Houck v. US Bank NA et al

Filing 55

MEMORANDUM & ORDER terminating 26 Letter Motion to Continue; denying as moot 9 Motion to Transfer Case; granting 11 Motion to Dismiss; denying as moot 13 Motion to Strike. The Court grants Defendants' unopposed request for judic ial notice with respect to Exhibits F through L, and it denies the request as to the other exhibits as moot. Defendants' motion to dismiss is granted because (1) Plaintiff's challenges to the validity of his mortgage are barred by res judicata, (2) Plaintiff suffered no injury by virtue of the assignments of his mortgage, and (3) Plaintiff does not, and cannot, allege that Defendants' are "debt collectors" subject to the FDCPA. Plaintiff's request for leave to amend is denied, see Opp. paragraph 49, because amendment would be futile and would cause unnecessary delay. See Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001); Dkt No. 21 (order from this Court stating that failure to cure the defects in a complaint in response to the motion to dismiss "may well constitute a waiver of Plaintiffs right" to file another complaint). In light of the Court's resolution of the motion to dismiss, Defendants' motions to t ransfer and strike are denied as moot. This resolves Docket Numbers 9, 11, 13, 17, 26, 39, and 43. The Clerk of the Court is directed to close the case. (As further set forth in this Memorandum & Order.) (Signed by Judge Alison J. Nathan on 9/30/2016) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

David I. Houck,

USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
•
DOC#:
DATE FILED:SEE 3 0 21J16

Plaintiff,
15-cv-10042 (AJN)

-vMEMORANDUM &
ORDER

US Bank NA et al.,
Defendants.

ALISON J. NATHAN, District Judge:
Plaintiff David Houck has brought suit against Wells Fargo Bank, N .A. ("Wells Fargo")
and US Bank as Trustee for Citigroup Mortgage Loan Trust 2007-ARS ("US Bank"),
challenging various actions taken by the defendants when handling Plaintiffs mmtgage loan.
Plaintiff previously sued Wells Fargo in state court, alleging very similar (and often identical)
claims and seeking the same relief. Plaintiff lost in state court, and he subsequently filed suit in
federal court.
Defendants' motions to dismiss, transfer, strike, and take judicial notice are now before
the Court. As explained below, the Court grants in part Defendants' unopposed motion to take
judicial notice. The Court also grants Defendants' motion to dismiss because, among other
things, Plaintiff brings claims barred by res judicata, and he cannot allege a cognizable injury.
The motions to transfer and strike are thus denied as moot.

I.

BACKGROUND
A.

Plaintiff's Mortgage & Subsequent Assignments

The following factual allegations are taken largely from Plaintiff's amended complaint,
but have been supplemented with several judicially noticeable documents. 1
On May 20, 2006, Plaintiff purchased a property at 545 Bellagio Terrace in Los Angeles,
California. Amend. Compl.

if 7 (Dkt No. 36).

Plaintiff acquired this property with a $2.7 million

loan originated by Defendant Wells Fargo, which was secured by a deed of trust on the property.

Id.; Def. Ex. A (Dkt No. 17-1 ). 2 Such an arrangement constitutes the equivalent of a mortgage in
California. Rajamin v. Deutsche Bank Nat'l Trust Co., 757 F.3d 79, 81 (2d Cir. 2014).
Plaintiff was unable to pay back this loan. According to Plaintiff, Wells Fargo "illegally,
deceptively and/or otherwise unjustly qualified Plaintiff for a loan which [Wells Fargo] knew or
should have known that Plaintiff could not qualify for or afford." Amend. Compl.

if 23.

Plaintiff

failed to make a March 1, 2012 payment, and the "Notice of Default" eventually sent to Plaintiff
stated that he owed $119,205.40 as of November 13, 2012. Ex. C. Foreclosure proceedings
were eventually instigated and appear to remain pending. See Amend. Compl. if 21; Ex. D.; Def.
Ex.Fat 51-52; Def. Ex. J; Mot. at 1 (Dkt No. 44).
Plaintiff's deed of trust was transferred several times. The deed itself contemplated this
occurrence, stating that the deed "can be sold one or more times without prior notice to
Borrower." Def. Ex. A at 11. On October 18, 2012, Wells Fargo assigned the deed of trust to
Defendant US Bank. Amend. Compl.

if 8; Ex. A.

One day later, on October 19, 2012, US Bank

substituted non-party Cal-Western Reconveyance Corporation ("Cal-Western") as the new

1

See infra Part III (discussing the documents of which the Court has taken judicial notice).
Citations to "Ex." refer to the documents attached to Plaintiffs amended complaint. See Dkt No. 36. Citations to
"Def. Ex." refer to the documents attached to Defendants' unopposed request for judicial notice. See Dkt No. 17.
2

2

trustee. Amend. Compl. ii 9; Ex. B. Plaintiff repeatedly alleges that Defendants never infonned
him of these transfers or assignments. Amend. Compl. iiii 8-9, 18-19, 38, 47-49, 70. According
to Plaintiff, he first learned about the assignments in October 2014, when he hired an
independent auditor to examine his mortgage. Amend. Compl. iiii 12, 17.

B.

Prior State Court Litigation

In March 2013, Plaintiff filed a lawsuit in California Superior Court against Wells Fargo
and Cal-Western. Amend. Compl.

ii 18; Def. Ex. F.

In that lawsuit, Plaintiff asserted that

Defendants had no "right, title, or interest in Plaintiff's note, mortgage, or deed of trust," and he
sought to prevent foreclosure on his property. Def. Ex. F.

ii 3.

