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Wood v. Aegis Wholesale Corp.

July 2, 2009


The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge



On September 14, 2001, Plaintiff Gregory Wood ("Wood") purchased Lots 27 and 28 in block 556 in Modesto California.*fn2 On March 12, 2007,Wood obtained a mortgage from Defendant Aegis Wholesale Corporation ("Aegis"). The note was secured by a Deed of Trust, which names Defendant Mortgage Electronic Registrations Systems, Inc. ("MERS") as the beneficiary and Aegis as the lender. See Ex. B to MTC's Request for Judicial Notice. AmericaOne International, Inc. ("AmericaOne") was the mortgage broker. The loan was later assigned to Defendant IndyMac Federal Bank, FSB ("IndyMac"). Plaintiff defaulted on the loan, and foreclosure proceedings were commenced by Defendant MTC Financial Inc., dba Trustee Corps ("MTC"). On November 17, 2008, MTC, acting as an agent for IndyMac, recorded a Notice of Default and Election to Sell Under Deed of Trust ("Notice of Default") in the Stanislaus County Recorder's Office.*fn3 See Ex. C to MTC's Request for Judicial Notice. On February 20, 2009, Indymac substituted MTC as the trustee under the Deed of Trust and recorded the Substitution of Trustee. See Ex. D to MTC's Request for Judicial Notice. On February 20, 2009, MTC, as a substituted trustee, recorded a Notice of Trustee's Sale with a foreclosure sale date of March 10, 2009.

Plaintiff filed suit in Superior Court of California, County of Stanislaus on March 9, 2009. Plaintiff alleges: (1) A (first) cause of action to enjoin the sale because the non-judicial foreclosure is void since IndyMac and MTC filed the Substitution of Trustee three months after the Notice of Default was filed and because all Defendants have failed to provide the original note; (2) a (second) quiet title cause of action that Defendants' assertion of rights or interests in the property are void and unenforceable; (3) a (third) cause of action for rescission of the loan based on fraud (non-disclosure) because Aegis and AmericaOne did not disclose to Plaintiff that his income would be insufficient to repay the loan following the adjustment period; (4) a (fourth) accounting cause of action for the amount of money, if any, still owed to Defendants; (5) a (fifth) breach of fiduciary duty cause of action against all Defendants for failure to provide him with disclosure notice requirements; (6) a (sixth) cause of action for unfair debt collection practices under the Rosenthal Fair Debt Collections Act, Federal Fair Debt Collections Act, Truth in Lending Act, and Real Estate Settlement Procedures Act against Defendants MERS, IndyMac, T.D. Service Company ("T.D."), and Aegis; (7) a (seventh) cause of action for unfair business practices against Defendants New Century, IndyMac, and AmericaOne for violating Cal. Bus. & Prof. Code § 17200; (8) an (eighth) cause of action for breach of the implied covenant of good faith and fair dealing based on predatory lending practices; (9) a (ninth) cause of action against Defendants Aegis, AmericaOne and Does 1-250 for violating 15 U.S.C. § 1639(h) by failing to verify Plaintiff's ability to repay the loan; (10) a (tenth) declaratory and injunctive relief cause of action requesting a declaration as to the validity of the loan agreement and foreclosure proceedings.

The complaint seeks declaratory relief, a rescission of the loan, a temporary restraining order as to the sale of the property, a permanent injunction precluding Defendants from engaging in wrongful conduct, cancellation of the trustee sale, quieting title to Plaintiff's property, an accounting of amounts owed by Plaintiff, and attorney's fees.

MTC removed the case to the Eastern District of California and now moves to have the case dismissed for failure to state a claim.*fn4

Plaintiff has neither filed an opposition nor a notice of non-opposition.

On May 26, 2009, the court took the matter under submission without oral argument.


Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of a plaintiff's "failure to state a claim upon which relief can be granted." A dismissal under Rule 12 (b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "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. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact.)" Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007). The court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). The Supreme Court has recently explained that "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949 - L.E.d.2d -, 2009 WL 1361536, at *12 (May 18, 2009) (citations and alterations omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawful." Id.

The court must also assume that "general allegations embrace those specific facts that are necessary to support the claim." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990). Thus, the determinative question is whether there is any set of "facts that could be proved consistent with the allegations of the complaint" that would entitle plaintiff to some relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). At the other bound, courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint. "There are, however, two exceptions . . . First, a court may consider material which is properly submitted as part of the complaint on a motion to dismiss . . . If the documents are not physically attached to the complaint, they may be considered if the documents' authenticity is not contested and the plaintiff's complaint necessarily relies on them. Second, under Fed. R. Evid. 201, a court may take judicial notice of matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). The Ninth Circuit later gave a separate definition of "the 'incorporation by reference' doctrine, which permits us to take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). Moreover, "judicial notice may be taken of a fact to show that a complaint does not state a cause of action." Sears, Roebuck & Co. v. Metropolitan Engravers, Ltd., 245 F.2d 67, 70 (9th Cir. 1956); see Estate of Blue v. County of Los Angeles, 120 F.3d 982, 984 (9th Cir. 1997).*fn5

If a Rule 12(b)(6) motion to dismiss is granted, claims may be dismissed with or without prejudice, and with or without leave to amend. "[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (quoting Doe. v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).


The basis of Plaintiff's suit is his contention that the Defendants did not have the legal authority to foreclose on his property. Plaintiff contends that Defendants IndyMac and MTC lack authority because: (1) they are not holders in due course; (2) they are not real parties in interest (because they did not provide the original note establishing themselves as the real party in interest); and (3) MTC filed the Notice of Default three months prior to recording the Substitution of Trustee. See Complaint ¶¶27-28.

Enjoinment of Sale

Plaintiff alleges that the foreclosure procedure was fatally defective because MTC violated Cal. Civ. Code § 2924(a) by recording the Notice of Default three months before the Substitution of Trustee. MTC contends that there is no requirement for a trustee to file a Substitution of Trustee before a Notice of Default.

Under California law, a "trustee, mortgagee or beneficiary or any of their authorized agents" may conduct the foreclosure process by filing a Notice of Default. Cal. Civ. Code § 2924(a)(1). Under Cal. Civ. Code § 2924(b)(4) a "person authorized to record the notice of default or the notice of sale" includes "an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee." "Upon default by the trustor, the ...

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