UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
June 23, 2011
CHRISTINE A. BENNETT,
ONE WEST BANK, INDYMAC BANK, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER RE MOTIONS FOR DISMISSAL, MOTION TO EXPUNGE LIS PENDENS
Defendant Federal Deposit Insurance Corporation ("FDIC"), in its capacity as receiver for IndyMac Bank, moves to dismiss under Fed. R. Civ. P. 12(b)(1), or, in the alternative, for summary judgment on all of Plaintiff's claims. [Dock. # 6] Also pending are motions by Defendant OneWest Bank, FSB ("OneWest") to dismiss [dock. #9] and to expunge the lis pendens filed by Plaintiff in connection with this action [dock. # 10]. Plaintiff has not filed briefs in opposition to any of these motions.
For the reasons that follow, the Court GRANTS Defendant FDIC's motion for dismissal under Fed. R. Civ. P. 12(b)(1), or, in the alternative, for summary judgment on all of Plaintiff's claims; GRANTS with leave to amend OneWest's motion to dismiss; and GRANTS OneWest's motion to expunge the lis pendens.
On July 11, 2008, the Office of Thrift Supervision ("OTS") closed IndyMac and appointed the FDIC as the bank's receiver. The same day, OTS authorized the creation of IndyMac Federal Bank, FSB ("IndyMac Federal") and appointed the FDIC as conservator for IndyMac Federal ("FDIC-Conservator"). Also on that day, pursuant to a purchase and assumption agreement, the bulk of the assets and deposit liabilities of IndyMac were transferred to the FDIC-Conservator.
On March 19, 2009, the OTS closed IndyMac Federal and appointed the FDIC as receiver for IndyMac Federal. The same day, substantially all of the assets and liabilities of IndyMac Federal were transferred to OneWest, pursuant to an agreement between the FDIC, as receiver for IndyMac Federal, and OneWest.
On November 12, 2009, the FDIC, by its Board of Directors, issued a resolution determining that in each IndyMac receivership, "[I]nsufficient assets exist to make any distribution on general unsecured claims . . . and therefore all such claims, asserted or unasserted, will recover nothing and have no value." FDIC Ex. D (hereinafter "no value determination"). On November 18, 2009, the FDIC published a notice of the no value determination in the Federal Register. 74 Fed. Reg. 59540; FDIC Ex. E.
On May 12, 2010, Plaintiff brought suit against OneWest and IndyMac Bank for "Damages and for Injunctive Relief to Stay Wrongful Foreclosure Sale of Property and Ex Parte Application for Temporary Restraining Order" in the San Diego County -- North County Regional Center, Superior Court of California. [Dock. # 9, Ex. 1] On August 16, 2010, Plaintiff filed an amended complaint asserting the following claims: (1) Wrongful Foreclosure, (2) Fraud by Concealment, (3) Fraud by Misrepresentation, (4) Conversion, and (5) Intentional Infliction of Emotional Distress. [Dock. # 9, Ex. 2] Plaintiff seeks monetary damages and injunctive relief to prevent Defendants "from any and all further attempts to affect plaintiff's ownership interest in subject PROPERTY." Id. at 13. On September 9, 2010, the FDIC, in its capacity as receiver for IndyMac Bank, removed this action to federal court pursuant to 12 U.S.C. § 1819(b) and 28 U.S.C. § 1441. [Dock. #1]
II. STANDARDS OF REVIEW
A. FRCP 12(b)(1)
A moving party may base a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction on the allegations of the complaint, or may bring a factually based motion "by presenting affidavits or other evidence properly brought before the court . . . ." Savage v. Glendale Union High School, 343 F.3d 1036, 1039 n.2 (9th Cir. 2003). If the motion to dismiss for lack of jurisdiction is factually based, the court may look beyond the allegations of the complaint. Id. (citing White v. Lee, 227 F.3d, 1214, 1242 (9th Cir. 2000)). If the moving party supports a motion to dismiss for lack of jurisdiction with evidence, the nonmoving party "must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Id.
B. FRCP 56
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248.
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case on which the nonmoving party bears the burden of proving at trial. Id. at 322-23.
Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 314. The nonmoving party cannot oppose a properly supported summary judgment motion by "rest[ing] on mere allegations or denials of his pleadings." Anderson, 477 U.S. at 256. When ruling on a summary judgment motion, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
C. FRCP 12(b)(6)
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must meet the requirements of Rule 8(a)(2), which requires the pleader to make a "short and plain statement of the claim." This motion 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, 129 S,Ct. 1937, 1950 (2009) (internal quotation marks omitted).
A. CLAIMS AGAINST THE FDIC
The FDIC argues that the Court lacks jurisdiction over Plaintiff's claims for monetary relief because, inter alia, they are moot due to the FDIC's no value determination. Federal courts lack subject matter jurisdiction to hear claims that are moot. See In re Burrell, 415 F.3d 994, 998 (9th Cir.2005) ("If the controversy is moot, both the trial and appellate courts lack subject matter jurisdiction, and the concomitant 'power to declare the law' by deciding the claims on the merits.") (citations omitted). Under Article III of the United States Constitution, federal courts have jurisdiction to decide only actual cases or controversies. To satisfy Article III's case or controversy requirement, Plaintiff "'must have suffered some actual injury that can be redressed by a favorable judicial decision.'" Henrichs v. Valley Ciew Development, 474 F.3d 609, 615 (9th Cir. 2007).
Due to the FDIC's no value determination, Plaintiff's claims for monetary relief cannot be redressed by a favorable judicial decision. See Tinoco v. IndyMac, FSB, et al., No. CV 09-9174, Order Granting Motion To Dismiss or in the Alternative Summary Adjudication (C.D. Cal., Feb 5, 2010). As noted by the Tinoco court, "If the Plaintiff were to succeed on any of his claims for monetary relief, the FDIC as Receiver would simply have no assets to satisfy a judgment." Id. The Court follows this reasoning and the reasoning of several courts that have considered this issue and dismisses monetary claims against the FDIC for lack of subject matter jurisdiction because the Court cannot provide meaningful relief even if it were to render judgment in favor of Plaintiff. See, e.g., Brech v. CU Mortg. Direct, LLC, No. CIV. 10-4123-KES, 2011 U.S. Dist. LEXIS 12543, at *12-13 (D.S.D. Feb. 7, 2011); ("Courts routinely find that they lack jurisdiction under the prudential mootness doctrine when a plaintiff sues the FDIC and the FDIC has determined that the receivership estate has insufficient assets to satisfy the claims."); Henrichs v. Valley View Dev., 474 F.3d 609, 615 (9th Cir. 2007); FDIC v. Kooyomjian, 220 F.3d 10, 15 (1st Cir. 2000); Tinoco, No. CV 09-9174 (Feb 5, 2010); Nasoordeen v. F.D.I.C, No. CV 08-05631, 2010 WL 1135888, at *8 (C.D. Cal., March 17, 2010).
Plaintiff's remaining claims for equitable relief against the FDIC are barred by 12 U.S.C. § 1821(j). This provision precludes courts from taking "any action . . . to restrain or affect the exercise of powers or functions of the Corporation [the FDIC] as a conservator or a receiver." The Ninth Circuit has described this ban as an essential part of the FDIC's ability to function as a receiver and has held that this provision bars the granting of the equitable remedy of rescission. Sahni v. American Diversified Partners, 83 F.3d 1054, 1058-1059 (9th Cir. 1996). Other courts have specifically held that § 1821(j) bars injunctive relief restraining a foreclosure sale. See Freeman v. FDIC, 56 F.3d 1394, 1399 (D.C. Cir. 1995); Tillman v. Resolution Trust Corp., 37 F.3d 1032, 1036 (4th Cir. 1994). In line with these decisions, the Court concludes that the FDIC, in its capacity as receiver for IndyMac Bank, is entitled to judgment as a matter of law on Plaintiff's remaining claims for equitable relief. Defendant FDIC's motion for dismissal or summary judgment on all of Plaintiff's claims is GRANTED. This order removes the FDIC, in its capacity as receiver for IndyMac Bank, as a party to this case.
