Zapata et al v. Wells Fargo Bank, N.A. et al, No. 3:2013cv04288 - Document 42 (N.D. Cal. 2013)
Court Description: ORDER GRANTING MOTION TO DISMISS by Judge William Alsup [granting 10 Motion to Dismiss]. (whasec, COURT STAFF) (Filed on 12/10/2013)
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Zapata et al v. Wells Fargo Bank, N.A. et al Doc. 42 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 CHRISTOPHER ZAPATA and ELAINE A. ZAPATA, No. C 13-04288 WHA Plaintiffs, 12 13 14 15 16 17 18 19 20 v. WELLS FARGO BANK, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; U.S. BANK, N.A., as trustee for the CSMC Armt 2006-3 Trust, ORDER GRANTING MOTION TO DISMISS Defendants. / INTRODUCTION In this foreclosure action, defendants move to dismiss the complaint for failure to state a claim. For the reasons stated below, the motion to dismiss is GRANTED. 21 STATEMENT 22 This action boils down to an attempt to avoid foreclosure by attacking the mortgage 23 securitization process. Plaintiffs Christopher and Elaine Zapata took out a promissory note 24 and deed of trust with Family Lending Services, Inc. (“FLS”). The deed of trust named S.P.S. 25 Affiliates as trustee and Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee 26 for the lender and as beneficiary. FLS subsequently securitized and sold the loan to the 27 Adjustable Rate Mortgage Trust 2006-3, Adjustable Rate Mortgage-Backed Pass-Through 28 Certificates Series 2006-3 (the “ARM Trust”). In October 2009, a notice of default and election Dockets.Justia.com 1 to sell under deed of trust was recorded. In November 2009, MERS assigned all beneficial 2 interest under the deed of trust to U.S. Bank, N.A. as trustee for the ARM Trust. Wells Fargo 3 Bank, N.A., services the loan as Attorney-in-Fact for U.S. Bank. In July 2010, a notice of 4 trustee’s sale was recorded. In August 2012, a Loan Modification Deed of Trust was issued. 5 In September 2012, the October 2009 notice of default and election to sell under deed of trust 6 was rescinded. In April 2013, a second and final notice of default and election to sell under deed 7 of trust was recorded. A trustee sale of the property in question was set for August 2013. It is 8 unclear whether this sale ever took place (Compl. ¶¶ 10–19). 9 Plaintiffs are represented by counsel and allege a host of violations. Defendants allegedly violated the terms of the deed of trust by executing an invalid and false notice of 11 For the Northern District of California United States District Court 10 default because they were not the true lender or trustee. Plaintiffs also allege that defendants 12 violated the pooling and service agreement for the ARM Trust by failing to record the 13 assignments. Wells Fargo allegedly failed to sign the Loan Modification Agreement or provide 14 plaintiffs with a copy Wells Fargo had signed. Defendants also allegedly recorded invalid 15 substitution of trustee, assignment of the deed of trust, and notice of default because of various 16 alleged recording errors and delays. Plaintiffs also allege that defendants intentionally confused 17 them (id. ¶¶ 23–24, 26, 28, 41–46, 50–56, 74–100). 18 Plaintiffs seek declaratory relief and claim breach of express agreements, breach of 19 implied agreements, slander of title, wrongful foreclosure, violation of California Civil Code 20 Section 2923.5, violation of California Civil Code Section 2923.55, violation of 18 U.S.C. 1962, 21 and violation of California Business and Professions Code Section 17200 of California’s Unfair 22 Competition Law. This order follows full briefing and oral argument. 23 ANALYSIS 24 To survive a motion to dismiss, a complaint must contain sufficient factual matter, 25 accepted as true, to state a claim for relief that is plausible on its face. Rule 12(b)(6); Ashcroft v. 26 Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when there are sufficient factual 27 allegations to draw a reasonable inference that defendants are liable for the misconduct alleged. 28 While a court “must take all of the factual allegations in the complaint as true,” it is “not bound 2 1 to accept as true a legal conclusion couched as a factual allegation.” Bell Atl. Corp. v. Twombly, 2 550 U.S. 544, 555 (2007). “[C]onclusory allegations of law and unwarranted inferences are 3 insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy 4 Co., 83 F.3d 1136, 1140 (9th Cir. 1996) (citation omitted). 5 As an initial matter, plaintiffs’ central underlying theory has been rejected by courts in 6 this district as well as the undersigned. Neither our court of appeals nor the California Supreme 7 Court has ruled on whether plaintiffs may challenge the mortgage securitization process, but the 8 undersigned has held, in agreement with persuasive authority from this district, that there is no 9 standing to challenge foreclosure based on a loan’s having been securitized. See Tall v. MERS, 11 For the Northern District of California United States District Court 10 No. C 12-05348 WHA (N.D. Cal. Dec. 21, 2012). Plaintiffs rely on Glaski v. Bank of America, N.A., 218 Cal.App.4th 1079 (2013), to argue 12 that they can challenge the securitization process. Glaski, however, is in the clear minority on 13 this issue. The Glaski decision relies on New York law to reach its conclusion. 