October 26, 2009. Plaintiff failed to file a timely opposition, or to ask for an extension of time to oppose the motion. Instead, on November 2, 2009, Plaintiff filed an ex parte motion for leave to file his response in opposition late. (Doc. No. 26.) On the same day, Plaintiff filed his response in opposition to defendants' motion to dismiss. (Doc. No. 27.) Defendants filed their reply in support of motion to dismiss on November 4, 2009. (Doc. No. 28.) The Court granted Plaintiff's ex parte motion for leave to file his opposition. (Doc. No. 31.) For the reasons 1 below, the Court GRANTS Defendants' motion to dismiss the FAC. 2 3 I. Plaintiff's Factual Allegations 4 Plaintiff alleges that he is the owner of property located at 7672 Mocking Bird Drive, Background 5 San Diego, CA ("the Property"). (FAC 12.) On or about March 2, 2007, Plaintiff entered 6 into a consumer mortgage refinance transaction with BNC Mortgage, Inc. ("BNC"), obtaining 7 a loan in the amount of $408,000 ("the Loan"). (FAC 18.) Plaintiff alleges that "a deed of 8 trust for the Loan" named T.D. Service Company as Trustee and Mortgage Electronic 9 Registration Systems, Inc. ("MERS") as beneficiary, and was notarized on February 27, 2007, 10 and recorded on April 2, 2007. (FAC 20.) Plaintiff alleges that at closing, BNC Mortgage, 11 Inc. failed to provide Plaintiff with "all material disclosures required by the Truth in Lending 12 Act ... including ... the correct identity of the creditor and two copies of Notice of Right to 13 cancel." (FAC 22.) Plaintiff alleges that "the current holder, or a previous holder, has 14 discharged the promissory Note by materially and fraudulently altering it, an/or canceling 15 and/or renouncing it. (FAC 25.) 16 Plaintiff alleges that he elected to exercise his three-day right to cancel the Loan by 17 mailing a notice of cancellation to BNC on March 6, 2007. (FAC 27.) BNC allegedly 18 informed Plaintiff that his cancellation was late because it was not given within three days, and 19 therefore ineffective. (Id.) Plaintiff alleges that he continued to pay off the Loan. (Id.) 20 Plaintiff alleges that, on January 25, 2008, and on April 15, 2008, Defendant Ocwen Loan 21 Servicing ("Ocwen") offered loan modification agreements, which Plaintiff accepted and 22 complied with. (FAC 28-30.) Plaintiff alleges that Defendant Ocwen repudiated the April 23 15, 2008 agreement "without cause," and insisted upon the January 25, 2008 agreement. (FAC 24 31.) Plaintiff alleges that despite Plaintiff's compliance with the April 15, 2008 agreement, 25 Ocwen "declared a default and initiated foreclosure." (Id.) 26 Plaintiff alleges that there was never a recorded assignment of deed of trust from MERS 27 to Wells Fargo, or, in the alternative, that the assignment was signed by an unauthorized party. 28 (FAC 32-33.) Plaintiff alleges that the recorded assignment of deed of trust was recorded -209cv1486 1 on August 8, 2009, after the sale. (FAC 34-7.) 2 Plaintiff alleges that on October 19, 2007, Alliance Title Company, Default Service 3 Center, filed a notice of default and election to sell the Property under the deed of trust alleging 4 that Plaintiff was in default for more than $16,000. (FAC 39.) Plaintiff alleges that the notice 5 was signed by an authorized signatory of "Alliance Title Company, a California Corporation 6 as agent for the beneficiary by: Title Court Services, Inc., agent." (FAC 40.) Plaintiff 7 alleges that Alliance Title Company, Default Service Center, was not the "trustee, mortgagee, 8 or beneficiary, or any of their authorized agents" as required by section 2924(1) of California 9 Civil Code. (FAC 42-1.) Plaintiff alleges that the notice of default was false, because 10 Plaintiff kept the agreement according to the modification. (FAC 42.) Plaintiff also alleges 11 that service of the Note was defective. (Id. 43.) 