Mottale v. Kimball, Tirey, & St. John et al, No. 3:2013cv01160 - Document 27 (S.D. Cal. 2014)

Court Description: ORDER Granting 20 Defendants' Motion to Dismiss. Defendants' Motion to Dismiss is Granted Without Prejudice as to Plaintiffs' First, Second, and Fourth Causes of Action against Defendants Kimball, Tirey & St. John, Patricia Coyne, Christine Relph, and Alegria Real Estate Fund IV. Plaintiffs granted thirty (30) days Leave to Amend. The hearing date for this motion scheduled for January 17, 2014 isVacated. Signed by Judge Gonzalo P. Curiel on 1/10/2014. (srm)
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Mottale v. Kimball, Tirey, & St. John et al Doc. 27 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 MICHAEL MOTTALE and ERICA MOTTALE, vs. Plaintiffs, 13 14 15 16 CASE NO. 13cv1160-GPC-MMA ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS [Dkt. No. 20] KIMBALL TIREY & ST. JOHN, LLP et al., Defendants. 17 18 19 20 21 22 23 24 25 26 27 28 On November 8, 2013, Plaintiffs Michael and Erica Mottale (collectively, “Plaintiffs”) filed an amended complaint (“FAC”) in the above-captioned matter. (Dkt. No. 17.) On November 15, 2013, Defendants Kimball Tirey & St. John (“ KTSJ”), Alegria Real Estate Fund IV, LLC (“Alegria”), Patricia Coyne (“Coyne”), and Christine Relph (“Relph”) (collectively, “Defendants”) filed a request for judicial notice, (Dkt. No. 20-2), and a motion to dismiss Plaintiffs’ FAC pursuant to Federal Rule of Civil Procedure 12(b)(6), (Dkt. No. 20). The motion has been fully briefed. (Dkt. Nos. 22, 23.) Pursuant to L.Civ.R. 7.1(d)(1), the Court finds the matter suitable for adjudication without oral argument. For the reasons set out below, the Court GRANTS Defendants’ Motion to Dismiss without prejudice as to Plaintiffs’ First, Second, and Fourth Causes of Action. -1- 13cv1160-GPC-JMA Dockets.Justia.com 1 2 I. BACKGROUND On February 23, 2007, Plaintiffs completed a loan (“Loan”) for the property 3 located at 304 Crestview Drive, Bonita, California, 91902 (“Property”).1 (RJN, Ex. 2.) 4 The Loan was secured by a deed of trust (“Deed of Trust”) and a promissory note. (Dkt. 5 No. 17, “FAC.”) The deed of trust listed Mortgage Electronic Registration System 6 (“MERS”) as the beneficiary, Bear Stearns Residential Mortgage Corporation as the 7 lender, and First American Title Company as the trustee. (RJN, Ex. 2.) 8 On September 22, 2010, Recontrust Company, acting as agent of MERS, 9 executed a notice of default and election to sell under deed of trust (“Notice of 10 Default") which showed that Plaintiffs were in default on the Loan in the amount of 11 $52,467.01. (RJN, Ex. 3.) The Notice of Default informed Plaintiffs that the Property 12 “may be sold without any court action.” (Id.) 13 On September 24, 2010, MERS executed a substitution of trustee and assignment 14 of deed of trust (“Assignment”). (RJN, Ex. 7.) In the Assignment, MERS assigned the 15 Deed of Trust to BAC Home Loan Serving, LP as the new beneficiary and substituted 16 Recontrust Company as the new trustee. (Id.) 17 On August 3, 2011, Recontrust Company recorded a notice of trustee’s sale in 18 San Diego County, which showed that Plaintiffs were in default on the Loan in the 19 amount of $854,171.22. (RJN, Ex. 1.) The notice also stated that the Property may be 20 sold at a public auction. (Id.) On March 14, 2013, Recontrust executed a trustee’s deed 21 upon sale, in which Recontrust sold the Property to Alegria. (RJN, Ex. 4.) 22 On April 2, 2013, KTSJ, on behalf of Alegria, filed an unlawful detainer action 23 against Plaintiffs in California Superior Court. (RJN, Ex. 6.) Following the unlawful 24 detainer action, Plaintiffs were removed from the Property. (FAC ¶ 19.) 25 1 Unless otherwise noted, the factual background is taken from the FAC and 26 Defendant’s Request for Judicial Notice, (Dkt. No. 20-2, “RJN,” Exhibits 1-7). Defendants asks the Court to take judicial notice of exhibits 1-7. (Dkt. No. 9.) 27 Pursuant to Federal Rule of Evidence 201, the Court takes judicial notice of these documents because they are matters of public record or, alternatively, Plaintiff has cited 28 to them in the FAC. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). See also, infra, Section III. -2- 13cv1160-GPC-JMA 1 On May 15, 2013, Plaintiff Michael Mottale filed the initial complaint in the 2 present action against Defendants KTSJ, Alegria, Coyne, and Relph, seeking to quiet 3 title and alleging fraudulent and negligent misrepresentation, violations of the Fair 4 Debt Collection Practices Act (“FDCPA”) and violations of California Business & 5 Professional Code § 17200. (Dkt. No. 1, “Compl.”) On October 9, 2013, the Court 6 dismissed Plaintiff’s Complaint without prejudice. (Dkt. No. 16.) On November 8, 7 2013, Plaintiffs Erica Mottale and Michael Mottale filed the FAC against Defendants 8 KTSJ, Alegria, Coyne, and Relph, as well as against Defendant Bank of America. (Dkt. 9 No. 17, “FAC.”) Plaintiffs’ FAC retains the causes of action for fraudulent 10 misrepresentation and violations of the FDCPA from the initial Complaint and again 11 seeks to quiet title.2 (FAC.) Plaintiffs’ FAC adds one new cause of action alleging 12 violation of the California Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code 13 §§ 1788 et seq.3 (FAC ¶¶ 38-42.) 14 Plaintiffs’ FAC challenges the validity of a home foreclosure based on the 15 allegedly fraudulent assignment of Plaintiffs’ Loan. Plaintiffs allege securitization of 16 their Loan by unknown investors who misrepresented the identities of the actual 17 lenders. (FAC ¶¶ 10, 13.) Plaintiffs allege the assignment of Plaintiffs’ Deed of Trust 18 was invalid and fraudulent because the assignment documents were forged and 19 defective. (FAC ¶ 14.) Plaintiffs further allege the Notice of Default was void because 20 BAC had “no prior recorded interest” in the Property when Recontrust recorded the 21 Notice of Default. (FAC ¶ 16.) Plaintiffs allege the Assignment was also fraudulent 22 because Reconstrust had no legal right to record a substitution of trustee. (FAC ¶ 16.) 23 2 The Court notes that although both parties address Plaintiffs’ previous cause of 24 action, for violation of California Business & Professions Code § 17200, in their briefing on Defendants’ motion to dismiss the FAC, (Dkt. No. 20-1 at 12-14); (Dkt. No. 25 22 at 7); (Dkt. No. 23 at 11-13), Plaintiffs no longer assert a violation of section 17200 in the FAC. (Dkt. No. 17.) The parties’ arguments related to section 17200 are 26 therefore moot, and the Court declines to address them. 27 3 Defendants do not challenge Plaintiffs’ Cal. Civ. Code §§ 1788 et seq. Cause of Action. (See Dkt. No. 20-1) (addressing Plaintiffs’ claims for “(1) Fraud/Deceit; (2) 28 violation of the FDCPA . . . (3) Violation of California Business & Profession Code § 17200; (4) Negligent Misrepresentation and (5) Quiet Title”). -3- 13cv1160-GPC-JMA 1 Defendants KTSJ, Alegria, Coyne, and Relph4 move to dismiss Plaintiffs’ FAC 2 on several grounds. (Dkt. No. 20.) Defendants argue Plaintiffs lack standing to 3 challenge the foreclosure because Plaintiffs fail to show tender of the amount owed 4 under the Notice of Default. (Dkt. No. 20-1 at 5-7.) In addition, Defendants argue 5 Plaintiff’s securitization theory has been rejected by several courts in California. (Id. 6 at 7-8.) Defendants further contend that possession of the promissory note is not a pre7 requisite to commence Non-Judicial Foreclosure proceedings, (id. at 8-9), and that 8 Alegria should be insulated from Plaintiffs’ claims as a bona fide purchaser, (id. at 99 10). Defendants also challenge Plaintiffs’ FDCPA allegations for failure to state a 10 claim. (Id. at 10-12.) 11 12 II. STANDARD A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the 13 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 14 Dismissal is warranted under Rule12(b)(6) where the complaint lacks a cognizable 15 legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 16 1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule12(b)(6) authorizes 17 a court to dismiss a claim on the basis of a dispositive issue of law.”). Alternatively, 18 a complaint may be dismissed where it presents a cognizable legal theory yet fails to 19 plead essential facts under that theory. Robertson, 749 F.2d at 534. While a plaintiff 20 need not give “detailed factual allegations,” a plaintiff must plead sufficient facts that, 21 if true, “raise a right to relief above the speculative level.” Bell Atlantic Corp. v. 22 Twombly, 550 U.S. 544, 545 (2007). “To survive a motion to dismiss, a complaint 23 must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that 24 is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 25 Twombly, 550 U.S. at 547). A claim is facially plausible when the factual allegations 26 permit “the court to draw the reasonable inference that the defendant is liable for the 27 misconduct alleged.” Id. In other words, “the non-conclusory ‘factual content,’ and 28 4 Defendant Bank of America does not join this motion. -4- 13cv1160-GPC-JMA 1 reasonable inferences from that content, must be plausibly suggestive of a claim 2 entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th 3 Cir. 2009). “Determining whether a complaint states a plausible claim for relief will 4 . . . be a context-specific task that requires the reviewing court to draw on its judicial 5 experience and common sense.” Iqbal, 556 U.S. at 679. 