Although Plaintiff brought a

number of causes of actions, his basic assertion was that Wells Fargo and Cal-Western were
foreclosed from asserting their rights under the deed of trust because they had taken a number of
illegal actions, including using "deception in inducing Plaintiff to enter into [the] loan and
mortgage," failing to negotiate in good faith a modification of the loan, and violating "numerous
consumer and home protection statutes." Def. Ex. F.

iiii 1, 42-46.

In support of his state court complaint, Plaintiff attached a number of documents. One
such document was the "Notice of Default" sent to Plaintiff on November 13, 2012. Def. Ex. F.
at 51-52; Def. Ex. I at 76. This document stated that, in order to avoid foreclosure, Plaintiff
needed to "contact" or "pay" "US BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR
CITIGROUP MOROTGAGE LOANTRUST INC .... C/O CAL-WESTERN
RECONVEYANCE CORPORATION." Def. Ex.Fat 51. The Notice of Default also stated that
Cal-Western was "either the original trustee, duly appointed substituted trustee, or acting as an
agent for the trustee or beneficiary" of Plaintiff's mortgage. Def. Ex. F. at 52; Def. Ex. I at 76.
Plaintiff attached this same "Notice of Default" as an exhibit to the amended complaint filed in

3

this Court. Amend. Compl. Ex. C (Dkt No. 36-3). Notwithstanding these documents identifying
US Bank and Cal-Western as parties with interest in his mortgage loan, Plaintiff claims that he
had no idea that US Bank and Cal-Western were involved with his mortgage. Amend. Compl. iii!
8-9, 18-19, 38, 47-49, 70.
Plaintiff lost in state court. Defendants successfully demurred Plaintiffs first, second,
and third amended complaints. Def. Ex. G; Def. Ex. H; Def. Ex. J; Def. Ex. K; see Swahn Grp.,

Inc. v. Segal, 108 Cal. Rptr. 3d 651, 661 (Cal. Ct. App. 2010) ("A motion to dismiss in federal
court is the equivalent of a demurrer in California."). The state court upheld the validity of
Plaintiffs mortgage loan and Wells Fargo's rights under the deed of trust. See Def. Ex. J; Def.
Ex. K. In doing so, the state court recognized that Plaintiff had "delinquent obligations" and had
been unable "to allege performance on his part of the underlying mortgage obligation." See Def.
Ex. J at 3. On June 13, 2014, the California Superior Court dismissed the action with prejudice
for failure to state a claim upon which relief could be granted. Def. Ex. J; Def. Ex. K.

C.

Current Lawsuit

On December 24, 2015, Plaintiff filed the present lawsuit against Wells Fargo and US
Bank. Dkt. No. 1. On January 20, 2016, Defendants filed a motion to dismiss, a motion to
transfer the case to the United States District Court for the Central District of California, and a
motion to strike certain portions of the complaint. Dkt Nos. 8, 11, 13. They also sought judicial
notice of several exhibits, most of which were documents filed in the 2013 state court litigation.
Dkt No. 17. In response to the motion to dismiss, Plaintiff filed a first amended complaint on
February 26, 2016. Dkt. No. 36.
Plaintiffs amended complaint asserts six causes of actions. Amend. Compl.

iii! 33-73.

Count I, Plaintiff seeks three declarations: (1) that neither defendant has "a valid property

4

In

interest in [his] Property,'' (2) that the assignments are "void" and thus that "all attempts to
foreclose by Defendants (and Cal Western) against the subject property are void," and (3) that
"Defendants failed to comply with the PSA and other trust documents." Amend. Compl. iii! 3336. Plaintiffs other causes of action are for constructive fraud (Count II), a violation of the
Truth in Lending Act (Count III), slander of title (Count IV), violations of the Fair Debt
Collection Practice Act ("FDCP A") (Count V), and breach of the covenant of good faith and fair
dealing (Count VI). Amend. Compl.

iii! 37-73.

Plaintiff seeks relief in the form of a declaration

that neither of the defendants "have an enforceable ... claim against [his] property," an
injunction preventing the foreclosure sale of his home, a return of all of the money that
Defendants have collected from Plaintiff under the mortgage loan agreement, and other damages.
Amend. Compl. at 15-17.
Defendants responded to the amended complaint with renewed motions to dismiss and
strike. Dkt. Nos. 39, 43. The motions to transfer and take judicial notice remained pending.
Dkt. No. 17, 37. The Court now resolves all four motions.

II.

LEGALSTANDARD
To survive a motion to dismiss, a complaint must plead "enough facts to state a claim to

relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). In
assessing a motion to dismiss, all allegations in the complaint are assumed to be true. Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). This tenet, however, does not apply "to legal conclusions." Id.
"Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice." Id. Regardless of the amount of factual detail provided in a
complaint, a court may grant a motion to dismiss "when the allegations in a complaint, however
true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558.

5

III.

REQUEST TO TAKE JUDICIAL NOTICE
Defendants have filed a motion to take judicial notice of several documents. Dkt No. 17.

