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Spurlock v. Carrington Mortgage Services

August 4, 2010


The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge


Defendants Carrington Mortgage Services, Deutsche Bank National Trust Company, Atlantic and Pacific Foreclosure, LLC, Quicken Loans, Mortgage Electronic Registration Systems, Inc. ("MERS"), Ocwen Loan Servicing, and HSBC Bank USA, N.A. (collectively "Defendants"), bring motions to dismiss Plaintiffs' Second Amended Complaint ("SAC"). (Doc. Nos. 44, 49, 50.) Plaintiffs Steve and Vickie Spurlock and KAP CA, LLC (collectively "Plaintiffs") oppose the motions. (Doc. Nos. 53, 57, 59.) Plaintiffs also move to strike portions of Defendants' requests for judicial notice. (Doc. Nos. 54, 58.) The Court, in its discretion, finds the matter suitable for resolution without oral argument. See S.D. Civ. L.R. 7.1(d)(1). For the reasons set forth below, the Court GRANTS Defendants' motions to dismiss and DENIES Plaintiffs' motions to strike.


This action arises from foreclosure-related events with respect to Plaintiffs' home. On June 29, 2000, Plaintiffs financed the purchase of property, located at 442 Parkside Drive, Oceanside, California, with a loan in the amount of $108,120.00. (Carrington's Request for Judicial Notice ("RJN") [Doc. No. 44], Ex. 1.)*fn1 Thereafter, the Spurlocks refinanced their loan for $131,000.00. (Id., Ex. 2.) In April 2003, the Spurlocks again refinanced the property for $175,500.00. (Id., Ex. 3.) In August 2004, the Spurlocks took out a second loan on the property in the amount of $45,000.00. (Id., Ex. 4.) The Spurlocks then refinanced their first loan in the amount of $249,600.00. (SAC [Doc. No. 39], Ex. B.) Finally, the Spurlocks refinanced their second loan for $48,750.00. (Id., Ex. E.) Plaintiffs subsequently defaulted on their first loan, and a Notice of Default was recorded on April 30, 2009. (Id., Ex. H.) On August 5, 2009, a Notice of Trustee's Sale was recorded. (Id., Ex. K.) On August 15, 2009, the Spurlocks transferred title to the property to KAP CA, LLC pursuant to a Grant Deed, which was recorded on August 28, 2009. (Id., Ex. L.) The subject property was sold in a trustee's sale on September 8, 2009, which was recorded on September 10, 2009. (Id., Ex. M.)

On October 14, 2009, Plaintiffs filed this action against Defendants.*fn2 On March 29, 2010, Plaintiffs filed their SAC alleging the following causes of action:

(1) equitable wrongful foreclosure; (2) cancellation of trustee's deed for the First and Second Trust Deeds; (3) quiet title pursuant to California Code of Civil Procedure § 760.010 et seq.; (4) violations of the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692e; (5) violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. and Regulation Z, 12 C.F.R. § 226 et seq.; (6) violations of California Business and Professions Code § 17200 et seq.; (7) violation of California Civil Code § 789.3; (9) violation of California Civil Code § 1940.2; (8) fraud in the inducement; (9) breach of fiduciary duty; and (10) declaratory relief pursuant to 28 U.S.C. § 2201. (Doc. No. 39.) On April 20, 2010, Defendants Atlantic and Pacific Foreclosure, LLC, Carrington Mortgage and Deutsche Bank National Trust Company moved to dismiss the SAC pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 44.) On May 12, 2010, Defendant Quicken Loans, Inc. also moved to dismiss the SAC. (Doc. No. 49.) Finally, on May 14, 2010, Defendants HSBC Bank, USA, N.A., MERS, and Ocwen Loan Servicing, LLC moved to dismiss the SAC. (Doc. No. 50.) In addition to opposing the motions, Plaintiffs moved to strike portions of Defendants' requests for judicial notice. (Doc. Nos. 54, 58.)


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 reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). Notwithstanding this deference, the reviewing court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S.Ct. 1937, 1949 (2009). Moreover, it is improper for a court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). Accordingly, a reviewing court may begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft, supra, 129 S.Ct. at 1950.

"When 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. "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).


While Defendants move to dismiss each cause of action for failure to state a claim, Carrington Mortgage, Deutsche Bank, and Atlantic and Pacific Foreclosure argue that the Court should dismiss all of Plaintiffs' claims because Plaintiffs have not tendered the full amount of their outstanding obligation. (Carrington's Motion to Dismiss at 3:17--15:5.) The Court, however, finds this argument without merit because not all of Plaintiffs' claims require tender as a prerequisite to relief. Accordingly, the Court shall address tender, where appropriate, as well as the merits of each claim in turn.

I. Equitable Wrongful Foreclosure

Plaintiffs' claims for equitable wrongful foreclosure, cancellation of trustee's deed for the First and Second Trust Deeds, and quiet title pursuant to California Code of Civil Procedure § 760.010 et seq. are all based on Defendants' alleged failure to comply with California non-judicial foreclosure procedures. Specifically, Plaintiffs allege that Defendants failed to adhere to statutory requirements set forth in Cal. Civ. Code § 2924 et seq., § 2923.5, and § 2923.6. Defendants move to dismiss these claims because Plaintiffs have failed to tender the amount owed.

a. Tender

It is well established under California law that a "valid and viable" tender of payment for the debt owed is essential to an action to cancel a sale under a deed of trust. Karlsen v. American Sav. & Loan Assn., 15 Cal. App. 3d 112, 117 (1971); see also Copsey v. Sacramento Bank, 133 Cal. 659, 662 (Cal. 1901) ("an action to set aside the sale, unaccompanied by an offer to redeem, would not state a cause of action which a court of equity would recognize.") An offer to tender is "an offer to pay the full amount of the debt for which the property was security." Arnolds ManagementCorp. v. Eischen, 158 Cal. App. 3d 575, 578 (1984). In addition, "[A] mortgagor cannot quiet his title against the mortgagee without paying the debt secured." Shimpones v. Stickney, 219 Cal. 637, 649 (1934). "The rationale behind the rule is that if plaintiffs could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the plaintiffs." FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal. App. 3d 1018, 1021 (1989).

Here, Plaintiffs assert that they tendered the reasonable value of the property, but that Defendants rejected the offer. As an initial matter, Plaintiffs fail to offer any on-point legal authority for their assertion that an offer to pay the reasonable value of the property is a sufficient tender under facts similar to those in the case at bar.*fn3 Furthermore, Plaintiffs' claim that they made a tender offer appears to be based on the alleged short sale offer they presented. Plaintiffs have provided no legal support for their position that a short sale offer is sufficient. Because Plaintiffs have not alleged or demonstrated that they have tendered or are capable of tendering the debt owed, the Court DISMISSES Plaintiff's claims for wrongful eviction, cancellation of the trustee's deeds, and quiet title.

b. Cal. Civ. Code § 2923.6

Embedded within Plaintiff's complaint are references to purported violations of Cal. Civ. Code § 2923.6. Defendants argue that § 2923.6 does not create a private right of action for borrowers. The Court agrees. Civil Code § 2923.6 provides:

(a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interests of all parties if it agrees to or implements a loan modification or workout plan for which both of the following apply: (1) The loan is in payment default, or payment default is reasonably foreseeable. (2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis. (b) It is the intent of the Legislature that the mortgagee, ...

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