CLAUDIA WILKEN, District Judge.
Plaintiff Stephani Jackson
Defendants Wells Fargo (also sued as America's Servicing Company), HSBC (as trustee for Deutsche Alt-A Securities Mortgage Loan Trust Series 2007-1, Mortgage Pass-Through Certificates) and MERS (Wells Defendants) move to dismiss Plaintiff's complaint. Defendant DB filed a separate motion to dismiss.
The following summary is taken from the complaint and documents of which the Court takes judicial notice.
In March 2007, Plaintiff obtained two loans funded by Atlantic Savings of America in the principal amount of $556,000. This lawsuit concerns one of the loans, in the principal amount of $444,800. Defs.' Request for Judicial Notice (RFJN), Ex. A. The loan was secured by a deed of trust encumbering the real property located at 462-464 38th Street, Oakland, California. RFJN, Ex. B. The beneficiary of the deed of trust was MERS and Chicago Title Company was appointed as the trustee.
In December 2008, NDEx West, LLC, as agent for MERS, recorded a notice of default on Plaintiff's loan. RFJN, Ex. C.
In January 2009, MERS recorded an assignment of the deed of trust transferring its beneficial interests to HSBC, trustee for the holders of certificates issued by Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-1 (Deutsche Certificates). RFJN, Ex. D. Also in January 2009, NDEx West was recorded as replacing Chicago Title Company as the trustee. RFJN, Ex. E. A notice of trustee sale was recorded in March 2009, signed by "Randy Middleton."
In June 2009, Plaintiff entered into a loan modification agreement with Wells Fargo Bank. RFJN, Ex. G. In July 2009, the notice of default was rescinded by NDEx West. RFJN, Ex. F. The notice of rescission was signed by "Randy Middleton." RFJN, Ex. H. Plaintiff alleges "Randy Middleton" is a robo-signer. Compl. ¶ 8-9.
In July 2011, another assignment of the deed of trust was recorded, again documenting that MERS assigned its beneficial interests to HSBC. RFJN, Ex. H. Plaintiff alleges that the assignment of deed of trust either does not exist or was fabricated. Compl. ¶¶ 14, 46.
In April 2012, NDEx West, as agent for Wells Fargo Bank, recorded a notice of default on Plaintiff's modified loan. RFJN, Ex. I. Also in April 2012, HSBC substituted NDEx West as trustee under the deed of trust. RFJN, Ex. J. Between July 2012 and November 2013, NDEx West recorded three notices of trustee's sale. RFJN, Exs. K, L & M. There is no record of an actual foreclosure sale.
Plaintiff does not allege any facts regarding DB or Deutsche Bank Securities, nor does she bring any claims against them.
Plaintiff's complaint asserts six causes of action against all Defendants: (1) declaratory relief to determine the status of Defendants' claims; (2) a request to set aside the deed of trust; (3) violation of California Business and Professions Codes section 17200; (4) a request to void or cancel the trustee's deed upon sale; (5) an accounting; and (6) quiet title.
In addition to the relief she requests for each of her claims, Plaintiff asks for "compensatory, special and general damages in excess of $5,000,000, against each of the Defendants" as well as "punitive and exemplary damages in an amount to be determined by the Courts [sic] against all Defendants," costs of suit and attorney's fees. Compl. 14.
A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). The plaintiff must proffer "enough facts to state a claim to relief that is plausible on its face."
In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff.
When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile.
Defendants seek to dismiss Plaintiff's complaint in its entirety.
Plaintiff's first cause of action requests that the Court "declare the actual rights and obligations of the Parties and make a determination as to whether Defendant [sic] was the lawful successor in interest to fraudulent lien claim against Plaintiff is enforceable [sic] and whether it is secured by an [sic] right, title, or interest in Plaintiff's Property." Compl. ¶ 40. The Wells Defendants argue that "declaratory relief is not an independent cause of action, but only a remedy." Docket No. 13 at 6. They also argue that there is "no actual controversy to support declaratory relief."
