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Sharon J. Madrid v. Bank of America Corporation Doing Business As Bac Home Loan

July 13, 2011

SHARON J. MADRID,
PLAINTIFF,
v.
BANK OF AMERICA CORPORATION DOING BUSINESS AS BAC HOME LOAN SERVICING, LP, MERS, DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hon. Anthony J. Battaglia U.S. District Judge

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT

On April 26, the Court dismissed Plaintiff's First Amended Complaint (Doc. No. 9) without prejudice and granted Plaintiff leave to file a second amended complaint. (Doc. No. 27.) Plaintiff filed her Second Amended Complaint ("SAC") on May 16, 2011. (Doc. No. 28.) Pending is Defendants' Motion to Dismiss the SAC, filed June 3, 2011. (Doc. No. 34.)

FACTUAL BACKGROUND

On June 7, 2005, Plaintiff obtained a loan from Countrywide Home Loans, Inc. ("Countrywide") and executed a promissory note in the amount of $1,555,000. (SAC Ex. C). As security for the note, Plaintiff signed a Deed of Trust that was recorded on June 23, 2005. (SAC Ex. B). The Deed of Trust identifies Countrywide as the lender, ReconTrust Company, N.A. ("Recon") as the trustee, and Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary and nominee for the lender. (Id.). Bank of America Corporation doing business as BAC Home Loan Servicing, LP ("BAC") purchased Countrywide. (SAC ¶ 7).

Plaintiff subsequently defaulted on the loan. (SAC Ex. D). Recon, acting as an agent for MERS, issued a Notice of Default beginning foreclosure proceedings against Plaintiff in September 2010. (Id.). Plaintiff received two letters from Recon, dated September 2, 2010, and September 23, 2010, verifying the indebtedness on the note and identifying Countrywide as the original creditor of the underlying debt. (SAC ¶ 21; SAC Ex. C).

On January 13, 2011, Plaintiff filed this action against BAC, MERS, and Does 1-50. Specifically, Plaintiff alleges that MERS served solely as the nominee for the lender and could not be the beneficiary of the Deed of Trust. (SAC ¶¶ 9, 11). Plaintiff argues that MERS, while serving a limited capacity as nominee on the Deed of Trust, had no authority to transfer any beneficial interest in the Deed of Trust. (Id. at ¶¶ 11, 12). Plaintiff contends that the current beneficiary of the note is unknown because there are "no recorded documents that transfer, convey, or assign any rights, title or interest as beneficiary holding legal title to a different present beneficiary." (Id. at ¶ 9). Thus, Plaintiff alleges that Recon lacks the authority necessary to institute foreclosure proceedings on Plaintiff's property.

Based on these allegations, the SAC contains the following four counts: Count One - Fraud and Fraud in the Inducement against BAC and MERS; Count Two - Declaratory Relief against BAC; Count Three - Negligent Misrepresentation against BAC and MERS; and Count Four - Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 against BAC.

LEGAL STANDARD FOR MOTION TO DISMISS

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337--38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, ------ U.S. --------, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

However, "a plaintiff's obligation to provide 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 Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in original). A court need not accept "legal conclusions" as true. Iqbal, 129 S.Ct. at 1949. In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the ... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.' " Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557).

For a Rule 12(b)(6) motion, a court generally cannot consider material outside the complaint. See Branch v. Tunnell, 14 F.3d 449, 453--54 (9th Cir.1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). A court may, however, consider exhibits submitted with the complaint. Van Winkle v. Allstate Ins. Co., 290 F. Supp.2d 1158, 1162 n. 2 (C.D. Cal. 2003). A court may disregard allegations in the complaint if they are contradicted by facts established by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.)

ANALYSIS

There are two primary differences between the SAC and the previously dismissed FAC. First, the SAC does not include the negligence claim found in Count Three of the FAC. Second, the SAC contains four new paragraphs, ¶¶ 8, 9, 11, and 12, in which Plaintiff alleges that there is no recorded document conveying any beneficial interest in the Deed of Trust to BAC from Countrywide and thus BAC cannot foreclose on the Deed of Trust through Recon. Beyond these two changes, the SAC does not differ significantly from the FAC and the allegations in the four remaining causes of action remain the same.

As explained in the Court's prior order, California Civil Code section 2924 provides the "comprehensive statutory framework established to govern non-judicial foreclosure sales [and] is intended to be exhaustive." Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994); I.E. Assoc. v. Safeco Title Ins. Co., 39 Cal. 3d 281 (1985). Under section 2924(a)(1), a "trustee, mortgagee, or beneficiary or any of their authorized agents" may conduct the foreclosure process. The Deed of Trust names Recon as the trustee and MERS as nominee for the lender and beneficiary. (SAC. Ex. C at 2). Pursuant to section 2924(a)(1), both Recon and MERS have the ability to initiate the foreclosure process. Plaintiff's additions to the SAC relate to the propriety of BAC foreclosing on the property; however, the Notice of Default clearly states that Recon acting as an agent ...


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