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Donna Jacobson; and Murray Jacobson v. Balboa Arms Drive Trust #5402

August 1, 2011


The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge


Doc. Nos. 26 & 28

Pro se plaintiffs Donna Jacobson and Murray Jacobson ("Plaintiffs") bring the instant suit based on a loan obtained in 2006 and secured by a Deed of Trust encumbering certain real property, and the subsequent foreclosure and eviction proceedings instituted against them. Plaintiffs allege sixteen different causes of action against all named defendants, including claims for breach of contract, wrongful foreclosure, fraud, and violations of the federal Truth in Lending Act ("TILA") and Real Estate Settlement Procedures Act ("RESPA"). (Doc. No. 25, hereafter "FAC.") Three of the defendants now bring two separate motions to dismiss all claims against them. (Doc. Nos. 26 & 28.)

Pursuant to CivLR 7.1(d)(1), the court determines this matter is appropriate for resolution without oral argument. For the reasons set forth below, the court hereby GRANTS both motions to dismiss.


Plaintiffs are a married couple residing in San Diego County, and the alleged owners of a parcel of real property identified as 5402 Balboa Arms Drive, Unit 340, San Diego, California, Assessor's Parcel No. 361-029-046 (the "Property"). (FAC at p.4.) On or around August 23, 2006,*fn1 Plaintiffs signed two promissory notes for loans in the amounts of $349,544 ("Loan 1 ") and $87,386 ("Loan 2 "), secured by Deeds of Trust on the Property. Both Deeds of Trust list Defendant Newport Mortgage Funding, Inc. ("Newport") as the lender, Chicago Title Company as the trustee, and Defendant Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary.*fn2 (Id. at p.4 & Exh. V.)

According to Plaintiffs, they made timely payments on both loans for the next year and a half, through March of 2008. (Id. at p.4.) Around this time, however, Plaintiffs became aware of some irregularities in the amounts owed and obtained a professional audit of their loans. (Id.) The audit revealed that the loans were "predatory" in nature, and that they had been issued in violation of TILA. (Id.) As a result, Plaintiffs sent a Notice of Rescission to both Newport as well as Defendant IndyMac Bank*fn3 ("IndyMac") on February 19, 2008, demanding cancellation of both loans. (Id. at pp. 4-5 & Exh. II.)

IndyMac subsequently agreed to settle the dispute with Plaintiffs by executing a modified loan agreement ("Modification Agreement") that would lower their interest rate and monthly interest payments on Loan 1*fn4 in exchange for Plaintiffs' agreement to withdraw their demand for rescission. (Id. at p.5 & Exh. III.) The Agreement was negotiated and entered into on IndyMac's behalf by an IndyMac officer, Defendant Brandon Latman ("Latman"). (Id.)

According to Plaintiffs, after entering into the Modification Agreement with IndyMac, they continued to make full and timely payments at the negotiated reduced rate for the next four months until Defendant OneWest Bank, F.S.B*fn5 ("OneWest") contacted them to inform them that it was "taking over the IndyMac assets including its mortgage loan accounts." (Id. at p.6.) Plaintiffs claim that OneWest then rejected and returned the new, lower payments that they had made, and notified Plaintiffs that it was rescinding the Modification Agreement. (Id.)

However, copies of official records from the San Diego County Recorder's Office submitted by Defendants MERS, OneWest, and MTC Financial Inc., dba Trustee Corps*fn6 ("Trustee Corps") raise a question as to whether IndyMac ever held an interest in Plaintiffs' loan.*fn7 According to those records, the originating lender on the loan, MERS, executed an Assignment of Deed of Trust on September 24, 2009, transferring its interest in the Deed of Trust directly to OneWest. (Doc. Nos. 26-5 to -11, Request for Judicial Notice ("OneWest/MERS RJN"), Exh. 2; Doc. No. 28-2, Request for Judicial Notice ("Trustee Corps RJN"), Exh. B.) That same day, OneWest executed a Substitution of Trustee, substituting Trustee Corps for Chicago Title Company as trustee on the transferred Deed of Trust. (OneWest/MERS RJN at Exh. 3; Trustee Corps RJN at Exh. C.) There is no mention of IndyMac in the public records before this court.

In any event, it is undisputed that foreclosure proceedings were subsequently begun against Plaintiffs. (FAC ¶¶ 8, 51.) On October 2, 2009, Trustee Corps recorded a Notice of Default and Election to Sell Under Deed of Trust ("Notice of Default") against the Property.