Under the Declaratory Judgment Act (DJA), "in a case of actual controversy within its jurisdiction, upon the filing of an appropriate pleading, [any federal court] may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201;
Plaintiff's declaratory relief claim is based on the same facts alleged to support her other causes of action. This claim fails for the same reasons the other claims fail, as will be discussed below. Accordingly, the Court GRANTS Defendants' motions to dismiss this claim. Plaintiff is granted leave to amend to remedy the deficiencies noted in this as well as her other causes of action if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Plaintiff requests that the Court set aside the deed of trust that secures the property. Plaintiff appears to be referring not to the original deed of trust that secures the loan on her home, but to both the 2009 and 2011 assignments of the deed of trust which transfer the beneficial interests in the deed from MERS to HSBC.
For the reasons discussed below, the Court GRANTS Defendants' motions to dismiss this cause of action.
The Wells Defendants argue that Plaintiff lacks standing to assert this claim because she has failed to tender the undisputed obligation in full. Docket No. 13 at 3. Plaintiff alleges that she "has offered to and is ready, willing and able to unconditionally tender [her] obligation to whomever it is determined [she] lawfully owes [her] debt to." Compl. ¶ 33. As an alternative, Plaintiff argues that she is exempt from the tender requirement.
"As a general rule, a homeowner in default must first tender payment of the obligation in full to achieve standing to challenge nonjudicial foreclosure proceedings."
However, "[r]ecent opinions in this court . . . reflect a split in authority as to whether the tender rule should apply in situations where a sale is pending."
This Court finds that the tender rule is applicable when a plaintiff seeks to set aside a deed of trust or requests a quiet title. Plaintiff cannot claim exclusive rights to the property without first paying her obligation in full. Further, the Court finds that Plaintiff's offer must be a "valid and viable tender of payment of the indebtedness owing" in order to support her action to cancel a voidable sale under a deed of trust.
There are exceptions, however, to the tender requirement.
As an alternative to tendering her full obligation, Plaintiff seeks exemption from the tender rule under the fourth exception. In
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). "Therefore, in an action based on state law, while a district court will rely on state law to ascertain the elements of fraud that a party must plead, it will also follow Rule 9(b) in requiring that the circumstances of the fraud be pleaded with particularity."
Plaintiff does not plead with the required particularity that the document recording the assignment of the deed of trust is fraudulent. She does not allege any facts stating which Defendant did what to support her claim. Thus Plaintiff does not satisfy any of the requirements to be exempted from tender, nor does she allege a valid and viable tender of her obligation, in full, to support her claim to set aside the deed of trust.
Accordingly, the Court GRANTS the Wells Defendants' motion to dismiss this claim. Plaintiff is granted leave to amend to remedy the deficiencies noted above if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Even if Plaintiff's claim to set aside the deed of trust did not fail for lack of tender, the Wells Defendants further argue that Plaintiff is prohibited from bringing this claim because "she failed to comply with the presuit notice and opportunity to cure provision in the deed of trust." Docket No. 13 at 14-15. In
Section 20 of the deed of trust provides:
Plaintiff does not allege that she has complied with the provision as it pertains to her cause of action to set aside the deed of trust. This claim depends specifically on Plaintiff's allegations of irregularities and fabrication of mortgage documents. Nor has Plaintiff alleged that she is excused from complying with the provision. Accordingly, for this reason as well, the Court GRANTS the Wells Defendants' motion to dismiss Plaintiff's request to set aside the deed of trust. Plaintiff is granted leave to amend to remedy this deficiency. If Plaintiff wishes to pursue this claim in any amended complaint, she must first give Defendants notice of her claims within seven days of the date of this order. Defendants will then have twenty-one days to cure before these claims can be re-filed.
Plaintiff's request to set aside the deed of trust also fails to state a "legally cognizable claim and the grounds on which it rests."
In general, "California courts have refused to delay the non-judicial foreclosure process by allowing trustor-debtors to pursue preemptive judicial actions to challenge the right, power, and authority of a foreclosing `beneficiary' or beneficiary's `agent' to initiate and pursue foreclosure."
Plaintiff suggests three theories to support her claim that the foreclosure was not initiated by the correct party, rendering the initiation of foreclosure void. First, Plaintiff alleges that "there is no evidence in the Record to indicate that the Deed of Trust was ever transferred concurrently with the purported legal transfer of the Note, such that the Deed of Trust and Note has been irrevocably separated, thus making a nullity out of the purported security in a property." Compl. ¶ 23.
