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Razawi v. Federal Deposit Insurance Corp.

September 8, 2009


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


Through the present lawsuit, Plaintiffs Ahmad and Daniela Razawi ("Plaintiffs") seek redress for a litany of alleged statutory and common law violations arising from the refinancing of their home mortgage and the subsequent non-judicial foreclosure and trustee's sale of the mortgaged property.

Named Defendants in this matter include: Federal Deposit Insurance Corporation as receiver for Downey Savings, F.A.; Central Mortgage Company ("CMC"); MTC Financial, Inc., doing business as Trustee Corps; Mortgage Electronic Registration Systems, Inc. ("MERS"); Community One Financial & Real Estate; and individual Defendants Jamal Akbar, Alex Burhan and Chris Colon. Defendant MTC Financial, Inc., dba Trustee Corps ("Trustee Corps") now moves to dismiss, pursuant to Rule 12(b)(6), for failure to state a claim, and to strike Plaintiffs' punitive damages claims pursuant to Rule 12(f). As set forth below, Defendant Trustee Corps' Rule 12(b)(6) motion is granted, and its Rule 12(f) motion is denied as moot.


On December 9, 2005, Plaintiffs secured a $520,000 loan by executing a Deed of Trust ("Deed") encumbering their home, located at 4045 Clover Valley Road, Rocklin, CA 95677 ("Subject Property"). The Deed identifies Downey Savings and Loan Association, F.A., as the Lender, and DSL Service Company as the Trustee.*fn1

According to Plaintiffs' First Amended Complaint ("FAC"), sometime in 2005 several employees from Defendant Community One Financial and Real Estate Services ("Community One"), including Defendants Burhan and Colon, approached Plaintiff Daniela Razawi, whose office is in the same building as Community One. These employees solicited her and her husband, co-Plaintiff Ahmad Razawi, to refinance their home. Defendants Burhan and Colon assured Plaintiffs that they could secure for them the "best deal" and "best interest rates" available on the market. Plaintiffs expressed interest in this offer and explained that they hoped to obtain cash from the refinancing to buy a new home. They planned to convert their existing home in Rocklin into a rental property, but intended to retain it to become their eventual retirement home.

Defendants Burhan and Colon advised Plaintiffs that an Option ARM loan with Downey Savings would best fit their needs. Defendants Burhan, Colon and Akbar allegedly assured Plaintiffs that although the Option ARM was an adjustable-rate loan, their payments would never exceed $1,924.81 per month. These individual Defendants also allegedly promised Plaintiffs that if the loan ever became unaffordable, they could simply refinance it again into an affordable loan. By September 2008, however, Plaintiffs' monthly mortgage payments had risen to more than $3,600 per month, which Plaintiffs were unable to afford.

Plaintiffs further allege that Defendant Burhan told them he would have Defendant Community One's appraiser "push" the appraised value of Plaintiffs' property to ensure approval of the loan. When Plaintiffs protested and questioned the propriety of this practice, Defendant Burhan purportedly told them not to worry about it. In addition, Plaintiffs allege that Defendants Burhan and Colon falsely promised that Downey Savings, not Plaintiffs, would pay the broker fee.

According to Plaintiffs, they never received a copy of the required loan documents prior to closing. Instead, a mobile notary brought the documents and gave them only a few minutes to sign and initial them. Plaintiffs never had the opportunity to review the documents, nor did the notary explain to them what they were signing. In addition, Plaintiffs were never furnished with a notice of cancellation or disclosure of the amount financed or the finance charge, as required by the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. Plaintiffs signed the promissory note and Deed on December 9, 2005. The Deed was recorded at the Placer County Recorder's Office on December 15, 2005.

On November 15, 2006, Downey Savings & Loan Association, F.A., assigned the Deed and promissory note to MERS, as nominee for CMC, the assignee. This Corporate Assignment of Deed of Trust instrument was recorded on November 27, 2006.

On April 30, 2008, MERS assigned the Deed to CMC. This Assignment of Deed of Trust document was not recorded until April 13, 2009.

On October 1, 2008, CMC substituted Trustee Corps as trustee under the Deed. The Substitution of Trustee document, however, was not recorded until January 29, 2009.

On October 2, 2008, a Notice of Default and Election to Sell under Deed of Trust was executed by Trustee Corps, on behalf of CMC. The notice was recorded that same day. According to the notice, as of October 2, 2008, Plaintiffs were in default in the amount of $27,835.56.

On January 5, 2009, CMC assigned the Deed to Deutsche Bank National Trust Company as Trustee for Downey 2006-AR1 ("Deutsche Bank"). The Assignment of Deed of Trust document was recorded on April 13, 2009.

On January 29, 2009, Trustee Corps executed a Notice of Trustee's Sale, which was recorded the same day.

On March 18, 2009, Trustee Corps sold the Subject Property to Deutsche for $450,540. The Trustee's Deed Upon Sale instrument was recorded on April 13, 2009.

On April 14, 2009, Plaintiffs mailed a Qualified Written Request ("QWR"), pursuant to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605 et seq., to Defendant CMC. The QWR purported to rescind the loan under TILA and demanded a cancellation of the trustee sale. Plaintiffs filed their original complaint with this Court on April 10, 2009 and their FAC on June 2, 2009.


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, 550 U.S. 544, 555 (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 555-556 (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative ...

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