12 Plaintiff alleges that on March 17, 2008, Fidelity National Title recorded a notice of 13 trustee's sale for the Loan, scheduling a sale for April 1, 2008. (FAC 45.) Plaintiff alleges 14 that the notice was signed by an "`authorized signer' for "Financial Title Company, a 15 California Corporation as Trustee.'" (FAC 46.) Plaintiff further alleges that Financial Title 16 Company was not the "trustee, mortgagee, or beneficiary, or any of their authorized agents" 17 as required by section 2924(3) of California Civil Code. (FAC 48-3.) Plaintiff also alleges 18 that service of the Notice was defective. (FAC 48.) 19 Plaintiff states that the foreclosure sale was held, and the Property was purchased by 20 "Defendant." (FAC 49.) Plaintiff alleges that Wells Fargo and Ocwen "violated the notice 21 requirements of California Civil Code section 2924a, subsection (b), by making false 22 statements." (FAC 50.) Plaintiff alleges that the substitution of trustee's mailing affidavit, 23 indicating that notice requirements had been fulfilled, is false. (FAC 51-2.) Plaintiff also 24 alleges that Wells Fargo "is not and was not the holder of the Note, nor is it or was it in 25 possession of the Note properly endorsed to it, nor was it or is it otherwise entitled by law to 26 initiate foreclosure under the Deed of Trust." (FAC 51.) 27 Plaintiff alleges that on October 3, 2008, Defendant filed an unlawful detainer 28 complaint against Plaintiff in California state court. (FAC 63.) Plaintiff alleges that he -309cv1486 1 moved to vacate the unlawful detainer action for lack of subject matter jurisdiction, and that 2 his motion is pending. (FAC 64.) 3 II. Procedural History 4 On July 9, 2009, Plaintiff filed a complaint in this court against Wells Fargo and 5 Ocwen. (Doc. No. 1.) Plaintiff brought a cause of action to quiet title and for violations of 6 TILA against Wells Fargo. Plaintiff also brought a cause of action for wrongful foreclosure 7 against both Wells Fargo and Ocwen. Defendants moved to dismiss the complaint for failure 8 to state a claim. (Doc. No. 12.) On August 31, 2009, the Court granted Defendants' motion 9 and gave Plaintiff leave to file an amended complaint. (Doc. No. 16.) Plaintiff filed his FAC 10 on September 17, 2009. (Doc. No. 21.) Defendants move to dismiss the FAC for failure to 11 state a claim. (Doc. No. 23.) 12 III. Request for Judicial Notice 13 Defendants' motion to dismiss is accompanied by a request for judicial notice, in which 14 Defendants ask the Court to take judicial notice of several documents. (Doc. No. 23, Attach 15 7, Ex. 1-8.) In general, the scope of review on a motion to dismiss for failure to state a claim 16 is limited to "allegations contained in the pleadings, exhibits attached to the complaint, and 17 matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th 18 Cir. 2007). The Court may consider additional documents under the "incorporation by 19 reference" doctrine as long as "the plaintiff's claim depends on the contents of a document, the 20 defendant attaches the document to its motion to dismiss, and the parties do not dispute the 21 authenticity of the document, even though the plaintiff does not explicitly allege the contents 22 of that document in the complaint." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). 23 Defendants submit for judicial notice the Deed of Trust recorded in the San Diego 24 County Recorder's Office on April 2, 2007. The Deed is a public record, and is referenced in 25 the FAC. (See FAC 20.) Defendants also submit for judicial notice a copy of the Notice of 26 Default and Election to Sell, recorded on October 19, 2007 in the San Diego County 27 Recorder's Office. The Notice of default is also a public record, and is referenced in the FAC. 28 (See FAC 39.) Defendants submit a copy of the Assignment recorded in the San Diego -409cv1486 1 County Recorder's Office on August 8, 2008. The Assignment is a public record and is 2 referenced in the FAC. (See FAC 34-7.) Defendants submit a copy of the Substitution of 3 Trustee, recorded on March 17, 2008 in the San Diego County Recorder's Office. It is a public 4 record and is referenced in the FAC. (See FAC 51-2.) Defendants also submit a copy of the 5 