218 Cal.App.4th 14 at 1096-97. Every court in this district that has evaluated Glaski has found it is unpersuasive and 15 not binding authority. See Subramani v. Wells Fargo Bank N.A., No. C 13-1605, 2013 WL 16 5913789, at *3 (N.D. Cal. Oct. 31, 2013) (Judge Samuel Conti); Dahnken v. Wells Fargo Bank, 17 N.A., No. C 13-2838, 2013 WL 5979356, at *2 (N.D. Cal. Nov. 8, 2013) (Judge Phyllis J. 18 Hamilton); Maxwell v. Deutsche Bank Nat’l Trust Co., No. C 13-3957, 2013 WL 6072109, 19 at *2 (N.D. Cal. Nov. 18, 2013) (Judge William H. Orrick Jr.); Apostol v. Citimortgage, Inc., 20 No. C 13-1983, 2013 WL 6140528, at 6 (N.D. Cal. Nov. 21, 2013) (Judge William H. Orrick 21 Jr.). Instead, courts in this district rely on the majority rule in Jenkins v. JP Morgan Chase Bank, 22 N.A., 216 Cal.App.4th 497 (2013). The Jenkins decision held that “[a]s an unrelated third party 23 to the alleged securitization, and any other subsequent transfers of the beneficial interest under 24 the promissory note, [a plaintiff] lacks standing to enforce any agreements, including the 25 investment trust's pooling and servicing agreement, relating to such transactions.” Id. at 515. 26 Until binding authority rules otherwise, the undersigned will follow the majority rule in Jenkins. 27 This order therefore finds that plaintiffs have no standing to base their claims for relief on the 28 securitization process or breaches of the Pooling and Service Agreement (“PSA”). 3 1 1. 2 Plaintiffs allege that three agreements were breached by defendants: the deed of trust, 3 the PSA, and the loan modification agreement (“LMA”). Allegations of all three breaches are 4 ultimately predicated on challenging the securitization process. 5 BREACH OF EXPRESS AGREEMENTS. Plaintiffs argue that defendants breached the deed of trust because defendants executed 6 “an invalid and false Notice of Default . . . when it was not in fact the true Lender or Trustee” 7 (Compl. ¶ 24). Plaintiffs rely on defendants’ alleged mishandling of the securitization process to 8 argue breach of the deed of trust. In the absence of an express contractual bar, plaintiffs may not 9 challenge the securitization process. Plaintiffs next argue that defendants breached the PSA by a late “Assignment of the 11 For the Northern District of California United States District Court 10 Beneficial Interest of the Deed of Trust” (Compl. ¶ 26). Plaintiffs have no standing to base a 12 claim on the PSA both because it is part of the securitization process and because they are not a 13 party to the PSA. 14 Plaintiffs finally argue that defendants breached the LMA because “the agreement that 15 was recorded was signed only by Plaintiffs and not by Wells Fargo” and because “Wells Fargo 16 was a stranger to Plaintiffs’ DOT with no rights to receive or demand payments pertaining 17 to Plaintiffs’ Note of DOT, invalidating the Loan Modification Agreement” (Compl. ¶ 28). 18 This theory is also predicated on plaintiffs’ challenge to the securitization process. Even if it 19 was not, neither allegation is sufficient to show that defendants breached the LMA, they simply 20 suggest that defendant Wells Fargo is not a party to the LMA. 21 22 Plaintiffs’ claim for breach of express agreements is therefore DISMISSED WITHOUT LEAVE TO AMEND. 23 2. BREACH OF IMPLIED AGREEMENTS. 24 Plaintiffs claims for breach of implied agreements are entirely predicated on defendants’ 25 alleged violations of the PSA. As already discussed, plaintiffs have no standing to base a claim 26 on the PSA because it is part of the securitization process and because they are not a party to the 27 PSA. Plaintiffs’ claim for breach of implied agreements is therefore DISMISSED WITHOUT 28 LEAVE TO AMEND. 4 1 3. SLANDER OF TITLE. 2 Slander of title is a tortious injury to property resulting from unprivileged, false, 3 malicious publication of disparaging statements regarding the title to property owned by 4 plaintiff, to plaintiff's damage. Southcott v. Pioneer Title Co., 203 Cal.App.2d 673, 676, 21 5 Cal.Rptr. 917 (1962). 6 Plaintiffs’ slander of title claim fails. Plaintiffs rely on violations of the PSA and errors 7 in the securitization process to show falsity. As already discussed, they are barred from basing 8 their claim on this theory. Plaintiffs are therefore unable to allege that defendants’ recording 9 was false. Plaintiffs’ slander of title claim is therefore DISMISSED WITHOUT LEAVE TO AMEND. 4. 