Specifically, Defendants ask the Court to take judicial notice of the following twelve documents:
(1) Plaintiffs deed of trust (Def. Ex. A); (2) the assignment of the deed of trust from Wells Fargo
to US Bank (Def. Ex. B); (3) the substitution of Cal-Western as trustee (Def. Ex. C); (4) the
November 13, 2012 Notice of Default (Def. Ex. D); (5) a Notice of Trustee's Sale (Def. Ex. E);
(6) Plaintiffs initial state court complaint (Def. Ex. F); (7) a notice of the state court's demurrer
of Plaintiffs first amended complaint (Def. Ex. G); (8) the state court's demurrer of Plaintiffs
second amended complaint (Def. Ex. H); (9) Plaintiffs third amended complaint in state court
(Ex. I); (10) the state court's demurrer of Plaintiffs third amended complaint (Def. Ex. J); (11)
the state court's order dismissing Plaintiffs third amended complaint with prejudice (Def. Ex.
K); and (12) the state court order dismissing Plaintiffs appeal (Def. Ex. L). Defendants' request
for judicial notice is unopposed.
Defendants' request to take judicial notice of Exhibits B, C, D, and Eis denied as moot.
On a motion to dismiss, "[i]n addition to the allegations in the complaint itself, a court may
consider documents attached as exhibits, incorporated by reference, or relied upon by the
plaintiff in bringing suit, as well as any judicially noticeable matters." Ace Sec. Corp. Home

Equity Loan Tr, Series 2007-HE3 ex rel. HSBC Bank USA, Nat 'l Ass 'n v. DB Structured
Products, Inc, 5 F. Supp. 3d 543, 551 (S.D.N.Y. 2014) (citing Halebian v. Berv, 644 F.3d 122,
131 n.7 (2d Cir. 2011)); see also Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir.
2002). These four exhibits (the assignment of the deed of trust to US Bank, the assignment of
the deed of trust to Cal-Western, the 2012 Notice of Default, and the Notice of Trustee's Sale)
were attached to Plaintiffs amended complaint, and thus may be considered when analyzing the

6

motion to dismiss even without taking judicial notice. Compare Ex. A, with Def. Ex. B; Ex. B,

with Def. Ex. C; Ex. C, with Def. Ex. D; Ex. D, with Def. Ex. E; see Chambers, 282 F.3d at 152
(noting that, for purposes of analyzing a motion to dismiss, "the complaint is deemed to include
any written instrument attached to it as an exhibit" (citation omitted)).
Defendants' request to take judicial notice of Exhibit A, Plaintiffs deed of trust, is also
denied as moot. When analyzing a motion to dismiss, a court may consider "documents
incorporated in [the complaint] by reference." Chambers, 282 F.3d at 152 (citation omitted).
"Even where a document is not incorporated by reference, the court may nevertheless consider it
where the complaint relies heavily upon its terms and effect, which renders the document
integral to the complaint." Id. at 153 (citation and quotation marks omitted). Here, although
Plaintiff does not attach the deed of trust to his amended complaint, the allegations in the
amended complaint repeatedly refer to, and rely heavily on, the deed of trust. See, e.g., Amend.
Compl. iii! 7-9, 15-20, 22, 29-31, 36, 38-41, 52. Thus, the Court may consider the deed of trust
even without granting the request for judicial notice.
The Court grants Defendants' unopposed request to take judicial notice of Exhibits F
through L. As noted above, these are all documents filed during the prior state court litigation.
Courts are permitted to take judicial notice of state court documents, even on a motion to
dismiss. See Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc.,
369 F.3d 212, 217 (2d Cir. 2004) (noting that courts "may also look to public records, including
complaints filed in state court, in deciding a motion to dismiss"); Bey v. City ofNew York, No.
13-CV-9103 (AJN), 2015 WL 363903, at *1 & n.2 (S.D.N.Y. Jan. 28, 2015). This is especially
true when a court is tasked with deciding the preclusive effect of the prior proceedings. See

Jacobs v. Law Offices ofLeonard N Flamm, No. 04 Civ. 7607, 2005 WL 1844642, at *3

7

(S.D.N.Y. July 29, 2005) ("In cases where some ofth[e] factual allegations have been decided
otherwise in previous litigation, ... a court may take judicial notice of those proceedings and
find that plaintiffs are estopped from re-alleging those facts."). Because Defendants allege that
Plaintiff's lawsuit is barred by the principle ofres judicata, see Mot. at 12-15, the Court takes
judicial notice of these state court documents for purposes of analyzing this question.
In summary, the Court has considered all of the exhibits attached to Defendants'
unopposed request for judicial notice when deciding this motion to dismiss. The Court considers
Exhibits A through E, not because Defendants have asked for judicial notice of these documents,
but because they are considered part of the complaint for purposes of the motion to dismiss, as
they were either attached to or relied upon in the amended complaint. See Chambers, 282 F.3d
at 152-53. The Court considers Exhibits F through Lon the unopposed ground that the Court
may take judicial notice of such state court documents, especially for purposes of analyzing
claim and issue preclusion.

IV.

PLAINTIFF'S AMENDED COMPLAINT IS DISMISSED
Plaintiff has voluntarily dismissed Count III of his amended complaint, see Opp.

if 36,

which leaves five other counts pending. Plaintiff's remaining counts can be divided into three
different categories: (1) challenges to the validity of the mortgage itself, (2) challenges to
assignments of Plaintiff's mortgage, and (3) a claim under the FDCP A.
Counts I and VI fall within both the first and second categories, as these counts in part
challenge the underlying validity of Plaintiff's mortgage loan and in part challenge the
assignments of that loan. Amend. Compl. ilil 33-36, 67-73. Counts II and IV fall into the second
category, as they challenge the assignments of Plaintiff's deed of trust to US Bank and CalWestem. See Amend. Compl. ilil 33-60, 67-73. Finally, Count V falls into the third category and

8

is the only cause of action not directly challenging the mortgage or assignments. This count
alleges that the defendants violated the FDCPA. Amend. Compl. iii! 61-66.
For the reasons provided below, the Court dismisses all five counts. To the extent Counts
I and VI challenge validity of Plaintiffs mortgage, those counts are barred by res judicata under
California law. The Court dismisses the remainder of those two counts, along with Counts II and
IV, because Plaintiff did not suffer an injury by virtue of the assignments. The failure to allege
an injury means both that Plaintiff lacks standing to bring his amended complaint and that
Plaintiff has failed to state a claim for several of his causes of action. Finally, the FDCPA claim
(Count V) is dismissed because Defendants are not "debt collectors," and thus Plaintiff has failed
to state a claim upon which relief can be granted.