Notice of Trustee Sale recorded on March 17, 2008 in the San Diego County Recorder's 6 Office. It is a public record and is referenced in the FAC. (See FAC 45.) Defendants submit 7 for judicial notice a copy of the Trustee's Deed Upon Sale which was recorded on August 8, 8 2008 in the San Diego County Recorder's Office. It is a public record and is referenced in the 9 FAC. (See FAC 59.) Defendants also seek judicial notice of a copy of the court docket, and 10 a copy of the Stipulation for Entry of Judgment for the Unlawful Detainer action against 11 Plaintiff in San Diego Superior Court initiated by Defendants. Plaintiff's FAC references the 12 unlawful detainer action, as well as Plaintiff's motion that is allegedly pending in that action. 13 (FAC 63-64.) Finally, Defendants seek judicial notice of a copy of the California Secretary 14 of State's office records regarding the status of Ocwen Loan Servicing LLC as an active and 15 registered foreign entity. The Court grants Defendants' request to the extent the offered 16 documents are properly subject to judicial notice. 17 18 I. Motion to Dismiss - Legal Standard 19 A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests Discussion 20 the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 21 732 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading 22 requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 23 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that 24 a pleading stating a claim for relief contain "a short and plain statement of the claim showing 25 that the pleader is entitled to relief." The function of this pleading requirement is to "`give the 26 defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell 27 Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 28 47 (1957)). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need -509cv1486 1 detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitlement 2 to relief' requires more than labels and conclusions, and a formulaic recitation of the elements 3 of a cause of action will not do." Id. A complaint does not "suffice if it tenders `naked 4 assertion[s]' devoid of `further factual enhancement.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 5 (2009) (quoting id. at 557). "Factual allegations must be enough to raise a right to relief above 6 the speculative level." Twombly, 550 U.S. at 555 (citing 5 C. Wright & A. Miller, Federal 7 Practice and Procedure 1216, pp. 23536 (3d ed. 2004)). "All allegations of material fact 8 are taken as true and construed in the light most favorable to plaintiff. However, conclusory 9 allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for 10 failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see 11 also Twombly, 550 U.S. at 555. 12 II. Plaintiff's General Allegations 13 The FAC makes conclusory allegations of fact that do not raise a right to relief above 14 the speculative level. First, Plaintiff alleges that there was never a recorded assignment of 15 Deed of Trust from MERS to Wells Fargo. (FAC 32.) The Court previously took notice of 16 the recorded assignment of Deed of Trust from MERS to Wells Fargo dated February 5, 2008. 17 (Doc. No. 6, Def's RJN Ex. 3.) Plaintiff argues that, in the alternative, the assignment was 18 signed by an unauthorized party, because "Scott Anderson was not and is not a Vice President 19 of MERS." (FAC 33.) Plaintiff does not support this allegation with facts, but instead states 20 that this allegation is "likely to have evidentiary support after a reasonable opportunity for 21 further investigation or discovery." (FAC at 1.) 22 The FAC alleges that an "unknown party" recorded a Substitution of Trustee 23 ("Substitution"), that the Substitution was not signed by "all of the beneficiaries under the trust 24 deed," and that no notice affidavit was attached to the Substitution. (FAC 35-38.) These 25 allegations are refuted by Exhibit 4 to Defendants' Request for Judicial Notice, which includes 26 a copy of the recorded Substitution, authorized by Wells Fargo, the beneficiary on the Deed 27 of Trust, and a notice of mailing affidavit. (Doc. No. 23, RJN Ex. 4.) The FAC makes similar 28 allegations about each step in the foreclosure, but does not provide any evidence to support his -609cv1486 1 claims. The FAC alleges that the Notice of Default and Notice of Trustee's Sale are defective. 