The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER GRANTING IN PART DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT AND DENYING IN PART DEFENDANT'S MOTION TO
Presently before the Court is Defendant America's Servicing Company's ("Defendant") motion to dismiss Plaintiffs' first amended complaint (Doc. No. 13) and Defendant's request for judicial notice of several documents in support of its motion (Doc. No. 5-4). Plaintiffs filed an opposition, and Defendant filed a reply. The Court finds Defendant's motion suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss.
The following facts are drawn from Plaintiffs' first amended complaint ("FAC") unless otherwise noted. This matter concerns a loan obtained by Plaintiffs Suzanne Storm and John Storm ("Plaintiffs"), which was secured by a deed of trust against their property. Defendant is the servicer for the loan. On September 30, 2003, Plaintiff Suzanne Storm inherited a parcel of land in Boulevard, California (the "Property") of approximately 113 acres. She later transferred her interest in the Property to both herself and John Storm. One five-acre portion of the Property, commonly known as 39323 Lillie Lane, was improved with a home (the "Home Parcel"), and the rest remained undeveloped (the "Unimproved Parcels"). According to Plaintiffs, until recently, both parties believed the Property was divided into several separate legal parcels because the land had multiple different assessor's parcel numbers.
On July 14, 2006, Plaintiffs obtained a loan from Accredited Home Lenders, Inc. in the amount of $520,000, secured by a first deed of trust ("Deed of Trust") against the Property.*fn1 The loan was subsequently transferred to U.S. Bank National Association, and Defendant became the servicer for the loan. According to Plaintiffs, when they acquired the loan, they were informed that the loan was only being secured against the Home Parcel and not the Unimproved Parcels. However, in 2007, when Plaintiffs decided to sell a portion of the Unimproved Parcels, they discovered the Deed of Trust had a legal description which appeared to encumber both the Home Parcel and Unimproved Parcels.
Upon discovering the mistake, Defendant agreed that only the Home Parcel should have been encumbered. Subsequently, on March 6, 2007, Defendant recorded a Substitution of Trustee and Partial Reconveyance to release the lien on the Unimproved Parcels. (FAC, Exhibit A.) On October 18, 2007, Defendant recorded an updated Substitution of Trustee and Partial Reconveyance (the "Partial Reconveyance") with a more specific legal description of the property.*fn2 (FAC, Exhibit B.)
In November 2007, Plaintiffs defaulted on their loan payments, and Defendant subsequently began non-judicial foreclosure proceedings. On May 9, 2008, Plaintiffs filed for Chapter 13 Bankruptcy protection. During the bankruptcy proceedings, the parties stipulated to Plaintiffs making an agreed-upon monthly payment on the loan. (Def. Request for Judicial Notice to Pl.'s Original Compl., Exhibit B.) However, Plaintiffs defaulted on the payments, and on March 16, 2009, the Bankruptcy Court lifted the automatic stay in this case. (Id., Exhibit C.) On March 23, 2009, Plaintiffs voluntarily dismissed their bankruptcy case. (Id., Exhibit D.)
On January 14, 2009, Plaintiffs and Defendant learned that the Home Parcel and Unimproved Parcels were in fact, one legal parcel. (FAC, Exhibit C.)
This lawsuit followed. On April 2, 2009, Plaintiffs filed their original complaint in California Superior Court for the County of San Diego seeking declaratory and injunctive relief, alleging that the Deed of Trust was invalid and Defendant was attempting to foreclose on the Home Parcel separately despite knowing that it was not a separate legal parcel. Nevertheless, on April 8, 2009, the property was sold at a trustee's sale for $299,000. (FAC, Exhibit C.) According to Plaintiffs, they only became aware after filing the original complaint that Defendant had not foreclosed on the Home Parcel alone, but on the entire property, including the Unimproved Parcels. Id.
On June 3, 2009, Defendant removed the case to this court on the basis of diversity jurisdiction. (Doc. No. 1.) On June 10, 2009, Defendant filed a motion to dismiss the original complaint (Doc. No. 5), which the Court denied as moot in light of its order granting Plaintiffs' motion to amend the complaint. (Doc. No. 11.) On July 27, 2009, Plaintiffs filed the FAC (Doc. No. 12) which sets forth three causes of action: (1) declaratory relief and injunctive relief, (2) quiet title, and (3) slander of title.
On August 21, 2009, Defendant filed this motion to dismiss the FAC for failure to state a claim upon which relief may be granted under Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 13.) Defendant seeks dismissal of all three causes of action and requests judicial notice of several documents in support of its motion.
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pled in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). However, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] 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 (citation omitted). "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)." Id. (citation omitted). In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526, (1983). Also, the court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009). Id. at 1950.
However, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. 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. at 1949 (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (citing Twombly, 550 U.S. at 557).
II. Request for Judicial Notice
On June 10, 2009, Defendant filed a request for judicial notice asking the Court to judicially notice the following documents, which are either filed in the U.S. Bankruptcy Court for the Southern District of California or recorded in the San Diego County Recorder's Office: (1) Plaintiffs' Chapter 13 Voluntary Petition, filed on May 9, 2008 in the U.S. Bankruptcy Court; (2) the parties' Stipulation Granting Adequate Protection, filed on November 24, 2008 in the U.S. Bankruptcy Court; (3) the U.S. Bankruptcy Court's Order Granting Motion for Relief from Stay, filed on March 16, 2009; (4) the U.S. Bankruptcy Court's Order Granting Request by Debtor for Dismissal of Chapter 13 Bankruptcy Case, filed on March 23, 2009; (5) the Notice of Trustee's Deed Upon Sale, filed with the San Diego County Recorder's Office on April 23, 2009; and (6) the Deed of Trust, filed with the San Diego County Recorder's Office on July 14, 2006.
In ruling on a motion to dismiss for failure to state a claim, "a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). Accordingly, a court may consider matters of public record on a motion to dismiss, and in doing so "does not convert a Rule 12(b)(6) motion to one for summary judgment." Mack v. South Bay Beer Distrib., 798 F.2d 1279, ...