A.

Plaintiff's Challenges to the Underlying Validity of His Mortgage Loan Are
Barred by Res Judicata

Defendants contend that Plaintiffs lawsuit is barred by res judicata. Mot. at 12-15. The
Court agrees in part.
"The doctrine of res judicata precludes the relitigation of certain matters which have been
resolved in a prior proceeding under certain circumstances." Pitzen v. Superior Court, 16 Cal.
Rptr. 3d 628, 6.32 (Cal. Ct. App. 2004) (citation omitted); see also Conopco, Inc. v. Roll Int'l,
231 F.3d 82, 87 (2d Cir. 2000) ("To determine the effect of a state court judgment, federal
courts, including those sitting in diversity, are required to apply the preclusion law of the
rendering state."). 3 In California, the doctrine of res judicata "has two aspects[:] [i]t applies to
both a previously litigated cause of action, referred to as claim preclusion, and to an issue

3

The parties here agree that California law applies to determine the preclusive effect of the prior state court
litigation. See Mot. at 12-13; Opp. ii 21.

9

necessarily decided in a prior action, referred to as issue preclusion." 4 Pitzen, 16 Cal. Rptr. 3d at
63 2-63 3. Both claim and issue preclusion "have the 'dual purpose of protecting litigants from
the burden of relitigating an identical issue with the same party or his privy and of promoting
judicial economy by preventing needless litigation." Border Bus. Park, Inc. v. City ofSan

Diego, 49 Cal. Rptr. 3d 259, 279 (Cal. Ct. App. 2006). California requires three elements before
"applying the doctrine [of res judicata] to either an entire cause of action [claim preclusion] or
one or more issues [that] are the same [issue preclusion]: (1) A claim or issue raised in the
present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior
proceeding resulted in a final judgment on the merits; and (3) the party against whom the
doctrine is being asserted was a party or in privity with a party to the prior proceeding." Pitzen,
16 Cal. Rptr. 3d at 633; see also DKN Holdings LLC v. Faerber, 352 P.3d 378, 386 (Cal. 2015).
Plaintiff does not dispute that the last two elements parties" 5 -

are met in this case. See Opp.

ifi! 21-25.

"final judgment" and "same

He argues, however, that his federal

lawsuit does not involve the same cause of action or issues as his prior state court litigation.
According to Plaintiff, the state court litigation focused on the defendants' unlawfulness in
issuing and handling his mortgage loan, while the present lawsuit challenges "the void

4

In California courts, the term "res judicata" is sometimes used "to encompass both claim preclusion and issue
preclusion." Mycogen Cmp. v. Monsanto Co., 51P.3d297, 301 (Cal. 2002). In other cases, California courts use
the term "res judicata" to describe "claim preclusion," which has a "distinct meaning[]" from "collateral estoppel"
(or "issue preclusion"). Id. Here, the Court uses the term "res judicata" to refer to both claim and issue preclusion,
as both doctrines operate to in tandem in this case to bar Plaintiff's allegations.
5
Although US Bank was not a party to the prior lawsuit, res judicata nonetheless applies as to both Wells Fargo and
US Bank because the two entities are in privity with one another. See Mycogen Corp., 51 P.3d at 301 (noting that
res judicata applies "between the same parties or parties in privity with them"); see also Barnes v. Homeward
Residential, Inc., No. 13-3227 SC, 2013 WL 5217393, at *33 (N.D. Cal. Sept. 17, 2013) (finding privity between
the "former and current holders of the beneficial interest of the [deed of trust] securing the mortgage"); Planning &
Conservation League v. Castaic Lake Water Agency, 103 Cal. Rptr. 3d 124, 142 (Cal. Ct. App. 2009) (noting that
privity "refers to a mutual or successive relationship to the same rights of property" (quotation marks omitted)).

10

assignment of [the] Deed of Trust to [US Bank]." Opp. if 23. Because the two lawsuits focus on
"different wrongs," Plaintiff argues that res judicata does not apply. Id.
Plaintiff misrepresents the scope of his allegations in this federal lawsuit. Although
Plaintiff claims that this federal lawsuit does not repeat the same claims that he raised in state
court, see Opp. iii! 23-24, this is incorrect. Many of Plaintiff's factual allegations raise the same
issues that were raised before, and rejected by, the California Superior Court. For example, in
both state and federal court, Plaintiff alleged that Wells Fargo acted improperly in inducing him
to obtain a mortgage loan in the first place. Def. Ex. F if 1; Amend. Compl. if 23. Additionally,
Plaintiff argued in state court (as he does here) that Wells Fargo failed to modify his loan in good
faith. Def. Ex. F iii! 25-27, 34; Def. Ex. I.

iii! 27-43; Amended Compl. if 72.

Furthermore,

Plaintiff seeks the same relief as he did in state court, including a declaration that none of the
defendants have any right or interest in his mortgage loan and an injunction prohibiting the sale
of his home. Def. Ex. F.

if 3; id. at 26-27; Def. Ex. I at 43; Amended Compl. at 15-17.