6 In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the 7 truth of all factual allegations and must construe all inferences from them in the light 8 most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th 9 Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal 10 conclusions, however, need not be taken as true merely because they are cast in the 11 form of factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); 12 W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a 13 motion to dismiss, the court may consider the facts alleged in the complaint, documents 14 attached to the complaint, documents relied upon but not attached to the complaint 15 when authenticity is not contested, and matters of which the court takes judicial notice. 16 Lee v. Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). 17 III. DISCUSSION 18 A. Judicial Notice 19 Defendants seeks judicial notice of seven documents: (1) a notice of trustee’s 20 sale dated August 3,2011, recorded in the San Diego Recorder’s Office identified as 21 document number 2011-0394501; (2) a deed of trust recorded on 13 February 28, 2007 22 in the San Diego County Recorder’s Office as document number 2007-0136837; (3) 23 a notice of default and election to sell under deed of trust recorded on September 22, 24 2010 in the San Diego County Recorder’s Office as document number 2010-0502100; 25 (4) a trustee’s deed upon sale recorded on March 20, 2013 in the San Diego County 26 Recorder’s Office as document number 2013-0178924; (5) a notice of trustee’s sale 27 recorded on January 11, 2013 in the San Diego County Recorder’s Office as document 28 number 2013-0022014; (6) a California Superior Court complaint identified as Alegria -5- 13cv1160-GPC-JMA 1 Real Estate Fund IV, LLC v. Mottale, et al., case number 37-2013-00042284; and (7) 2 a substitution of trustee and assignment of deed of trust dated September 24, 2010 and 3 recorded on September 29, 2010 in the San Diego County Recorder’s Office as 4 document number 2010- 0517550. (Dkt. No. 20-2.) 5 Although the court generally may not consider material outside the pleadings 6 when resolving a motion to dismiss for failure to state a claim, the court may consider 7 matters that are properly the subject of judicial notice under Federal Rule of Evidence 8 201(b). Fed. R. Evid. 201(b); see also Lee v. City of Los Angeles, 250 F.3d 668, 689 9 (9th Cir. 2001) (noting that the court may take judicial notice of undisputed matters of 10 public record), overruled on other grounds by Galbraith v. County of Santa Clara, 307 11 F.3d 1119, 1125-26 (9th Cir. 2002). Courts have routinely taken judicial notice of 12 records filed with the county recorder as well as pleadings filed with the state court. 13 See e.g., Reyna Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n. 6 (9th 14 Cir.2006); Liebelt v. Quality Loan Serv. Corp., 2011 WL 741056, at *6 n. 2 (N.D. 15 Cal.2011); Reynolds v. Applegate, 2011 WL 560757, at *1 n. 2 (N.D. Cal.2011). In 16 taking judicial notice of documents pursuant to Rule 201(b), the court may take notice 17 of the existence of the documents but not the truth of the matters asserted therein. See 18 In re Bare Escentuals, Inc. Securities Litigation, 745 F. Supp. 2d 1052, 1067 (N.D. Cal. 19 2010). 20 Here, Plaintiffs do not object to Defendants’ Request for Judicial Notice, and the 21 documents are publically recorded documents or publically available state court filings. 