11 For the Northern District of California United States District Court 10 WRONGFUL FORECLOSURE. A nonjudicial foreclosure sale is presumed to have been conducted regularly and fairly. 12 Nguyen v. Calhoun, 105 Cal.App.4th 428, 444, (2003) (“Our analysis proceeds on the 13 presumption of validity accorded the foreclosure sale”). To state a cause of action for wrongful 14 foreclosure, plaintiff must plead “(1) the trustee or mortgagee caused an illegal, fraudulent, or 15 willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of 16 trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was 17 prejudiced or harmed; and (3) in actions where the trustor or mortgagor challenges the sale, 18 the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from 19 tendering.” Lona v. Citibank, N .A., 202 Cal.App.4th 89, 104 (2011). 20 Plaintiffs again rely on violations of the PSA and errors in the securitization process 21 as a basis for this claim: “there is no true Trustee because the original Lender, FLS, sold the 22 beneficial interest to the REMIC in 2006” (Opp. 11). Plaintiffs are again barred from relying on 23 this theory as outlined above. Plaintiffs’ wrongful foreclosure claim is accordingly DISMISSED 24 WITHOUT LEAVE TO AMEND. 25 5. VIOLATION OF CALIFORNIA CIVIL CODE SECTION 2923.5. 26 Plaintiffs’ complaint alleges that they were never contacted prior to the notice of default 27 as required by Section 2923.5. Plaintiffs additionally allege that “there is no declaration by 28 Defendants contained in the Notice of Default that someone tried with due diligence to contact 5 1 the borrowers as required under Section 2923.5, and if there was it would be false because 2 although signed under oath, the signer had no personal knowledge of whether Plaintiffs were 3 ever contacted: an in fact Plaintiffs were never contacted” (Compl. ¶ 61). 4 Plaintiffs’ allegations are a formulaic recitation of the elements of their claim, which 5 is inadequate under Twombly. 550 U.S. at 555 (“Formulaic recitation of the elements of a cause 6 of action,” will not do). Even if plaintiffs’ allegations were more detailed, defendants filed a 7 declaration that complies with Section 2923.5 (RJN Exh. G at 6). 8 9 Plaintiffs also argue defendants violated the Fair Debt Collection Practices Act (Opp. 14). This argument is not found in the complaint. Plaintiffs’ claim under Section 2923.5 is therefore DISMISSED WITH LEAVE TO AMEND. 11 For the Northern District of California United States District Court 10 6. 12 Plaintiffs’ complaint fails to plead sufficient facts to state a claim under Section 2923.55. VIOLATION OF CALIFORNIA CIVIL CODE SECTION 2923.55. 13 The complaint does not describe what part of Section 2923.55 has been allegedly violated. 14 Instead, the complaint asks the Court to make a series of determinations tangentially related to 15 the securitization process. 16 In their opposition, plaintiffs make various arguments that defendants cannot comply 17 with Section 2923.55 (Opp. 13–14). These arguments are based on plaintiffs challenge to the 18 securitization process. 19 20 21 Plaintiffs also argue defendants violated the Fair Debt Collection Practices Act (Opp. 14). This argument is not found in the complaint. It is unclear whether plaintiffs could sufficiently plead a violation of Section 2923.55 and 22 simply rely on a challenge to the securitization process because they believe it to be a stronger 23 argument or whether they are unable to plead sufficient facts. Plaintiffs’ claim under Section 24 2923.55 is therefore DISMISSED WITH LEAVE TO AMEND. 25 7. VIOLATION OF 18 U.S.C. 1962. 26 The Racketeer Influenced and Corrupt Organizations Act (“RICO”) imposes civil 27 liability on persons and organizations engaged in a “pattern of racketeering activity.” 18 U.S.C. 28 1962(c). Racketeering activity is defined to include a number of generically-specified criminal 6 1 acts, as well as the commission of one of a number of listed predicate offenses. 18 U.S.C. 2 1961(1). The elements of a civil RICO claim are: “(1) conduct (2) of an enterprise (3) through a 3 pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing injury to the plaintiff's 4 ‘business or property.’” Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996). Plaintiffs must 5 additionally meet the heightened pleading standard under FRCP 9(b) to state a claim under 6 RICO. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir.1989). Plaintiffs 7 fail to do so. 8 9 First, plaintiffs allege that defendants brought “suit on behalf of entities which were not the real parties in interest,” actively concealed “the parties’ lack of standing in their standard complaints for foreclosure,” and drafted and filed “fraudulent affidavits and documents” (Compl. 