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Basham v. Pacific Funding Group

July 21, 2010

DANIEL R. BASHAM AND CAROLE BASHAM, PLAINTIFFS,
v.
PACIFIC FUNDING GROUP, A CALIFORNIA BUSINESS ENTITY, FORM UNKNOWN; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., A DELAWARE CORPORATION; WELLS FARGO HOME MORTGAGE, INC., A CALIFORNIA CORPORATION, DBA AMERICA'S SERVICE COMPANY; CITIBANK N.A. AS INDENTURE TRUSTEE FOR BSARM 2007-2, A BUSINESS ENTITY, FORM UNKNOWN; AND NDEX WEST, L.L.C., A DELAWARE CORPORATION, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS

Plaintiffs Daniel R. Basham and Carole Basham brought this action against defendants Pacific Funding Group ("Pacific"), Mortgage Electronic Registration Systems, Inc. ("MERS"), Wells Fargo Home Mortgage, Inc., dba America's Service Company ("ASC"), Citibank N.A. as Indenture Trustee for BSARM 2007-2 ("Citibank") and NDEX West, L.L.C. ("NDEX") alleging various federal and state claims arising out of plaintiffs' mortgage transaction. Presently before the court is defendant ASC's motion to dismiss the First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket No. 30.)

I. Factual and Procedural Background

On or about September 27, 2005, plaintiffs obtained a loan from the now-bankrupt subprime loan originator and reseller American Home Mortgage ("AHM") in order to refinance their home, located at 110 Bewicks Circle in Sacramento, California (the "Subject Property"). (FAC ¶ 15.) This loan was secured by a Deed of Trust on the property. (Req. for Judicial Notice ("RJN") (Docket No. 39) Ex. A.) The Deed of Trust listed North American Title Company as Trustee, American Brokers Conduit as the lender, and MERS as the nominal beneficiary for the lender and the lender's successors and assigns. (Id.)

In October 2008, plaintiffs began experiencing financial problems and defaulted on their mortgage; sometime thereafter they allegedly contacted ASC to discuss loan modification. (Id.) In May 2009, plaintiffs requested a loan modification from ASC which was subsequently denied. (Id. ¶ 19.) NDEX recorded a Notice of Default on July 8, 2009. (RJN Ex. B.) In September 2009, plaintiffs submitted a second loan modification application to ASC. This application was also denied. (FAC ¶ 20.)

A Trustee's sale of plaintiffs' property was scheduled for January 14, 2010, but plaintiffs were granted a temporary restraining order and preliminary injunction against the sale. (See Mot. to Dismiss (Docket No. 38), at 4; Docket Nos 1, 24-25.) Plaintiffs initiated this action on January 13, 2010, and filed a First Amended Complaint ("FAC") on April 5, 2010. (Docket Nos. 1, 34.)

II. Discussion

To survive a motion to dismiss, a plaintiff must 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, 566 U.S. ---, ----, 129 S.Ct. 1937, 1949 (U.S. 2009) (quoting Twombly, 550 U.S. at 556-57). In deciding whether a plaintiff has stated a claim, the court must assume that the plaintiff's allegations are true and draw all reasonable inferences in the plaintiff's favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

In general, a court may not consider items outside the pleadings in deciding a motion to dismiss, but may consider items of which it takes judicial notice. Barron v. Raich, 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. ASC requests that the court take judicial notice of the following publicly recorded documents associated with the Subject Property: (1) the Deed of Trust, (2) the Notice of Default and Election to Sell Under Deed of Trust, (3) the Assignment of Deed of Trust, (4) the Substitution of Trustee, and (5) the Notice of Trustee's Sale. (RJN Exs. A-E (Docket No. 39).) The court will take judicial notice of these documents, since 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).

A. Negligence Per Se

Plaintiffs' first cause of action for negligence per se alleges that all defendants are negligent because they violated California Civil Code sections 2923.5 and 2924. (FAC ¶ 29.) Negligence per se is an evidentiary presumption that a party failed to exercise due care if:

(1) he violated a statute, ordinance, or regulation of a public entity;

(2) the violation proximately caused death or injury to a person or property;

(3) the death or injury resulted from an occurrence of the nature within the statute, ordinance, or regulation was designed to prevent; and

(4) the person suffering the death or the injury to his person or property was one of the class of persons for whose protection the statute, ordinance, or regulation was adopted.

Cal. Evid. Code § 669. California Civil Code section 2924 provides a "comprehensive statutory framework" that governs the non-judicial foreclosure process. Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994); see Cal. Civ. Code § 2924 (listing, inter alia, the requirements for a properly filed notice of default and the timing and process for the foreclosure sale). Section 2923.5 regulates who can file and when and how a notice of default can be filed to initiate a non-judicial foreclosure. Cal. Civ. Code § 2923.5 (requiring, inter alia, that the mortgagee, beneficiary, or authorized agent must use due diligence contact the borrower to explore options to avoid foreclosure).

The negligence per se doctrine does not establish a cause of action distinct from negligence. Cal. Serv. Station & Auto. Repair Ass'n v. Am. Home Assurance Co., 62 Cal. App. 4th 1166, 1178 (1998) ("[A]n underlying claim of ordinary negligence must be viable before the presumption of negligence of Evidence Code section 669 can be employed."). Rather, the negligence per se doctrine treats a statutory violation as evidence of negligence. See Sierra-Bay Fed. Land Bank Assn. v. Superior Court, 227 Cal. App. 3d 318, 333 (1991) ("[I]t is the tort of negligence, and not the violation of the statute itself, which entitles a plaintiff to recover civil damages. In such circumstances the plaintiff is not attempting to pursue a private cause of action for violation of the statute; rather, he is pursuing a negligence action and is relying upon the violation of a statute, ordinance, or regulation to establish part of that cause of action."). Plaintiffs are not entitled to a ...


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