This theory is unpersuasive. "It is well established that when a note secured by a mortgage is transferred, `transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.' Thus, transfer of the note without the mortgage does not cause the mortgage to become null, nor the note to become unsecured; the mortgage automatically follows the note."
According to Plaintiff's second theory, the securitization of the note renders the note "no longer a Note." Compl. ¶ 21. Plaintiff claims that "once a loan has been securitized . . . it forever loses its security component (i.e. the Deed of Trust) and the right to foreclose through the Deed of Trust is lost forever." Compl. ¶ 22.
Defendants respond that the assertion that securitization renders a note unenforceable is incorrect. "The argument that parties lose interest in a loan when it is assigned to a trust pool . . . [has] been rejected by numerous district courts."
Like Plaintiff here, the plaintiff in
Plaintiff's third theory is that the 2011 assignment of the deed of trust in favor of HSBC as trustee for the Deutsche Certificates is fabricated. Compl. ¶ 10-14, Ex. A. Plaintiff alleges that if that assignment is fabricated, HSBC lacks the legal authority to foreclose on Plaintiff's property. Defendants respond that Plaintiff fails to provide any factual allegations as to the particulars of the alleged fabrication of this assignment.
As stated above, a plaintiff can pursue an action to delay the non-judicial foreclosure process if there is a "specific factual basis for alleging that the foreclosure was not initiated by the correct party."
Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action for the additional reason that it fails to state a claim. Plaintiff is granted leave to amend to remedy the deficiencies noted above if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Plaintiff alleges that Defendants engaged in "unfair, unlawful, and fraudulent business practices with respect to mortgage loan servicing." Compl. ¶ 58.
The California Unfair Competition Law (UCL), California Business and Professions Code section 17200
An unlawful business practice includes anything that can be called a business practice and that is forbidden by law.
Plaintiff claims Defendants' actions were unlawful and fraudulent according to California Penal Code section 532(f)(a)(4) ("A person commits mortgage fraud if, with the intent to defraud, the person does any of the following . . . Files or causes to be filed with the recorder of any county in connection with a mortgage loan transaction any document the person knows to contain a deliberate misstatement, misrepresentation, or omission") and California Civil Code section 1095 ("When an attorney in fact executes an instrument transferring an estate in real property, he must subscribe the name of his principal to it, and his own name as attorney in fact.").
As discussed above, Plaintiff has failed to allege, against any Defendant, facts sufficient to support any claim of a violation of a predicate law. Furthermore, as discussed above, Plaintiff has failed to plead, with particularity, her fraud allegations as required by Rule 9(b). Plaintiff, therefore, fails to allege sufficient facts to support an unlawful business practices claim.
Plaintiff alleges that Defendants' misconduct "gave Defendants an unfair competitive advantage over their competitors." Compl. ¶ 62. She also alleges that "as a direct and proximate result of the actions of Defendants . . . [she] has been injured in that a cloud has been placed upon title to [her] Property and Defendants, [sic] have failed to remove this cloud from [her] title."
The California Supreme Court has not established a definitive test to determine whether a business practice is unfair under the UCL.
Under one test, a consumer must allege a "violation or incipient violation of any statutory or regulatory provision, or any significant harm to competition."
Under the second test, the "unfair prong" requires a consumer to plead that (1) a defendant's conduct "is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers" and (2) "the utility of the defendant's conduct" is outweighed by "the gravity of the harm to the alleged victim."
The third test, which is based on the Federal Trade Commission's definition of unfair business practices, requires that, as a result of unfair conduct, "(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided."
In
"A fraudulent business practice is one in which members of the public are likely to be deceived."
Plaintiff's claims based on fraudulent business practices lack the particularity required by Rule 9(b). As discussed above, Plaintiff makes broad assertions unsupported by factual allegations. She does not allege any facts to support her claim that the assignment of the deed of trust was fabricated and she does not specify what role, if any, each Defendant played in the alleged fabrication and fraud. Therefore, Plaintiff fails to satisfy the requirements of Rule 9(b).
