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Espinoza v. Recontrust Co.

April 19, 2010

OSCAR ESPINOZA AND MARIBEL GUARDADO, PLAINTIFFS,
v.
RECONTRUST COMPANY, N.A.; COUNTRYWIDE HOME LOANS INC., A CALIFORNIA CORPORATION; DITECH HOME FINANCING; GREENLIGHT FINANCIAL SERVICES, A CALIFORNIA CORPORATION; GMAC MORTGAGE, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; AND DOES 1-20, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER:

(1) GRANTING IN PART MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT [Doc. No. 18]; and

(2) DENYING AS MOOT MOTION TO DISMISS [Doc. No. 12].

Currently before the Court are Defendants Ditech Home Financing and GMAC Mortgage, LLC's (together, "Moving Defendants") Motion to Dismiss First Amended Complaint ("Motion to Dismiss"), [Doc. No. 12], and Plaintiffs' Motion for Leave to File a Second Amended Complaint (Motion to Amend). [Doc. No. 18]. Having considered the parties' arguments, and for the reasons set forth below, the Court GRANTS IN PART the Motion for Leave to File a Second Amended Complaint and DENIES AS MOOT the Motion to Dismiss.

BACKGROUND

Plaintiffs Oscar Espinoza and Maribel Guardado are owners of certain real property commonly known as 1427 RIVERVIEW AVE., EL CENTRO, CA 92243 ("Property"). On February 28, 2006, Plaintiffs purchased the Property with the financing obtained from Defendants. Plaintiffs borrowed $318,200 for the first mortgage from Defendant Greenlight Financial Services ("Greenlight") and $79,500 for the concurrent second mortgage from Defendant GMAC Mortgage, LLC ("GMAC").*fn1 (FAC ¶ 9; Motion to Amend, at 2-3.) Plaintiffs allege Defendant Countrywide Home Loans ("Countrywide") is the current servicer of the first loan and Defendant Ditech Home Financing ("Ditech") is the current servicer of the second loan. (FAC ¶ 11; Motion to Amend, at 3.)

Plaintiffs subsequently had difficulties making payments on the mortgages, and on July 24, 2009, received a Notice of Trustee's Sale from Defendant Recontrust Company, setting a trustee's sale of the Property for August 14, 2009. On August 5, 2009, Plaintiffs commenced the present action, alleging eighteen causes of action against Defendants. [Doc. No. 1]. The Moving Defendants then filed a Motion to Dismiss Complaint pursuant to Rule 12(b)(6). [Doc. No. 5]. However, before the Court could rule on the motion, Plaintiffs filed their First Amended Complaint ("FAC"), alleging fifteen causes of action. [Doc. No. 9]. In light of the FAC, the Court denied as moot the Motion to Dismiss. [Doc. No. 11]. Defendants immediately filed the present Motion to Dismiss. [Doc. No. 12]. Plaintiffs filed a late opposition and also a Motion to Amend. After both motions have been fully briefed, the Court took them under submission.

LEGAL STANDARD

I. Motion to Amend

Fed. R. Civ. P. 15(a) allows a party to amend its pleading with leave of court after the period for amendment as a matter of course has expired. See FED. R. CIV. P. 15(a)(2). Pursuant to Rule 15(a), "[t]he court should freely give leave when justice so requires." Id. The Ninth Circuit has construed this broadly, requiring that leave to amend be granted with "extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990) (citation omitted); Poling v. Morgan, 829 F.2d 882, 886 (9th Cir. 1987) (noting "the strong policy permitting amendment" (citation omitted)). This broad discretion "must be guided by the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or technicalities." United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981) (citing Conley v. Gibson, 355 U.S. 41, 47-48 (1957)).

The Supreme Court has articulated five factors that the court should consider in deciding whether to grant leave to amend: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party; (4) futility of amendment; and (5) whether the party has previously amended its pleadings. Forman v. Davis, 371 U.S. 178, 182 (1962); see also Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003). Not all factors merit equal weight, however. Eminence Capital, 316 F.3d at 1052. "Prejudice is the 'touchstone of the inquiry under rule 15(a)'" and "carries the greatest weight." Id. (citations omitted). Nevertheless, "[f]utility of amendment can, by itself, justify the denial of a motion for leave to amend." Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995).

II. Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings. A complaint survives a motion to dismiss if it contains "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). The court may dismiss a complaint as a matter of law for: (1) "lack of cognizable legal theory," or (2) "insufficient facts under a cognizable legal claim." SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). The court only reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citation omitted).

Despite the deference, the court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949-50 (2009). It is also improper for the court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[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." Iqbal, 129 S.Ct. at 1950.

DISCUSSION

Plaintiffs' Proposed Second Amended Complaint ("PSAC") deletes nine causes of action and clarifies the roles of the different Defendants as to the remaining six causes of action. Plaintiffs assert the amendment should be granted because it addresses the concerns raised by the Motion to Dismiss and does not result in any prejudice to the Moving Defendants. On the other hand, the Moving Defendants urge the Court to deny the Motion to Amend because it was filed solely in anticipation of the Court's adverse ruling on the pending Motion to Dismiss, and in the alternative because all of the amendments to the remaining six causes of action would be futile. Plaintiffs respond that the timing of their Motion to Amend is based upon their obtainment of more loan documents in response to their Qualified Written Requests ("QWRs"), further forensic auditing of Plaintiffs' loan documents, and the dismissal of similar causes of action in other similar cases. Plaintiffs also argue that their amendments to the remaining six causes of action would not be futile.

A. Dilatory motive

Amendment to the pleadings may be denied where it is apparent that there is bad faith or dilatory motive on the part of the movant. See Forman, 371 U.S. at 182. In this case, however, there is no reason to believe the amendment is being sought for a dilatory purpose. Although the amendment might have been motivated by the filing of the Motion to Dismiss, that alone is not sufficient to deny the amendment. Instead, the broad discretion given to the district courts "must be guided by the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or technicalities." Webb, 655 F.2d at 979 (citing Conley, 355 U.S. at 47-48). Moreover, in the present case, there were other legitimate reasons--such as obtaining additional information on the subject loans through the use of the QWRs and the forensic loan auditing--that gave rise to the Motion to Amend. Accordingly, after careful consideration, the Court finds no bad faith or dilatory motive. See Rusyniak v. Gensini, 629 F. Supp. 2d ...


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