-WVG Madrid v. Bank of America Corporation et al, No. 3:2011cv00077 - Document 37 (S.D. Cal. 2011)
Court Description: ORDER granting Defendant's 34 Motion to Dismiss Plaintiff's Second Amended Complaint with Prejudice. Signed by Judge Anthony J. Battaglia on 07/13/11. (cge)
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-WVG Madrid v. Bank of America Corporation et al Doc. 37 1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 SHARON J. MADRID, 13 Plaintiff, v. 14 15 16 17 BANK OF AMERICA CORPORATION doing business as BAC Home Loan Servicing, LP, MERS, DOES 1 through 50, inclusive, ) ) ) ) ) ) ) ) ) Case No.: 3:11-cv-0077 AJB (WVG) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S SECOND AMENDED COMPLAINT Defendants. 18 19 20 On April 26, the Court dismissed Plaintiff’s First Amended Complaint (Doc. No. 9) without 21 prejudice and granted Plaintiff leave to file a second amended complaint. (Doc. No. 27.) Plaintiff filed 22 her Second Amended Complaint (“SAC”) on May 16, 2011. (Doc. No. 28.) Pending is Defendants’ 23 Motion to Dismiss the SAC, filed June 3, 2011. (Doc. No. 34.) 24 25 FACTUAL BACKGROUND 26 27 On June 7, 2005, Plaintiff obtained a loan from Countrywide Home Loans, Inc. (“Countrywide”) 28 and executed a promissory note in the amount of $1,555,000. (SAC Ex. C). As security for the note, 1 3:11-cv-0077 Dockets.Justia.com 1 Plaintiff signed a Deed of Trust that was recorded on June 23, 2005. (SAC Ex. B). The Deed of Trust 2 identifies Countrywide as the lender, ReconTrust Company, N.A. (“Recon”) as the trustee, and 3 Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary and nominee for the 4 lender. (Id.). Bank of America Corporation doing business as BAC Home Loan Servicing, LP (“BAC”) 5 purchased Countrywide. (SAC ¶ 7). 6 Plaintiff subsequently defaulted on the loan. (SAC Ex. D). Recon, acting as an agent for 7 MERS, issued a Notice of Default beginning foreclosure proceedings against Plaintiff in September 8 2010. (Id.). Plaintiff received two letters from Recon, dated September 2, 2010, and September 23, 9 2010, verifying the indebtedness on the note and identifying Countrywide as the original creditor of the 10 11 underlying debt. (SAC ¶ 21; SAC Ex. C). On January 13, 2011, Plaintiff filed this action against BAC, MERS, and Does 1-50. Specifi- 12 cally, Plaintiff alleges that MERS served solely as the nominee for the lender and could not be the 13 beneficiary of the Deed of Trust. (SAC ¶¶ 9, 11). Plaintiff argues that MERS, while serving a limited 14 capacity as nominee on the Deed of Trust, had no authority to transfer any beneficial interest in the 15 Deed of Trust. (Id. at ¶¶ 11, 12). Plaintiff contends that the current beneficiary of the note is unknown 16 because there are “no recorded documents that transfer, convey, or assign any rights, title or interest as 17 beneficiary holding legal title to a different present beneficiary.” (Id. at ¶ 9). Thus, Plaintiff alleges that 18 Recon lacks the authority necessary to institute foreclosure proceedings on Plaintiff’s property. 19 Based on these allegations, the SAC contains the following four counts: Count One - Fraud and 20 Fraud in the Inducement against BAC and MERS; Count Two - Declaratory Relief against BAC; Count 21 Three - Negligent Misrepresentation against BAC and MERS; and Count Four - Fair Debt Collection 22 Practices Act (“FDCPA”), 15 U.S.C. § 1692 against BAC. 23 24 LEGAL STANDARD FOR MOTION TO DISMISS 25 26 A complaint must contain “a short and plain statement of the claim showing that the pleader is 27 entitled to relief.” Fed. R. Civ. P. 8(a). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal 28 Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. 2 3:11-cv-0077 1 P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual 2 allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences 3 from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337–38 (9th 4 Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, 5 rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. 6 v. Twombly, 550 U.S. 544, 570 (2007). A claim has “facial plausibility when the plaintiff pleads factual 7 content that allows the court to draw the reasonable inference that the defendant is liable for the 8 misconduct alleged.” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 9 550 U.S. at 556). 10 However, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires 11 more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not 12 do.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in 13 original). A court need not accept “legal conclusions” as true. Iqbal, 129 S.Ct. at 1949. In spite of the 14 deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume 15 that “the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the ... 