Because

these are the exact same issues litigated before and rejected by the California court, these
allegations are barred by issue preclusion. See Proctor v. Vishay Intertechnology, Inc., 152 Cal.
Rptr. 3d 914, 926 (Cal. Ct. App. 2013) (noting that issue preclusion bars relitigation of the "the
same facts in different cases between the same parties" (citation omitted)).
Additionally, two of Plaintiff's causes of actions raise claims already rejected by the state
court. For example, one of the declarations Plaintiff seeks in Count I is a declaration that the
defendants "cannot prove that they have a valid interest in the Property." Amended Compl. if 34.
The California Superior Court, however, has already concluded that Wells Fargo has a valid
interest in Plaintiff's property. See Def. Ex. at J; Def. Ex. K. Additionally, in Count VI, Plaintiff
contends that the defendants breached the covenant of good faith and fair dealing for a variety of

11

reasons, including by "failing to perfonn loan servicing functions consistent with their
responsibilities to Plaintiff," failing to modify Plaintiffs loan in good faith, and "failing to
follow through on written, verbal, and implied promises." Amended Compl.

ii 72.

himself admits that he raised these claims during the prior litigation. See Opp.
Def. Ex. F iii! 1, 25-27, 34; Def. Ex. I.

iii! 27-43.

Plaintiff

ii 23; see also

These causes of action are thus barred by the

principle of claim preclusion. Burdette v. Carrier Corp., 71 Cal. Rptr. 3d 185, 190 (Cal. Ct.
App. 2008) ("Claim preclusion bars a second action upon the same claim against the same
parties litigated to a final judgment in a prior action.").
Overall, Plaintiff previously challenged the underlying validity of his loan, on the basis
that Wells Fargo acted unlawfully when issuing and handling Plaintiffs mortgage. The state
court rejected this challenge. Def. Ex. at J; Def. Ex. K. In light of the state court's final
judgment, any challenges to the validity of Plaintiffs mortgage (as distinct from the assignments
of those mortgages) are barred by res judicata. Additionally, Plaintiffs request for a declaration
that Wells Fargo has no valid interest in his property (one of the three declarations sought in
Count I) and Plaintiffs cause of action alleging a breach of the covenant of good faith and fair
dealing based on Wells Fargo's mishandling of Plaintiffs mortgage loan (Count VI) are also
barred by res judicata. 6
The Court, however, agrees with Plaintiff that res judicata does not bar his entire
amended complaint. "Res judicata bars ... only issues that were raised in the prior suit [and]
related issues that could have been raised." Villacres, 117 Cal. Rptr. 3d at 404. As Plaintiff

6

Counts I and Counts VI contain multiple allegations and, as mentioned previously, challenge both the underlying
validity of Plaintiffs mortgage and the assignments of that mortgage. See Amend. Comp I. iJiJ 33-36, 67-73. Only
the aspects of Counts I and VI challenging the validity of the mortgage loan itself are barred by res judicata. As
explained below, however, the Court dismisses the entirety of Counts I and VI because, to the extent Counts I and
VI not barred by res judicata, they are nonetheless barred because Plaintiff cannot show an injury.

12

points out in his opposition brief, his prior lawsuit challenged Wells Fargo's issuing and
handling of his mortgage loan, not the allegedly void assignments. Opp. if 23. And, assuming
that Plaintiffs allegations are true, which the Court must do at this stage of the litigation,
Plaintiff could not have challenged the assignments during the prior state court litigation. This is
because, according to Plaintiff, he did not know about the assignments until October 2014, after
the state court litigation had ended. Amend. Compl.

iii! 12, 17.

Because Plaintiff could not have

previously challenged the assignments, the Court rejects Defendants' argument that all of the
causes of actions in Plaintiffs amended complaint are barred by res judicata.

B.

Plaintiff Does Not Plausibly Allege that the Assignments of His Mortgage
Loan Caused an Injury

Although the Court rejects Defendants' argument that Plaintiffs entire amended
complaint is barred by res judicata, the Court agrees with the defendants that Counts I, II, IV,
and VI must nevertheless be dismissed because Plaintiff has failed to plausibly allege an injury.
Mot. at 8-12.
As previously mentioned, all four of these counts focus on the same alleged wrong: the
assignments of Plaintiffs mortgage loan, first from Wells Fargo to US Bank and then from US
Bank to Cal-Westem. In Counts I, IV, and VI, Plaintiff seeks relief on the ground that the
assignments are "void." Amend. Compl.

iii! 21, 34-35, 53, 72(h).

In Counts II and VI, Plaintiff

claims that Defendants are liable for failing to disclose the assignments. Amended Compl. iii!
38, 72(e).
As explained in greater detail below, these counts fail as a matter oflaw because Plaintiff
cannot allege an injury. In sum, even ifthe assignments of Plaintiffs mortgage were unlawful,
as Plaintiff maintains, Wells Fargo nonetheless maintained a valid interest in the mortgage loan.

13

Because Plaintiff was required to pay back his mortgage loan regardless of the assignments, he
was not harmed by the assignments.
1.

