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Amilcar Quinteros v. Aurora Loan Services

May 23, 2011



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 third party First Magnus Financial Corporation. The Deed of Trust was recorded on August 14, 2006 and listed third party First American Lenders Advantage as trustee and third party Mortgage Electronic Registration Systems, Inc. as beneficiary. The servicing of the loan was transferred from third party Homecomings Financial to Defendant Aurora Loan Services on March 18, 2008. Plaintiff fell behind on his mortgage payments in 2008. The parties orally agreed that Plaintiff would make monthly payments of $1,900, which was memorialized in a written forbearance agreement.

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 property was sold at public auction on May 12, 2009. Defendant was the high bidder.

Plaintiff filed suit on November 6, 2009 in the Superior Court, County of Fresno. The case was removed to the Eastern District based on federal question jurisdiction. The original complaint was dismissed for failure to state a claim, on motion from Defendant. Plaintiff filed the first amended complaint ("FAC") which lists seven causes of action: (1) declaratory relief, (2) cancellation of instruments, (3) to set aside foreclosure proceedings, (4) injunction, (5) breach of oral contract, (6) promissory estoppel, and (7) violation of RESPA. Doc. 30. Defendant has filed a motion to dismiss for failure to state a claim. Plaintiff opposes the motion and the matter was taken under submission without oral argument.

Meanwhile, Plaintiff filed for Chapter 13 bankruptcy protection in the U.S. Bankruptcy Court, Eastern District of California on July 8, 2010. As this case involves claims made by the debtor and not claims made against the debtor, this suit is unaffected by the 11 U.S.C. §362 automatic stay. See Snavely v. Miller, 397 F.3d 726, 729 (9th Cir. 2005).

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.

We have extended the 'incorporation by reference' doctrine to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint." 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, Setting Aside Foreclosure Proceeding and Trustee's Deed Upon Sale, and Injunction

These causes of action all allege that the foreclosure was invalid as it was not conducted in accord with the procedures specified in Cal. Civ. Code §2924 et seq. A cause of action to set aside a foreclosure action for failure to follow the correct procedure rises in equity. See Knapp v. Doherty, 123 Cal. App. 4th 76, 87 (Cal. App. 6th Dist. 2004). Plaintiff specifically alleges 14. Under the Deed of Trust for the Property, the Trustee was First Magnus Financial Corporation (the "Trustee"). However, the Trustee did not prepare and execute the Notice of Default ("NOD"), which initiated the foreclosure proceeding under attack, ETS Services, LLC ("ETS") did, without any authority to do so.

15. On January 8, 2009, ETS, not the Trustee, prepared and executed the Notice of Trustee Sale (the "NOS"), without any authority to do so. The NOS was recorded on January 12, 2009, but, was not sent by registered or certified mail to the Plaintiff and was not posted on the Property, at any time....

17. The failure of the Trustee to execute the NOD and the NOS and the failure of the Defendants to serve Plaintiff with the same renders the purported foreclosure proceeding and Trustee's Deed Upon Sale, void, as a matter of law. Further, the aforementioned failure harmed PLAINTIFF as he was not afforded the opportunity (his statutory right) to reinstate the loan, redeem the property (tender), or compel Defendant's performance under the Agreement, which was a written offer to forebear and modify, accepted, delivered and performed by PLAINTIFF.

Doc. 30, FAC, at 3:25-4:15. A trustee under a deed of trust "may be substituted by the recording in the county in which the property is located of a ...

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