16 laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State 17 Council of Carpenters, 459 U.S. 519, 526 (1983). “Where a complaint pleads facts that are ‘merely 18 consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of 19 entitlement to relief.’ “ Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557). 20 For a Rule 12(b)(6) motion, a court generally cannot consider material outside the complaint. See 21 Branch v. Tunnell, 14 F.3d 449, 453–54 (9th Cir.1994), overruled on other grounds by Galbraith v. 22 County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). A court may, however, consider exhibits 23 submitted with the complaint. Van Winkle v. Allstate Ins. Co., 290 F. Supp.2d 1158, 1162 n. 2 (C.D. Cal. 24 2003). A court may disregard allegations in the complaint if they are contradicted by facts established 25 by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 26 1987). 27 28 3 3:11-cv-0077 1 ANALYSIS 2 3 There are two primary differences between the SAC and the previously dismissed FAC. First, 4 the SAC does not include the negligence claim found in Count Three of the FAC. Second, the SAC 5 contains four new paragraphs, ¶¶ 8, 9, 11, and 12, in which Plaintiff alleges that there is no recorded 6 document conveying any beneficial interest in the Deed of Trust to BAC from Countrywide and thus 7 BAC cannot foreclose on the Deed of Trust through Recon. Beyond these two changes, the SAC does 8 not differ significantly from the FAC and the allegations in the four remaining causes of action remain 9 the same. 10 As explained in the Court’s prior order, California Civil Code section 2924 provides the 11 “comprehensive statutory framework established to govern nonjudicial foreclosure sales [and] is 12 intended to be exhaustive.” Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994); I.E. Assoc. v. Safeco 13 Title Ins. Co., 39 Cal. 3d 281 (1985). Under section 2924(a)(1), a “trustee, mortgagee, or beneficiary or 14 any of their authorized agents” may conduct the foreclosure process. The Deed of Trust names Recon 15 as the trustee and MERS as nominee for the lender and beneficiary. (SAC. Ex. C at 2). Pursuant to 16 section 2924(a)(1), both Recon and MERS have the ability to initiate the foreclosure process. Plaintiff’s 17 additions to the SAC relate to the propriety of BAC foreclosing on the property; however, the Notice of 18 Default clearly states that Recon acting as an agent for MERS is foreclosing on Plaintiff’s property. 19 (SAC Ex. D.) Plaintiff has not added any allegations to the SAC explaining why Recon acting as an 20 agent for MERS should be prohibited from foreclosing upon the property. 21 Similarly, Plaintiff has yet to provide the Court with any legal basis for the proposition that 22 MERS does not have the capacity to act as a beneficiary of the Deed of Trust. The SAC continues to 23 base its claims on MERS’ alleged inability to serve as a beneficiary despite the Court dispelling this 24 theory with regard to the FAC. As previously noted, Plaintiff agreed to MERS’ designation as nominee 25 and beneficiary with the power to foreclose when she executed the Deed of Trust. That document 26 clearly states that “Borrower understands and agrees that MERS holds only legal title to the interests 27 granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS 28 (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those 4 3:11-cv-0077 1 interests, including, but not limited to, the right to foreclose and sell the Property....” ( Id. at 3-4.). 2 Thus, pursuant to the Deed of Trust, MERS had authority to assign its beneficial interest to another 3 party. Castaneda v. Saxon Mortg. Servs., Inc., 687 F. Supp. 2d 1191, 1198 (E.D. Cal. 2009); Lane, 713 4 F. Supp. 2d at 1099 (“MERS has standing to foreclose as the nominee for the lender and beneficiary of 5 the Deed of Trust and may assign its beneficial interest to another party”). As discussed further below, 6 Plaintiff’s claims to the contrary are unsupported. 7 Inasmuch as the four causes of action in Plaintiff’s SAC are those set forth in the FAC, the 8 analysis set forth in the Court’s previous order dismissing the FAC remains applicable. Accordingly, 9 the following analysis is taken largely from the Court’s previous opinion. (Doc. No. 27.) 