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Baisa v. Indymac Federal Bank

November 5, 2009



Plaintiffs Rodolfo B. and Bella G Baisa ("the Baisas") filed this action against Indymac Federal Bank ("Indymac"),*fn1 Mortgage Electronic Registration Systems, Inc. ("MERS"), Trustee Corps, Baldwin Mortgage, Inc., C21 Funding, Inc.,*fn2 Orhan Tolu, and Myrna D. Baesa alleging various state and federal claims relating to loans they obtained to refinance their home in Fair Oaks, California. MERS moves to dismiss plaintiff's First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.*fn3

I. Factual and Procedural Background

On February 6, 2007, plaintiffs obtained two loans from AEGIS Wholesale Corp. ("AEGIS") to refinance their home. (FAC ¶ 33; plaintiff's Req. Judicial Notice ("RJN") Ex. 2-3.)*fn4 These loans were secured by deeds of trust on the property. ((FAC ¶ 33; RJN Ex. 2-3.) On both loans, Commonwealth Land Title ("Commonwealth") was listed as trustee and AEGIS was listed as Lender. (FAC ¶ 33; RJN Ex. 2-3.) Both Deeds of Trust identified MERS as the nominee for the Lender and Lender's successors and assigns, and as the beneficiary. (FAC ¶ 34; RJN Ex. 2, 3.)

MERS facilitates the transfer of mortgage interests by providing an electronic tracking system for the mortgage interests registered in its system. (Opp. Mot. to Dismiss 1: 24-26.) To do this, MERS is the beneficiary of record in a "nominee" capacity for the mortgage lender on all security instruments in its system. (FAC ¶ 10.) When the lender assigns its beneficial interest to another entity within MERS's electronic system, MERS remains the beneficiary of record for that instrument by serving as nominee for the new beneficial interest holder. (Opp. Mot. to Dismiss 6.) MERS remains the beneficiary of record on the deed of trust or mortgage even as the beneficial interest is assigned repeatedly within MERS's electronic system.

Approximately two years after they obtained their loans, plaintiffs defaulted, and a Notice of Default and Election to Sell Under Deed of Trust was recorded on April 17, 2009. (FAC ¶ 45; RJN Ex. 6.) MERS allegedly assigned the Note and Deed of Trust for plaintiffs' first loan to Indymac on April 15, 2009, and the assignment was recorded on August 28, 2009 (RJN Ex. 5). A Notice of Trustee's Sale was recorded on August 5, 2009 by Trustee Corps, and a Trustee's Deed Upon Sale was recorded by Trustee Corps on August 28, 2009. (RJN Ex. 7, 8.)

In their FAC, plaintiffs assert nine causes of action against seven defendants. MERS's Motion to Dismiss challenges only the causes of action that apply to MERS. (Mot. to Dismiss at 1-2.)

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57).

A. Rosenthal Fair Debt Collection Practices Act

Plaintiff's first cause of action alleges that MERS and other defendants violated the Rosenthal Fair Debt Collection Practices Act ("RFDCPA" or "Rosenthal Act"), 1 Cal. Civ. Code §§ 1788 et seq. (FAC 10.) The RFDCPA prohibits a host of unfair and oppressive methods of collecting debt, but to be liable under the RFDCPA a defendant must fall under its definition of "debt collector." Izenberg v. ETS Svcs., LLC, 589 F. Supp. 2d 1193, 1199 (C.D. Cal. 2008). A "debt collector" under the RFDCPA is "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection." Cal. Civ. Code § 1788.2(c) (2008).

Plaintiffs do not identify in their FAC the sections of the RFDCPA that MERS has allegedly violated and fail to allege facts that would support the inference that MERS is a "debt collector" under the RFDCPA. Instead, their FAC contains only a conclusory restatement of the definition of "debt collector" under the RFDCPA, (FAC ¶ 53.), and lumps MERS, Indymac, and Trustee Corps as "defendants" who threatened to (1) collect on a debt not owed to them, (2) make false reports to credit reporting agencies, (3) foreclose upon a void security interest, (4) foreclose upon a note that they did not possess, (5) falsely state the amount of a debt, (6) increase the amount of a debt by including amounts not permitted by law or contract, and (7) use unfair and unconscionable means to collect a debt. (FAC ¶ 54.)

In their Opposition, plaintiffs allege that MERS is a debt collector by virtue of assigning plaintiff's Note and Deed of Trust to Indymac, (Opp. Mot. to Dismiss 12:4-5.), and that their illegal act was participating in a "civil conspiracy" with Indymac by enabling them to collect a debt from plaintiffs. (Id. 12:6,:14-17.) Plaintiffs fail to explain how assigning the Deed of Trust constitutes "debt collection" under the RFDCPA. Plaintiffs have therefore failed to plead facts sufficient under Federal Rule of Civil Procedure 8(a)(2) to survive a motion to dismiss. MERS's Motion to Dismiss plaintiffs' cause of action for RFDCPA violations is granted with leave to amend.

B. Negligence

To prove a cause of action for negligence, plaintiffs must show "(1) a legal duty to use reasonable care; (2) breach of that duty, and (3) proximate [or legal] cause between the breach and (4) the plaintiff[s'] injure[ies]." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (Ct. App. 1998) (citation omitted). "The existence of a legal duty to use reasonable care in a particular factual situation is a question of law for the court to decide." Vasquez v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (2004). Plaintiffs contend that "[d]efendants breached their duty of care to [p]laintiffs when they failed to ...

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