22 Thus, the Court finds that the accuracy of these documents cannot reasonably be 23 questioned. Accordingly, the Court hereby takes judicial notice of Exhibits 1-7.5 24 25 5 The Court notes that although Plaintiffs’ FAC references but does not include exhibits “previously filed with the Court,” (FAC ¶¶ 15-19), in violation of Local Rule 26 15.1, see Civ.L.R. 15.1 (“All amended pleadings must contain copies of all exhibits referred to in such amended pleadings.”), the Court will consider the referenced 27 exhibits because they are duplicated in Defendants’ properly filed request for judicial notice, (RJN Exs. 2, 3, 6, 7). Additionally, the Court has discretion to consider 28 documents referenced extensively in the complaint and documents that form the basis of the plaintiff’s claims. See No. 84 Employer-Teamster Joint Counsel Pension Trust -6- 13cv1160-GPC-JMA 1 B. Motion to Dismiss 2 Defendants move to dismiss Plaintiffs’ “securitization” theory as failing to set 3 forth a cognizable legal theory. (Dkt. No. 20-1 at 7-8) (“Plaintiff’s securitization 4 argument is simply not the law in California and thus the related claims against KTS[J] 5 are improper and baseless as a matter of law.”). In response, Plaintiffs cite the recent 6 California Court of Appeal case Glaski v. Bank of America National Association, et 7 al., 218 Cal. App. 4th 1079 (Aug. 8, 2013), to support the plausibility of Plaintiffs’ 8 unlawful securitization theory of liability. (Dkt. No. 22 at 3.) In Glaski, the court 9 interpreted New York trust law to find that a borrower could have standing to challenge 10 the assignment of the borrower’s loan if the defect asserted by the borrower would void 11 the assignment. Id. at 1095. The Court first notes that the weight of authority rejects 12 Glaski as a minority view on the issue of a borrower’s standing to challenge an 13 assignment as a third party to that assignment. See Rivac v. Ndex West LLC, No. C 1314 1417 PJH, 2013 WL 6662762 at *4 (N.D. Cal. Dec. 17, 2013) (collecting cases); Boza 15 v. U.S. Bank Nat. Ass’n, LA CV12-06993 JAK, 2013 WL 5943160 at *10 (C.D. Cal. 16 Oct. 28, 2013) (same); In re Sandri, 501 B.R. 369, 374-78 (Bankr. N.D. Cal. 2013) 17 (same). 18 Additionally, even if the Court found the Glaski court’s reasoning persuasive, 19 the Court finds that Plaintiffs fail to plead the facts to support such a theory. For 20 example in Glaski, the court considered many factual details regarding the loan at issue 21 in that case, including facts regarding the payments owed and the borrower’s attempts 22 to obtain loan modifications. 218 Cal. App. 4th 1079, 1083-84 (2013). The court 23 considered details regarding the creation of the alleged fraudulent trust and assignment 24 of plaintiff’s loan challenged by the plaintiff in that case, including: the factual 25 allegations that assignment was attempted after the closing date; the specifics of 26 alleged transfers of plaintiff’s loan; and the alleged roles the defendants played in these 27 Fund v. America West Holding Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003). However, 28 in the event Plaintiffs elect to file a second amended complaint, the Court directs Plaintiffs to heed Local Rule 15.1. -7- 13cv1160-GPC-JMA 1 actions. Id. at 1084-85. Furthermore, the court in Glaski considered facts regarding 2 alleged misrepresentations made by defendants to plaintiff, including what the plaintiff 3 was told, how the plaintiff interpreted the statements made, and who made the 4 representations at issue. Id. at 1085-86. In summary, even if Glaski supports a finding 5 that Plaintiffs’ legal theory is legally cognizable, Glaski cannot relieve Plaintiffs of the 6 burden of alleging sufficient facts to state a claim under Federal Rule of Civil 7 Procedure 12(b)(6) or, where Plaintiffs are alleging fraud, of pleading allegations of 8 fraud with particularity, Fed. R. Civ. P. 9(b). The Court therefore turns to addressing 9 each of the Causes of Action challenged for factual sufficiency in Defendants’ motion 10 to dismiss. 11 1. First Cause of Action: Fraudulent Misrepresentation 12 In the Court’s previous Order dismissing Plaintiff Michael Mottale’s initial 13 Complaint, the Court dismissed Plaintiff’s fraudulent misrepresentation claim on the 14 ground that Plaintiff failed to meet Rule 9(b)’s particularity requirement for allegations 15 of fraud. (Dkt. No. 16 at 6-7) (citing Fed. R. Civ. P. 9(b) (“in alleging fraud or mistake, 16 a party must state with particularity the circumstances constituting fraud or mistake.”). 17 In addition, the Court found that Plaintiff failed to differentiate Plaintiff’s allegations 18 against the multiple defendants Plaintiff sought to hold liable. (Id. at 17) (citing Swartz 19 v. KPMG LLP, 476 F.3d 756, 764–65 (9th Cir. 2007) (“[T]he plaintiffs must, at a 20 minimum, identify the role of each defendant in the alleged fraudulent scheme.”). 