2 (FAC 42, 45-48.) Plaintiff alleges that the Notice of Default did not identify the present 3 Trustee or Beneficiary. (FAC 39.) This allegation is refuted by Exhibit 2 to Defendants' 4 Request for Judicial Notice, which clearly identifies Wells Fargo as the present Beneficiary. 5 (Doc. No. 23, RJN Ex. 2.) Plaintiff also alleges that the Notice of Default was not signed by 6 an authorized individual. (FAC 41.) Plaintiff also alleges that the Trustee's Deed Upon Sale 7 is defective, because it was not signed by an authorized individual. (FAC 59-62.) Once 8 again, Plaintiff does not support these allegations with facts, but instead states that this 9 allegation is "likely to have evidentiary support after a reasonable opportunity for further 10 investigation or discovery." (FAC at 1.) In sum, Plaintiff's FAC fails to provide sufficient 11 factual support to satisfy the pleading requirements of Rule 8. 12 III. Quiet Title 13 Plaintiff's first cause of action is for quiet title. (FAC 72-79.) In an action to quiet 14 title, two conditions must be met. First, the complaint must be verified and include (1) a legal 15 description of the property and its street address or common designation, (2) the title of the 16 plaintiff and the basis of the title, (3) the adverse claims to the title of the plaintiff, (4) the date 17 as of which the determination is sought, and (5) a prayer for the determination of the title of 18 the plaintiff against the adverse claims. Cal. Code Civ. Pro. 761.020. Second, any 19 outstanding debts must be paid before the action to quiet title is commenced. Aguilar v. Bocci, 20 114 Cal. Rptr. 91, 92 (App. Ct. 1992). Plaintiff argues that he does not owe a debt to 21 Defendants, because the loan had been rescinded. (See FAC 42.) There is no evidence 22 supporting Plaintiff's allegation. In fact, Plaintiff's claim is contradicted by the unlawful 23 detainer state court proceeding which resulted in judgment for Wells Fargo because Plaintiff 24 did not pay a debt he owed. (See Doc. No. 23, Attach. 7, Ex. 8.) Furthermore, Plaintiff's 25 FAC does not allege tender or offer of tender of the amounts borrowed. Arnold Mgmt. Corp. 26 v. Eischen, 205 Cal. Rptr. 15 (Ct. App. 1984); Karlsen v. Am. Sav. & Loan Ass'n, 92 Cal. 27 Rptr. 851, 854 (Ct. App. 1971) ("A valid and viable tender of payment of the indebtedness 28 owing is essential to an action to cancel a voidable sale under a deed of trust."). -709cv1486 1 IV. TILA Violations 2 Plaintiff's TILA claim seeks "enforcement of the rescission" of the loan. (FAC 95.) 3 The remedy of rescission is available for three years under TILA, 15 U.S.C. 1635(f), but only 4 where a borrower is willing and able to tender the balance owed. See Yamamoto v. Bank of 5 N.Y., 329 F.3d 1167, 1173 (9th Cir.2003); LaGrone v. Johnson, 534 F.2d 1360, 1392 (9th 6 Cir.1974). In its previous Order dismissing Plaintiff's rescission claim, the Court stated that 7 if "Plaintiff continues to seek rescission under TILA, he must tender the owed amount or 8 provide proof of his ability to tender." (Doc. No. 16 at 5.) Instead of addressing his ability to 9 tender, Plaintiff argues that the Yamamoto decision is "not on point," and that it was overruled 10 by the Federal Reserve Board. (FAC 87-3.) Plaintiff's FAC instructs the Court to "fashion 11 an equitable solution that is within the parties' reach and which restores both parties to their 12 original positions." (FAC 87-2.) The Court has provided Plaintiff with an opportunity to 13 tender the owed amount, or to provide proof of his ability to tender. After careful reading of 14 the FAC, the Court concludes that Plaintiff did not, and cannot cure the deficiency in his 15 rescission claim. Accordingly, the Court dismisses the TILA rescission claim with prejudice. 