B. CLAIMS AGAINST ONEWEST
Following this dismissal of claims against the FDIC, there exists no ground for original subject matter jurisdiction over Plaintiff's claims against OneWest. See Schwartz v. IndyMac Fed. Bank, 10-cv-00516, 2010 U.S. Dist. LEXIS 136435, at *4 (E.D. Cal. Dec. 14, 2010).*fn1 Plaintiff's claims against OneWest are sufficiently related to the claims against the FDIC, as receiver for IndyMac Bank, "that they form part of the same case or controversy." 28 U.S.C. § 1367(a). The Court will exercise supplemental jurisdiction over these claims and consider OneWest's motion to dismiss each count in Plaintiff's first amended complaint and its motion to expunge the lis pendens.
1. Wrongful Foreclosure (Count One)
Plaintiff's first cause of action for wrongful foreclosure alleges that Defendants violated California Civil Code section 2923.5(a). Section 2923.5 provides that a mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made or 30 days after failing to contact the borrower despite the exercise of due diligence as defined in subsection (g). "Initial contact" is governed by the following requirements:
A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency.
Any meeting may occur telephonically.
Cal. Civ. Code § 2923.5(a)(2). Plaintiff's first cause of action largely parrots the text of the statute without providing any supporting facts and is therefore insufficiently pled. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); Resendiz v. Recontrust Co., N.A., No. 09CV1959 DMS (CAB), 2010 U.S. Dist. LEXIS 36936, at *8 (S.D. Cal. Apr. 13, 2010).
Moreover, judicially noticeable documents contradict key allegations in this count. For example, paragraph 38(I) alleges that Defendants failed to "file a notice of default with section 2924 language which includes a declaration that defendants have contacted borrower-plaintiff . . . ." However, the notice of default includes the declaration required by section 2923.5(b) stating that the borrower was contacted to discuss the borrower's financial situation and options for the borrower to avoid foreclosure. (Def. RJN Ex. D)
The first cause of action also incorporates the prior paragraphs of the first amended complaint. Although it is not entirely clear which allegations Plaintiff believes supports a claim for wrongful foreclosure, nearly all are pled with insufficient particularity to meet the standard required by Twombly and Iqbal. See, e.g., FAC ¶ 22 (alleging that "none of the defendants have yet to respond to Plaintiff's Debt Validation letter and RESPA letter" without providing any facts detailing when such letters were sent or their contents).
Other allegations that theoretically could impact Defendants right to initiate foreclosure proceedings fail as a matter of law. Plaintiff contends that foreclosure would be invalid because Defendants do not possess the original note. (FAC ¶¶ 16, 32) This holder in due course argument has been consistently rejected by the courts. See Usher v. Greenpoint Mortg. Funding, Inc., No. CIV S-10-0952 LKK DAD PS, 2010 U.S. Dist. LEXIS 127311, at *6 (E.D. Cal. Dec. 1, 2010). It is well-settled under California law that non-judicial foreclosures can be commenced without producing the original promissory note.
Plaintiff also contends that the securitization of his mortgage was somehow improper. (FAC ¶¶ 16, 32) Such allegations, too, do not provide the basis for a cause of action. See Sarmiento v. Bank of N.Y. Mellon, CIVIL NO. 10-00349 JMS/BMK, 2011 U.S. Dist. LEXIS 24365, at *17 (D. Haw. Mar. 10, 2011) (citing cases).
2. Fraud By Concealment (Count Two)
Plaintiff's second cause of action is for fraud by concealment. Under California law, the elements of a claim of fraud by concealment are: 1) suppression of a material fact; 2) by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; 3) with intent to deceive a person unaware of the concealed fact and who would not have acted had he known of the fact. Melanson v. United Air Lines, Inc., 931 F.2d 558, 563 (9th Cir. 1991) (citing Cal. Civ. Code §§ 1709, 1710); see also Newson v. Countrywide Home Loans, Inc., No. C 09-5288 SBA, 2010 U.S. Dist. LEXIS 126383, at *13 (N.D. Cal. Nov. 29, 2010).