Plaintiff Must Allege an Injury

For two different reasons, in order for his amended complaint to survive the motion to
dismiss, Plaintiff must allege a cognizable injury. First, a plaintiff has standing to sue in federal
court only ifhe suffered an "injury in fact." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992); Baur v. Veneman, 352 F.3d 625, 631-32 (2d Cir. 2003). "To qualify as a constitutionally
sufficient injury-in-fact, the asserted injury must be concrete and particularized as well as actual
or imminent, not conjectural or hypothetical." Baur, 352 F.3d at 632 (citation marks omitted)
(quoting Lujan, 504 U.S. at 560). If a plaintiff does not plausibly allege that he suffered an
injury, then he does not have standing, and the Court lacks jurisdiction over the claim. Cacchillo
v. Insmed, Inc., 638 F.3d 401, 404 (2d Cir. 2011).
Second, several of Plaintiff's causes of action require an "injury." For example, to
prevail on a constructive fraud claim (Count II), a plaintiff must demonstrate an injury.
Schweizer v. Mulvehill, 93 F. Supp. 2d 376, 400 (S.D.N.Y. 2000) (noting that injury is an
element of constructive fraud); Prakashpalan v. Engstrom, Lipscomb and Lack, 167 Cal. Rptr.
3d 832, 854 (Cal. Ct. App. 2014) (same). Similarly, in order to demonstrate a breach of the
covenant of good faith and fair dealing (Count VI), a plaintiff must show that the defendant's
action "deprived the []party of the benefit of its bargain." Pearce v. Manhattan Ensemble
Theater, Inc., 528 F. Supp. 2d 175, 180-81(S.D.N.Y.2007).
In conclusion, unless Plaintiff demonstrates he suffered an injury as a result of
Defendants' alleged unlawful actions, the Court must dismiss the complaint for lack of subject
matter jurisdiction and for failure to state a claim upon which relief can be granted.

14

2.

Plaintiff Suffered No Injury by Virtue of the Assignments

The Court concludes that, in light of the Second Circuit Court of Appeals decision in

Rajamin, Plaintiff has failed to allege a cognizable injury. 757 F.3d 79. In that case, the Second
Circuit held that a plaintiff generally does not suffer an injury by virtue of an assignment of his
mortgage, even ifthat assignment was invalid or unlawful. Id. at 85-87. The Court reasoned
that, regardless of whether a mortgage was validly assigned, the mortgagor is still obligated to
repay someone, whether it be the original lender or the entity to which the mortgage was
assigned. Id. at 85-86.

Accordingly, the Second Circuit held that the assignment of a mortgage

generally causes no injury to the mortgagor, and therefore that such a person does not have
standing to challenge an assignment of his mortgage loan in federal court. Id; see also Tran v.

Bank ofN Y, No. 13 Civ. 580 (RPP), 2014 WL 1225575, at *4 n.7 (S.D.N.Y Mar. 24, 2014)
("[M]any federal courts, including several federal appellate courts, have held that a plaintiffborrower lacks standing to bring any claim that is based upon ... the assignment of the plaintiffs
mortgage loans." (collecting cases)). Relying on the same rationale, the Second Circuit also held
that a mortgagor does not have standing to challenge alleged violations of the Pooling Service
Agreement ("PSA"). Rajamin, 757 F.3d at 87; Tran, 2014 WL 1225575, at *4 n.7.
This same principle applies to this case. Plaintiff acknowledges that he took out the $2.7
million mortgage loan, that he could not afford the loan, and that he eventually defaulted.
Amended Compl. if 7, 23; Def. Ex. F if 23. Furthermore, as detailed above, the California
Superior Court already upheld the validity of the mortgage and Plaintiff's contractual obligation
to repay it, and Plaintiff is precluded from relitigating this issue or claim. Even if Plaintiff's
allegations fact -

that the defendants invalidly assigned his mortgage loan and then concealed that

are true, these allegations do not obviate Plaintiff's contractual obligation to repay his

15

mortgage. As another district court has explained "the question of who owns plaintiffs
Mortgage is irrelevant. ... [T]he mere fact there may be a dispute as to which entity has legal
ownership of the Mortgage does not obviate plaintiffs contractual obligation to repay the loans."
Ocampo v. JP Morgan Chase Bank, NA., 93 F. Supp. 3d 109, 116-17 (E.D.N.Y. 2015)
(quoting Pollak v. Bank ofAmerica, No. 12 CV 7726 (VB), 2013 WL 4799264, at *3
(S.D.N.Y. Aug. 27, 2013)). In short, Plaintiff suffered no injury because he was required to pay
back his mortgage regardless of whether his loan was assigned.
Plaintiff recognizes Rajamin's general rule that a mortgagor does not have standing to
challenge the assignments of his mortgage or violations of the PSA, see Opp. ii 13, but raises two
arguments as to why this general rule should not apply to this case. The Court finds neither
persuasive.
Plaintiff first contends he suffered an injury because Defendants' concealment of the
assignments caused him to "sue the wrong party" in state court. Opp. ii 24. According to
Plaintiff, he "intended to file the lawsuit against the owner and holder of the note and mortgage,"
so he should have sued US Bank. Opp. ii 22. Because he did not know about the assignments,
Plaintiff sued only Wells Fargo and Cal-Western in state court.
This argument suffers from two deficiencies. First, Plaintiff did not sue the wrong party.
According to Plaintiffs allegations, US Bank owned his mortgage for only one day: Wells Fargo
assigned the mortgage to US Bank on October 18, 2012, and US Bank substituted Cal-Western
as trustee the very next day. Amend. Compl. ii 8-9; Ex. A; Ex. B. Plaintiff did sue Cal-Western
(along with Wells Fargo) in the prior litigation, and therefore did sue the "real" owners of his
note and deed of trust. Def. Ex. F; Def. Ex. I.

