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Jacqueline Kim Selby v. Bank of America

March 14, 2011


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


Defendants Aztec Foreclosure Corporation ("Aztec"), EMC Mortgage Corporation ("EMC"), and GMAC Mortgage LLC ("GMAC"), each have filed a motion to dismiss Plaintiff's Second Amended Complaint. For the reasons discussed below, Aztec's motion to dismiss is GRANTED, EMC's motion to dismiss is GRANTED, and GMAC's motion to dismiss is GRANTED IN PART and DENIED IN PART.


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

Plaintiff resides at 2831 Angell Avenue, San Diego, CA 92122 (the "Angell property"). On October 17, 2005, Plaintiff refinanced the Angell property, borrowing $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 Mellon (fka The Bank of New York as successor Trustee to JPMorgan Chase Bank, National Association as Trustee for the Certificateholders of Structures Asset Mortgage Investments II Inc. Bear Stearns ALT-A Trust, Mortgage Pass-Through Certificates Series 2005-10 by EMC Mortgage Corporation as attorney in fact), 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 and did not go through. EMC is the servicer of the Angell property loan.

GMAC is the 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.

In an order filed on February 10, 2010, the Court granted Aztec's motion to dismiss the original complaint and granted in part and denied in part motions to dismiss filed by GMAC and EMC.

On March 1, 2010, Plaintiff filed a First Amended Complaint ("FAC"). In an order filed on October 27, 2010, the Court granted motions to dismiss the FAC filed by Aztec, EMC, and GMAC.

On November 16, 2010, Plaintiff filed a Second Amended Complaint ("SAC"), which is the subject of the instant motions.


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 (9thCir. 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, 555 (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). Only a complaint that states a plausible claim for relief will survive a motion to dismiss. Id.


A. Aztec's Motion to Dismiss

The SAC asserts the following claims against Aztec: (1) common law fraud; and (2) violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692f(6)(A). As discussed below, the Court concludes that both of these claims fail to state a claim against Aztec.

Plaintiff's fraud claim alleges that Defendants made false and fraudulent statements of material fact relating to Plaintiff's loans and properties by recording manufactured documents in public land records against her properties and submitting false statements to her that they were acting on behalf of the lawful owners of her obligations. (SAC ¶ 151.) With respect to Aztec, Plaintiff alleges that Aztec was not acting as an authorized agent of the beneficiary or trustee of the Deed of Trust when it recorded the Notice of Default because the BSALTA 2005-10 trust fund*fn1 was not the lawful owner of the promissory note. (SAC ¶¶ 40.) Plaintiff alleges that the promissory note was not properly transferred to the trust because the promissory note was not endorsed to each person in the chain of assignments, but, rather was endorsed in blank along the way. (SAC ¶¶ 29-30.) Plaintiff alleges that the governing Pooling and Servicing Agreement as well as New York trust law prohibits the conveyance of property to trusts through endorsements in blank. (SAC ¶¶23-30.) Therefore, Plaintiff argues, the BSALTA 2005-10 trust is not the lawful owner of Plaintiff's promissory note, and the trustee of the BSALTA 2005-10 trust had no power to substitute Aztec as a trustee under the Deed of Trust. (SAC ¶ 31.) Plaintiff also alleges that the Substitution of Trustee was a forgery because it was signed by "Greg Allen" with the title of "VP" on behalf of the Bank of New York Mellon (trustee of the BSALTA 2005-10 trust) even though Mr. Allen was in fact an employee of Lender Processing Services, a company that is under criminal investigation. (SAC ¶¶ 33-37.)

Under California law, a claim of fraud must have the following elements: "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young, 160 Cal. App. 4th 62, 79 (2008) (quoting Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996) (internal quotation marks omitted)). Federal Rule of Civil Procedure 9(b) requires that each of these elements be pled with particularity. It is unclear how Plaintiff relied on any improper substitution of Aztec as a trustee. Plaintiff was apparently already in default at the time Aztec recorded the Notice of Default, and Plaintiff does not allege that he made any payments as a result of Aztec's actions.

Plaintiff's fraud claim against Aztec also fails because it does not allege facts supporting a plausible claim of fraud. Contrary to Plaintiff's claims, the Pooling and Servicing Agreement and New York law do not prohibit the transfer of property to trusts through endorsements in blank. The Pooling and Servicing Agreement (Exh. A to SAC) provides:

(b) In connection with the above transfer and assignment, the Seller hereby deposits with the Trustee or the Custodian, as its agent, ...

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