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Webb v. Indymac Bank Home Loan Servicing

January 6, 2010



Plaintiffs Bryson Webb and Yvonne Webb filed this action against defendants Indymac Bank Home Loan Servicing ("Indymac Servicing"), Indymac Federal Bank ("Indymac Bank"), Indymac Mortgage Services ("Indymac Mortgage"), MTC Financial, Inc. d/b/a Trustee Corps. ("Trustee Corps"), Mortgage Electronic Registration Systems, Inc. ("MERS"), MTH Mortgage, LLC ("MTH"), and Joyce S. Perkins, alleging various state and federal claims relating to a loan they obtained to purchase their home in Lincoln, California. MERS and Trustee Corp each move to dismiss plaintiffs' 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. Trustee Corps also moves to strike plaintiffs' demands for punitive damages from the FAC pursuant to Federal Rule of Civil Procedure 12(f).

I. Factual and Procedural Background

On August 15, 2006,*fn1 plaintiffs obtained a loan from MTH to purchase their home, located at 1248 Jurgenson Drive in Lincoln, California. (FAC ¶¶ 7, 38.) This loan was memorialized in a Promissory Note ("the Note") secured by a Deed of Trust on the property. (Id. ¶ 38.) Plaintiffs claim that they were channeled into this allegedly unaffordable loan through the conduct of their mortgage broker Perkins, who allegedly exaggerated plaintiff's earnings to secure the loan. (Id. ¶¶ 31-33.) The Deed of Trust listed First American Title as trustee, MTH as lender, and MERS as nominee and beneficiary for the lender and lender's successors and assigns. (Id. ¶¶ 38-39.) MERS facilitates the transfer of mortgage interests by providing an electronic tracking system for the mortgage interests registered in its system. To do this, MERS is the beneficiary of record in a "nominee" capacity for the mortgage lender on all security instruments in its system. (Id. ¶ 11.)

Plaintiffs eventually defaulted on their loan, and a Notice of Default and Election to Sell Under Deed of Trust was filed in Placer County by Trustee Corps on March 13, 2009. (Id. ¶ 41.) On March 9, 2009, Trustee Corps allegedly noticed the trustee sale of the property. (Id. ¶ 42.) This notice identified Trustee Corps as the trustee under the Deed of Trust. (Id.) On June 9, 2009, plaintiffs allegedly sent a Qualified Written Request ("QWR") under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, to Indymac Bank that included a demand to rescind their loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f. (Id. ¶ 43.)

In their FAC, plaintiffs assert ten causes of action against seven defendants. MERS and Trustee Corps's motions to dismiss challenge only the causes of action that apply to MERS and Trustee Corps, respectively.

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, 550 U.S. 544, 570 (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).

In general a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201.

Trustee Corps submitted a RJN in support of its motion to dismiss and motion to strike that contains seven exhibits, all of which are recorded documents relating to plaintiffs' loan transaction and subsequent foreclosure. Plaintiffs also submitted a RJN which contains publically recorded documents relating to plaintiffs' mortgage and two law review articles discussing the "mortgage crisis." The court will take judicial notice of defendants' exhibits and the publically recorded documents of plaintiffs, as they are matters of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The court will not take notice of the law review articles submitted by plaintiffs, as they are sources whose accuracy may be debated and questioned.

A. California Civil Code Section 47 Privilege

Trustee Corps contends that its conduct was privileged under California Civil Code sections 47 and 2924(d) and therefore all claims against it must be dismissed. Non-judicial foreclosure sales "are governed by a 'comprehensive' statutory scheme. This scheme, which is found in Civil Code sections 2924 through 2924k, evidences a legislative intent that a sale which is properly conducted 'constitutes a final adjudication of the rights of the borrower and lender.'" Royal Thrift & Loan Co. v. County Escrow, Inc., 123 Cal. App. 4th 24, 32 (quoting 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc., 85 Cal. App. 4th 1279, 1283-1284 (footnote omitted) (2001)). Under section 2924(d) the "mailing, publication, and delivery" of foreclosure notices and "performance" of the foreclosure procedures created by California law constitute "privileged communications" pursuant to section 47. Cal. Civ. Code § 2924(d).

The privilege created by section 2924(d) "provides a qualified privilege for communications made without malice, to a person interested therein,... by one who is also interested." Kachlon v. Markowitz, 168 Cal. App. 4th 316, 336 (2008) (internal quotation marks omitted). For the purposes of the statute, "malice is defined as actual malice, meaning that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights." Id. (internal quotation marks omitted). This privilege applies to tort claims other than malicious prosecution and also applies to alleged violations of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210. Hagberg v. Cal. Fed. Bank FSB, 32 Cal. 4th 350, 361 (2004) ("As noted, the only tort claim we have identified as falling outside the privilege established by section 47(b) is malicious prosecution."); see Stevens v. Superior Court, 75 Cal. App. 4th 594, 603-604 (1999) (finding that the UCL "allows a private plaintiff to proceed under it to seek redress for conduct which violates any predicate statute, unless the defendant is privileged, [or] immunized by another statute....").

All of the claims alleged against Trustee Corps arise out of its performance of the non-judicial foreclosure procedures enumerated in the California Civil Code as agent for the beneficiary of plaintiffs' loan. The allegations against Trustee Corps stem from its alleged misrepresentations of its right to foreclose on plaintiffs' property and subsequent actions in foreclosing on the property. Plaintiffs have not plead any facts that demonstrate that Trustee Corps acted with malice during the foreclosure process. Trustee Corps's actions are clearly privileged under California law and accordingly plaintiffs cannot succeed on any of their claims against Trustee Corps. See Cisneros v. Instant Capital Funding Group, Inc., No. CV F 09-1436 LJO SMS, --- F.R.D. ----, 2009 WL 3049209, at *4-5 (E.D. Cal. Sept. 18, 2009) (finding Trustee Corps's actions as trustee for beneficiary allows them to claim immunity under California Civil Code section ...

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