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Davidson v. Countrywide Home Loans

July 23, 2010


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


Presently before the Court is Defendants Countrywide Home Loans, Inc., BAC Home Loans Servicing, LP, Mortgage Electronic Registration System, Inc., Landsafe Title Corporation, and ReconTrust Company, N.A.'s (collectively, "Defendants") motion to dismiss Plaintiffs Harriet Davidson and KAP CA, LLC (collectively, "Plaintiffs") First Amended Complaint. (Doc. No. 27.)

Plaintiffs filed an opposition, and Defendants have not filed a reply. This motion is suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the CourtGRANTS IN PART and DENIES IN PART Defendants' motion to dismiss.


The following facts are drawn from Plaintiffs' First Amended Complaint ("FAC"). On or about February 13, 2007, Plaintiff Harriet Davidson ("Davidson") obtained two loans in the total amount of $528,650, secured by property located at 3731 Ruette De Ville, San Diego, California 92130 ("the Property"). Two deeds of trust were recorded on February 21, 2007.

Davidson applied for the loans with Kate Sappenfield, an agent for Defendant Countrywide Home Loans, Inc ("Countrywide"). Plaintiffs alleges Countrywide, through its agent, misrepresented the loan terms, failed to make certain disclosures or made inaccurate disclosures, and fraudulently induced Davidson into obtaining loans for which she was not qualified.

On October 9, 2009, Davidson mailed a "qualified written request" to Defendant BAC Home Loans Servicing, LP ("BAC"), requesting information related to the servicing of the loans. Plaintiffs allege BAC did not acknowledge receipt of the request within 20 days or take action within 60 days, as required by federal law. On October 14, 2009, Davidson mailed a written notice of rescission of the loans to BAC. Davidson mailed an amended notice of rescission on February 10, 2010.

On May 8, 2009, Defendant LandSafe Title Corporation ("LandSafe") published and recorded a Notice of Default ("NOD") and Election to Sell against the Property. The NOD listed the information of BAC, as agent for Defendant Mortgage Electronic Registration System, Inc. ("MERS").

On November 16, 2009, a Notice of Trustee's Sale was recorded against the Property. On May 13, 2009, Davidson conveyed title of the Property to Plaintiff KAP CA, LLC ("KAP") pursuant to a grant deed. On July 21, 2009, Plaintiffs tendered a short sale offer to BAC based upon the Property's reasonable market value, and BAC denied the offer. The Trustee's Sale was scheduled for June 4, 2010. Plaintiffs allege none of the Defendants have an interest in the deeds of trust or the Property, because the notes and deeds of trust have been split. Therefore, none of the Defendants have authority to foreclose.


On December 2, 2009, Davidson filed the Complaint, naming Defendants Countrywide, BAC, MERS, ReconTrust Company, N.A., and LandSafe. The Complaint alleged four causes of action: (1) violation of the Real Estate Settlement Procedures Act ("RESPA"), (2) violation of California Civil Code § 2943, (3) quiet title, and (4) declaratory relief. (Doc. No. 1.) On March 16, 2010, the Court granted in part Defendants' motion to dismiss the Complaint for failure to state a claim, with respect to all the claims except Plaintiff's RESPA claim, and granted leave to amend. (Doc. No. 23.)

On April 5, 2010, Plaintiffs timely filed the FAC. The FAC added a new Plaintiff, KAP, and a new Defendant, Wells Fargo Bank.*fn1 The FAC alleges ten causes of action: (1) equitable wrongful foreclosure; (2) cancellation of trust deeds; (3) quiet title; (4) violation of California Civil Code § 789.3; (5) violation of the Fair Debt Collection Practices Act; (6) violation of the Real Estate Settlement Procedures Act, 12 U.S.C. 2605; (7) violation of the Truth and Lending Act ("TILA"); (8) violation of California Business & Professions Code § 17200; (9) breach of fiduciary duty; and (10) fraud in the inducement.*fn2

On May 6, 2010, Defendants filed the instant motion to dismiss the FAC. (Doc. No. 27.)


I. Legal Standard

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). 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." Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

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." Twombly, 550 U.S. at 555 (citation omitted). A court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009). 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).

II. Analysis

A. Tender

Defendants contend Plaintiffs must tender the outstanding amount of debt in order to bring their first, second, and third causes of action -- for wrongful foreclosure, cancellation of the Trust Deeds, and quiet title - which challenge the foreclosure of the Property.*fn3

The Court agrees that tender is required to maintain these causes of action. Under California law, "[i]n obtaining rescission or cancellation, the rule is that the complainant is required to do equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the plaintiff has received in the transaction." Fleming v. Kagan, 11 Cal. Rptr. 737, 740 (Ct. App. 1961); see also Karlsen v. Am. Sav. & Loan Assn., 92 Cal. Rptr. 851, 854 (Ct. App. 1971) ("A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.") "The rule applies although the plaintiff was induced to enter into the contract by the fraudulent representations of the defendant." Fleming, 11 Cal. Rptr. at 740. Also, "[i]t is settled in California that a mortgagor cannot quiet his title against the mortgagee without paying the debt secured." Shimpones v. Stickney, 219 Cal. 637, 649 (1934).

Plaintiffs argue they have satisfied any tender requirement by tendering the reasonable value of the Property, which Defendants declined to accept, and that it would be inequitable to require tender of the full loan value. However, the cases which Plaintiffs rely on for the proposition that tender of the reasonable value of the Property is sufficient do not support their position. See United States Cold Storage v. Great Western Savings & Loan Ass'n, 165 Cal.App.3d 1223 (1985) (explaining "the law is long-established that a trustor or his successor must tender the obligation in full as a prerequisite to challenge of the foreclosure sale.") (emphasis in original); American Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 822 (4th Cir. 2007) (holding "[t]he trial court properly denied rescission, given the appellants' inability to tender payment of the loan amount"). Plaintiff also relies on language from the rescission provision in TILA, 15 U.S.C. § 1635(b), but the causes of action for wrongful foreclosure, cancellation of trust deeds, and quiet title, are brought under California law, not TILA.

Accordingly, the Court grants the motion to dismiss as to Plaintiffs' first, second, and third causes of action. Because it is possible for Plaintiffs to allege tender of the outstanding amount of the debt, ...

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