21 The Court finds that Plaintiffs fail to remedy this defect in their cause of action 22 for fraudulent misrepresentation in the FAC. (FAC ¶¶ 21-29.) To the extent that 23 Plaintiffs seek to hold Defendants KTSJ, Coyne, Relph, or Alegria liable for fraud, 24 Plaintiffs again fail to identify each individual Defendant’s role in the alleged fraud or 25 fraudulent misrepresentation. The only paragraph in Plaintiffs’ fraud allegations that 26 names KTSJ individually states that “[t]he filing of the unlawful detainer was 27 fraudulent because KIMBALL TIREY & ST. JOHN knew or should have known based 28 on themselves being held out as real estate experts and charged with knowing the state -8- 13cv1160-GPC-JMA 1 of the law in In Re Veal and Herra, and it’s progeny.” (FAC ¶ 27.) This allegation is 2 a legal argument and wholly fails to provide a factual basis for Plaintiffs’ claim that, 3 as required to plead a claim for fraudulent misrepresentation, “(1) the defendant 4 represented to the plaintiff that an important fact was true; (2) that representation was 5 false; (3) the defendant knew that the representation was false when the defendant 6 made it, or the defendant made the representation recklessly and without regard for its 7 truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the 8 plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and, (7) 9 the plaintiff's reliance on the defendant's representation was a substantial factor in 10 causing that harm to the plaintiff.” Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 11 429, 434 (2010) (internal citations and quotations omitted). 12 Furthermore, Plaintiffs’ fraud cause of action again lacks any individual 13 allegations against Defendants Coyne, Relph, or Alegria. See Swartz v. KPMG LLP, 14 476 F.3d 756, 764–65 (9th Cir. 2007). Accordingly the Court DISMISSES without 15 prejudice Plaintiffs’ claim for fraudulent misrepresentation as to Defendants KTSJ, 16 Coyne, Relph, and Alegria. 17 2. Second Cause of Action: Violation of the FDCPA 18 Plaintiffs have similarly failed to address the FDCPA Cause of Action defects 19 discussed in the Court’s previous Order dismissing Plaintiff Michael Mottale’s initial 20 Complaint. (Dkt. No. 16 at 8-9.) Although Plaintiffs add allegations in the FAC against 21 Defendant Bank of America, who does not join the present motion to dismiss, Plaintiffs 22 have again failed to allege any facts supporting a claim that any Defendants are “debt 23 collectors” under the FDCPA or that Defendants KTSJ, Coyne, Relph, or Alegria used 24 “false, deceptive, or misleading representation or means in connection with the 25 collection of any debt.” (Id. at 8-9) (citing FDCPA, 15 U.S.C. § 1692(e)). Accordingly, 26 the Court again DISMISSES without prejudice Plaintiffs’ cause of action for violation 27 of the FDCPA as to Defendants KTSJ, Coyne, Relph, and Alegria. 28 // -9- 13cv1160-GPC-JMA 1 3. Fourth Cause of Action: Quiet Title 2 The Court also GRANTS Defendants’ motion to dismiss Plaintiffs’ claim to 3 Quiet Title to the subject Property. As the Court stated in its previous Order, Plaintiffs 4 must allege tender or offer of tender in order to have standing to bring an action to 5 quiet title. (Dkt. No. 16 at 10) (citing Ricon v. Recontrust Co., 2009 WL 2407396, at 6 *6 (S.D. Cal. Aug.4, 2009); Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 7 578, 205 Cal. Rptr. 15 (1984)). Plaintiffs fail to remedy this defect in the FAC, 8 changing the Quiet Title Cause of Action alleged in the FAC only by adding new 9 allegations against Defendant Bank of America. (FAC ¶ 45.) 10 IV. CONCLUSION 11 For the foregoing reasons, the Court hereby ORDERS: 12 1. Defendants’ Motion to Dismiss is GRANTED WITHOUT PREJUDICE as 13 to Plaintiffs’ First, Second, and Fourth Causes of Action against 14 Defendants Kimball, Tirey & St. John, Patricia Coyne, Christine Relph, 15 and Alegria Real Estate Fund IV. (Dkt. No. 20.) 16 17 18 19 2. Plaintiffs are granted LEAVE TO AMEND the FAC within thirty (30) days from the date this Order is electronically docketed. 3. The hearing date for this motion scheduled for Friday, January 17, 2014 is VACATED. 20 Plaintiffs are reminded that any amended pleading must be complete in itself without 21 reference to prior pleadings. Civ.L.R. 15.1. 22 IT IS SO ORDERED. 23 24 DATED: January 10, 2014 25 26 HON. GONZALO P. CURIEL United States District Judge 27 28 - 10 - 13cv1160-GPC-JMA