11 For the Northern District of California United States District Court 10 ¶¶ 76). Plaintiffs also make various other conclusory allegations such as “[t]he conspirators set 12 about to confuse everyone as to who owned what” (Compl. ¶ 100). FRCP 9(b) requires that 13 plaintiffs must “state the time, place, and specific content of the false representations, as well 14 as the identities of the parties to the misrepresentation.” Edwards v. Marin Park, Inc., 356 F.3d 15 1058, 1065–66 (9th Cir. 2004). Rather than pleading predicate acts relevant to this action, 16 plaintiffs instead attempt to incorporate facts from other unrelated actions (Compl. ¶¶ 77–80). 17 In their opposition, plaintiffs state that they “could amend to allege a pattern of predicate acts,” 18 but then again attempt to incorporate facts from unrelated actions (Dkt. No. 21 at 16). 19 Second, plaintiffs RICO allegations directly rely on violations of the PSA and errors in 20 the securitization process as a basis for this claim. Many of plaintiffs’ allegations only vaguely 21 relate to the present action: 22 23 24 25 26 27 The conspirators intended to maintain an absolute stranglehold on the American economy for many decades, if not centuries, into the future . . . The point is that the conspirators adjusted the American lending system and the legal system governing it in a way designed to most effectively gratify their greed motivated crimes over the longest period of time. Through this revolution in the use of words and ephemeral concepts such as the “corporation,” the conspirators, including the present Defendants, have by and- large [sic] been successful in changing the paradigm so that the rights of individuals are In [sic] contradiction with the ownership proclamation contained on rules of the Pooling and Servicing Agreement . . . . 28 7 1 This order finds that plaintiffs fail to state a RICO claim. Plaintiffs’ claim for violation of 2 18 U.S.C. 1962 is therefore DISMISSED WITHOUT LEAVE TO AMEND. 3 8. VIOLATION OF THE CALIFORNIA BUSINESS AND PROFESSIONS CODE SECTION 17200. 4 Plaintiffs’ claims under California’s Unfair Competition Law are entirely predicated on 5 violations of the PSA and errors in the securitization process. The sole non-conclusory 6 allegation is that defendants “executed and recorded false Assignment(s) of Deed of Trust” 7 (Compl. ¶ 112). This was allegedly wrongful because “Plaintiffs’ loan was securitized and sold 8 before the Assignment(s) were executed, and thus they had no interest in the Deed of Trust to 9 transfer to U.S. Bank . . .” (ibid.). As thoroughly discussed above, plaintiffs are barred from 10 AMEND. For the Northern District of California United States District Court relying on this theory. Plaintiffs’ claim under Section 17200 is DISMISSED WITHOUT LEAVE TO 11 12 9. JUDICIAL NOTICE. 13 Defendants request judicial notice of their declaration in compliance with California 14 Civil Code Section 2923.5. Plaintiff opposes. A court may judicially notice a fact that is not 15 subject to reasonable dispute because it: “(1) is generally known within the trial court’s 16 territorial jurisdiction; or (2) can be accurately and readily determined from sources whose 17 accuracy cannot reasonably be questioned.” FRE 201(b). A court may take judicial notice of 18 court filings and other matters of public record. See Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 19 442 F.3d 741, 746 n.6 (9th Cir. 2006). Judicial notice of the existence and content of these 20 documents, but not the truth of any facts stated therein, is proper under Federal Rule of Evidence 21 201(b) because the authenticity of the documents is capable of accurate and ready determination 22 by resort to sources whose accuracy cannot reasonably be questioned. See Castillo v. Wachovia 23 Mortg., No. 12–0101, 2012 WL 1213296, at *1 n. 2 (N.D. Cal. Apr.11, 2012) (Judge Edward 24 Chen). 25 Accordingly, defendants’ request for judicial notice of Exhibit G is GRANTED. 26 This order does not cite to any other document in defendants’ request for judicial notice. 27 Judicial notice of defendants’ other exhibits is therefore DENIED AS MOOT. 28 8 1 2 CONCLUSION For the reasons stated above, the motion to dismiss is GRANTED. Plaintiffs may seek 3 leave to amend the complaint and will have until DECEMBER 20, 2013, to file a motion, noticed 4 on the normal 35-day calendar, for leave to amend their claims for relief under California Civil 5 Code Section 2923.5 and 2923.55 without relying on a challenge to the securitization process. 6 A proposed amended complaint must be appended to this motion. Plaintiffs should plead their 7 best case. The motion should clearly explain how the amended complaint cures the deficiencies 8 identified herein, and should include as an exhibit a redlined or highlighted version identifying 9 all changes. 11 For the Northern District of California United States District Court 10 IT IS SO ORDERED. 12 13 Dated: December 10, 2013. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9
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