Because Plaintiff's claims under all three prongs fail, the Court GRANTS Defendants' motions to dismiss the UCL causes of action. Plaintiff is granted leave to amend to remedy the deficiencies noted above if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Plaintiff's fourth cause of action asks the Court to void or cancel the trustee's deed upon sale. The Court GRANTS Defendants' motions to dismiss this claim.
In order for the Court to void or cancel a trustee's deed upon sale, there must have been a foreclosure sale.
Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiff is granted leave to amend to remedy this deficiency if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Plaintiff requests an accounting for the payments she made to Defendants, alleging that, due to fraud, none of the money she paid was actually owed to Defendants. The Wells Defendants argue that "accounting is only a valid claim where the defendant owes the plaintiff money — not the other way around." Docket No. 13 at 13. DB argues that Plaintiff does not allege any facts to show that she paid DB any money.
"A cause of action seeking an accounting may be maintained when (1) a relationship exists between a plaintiff and defendant that requires an accounting, and (2) some balance is due to the plaintiff that can only be ascertained by an accounting."
Plaintiff has not alleged any facts that would warrant an accounting because there is no indication that there is a balance due to Plaintiff. Instead, Plaintiff "has offered to and is ready, willing, and able to unconditionally tender his [sic] obligation to whomever it is determined he [sic] lawfully owes his [sic] debt to." Compl. ¶ 32. Plaintiff does not dispute what she owes under the deed of trust; rather she purports to question to whom it is owed.
Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiff is granted leave to amend to remedy these deficiencies if she can do so truthfully and without contradicting the allegations in her prior pleadings.
Plaintiff requests that the Court make a "judicial declaration that title to the . . . Property is vested solely in Plaintiff[.]" Compl. ¶ 83. Defendants argue that Plaintiff's cause of action to quiet title fails for the same reasons her causes of action to set aside the deed of trust and void or cancel the deed of trust fail.
"The purpose of a quiet title action is to finally settle and determine, as between the parties, all conflicting claims to the property in controversy, and to decree to each such interest or estate therein as he may be entitled to."
Plaintiff seeks to remove all clouds from her title and requests a determination that she holds title to the property, free from all claims of Defendants, apparently including the original promissory note and deed of trust. Compl. ¶ 66. As discussed above with respect to the claim to set aside and the claim to void the sale, Plaintiff must tender her obligation in full to show that she has satisfied her debt, and she must provide pre-suit notice and opportunity to cure. Without tender and providing notice, Plaintiff has not stated a claim to quiet title.
Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiff is granted leave to amend to remedy this deficiency if she can do so truthfully and without contradicting the allegations in her prior pleadings.
For the reasons set forth above, the Court GRANTS Defendants' motions to dismiss (Dockets No. 13 and 23) and GRANTS Plaintiff leave to amend. In her amended complaint Plaintiff must state, within each cause of action, which Defendant she accuses and the alleged actions of that Defendant. Plaintiff may not, absent a foreclosure sale, renew her claim to void or cancel the trustee's deed upon sale. She must also satisfy the requirement of pre-suit notice and opportunity to cure. Likewise, Plaintiff may not include in an amended complaint her claims to set aside the deed of trust and quiet title without satisfying the requirements of pre-suit notice and opportunity to cure. If Plaintiff wishes to pursue these claims in any amended complaint, she must first give Defendants notice of her claims within seven days of the date of this order. Defendants will then have twenty-one days to cure before these claims can be re-filed. If Defendants do not cure, Plaintiff may, within seven days thereafter, file an amended complaint alleging notice and failure to cure and remedying the other deficiencies identified above. She may not add further claims or allegations not authorized by this order. In any event, Plaintiff must file any amended complaint within five weeks of the date of this order.
If Plaintiff files an amended complaint, Defendants shall respond to it within fourteen days after it is filed. If Defendants file a motion to dismiss, Plaintiff shall respond to the motion within fourteen days after it is filed. Plaintiff must file a brief that responds only to the arguments raised in Defendants' motion. If Plaintiff files an opposition that is inapplicable to this case or does not respond to Defendants' arguments, the Court will consider the motion to be unopposed and will grant it. Defendants' reply, if necessary, shall be due seven days thereafter. Any motion to dismiss will be decided on the papers.
IT IS SO ORDERED.