Here, Plaintiff's FAC fails to identify what material facts were not disclosed or what Plaintiff was induced to do or not do as a result of the concealment. Plaintiff has failed to plead the elements of a fraud by concealment claim.
The allegations Plaintiff does raise largely fail as a matter of law. First, Plaintiff reiterates the allegation that Defendants failed to satisfy the requirements of California Civil Code section 2923.5. As set forth above, judicially noticeable documents contradict key aspects of this claim. Moreover, even if properly pled, it is questionable that such a claim could support a cause of action for fraud because a private right of action for violation of Section 2923.5 "is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with section 2923.5." Mabry v. Superior Court, 185 Cal. App. 4th 208, 214 (Cal. App. 4th Dist. 2010).
Second, Plaintiff asserts that fraud was committed because Defendants did not "obtain plaintiff's consent to Monetize the Promissory Note in a transfer to another mortgage pool in violation of the statute of fraud of this state, as well as in violation of pertinent securities and banking laws." (FAC ¶ 41) However, Plaintiff does not cite any law that would require a borrower's consent to securitize a mortgage and identifies no oral agreement that would give rise to a statute of frauds violation. Plaintiff also contends that Defendants failed to comply with California Civil Code section 2941.7, which, according to Plaintiff, "require[s] Defendants to record a corporate bond accompanied with the declaration after transfer or conveyance to another mortgage pool." (Id.) Assuming, arguendo, that section 2941.7 would provide Plaintiff with a private right of action and that its provisions have otherwise been violated, Plaintiff's reliance on this statute is improper, as it only applies when an "obligation secured by a mortgage or deed of trust has been fully satisfied and the present mortgagee or beneficiary of record cannot be located after diligent search." Cal. Civ. Code § 2941.7. Plaintiff does not allege that either condition has been met here.
Finally, Plaintiff alleges that transfer of assets from Indymac to OneWest "is illegal and against bankruptcy rules." (FAC ¶ 44) Contrary to Plaintiff's allegation, Indymac is in receivership, not bankruptcy. Plaintiff provides absolutely no basis for the assertion that the transfer of assets to OneWest was illegal.
3. Fraud By Misrepresentation (Count Three)
Plaintiff's third cause of action is for fraudulent misrepresentation. To state a claim for fraudulent misrepresentation, a party must allege facts to support the following elements: 1) misrepresentation; 2) knowledge of falsity; 3) intent to defraud; 4) justifiable reliance; and 5) damages. Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (citing Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951, 974 (1997)). As above, Plaintiff failed to allege the elements of this claim.
Plaintiff's misrepresentation claim also fails on additional grounds. Plaintiff asserts that Defendants "committed fraud" through statements or omissions made on August 12, 2005. (FAC ¶ 50) To the extent that Plaintiff's claim rests on events occurring on that date, this claim is barred by the three-year statute of limitations for a claim of fraud. Cal. Code Civ. Proc. § 338(d). Plaintiff's original complaint was filed well after this three-year limit, and Plaintiff does not raise any basis to toll this limitations period.
Moreover, this claim is not pled with sufficient particularity required by Fed. R. Civ. P. 9(b). The FAC does not allege when many of the purportedly fraudulent acts were committed, how they were committed, or which defendant committed them. For example, Plaintiff alleges that "Defendants . . . committed fraud by transferring the note and enter [sic] into a real estate transaction without disclosing to Plaintiff . . . the terms of the new loan. And since there was a modification of the named parties to the original contract[,] that binds plaintiff." (FAC ¶ 53) The FAC does not allege when, how, or by whom the note was transferred, does not allege any facts in connection with a "real estate transaction," and does not allege any facts relevant to a loan modification.
Finally, Plaintiff alleges that Defendants committed fraud "by selling nonexempt securities without permit as required by California Corporations code § 25110." (FAC ¶ 51) This statute provides, in pertinent part: "It is unlawful for any person to offer or sell in this state any security in an issuer transaction . . . , whether or not by or through underwriters, unless such sale has been qualified." Cal. Corp. Code § 25110. Plaintiff's complaint does not identify what "securities" are the subject of this claim, however, to the extent that Plaintiff is referencing her own mortgage transaction, this claim fails as a matter of law. A promissory note secured by a lien on real property is expressly exempted from the requirements of section 25110. Cal. Corp. Code § 25100(p).