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Second, even if Plaintiff had actually sued the "wrong party" in state court, he suffered
no injury. The California Superior Court rejected Plaintiffs claims on the ground that they had
no merit, as his mortgage was valid and Plaintiff had failed to perform his contractual
obligations. Def. Ex. at J; Def. Ex. K. The state court did not reject Plaintiff's claims because he
failed to sue the actual owner of the loan. See id. This reasoning demonstrates that the state
court would have demurred the complaint, even if Plaintiff had sued US Bank in addition to
Wells Fargo and Cal-Western. Because the outcome would have been the same if Plaintiff had
known about US Bank, the failure to disclose the assignment caused Plaintiff no harm.
Plaintiff's next argument as to why he suffered an injury by virtue of the assignments is
similarly unavailing. As mentioned earlier, in Rajamin the Second Circuit held that a mortgagor
generally lacks standing to challenge the assignment of his mortgage, reasoning that such an
assignment usually does not cause an injury to the mortgagor. 757 F.3d at 85-86. The Second
Circuit, however, suggested that there may be exceptions to this general rule. In concluding that
the plaintiffs in that particular case lacked standing, the Court noted that "there is no allegation
that plaintiffs have paid more than they owed or have been asked to do so." Id. at 85. Plaintiff
latches on to this passage from Rajamin, contending that he has standing because he is "facing
multiple entities claiming ownership of his note and deed of trust." Opp. if 14.
There are two problems with this argument. First, Plaintiff's allegations regarding the
"multiple claims" of ownership are too conclusory and hypothetical to sufficiently state a claim.
See Iqbal, 556 U.S. at 681 (noting that "conclusory" allegations are "not entitled to be assumed
true"). This is because Plaintiff does not allege that multiple entities have actually made a
demand of him or that Plaintiff has actually paid more than what was owed. Rather, he only
speculates that he might run into problems in the future because multiple entities could

17

theoretically claim ownership. See Amend. Compl. if 20. The Second Circuit has already held
that such conjecture is insufficient to state a plausible claim for relief. See Rajamin, 757 F.3d
at 85-86.
Second, Plaintiffs argument appears to misunderstand the role of the various parties
involved in his deed of trust. Under California law, multiple entities can foreclose on a property.

Calvo v. HSBC Bank USA, NA., 130 Cal. Rptr. 3d 815, 821 (Cal. Ct. App. 2011) (quoting Cal.
Civ. Code§ 2924(a)(l)) ("[A] 'trustee, mortgagee, or beneficiary, or any of their authorized
agents,' may initiate the foreclosure process."). Plaintiffs amended complaint demonstrates that
Wells Fargo is the lender (or the "beneficiary") and that US Bank and Cal-Western are
subsequent "trustees." See Ex. A; Ex. B; Ex. F. Consequently, Wells Fargo and US Bank and
Cal-Western could all lawfully foreclose on his property. Plaintiff is not facing "multiple
claims" of ownership, but rather being validly foreclosed upon by multiple permissible entities.
In conclusion, the Second Circuit has held that a plaintiff generally does not have
standing to challenge the assignment of his mortgage loan because such an assignment does not
cause an injury. Rajamin, 757 F.3d at 85-87. Although Plaintiff raises a number of arguments as
to why this general rule should not apply in his case, the Court finds none of the arguments
persuasive. Because Plaintiff does not plausibly state that he suffered an injury by the fact of the
assignments, the counts premised on the allegedly unlawful assignments (Counts I, II, IV, and
VI) are dismissed on standing grounds and for failure to state a claim.

C.

Defendants are Not "Debt Collectors" for Purposes of the FDCPA

Count V, a cause of action alleging "several violations of the Fair Debt Collection
Practice Act," is the only one of Plaintiffs claims not premised on the purportedly invalid

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assignments of his mortgage loan. See Amend. Compl. if 62. This count fails for an independent
reason.
The FDCP A prohibits debt collectors from engaging in abusive, deceptive, and unfair
practices in the collection of consumer debts. Jacobson v. Healthcare Financial Servs., Inc., 516
F.3d 85, 89 (2d Cir. 2008). In order to survive a motion to dismiss, Plaintiff must allege in his
complaint that the defendants are "debt collectors" within the meaning of the FDCP A. In re
Residential Capital, LLC, No. 12-12020 (MG), 2015 WL 4040506, at *15 (S.D.N.Y. June 30,
2015) ("To state a claim for violation of the FDCP A, a plaintiff must allege that the defendant is
a 'debt collector' collecting a 'debt."'); Capogrosso v. Troyetsky, No. 14-CV-00381 (KNF),
2015 WL 4393330, at *3 (S.D.N.Y. July 17, 2015) (same). Plaintiff makes no such allegation in
the complaint itself. See Amend. Compl. if 61-66. For this reason alone, the cause of action
should be dismissed.
Plaintiff likely fails to make this allegation because it is clear that Defendants are not
"debt collectors." The FDCPA defines "debt collector" as one who "collects or attempts to
collect ... debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6).
Crucially, the Act does not apply to "creditors," i.e. those "seeking to collect on debts owed to
themselves." Kapsis v. Am. Home Mortg. Servicing Inc., 923 F. Supp. 2d 430, 439 (E.D.N.Y.
2013) (quoting Muniz v. Bank ofAm., NA., 11 Civ. 8296(PAE), 2012 WL 2878120, at *3,
(S.D.N.Y. July 13, 2012)); see also 15 U.S.C. § 1692a(6)(A).
Wells Fargo is not a "debt collector." Plaintiff originated his mortgage loan with Wells
Fargo. Amend. Compl.

if 7.

"[B]ecause [Wells Fargo] was the very party to whom the debt was

due," Wells Fargo "was clearly not a debt collector under the FDCPA." Muniz, 2012 WL
2878120, at *3 (citation and quotation marks omitted).