10 Count One alleges that BAC and MERS engaged in fraud by intentionally omitting the fact that 11 “MERS had no authority to convey or transfer its beneficial interest to any party because it lacked the 12 substantive rights and ... had no legal beneficial interest to begin with.” (SAC ¶ 30). Plaintiff claims 13 that “[t]hrough MERS’s invalid transfer of the Deed of Trust to BAC, a scheme was borne [sic] wherein 14 BAC, as the purported/beneficiary of the Note is now attempting to collect the debt and foreclose on the 15 Subject Property as though it has legal authority to do so.” (Id. at ¶ 28). As an initial matter, Plaintiff’s 16 allegations that BAC is foreclosing on the loan contradict the Notice of Default attached to the Amended 17 Complaint. (SAC Ex. D). The Notice of Default clearly states that Recon acting as an agent for MERS 18 is foreclosing on Plaintiff’s property. Both Recon as the trustee and MERS as the beneficiary under the 19 Deed of Trust have authority to foreclose following Plaintiff’s default by virtue of section 2924(a)(1). 20 Additionally, Plaintiff has not pled her fraud claim with particularity as required under Fed. R. Civ. P. 21 9(b). While Plaintiff argues that Defendants fraudulently failed to inform her of MERS’ capabilities, 22 Plaintiff has not offered any support for her claim that MERS could not legally serve as beneficiary 23 under the Deed of Trust or the specific nature of the alleged omissions by the Defendants. For these 24 reasons, Count One is dismissed for failure to state a claim upon which relief may be granted. 25 Count Three is based upon allegations nearly identical to those in Count One and, thus, fail for 26 the same reason. Count Three alleges that BAC and MERS made negligent misrepresentations and 27 omissions “causing Plaintiff to believe any transfers, sales or assignments of the Note would be made in 28 a legal manner consistent with prevailing state law.” (Id. at ¶ 47). Count Three alleges, in essence, that 5 3:11-cv-0077 1 BAC and MERS negligently failed to inform Plaintiff that MERS could not legally serve as beneficiary 2 on the Deed of Trust or make valid transfers of its interest under the Deed of Trust. Once again, 3 Plaintiff has not offered any support for her claim that MERS could not legally serve as beneficiary. 4 Pursuant to the Deed of Trust, Plaintiff authorized MERS to serve as nominee for the lender and as the 5 beneficiary. Thus, Count Three is dismissed. 6 Count Two requests declaratory relief because the “scheduled foreclosure and sale [of Plaintiff’s 7 property] will be wrongful and should be enjoined by virtue of the facts alleged” in the SAC. (Id. at ¶ 8 44). Plaintiff specifies in her prayer for relief that she seeks a declaration that “trustee had no right to 9 foreclose and conduct the trustee sale, and has no right to transfer title as a result of that sale because no 10 breach occurred by Plaintiff.” (SAC Prayer ¶ 1). As discussed above, a “trustee, mortgagee, or 11 beneficiary or any of their authorized agents” may conduct the foreclosure process. Inasmuch as Recon 12 had authority to foreclose as both either the trustee or as the beneficiary’s agent under section 13 2924(a)(1), Count Two is dismissed. 14 Count Four alleges that BAC violated the FDCPA “in that it should have informed Plaintiff that 15 it was the legal owner or had authority from the legal owner to collect and pursue payment on the debt 16 tied to the Note secured to the Deed of Trust.” (Id. at ¶ 51). The FDCPA prohibits certain unfair and 17 oppressive methods of collecting debt. 15 U.S.C. § 1692e. In order to be liable under the FDCPA, BAC 18 must fall under its definition of “debt collector.” 15 U.S.C. § 1692a(6). A “debt collector” under the 19 FDCPA is “any person who uses any instrumentality of interstate commerce or the mails in any business 20 the principal purpose of which is the collection of any debts, or who regularly collects or attempts to 21 collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Id. However, it 22 was Recon “acting as an agent for the Beneficiary” MERS that filed the Notice of Default under the 23 Deed of Trust. (SAC Ex. D at 2). Nothing in the SAC suggests that BAC had any communication with 24 Plaintiff in an attempt to collect on the mortgage debt. Accordingly, Count Four is dismissed for failure 25 to state a claim upon which relief may be granted. 26 27 28 6 3:11-cv-0077 1 CONCLUSION 2 3 Based on the foregoing, Defendants’ Motion to Dismiss the SAC is GRANTED. Plaintiff was 4 previously granted the opportunity to amend her complaint in order to remedy the deficiencies noted by 5 the Court in its previous order. Despite the changes made by Plaintiff, the SAC’s allegations are 6 insufficient under Rule 12(b)(6). Accordingly, it is ORDERED that Plaintiff’s claims be, and they 7 hereby are, DISMISSED WITH PREJUDICE, as any further amendment is futile at this point. 8 9 DATED: July 13, 2011 10 11 Hon. Anthony J. Battaglia U.S. District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 3:11-cv-0077
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