4. Conversion (Count Four)
Plaintiff's fourth cause of action alleges conversion based on a misapplication of mortgage loan payments in violation of California Civil Code section 2985.3. Under California law, the elements of a conversion claim are 1) the plaintiff's ownership or right to possession of the property at the time of the conversion; 2) the defendant's conversion by a wrongful act or disposition of property rights; and 3) damages. Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 601 (9th Cir. 2010) (citing Oakdale Village Group v. Fong, 50 Cal. Rptr. 2d 810, 812 (Cal. App. 3d Dist. 1996).
Here, Plaintiff failed to allege that Plaintiff owned or had a right to possess anything withheld by OneWest. Clearly, a mortgagor does not have a right to possess payments made under the loan -- even if, as alleged by Plaintiff, they were misapplied by Defendants for an improper use. Plaintiff's conversion claim fails.
5. Intentional Infliction Of Emotional Distress (Count Five)
Plaintiff's fifth cause of action is for intentional infliction of emotional distress. Under California law, the elements of a claim for intentional infliction of emotional distress are: 1) extreme and outrageous conduct by the defendant with the intent to cause, or reckless disregard for the probability of causing, emotional distress; 2) suffering of severe or extreme emotional distress by the plaintiff; and 3) the plaintiff's emotional distress is actually and proximately the result of defendant's outrageous conduct. Chang v. Lederman, 90 Cal. Rptr. 3d 758, 774 (Cal. App. 2d Dist. 2009).
The FAC is devoid of facts to support this claim, stating only: "Defendants . . . have engaged in intentional torts, actions and have intentionally failed to act in [sic] way that is extreme and outrageous transcending all bounds of decency and, as a result, have actually and proximately caused plaintiff and his family to severe emotional distress and other similar symptoms." (FAC ¶ 65) This conclusory statement is not sufficient to meet the pleading standards required by Twombly and Iqbal.
6. Motion To Expunge Lis Pendens "At any time after notice of pendency of action has been recorded, any party . . . may apply to the court in which the action is pending to expunge the notice." Cal. Code Civ. Proc. § 405.30. Pursuant to California Code of Civil Procedure sections 405.32, a court shall order that the notice be expunged if "the court finds that the claimant has not established by a preponderance of the evidence the probable validity of the real property claim."
Although the Court dismisses Plaintiff's claims against OneWest without prejudice so that she may have an opportunity to cure the deficiencies discussed above, the Court holds that Plaintiff has not met her burden of proving the "probable validity" of her claims. See Cal. Code Civ. Proc. § 405.30. Moreover, based on the allegations in the FAC, it is not likely that Plaintiff will be able to meet this burden by filing a second amended complaint. Many of Plaintiff's claims fail as a matter of law and the remainder lack the specificity necessary to conclude "that the claimant will obtain a judgment against the defendant on the claim." Cal. Code Civ. Proc. § 405.3. Accordingly, the Court EXPUNGES the lis pendens without prejudice. If Plaintiff files a second amended complaint, she may apply to have the lis pendens reinstated.
The Court holds that it lacks subject matter jurisdiction over Plaintiff's monetary claims against the FDIC and that Plaintiff's equitable claims against the FDIC are foreclosed as a matter of law. Accordingly, the Court GRANTS Defendant FDIC's, in its capacity as receiver for IndyMac Bank, motion for dismissal under Fed. R. Civ. P. 12(b)(1), or, in the alternative, for summary judgment on all of Plaintiff's claims. [Dock. #6].
Plaintiff's claims against OneWest are DISMISSED with leave to amend. Plaintiff may file an amended complaint within twenty days to cure the deficiencies discussed above. OneWest's motion to expunge the lis pendens is GRANTED without prejudice to Plaintiff applying to have the lis pendens reinstated if she chooses to file a second amended complaint.
IT IS SO ORDERED.