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The Court also concludes that US Bank is not a "debt collector." When the right to
collect on a mortgage loan is transferred or assigned, the assignee is a "debt collector" within the
meaning of the FDCP A only if the loan was in default at the time of the transfer. Kapsis, 923 F.
Supp. 2d at 439; see also Ademiluyi v. PennyMac Mortg. Inv. Tr. Holdings L LLC, No. ELH-1200752, 2015 WL 2455811, at *10 (D. Md. May 22, 2015) ("Generally speaking, entities
servicing or collecting a debt they were assigned before default are considered 'creditors' under
the Act."); Pascal v. JPMorgan Chase Bank, Nat'l Ass'n, No. No. 09-CV-10082 (ER), 2013
WL 878588, at *4 (S.D.N.Y. Mar. 11, 2013) (same). The "critical" question for purposes of this
motion to dismiss, therefore, is whether the amended complaint's allegations establish that
Plaintiffs mortgage loan was "in default" at the moment of the assignment, or whether it was
"merely outstanding." Kapsis, 923 F.Supp.2d at 439; see also Alibrandi v. Fin. Outsourcing
Servs., Inc., 333 F.3d 82, 86 (2d Cir. 2003). Because Congress has failed to define the tenn
"default" for purposes of the FDCPA, see Alibrandi, 333 F.3d at 86, this determination "is to be
made by a court on a case-by-case basis," Kapsis, 923 F. Supp. 2d at 440.
Plaintiffs allegations and attached exhibits, which the Court may properly consider under
Chambers, 282 F .3d at 152, establish that his debt was not in default at the time of the
assignment. The assignment of Plaintiffs note and deed of trust from Wells Fargo to US Bank
occurred on October 18, 2012. Ex. A. Plaintiff fell behind on his loan payments before this
date, as he did not make his March 1, 2012 payment. Ex. C. However, the fact that Plaintiff
failed to make his payment on March 1, 2012 does not mean he was in default. In Alibrandi, the
Second Circuit Court of Appeals rejected the argument "that a debt goes into default
immediately after it becomes due," 333 F.3d at 84, instead holding that "[d]efault does not occur
until well after a debt becomes outstanding," id. at 87. Here, a "Notice of Default" was sent on

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November 13, 2012. Ex. C. Plaintiff has made no allegations suggesting that his debt went into
default before this date. See Roth v. CitiMortgage Inc., 756 F.3d 178, 183 (2d Cir. 2014)
(dismissing FDCP A claim on a motion to dismiss because "the amended complaint does not
allege that CitiMortgage acquired [plaintiff's] debt after it was in default and so fails to plausibly
allege that CitiMortgage qualifies as a debt collector under FDCP A"). For example, Plaintiff
does not point to any contractual or regulatory language suggesting an earlier default date, and
the Court has found no such language in the deed of trust. See Def. Ex. A; cf Kapsis, 923 F.
Supp. 2d at 442 (finding that plaintiff had plausibly alleged that his debt went into default
immediately, but only because the note had language suggesting that default was immediate).
Because Plaintiff's allegations establish that his debt went into default on the date of the "Notice
of Default" (November 13, 2012), Plaintiff's mortgage was not in default at the time of the
assignment (October 18, 2012), and therefore US Bank is not a "debt collector" subject to the
FDCPA.
Plaintiff's only argument in response to this conclusion is to urge the Court to adopt the
reasoning of Lohse v. Nationstar Mortg., No. 14-cv-00514-JCS, 2014 WL 5358966 (N.D. Cal.
2014). Opp.

iii! 39-42.

The Court, however, fails to see how Lohse is relevant to this case. The

question in this case is whether Defendants are "creditors" not subject to the FDCP A, a question
that turns on whether Plaintiff's mortgage was in default at the time of the assignment. In Lohse,
however, it was apparently uncontested that the plaintiffs' mortgages were in default. See 2014
WL 5358966, at *l. Furthermore, Lohse dealt with an entirely different legal question,
specifically, whether a defendant who initiated foreclosure proceedings could be a "debt
collector" for purposes of the FDCP A. In Lohse, the district court answered that question in the
negative, holding that a defendant constitutes a debt collector subject to the FDCP A only if the

21

defendant engaged in "an[ ] action beyond statutorily mandated actions for non-judicial
foreclosure." Id. at *8 (quoting Reyes-Aguilar v. Bank ofAmerica, 2014 WL 2153792, *14
(N.D. Cal. March 20, 2014)). Lohse has no bearing on this case.

V.

CONCLUSION
The Court grants Defendants' unopposed request for judicial notice with respect to

Exhibits F through L, and it denies the request as to the other exhibits as moot.
Defendants' motion to dismiss is granted because (1) Plaintiffs challenges to the validity
of his mortgage are barred by res judicata, (2) Plaintiff suffered no injury by virtue of the
assignments of his mortgage, and (3) Plaintiff does not, and cannot, allege that Defendants' are
"debt collectors" subject to the FDCPA. Plaintiffs request for leave to amend is denied, see
Opp. if 49, because amendment would be futile and would cause unnecessary delay. See
Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001); Dkt No. 21 (order from this

Court stating that failure to cure the defects in a complaint in response to the motion to dismiss
"may well constitute a waiver of Plaintiffs right" to file another complaint).
In light of the Court's resolution of the motion to dismiss, Defendants' motions to
transfer and strike are denied as moot. 7
This resolves Docket Numbers 9, 11, 13, 17, 26, 39, and 43.
The Clerk of the Court is directed to close the case.

7

In their motion to dismiss, Defendants concede that if the Court "dismiss[ es] the action on the merits," it would
"alleviat[ e] the need to transfer." Mot. at 1 n. l.

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SO ORDERED.

Dated:

September~ 2016
New York, New York

United States District Judge

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