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Rodriguez v. Litton Loan Servicing LP

May 11, 2009


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Plaintiff Angel Rodriguez ("Plaintiff") brought this action in state court for injuries allegedly suffered as a result of entering a mortgage agreement with New Century Mortgage Corporation ("New Century"), as well as the subsequent foreclosure and Trustee's sale of the underlying parcel of real property ("Subject Property"). Defendants Avelo Mortgage LLC ("Avelo"), Litton Loan Servicing LP ("Litton"), and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively "Moving Defendants"), removed to this Court on January 5, 2009, and filed a Motion to Dismiss Plaintiffs' First Amended Complaint ("FAC") on February 23, 2009. For the following reasons, Moving Defendants' Motion to Dismiss is granted with leave to amend.


On October 20, 2006, Plaintiff signed a Deed of Trust and Promissory Note, obtaining a loan for $432,000 that was secured by the Subject Property. New Century originated the loan, and the Deed granted New Century a security interest in the Subject Property.

According to Plaintiff, New Century did not verify Plaintiff's income and processed the loan as a "stated income" loan application. Additionally, Plaintiff alleges he was not given the proper disclosures as required by California law and that Defendants New Century and MERS placed him in a securitized, sub-prime and predatory loan. Plaintiff also contends that the loan resulted in negative amortization and allowed for payments to be adjusted every six months. Finally, Plaintiff alleges that, subsequent to signing, the loan was placed into a Pooling and Service Agreement ("PSA").

On June 4, 2008, MERS, as nominee for New Century, assigned the Deed of Trust and Promissory Note to Defendant LaSalle Bank National Association ("LaSalle"). Later, Defendant Quality Loan Service Corporation ("Quality") was substituted as Trustee.

Plaintiff subsequently defaulted on the loan, and, on June 5, 2008, Quality recorded a Notice of Default and Election to Sell Under Deed of Trust ("Notice") in the Solano County Recorder's office.

According to the Notice, Plaintiff owed $19,982.50 and any further inquiry was to be directed to Avelo by way of Quality. Moving Defendants' Request for Judicial Notice ("RJN"), Exh. 3.*fn1

No payment was forthcoming, and, on October 24, 2008, Quality issued a Notice of Trustee's Sale informing Plaintiff that he was in default and that unless Plaintiff took action, the Subject Property might be sold at public sale. Id., Exh. 4.

On November 18, 2008, Plaintiff's counsel sent a letter to Defendants New Century, Quality, Litton and Avelo. The letter, now referred to by Plaintiff as a "cancellation notice," purported to rescind the mortgage loan and offered "to discuss the tender of reduced payoff amount subject to all offsets for all damages including an inflated appraisal of the property." Id., Exh. 5. On November 24, 2008, Quality sold the property to LaSalle at public auction for $186,200.


B. General Pleading Requirements

"Rule 8(a)(2)...requires a 'showing,' rather than a blanket assertion of entitlement to relief.

Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Twombly, 550 U.S. 556 n.3. A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed."

Id. Nevertheless, "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556.

Federal Rule of Civil Procedure 9(b) provides that "a party must state with particularity the circumstances constituting fraud." "A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations." Neubronner v. Milken, 6 F.3d 666, 671-672 (9th Cir. 1993) (internal quotations and citations omitted). "The complaint must specify such facts as the times, dates, places, benefits received, and other details of the alleged fraudulent activity." Id. at 672.

B. Motion to Dismiss Under Rule 12(b)(6)

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the "grounds" of his "entitlement to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Id. at 1964-65 (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative ...

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