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Selby v. Bank of America

October 27, 2010


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Defendant Aztec Foreclosure Corporation ("Aztec"), EMC Mortgage Corporation ("EMC"), and GMAC Mortgage LLC ("GMAC"), each have filed a motion to dismiss Plaintiff's First Amended Complaint. For the reasons discussed below, Defendants' motions are GRANTED.


This case arises out of ten loans obtained by Plaintiff, which are secured by liens on five residential properties owned by Plaintiff.

On October 17, 2005, Plaintiff refinanced her property located at 2831 Angell Avenue, San Diego, CA 92122 (the "Angell property"). She borrowed $648,000 from Stearns Lending, Inc ("Stearns"). (Aztec RJN, Ex. A.) The loan was secured by a Deed of Trust, which named Stearns as the lender, MERS as a nominee for the lender and a beneficiary, and Carriage Escrow, Inc. as the trustee. (Id.) In a Substitution of Trustee executed on May 28, 2009, The Bank of New York, which identified itself as the present beneficiary under the deed of trust, substituted Aztec as the trustee. (Aztec RJN, Ex. D.) On May 26, 2009, Aztec recorded a Notice of Default and Election to Sell Under Deed of Trust. (Aztec RJN, Ex. B.) On August 26, 2009, Aztec recorded a Notice of Trustee's Sale, scheduling the public sale of the Angell property to take place on September 16, 2009. (Aztec RJN, Ex. C.) The sale of the property was suspended. EMC is the alleged servicer of the Angell property loan.

GMAC is the alleged servicer of the second loans secured by junior liens on Plaintiff's other four properties. Foreclosure proceedings have not been initiated with respect to these second loans.


A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although detailed factual allegations are not required, factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965 (2007). "A plaintiff's obligation to prove 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." Id. "[W]here 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 show[n] that the pleader is entitled to relief." Ashcroft v. Iqbal, __ U.S. __, 129 S,Ct. 1937, 1950 (2009) (internal quotation marks omitted).


A. Aztec's Motion to Dismiss

The FAC alleges that Aztec violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692f(6)(A), which prohibits "[t]aking or threatening to take any non-judicial action to effect dispossession or disablement of property if . . . there is no present right to possession of the property claimed as collateral through an enforceable security interest." According to Plaintiff, "Bank of New York's substitution of Aztec was a legal nullity as Bank of New York lacked the power of sale since it had not recorded the assignment by which it allegedly acquired plaintiff's promissory note." (FAC ¶ 32.) Plaintiff also asserts a claim against Aztec under California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, based on Aztec's alleged violation of the FDCPA.

Aztec argues that Plaintiff should not be able to maintain her claims against Aztec without first tendering a sum sufficient to cure the default. However, as explained in the Court's previous Order on Motions to Dismiss filed on February 10, 2010, the Court declines to require a tender in this case because Plaintiff is not attempting to set aside a sale that has already taken place. See Karlsen v. American Sav. & Loan Assn., 15 Cal. App. 3d 112, 117 (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.") Moreover, the Court has required Plaintiff to post a monthly bond to protect Defendants' financial interests.

Aztec next argues that it is not a "debt collector" within the meaning of the FDCPA and was not attempting to collect a "debt." The Court rejects this argument. As explained in the Court's prior order, although a mortgage servicer is not a "debt collector" under the FDCPA's general definition of the term, 15 U.S.C. § 1692a(6), Aztec qualifies as a "debt collector" for purposes of § 1692f(6).

Section 1692a(6) specifies that for the purposes of § 1692f(6), the term debt collector "also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests." Thus, even though the FDCPA generally does not apply to actions taken in pursuit of foreclosure, "the statute expands its reach to enforcers of security interests in one specific instance: where that party seeks to take property to which 'there is no present right to possess.'" Rousseau v. Bank of New York, 2009 WL 3162153, at * 8 (D. Colo. Sept. 29, 2009). See also Overton v. Foutty & Foutty, LLP, 2007 WL 2413026, at * 6 (S.D. Ind. Aug. 21, 2007) ("If a person invokes judicial remedies only to enforce the security interest in property, then the effort is not subject to the FDCPA (other than § 1692f(6) ...

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