16 V. Wrongful Foreclosure 17 To the extent Plaintiff's wrongful foreclosure relies on the alleged deficiencies in the 18 documents at various steps of the foreclosure, these allegations are refuted by Exhibits to 19 Defendants' Request for Judicial Notice discussed above. Plaintiff also alleges that the loan 20 was not in default, and therefore there was no right to foreclose. (FAC 88.) This allegation 21 is contradicted by the recorded Notice of Default, which documented a default amount of 22 $16,339.21 as of October 18, 2007. (Doc. No. 23, RJN Ex. 2 at 1.) Plaintiff alleges that the 23 loan was not in default because Plaintiff had cancelled the loan. (FAC 88.) However, the 24 FAC itself contradicts this allegation, because Plaintiff also states he "kept paying on the loan" 25 once a BNC representative informed Plaintiff that the loan would not be cancelled. (FAC 26 27.) 27 Additionally, under California law, the "tender rule" requires that as a precondition to 28 challenging a foreclosure sale, the borrower must make a valid and viable tender of payment -809cv1486 1 of the secured debt. Karlsen, 92 Cal. Rptr. 85; Arnolds Management Corp., 205 Cal. Rptr. 15. 2 As discussed bove, Plaintiff failed to allege that he has attempted to tender the amount owed. 3 Thus, Plaintiff fails to adequately allege his cause of action for wrongful foreclosure. 4 VI. Fraud Allegations 5 Plaintiff makes a number of fraud allegations in the FAC.1 Plaintiff alleges that 6 Defendants argue that "the current holder, or a previous holder, has discharged the promissory 7 Note by materially and fraudulently altering it, an/or canceling and/or renouncing it. (FAC 8 25.) Plaintiff also alleges that Ocwen made "continuous statements" that the foreclosure 9 process had stopped when it was still moving forward. (FAC 44.) 10 Under California law, the elements of fraud are "false representation, knowledge of its 11 falsity, intent to defraud, justifiable reliance, and damages." Moore v. Brewster, 96 F.3d 1240, 12 1245 (9th Cir.1996) (quotations omitted). Under Federal Rule of Civil Procedure 9, a Plaintiff 13 must plead fraud with particularity. "Rule 9(b)'s particularity requirement applies to state-law 14 causes of action." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). 15 "Averments of fraud must be accompanied by `the who, what, when, where, and how' of the 16 misconduct charged." Id. at 1106 (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th 17 Cir.1997)). "`[A] plaintiff must set forth more than the neutral facts necessary to identify the 18 transaction. The plaintiff must set forth what is false or misleading about a statement, and why 19 it is false.'" Id. at 1106 (quoting Decker v. GlenFed, Inc. (In re GlenFed, Inc. Sec. Litig.), 42 20 F.3d 1541, 1548 (9th Cir.1994)). "While statements of the time, place and nature of the 21 alleged fraudulent activities are sufficient, mere conclusory allegations of fraud" are not. 22 Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). Further, Rule 23 9(b) requires a plaintiff to attribute particular fraudulent statements or acts to individual 24 defendants. Id. To the extent Plaintiff may have alleged fraud, his claim cannot succeed. 25 Plaintiff fails to plead fraud with sufficient particularity. He also fails to allege that he relied 26 on the alleged fraudulent statements. 27 28 1 Plaintiff does not allege a separate cause of action for fraud. -909cv1486 1 2 Conclusion For the reasons stated above, the Court GRANTS Defendants' motion to dismiss. 3 Because the Court concludes that an amendment cannot cure the deficiencies in the FAC, 4 Plaintiff's causes of action for violations of TILA, quiet title and wrongful foreclosure are 5 dismissed with prejudice. 6 IT IS SO ORDERED. 7 DATED: November 6, 2009 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 09cv1486 ________________________________ MARILYN L. HUFF, District Judge UNITED STATES DISTRICT COURT

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