(OneWest/MERS RJN at Exh. 4; Trustee Corps RJN at Exh. D.) The Notice of Default informed Plaintiffs that they had defaulted on their payments on Loan 1 beginning on March 1, 2009, and that, as of September 29, 2009, they owed a total of $20,469.93. (Id.) The Notice of Default also provided the address and phone number of OneWest, and advised Plaintiffs to contact OneWest "[t]o find out the amount [they] must pay, [or] to arrange for payment to stop the foreclosure." (Id.) The Notice of Default also expressly stated that Trustee Corps was acting as an agent for OneWest, and was signed by a Trustee Corps representative. (Id.)

On January 4, 2010, a Notice of Trustee's Sale was recorded, notifying Plaintiffs that, as a result of their default, a public auction would be held to sell the Property. (OneWest/MERS RJN at Exh. 5; Trustee Corps RJN at Exh. E.) The Property was ultimately sold on July 12, 2010 to Defendant Balboa Arms Drive Trust 5402-340 HSBC Financial as Trustee ("Balboa Trust"), and a Trustee's Deed Upon Sale recorded on July 30, 2010. (FAC ¶ 51; OneWest/MERS RJN at Exh. 6; Trustee Corps RJN at Exh. F.)

Plaintiffs commenced the instant action in California Superior Court on October 12, 2010 against Defendants Balboa Trust, OneWest, Newport, Trustee Corps, and MERS. (Doc. No. 1 Exh. A.) Defendant Trustee Corps removed the action to federal court on October 21, 2010, citing federal question jurisdiction under 28 U.S.C. § 1441(b), in which it was joined by OneWest. (Doc. Nos. 1 & 4.) Trustee Corps and OneWest/MERS then brought two separate motions to dismiss Plaintiffs' complaint, both of which were granted with leave to amend. (Doc. Nos. 5, 7 & 17.) Plaintiffs subsequently filed their FAC on May 10, 2011, naming the same five original defendants*fn8 as well as adding claims against IndyMac, Latman, and the Federal Deposit Insurance Corporation ("FDIC"). (FAC.) Trustee Corps and OneWest/MERS now once again bring motions to dismiss the FAC. (Doc. Nos. 26 & 28.) Plaintiffs have filed a single opposition to both motions. (Doc. No. 37.)


A motion to dismiss under FED. R. CIV. P. 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the non-moving party, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). While Rule 12(b)(6) dismissal is proper only in "extraordinary" cases, United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981), the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court should grant 12(b)(6) relief only if the complaint lacks either a "cognizable legal theory" or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).


A. Challenges to Foreclosure

At the outset, it should be noted that, in its previous order dismissing the original complaint, the court required Plaintiffs to "make a showing of their ability to tender any outstanding indebtedness" before they could re-allege their causes of action for wrongful foreclosure, quiet title, and setting aside the sale of the Property. (Doc. No. 17 p.17.) The court also set forth several ways in which Plaintiffs could make such a showing, such as by producing "copies of loan applications in which Plaintiffs have set forth their assets and liabilities, bank account statements, and brokerage statements" from "the last twelve months." (Id.) Although the FAC re-alleges causes of action for wrongful foreclosure and quiet title (FAC ¶¶ 224-31, 295-302), Plaintiffs have yet to file any documents demonstrating their ability to tender the amount owed on the contested loans.

Plaintiffs claim that they "are willing and able and hereby offer to tender any and all amounts due to any Defendant," although that amount "cannot be known" at present. (Id. ¶ 112.) Plaintiffs also claim that they have located a qualified buyer who stands willing to purchase the Property from them for $361,123-the amount that Plaintiffs allege is the true amount owing on their loan-and that a purchase offer and letter of intent from the buyer can be produced "[i]f the court should require it." (Id. at p.7, ¶ 9.)

However, even if Plaintiffs were to provide evidence of the existence of this alleged buyer, a showing of Plaintiffs' ability to pay their outstanding indebtedness that is contingent upon some other event-here, the purchase of the Property by an individual who is not a party to the suit-is not tender, as Trustee Corps, OneWest, and MERS correctly point out:

The rules which govern tenders are strict and strictly applied . . . . The tenderer must do and offer everything that is necessary on his part to complete the transaction, and must fairly make known his purpose without ambiguity, and the act of tender must be such that it needs ...

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