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Quinteros v. Aurora Loan Services

September 29, 2010

AMILCAR QUINTEROS, PLAINTIFF,
v.
AURORA LOAN SERVICES, AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



ORDER RE: MOTION TO DISMISS (Docs. 5, 6, and 7)

I. History*fn1

Plaintiff Amilcar Quinteros resides at 1405 S. Temperance Ave., Fresno, CA 93727. Plaintiff purchased that property with a $382,000 mortgage provided by New Century Mortgage Corporation on March 25, 2005. Plaintiff alleges New Century transferred, sold, or assigned the loan to Defendant Aurora Loan Services. Plaintiff fell behind on his mortgage payments in 2008. Plaintiff contacted Defendant and orally agreed to make payments of $1,900 per month. Plaintiff made those payments between January and April 2009, four payments in all. In May 2009, Plaintiff was orally informed that the property was being foreclosed on. The foreclosure may have been completed on June 4, 2009.

Plaintiff filed suit on November 6, 2009 in the Superior Court, County of Fresno. Plaintiff asserts eleven causes of action: (1) declaratory relief, (2) cancellation of instruments, (3) to set aside foreclosure proceedings, (4) injunction, (5) accounting, (6) breach of oral contract,(7) promissory estoppel, (8) intentional infliction of emotion distress, (9) negligent infliction of emotional distress, (10) violation of RESPA, and (11) violation of Cal. Civ. Code §2923.6. Doc. 10. The case was removed to the Eastern District based on federal question jurisdiction. Defendant has made motions to dismiss for failure to state a claim and to strike. Plaintiff has filed an opposition, and Defendant filed a reply. The matter was taken under submission.

Plaintiff filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court, Eastern District of California on July 8, 2010. The automatic stay pursuant to 11 U.S.C. §362 is in effect. "The automatic stay is applicable only to proceedings against the debtor." Snavely v. Miller, 397 F.3d 726, 729 (9th Cir. 2005), citing Ingersoll-Rand Financial Corp. v. Miller Mining Co., 817 F.2d 1424, 1426 (9th Cir. 1987) (staying appeal where the debtor-appellant is the defendant in the underlying case despite noting that "Because this appeal is brought by the debtor, it could be argued that the language of section 362 does not apply"); see also Rett White Motor Sales Co. v. Wells Fargo Bank, 99 B.R. 12, 15 (N.D. Cal. 1989); Serrato v. Ashley, 1993 U.S. Dist. LEXIS 4556, *3 (N.D. Cal. Feb. 1, 1993). Plaintiff's claims in this case are unaffected by the stay.

II. Legal Standards

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)....a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007), citations omitted. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not shown that the pleader is entitled to relief." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009), citations omitted. The court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). The court must also assume that "general allegations embrace those specific facts that are necessary to support the claim." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990), citing Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds at 127 S.Ct. 1955, 1969. Thus, the determinative question is whether there is any set of "facts that could be proved consistent with the allegations of the complaint" that would entitle plaintiff to some relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). At the other bound, courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated...laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint. "There are, however, two exceptions....First, a court may consider material which is properly submitted as part of the complaint on a motion to dismiss...If the documents are not physically attached to the complaint, they may be considered if the documents' authenticity is not contested and the plaintiff's complaint necessarily relies on them. Second, under Fed. R. Evid. 201, a court may take judicial notice of matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001), citations omitted. The Ninth Circuit later gave a separate definition of "the 'incorporation by reference' doctrine, which permits us to take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005), citations omitted. "[A] court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss. Facts raised for the first time in opposition papers should be considered by the court in determining whether to grant leave to amend or to dismiss the complaint with or without prejudice." Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003), citations omitted.

If a Rule 12(b)(6) motion to dismiss is granted, claims may be dismissed with or without prejudice, and with or without leave to amend. "[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc), quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).

III. Discussion

A. Declaratory Relief, Cancellation of Instruments, and Setting Aside Foreclosure Proceeding and Trustee's Deed Upon Sale

These causes of action all generally allege that the foreclosure was invalid and must be reversed. Plaintiff alleges "DEFENDANTS violated Civil Code section 2924 et seq., thereby rendering the foreclosure proceeding and the Notice of Default, Assignment of Deed of Trust, Substitution of Trustee, Notice of Trustee Sale and Trustee's Deed Upon Sale (collectively the 'Foreclosure Documents') void." Doc. 10, Complaint, at 4:17-20. In key part, Plaintiff alleges, "Plaintiff was never notified by DEFENDANTS that the property was being foreclosed upon." Doc. 10, Complaint, at 3:11-12. California's statutory system of non-judicial foreclosure has been summarized in the following oft cited passage:

Upon default by the trustor, the beneficiary may declare a default and proceed with a non-judicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. The trustee may postpone the sale at any time before the sale is completed. If the sale is postponed, the requisite notices must be given. The conduct of the sale, including any postponements, is governed by Civil Code section 2924g.

During the foreclosure process, the debtor/trustor is given several opportunities to cure the default and avoid the loss of the property. First, the trustor is entitled to a period of reinstatement to make the back payments and reinstate the terms of the loan. This period of reinstatement continues until five business days prior to the date of the sale, including any postponement. In addition to the right of reinstatement, the trustor also possesses an equity of redemption, which permits the trustor to pay all sums due prior to the sale of the property at foreclosure and thus avoid the sale. Additionally, at the time of the foreclosure sale in this case, the trustor had the right to postpone the trustee's sale for one day in order to pay off the loan.

As a general rule, the purchaser at a non-judicial foreclosure sale receives title under a trustee's deed free and clear of any right, title or interest of the trustor. A properly conducted non-judicial foreclosure sale constitutes a final adjudication of the rights of the borrower and lender. Once the ...


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